The Medicare Payment Advisory Commission Thursday approved measures to increase payments to Medicare Advantage plans, potentially increasing federal spending by as much as $10 billion over five years.
MedPAC members unanimously voted to request that the HHS secretary change the formula used to determine rates for Medicare Advantage plans.
The CMS currently calculates MA payments based on fee-for-service Part A spending, which covers hospital care, and Part B, which covers more routine care such as doctors' visits.
Health plans that offer Medicare Advantage cover both parts. Medicare fee-for-service does not mandate participation in both parts. That means the current formula for determining rates underestimates spending, resulting in plans potentially being underpaid.
To address this issue, MedPAC is recommending that the HHS secretary alter the current formula to be based only on fee-for-service spending data for beneficiaries enrolled in both Part A and Part B.
Plans, not surprisingly, lauded MedPAC's recommendation.
"We have encouraged policymakers to correct the underestimation of MA benchmarks in this way, and hope to see administrative action soon,” said Ceci Connolly, president and CEO of the Alliance of Community Health Plans, an insurer organization.
More fee-for-service Medicare beneficiaries are opting out of Medicare Part B, while remaining in Part A. This group grew to 12.4% of Medicare's population in 2015 from 10.2% in 2009. MedPAC staffers can't say why this trend is happening, but they guess it could be due to the cost of coverage. For instance, individuals with incomes above $100,000 will pay as much as $300 a month this year for the coverage.
MedPAC data shows that beneficiaries who are in enrolled in both Parts A and B have higher spending than fee-for-service beneficiaries who have only one of the coverages.
The recommendation will be sent in the commission's March 2017 report to both Congress and the HHS secretary. The formula change would not require legislation, MedPAC staffers said.
MedPAC estimates that there will be an increase in federal spending between $750 million to $2 billion in the first year and as much as $10 billion five years after implementation. Those estimates worried some commissioners, especially, some said, since beneficiaries don't seem to have trouble finding MA plans, which means insurers aren't losing incentives to sell those products.
”It does seem like a lot of money for something that won't increase quality, value or access,” said Dr. Rita Redberg, a commissioner and cardiologist at the University of California, San Francisco.
In fact, the program has exploded, giving insurers access to huge sums of taxpayer-funded revenue.
Still, Commissioner Pat Wang, CEO of the Healthfirst plan in New York, said a “downward spiral” in MA plans could occur if the formula isn't fixed to insurers' advantage.
Others noted that MedPAC shouldn't find ways to just save money, but improve the program.
“We need to occasionally be willing to spend to ensure consistency,” said Dr. Craig Samitt, a MedPAC commissioner and chief clinical officer at Anthem.
MedPAC's Executive Director Mark Miller said spending increases could be offset by savings provided by other recommendations that will be sent to HHS and Congress in the report.
It's unclear if the recommendation will be adopted by HHS. MedPAC is usually considered very influential on Capitol Hill and in the federal government. However, President-elect Donald Trump's nominee for HHS secretary, Rep. Tom Price (R-Ga.), has made it clear his goal will be to cut spending for the Medicare program.
Price has also been critical in the past of MedPAC's calculations related to spending issues in Medicare.