6 Observations and Things to Know About CMS' Final Medicare Advantage Payment Rates

On Monday, CMS announced Medicare Advantage plans will see a 0.4 percent payment increase in 2015. Here are six key observations and things to know about CMS' decision to raise Medicare Advantage payment rates.

1. CMS originally intended to cut Medicare Advantage payments. Earlier this year, the agency had proposed a pay cut for health insurers that administer private Medicare plans. Different news sources and analysts interpreted the proposed rates as translating to a pay cut of anywhere from 1.9 percent to 6 percent, depending on whether they considered just the base payment reduction derived from the statutory Medicare Advantage reimbursement formula or included other factors such as payment system reforms included in the Patient Protection and Affordable Care Act.

2. The reversal of the proposed pay cut can be attributed to a number of different factors. In discussing the issues with Jonathan Blum, CMS principal deputy administrator, at a healthcare panel at the 2014 Wharton Health Care Business Conference, Scott Becker, publisher of Becker's Hospitals Review, observes that there is a growing point of view within the Obama administration and CMS that there is a long-term place for Medicare Advantage plans as part of the healthcare solution. This seems to be an evolution from an earlier position that perhaps Medicare Advantage was a bad program and that accountable care organizations, the health insurance exchanges and other mechanisms advanced by the PPACA would provide most or all of the answers to healthcare reform. This evolution in position that there may be several different ways to solve the nation's healthcare problem is admirable in our own view, says Mr. Becker.

3. The reduction in cuts also follows fierce opposition from industry members and lawmakers alike on both sides of the aisle (both Democrats and Republicans). The insurance industry and federal lawmakers on both sides protested the proposed cut, saying the reduced payments would hurt seniors by causing them to lose benefits and coverage choices. In February, a bipartisan group of 40 senators urged CMS not to cut Medicare Advantage payments.

America's Health Insurance Plans also lobbied strongly against the proposed 2015 pay cut: "The new proposed Medicare Advantage cuts would cause seniors in the program to lose benefits and choices on which they depend," AHIP President and CEO Karen Ignagni said in a statement. Ms. Ignagni has earned recognition as a highly effective lobbyist, and more recently, was named one of the 40 Smartest People in Healthcare.

4. This isn't the first time CMS has changed its mind about cutting Medicare Advantage. CMS' reversal of the Medicare Advantage pay cut echoes its actions last year, when the agency turned a suggested 2.2 percent cut into a 3.3 percent pay increase after the insurance industry lobbied against the proposed reduction.

5. Some Lawmakers view the decision as a result of the government giving in to political pressure and considering the public's positive view of Medicare Advantage. Rep. Ron Barber (D-Ariz.) told The Wall Street Journal CMS' latest decision to reverse the proposed pay cut shows federal officials realized Medicare Advantage is "a program people really like" and don't want "messed with." Meanwhile, Sen. John McCain (R-Ariz.) told the Journal the Obama administration had given in to political pressure: "They cannot sustain it politically, so what are they doing? Delaying it again."

Here, we perceive that Rep. Barber largely observes the softening in position on the Medicare Advantage plans correctly. Overall, they are now perhaps viewed as part of the solution, compared to at an earlier time when they were largely viewed negatively by the Obama administration.  

6. Medicare Advantage plans still face cuts under the PPACA. In order to contain costs, the PPACA cuts Medicare Advantage by $156 billion from 2013 to 2022, according to the Congressional Budget Office. Despite the base pay raise the program saw last year, AHIP determined Medicare Advantage plans actually saw a 6 percent cut in 2014 as a direct result of healthcare reform efforts.

In response to the final 2015 payment rates, Ms. Ignagni released another statement saying that although the "changes CMS included in the final rate notice will help mitigate the impact on seniors," Medicare Advantage plans still face reimbursement reductions next year. "We remain concerned about the impact year-over-year cuts to Medicare Advantage would have on the high-quality, affordable coverage millions of seniors like and rely on today," she said.

More Articles on Medicare Advantage:
3 Key Observations on Medicare Advantage Cuts in 2015
CMS Proposes Medicare Advantage Cuts
Senators Ask CMS Not to Cut Medicare Advantage 

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