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CMS to increase Medicare Advantage pay rate by 0.4%

After an aggressive lobbying push from the insurance industry, the CMS announced Monday that it would increase the overall rate it pays Medicare Advantage plans by 0.4% in 2015, despite a proposed policy issued in February that signaled a 1.9% rate cut.

The positive change is the result of “various policy changes” and “new estimates,” Jonathan Blum, CMS principal deputy administrator, said in a phone call with reporters.

These include the administration's approach to phasing in a new risk model and a decision to walk away from a proposal to require that home risk assessments be confirmed by in-office assessments, Blum said.

The CMS announced the new rates after U.S. markets closed on Monday.

One factor that argued against raising rates next year is that “Medicare costs will continue to fall much more dramatically than we had projected back in February,” Blum said.

The increase came as a surprise. Analysts interviewed by Modern Healthcare prior to the release of the 2015 Medicare Advantage and Part D Rate Announcement and final Call Letter largely forecast a payment cut, not an increase.

Although the administration cited policy changes and new estimates as reasons for the positive shift, some analysts saw politics.

"History tells us that you have to be really, really careful on your early reads on these things," said Sheryl Skolnick, managing director and senior healthcare analyst at CRT Capital Group, in a Monday evening interview. But, she added, "I'm very suspicious with what I've seen so far on how you get from their estimate of down 1.9 to plus (zero point) 4 when it just so happens to be exactly the kind of overall rate change that the Democrats need to support their election hopes."

There are currently more than 15 million seniors enrolled in Medicare Advantage, and seven months until the general election. Beneficiaries enrolled in the plans, administered by private companies that contract with Medicare, account for approximately 30% of the total enrolled in Medicare.

Since the beginning of the year, political rhetoric surrounding the CMS' decision has heated up, led by America's Health Insurance Plans, an insurance company industry group, which vowed in January to launch its “largest-ever mobilization” to keep the administration from cutting Medicare Advantage rates, employing a combination of grassroots efforts and ad buys.

Karen Ignagni, president and CEO of America's Health Insurance Plans, issued a statement late Monday noting "the tens of thousands of seniors, a majority of the U.S. Congress, and more than 170 stakeholder organizations" that raised concerns about the administration's proposed policy. "The changes CMS included in the final rate notice will help mitigate the impact on seniors, but the Medicare Advantage program is still facing a reduction in payment rates next year on top of the 6% cut to payments in 2014," Ignagni said.

Congressional Republicans were joined recently by a number of Democrats in their letters to the administration asking them to maintain the rates as they were. “I am concerned that the proposed payment rate reductions for 2015 will undermine the choices made by my fellow Arizonans by causing beneficiaries to lose needed services and to experience increases in premiums,” Kyrsten Sinema (D-Ariz.), said in a Friday statement. Several Democrats spoke out on this issue on the House floor last week.

“I think that this (CMS) press release certainly serves the purpose of satisfying the Democrats on the Hill who are standing for reelection by being able to go out and campaign that 'hey, you know, our administration didn't cut Medicare Advantage,'” Skolnick said.

The Patient Protection and Affordable Care Act sought to bring the cost of Medicare Advantage more closely in line with traditional Medicare. Right now, Medicare Advantage plans are typically paid more than their traditional counterparts.

“We are committed to the new model; however, for 2015, given the number of changes in other payment factors, we believe that providing a longer time frame for full implementation is appropriate,” the CMS said in a fact sheet issued Monday explaining the policy.

Another hot-button issue was a proposal to require in-home risk assessments to be verified by a “clinical encounter” before they could influence risk scores (and thus payments to insurers). The CMS dropped the provision from the final policy despite earlier rhetoric calling the value of these assessments into question.

“There appears to be little evidence that beneficiaries' primary-care providers actually use the information collected in these assessments or that the care subsequently provided to beneficiaries is substantially changed or improved as a result of the assessments,” the CMS had said in its February proposal (PDF).

On Monday, Blum told reporters that the CMS would delay this proposal, as it had done with a similar proposal in 2014.

The American Hospital Association and other provider organizations lobbied hard against the methodology employed, Skolnick said. “That one actually was the least surprising to me when I saw that one was delayed.”

David Lipschutz, policy attorney at the nonprofit Center for Medicare Advocacy, said he was “disappointed” by that choice. “I would say we were more supportive of the proposed rule,” he said, adding that the delay didn't surprise him, thanks to a “vigorous, well-financed campaign” by the insurance industry against any payment reductions.

Catherine Hollander is a Washington, D.C.-based freelance writer.

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