The 2015 Medicare Advantage Final Call Letter = Unicorn Rainbow Farts
The Center for Medicare and Medicaid Services' (CMS) release of the final 2015 Call Letter for Medicare Advantage (MA) Monday after the close was a "unicorns farting rainbows" moment. Unicorn rainbow farts bring happiness and joy to all those that observe them, and then dissipate quickly. After a beating at the hands of the ever-more powerful insurance lobby for another draconian draft released in February, CMS reversed itself yet again and proclaimed a 0.4% increase in MA benchmarks. Lobbyists and Wall Street analysts rejoiced...only to find after a closer look that there are some nasty hooks in the pie CMS put on the windowsill.
We've tried for days to replicate CMS' math to get to a 0.4% increase, and can't, because it's vapor, magical horse methane. The truth is, we're looking at an average cut of at least 3% for MA next year, and our logic follows below:
Others agree: DeutscheBank says -3.5%; Morgan Stanley projects -3.1%, Bank of America says -3.3%. And that ushers in a two-year march in the desert for Medicare plans following the 6% hit they took in 2014. There will be wide variation among plans, with lesser negative impact for plans which can continue to bid below the benchmarks.
The trends by themselves cut the benchmarks a lot, to the tune of almost 8%. And there's a ripple effect there, on Star ratings of all things: the -4% trend on the old benchmarks lowers the ceiling, and the effect is to truncate Stars bonuses in almost half of US counties. Ironically, high-performing plans take a hit, especially in double bonus counties, in this final rate announcement.
CMS's second consecutive reversal of its proposed ban on diagnostic codes for risk adjustment from home visits was a huge win for the industry, and as we see it, the one ray of light in the final call letter. CMS delayed the change until 2016, and that delay makes up for most of the impact of the negative trends in the benchmarks. But this isn't an equal across the board fix. Given that the FFS normalization factor places a 4% multiple on every point of a plan's risk adjustment factor (RAF) score, plans have an even greater incentive to identify and document every diagnosis that maps to an HCC.
This is further amplified by the decision to roll back the phase in of the new HCCs. On average, the new HCC scores would cut about 2.6% out of MA plans' payments. In 2014, CMS is blending new and old HCCs, with new scores given a 0.75 weight. For 2015, they are rolling that back to a 0.33 weight. That's worth 109 basis points by our calculation. So, compared to 2014, one RAF point is worth 1.05 points in 2015. Given the deferral of the home risk assessment rule for at least another year, plans should be doing home visits intensively this year, and working to evolve their programs to be more clinically meaningful, e.g., a care plan for every diagnostic code submitted from a home visit, and making the house call into more of a "mobile medical home" including mobile labs, imaging and drug therapy counseling.
CMS also makes clear in the final call letter that Medicare Advantage plans ranked 3 Stars or less for 3 consecutive years will be nonrenewed. This means termination notices could be going out as early as August given plans have to execute 2015 contracts with the agency in September, before the Annual Enrollment Period. Many plans will choose to nonrenew rather than be publicly shut down by CMS for poor quality. Dozens of plans are now dead men walking, including several of the publicly-traded Medicaid plans and several Blue Cross/Blue Shield organizations. So in a matter of weeks, a Hunger Games-style "reaping" will occur that will change the face of this industry.
So the long walk in the desert for Medicare Advantage begins. Forward-looking plans will prepare by ramping up their risk adjustment operations, ensuring their Stars programs have the resources they need to keep scores moving up, revisiting their service models, and working daily on closer collaboration with their provider networks.
Resources
On April 11 GHG Comments on the Final Rate Announcement in a webinar hosted by Gorman Health Group Founder and Executive Chairman John Gorman, financial expert and former health plan CFO, Bill MacBain, and former regulator and industry-renowned policy expert Jean LeMasurier. Register for the webinar >>
Listen in as John Gorman shares his reactions to the 2015 Final Call Letter from CMS. He covers the implications of the final rates, as well as what the pull back on risk adjustment means to MA plans this year, and beyond. Click here to download the podcast >>
Join Gorman Health Group May 1 — 2 at the Red Rock Casino and Resort in Las Vegas for the 2014 GHG Forum. This two-day event builds on the success of past GHG Forums and is designed to provide best practices for the decision makers of organizations serving Medicare members, Exchange beneficiaries, and the Dual eligible population. Register now >>
Member Engagement and Experience are the New Risk Adjustment
In this new era of Star Ratings in Medicare Advantage and Part D, where a 4+ score is now do-or-die, health plan survival comes down to two things: member engagement and the member experience. They're the new risk adjustment when rates in 2014-2015 will be at their lowest levels in more than a decade, and a low-quality rating is a kiss of death in government programs. Plans that can't evolve into kinder, gentler, more coordinated and Member-Centric service providers are already beginning to disappear.
