Medicare Advantage Payment Rates for 2015 Cloaked in Uncertainty

With weeks to go before federal regulators set the final figure for a payment rate cut to the Medicare Advantage program, insurers and financial analysts are predicting the blow will be twice as hard as what CMS proposed last week.

Confusion continues to swirl around Friday's release of the 2015 federal notice for Medicare payment rates that calls for a cut of at least 1.9 percent. But insurers and financial analysts believe the final payment cut figure that will be set on April 7 will be at least twice as deep.

In an email released on Monday, America's Health Insurance Plans predicted the payment cut to Medicare Advantage in the federal fiscal year beginning in October would be at least 4 percent. The Medicare Advantage payment rate was cut more than 6 percent for the current fiscal year.

See Also: CMS Proposes MA Payment Cut

"While we continue to evaluate the proposed rate notice and its impact on overall Medicare Advantage payments, estimates released over the past few days from a broad array of analysts help highlight the magnitude of the proposed cut facing seniors in Medicare Advantage next year," AHIP said in prepared statement that included quotations from industry analysts predicting MA payment rate cuts as deep as 9.3 percent.

"Reports from leading industry analysts show broad consensus that the CMS proposal, if finalized, would result in Medicare Advantage payment cuts of at least 4 percent in 2015 and likely much higher once other changes are factored in. This means that total cuts to Medicare Advantage would exceed 10 percent in just a two-year period, causing further disruption for the more than 15 million seniors who get their Medicare coverage through Medicare Advantage."

A federal Centers for Medicaid & Medicare Services spokesperson reached Tuesday said the agency could not "speculate" about any add-ons that could increase the size of the financial hit to Medicare Advantage insurers. The official also defended the 1.9 percent cut announced Friday.

"The proposed changes for 2015 for Medicare Advantage are smaller than those implemented in 2014," the spokesperson said. "As we've seen over the past few years, efforts to reduce overpayments for medical services have corresponded with falling premiums for consumers."

"Since the Affordable Care Act became law, enrollment in Medicare Advantage 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."

While the financial markets abhor uncertainty, Wall Street reacted positively to a security exchange filing Monday by Humana that predicted the company would experience a weaker-than expected 2015 Medicare funding decline. Humana reported the financial hit could be harder depending on the impact of proposed changes to enrollee risk assessments.

Humana stock ended trading Monday up 10 percent.

In a research note released Tuesday, Wells Fargo sounded a cautiously bullish tone for investors in Medicare Advantage insurers such as Humana.

"We now expect the overall headwinds to [Medicare Advantage] health plans for 2015 to be 3.79 percent (better than our previous estimate of 5.67 percent), with some variation by plan and county," Wells Fargo reported.

"This is consistent with an 8-K released by Humana on February 24, in which the company updates its anticipated funding decline in MA in 2015 to 3.5-4.0 percent (from 6.0-7.0 percent). We expect significant pressure from the industry for further improvements in the final rate notice expected on April 7, but believe further help is less likely."

Humana holds the second-largest Medicare Advantage market share, with nearly 2.8 million members as of Jan. 10, according to a report Monday from Moody's Investors Services. UnitedHealth Group leads in market share at about 3.2 million members, and Aetna is third at 1.1 million members.

"Overall growth was good for most companies," Moody's concluded on data collected from September 2013 to January 2014, "with variations in the growth rates among companies reflecting local strategies, acquisitions or the competitive environment."

On the political front, Republicans are seizing the opportunity to assail the Obama administration over the proposed Medicare spending cuts. Florida Gov. Rick Scott, a Republican, blasted the cuts after meeting with the President Monday.

"If the President cares about our seniors, he needs to fix Obamacare immediately," Scott said in a prepared statement on his website. "We learned last week that Medicare is being raided to pay for Obamacare which is hurting our seniors who could lose access to the doctors they liked and were told they could keep. We need to give our seniors a voice and ask the President directly to not pay for Obamacare by raiding Medicare."