Health insurers that sell Medicare Advantage plans are primed for bigger pay bumps in 2017. It's a preliminary sign that the days of stark payment cuts under the Affordable Care Act are all but over for the industry.
The CMS quietly released a key metric for 2017 Medicare Advantage payment rates (PDF) late Tuesday. The document shows the Medicare fee-for-service baseline rate, which measures traditional Medicare spending, will increase by 3.1% in 2017. Last December, for 2016 rates, the CMS pegged that initial growth number at 2.02%.
The growth rate in fee-for-service Medicare is one of the main components the federal government uses to calculate the monthly capitated, or lump sum, payments to Medicare Advantage insurers. The rate fluctuates as actuaries obtain and analyze more Medicare spending data, meaning the number released Tuesday is only a guide and will almost certainly change over the coming months. Last year, the growth rate went from 2.02% to 1.7% in the second draft to 4.2% in the final draft.
But the fee-for-service rate is not the only important measurement. The formula for Medicare Advantage payments is a cocktail of complex estimates and adjustments. For instance, the 4.2% growth rate for 2016 plans was offset by cuts mandated by the ACA and other specific policies, which resulted in a 1.25% average hike to payments. That 1.25% increase was the largest Medicare Advantage pay boost insurers got in the past several years, due in part to the industry's intense lobbying campaign that has became an annual ritual.
While the 3.1% figure for 2017 bodes well for the coffers of Medicare Advantage plans, a slew of other issues will likely be addressed. These include the new risk-scoring methodology that is going into effect next year, in-home visits for Medicare patients and star ratings for plans that cover people who are in both Medicare and Medicaid.
The advance notice of the 2017 Medicare Advantage rates, which will include all policies and adjustments, will be published Feb. 19. The final rates will go live after the markets close April 4.
More than 17.7 million people, or a third of all Medicare beneficiaries, have a Medicare Advantage plan. UnitedHealth Group, Humana, Kaiser Permanente and Aetna have the most members.