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February 3, 2017

CMS proposes 'moderate' 2018 payment increase for MA plans

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CMS on Wednesday released proposed changes to how it calculates Medicare Advantage (MA) plan payments.

CMS released the proposal for calendar year 2018 via an advance notice and draft call letter. According to analysts, the proposal likely reflects work done under the Obama administration because President Trump's pick for CMS administrator has yet to be confirmed. CMS will accept comments on the proposal until March 3 and plans to release a final version on April 3. 

Background on CMS' methodology

CMS historically has relied on data from the Risk Adjustment Processing System (RAPS) to calculate payments for MA plans. In 2016, the agency began using a blend of encounter data from MA organizations and patient records submitted to RAPS. The percentage of encounter data for 2017 was set at 25 percent, and the Obama administration had proposed raising the threshold to 50 percent in 2018, according to Politico Pro.

America's Health Insurance Plans (AHIP) has criticized CMS' increased use of encounter data, saying it results in lower payments to plans.

Proposal details

In the latest proposal, CMS said it would delay increasing the percentage of encounter data it uses to set payments to 50 percent.

CMS for 2018 also proposed adjusting plan payments to reflect differences in diagnosis coding between MA plans and fee-for-service providers.

After the adjustments, CMS said MA insurers would see a 0.25 percent average payment increase in 2018, down from 0.85 percent last year. Overall, the agency said MA plans could expect to see revenue increase by roughly 2.75 percent as they provide more intense services. CMS in a statement said the rates represented "moderate growth."

CMS also renewed calls for higher payments for plans that enroll high numbers of low-income seniors who are eligible for both Medicare and Medicaid, Modern Healthcare reports.

Providers' markup over Medicare rates varies by specialty, region, study finds

In addition, CMS in the proposal addressed a policy regarding the bidding process for employers and unions that offer MA plans. In last year's payment update, CMS initially proposed ending the existing bidding process for employer- and union-sponsored MA plans and replacing it with a system of predetermined payments. But CMS later announced that it will phase in the change over two years rather than imposing it completely in 2017.

Under CMS' final notice for 2017, half of employer-sponsored MA plan payments in 2017 will be based on the existing bidding system, while the other half will be based on county-level benchmarks. CMS said it planned to fully transition MA plan payments to the county-level benchmark system by 2018. 

In the latest notice, CMS asked the industry whether it should continue the setup it implemented for 2017.

Medicare Part D updates

For Part D plans, CMS proposed updating processes designed to address the U.S. opioid misuse epidemic. To better address drug use concerns within the Part D program, CMS for 2018 proposed:

  • Changes to its Overutilization Monitoring System to better align with CMS guidelines on opioid prescribing; and
  • Setting an expectation among Part D sponsors to implement changes to better "prevent opioid overuse at point of sale at the pharmacy."

CMS in the rule said that risk percentages and payment adjustments for Part D risk sharing for 2018 would remain at 2017 levels.

What's behind Medicare Advantage market discrepancies?


Ipsita Smolinski, managing director at Capitol Street, said, "The 2018 update is only a smidge better than flat which I suspect may anger some plans." She added that the payment rate could increase in the final update.

Smolinski also said MA plans could see a boost if Republicans act on calls to privatize Medicare.

Separately, Ankur Goel, a partner with McDermott Will & Emery, said "stability and continuity" seem to be the rate notice's theme. He added, "Nothing really jumped out as being a major new proposal."

AHIP President and CEO Marilyn Tavenner said, "AHIP is carefully reviewing this advance rate notice to ensure that the program is protected from harmful cuts." She added, "We are committed to ensuring that seniors continue to have access to affordable, high-quality care, and that Medicare Advantage is positioned for long-term stability" (Wilde Mathews, Wall Street Journal, 2/1; Humer, Reuters, 2/1; Dickson, Modern Healthcare, 2/1; Demko [1], Politico Pro, 2/1 [subscription required]); Demko [2], Politico Pro, 2/1 [subscription required]; Morse, Healthcare Finance, 2/1; CMS advance notice, 2/1).

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