February 26, 2015 at 6:55 am ET
The Medicare Advantage Shuffle: Insurers, Administration Ready for Annual Dance
The Obama administration released its proposed 2016 payment rates for private Medicare plans Friday, a figure that Wall Street interpreted as a cut in pay, albeit one that wasn’t nearly as deep as past years.But that doesn’t mean the opposition to any cuts in the increasingly popular program is slowing down. The insurance industry is stepping up to the fight again this year, arguing that the proposed changes will lead to seniors paying more out of pocket and being forced to select new plans.
According to a report first shared with Morning Consult, seniors will have paid an average of $60 to $160 more per month when accounting for Medicare Advantage reimbursement changes in 2014 and 2015, and the proposed changes in 2016. It also predicts that the cuts could produce a “high degree of disruption” in the market.
The report was conducted by consulting firm Oliver Wyman, on behalf of America’s Health Insurance Plans. Centers for Medicare and Medicaid Services official Andy Slavitt said the opposite when announcing the rates last week, saying they would enhance the stability of Medicare Advantage and minimize disruption.
The proposal from CMS is the start of a three-month dance between the Obama administration and insurers, seniors groups and providers. Thanks to cuts in the Affordable Care Act – the majority of which have taken effect by now – the back and forth between industry and the federal government over Medicare Advantage payments has grown more heated over the past three years. The opening shot from the administration, as in the two years prior, is a proposal that reduces pay, but arguably leaves some room to reverse those numbers after enough public outcry. The final reimbursement rule will emerge in April, and industry has until March to share its comments.
With more seniors signing up for the program, insurers are getting more help from Congress to pressure the Obama administration to protect payment rates from any reductions. Last year, 40 senators signed a letter urging CMS to reduce the cuts. This year, 13 more joined in, including two additional Democrats – Sen. Jon Tester of Montana and Sen. Gary Peters of Michigan.
Support for Medicare Advantage has grown with the program: Approximately 16 million seniors, almost a third of all in the Medicare program, are in Medicare Advantage plans. Enrollment has increased more than 40 percent from 2010 to 2015, according to the federal government. And even with previous cuts, the Kaiser Family Foundation found that the number of plans offered throughout the country hovered around 2,000 since 2011. While 378 plans left the market for 2015, 309 new plans entered.
Karen Ignagni, the president and CEO of AHIP, said the 2016 cuts would create “instability and uncertainty” for seniors on Medicare Advantage plans, in addition to slowing down efforts from the insurance industry to make health care services more efficient.
The administration proposes to shift Medicare Advantage to a new methodology for calculating the “risk” of an insurance plan’s population. The proposed approach would pay insurers less when enrollees are not acutely ill, said William MacBain, a former MedPac commissioner now at Gorman Health Group, a consulting firm advising insurers on the rate changes. The proposal posits that the current approach was overpaying plans when seniors are in the earlier (and often cheaper) stages of treatment.
But helping manage the long-term costs of chronic conditions like kidney disease, one area that could potentially see a sizable reduction in reimbursement, is the “chassis for building the new system for 21st century payment reforms,” Ignagni said.
“This gets to, how does the agency think about the value of encouraging plans to identify individuals with chronic kidney disease or diabetes and reporting them, with the idea that when we bring people in early, we save money in the longer term,” Ignagni said in an interview.
The administration also proposed limiting the total amount insurers can get back on the so-called “risk adjustment” payments, based on calculations that takes into account overall demographic data on beneficiaries, like age and sex. Right now, there is no overall cap, MacBain said.
“It’s a defensible, replicable econometric model,” MacBain said about the overall CMS proposal. “Having said that, there is some discretion. As with any kind of forecast, and there is some wiggle room in these numbers.”
If recent history is any guide, CMS will use that discretion to soften the blow. In the meantime, stakeholders will continue pushing their message to the federal government as much as they can.
“We’ve seen the impact of cuts to seniors, the disruption…it isn’t theoretical,” Ignagni said.