Here's why: the vast majority of the Star Ratings performance measures, especially those that are triple-weighted, are utterly dependent on an engaged member. Example: breast cancer screening. All women hate mammograms, and this measure doesn't move unless the member shows up. Another: Diabetes Care -- Blood Sugar Controlled. "Controlled" is a clinical outcome. And you can't get there with daily testing and insulin treatment without a member who's paying attention every day. Less than 20% of seniors engage in all screenings and tests required in Stars.
Similarly, the patient's experience measures and surveys now comprise fully a third of the Star Rating and are all 1.5 weighted, which means they count 500 basis points more than simple process measures. Getting appointments and care quickly, handling of complaints and coverage disputes, interpreter availability -- just a couple examples, all 1.5 weighted and instrumental to getting or keeping those all-important 4 Stars. The Consumer Assessment of Health Plan Survey (CAHPS) and the Health of Seniors Survey (HOS) are enormous determinants of ratings, both conducted by government surveyors, and both strike fear in the hearts of health plans. "Has your health improved in the last two years you've been enrolled, and who do you attribute it to?" are two of the most critical questions facing our industry. You have no hope of a positive answer to these questions from your members if they don't know who you are and what you're doing for them.
Most of the tasks involved in the Stars measures are actually pretty simple, like getting a flu shot. And behavioral economics show us that simple tasks are susceptible to contingent, or "if-then" rewards. So plans need to have the ability to track member progress on health-related tasks and administer appropriate incentives when they are completed. And all of the patient's experience measures necessitate a responsive, proactive service model that could be lifted from some of the leaders of e-commerce.
So the more we thought about it, the more we realized we needed to offer our clients a platform that can help them execute better on Stars tasks, while ensuring dramatically better member engagement and a much more positive consumer experience. And that's where our new partnership with Novu comes in. Novu is a unique platform which creates a deep ongoing relationship between your plan and your members, and gives you the "stickiness" that keeps them around. Members engage in a fun, easy to use, and rewarding health engagement tool that has a proven record of getting people to actively participate in their health: 76% of members return to the site 2 or more times per week, and stay on the site almost 10 minutes per visit.
We're thrilled to offer this first-of-its-kind engagement platform specifically tailored to the needs of Medicare, Medicaid and ObamaCare exchange members with Novu. Check out the product on the GHG website: https://www.ghgadvisors.com/who-we-are/our-partners/novu
Resources
New Webinar with John Gorman: Join him on April 2 for this complimentary presentation. "Member-centricity is more than a catch-phrase. How enhancing member engagement impacts the top AND bottom lines." Register now.
Learn more about the GHG-Novu partnership by reading our press release.
Join John Gorman, Novu's Tom Wicka, and dozens more industry thought leaders at the 2014 GHG Forum. Full agenda just released.
