The Centers for Medicare and Medicaid Services have cut the national average fee-for-service growth rate for 2010 Medicare Advantage plans.
Rather than the anticipated 4.24 percent growth rate of 2009, CMS will give Medicare Advantage plans a 0.81 percent rate for 2010.
"The lower growth rate for 2010 is mainly due to the projected decline in physician payments under current Medicare payment rules," CMS officials said in a statement. In January 2010, physicians are expected to take a 21 percent cut in fee-for-service.
The 2010 rate includes a -3.41 percent adjustment to reflect coding differences between MA organizations and the original Medicare program and reflects a multi-year phase-out of indirect medical education costs as required by the Medicare Improvements for Patients and Providers Act, CMS said.
"The announcement provides Medicare Advantage and prescription drug plans the information they need to structure their benefits and beneficiary cost sharing and prepare their bids for the 2010 plan year," said Jonathan Blum, acting director of CMS' Center for Drug and Health Plan Choice.
According to Blum, by law CMS annually updates the Medicare Advantage capitation rates by a growth percentage that reflects growth in all Medicare expenditures, including expenditures under Part A and Part B payment rules. The growth percentage reflects the projected reduction in 2010 physician payments provided for under Part B payment rules.
For prescription drug program enrollees, the announcement included information about the 2010 Part D deductible, initial coverage limit, out-of-pocket threshold and related parameters for the standard benefit. The annual percentage increase in average per capita Part D spending, used to update the deductible, initial coverage limit and out-of-pocket threshold for the defined standard benefit for 2010, is 4.66 percent.
Health insurance industry representatives criticized the CMS action.
"It's an unnecessary disruption in the health security of seniors on Medicare Advantage," said Robert Zirkelbach, director of strategic communications for America's Health Insurance Plans.
Health insurance companies fear the growth rate decreases are merely the first step in the Obama administration’s plan to phase out Medicare Advantage plans altogether. Earlier this year, White House budget director Peter Orszag made clear the administration’s belief that Medicare Advantage plans are merely government subsidies for private payers.
“I believe in competition. I don't believe in paying $1.30 to get a dollar," Orszag said, noting that cost burdens fall on taxpayers as well as patients in regular Medicare, who pay higher premiums.
For the first time, for plan year 2010, CMS will make a "coding pattern differences adjustment" to Medicare Advantage risk scores, reducing Medicare Advantage payment rates to account for differences in disease coding patterns between Medicare Advantage organizations under Part C and the original Medicare program Parts A and B.
The adjustment will be applied as a uniform 3.41 percentage reduction to all Medicare Advantage plans' Part C risk scores in 2010.
In addition, the 2010 rates reflect a provision in recently enacted legislation requiring a multi-year phase-out of the inclusion of costs of indirect medical education in Medicare Advantage rates. The maximum reduction as part of this phase-out is approximately 0.60 percent per year.