The Centers for Medicare & Medicaid Services is easing back on some of the reductions to Medicare Advantage, although the negative impact could still be as much 3 percent for some insurers and many changes loom beyond 2015.
While industry groups and analysts disagreed with the agency's numbers, when the rates were proposed in February CMS estimated that the average rate decline would amount to just under 2 percent, based on a 3.5 percent downward adjustment of the National Per Capita Medicare Advantage Growth Percentage and other factors.
Now, CMS is projecting that average rates will rise slightly less than half a percent, after revised calibrations of risk models and a decision to phase in new, more selective risk adjustments.
The total beneficiary cost benchmark of $32 per-member per-month remains from the proposal, and the agency's actuarial estimates of cost growth trends were reduced from negative 1.9 percent to negative 3.4 percent. But three other factors that the agency is revising will contribute to a net increase of 0.4 percent, said Jonathan Blum, CMS deputy principal administrator.
Adjusting risk adjustments
One is a recalibration from 3.2 percent to 4.3 percent of demographics in the risk models, with a "baby boomer adjustment" that accounts for healthier seniors entering the Medicare program (and many choosing MA plans).
Another is a decision not to go forward with a proposal to exclude data collected during home risk assessments from enrollee risk calculations. The other is an easing-in of a new hierarchical condition category (HCC) risk adjustments. Instead of using a calculation based on 75 percent of 2013 scores and 25 percent of 2014 scores, the agency will use a blend of 67 percent and 33 percent.
The new risk model that began in the 2014 plan year and is being phased in at the 33 percent proportion will eventually increase, CMS wrote.
"We are committed to the new model; however, for 2015, given the number of changes in other payment factors, we believe that providing a longer timeframe for full implementation is appropriate," regulators wrote. Likewise, the withdrawn proposal to exclude home risk assessments (the second time it has been proposed and retracted) may return.
"CMS will continue to analyze the data on home risk assessments we began collecting and may reconsider this proposal to exclude home-based diagnoses for payment purposes in a future plan year," regulators wrote, expressing concern "that many home visits are being used primarily for the gathering of diagnoses for payment rather than to provide treatment and/or follow-up care to beneficiaries."
The agency is estimating that all those factors will mean the final benchmark for MA organizations offering bids this June will be an increase of 0.4 percent on average.
Impact will vary
With almost 30 percent of Medicare beneficiaries enrolling in an MA plan and with premiums falling about 10 percent in the last four years amid heightened competition, "we are very confident we will continue to see a very strong program going forward," CMS's Blum said.
"CMS has a very good track record at projecting plan participation, payments and enrollments," he said during a conference call. "We've been pretty spot on in the past four years predicting the market and how it's grown. So we've got a pretty strong track record with these estimates."
While CMS is dubbing the average payment impact from the benchmarks as an increase of 0.4 percent, industry analysts think it could amount to a reduction for many Medicare Advantage plans, depending on where they stand on all the contributing risk scoring calculations.
"All-in, we estimate Medicare Advantage rates will drop around 3.0-3.5 percent in 2015, which might be slightly worse than the consensus expectation," wrote Citi Research managed care analyst Carl McDonald.
America's Health Insurance Plans has not weighed in with estimates on the average impact, as the trade group's leaders take time to digest the 154 page final call letter.
Other analysts weighing in highlighted the fact that the many provisions in the annually-updated regulations -- including new standards for provider network changes, the phasing out of the quality bonus demonstration and revised templates for beneficiary coverage notices -- will have a range of impacts on insurers.
"There is a significant extent to which the effect of any one particular policy will vary by an MA plan," said Anne Hance, a partner at McDermott Will & Emery specializing in payer issues. While the rates are generally on a downward trend per the directives of the Affordable Care Act, Hance said that CMS does seem to be holding true to its promise of "achieving some stability in plan payments."
Provider, beneficiary notice updates
While offering payment stability, though, CMS is also adding some additional requirements for practices that regulators see as potentially detrimental to beneficiaries.
Amid increasing scrutiny of narrow provider networks, especially in insurance exchanges, in the 2015 year CMS will require Medicare Advantage organizations to notify regional CMS account managers of significant provider terminations at least 90 days ahead of time and, upon request, submit plans detailing how beneficiaries will locate new providers.
Also, as a best practice, but not a requirement, CMS is suggesting that MA plans making significant network changes that "should provide enrollees more than the required 30 days advance notice," in addition to information on in-network providers and instructions for requesting continuation of ongoing medical treatment or therapies with current providers. CMS regulators had said in February that they were considering lengthening the required 30 days notice via new regulations, but they're holding off on that.
CMS is also revising its approach to oversight of beneficiary cost-sharing, following some reports of inconsistencies between Medicare fee-for-service cost-sharing and Medicare Advantage.
"(W)e have become aware that some MA plans' representation of cost sharing for inpatient services is not as transparent as it should be," regulators wrote.
"As an example, an MA plan may charge inpatient cost sharing for each inpatient admission that includes the inpatient deductible and per diem cost-sharing beginning with admission to an inpatient acute hospital. In the event that the enrollee is subsequently transferred to an inpatient rehabilitation hospital, the plan may then charge a second round of cost-sharing (e.g., a second inpatient deductible and other cost-sharing) upon admission to the rehabilitation hospital." Whereas under traditional Medicare, beneficiaries pay only one inpatient deductible even if they're transferred to another type of inpatient hospital.
The agency has decided to revise templates for Evidence of Coverage and Annual Notice of Change "to more clearly show each plan's inpatient cost sharing structure," with language for MA plans to "clearly identify all cost sharing (deductible, copayments/coinsurance) for inpatient stays and the period for which such cost sharing would be charged, if applicable."
The agency also emphasized that it has existing authority to deny Medicare Advantage bids on a case-by-case basis "if it determines the bid proposes too significant an increase in cost sharing or decrease in benefits from one plan year to the next through the use of the total beneficiary cost requirement."