Lighting the Path in the Golden Age of Government-Sponsored Health Programs: Join Us for the GHG Client Forum
More than 300 guests will convene on May 1-2 at the Red Rock Casino in Las Vegas for the 2014 Gorman Health Group Forum, our annual strategic retreat for leaders in government-sponsored health programs. This year's gathering promises to be the most actionable, content-packed conference you could attend on how to succeed in this new Golden Age of government business. And when the learning and planning is done for the day, we will celebrate this unique moment in health care history as only GHG can in Vegas. Here's what's happening this year and why you've got to join us:
- The event features 27 content-charged sessions, including multiple presentations on Star Ratings tactics, quality improvement, risk adjustment, and compliance challenges unique to Medicare Advantage and Part D, Medicaid, and the ObamaCare exchanges
- A keynote presentation from CMS leadership
- An expert roster of presenters from Gorman Health Group and leading health plans in government-sponsored programs. No fluff, no sales pitches, no history lessons -- it's all about what to do NOW
- Approved for up to 12 continuing education credits from the Compliance Certification Board
- The perfect off-the-strip venue to minimize distractions during the day, but close enough to the action to make plenty of bad decisions in the evenings. ;)
Based on feedback from last year's Forum, I'm speaking in three separate sessions on overall strategy and implementation planning for government programs. If you've heard my "state of the industry" presentation before, you may think you know what to expect from me on stage. Think again. This is my favorite gathering of the year, and I'm building three brand-spankin' new presentations that are focused on specific steps and mileposts your organization needs to reach this year in care management innovation, risk adjustment, Star Ratings, and operational performance improvement. In each session I'll drill down to specific steps, and we'll leave you with a self-assessment tool in our closing session to help track your progress.
Many of our clients use the Forum as an offsite retreat for their government programs executive teams, and so we offer huge group discounts to encourage it. It's a unique opportunity for team-building and action-oriented planning and budgeting.
If government-sponsored health programs are central to your company's future, do yourself a favor and join us in Vegas. You'll come back tired, happy, and ready to win in this crazy new environment of health reform.
Don't believe me? Hear what last year's attendees thought about the event, and why they keep coming back for more.
Resources
Register today for The Annual GHG Forum held May 1-2 at the Red Rock Casino and Resort in Las Vegas. This two day event is designed to provide best practices for the decision makers of organizations serving Medicare members, Exchange beneficiaries, and the Dual eligible population.
On April 11, Bill MacBain and Jean LeMasurier will be back, and this time joined by John Gorman, Executive Chairman of GHG, to offer insight on the Final Rate Announcement from CMS. You will walk away from this session with critical to-do items and issues to tackle in order to ensure your success in 2015 and beyond. Register now >>
2015 Medicare Advantage Draft Rate Notice is a Bear: Messy, Noisy, and Smells Like Roadkill
Friday after the close of business, CMS released the draft 2015 "call letter", the rate announcement for Medicare Advantage. As expected, it's a bear: messy, noisy, and smells like roadkill. It's just about a worst-case scenario for flabby, distracted, uncommitted health plans in Medicare -- the roadkill to come. The table is now heavily tilted against low performers who can't keep up. Some topline observations:
- The benchmark calculations were anticipated and about as rough as they could be under the Affordable Care Act. Having said that, for the "glass half-full" types, the average MA benchmark is still 103.4% of Medicare fee-for-service expense. In the 1990's under the old AAPCC methodology, all plans got 95% of fee-for-service, and plenty of plans were profitable -- and that was before risk adjustment and Stars. We knew the Bush party was over. It's time to get over it and push forward because the only way out now is through.
- The Star Ratings quality demonstration is officially over, and those plans below 4 Stars are now leaving a blood trail in the snow. After this year, as required under the ACA, all plans above 4 Stars will get a 5% bonus, while those below get nothing.
- CMS makes it clear in the call letter that it will terminate sub-3-Star plans for three consecutive years at the end of 2014. The reaping is coming in a few short months.
- The demo's conclusion is a grave wound for 3.5 Star plans, who just missed the threshold and take an additional 3.5% cut for added misery.
- At the same time, CMS made a big move to remove Stars as a barrier to market entry for new plans, especially those spawned by high-performing veteran organizations. A new plan starts out with a 3.5 Star rating now -- and will receive the 3.5% bonus; a new plan born of a veteran MA organization gets a weighted average of all its other plans. It's a welcome mat for Stars heroes like Kaiser, Providence, and CIGNA to expand to new markets, especially those with weak competition.
- The risk adjustment provisions were very tough, but leave significant maneuvering room for sophisticated plans to adapt their much-maligned home visits into a mobile medical home model that closes gaps in care for the chronically ill.
- It's the beginnings of good policy but not there yet, and CMS is giving the industry an opportunity to shape it. We should not fight this policy change and should embrace the dialogue.
- The home is the most underutilized source of care for frail elders, and risk adjustment must be much more than a data collection exercise.
