CMS Proposes Medicare Advantage Payment Cut of At Least 1.9 Percent

The proposed 2015 payment rate cut to Medicare Advantage health plans is less than expected and less than the reduction this year, but insurers and their allies in Congress are expressing displeasure with the prospect of a second consecutive haircut.

The Centers for Medicare & Medicaid Services is proposing a Medicare Advantage pay cut of at least 1.9 percent despite urging from lawmakers and insurers to maintain current payment rates in 2015.

The payment cut would affect Medicare Advantage health plans in 2015.

See Also: MA Payment Rates for 2015 Cloaked in Uncertainty

"Preliminary estimate of the combined effect of the Medicare Advantage growth percentage and the fee-for-service growth percentage is estimated to be -1.9 percent," CMS said Friday. The agency released a 148-page document detailing proposed MA payment and other changes in the fiscal year starting in October. "This historically low growth in Medicare per-capita spending is tied, in part, to successful initiatives undertaken to promote value over volume and help curb fraud, waste, and abuse in the Medicare fee-for-service program in recent years."

Supporters of the MA program, including some of the country's leading insurers, say a second straight year of cuts would impede progress toward a value-based healthcare system and would lead to higher out-of-pocket expenses for seniors.

"The proposed funding cuts threaten the stability of the Medicare Advantage program, which has proven to provide high levels of satisfaction and quality of care for millions of beneficiaries," Aetna officials said in a statement provided to HealthLeaders Media Thursday. "Research shows that these plans outperform Medicare fee-for-service in 9 out of 11 clinical quality measures and have high levels of member satisfaction."

After MA payments took a 6 percent hit in 2014, insurers nationwide and lawmakers in Washington began pressing CMS to maintain the current payment rate level next year. The opposition effort includes a Feb. 14 letter to CMS signed by a bipartisan group of 40 US senators. And at the grassroots, America's Health Insurance Plans has launched a campaign urging seniors to contact their representatives in DC called Seniors are Watching.

According to the senators' letter to CMS, MA health plans are in line with crucial health care reform goals and are performing well. "Studies show that enrollees in the MA program enjoy better health outcomes and receive higher quality care than their counterparts in the Medicare fee-for-service program," the lawmakers' letter states.

After the CMS proposal was announced, Senator Orrin Hatch (R-UT), said in a statement, "These Medicare Advantage cuts are misguided, threaten a successful program for seniors, and must be overturned. Medicare Advantage is extremely popular for a reason. Run through the private market, seniors gain access to high-quality and coordinated care with additional benefits that they otherwise wouldn't get."

Two consecutive years of deep cuts could have dire consequences for insurers. "If rate reductions are imposed, health plans will have to make difficult choices that could create disruption and confusion among beneficiaries," Aetna said. "Reducing benefits and plan options, charging higher premiums and copays, offering products with limited provider networks, and, in some cases, leaving the market, are all possible consequences of a second round of cuts to the program."

According to a recent Oliver Wyman report commissioned by AHIP, seniors and people with disabilities enrolled in Medicare Advantage plans would face premium increases and benefit losses of $35 to $75 per month, or $420 to $900 annually, if MA payments were to be reduced by 6 percent next year.

After MA payments were cut 6 percent for 2014, beneficiaries experienced monthly cost increases and benefit cuts from $30 to $70, the Oliver Wyman report found.

Citing the likelihood of "significant upheaval in the MA market," the Oliver Wyman report warns of the "potential for plan exits, reductions in service areas, reduced benefits, provider network changes, and reduced MA enrollment."

In a prepared statement released Friday night, AHIP President and CEO Karen Ignagni cautioned against any further cuts to MA payments.

"The new proposed Medicare Advantage cuts would cause seniors in the program to lose benefits and choices on which they depend," she said. "Last year’s six percent cut to Medicare Advantage rates resulted in higher premiums, reduced benefits, fewer coverage options, and loss of provider choices for seniors. Another round of payment cuts would be devastating to the more than 15 million seniors and people with disabilities that have chosen to enroll in Medicare Advantage for the better benefits and higher quality coverage these plans provide."

In AHIP's view, the MA payment cut could be much higher than 1.9 percent. "There are a number of factors that impact total Medicare Advantage payment rates. The growth rate percentage included in the rate notice is only one factor and does not represent what the total cut will be when other factors are included. In fact, there is no single number in the rate notice that represents the cumulative impact on rates," AHIP said.

Aetna officials encouraged CMS to avoid casting too great a burden on Medicare Advantage as federal healthcare reform initiatives move forward.

"The healthcare reform law includes more than $200 billion in payment cuts, most of these have not yet gone into effect. It also imposes a new health insurance tax that begins this year," they said. "These funding reductions plus other changes to the program resulted in payment cuts of 6.5 percent in 2014… CMS should keep current payment levels and protect MA beneficiaries from any additional cuts, other than those that are already part of the health care reform law."

CMS expects to set the final Medicare Advantage payment rate for 2015 in early April.