(Story updated at 6:45 p.m. ET)
The CMS has proposed increasing health insurers' Medicare Advantage payment rates by 1.05% for 2016, a move that kicks off a 45-day dogfight in Washington before the rates are cemented.
The base rate was an 0.95% average decrease, but "when combined with expected growth in plan risk scores due to coding," Advantage plans will actually receive the 1.05% hike in revenue next year, according to a release from the CMS posted late Friday afternoon. Risk scores relate to how Medicare pays for the health status of beneficiaries. CMS pays more for patients who have more health conditions and less for those who are healthier.
Comments on the proposed rates are due by March 6. Final rates will be released April 6.
The preliminary 2016 rates differ from the 2% rate increase preview the CMS issued in December (PDF). But Sean Cavanaugh, director of the CMS' Center for Medicare, said the payments were "fair" and would "minimize disruptions to beneficiaries."
The -0.95% and 1.05% averages are crude figures, however, and several other factors like geography will determine whether Advantage plans receive hefty raises or reductions from the government in 2016. Star ratings are also one of the most closely monitored elements.
Like last year, Advantage plans that earn at least four stars out of five will receive a 5% bonus payment in 2016, the CMS said. Any plans with 3.5 stars or fewer will continue to get no additional payments. John Gorman, a former CMS official and founder of consulting firm Gorman Health Group, has said the star ratings will likely make or break Advantage plans. “You're already circling the toilet bowl” with fewer than four stars, Gorman said. “And you've got maybe two years before you get flushed.”
Risk-adjustment scores also heavily affect how much insurers are paid. In the proposed rate notice, the CMS said it will completely transition to a new risk-adjustment methodology that the insurance industry has generally opposed. Edwin Park, vice president of health policy at the left-leaning Center on Budget and Policy Priorities, said the CMS has tried to move to this latest version of the risk-adjustment model to improve the accuracy of diagnoses. “It's not inconsistent from where (CMS was) headed from the past few years,” Park said.
Breaking from proposals in the previous two years, the CMS said it will not propose any adjustments to the use of home visits for patient risk assessments. Many Advantage plans diagnose the severity of patients' illnesses at home instead of in a physician's office. But this has raised concerns that many plans are falsely inflating the diagnoses in a bid to warrant higher payments for sicker members, a process called upcoding.
Medicare Advantage's risk-assessment process has been under fire from policymakers and consumer advocates who argue private insurers are purposefully bilking money from the program, which covers 17.3 million people as of this month. The Medicare Payment Advisory Commission has said the risk scores of Advantage patients have grown more rapidly than those of regular fee-for-service beneficiaries, and the current risk-score payment reductions mandated by the Affordable Care Act may not be enough.
Humana, one of the largest Advantage insurers in the country, disclosed this week that it is facing increased scrutiny from the U.S. Justice Department for its risk-adjustment practices.
Health insurers have already begun their Medicare Advantage lobbying campaign in the hope of extracting higher rates come April. The Coalition for Medicare Choices, part of America's Health Insurance Plans, has aired several ads featuring seniors advocating for the private plans. The Better Medicare Alliance—a group funded by large Advantage insurers such as Aetna, Humana and UnitedHealth Group as well as pro-business groups like the U.S. Chamber of Commerce—sent a letter to outgoing CMS Administrator Marilyn Tavenner begging for positive bumps to Advantage rates.
“The more cuts there are, the more reduction there is in value,” said Krista Drobac, the interim executive director of the Better Medicare Alliance and a former CMS official.
Many members of Congress have also weighed in on the process. A bipartisan group of 53 senators, led by Chuck Schumer (D-N.Y.) and Mike Crapo (R-Idaho), sent their own letter to Tavenner this week urging the agency to “minimize disruptions for beneficiaries enrolled in the MA program by maintaining payment levels and providing a stable policy environment for 2016.”
The health insurance industry also happens to be one of the top financial backers of Schumer and Crapo. Since 2009, health insurers have given more than $493,000 to Schumer's campaigns and more than $234,000 to Crapo's, according to OpenSecrets.org.
Follow Bob Herman on Twitter: @MHbherman