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New Report: Proposed Cuts To Medicare Advantage Put Seniors’ Coverage At Risk

posted by Clare Krusing

on March 3, 2016

For Immediate Release

CMS’ Changes Could Undermine Care Delivery Programs, Reduce Benefits for Beneficiaries

Washington, D.C. – Millions of seniors who depend on Medicare Advantage plans could face additional threats to their coverage and benefits if new payment changes recently proposed by CMS take effect next year, according to a new analysis by Oliver Wyman prepared for America’s Health Insurance Plans (AHIP). “Such reductions, coupled with the reductions experienced in 2014 through 2016, could have a significant impact on the sustainability of Medicare Advantage Organization (MAO) program participation and the ability of MAOs to provide stable benefits and affordable premiums to their members,” the report states.

Proposed Cuts to MA Chart

Last month, CMS released proposed changes to Medicare Advantage that will impact the 17 million seniors enrolled in the program. According to the report from Oliver Wyman, these changes, if finalized, would result in an estimated 0.5 to 3.9 percent cut on average to Medicare Advantage payments in 2017. These proposed payment reductions add to ACA funding reductions that continue to be phased-in for one-third of the country. Moreover, these proposals build additional layers of complexity, uncertainty, and unpredictability into the Medicare Advantage program.

The most significant cuts to the Medicare Advantage program include:

  • Risk Adjustment (2.1 percent cut): The agency is proposing changes that create new risk adjustment models for dual eligible beneficiaries and individuals with disabilities.  However, the report estimates these changes would reduce program funding by 2.1 percent.  These changes fall particularly hard on plans’ efforts to improve beneficiaries’ health through early detection and prevention of chronic conditions and exacerbate the cuts CMS implemented last year that target health plans’ efforts to improve quality of care.
  • Encounter Data (up to 3 percent cut): CMS’ proposed changes would increase the percentage of risk score calculations based on encounter data, a model which currently has numerous unresolved operational and technical issues and fails to capture a reliable, comprehensive picture of beneficiaries’ diagnoses.
  • Employer Group Waiver Plans (EGWPs) (up to 0.86 percent program-wide; 2.5 percent – 4.5 percent cut for EGWPs): Employers, including state and local governments along with union sponsors, use customized EGWP products to finance retiree coverage for almost 3.2 million beneficiaries, or more than 18 percent of all Medicare Advantage enrollees. CMS’ proposals to alter the payment and bidding model for EGWP plans would lead to significant uncertainty in the cost of providing coverage for enrollees and potential disruptions in their coverage and benefits.

“Seniors should not face any further cuts to their Medicare Advantage coverage,” AHIP President and CEO Marilyn Tavenner said. “CMS’ proposals would jeopardize the benefits and care coordination programs that have improved beneficiaries’ health. We urge CMS to protect millions of seniors across the country by avoiding further cuts to Medicare Advantage and providing much needed stability to beneficiaries’ coverage.”

The new report comes at a time when a growing number of voices are urging CMS to prevent further cuts to Medicare Advantage, including more than 370 members of Congress. AHIP’s Coalition for Medicare Choices (CMC), the largest advocacy group of more than 2 million Medicare Advantage seniors, recently launched a nationwide grassroots and ad campaign to protect Medicare Advantage. Final payment rates are expected on April 4, 2016.

To view the full report, click here.

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