CMS Proposes MA Payment Rate Adjustments for 2016

Average payments to Medicare Advantage plans would increase by 1.05% in 2016 under a CMS proposal released Friday, Modern Healthcare reports (Herman, Modern Healthcare, 2/20).

Background

MA payments reflect several factors, including payment rates based on Affordable Care Act-related costs, quality ratings and a plan's mix of sick and healthy patients (Humer, Reuters, 2/20). The payment rates are also based on Medicare's cost growth and spending growth of traditional fee-for-service Medicare (Wilde Mathews, Wall Street Journal, 2/20). According to Modern Healthcare, the average rate and revenue change percentages "are crude figures," as region- and plan- specific factors will have major influences on payments to MA plans.

Details of Proposal

Under the proposal, the base rate would decline by 0.95%. However, "when combined with expected growth in plan risk scores due to coding," MA plans' revenue would increase by just over 1%, according to a CMS release. Risk scores are tied to how Medicare reimburses for the health status of beneficiaries; CMS pays more for sicker beneficiaries.

The proposal for 2016 comes after CMS' rate preview issued in December 2014 projected about a 2% increase in MA rates (Modern Healthcare, 2/20). However, CMS found that Medicare costs increased by 2.68%, compared with its December projection of 2.45%. Meanwhile, the agency found that fee-for-service Medicare spending growth increased by 1.47%, compared with the December projection of 2.02% (Wall Street Journal, 2/20).

CMS' proposal would fully implement a new model for risk adjustment, which has been in the process of being phased in (Adams/Zanona, CQ HealthBeat, 2/20). According to Modern Healthcare, insurers in general have opposed the new risk-adjustment methodology (Modern Healthcare, 2/20). Meanwhile, CMS said that it would not alter payments based on if beneficiaries are treated via an office visit or a home visit, an idea the department previously was considering.

In addition, the proposal would:

• Alter the MA star rating system to help families determine which MA plans are performing best;
• Reduce by 50% the importance of seven quality metrics that have seemed to put MA plans that serve beneficiaries enrolled in both Medicare and Medicaid at a disadvantage; and
• Require MA plans to have accurate and updated provider directories (CQ HealthBeat, 2/20).

Analysts' Expectations

Susquehanna Financial Group analyst Chris Rigg said the proposal would represent a payment cut of 1.45%, not including certain company-specific payments. However, he added that factoring in the proposed changes to how CMS calculates payments points to an overall positive outlook for insurers.

Meanwhile, Wells Fargo analyst Peter Costa said the proposal "allow[s] for a sigh of relief" for insurers (Wall Street Journal, 2/20).

Proposal To Incite 'Dogfight' Over Rates

The deadline for public comments on the proposal is March 6, and CMS is scheduled to release final rates on April 6. According to Modern Healthcare, the proposal is expected to launch a "dogfight" over the rates until they are finalized (Modern Healthcare, 2/20).

America's Health Insurance Plans CEO Karen Ignagni in a statement said CMS is "now proposing additional cuts to [MA] at a time when health care costs are projected to increase," adding, "Protecting the millions who rely on this program should mean no further cuts" (Wall Street Journal, 2/20). AHIP and other groups have launched a lobbying campaign aimed at having CMS issue higher final rates in April (Modern Healthcare, 2/20).