While keeping their options open, Medicare regulators are proposing to reduce Medicare Advantage rates by 3.5 percent, along with some other changes that could make the decline even steeper.
The Centers for Medicare & Medicaid Services released the much anticipated advanced notice of annual Medicare Advantage and Part D changes amid expectations of a large decline and warnings, media campaigns and lobbying by a number of insurers, trade groups, lawmakers and seniors organizations.
For the 2015 contract year, CMS is proposing a National Per Capita Medicare Advantage Growth Percentage downward adjustment of 3.55 percent, in other words a 3.5 percent payment reduction.
“This estimate reflects an underlying trend change for CY 2015 in per capita cost of -0.07 percent and, as required under section 1853(c)(6)(C) of the Act, adjustments to the estimates for prior years,” CMS regulators wrote in the 148-page draft notice, referring to provisions in the Affordable Care Act directing the agency to bring Medicare Advantage in line with the fee-for-service rates.
The 3.5 percent decline is about half the 6.5 percent reduction that executives from UnitedHealth Group and elsewhere were predicting, as perhaps the harshest of all the headwinds hitting the industry. While the less-than-expected decrease may be a middle ground yielding sighs of relief, a number of insurance industry stakeholders, including 40 Senators, are still hoping to convince the agency keep the rates flat.
Last year, CMS initially proposed decreasing rates by 2.2 percent, only to end up raising them by 3.3 percent, although accounting for coding, total beneficiary cost limits and risk adjustments, America's Health Insurance Plans argues that the Medicare Advantage program took what amounted to a 6.5 percent cut last year.
“The new proposed Medicare Advantage cuts would cause seniors in the program to lose benefits and choices on which they depend," said AHIP president and CEO Karen Ignagni, after an initial read of the 2015 draft rates. "Last year’s six percent cut to Medicare Advantage rates resulted in higher premiums, reduced benefits, fewer coverage options, and loss of provider choices for seniors. Another round of payment cuts would be devastating."
Final rates for the 2015 year are set to be released April 7, with public comment open through March 7.
The agency is proposing a number of other changes to the Medicare Advantage and Part D programs, some more than others being perhaps slightly disruptive for the industry and some likely to have noticeable benefits for beneficiaries.
CMS wants to reduce the allowed amount of increases into total beneficiary cost from $34 per member per month to $32, while maintaining limits on out-of-pocket spending, and is introducing a best practice for notification of provider network changes, suggesting more than 30 days notice.
The agency is also “considering whether to use the rulemaking process to broaden our authority to limit MAOs’ ability to terminate provider contracts without cause at any time during the year.”
Likewise in Medicare Part D: “Although we are not adopting any network adequacy standards at this time, sponsors should be aware that we are continuing to monitor beneficiary access to preferred cost sharing in plans that purport to offer it.”
This year and next, regulators are going to “review the retail networks of plans offering preferred cost sharing and will take appropriate action regarding any plan whose network of pharmacies offering preferred cost sharing appears to offer too little meaningful access to the preferred cost sharing.”
As an example, CMS regulators said, a standalone prescription drug plan with preferred cost sharing at seven pharmacies in a region may be asked to either add more preferred pharmacies or restructure its benefit design during the bid negotiation process.
Also in Part D, CMS is hoping to solve cost problems for beneficiaries falling into the coverage “donut hole,” with discounts of 55 percent on covered brand name pharmaceuticals and 35 percent on covered generics.
The proposed rate reductions to Medicare Advantage come amid record high beneficiary enrollment and some decline in the number of MA plans available, with many facing increasing market pressure and CMS trying to ensure that seniors have access to only high rated plans.
Medicare Advantage plans have grown to 15.9 million enrollees, covering just about 30 percent of all eligible American seniors, according to an analysis of data through January 10 by Avalere Health. This year, MA enrollment is set to grow by at least 5 percent.
Overall Part D enrollment, including standalone drug plans and MA prescription drug plans, is hovering just above 37 million, according to Avalere Health.
Even if rates decline, the baby boomer retirement and Medicare enrollment waves could make Medicare Advantage too big a business opportunity to ignore, some argue. “If current trends continue, plans choosing to compete in areas with growing enrollment and fewer plan options stand to gain market share,” said Matt Eyles, executive vice president at Avalere.
The challenge for MA plans will taking on the task of helping the federal government with the goals of keeping Medicare costs in check, while still offering seniors the healthcare access and choices they’ve come to expect from the 50-year-old program.