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Medicare Advantage rates to climb by 1.25 percent for 2016, CMS says, reversing proposed cuts

CMS said the final revenue increase was driven by a spike in Medicare fee-for-service spending per capita estimates.

The Centers for Medicare and Medicaid Service said the final revenue increase was driven by a spike in Medicare fee-for-service spending per capita estimates.The Centers for Medicare and Medicaid Service said the final revenue increase was driven by a spike in Medicare fee-for-service spending per capita estimates.

The Centers for Medicare and Medicaid Services on Monday said its 2016 reimbursement policy will lead to an average increase of 1.25 percent for Medicare Advantage plans, a reversal from the 0.95 percent decline initially proposed in February.

Accounting for beneficiary risk scores, the 0.95 percent proposed decline was estimated to come with an average increase of 1.05 percent. The final regulation’s 1.25 percent average increase will be a 3.25 percent post-adjustment boost, although the actual reimbursement will vary greatly across plans and regions depending on star ratings, performance and membership.

CMS said the final revenue increase is more than proposed largely because Medicare fee-for-service spending per capita estimates climbed by 1.9 percent to a growth rate of 4.2 percent. However, the rate remains below historical standards, CMS said.

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[Also: See what CMS proposed in February]

Medicare Advantage enrollment has ballooned since the Affordable Care Act was enacted, growing by 42 percent to more than 16 million seniors, or 30 percent of Medicare beneficiaries, according to CMS. In the same five years, premiums have also fallen by around 6 percent and 90 percent of Medicare beneficiaries can choose a plan with no premium, according to CMS. In 2015, 60 percent of MA enrollees will be covered in a four- or five-star plan, compared to an estimated 17 percent in 2009.

The industry, led by America’s Health Insurance Plans, has been concerned about the ACA’s mandated reductions in Medicare Advantage, to bring them into parity with fee-for-service rates. But CMS says it has effectively managing the transition, meeting the ACA’s goals by gradually bending the cost curve and also nurturing more choices and benefits for seniors.

“As the Medicare Advantage marketplace continues to grow, consumers are getting access to better care through more choice and competition,” said Andy Slavitt, acting CMS Administrator and former UnitedHealth Group executive. “Seniors and people with disabilities, including the dual-eligible population, will continue to have an extensive choice of plans, affordable premiums, and better and more transparent information about provider networks and pharmacies.”

[Also: These 779 hospitals actually scored Medicare bonuses]

Among the most significant policy changes for 2016, CMS is transitioning to an entirely new model for risk adjustment scores, after using a blend of old and new hierarchical condition category calculations in the 2015 plan year. However, for star ratings, CMS is not going to reduce seven measure weights to help plans serving Medicare-Medicaid dual eligible beneficiaries, as was proposed.

Another significant area in the regulations is network adequacy, following a number of incidents over the past few years of large MA sponsors like UnitedHealthcare, which has a 20 percent share of market, ending contracts with physician groups and hospitals in a bid to lower costs.

Though not new, CMS said that it expects MA plans to “update directories in real time, and have regular, ongoing communications with providers to ascertain their availability and, specifically, whether they are accepting new patients.”

The agency also warned that it will be enforcing those rules, with direct verification through a contractor, a new audit protocol and enforcement actions for those without a sufficient number of providers accepting new patients. Last year, CMS took 35 enforcement actions against MA and Part D sponsors for a range of issues, including limited provider access and charges for higher than allowed out-of-pocket costs. Among the enforcement actions last year were 25 fines in the six figures. This year, CMS has fined $1 million to Aetna for Part D directories that erroneously listed 7,000 pharmacies as being in-network.

In other areas, CMS is promising to track a number of issues, including MA and Part D plans for high-risk beneficiaries and Medicare-Medicaid dual eligibles.

CMS said it sees Medicare Advantage as a key part of the exodus away from Medicare fee-for-service. The agency wants to have a conversation with MA plans about the current and future of valued-based payment.

[Also: Which states earned the most Medicare bonuses?]

“CMS will be reaching out to and having conversations with MA organizations regarding how they are using physician incentive payments (e.g. payments based on quality of care, patient satisfaction) and value-based contracting of provider services to achieve these goals,” the agency said. “Based on this input, we will also, this year, ask MAOs to share data regarding their adoption of alternative payment models. In the context of value-based contracting we are also interested in comments from MAOs regarding issues or concerns they may have regarding compliance with the physician incentive regulations.”

For health systems, Medicare Advantage is a big opportunity to leverage payer contracts, ACOs or even use plan-provider integration. There are almost 100 provider-sponsored health plans in the country, and at least several dozen provider-sponsored MA plans, such Kaiser Permanente, Providence Health Plan, Gundersen Health Plan and UPMC Health Plan.

Here is the full CMS regulation:


Twitter: @AnthonyBrino