- While we got some hidden rate relief in a slightly favorable FFS normalization factor, we only anticipate 300 bps improvement on average, but for those flabby plans who can't keep up, the impact will be much less.
Our estimate is that the average MA plan will experience a real cut in payment of -4.9% if the draft is finalized in April. This includes a rough estimate of the impact of the new risk adjustment rules, and the average impact of the end of the Stars demo.
If this rate announcement is enacted, it's survivable for the adaptable and the high performers -- like the old adage about walking in the woods with a friend when you get chased by a bear, you just have to outrun the other guy. There is no question the 2015 call letter is an evolutionary event and some inferior species will be eliminated.
Want to know more? Watch this space for tons of additional resources from the veteran Gorman team.
Resources
Sign up for a Free GHG web account and receive an alert when GHG's summary of the draft 2015 "call letter" is available.
Join us on Thursday, February 27 to hear financial expert and former health plan CFO, Bill MacBain, and former regulator and industry-renowned policy expert Jean LeMasurier review critical take aways from the CMS Advance Notice, and what MA plans should prepare for in the next 45 days. Register >>
John Gorman featured in Wall Street Journal article "Government Proposes Cuts to Insurers' Medicare Payments." Click here to read more.
On April 11, Bill MacBain and Jean LeMasurier will be back, and this time joined by John Gorman, Executive Chairman of GHG, to offer insight on the Final Rate Announcement from CMS. You will walk away from this session with critical to-do items and issues to tackle in order to ensure your success in 2015 and beyond. Register now >>
Register today for The Annual GHG Forum held May 1-2 at the Red Rock Casino and Resort in Las Vegas. This two day event is designed to provide best practices for the decision makers of organizations serving Medicare members, Exchange beneficiaries, and the Dual eligible population.
There is no cheat sheet for 2014.
Now is the time of year when we all have 12 things to do in the next 30 minutes, plus we are budgeting and we need to write our strategic approach for 2014. We have to learn how to prioritize and focus on what is truly important to our success. Unfortunately, there is no cheat sheet, no best practices for all things healthcare, and we cannot succeed if we have too many strategies. Let's compare five areas:
- Administrative excellence and compliance
- Clinical innovations around case, disease, and utilization management
- Provider Engagement
- Risk Adjustment
- High-risk member management
Recently, Gorman Health Group asked the attendees of Medicaid Health Plan Association, "What are the most important strategies in 2014?" The answers and ranking are below:
- High-risk member management
- Provider engagement and innovative reimbursement models
- Risk Adjustment
I imagine that this may be that cheat sheet for all of us.
Although Michael Porter shares, "strategy is about making choices, trade-offs; it's about deliberately choosing to be different." There are some strategies that every business has to do well to survive, and we all need to be ready to succeed at those mentioned above in 2014.
Resources:
Decision-makers from Health Plans and Provider Organizations are invited to join GHG for a free webinar on November 19th: "The future of the Government sponsored health care." Register for this free event now >>
Medicaid health plans must be able to navigate through State and Federal regulations and work well with State agencies.
GHG solutions-based consulting drives results to your Medicaid health plan, visit our website to learn how >>
Reading the Stars in Medicare in 2014-2015
Whatever you may think of healthcare.gov, CMS is killing it on the Medicare Star Ratings Quality Demonstration.
As we move into the final year of CMS's historic and controversial $8.5 Billion Quality Demonstration, we see clear evidence that quality incentives are working, plans are making major investments to improve their ratings, and quality is improving across the industry. One thing we can be sure of in uncertain times: proven performance-based payment systems like MA Star Ratings will spread to Medicaid, the exchanges, and commercial accounts in the next 3-4 years under banners of transparency and accountability. $8.5 Billion in a $3 Trillion industry seems infinitesimal, but Stars are moving the industry in ways outsize to their impact.
Many industry experts giggled at the Affordable Care Act ‘s (ACA) provision allowing MA plans to earn up to 5% additional reimbursement from the government for quality metrics based on the CMS star system, and 10% in double bonus (mostly rural) counties. The Star ratings system was, at the time, a laughable ranking barely 2% of beneficiaries paid any attention to. Not anymore. In 3 years, CMS has evolved Stars to an increasingly sophisticated carrot and stick for quality improvement, with massive financial implications for payers.
