off the charts
BEYOND THE NUMBERS
BEYOND THE NUMBERS
Administration Did Not Reverse a Proposed New Cut to Medicare Advantage Plans
The federal government announced on April 1 its final 2014 payment rates and policies for private “Medicare Advantage” plans that serve some Medicare beneficiaries. Because this announcement from the Centers for Medicare and Medicaid Services (CMS) may be portrayed as reversing new cuts to Medicare Advantage plans (in addition to the cuts that health reform requires) that the Administration previously proposed, we should understand what the Administration had proposed and what it later decided.
- As we previously explained, the Obama Administration (through CMS) actually didn’t propose any new Medicare Advantage payment cuts in its preliminary February 15 announcement. It merely applied existing law, reflecting how health reform and the historical slowdown in Medicare costs would affect Medicare Advantage payment rates. Some factors that help determine Medicare Advantage payments in a particular county for the coming year are generally based on the estimated per-beneficiary cost of furnishing Medicare-covered services. Because spending per beneficiary grew slower than originally estimated in recent years and is now expected to grow slower in subsequent years than previously projected, the preliminary overall payment rates to Medicare Advantage plans were lower than what insurers had been forecasting.
- The final April 1 payment announcement did not change the underlying formula for calculating these factors. It did, however, change the timing of how Medicare Advantage payment rates are adjusted to reflect Congressional action that prevents cuts in physician payments under the “Sustainable Growth Rate” (SGR) formula. Under its longstanding practice, CMS assumes, in setting Medicare Advantage payment rates for the following year, that the SGR cuts will take effect as required under law. If the Administration and Congress subsequently take steps to prevent the cuts from taking effect (as they have repeatedly done, including for 2013), CMS adjusts the next year’s Medicare Advantage rates to take that into account retrospectively.
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