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Medicare Advantage rate cut would reduce payer funding

Business, healthcare advocates urge CMS not to cut rates

The Centers for Medicare & Medicaid Services (CMS) claim that its proposal to cut Medicare Advantage (MA) reimbursement rates by 0.95 percent in 2016 will not impact insurers' revenue, but industry experts say the changes will hit their bottom lines, the Wall Street Journal reported.

The CMS proposal, released Friday, said that risk-scoring adjustments for 2016 should actually give insurers a 1.05 increase in total MA revenue, with additional increases available for those with high quality and customer satisfaction scores.

However, initial estimates from insurers paint a different picture. Humana expects its MA funding to fall between 1.25 and 1.75 percent in 2016, according to the Journal, while Aetna expects funding to fall about 1 percent. This is not without precedent--insurers predicted MA payment reductions of 3 to 4 percent in 2015 despite a 0.4 rate increase.

The announcement didn't seem to affect insurers' stock prices. Following Friday's announcement from CMS, Humana, WellCare and UnitedHealth all saw their stock prices rise at least 2 percent, according to Investor's Business Daily.

The possibility of payment reductions nonetheless has the industry reeling. As FierceHealthPayer previously reported, a group of 53 U.S. Senators and America's Health Insurance Plans oppose a rate cut, indicating that lowered reimbursement rates have cut MA payments by 10 percent in the last two years. Other groups have joined the chorus.

In a letter to CMS, Krista Drobac, interim executive director of the Better Medical Alliance, said she is "deeply concerned" about the "real cuts" to MA.

"While overall healthcare cost inflation has thankfully been modest during [the Obama] administration, healthcare costs have nonetheless continued to rise at the same time that Medicare Advantage has been subject to these real cuts each year since 2010. Our coalition believes that these cuts have been harmful to Medicare beneficiaries and that the program must not be subject to yet another year of cuts," the letter said. Better Medical Alliance members include Aetna, Humana and UnitedHealth.

Meanwhile, a letter to CMS from a group of 35 state and national business associations said that annual MA cuts hurt employers, employees and healthcare providers. The letter also highlighted MA as a strong example of care coordination, better health outcomes and high member satisfaction.

CMS will accept comments on the MA rate plan until March 6 and will announce final rates on April 6.

For more:
- here's the Wall Street Journal article
- here's the Investor's Business Daily article
- read the Better Medical Alliance letter (.pdf)
- read the business associations' letter (.pdf)

Related Articles:
CMS proposes slight decrease in Medicare Advantage rates for 2016
Medicare Advantage cuts still in the cards for some insurers
Medicare Advantage changes send members scrambling