To date, each half-star rating equated to roughly $50 per member per month in bonus payments. For 2014, we estimate the enrollment weighted-average increase to plan paymentst from Star bonuses is approximately 4.75% and 3.3% in 2015. Anything below 4 Stars in 2015 means no bonus and a major financial headwind for plans. With MA plans seeing roughly 5% margins, 2014 being the worst year of MA reimbursement cuts from the ACA, and 2015 meaning the end of bonuses for plans below 4 Stars, plans are making significant investments to improve their ratings.
There was clear evidence that Stars incentives are working: 52% of MA plans are now at 4 Stars, up from around 37% of all MA plans. The average member weighted ranking for 2013 is 3.86, up from 3.7 in 2012. The biggest chunk of MA enrollment is now in 3.5 Star-rated plans: 30% or 4.4 million. There are now 16 5-Star rated plans up from 3 this year.
While tremendous progress is being made on Stars, GHG's analysis of the data also shows what a long, hard journey these performance metrics present to health plans. We have much improving to do in managing conditions like osteoporosis and mental health, where most plans scored badly. And the data shows a need to continually improve the service model, like providing interpreters, managing member complaints and coverage disputes.
MA plans in qualifying counties, mostly rural, can receive a "double bonus," the payment impact of which is significant. There are about 4 million MA members in double bonus counties, roughly 27% of the total MA population. Double bonus counties add about 100 basis points to payments across the entire MA program.
5-Star rated MA and Prescription Drug-only plans can enroll members year-round in 2014, rather than just during the annual enrollment period. This is a major strategic advantage for Star leaders, but one that few have taken full advantage of yet — and that's about to change. With big nationals finally attaining the honor, they'll be ready and hustling all year.
CMS has been very clear that it reserves the right to terminate MA contracts that are below 3 Stars for 3 consecutive years, citing its authority in an April 2012 final rule which became effective this year. About a half-million Medicare beneficiaries are enrolled in plans with less than 3 stars.
Resources:
Interested in seeing how your Plan's performance compares to others in your market? Download GHG's Star Ratings Database that combines the CMS-issued 2014 Star Ratings with those over the program's history from 2008 on.
Hear from GHG Stars expert Jane Scott on October 29th. GHG and AISHealth team up to present a 90 minute webinar: "Inside the 2014 Star Ratings for MA and Part D: Trends and their implications." Register now >>
Want to hear more from John? Decision-makers from Health Plans and Provider Organizations are invited to join GHG for a free webinar on November 19th: "The future of the Government sponsored health care." Register for this free event now >>
The survey says...
In May, GHG conducted several marketplace surveys. The initial survey highlighted our clients' top priorities. Here is what the ranking showed as our clients' focal points:
- STARS
- Clinical & Financial Alignment
- Risk Adjustment
- MLR monitoring
We understand that in order to emerge as leaders or at least survivors of the rate reduction and complex regulatory world we live in, health plans, health systems, ACOs, and capitated medical groups have to identify business levers that impact the greatest improvement to the bottom line. This is exactly why we created the Alignment Innovation Suite - we take your data and create a driver and alert system for an interdisciplinary team to review and discuss. The Alignment reports clearly indicate where the problems are and where we can jointly create the road map to fix them.
The new Alignment engine couples medical cost and utilization while at the same time overlays benefit and network design. The reports display the areas in the greatest need of collaboration and redesign, i.e. where to spend your time and resources to get the best bang for your buck.
In recent GHG case studies, the Alignment engine, assessment and reports clearly depict the need to 1) redesign provider payment models, 2) completely restructure health services or medical management functions and criteria to impact population health management & patient engagement , 3) operational improvements; simple changes with huge financial impacts and 4) benefit remodeling to improve patient navigation of your healthcare ecosystem.
Resources
GHG's Alignment Solution Suite assessment is backed by industry leading health care expertise and is managed by a team of veteran consultants who will help lead your organization to better financial alignment, product design and health care efficiency. Visit our website to find out more.
