April 3, 2013
There seems to be much confusion surrounding the recent drama of Medicare Advantage’s (MA) 2014 payment rate. Here’s what happened:
In February, the Centers for Medicare and Medicaid Services (CMS) released its advance notice of estimates of the national per capita Medicare Advantage (MA) growth percentage, which is a key factor in determining the MA payment rate for 2014. The notice revealed that MA payment rates were set to decrease by 2.2 percent. The CMS had until April 1 to finalize the rate.
This 2.2 percent reduction would have been on top of the MA reductions included in Obamacare ($156 billion over 10 years) and Obamacare’s new annual fee on health insurers, often referred to as the “premium tax” (costing $101.7 billion over 10 years), which will also hit MA plans.
America’s Health Insurance Plans commissioned the consulting group Oliver Wyman to study the impact of these combined reductions on MA plans. The report concluded, “Virtually all of the 14.1 million Medicare beneficiaries are likely to be affected by these changes, either through increased premiums, reduced benefits, or plan exits from local markets. Many beneficiaries could lose access to MA plans and their approach to care.”
The report found that payment to MA plans would be reduced by an estimated total of 6.9 percent to 7.8 percent and the combined reductions “could necessitate benefit reductions and premium increases of $50 to $90 per member per month.”
The severely negative impact on MA and the 14 million seniors enrolled in MA plans caused bipartisan pushback from Congress: More than 160 Members of Congress wrote letters to the CMS asking them to reconsider the reductions by changing how they calculate the growth rate.
One way to change this calculation is to assume that Congress will pass a “doc fix” to override the sustainable growth rate (SGR), which calls for a 25 percent reduction to Medicare physicians’ payment in 2014. Congress has passed a doc fix to override current law every year since 2003. This significantly increases Medicare spending each year compared to what it would be if the SGR were allowed to take place—thus, assuming a “doc fix” would increase per capita MA spending.