Last month, CMS sparked protests from health insurers and policymakers by issuing proposed payment rates for Medicare Advantage plans in 2015.
The rates suggest Medicare Advantage plans — which private health insurance companies administer as an alternative to traditional Medicare — will see their reimbursement decline again next year. However, the ultimate depth of those cuts and how they will affect payers, providers and beneficiaries remains to be seen.
"The new proposed Medicare Advantage cuts would cause seniors in the program to lose benefits and choices on which they depend," AHIP President and CEO Karen Ignagni said in the statement.
Additionally, last month, a bipartisan group of 40 senators sent a letter to CMS asking the agency not to cut Medicare Advantage payments. "Given the impact that payment policies could have on our constituents, we ask that you prioritize beneficiaries' experience and minimize disruption in maintaining payment levels for 2015," the senators wrote.
Health policy analyst and health economist Tim McBride, PhD, a professor at Washington University in St. Louis, studies Medicare Advantage and says the cuts are expected as part of the government's efforts to rein in healthcare spending and the reductions will inevitably affect beneficiaries and potentially hospitals and health systems. Here are three key insights he shared on the proposed payment rates.
1. The size of the proposed cuts is somewhat open to interpretation. The specific depth of the cuts has been debated. Kaiser Health News reported government officials said the rates could mean payment reductions of 1.9 percent, while an unidentified insurance industry official estimated the reductions would total 6 percent. RT Capital analyst Sheryl Skolnick told Reuters the proposed rates appeared to equal 6 to 7 percent in cuts, and AHIP has reported the cuts would total 5.9 percent if finalized. CMS is expected to release the final 2015 payment rates April 7.
Dr. McBride has seen a similar range of estimates. "I've been trying to sort this out," he says. "It depends on how you interpret it and what you count."
He says it depends on whether the cuts are considered to encompass just the base payment reduction derived from the statutory Medicare Advantage reimbursement formula or to include other factors such as payment system reforms included in the Patient Protection and Affordable Care Act. In order to contain costs, the PPACA cuts Medicare Advantage by $200 billion from 2010 through 2019. Last year, for instance, the Obama administration actually raised the base payment rate for Medicare Advantage by 3.3 percent, backpedaling on a proposed 2.2 percent cut that provoked an insurance industry lobbying campaign, according to Kaiser Health News. However, due to the combined effect of other components of the PPACA, AHIP determined Medicare Advantage plans actually saw a 6 percent cut in 2014 as a direct result of healthcare reform efforts.
2. In general, cuts mean either premiums will go up or benefits will shrink. AHIP has warned payment reductions in 2015 will harm Medicare Advantage beneficiaries. The group has estimated enrollees experienced benefit cuts of up to $70 per month as well as cost increases due to last year's cut. Another round of cuts will lead to fewer provider options, reduced benefits and higher premiums for beneficiaries, according to AHIP.
Dr. McBride agrees premiums and/or benefits will shift in response to the reduced rates. "Anytime you have the payment drop either relative to what it was or relative to what it could be, that's kind of a no-brainer: You're either going to have the premiums go up or the benefits go down," he says. "That's just going to happen. If you say that's not going to happen, you're not doing elementary math."
However, because of variation from plan to plan in terms of premiums and benefits, he says it's not possible to apply a blanket statement about the impact of the cuts on an individual beneficiary level.
3. The reduced rates could potentially hurt providers. In addition to increasing premiums or providing fewer benefits, health insurers administering Medicare Advantage plans could also respond to declining reimbursements by cutting their payments to providers in turn, Dr. McBride says, contributing to the pressure hospitals and health systems already face from traditional Medicare reimbursement reductions, sequestration cuts and other factors.
"It wouldn't be a surprise if an insurance plan turned around to their hospitals and physicians and said, 'Hey, we can't pay you what we've been paying you,'" he says.
Overall, whether the final base pay rates for Medicare Advantage providers in 2015 reflect a significant reduction depends on the actions of policymakers. "We'll just see if Congress gets this reversed," Dr. McBride says.
More Articles on Medicare Advantage:
CMS Proposes Medicare Advantage Cuts
Senators Ask CMS Not to Cut Medicare Advantage
Health Insurers Prepare to Fight Medicare Advantage Cuts