Healthcare Business News
AHIP President and CEO Karen Ignagni

CMS does about-face on Medicare Advantage payment cuts

By Jonathan Block
Posted: April 1, 2013 - 7:30 pm ET

Apparently swayed by insurers and lawmakers, the CMS backtracked on an earlier plan to cut Medicare Advantage payments to insurers by 2.2% in 2014 and instead decided to give them a 3.3% increase.

The CMS ultimately agreed, according to a final payment policy issued today (PDF), that “it is a more reasonable expectation” that Congress will again act to avert the dramatic physician pay cut scheduled under Medicare's sustainable growth rate formula. A draft policy issued in February was based on the CMS' actuary's customary calculation based on current law.

The about-face comes after a vocal lobbying campaign group from trade associations, particularly America's Health Insurance Plans. The health insurers' trade group released a report conducted by actuarial consulting firm Oliver Wyman arguing that an average Medicare Advantage beneficiary would see premiums $50 to $90 higher each month, and possibly reduced benefits.

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“By being responsive to the more than 160 members of Congress from both parties who raised concerns about the impact of the proposed payment rate on seniors, CMS has taken an important step to help stabilize Medicare Advantage at a time when the program is facing significant challenges,” AHIP President and CEO Karen Ignagni said in a statement. “We are currently reviewing the final rate announcement and will continue to work with policymakers in both parties to strengthen this critically important part of Medicare.”

Last month, the Congressional Research services said that the CMS should account for the “doc fix” when setting rates for 2014.

Lawmakers also heralded the CMS's change. “Today, CMS rightly acted to reverse course and implement a responsible rate that will preserve choices and ensure continued access to top-notch quality and affordable care for beneficiaries enrolled in the popular Medicare Advantage program,” Sen. Orrin Hatch (R-Utah), ranking member of the Senate Finance Committee, said in a prepared statement. “While this action alone isn't a silver bullet to guarantee the sustainability of the Medicare Advantage program, it does reflect the strong bipartisan support for preventing such devastating cuts from occurring.”

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