CMS changes course, will raise 2014 Medicare Advantage payments

CMS does an about-face under pressure from insurance industry

Under a withering barrage of pressure from the insurance industry, seniors groups and congressional members from both sides of the aisle, CMS on Monday did an about-face and significantly raised its 2014 growth percentage estimate for the Medicare Advantage program.

Significantly, CMS now expects a growth rate of 3.3 percent in 2014, a rate it had initially estimated in mid-February would decrease by 2.2 percent. The revision means that the private companies running the Medicare Advantage plans won’t absorb an estimated total reduction of nearly 8 percent in payments in 2014 – reductions that many feared would be disruptive to the program.

As Robert Zirkelbach, spokesman for America’s Health Insurance Plans (AHIP) said in an early March interview with Healthcare Finance News in reaction to the proposed payment reducttions: “Washington can’t cut the program that much and not expect seniors to be harmed. The money has got to come from somewhere.”

CMS found that money by readjusting how it calculated the growth rate. In announcing its proposed reduction in February, CMS calculations assumed the implementation of a 27 percent cut to the physician reimbursement rate paid by Medicare as a result of the sustainable growth rate formula (SGR) – payment cuts that are regularly overridden by Congress.

That method came under scrutiny during the 45-day comment period on the rate setting proposal. AHIP launched a multi-pronged attack on the proposal which included television commercials in selected markets across the country detailing how the proposed cuts would harm seniors enrolled in the program, and social media campaigns urging people to contact members of Congress to voice their opposition to the proposed cuts.

In a rare show of bi-partisan cooperation on Capitol Hill, Democrats and Republicans from both the House and Senate sent letters in mid-March to CMS decrying the proposed cuts and the method used to determine the growth rate.

“CMS continues the illogical policy of assuming the scheduled 25 percent reduction in the Medicare physician fee schedule (SGR) will be implemented on January 1, 2014. The assumption on the SGR is particularly problematic because it almost certainly will turn out to be wrong and it directly translates into lower funding to support the health benefits of the 14 million Medicare beneficiaries who currently are enrolled in MA plans,” read a portion of the letter signed by 98 member of the House.

CMS may have found its way out of the problem based on a March 26 report from the Congressional Research Service, which said the Secretary of Health and Human Services and CMS did have the latitude to set Medicare Advantage rates based on the assumption of the so-called doc-fix passed virtually every year by Congress.

And it was this factor, which CMS cited in its revised growth rate projections.