Republicans Blast Medicare Employer Plan Changes

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By Mindy Yochelson

April 5 — Republican lawmakers denounced an April 4 Medicare policy notice that would change the way Medicare health plans offered to retirees through employers are paid and would result in a payment cut starting in 2017.

The Obama administration “ignored warnings from Republicans and circumvented Congress to announce regulations that make harmful cuts to the Medicare Advantage Employer Group Waiver Plans,” Senate Finance Committee Chairman Orrin Hatch (R-Utah) said in an April 4 statement. “Instead of protecting retiree health coverage provided to beneficiaries who receive coverage through their employer, the administration acted unilaterally to undermine an important, market-based health program.”

The Centers for Medicare & Medicaid Services' Medicare Advantage rate notice and call letter, “failed to address many of the policy recommendations we made on behalf of MA beneficiaries, including our calls to abandon changes to the Employer Group Waiver Plans,” House Ways and Means Committee Chairman Kevin Brady (R-Texas) and Health Subcommittee Chairman Pat Tiberi (R-Ohio) said.

No Response

“Last week, Republican leaders explicitly requested that CMS abandon its EGWP proposal before it issued a final rule,” the two committee leaders said. “CMS has not provided the Ways and Means Committee with responses to either letter.”

In its final rate notice and call letter, the CMS said it will continue with a proposal issued in February to use the amounts in market bids in the individual (non-employer) market to establish payment amounts for the MA employer plans .

Currently, payments are established through the submission of bids by the employer plans. However, the CMS has said that because the employer plans don't compete against other plans, they have little incentive to submit lower bids.

The proposed changes would result in an average cut of 2.5 percent in Medicare reimbursement for the plans, according to the CMS.

The change had been criticized by representatives on both sides of the aisle, including Rep. Sander Levin (D-Mich.), ranking member of the House Ways and Means Committee.

The CMS said the new system is needed because the employer plans have little incentive to submit lower bids because they don't compete against other plans through the bidding process. EGWPs do not compete in the open market, which has resulted in EGWP bids that are systematically higher than bids for individual market MA plans.

Transition Period

In the final notice, the agency said it was spreading out the effect of the changes over two years rather than one to mitigate the impact. The cut would average out to 1.25 percent in 2017 and 1.25 percent in 2018.

The change, however, didn't please some Republicans and others involved with the issue.

“CMS’s brusque 'transition period' will affect plans as soon as 2017, potentially causing a disruption in coverage to over 3 million retirees,” Energy and Commerce Health Subcommittee Chairman Joseph Pitts (R-Pa.) said April 5. The change “could decrease access to millions of individuals’ employer-based Medicare Advantage plans, especially without responding to the concerns that my colleagues and I have raised.”

Groups Disappointed

A group formed to fight the change in payment, the Coalition to Save Medicare Advantage Retiree Coverage, said it was disappointed by the CMS's final policy. The group is comprised of employer, union and health care groups.

“Phasing in this cut to MA retiree coverage may cushion the initial blow, but this decision could nevertheless harm the coverage 3.3 million retirees count on today,” the group said April 4. “Millions of retirees could begin incurring higher costs and receiving reduced benefits this fall.”

Another coalition, the Better Medicare Alliance, said it was “unfortunate that CMS has decided to move forward with their proposal to change the payment methodology for a popular coverage option that is working for beneficiaries, employers, and providers alike.”

The group had told the CMS that the change will likely reduce access to vision and dental benefits and increase costs for beneficiaries, including higher premiums and co-payments. The alliance is comprised of medical professional, patient, and other consumer groups.

To contact the reporter on this story: Mindy Yochelson in Washington at

To contact the editor responsible for this story: Kendra Casey Plank at