Vice President for Health Policy
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.
The final announcement moves up the timing of these SGR adjustments. It now assumes that no SGR cuts will occur in 2014, which means CMS will not need to make a SGR adjustment for preliminary 2015 rates when it announces them early next year. (By moving the 2013 SGR adjustment and the 2014 SGR adjustment into a single plan year — 2014 — the final announcement now institutes a one-time, larger-than-expected increase in payment rates. Insurers should not expect this effect in the 2015 rates.)
Despite the attention that this year’s payment announcements received, we should remember that while health reform began scaling back Medicare Advantage overpayments last year, it will continue to cost Medicare more, on average, to cover comparable beneficiaries in private plans than in traditional Medicare even when health reform’s Medicare Advantage provisions are fully implemented.
Moreover, even if Congress went further and required that Medicare Advantage plans be paid no more than what fee-for-service Medicare costs, they would still receive excessive payments. That’s because such plans continue to enroll healthier-than-average, and hence lower-cost, beneficiaries and Medicare’s “risk adjustment” mechanism cannot fully account for these differences in health status in determining plans’ payment rates.
Nevertheless, insurers are aggressively lobbying to repeal or scale back health reform’s Medicare Advantage payment provisions. These provisions are sound, however, and the Administration and Congress should resist efforts to undermine them.