CMS Issues Final 2018 Medicare Advantage Rate Notice What Does it Mean?

CMS finalized payment rates for Medicare Advantage plans increasing them by 0.45% on average for 2018, in its final rate notice Monday. That’s an increase from the 0.25% rate increase proposed in February. After adjusting for beneficiaries risk scores the average Medicare Advantage payment rate will increase by 2.95%, up from February’s estimate of 2.75%.

In 2017, payment rates rose by 0.85% on average and 3.05% after adjusting for beneficiaries risk scores.

The better-than-expected final rates are “a big sigh of relief” for the insurance industry, said John Gorman, a former CMS official who is now a healthcare consultant in Washington. The rates are “further proof that (Medicare Advantage) is the only safe game in all of health insurance these days.”

Under the Medicare Advantage program, CMS pays health plans monthly amounts for every member they cover, and those payments are adjusted based on how sick someone is. Members who have more chronic conditions have higher risk scores, and plans that cover them therefore receive higher payments. Risk scores were created to incentivize plans to cover all seniors regardless of their health status, but the program has faced accusations of fraud and manipulation of those risk scores.

CMS is also slowing plans to increase the use of encounter data, or information about the care an enrollee received from a provider, to determine risk scores for plans after industry stakeholders argued that encounter data should not be used at all following a January 2017 report from the Government Accountability Office that found such data is often not accurate

What does all this mean to you and your clients? Overall, it’s a good thing, since the majority of and in the case of $0 Premium plans all of Medicare Advantage Health Plans revenue comes from CMS payments not member premiums these increases and policy changes can mean fewer benefit cuts or premium increases at a macro level.

Medicare Advantage plans were projected to receive $198 billion in 2016, accounting for 27% of total Medicare spending, according to a report by the Congressional Budget Office. Since 2004, the number of beneficiaries enrolled in private Medicare plans has more than tripled from 5.3 million to 17.6 million in 2016, according to the Kaiser Family Foundation.

Sources: Modern Healthcare, CMS final Rate Notice