Medicare Advantage Cuts Expected

Healthcare payers and providers are bracing for a payment rate cut to Medicare Advantage health plans next year. The 2015 rate is expected to be announced Monday by CMS.

In February, federal officials received a decidedly cold reaction to a proposed 2015 Medicare Advantage payment rate cut from the health insurance industry. Next week, regulators will likely feel some heat when they announce a final decision on the cut.

On Monday, the federal Centers for Medicare & Medicaid Services is set to release the final 2015 Rate Announcement and Call Letter that will establish payment rates and rule changes for next year. Among the most contentious changes CMS proposed in February is a payment rate cut to MA that insurers have estimated at just under 6 percent.

Medicare Advantage Program Standards Tightening

America's Health Insurance Plans, the main trade association for healthcare payers, has waged an aggressive lobbying campaign against the anticipated MA cut. The effort has included organizing seniors as well as an avalanche of press releases and op-ed pieces.

In an editorial published Wednesday in USA Today, AHIP President and CEO Karen Ignagni said a 6 percent cut to MA for a second year in a row could result in millions of seniors losing their health insurance policies.

"History often repeats itself, and that reality is a daunting one for seniors in Medicare Advantage," Ignagni wrote. "While some have argued that cuts to the popular program would do nothing to jeopardize seniors' health benefits, precedent tells us this isn't true. In 1997, Congress passed substantial cuts to Medicare Advantage, then known as Medicare+Choice. As a result, between 1999 and 2003, nearly 2.4 million seniors lost their health care coverage. That's a dangerous precedent."

Hospitals have also been lobbying against cuts to MA. On March 17, a coalition of hospitals, businesses, and hospital associations began airing a television ad blasting the proposed cuts. In a statement announcing the ad, the Coalition to Protect America's Health Care said it had launched "a major new advertising campaign" that included print ads at two Metro stations in Washington, DC.

There are more than 15 million seniors enrolled in MA health plans. About 40 percent of MA beneficiaries have annual incomes below $20,000 and are cost-sensitive to changes in their healthcare expenditures, according to AHIP.

Soon after the Feb. 21 release of the proposed 2015 Medicare payment rates and rule changes, a CMS spokesman defended the agency's plans for 2015. "Since the Affordable Care Act became law, enrollment in MA has increased nearly 33 percent while premiums have fallen by 10, and premiums for Part B have remained flat. We believe that beneficiaries will have a wide array of high quality, low cost options in 2015 while we make certain that plans are providing value to Medicare and taxpayers," he said.

A study AHIP commissioned in late February pegged the likely 2015 payment rate cut for MA at 5.9 percent. The New York-based management consulting firm Oliver Wyman conducted the research.

For beneficiaries, the payment cut would result in reductions of MA benefits or increases in MA out-of-pocket costs from $35 to $75, the study predicts. The dollar impact on beneficiaries from the 6 percent MA payment cut in the current year ranges from $30 to $70, it says.

Other changes CMS is expected to announce Monday include the transition from the demonstration phase of the MA five-star ratings program to a more stringent operational phase. One of the biggest changes slated for the star-based ratings program in 2015 is giving CMS authority to terminate MA health plans that earn less than a four-star rating for three consecutive years.