Medicare Advantage Plans to Get 0.85 Percent Raise in 2017

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By Mindy Yochelson

April 4 — Medicare managed care plans will receive a pay raise of 0.85 percent in 2017, less than proposed in February, according to a CMS announcement April 4.

The Centers for Medicare & Medicaid Services released the figure as part of 2017 Medicare Advantage Capitation Rates and Medicare Advantage and Part D Payment Policies and Final Call Letter. However, the agency said coding changes would boost rates an extra 2.2 percent so that payments to Medicare Advantage plans would actually rise by 3.05 percent.

By contrast, the agency's draft notice in February said that MA rates would increase by 1.35 percent in 2017. At that time, the agency said changes that the CMS is making to coding would add an extra 2.2 percent to next year's rates so that payments to MA plans would actually rise by 3.55 percent .

Sean Cavanaugh, the CMS's deputy administrator and director of the Center for Medicare, told reporters in a call that the slight change was due to technical updates in the risk adjustment normalization factor.

He said the policy changes for next year were mostly the same as in the draft rate notice and call letter with some modifications.

Plans have until June 6 to file their bids for 2017, which are influenced by policy and rate changes.

Employer Group Plans

In one of the modifications from the draft notice, the agency compromised on changes to Medicare employer group waiver plans (EGWP) that would result in an average cut of 2.5 percent for these plans by spreading out the effect of the changes over two years rather than one.

In the draft call letter, the CMS proposed to use the amounts in market bids in the individual market to establish payment amounts under employer plans rather than establish their payment amounts through bidding .

The agency said it will continue with that policy change but will allow a two-year plan so that the cut would average out to 1.25 percent in 2017 and 1.25 percent in 2018. This will mitigate the impact, Cavanaugh told reporters.

Changing Time Frame

Specifically, the agency said it will release 2017 final local EGWP county payment rates now in the 2017 rate announcement, rather than in the proposed August time frame “to facilitate implementation of this policy.”

Employers and plans will have more time to adapt to this payment change under the two-year transition, the agency said.

However, America's Health Insurance Plans President and CEO Marilyn Tavenner said April 4 that “more can be done to ensure stability for more than 3 million seniors who depend on Medicare employer retiree plans.” She urged “policymakers to focus on policies that will strengthen the Medicare Advantage program moving forward.”

Encounter Data

In another modification from the draft, the agency decided to change its proposed increase of plans' risk score calculation based on encounter data—information on the services and items furnished to enrollees—from 10 percent to 50 percent. Instead, it said it would scale back the proposed 50 percent to 25 percent.

The CMS had previously used diagnoses submitted into CMS’s Risk Adjustment Processing System (RAPS) to calculate risk scores.

However, for the 2016 plan year, it began using diagnoses from encounter data to calculate risk scores, by blending encounter data-based risk scores with RAPS-based risk scores.

In 2017, the CMS will use a blend of 25 percent weighting of encounter data and a 75 percent weighting of RAPS.

AHIP and other groups were not pleased with the proposed 50/50 ratio and had told the agency that plans have identified numerous unresolved issues with encounter data.

AHIP April 4 noted that the shift from 50 percent to 25 percent followed “overwhelming bipartisan Congressional outreach.”

The agency said it would continue to increase the percentage each year so that 2018 will be 50/50, 2019 75/25 and then reach a full phase-in of the use of encounter data by 2020.

The American Hospital Association said April 4 that it had advocated for the “slower transition to the use of encounter data in calculating risk scores.”

Risk Model

The agency also said it's finalizing its new risk adjustment model for 2017, despite widely divergent reactions from the industry, including a request from AHIP to the CMS that it not move forward.

The new model has separate coefficients for partial benefit dually eligible beneficiaries, full benefit dually eligible beneficiaries and non-dually eligible beneficiaries and is designed to shift funds to help health plans that enroll more Medicare beneficiaries who are also fully eligible for Medicaid.

Despite some opposition, one stakeholder told Bloomberg BNA that the CMS has spent awhile working out the logistics of its new model and is less likely to pull back on this proposal than others that are opposed by industry groups, such as changes dealing with employer plans and encounter data .

Praise From Community Plan Group

“With this final notice, CMS has addressed the flaw in its risk adjustment system that had led to systemic underpayments for health plans serving full-benefit dual eligibles—who are among the poorest, sickest, and most vulnerable Medicare beneficiaries,” Association for Community Affiliated Plans CEO Margaret A. Murray said in an April 4 statement. “This fix will help Safety Net Health Plans and others to continue their mission to bring integrated services to full-benefit dual eligibles through coordinated, accessible, high-quality care—as is the intent of the Dual Eligible Special Needs Plan program as originally passed in the Medicare Modernization Act.”

Another group, Alliance of Community Health Plans, said “adoption of a revised risk adjustment model provides welcome benefit for special needs plans caring for low-income and disabled individuals and other plans with high enrollment of dually eligible Medicare and Medicaid beneficiaries.” The group said it was “disappointed that CMS did not reflect concerns, however, about the impact of this change on other MA plans.”

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

To contact the editor responsible for this story: Janey Cohen at

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