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From Health Law Daily, April 8, 2014

Growth trends allow CMS to reverse planned MA payment cuts for 2015

By Jenny M Burke, JD, MS

CMS on April 7, 2014, announced a reversal of its plans to cut payments to its 2015 Medicare Advantage (MA) and prescription drug benefit (Part D) programs. MA payments to health insurers will now rise by 0.4 percent, instead of being cut by 1.9 percent.

CMS Principal Deputy Administrator Jonathan Blum noted that the 2015 Rates and Final Call Letter emphasized CMS’ commitment to keeping costs low for these Medicare beneficiaries. According to the press release, CMS believes the adjustments will “set a stable path for Medicare Advantage and implements a number of policies that ensure beneficiaries will continue to have access to a wide array of high quality, high value, and low cost options while making certain that plans are providing value to Medicare and taxpayers.”

The announcement came after Senators from both sides of the aisle came together to urge CMS to review the policy for the Medicare Advantage (MA) program and maintain MA payment levels in 2015. Forty Democrats and Republicans requested that CMS “minimize disruption” of the MA payment rates in 2015 and outlined some of the advantages in doing so. Republican leaders sent a similar letter to the President, expressing concern over more potential cuts to the MA program, however that letter requested more drastic measures such as a total repeal of the ACA. To read more on these two letters, see Bipartisan letter urges CMS to review Medicare Advantage for 2015, (Feb. 19, 2014).

Since the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) was passed in 2010, MA premiums have fallen by 10 percent while enrollment has increased by 38 percent. Enrollment is at an all-time high with more than15 million beneficiaries in MA plans, comprising 30 percent of all Medicare beneficiaries. Blum is confident that, due to these adjustments, these beneficiaries will see a strong program going forward for 2015.

What had originally been estimated as a 5.9 percent reduction in payment in 2015, comprised of a -3.9 percent reduction in payment and an average -2.0 percent reduction resulting from CMS’ recently proposed policy on health risk assessments, is no longer a decrease. Blum noted CMS now estimates that “the average change for a plan will be 0.4 percentage points, a little higher than what the industry had recommended to us." When he made the announcement, Blum claimed a number of adjustments made the increase possible.

Fixing the donut hole. Also included in the announcement are changes to out-of-pocket drug spending, which are expected to decrease with the new adjustments. Under the final plan, beneficiaries in the “donut hole,” or Part D prescription drug coverage gap, will benefit from greater savings on prescription drugs. To accomplish this task, beneficiaries will receive coverage and discounts at 55 percent for brand name medicines, versus 52.5 percent, as well as 35 percent for covered generic drugs as opposed to only 28 percent. To date, CMS indicates the discount program has provided discounts to more than 7.9 million Medicare beneficiaries, saving them an average of $1,265 per beneficiary amounting to $9.9 billion in savings.

Protecting beneficiaries. The ACA provides CMS the authority to implement beneficiary protections. CMS indicates it plans to use this authority to protect MA beneficiaries from significant increases in costs or cuts in benefits. For the 2015 contract year, CMS has limited the amount of increase in total beneficiary cost to $32 per member per month, which is down from $34 per member per month for the 2014 contract year. Additionally, the final Call Letter strengthens tools used to ensure compliance with established provider access requirements and establishes best practices for MA organizations.

Changing the risk adjustment model. CMS has changed the calibration of the Part C Risk Adjustment Model introduced in 2014 to account for the impact of the influx of baby boomers. CMS plans to implement a new phase-in schedule for the risk adjustment model. Additionally, for 2015, CMS will not finalize the proposal to exclude diagnoses from enrollee risk assessments.

CMS will not be finalizing some of the potential changes from the February proposal. CMS will not be delaying implementation of the new Part D Risk Adjustment Model. Beneficiaries will not see changes to the Star Ratings as proposed, nor will they receive additional coverage in the gap for generic and brand name drugs that are part of Enhanced Alternative plans.

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