Insurers and Wall Street analysts foresee 2015 payment cuts for Medicare Advantage plans even as the Obama administration, under intense industry lobbying, said last week that it planned to slightly boost rates.
On April 7, the CMS announced it would raise overall Advantage rates by 0.4% in 2015, reversing course from a February proposal the administration said would have led to a 1.9% rate cut. Analysts had calculated that the preliminary policy would cut payments between 3% and 5%. Last week's rate announcement came as a surprise to most analysts, who had forecast a larger cut.
The positive change is the result of “various policy changes” and “new estimates,” said Jonathan Blum, CMS' principal deputy administrator. 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.
Ana Gupte, an analyst at Leerink Partners, called the revised policy “an improvement relative to the preliminary rate,” but said she still believed overall rates would fall by roughly 3% next year. UBS analysts also said they expected 2015 rates to fall by 3%.
The move may give congressional Democrats some political cover with senior voters against GOP attacks in the November elections. America's Health Insurance Plans has led a major lobbying and advertising drive to keep the administration from cutting the rates. The industry notched at least one significant victory with the administration's decision to delay a plan to exclude diagnosis codes derived from home-risk assessments, which J.P. Morgan analysts estimated would have cut rates by an additional 2%.
The American Hospital Association and other provider organizations also lobbied hard against the home-risk assessment methodology, said Sheryl Skolnick, managing director and senior healthcare analyst at CRT Capital Group.
Some analysts saw politics in the CMS' rate announcement. “I'm very suspicious about how you get from their estimate of down 1.9 to plus (0.4%), when it just so happens to be exactly the kind of overall rate change that the Democrats need to support their election hopes,” Skolnick said.