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2016 Advance Notice: Changes To Medicare Advantage Payment Methodology

posted by Oliver Wyman

on February 25, 2015

Introduction

The Centers for Medicare & Medicaid Services (CMS) released the Advance Notice of Methodological Changes for Calendar Year 2016 Medicare Advantage Capitation Rates and Part C and Part D Payment Policies (the 2016 Advance Notice) on February 20, 2015. This notice outlines the planned changes to Medicare Advantage (MA) capitation rates applied under Part C for CY 2016 and other regulatory changes that will affect plan reimbursement. Based on information released in the 2016 Advance Notice and reductions already being implemented by the Affordable Care Act (ACA), Medicare Advantage Organizations (MAOs) are likely to experience additional payment reductions for 2016. Such reductions, coupled with the reductions experienced in 2014 and 2015, would have a significant impact on the sustainability of MAO program participation and the ability of MAOs to provide stable benefits and beneficiary premiums to their members.

Based on the 2016 Advance Notice and the implications of the ACA payment reductions, America’s Health Insurance Plans (AHIP) engaged the Actuarial Practice of Oliver Wyman to evaluate the impact of these potential changes in 2016. In this document, we first describe and estimate the value of the changes reflected in the 2016 Advance Notice along with those being implemented due to the ACA, and then estimate the effect these changes will have on beneficiary premiums and benefit levels, MAO enrollment, and the sustainability of MAO program participation.