CMS Bumps Up MA Rates for 2016, In Light of New Data From Previous Years

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By Mindy Yochelson

April 6 — The Centers for Medicare & Medicaid Services April 6 announced that Medicare Advantage rates will rise by 1.25 percent in 2016, rather than decline by 0.95 percent, as was estimated in February.

The final revenue increase is higher than the February advance notice, largely because “the Medicare actuaries recently updated Medicare per capita spending estimates for 2014 and 2015,” according to an agency fact sheet.

The agency also said that because MA plans tend to code at a higher level than fee-for-service providers, MA plans should expect an average change in revenue of an additional 3.25 percent. In February, the CMS said the expected average change in revenue, accounting for coding, would be 1.05 percent.

Behind the increase in the rate adjustment is an additional 2.5 percentage points in the growth rate from the advance to the final notice—from 1.7 percent to 4.2 percent. This reflects the actuarial reassessment of additional fee-for-service spending for 2014, 2015 and a forecast of spending for 2016, the fact sheet said.

Lobbying Against the Cut

The 0.95 percent proposed cut began 45 days of lobbying by the insurance industry and others.

Although a number of observers cited the diminutive size of the proposed cut as differing from previous advance notices when cuts were sharper, others were less sanguine.

America's Health Insurance Plans, the main industry group, said April 3 that even a “relatively small cut” for 2016 on top of previous rate changes could “pose real risk to millions of seniors, particularly the growing number of low income beneficiaries who rely on Medicare Advantage for their coverage.”

Hundreds of lawmakers in both the House and Senate wrote to the agency, asking that proposed cuts be reversed.

The impact of a rate change on a particular plan depends on a variety of factors, including a plan's location, quality rating and enrollee demographics. An analysis of the proposed rate adjustment by Oliver Wyman, released in mid-March, said enrollees in New York, Texas, and Louisiana would be most affected.

Star Ratings Policy

In a change from the February proposal, the CMS, in the final Call Letter that accompanies the rate announcement, dropped a proposal to alter its quality star ratings program for plans with higher enrollment of beneficiaries dually eligible for Medicare and Medicaid.

This had been considered a first step in addressing complaints by MA plans that enroll a disproportionate share of dual eligibles or beneficiaries who receive the Part D low-income subsidy (LIS) that they have trouble achieving high quality star ratings and the bonuses that go along with them.

The CMS had said it planned to offer immediate relief to those plans by reducing by 50 percent the weight of seven targeted measures for 2016.

However, in response to criticism from trade organizations and other commenters, the CMS decided to drop its temporary solution.

CMS Deputy Administrator Sean Cavanaugh said in a call to reporters that the CMS withdrew the proposal because of the opposition and because it didn't want to be “premature” in its actions.

He said there is no consensus on the drivers behind the difference in rates for the plans with high enrollment of duals and other plans, and the CMS will continue its research on the topic.

Preferred Cost Sharing for Pharmacies

On a major Part D issue, the CMS in the Advance Notice said that, although it's still concerned about beneficiary access to preferred cost-sharing pharmacies (PCSPs), it wasn't proposing standards for these arrangements, as some had thought it might.

Under PCSPs, Part D enrollees must fill their prescriptions from a subset of network pharmacies to receive lower cost sharing.

In the Advance Notice, the agency said it planned to work with plans that are “outliers with respect to access to preferred cost sharing networks to either improve access or prevent plans from marketing themselves as offering preferred cost sharing in areas where the benefit is not meaningfully available.”

Cavanaugh said that in the final notice, the CMS decided to require outliers to mention this designation in 2016 marketing materials.

Provider Directories

Like the proposed Call Letter, the final one takes steps to require MA plans to maintain accurate provider directories in a timely manner and make those directories widely available.

Cavanaugh said the final Call Letter clarifies the agency's expectations in this area.

The fact sheet said that this includes ensuring that the directories are updated in “real time” and that the providers included are accepting new patients. Plans also must have ongoing communications with providers and ensure that enrollee complaints are being addressed, according to agency staff on the call with reporters.

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

To contact the editor responsible for this story: Ward Pimley at


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