The Centers for Medicare and Medicaid Services on Friday proposed reimbursement rates for its Medicare Advantage program that range from a decrease of 0.9 percent to an increase of 1.05 percent, depending on the level of risk the insurer assumes. The move means insurers could put added pressure on hospitals to generate savings.
The CMS announcement now sets off a six week dialogue and lobbying blitz as the industry struggles to adapt to the Affordable Care Act’s mandate to bring Medicare Advantage rates in line with fee-for-service rates.
The new regulations are intended to “enhance the stability of Medicare Advantage program and minimize disruption to seniors and care providers,” said CMS principal deputy administrator Andy Slavitt, a former executive at UnitedHealth Group, the nation’s largest insurer in Medicare Advantage and beyond.
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The 0.9 percent decrease and the 1 percent increase are only averages, though.
“There will be significant variation around these numbers,” said deputy administrator Sean Cavanaugh. Medicare Advantage plans with good quality ratings and beneficiary satisfaction — with star ratings at 4 or 5 — will receive a 5 percent bonus reimbursement, and continue to receive reimbursement “somewhat higher than the equivalent payments in fee for service.”
As proposed, the regulations will continue the transition to a new risk adjustment methodology that is aimed at preventing inflated risk scores and helping achieve the parity with fee-for-service by 2017. Prior to the ACA, Medicare Advantage plans were being reimbursed as much as 15 percent more than the FFS program on a per-beneficiary basis. The past two years have already brought that disparity down by 10 percent, according to America’s Health Insurance Plans.
Dubbed the CMS-HCC model, the new risk adjustment methodology is partly being used this year and relies on more current data and clinical categories. Though the agency will still allow controversial home-based risk assessment, the old risk adjustment methodology was a significant driver of growth and earnings in the Medicare Advantage program.
Sterne Agee managed care analyst Brian Wright said the risk adjustment transition “is clearly a shot across the industry's bow with regard to this issue that CMS means business.”
At the same time, Medicare Advantage has robust enrollment. Low or no monthly premiums, combined with perks like gym discounts or vision products, have attracted more than 16 million seniors to Medicare Advantage plans, almost 30 percent of all Medicare beneficiaries. And that number is likely to grow.
Providers could be stung from limiting access for Advantage members. UnitedHealthcare garnered criticism for narrowing some of its Medicare Advantage networks and dropped hundreds of physicians from its Medicare networks across 10 states. Aetna, too, has taken flack for carving independent pharmacists out of its Medicare Part D drug plans, which seniors often buy in tandem with Advantage.
Medicare Advantage also brings a lot of opportunities for health systems, from partnering with insurers on accountable care networks to sponsoring their own Medicare Advantage plan.
At least a dozen health systems are running or jointly running Medicare Advantage plans, including Catholic Health Initiatives, Gundersen Health System, Indiana University Health, Mount Sinai and Health Partners, an HMO-owned by a group of hospital systems with Philadelphia’s fastest growing Medicare Advantage plan.
Given all the uncertainty and complexities with the Medicare accountable care organization programs, some think Medicare Advantage could be a kind of exit strategy for health systems operating Medicare ACOs.
[Also: Advantage plan tempts ACOs]
For health systems, launching a Medicare Advantage plan may be a way to “move up the food chain” and meet many of the same goals of ACOs without their downsides, said consultant John Gorman, founder of the Gorman Health Group.
Medicare ACOs, Gorman said, have suffered from an inability to control beneficiary out-migration and an inability to generate savings in already efficient markets, leaving some health systems “scratching their heads and wondering how to monetize the millions they’ve invested in population health and complex case management — the ‘hard part’ of Medicare managed care.”
While Medicare Advantage has its own challenges, the ability to design a network chiefly based on a health system’s providers is a good solution to the ACO’s problem of out-migration, seniors being able to use any provider they choose.
“If you’re a health system,” Gorman said, “instead of investing in a Medicare ACO, take your money to Vegas or to Medicare Advantage — in either place you know the rules and the odds.”