CMS finalizes 2017 Medicare Advantage rates: 8 things to know

CMS has finalized a number of payment and policy changes to the Medicare Advantage and Part D prescription drug programs for 2017, including a slight payment increase to health insurers who offer Medicare Advantage plans.

Here are eight takeaways from CMS' final rate notice for 2017.

1. Under the final rule, Medicare Advantage rates will increase 0.85 percent on average in 2017. That is lower than the 1.35 percent increase CMS proposed in February.

2. When combined with expected growth in plan risk scores, CMS said it anticipates Medicare Advantage and Part D sponsors will see revenue increase by 3.05 percent on average in 2017.

In February, CMS indicated that insurers were expected to see an average revenue increase of 3.55 percent. Sean Cavanaugh, CMS' deputy administrator and director of the Center for Medicare, said the final revenue increase is smaller primarily due to "technical updates in the risk adjustment normalization factor."

3. In its final update, CMS modified the methodology used to risk adjust payments to more closely align reimbursement with costs for dually eligible beneficiaries.

Regarding the risk adjustment changes, Association for Community Affiliated Plans CEO Margaret A. Murray said, "With this final notice, CMS has addressed the flaw in its risk adjustment system that had led to systemic underpayments for health plans serving full-benefit dual eligibles — who are among the poorest, sickest, and most vulnerable Medicare beneficiaries."

4. Under the final rule, the Star Ratings program measures are refined to reflect the socioeconomic and disability status of a plan's enrollees.

5. In 2015, CMS began using diagnoses from encounter data to calculate risk scores, by blending encounter data-based risk scores with CMS' Risk Adjustment Processing System-based risk scores. CMS will continue using the blend in 2017, but with a higher percentage of encounter data-based risk scores than in 2016.

6. In the final rule, CMS said it is finalizing policies that will further combat opioid overutilization by encouraging safeguards before an opioid prescription is dispensed.

7. In February, CMS proposed terminating the bidding process for all Medicare Advantage employer/union-only group waiver plans. Specifically, CMS proposed using individual market non-Employer Group Waiver Plan bids for 2017 to establish county level payment amounts for EGWPs. Under the final rule, CMS is phasing in the EGWP policy change over two years. In 2018, the policy will be fully implemented and only individual market plan bids will be used to calculate employer Medicare Advantage plan payments.

8. Following the release of the final rate notice, AHIP President and CEO Marilyn Tavenner recognized the steps CMS took to mitigate the negative effects of policy changes related to risk adjustment and encounter data. "Yet, more can be done to ensure stability for more than 3 million seniors who depend on Medicare employer retiree plans," she said.

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