Medicare Advantage payment cuts coming?

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CMS says reductions will average 1.9%; insurance companies say cuts will be much larger

Medicare wants to cut its payments to Medicare Advantage (MA) plans for 2015. And while the proposed reductions will be smaller than many in the insurance industry were expecting, they could still mean higher costs for enrollees in Advantage plans, reductions in payments to doctors, narrowing of provider networks, or some combination of the three. 

On February 21 the Centers for Medicare and Medicaid Services (CMS), announced preliminary payment and policy updates for Medicare health and drug plans for 2015. In its announcement, CMS estimated the rates it was proposing would lead to payment reductions of 1.9% to private plans in the MA program.

CMS says the reductions reflect “historically low growth in per-capita spending” and initiatives promoting “value over volume” that have cut waste, fraud, and abuse in Medicare’s fee-for-service programs. Jonathan Blum, CMS principal deputy administrator, says CMS wants to make certain that MA is providing both “high quality, high value, low cost” options to beneficiaries and “value to Medicare and taxpayers.”

But commercial insurance carriers say the actual reductions would be more severe. America’s Health Insurance Plans (AHIP), the trade association representing the health insurance industry, cites an analysis of the February 21 announcement by the management consulting firm Oliver Wyman, showing that CMS’ proposed changes would result in a 5.9% cut to Medicare Advantage payments. Reductions of that size, AHIP says, would lead to benefit reductions and premium increases of $35 to $75 per month.



“CMS should keep Medicare Advantage payment rates flat next year to protect seniors from harmful cuts that would cause them to face higher costs and lose benefits and choices,” Karen Ignagni, AHIP’s president and chief executive officer, said in a statement.

Another analysis of the CMS announcement, from the Gorman Health Group, concludes that the MA impact will average a redution of 4.9% when all the 2015 factors are accounted for.

In November 2013 insurance carrier UnitedHealthcare caused an uproar among physicians when it announced plans to trim its MA physician panel. While not tied directly to cuts in Medicare funding, a company executive told The Wall Street Journal, “It’s no secret that we are under substantial funding pressure from the federal government.”

UnitedHealthcare also said it expected its MA network to be 85% to 90% of its current size by the end of 2014. The company’s plans were put on hold, at least temporarily, by an injunction obtained by two county medical societies in Connecticut that are opposed to the network exclusions.

The final rule containing 2015 payment formulas will be released April 7.