Analysts Upbeat on Medicare Managed Care Rates, Policy

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By Mindy Yochelson

Analysts see mostly positive impacts for Medicare managed care plans from the April 3 “call letter” document setting out 2018 pay rates and policies.

The document was the first call letter under the Trump administration and offers a sense of the future attitude toward Medicare Advantage, which covers about one-third of beneficiaries.

“The tone throughout the call letter was positive towards plans in a ‘we want to work with you’ way,” Ipsita Smolinski, managing director of consultant Capitol Street in Washington, told Bloomberg BNA April 4. “Clearly the agency is looking for regulatory simplification, which is a welcome move by the plan community.”

The Centers for Medicare & Medicaid Services raised average payments slightly (by 0.45 percent) and held the reins on some policy changes that industry feared could result in smaller payments. The pay raise is higher than the 0.25 percent the CMS proposed in February.

Administration Focus

Ashraf W. Shehata, a principal at KPMG in Cincinnati and a member of its Global Healthcare Center of Excellence, told Bloomberg BNA the new rates “will build confidence in plans” and are a “good reiteration of where the Trump administration is planning to focus.”

“If you are in the Medicare Advantage program and have been successful, the new rate gives a little more leverage to stay in the program,” Shehata said.

Joshua R. Raskin, with Barclays Capital Inc. in New York, predicted that 2018 MA enrollment growth would be similar to 2017 levels “which are running above recent years.” If the Affordable Care Act’s health insurance fee is eliminated next year, growth could be higher, Raskin said in an April 3 equity research brief.

MA organizations must submit bids to participate in the 2018 program by June 4.

Political Feedback

Michael Wiederhorn, with New York financial services firm Oppenheimer & Co. Inc., called Medicare Advantage “a major beneficiary of the election.” Congressional Republicans “seem likely to favor the program through improved reimbursement,” he said in an April 4 industry update.

Republicans in both chambers gave a thumbs-up to the guidance and rates.

Senate Finance Committee Chairman Orrin Hatch (R-Utah) in an April 4 statement applauded the CMS for the payment increase and policy adjustments that were made since the proposed notice was published in February.

House Ways and Means Committee Chairman Kevin Brady (R-Texas) and Health Subcommittee Chairman Pat Tiberi (R-Ohio) said in an April 4 statement that the agency “adequately addressed the Committee’s concerns including those surrounding the increased use of encounter data.” The industry had criticized a plan to transition to the use of encounter data for calculating payments, calling it unreliable.

Encounter data are detailed information about the care and health status of MA enrollees.

The Medicare agency proposed in February to continue using a blend of 25 percent of encounter data and 75 percent of the data it had been using. However, in the final rate notice, the CMS said it would use just 15 percent of the new encounter data and 85 percent of data from the old system.

Weiderhorn cited as positive the CMS’s decision to reverse “the controversial shift” and hit the pause button on the transition. The industry had projected modest cuts from the shift to higher encounter data use, so this is a positive, he said.

New Ideas

The Medicare agency said it wants to build on the private plan program and added a “request for information” to the policy document for new ideas on MA and the Part D drug program.

The public has until April 24 to submit “recommendations regarding benefit design, operational or network composition flexibility.” These could include recommendations regarding changes to the way plans are paid, monitored and measured. It could also focus on how the agency can simplify rules and policies for beneficiaries, providers and plans, it said.

A goal is to look for ways to transform the MA and Part D drug programs so that enrollees have a variety of options that fit their health-care needs, a CMS official who asked not be to be named said in an April 3 call with reporters.

To contact the reporter on this story: Mindy Yochelson at

To contact the editor responsible for this story: Brian Broderick at

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