Medi­care Ad­van­tage cuts are likely for in­sur­ers

In­sur­ers will likely see Medi­care Ad­van­tage cuts

Modern Healthcare - - NEWS - Jes­sica Zig­mond

HHS has of­fered a pic­ture of what it ex­pects cer­tain in­surance pay­ment and cov­er­age pro­vi­sions to look like in 2014, and, when it comes to pay­ment rates, in­sur­ers don’t like what they see. The first glimpse came when HHS re­leased—af­ter the mar­ket closed Feb. 15— pro­posed Medi­care Ad­van­tage and Part D plan pay­ment and pol­icy changes that drew the ire of trade group Amer­ica’s Health In­surance Plans and sent health in­surance com­pany shares tum­bling the fol­low­ing week. Days af­ter the no­tice, HHS is­sued its fi­nal reg­u­la­tion on the health­care re­form law’s es­sen­tial health-ben­e­fits pro­vi­sion that re­ceived lit­tle re­ac­tion from the in­dus­try be­cause it largely mir­rored the de­part­ment’s pro­posed rule and ear­lier guid­ance.

In an ad­vance no­tice and com­ment let­ter for Medi­care Ad­van­tage and Part D plans, the CMS an­nounced for 2014 a neg­a­tive 2.2% growth per­cent­age rate, a met­ric that is used to help cal­cu­late the pay­ment bench­marks for Medi­care Ad­van­tage plans in coun­ties na­tion­wide. The agency at­trib­uted the neg­a­tive growth rate to “his­tor­i­cally low growth in Medi­care per-capita spend­ing” that it at­tributes to ef­forts the Medi­care pro­gram has made to com­bat fraud and pro­mote qual­ity over vol­ume. The CMS also pro­posed ben­e­fi­ciary de­ductible lev­els, outof-pocket thresh­olds and cov­er­age lim­its for Medi­care Part D next year.

In­sur­ers took a bleak view of the news, as the es­ti­mated neg­a­tive 2.2% growth per­cent­age rate trans­lates into re­duced pay­ment lev­els for Medi­care Ad­van­tage plans. In a state­ment, AHIP Pres­i­dent and CEO Karen Ig­nagni said the pro­posed changes are a “crush­ing blow” to about 14 mil­lion se­niors and peo­ple with dis­abil­i­ties who count on Medi­care Ad­van­tage.

“Th­ese cuts will com­pound the $200 bil­lion in Medi­care Ad­van­tage cuts and the new health in­surance tax in­cluded in the health­care re­form law,” Ig­nagni said. “The Con­gres­sional Bud­get Of­fice projects that the re­form law’s pay­ment cuts alone will re­sult in 3 mil­lion fewer peo­ple en­rolled in Medi­care Ad­van­tage,” she said, adding that the cu­mu­la­tive ef­fect of all of th­ese changes will re­duce Medi­care Ad­van­tage pay­ments next year by more than 8%, or about $11 bil­lion.

In se­cu­ri­ties fil­ings, in­surance com­pany Hu­mana said it ex­pects a “mid-sin­gle-digit de­cline” in its Medi­care Ad­van­tage bench­mark pay­ment rates, chang­ing course from its ear­lier es­ti­mate that bench­mark pay­ment rates would be “flat or slightly down.” Mean­while, shares of the Louisville, Ky.-based com­pany dropped more than 6% im­me­di­ately af­ter the news, while in­surance com­pa­nies Unit­edHealth Group, Health Net and Cigna Corp. also saw their shares fall.

AHIP re­sponded in part by is­su­ing a report from its re­search and pol­icy cen­ter that em­pha­sized how low-in­come and mi­nor­ity Medi­care ben­e­fi­cia­ries count on Medi­care Ad­van­tage for cov­er­age. For in­stance, the report noted, 28% of all Medi­care ben­e­fi­cia­ries were en­rolled in Medi­care Ad­van­tage plans, while 31% of African-Amer­i­can Medi­care ben­e­fi­cia­ries and 38% of His­panic Medi­care ben­e­fi­cia­ries were en­rolled in Medi­care Ad­van­tage plans. The report also found that while 37% of all Medi­care ben­e­fi­cia­ries had in­comes of $20,000 or less, 41% of Medi­care ben­e­fi­cia­ries with Medi­care Ad­van­tage cov­er­age had in­comes at that level or be­low.

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