Join us on August 8 to get practical advice on the best ways of getting into the MA market from GHG Chief Development Officer, Aaron Eaton, Senior Vice President of Finance, William A. MacBain, and Senior Director of Compliance Solutions, Regan Pennypacker.
Strange Bedfellows Come to Medicare Advantage's Rescue
If you can say anything about Medicare Advantage (MA), it definitely makes for strange bedfellows in both the private sector and in the halls of Congress. Last Friday the full lobbying fury of the industry was in evidence as three separate groups of legislators appealed to the Centers for Medicare and Medicaid Services (CMS) on its 2014 rate proposal.
First was a bizarre, bipartisan collection of Representatives: Reps. Bill Cassidy and John Barrow and 93 other lawmakers — mostly GOP, but some Dems — begged CMS to reconsider its approach to the 2014 MA rates, saying CMS shouldn't enact new risk adjustment policies and to assume that the 2014 Sustainable Growth Rate cuts will go into effect. "This reduction in funding will leave many vulnerable seniors with fewer benefits, higher out-of-pocket costs, and in some cases the loss of their current MA coverage," they wrote.
Then, Senators Max Baucus (D-MT) and Orrin Hatch (R-UT), leaders of the Senate Finance Committee, fired their own salvo. In a rare joint letter, they poked CMS for not giving MA plans enough notice on changes to the Star Rating calculation, and for assuming the SGR cuts would not be blocked, as they have every year for the last decade. This one change to CMS's proposal would restore about 5% to MA payments in 2014. "The lack of transparency surrounding this proposal is troubling," Baucus and Hatch wrote, asking CMS to delay changes until they can be vetted. Their voices are particularly important on the 2014 rates, as it is their panel that will handle the long-awaited confirmation of Marilyn Tavenner as CMS Administrator in the coming weeks.
Later that day a group of 22 other Senators sent a letter to CMS expressing their concerns about the 45-Day Notice. Another strange bipartisan assortment including several influential Democrats urged CMS to assume that Congress will address the Sustainable Growth Rate.
We don't have any doubt that CMS will walk back some of the draconian measures they included in the 45-Day Notice. The agency has the most discretion around its proposed risk adjustment changes, and I suspect many of them won't make it into the final rates on April 1. And while the most meaningful remedy is for CMS to assume an SGR fix will be passed later this year, the agency has never taken such a step and we don't expect they will here.
We believe an SGR fix will pass the Congress again, but not until later this fall and well after 2014 bids are due to CMS in June. That means we'll see a roughly 5% bump in MA rates in 2015 -- but still very tough times for MA plans and their members next year.
Resources
Click here to read the MA rate letter Max Baucus and Orrin G. Hatch sent to CMS on March 15, 2013.
To read the MA rate letter the US House of Representatives sent to CMS on March 15, 2013, click here.
Click here to review the MA rate letter the US Senate sent to CMS on March, 15 2013.
Gorman Health Group Senior Vice President Bill MacBain explains the logic behind the proposed rate change, and shares a brief analysis of the impact in this regulatory summary.
Click here to review GHG's comments in response to the Advance Rate Notice, submitted to CMS on March 1, 2013
Gorman Health Group Senior Vice President Jean LeMasurier summarizes the 2014 CMS Draft Call Letter.
Little Good News for Medicare Advantage in Senate Finance Hearing
The Senate Finance Committee held a hearing on Medicare yesterday and received testimony by CMS Medicare chief Jon Blum. Almost a week after the shocking 45-day Notice for Medicare Advantage (MA) and Part D was released, Blum offered little in the way of good news on the 2014 rates.
Blum said CMS is committed to ensuring seniors have strong choices and accuracy in payments. He briefly addressed the draconian 45-day Notice and said that one reason 2014 proposed rates to MA plans are lower is because Medicare spending is lower, and that's good news for the program. He also said it's longstanding CMS policy not to assume a Sustainable Growth Rate (SGR or the "doc pay cut") fix until it is current law, and said the best way to stabilize both traditional Medicare and MA is with a long-term fix to the SGR. He's certainly right about that, but with a $130 Billion price tag, may not be feasible while the budget debate rages here in DC.
