In­sur­ers pre­dict Medi­care Ad­van­tage cuts even as CMS touts rate in­crease

Modern Healthcare - - NEWS - By Cather­ine Hol­lan­der —Cather­ine Hol­lan­der is a San Fran­cisco-based free­lance writer.

In­sur­ers and Wall Street an­a­lysts fore­see 2015 pay­ment cuts for Medi­care Ad­van­tage plans even as the Obama ad­min­is­tra­tion, un­der in­tense in­dus­try lob­by­ing, said last week that it planned to slightly boost rates.

On April 7, the CMS an­nounced it would raise over­all Ad­van­tage rates by 0.4% in 2015, re­vers­ing course from a Fe­bru­ary pro­posal the ad­min­is­tra­tion said would have led to a 1.9% rate cut. An­a­lysts had cal­cu­lated that the pre­lim­i­nary pol­icy would cut pay­ments be­tween 3% and 5%. Last week’s rate an­nounce­ment came as a sur­prise to most an­a­lysts, who had fore­cast a larger cut.

The pos­i­tive change is the re­sult of “var­i­ous pol­icy changes” and “new es­ti­mates,” said Jonathan Blum, CMS’ prin­ci­pal deputy ad­min­is­tra­tor. These in­clude the ad­min­is­tra­tion’s ap­proach to phas­ing in a new risk model and a de­ci­sion to walk away from a pro­posal to re­quire that home-risk as­sess­ments be con­firmed by in-of­fice as­sess­ments.

Ana Gupte, an an­a­lyst at Leerink Part­ners, called the re­vised pol­icy “an im­prove­ment rel­a­tive to the pre­lim­i­nary rate,” but said she still be­lieved over­all rates would fall by roughly 3% next year. UBS an­a­lysts also said they ex­pected 2015 rates to fall by 3%.

The move may give con­gres­sional Democrats some po­lit­i­cal cover with se­nior vot­ers against GOP at­tacks in the Novem­ber elec­tions. Amer­ica’s Health In­sur­ance Plans has led a ma­jor lob­by­ing and ad­ver­tis­ing drive to keep the ad­min­is­tra­tion from cut­ting the rates. The in­dus­try notched at least one sig­nif­i­cant vic­tory with the ad­min­is­tra­tion’s de­ci­sion to de­lay a plan to ex­clude di­ag­no­sis codes de­rived from home-risk as­sess­ments, which J.P. Mor­gan an­a­lysts es­ti­mated would have cut rates by an additional 2%.

The Amer­i­can Hospi­tal As­so­ci­a­tion and other provider or­ga­ni­za­tions also lob­bied hard against the home-risk as­sess­ment method­ol­ogy, said Sh­eryl Skol­nick, man­ag­ing di­rec­tor and se­nior health­care an­a­lyst at CRT Cap­i­tal Group.

“The ad­min­is­tra­tion is start­ing off at a lower base­line that no one seems to be able to come up with.”

— Ana Gupte An­a­lyst Leerink Part­ners

Some an­a­lysts saw pol­i­tics in the CMS’ rate an­nounce­ment. “I’m very sus­pi­cious about how you get from their es­ti­mate of down 1.9 to plus (0.4%), when it just so hap­pens to be ex­actly the kind of over­all rate change that the Democrats need to sup­port their elec­tion hopes,” Skol­nick said.

The im­pact of CMS’ de­ci­sion on Medi­care Ad­van­tage plans will vary depend­ing on the plan and where it’s lo­cated. But over­all, in­sur­ers, who de­pend on Ad­van­tage plans for a grow­ing share of their rev­enue and prof­its, said they will see a de­cline. “The changes CMS in­cluded in the fi­nal rate no­tice will help mit­i­gate the im­pact on se­niors, but the Medi­care Ad­van­tage pro­gram is still fac­ing a re­duc­tion in pay­ment rates next year on top of the 6% cut to pay­ments in 2014,” AHIP Pres­i­dent and CEO Karen Ig­nagni said in a writ­ten state­ment.

Hu­mana, one of the ma­jor play­ers in Medi­care Ad­van­tage, es­ti­mated that rates will drop roughly 3% for 2015, based on a pre­lim­i­nary re­view of last week’s no­tice, ac­cord­ing to its fil­ing with the U.S. Se­cu­ri­ties and Ex­change Com­mis­sion. Cigna es­ti­mated a 3% cut “when fac­tor­ing in CMS changes with the Af­ford­able Care Act and other in­dus­try fees set to take ef­fect in 2015,” it said in a writ­ten state­ment.

A CMS spokesman de­clined to com­ment on the cal­cu­la­tions from in­sur­ers and Wall Street.

An­a­lysts cau­tioned that teas­ing out pre­cisely how the govern­ment cal­cu­lates its num­bers is a dif­fi­cult task, but of­fered some pos­si­ble ex­pla­na­tions.

“The ad­min­is­tra­tion is start­ing off at a lower base­line that no one seems to be able to come up with,” said Leerink’s Gupte.

The im­pact of pol­icy changes the ad­min­is­tra­tion made be­tween Fe­bru­ary and the an­nounce­ment this week—about 2.5 per­cent­age points—seems to be in line with Wall Street es­ti­mates, Gupte said. It’s just that the ad­min­is­tra­tion is start­ing from a much higher fig­ure.

In other words, if you add the 2.5 per­cent­age points to the -5.5% that some an­a­lysts be­lieved was the base­line in the CMS pol­icy pro­posed in Fe­bru­ary, you still end up in neg­a­tive ter­ri­tory. But if you add the same changes to a -1.9% base­line, you end up with a rate in­crease, which is how the CMS pre­sented its cal­cu­la­tions last week.

An­other an­a­lyst noted the way the ad­min­is­tra­tion is cal­cu­lat­ing risk ad­just­ments as the source of the dis­crep­ancy. The CMS is cal­cu­lat­ing an additional ben­e­fit of 3.9% at­trib­uted to “other risk ad­just­ment up­dates” that Wall Street doesn’t rec­og­nize, said Chris Rigg, a health­care an­a­lyst at Susque­hanna Fi­nan­cial Group.

More than 15 mil­lion se­niors are en­rolled in Medi­care Ad­van­tage plans, or nearly 30% of the to­tal Medi­care pop­u­la­tion. In­sur­ance com­pa­nies must sub­mit bids for next year’s plans to the CMS by June 2.

The Pa­tient Pro­tec­tion and Af­ford­able Care Act sought to bring the cost of Ad­van­tage plans more closely in line with tra­di­tional Medi­care. But Medi­care cur­rently spends sig­nif­i­cantly more on Ad­van­tage en­rollees than on tra­di­tional Medi­care ben­e­fi­cia­ries.

“The changes un­der­way re­vise pay­ments to Medi­care Ad­van­tage plans to be more con­sis­tent with costs in tra­di­tional Medi­care, while in­cen­tiviz­ing qual­ity im­prove­ments by bas­ing part of Ad­van­tage pay­ment on plan qual­ity per­for­mance,” the CMS said in a fact sheet.

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.