SGR Cut In MA Rates: To Be or Not To Be
With the MA Final Notice due out on April 1, and the 45-Day Notice suggesting the biggest decrease to MA rates in years, the new Congressional Research Service report, which evaluates the HHS Secretary’s authority with regard to including or not including an SGR fix in calculating the trend in FFS costs, is of paramount importance. The report concludes that the HHS Secretary, and therefore CMS, likely have broad authority with regard to whether or not CMS assumes that Congress will eventually create an SGR fix, in calculating CY 2014 MA rates.
As background, CMS for years has indicated that the reason it has not included an SGR fix in the coming year’s MA rates, is that it does not have the legal authority to do so, because it is required to go by current law, which would presume the SGR cuts would go into effect. In the 2013 Call Letter, published on April 1, 2012, in direct response to commenters suggesting that an SGR fix should be included in calculating MA rates, CMS stated: “CMS’s consistent interpretation and longstanding practice has been to base the projected growth percentage on the law as it exists on the date of the announcement…”. CMS goes on to explain that they believe the best reading of the statutory language requires them to use current law, and not assume an SGR fix. Therefore, it is of paramount importance, that since CMS’s decision is based on their interpretation of what Congress requires of HHS / CMS, that Congress has now had evaluation done by their own legal advisors. “The Congressional Research Service (CRS) works exclusively for the United States Congress, providing policy and legal analysis to committees and Members of both the House and Senate, regardless of party affiliation.” CRS is a Legislative Branch Agency, that is part of the Library of Congress.
Whether or not an SGR fix occurs likely represents the largest wildcard in terms of the potential magnitude of change in MA rates versus the approximately 7.5% cut, should the rates be updated as per the 45-Day Notice. In addition to whether or not the SGR fix is included being the largest wildcard, it is also the component that, in the name of “fairness” and “reasonableness”, is the most important to fix. Specifically, CMS should assume that the SGR cuts will not take effect, and therefore CMS should increase the trend factor versus what is included in the 45-Day Notice.
As noted above, for many years, in determining the FFS trend factor, which drives MA rates, CMS has assumed that the SGR cuts will occur, which has artificially depressed MA rates. Of course, the SGR cuts have in fact never happened (at least without being fixed retrospectively for FFS providers), so that physicians have never actually lost a dime due to SGR cuts. On the other hand, MA Plans have lost billions of dollars, compared to the way the rates were intended to be calculated, since the rates are set on April 1st, for a period 9 to 21 months in the future (the following calendar year). Of course, the SGR fix has always has always happened after April 1st, once MA rates are set, so that while the physicians are not subject to the SGR cuts, MA plan rates assume the SGR cuts occurred.
Therefore, given the timeliness of this CRS report, which was likely requested by a Member(s) of Congress in able to determine if CMS has the authority on April 1st to assume that there will not be SGR cuts in 2014, it is hopeful that the Secretary / CMS will in fact do what is “fair” and “reasonable”, and assume there will be no SGR cuts in calculating the 2014 MA rates. Looking at the language of the CRS report, CRS for example states: that the Medicare Advantage formula “does not specifically address the inclusion or exclusion of the effects of the Sustainable Growth Rate formula on the Medicare physician fee schedule when congressional action may be anticipated at a later date”; that the Secretary has “considerable discretion to interpret the law”; and, that given 11 years of consistent legislative action to avoid SGR cuts that “the foreseeability of congressional action makes such as assumption both authorized and reasonable”.
Finally, key reasons as to why it is so “fair” and “reasonable” for CMS to change their method, and assume that there will be no SGR cuts, in addition to that they now have CRS saying the authority may well exist, are that MA rates are: 1) legislatively tied to FFS; and, 2) much closer to FFS costs (and still falling) than in the recent past. The ACA mandates that MA rates are a specified percentage of FFS costs, and in doing so, it is the only reasonable assumption that Congress meant for CMS to accurately calculate expected FFS costs, which would require that they assume no SGR cuts. In fact, the CRS report suggests that the Secretary has a lot of discretion in making an accurate projection. Additionally, with rates now much closer to FFS costs and still falling, it seems much more fair than in the past to not utilize a “back door” method to “inaccurately” calculate the trend in FFS costs, in order to reduce MA payments. According to MedPAC, MA rates as a percentage of FFS have trended down from 114% in 2009, to 110% in 2011, to 104% in 2013. Between the fact that rates are much closer to and trending towards FFS, and that rates are legislatively tied to FFS, it seems only fair that HHS / CMS assume no SGR cuts in calculating the 2014 rates.
Guess we’ll see on Monday, April 1 …
Resources
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.
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.