Blum admitted that CMS does have discretion with respect to the risk adjustment model, and that could be good news for MA plans -- changes to the HCC model drove a significant portion of the cuts in the 45-day Notice. He suggested -- obliquely -- that CMS's proposal to refine the HCCs "to exclude certain conditions that are most commonly coded by Medicare Advantage plans" could be reconsidered.
Finance Committee Chairman Max Baucus (D-MT) said there is a need to address the 45-day Notice cuts, but did not offer any specific proposal, and neither did Blum. CMS has lowered the overpayments to MA plans relative to FFS from 14% in 2009 to just 4% in 2013 (before the proposed 45-day Notice cuts to 2014 rates), with the difference to be "phased down further." Blum stated on several occasions that the Medicare Advantage rates were proposed, not final. He said the payment reductions over the past few years coupled with membership growth in the program is evidence that CMS can reduce payments and yet the program can grow.
Blum later suggested that CMS's goal was to ensure that seniors have opportunities to enroll in 4 and 5 star plans, and pointed out that those plans not achieving 4 stars on the CMS rating system would face significant additional payment challenges.
So the brutal proposed 2014 payment rates for MA have Congress' attention, but a solution is far from clear with the sequester looming on March 1. The probability of a legislative SGR fix by June -- when MA bids for 2014 are due -- is virtually nonexistent, and that's tragic as an SGR fix of two or more years would bump up MA rates by about 5%, offsetting much of the shortfall in payments. Fixing the risk adjustment proposals won't impact benchmarks, so are only of limited value. Relief on other proposed payment changes like the Total Benefit Cost limits would be helpful but wouldn't significantly change the rate cuts.
So we got a few rays of daylight in the gloom of the 45-day Notice, but no clear path to fixing its worst features. AHIP is on the Hill with a massive lobbying campaign, and there's a steady stream of visitors to CMS seeking relief, but no evidence yet that we might duck the 9-10% cuts in the proposal with 30 days before it's final.
Resources
Listen in to John Gorman's take on the draft call letter and his thoughts on the implications for Medicare Advantage health plans — and their providers.
Gorman Health Group Senior Vice President Bill MacBain explains the logic behind the proposed rate change, and shares a brief analysis of the impact in this regulatory summary.
Gorman Health Group Senior Vice President Jean LeMasurier summarizes the 2014 CMS Draft Call Letter.
CMS Advance Notice for 2014: This Is What Austerity Looks Like
CMS's Advance Notice for Medicare Advantage and Part D for 2014 was released after the close on Friday and tanked health plan stocks on Tuesday. It is a shocking, stark portrait of what austerity looks like. There's nothing but bad news in it, and it's worse than anyone expected. Start with an average cut in payments of 6% (combined impact of ACA, proposed trend, and increase in coding adjustment); now add the likelihood of sequestration taking effect on March 1 -- another 2% cut; add the impact of draconian changes in risk adjustment and the 2014 industry tax for another point or two. All in, CMS could cut as deep as 9-10% if the proposed rates become final on April Fool's Day. The industry has little more than 5 weeks to howl, lobby, mobilize and cajole CMS to its senses before the meat-axe falls.
If the proposed rates become effective, it will lead to meaningful, painful benefit cuts. Plans will try to shift some of the pain to providers, and doctors, hospitals and pharmacists will see another year of payment cuts. It will stunt the stunning 10%+ growth in Medicare Advantage the last several years. Industry consolidation will intensify as local and regional MA plans struggle to make ends meet.
We knew the ACA cuts to Medicare Advantage were significant and were softened by the Star Ratings Demonstration. We expected that CMS would take a harder line with health plans in a second Obama term, especially with the deficit fight raging in Washington. The draft notice also shows that the Medicare fee-for-service physician pay cut could come home to roost as well on April Fool's Day. A permanent fix to the Medicare physician pay cut would help MA rates by 4.5-5.5%, offsetting some of the shortfall in payments. But it would cost upwards of $130 billion and we can't take that to the bank in the current political environment.
There's a difference between Chicken Little and Paul Revere...and there was an epic meteor shower on our planet this week. The clock is ticking for stakeholders in Medicare Advantage and Part D to engage with their legislators and CMS to prevent these proposed rates from becoming a cruel hazing on April Fool's Day.