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CMS pitches smaller increase for Medicare Advantage payment rate

Lower rate increase offset by policy changes that CMS did not put into effect.

Susan Morse, Managing Editor

Final Medicare Advantage payment rates for 2017 are lower than those proposed by the government in February, the Centers for Medicare and Medicaid Services said on Monday.

In its final rate notice, CMS said it would increase what it pays insurers, on average, by 0.85 percent.

This compares to the 1.35 percent rate increase CMS proposed in February.

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[Also: CMS proposes 1.35% increase on 2017 Medicare Advantage plans]

However, the lower rate increase is offset by policy changes that CMS did not put into effect. Taken as a total, the less than expected raise along with policy changes proposed in February would have resulted in an overall 0.5 to 3.9 percent cut in Medicare Advantage payments, according to a March 3 AHIP report.

After Monday's announcement, AHIP's President and CEO Marilyn Tavenner said she was pleased with most of CMS's final rates and policies for 2017.

"Medicare Advantage is a lifeline for more than 17 million seniors across the country," she said. "With beneficiaries facing new cuts to their coverage, more than 400 Members of Congress - the most support ever for the program - stood up to protect beneficiaries' benefits. Following this overwhelming bipartisan Congressional outreach, CMS took steps to mitigate the negative impact 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."

Medicare Advantage plans received a 1.25 percent raise last year for 2016.

The new 0.85 payment rate increase does not account for an additional 2.2 percent health plans add from coding acuity, according to CMS.

The total 3.05 percent rate is less than the total 3.55 percent CMS proposed in February. The final revenue increase is somewhat smaller than what was proposed due primarily to technical updates in normalizing risk adjustment, CMS said, adding that the growth is consistent with last year's update and reflects a similar pattern in Medicare fee-for-service payments.

AHIP had lobbied to keep current rates, saying seniors could face cuts to their coverage and benefits if CMS initiated payment changes to health plans. The final payment rates incorporate changes in response to comment period feedback, according to CMS.

The federal agency made a concession in agreeing to phase in cuts to employer-sponsored Medicare Advantage plans over two years instead of one.

CMS also backed off of on a new model for encounter data, which is used to assess risk scores.

New policies will improve the accuracy of payments to Medicare Advantage plans that serve vulnerable populations, such as dually eligible or low income beneficiaries, CMS said.

There is a revised methodology on risk-adjusted payments to health plans that will more accurately reflect the cost of care for dually eligible beneficiaries, CMS said.

CMS is also implementing an interim adjustment to the star ratings to reflect the socioeconomic and disability status of a plan's enrollees, it said, and will finalize policies that will further combat opioid overutilization by encouraging safeguards before an opioid prescription is filled at the pharmacy.

"We continue to strengthen Medicare Advantage and Medicare Part D, in particular for enrollees who need additional investments in their health, such as dually Medicare-Medicaid eligible individuals and those with complex socioeconomic needs," said CMS Acting Administrator Andy Slavitt.

Enrollment in Medicare Advantage has increased by more than 50 percent since passage of the Affordable Care Act to an all-time high of more than 17.1 million, or 32 percent, of Medicare beneficiaries, CMS said.

Average plan premiums are lower than before the Affordable Care Act went into effect, dropping about 10 percent between 2010 and 2016, CMS said.

Twitter: @SusanJMorse