Medicare Advantage plans get better than expected rate hike for 2018

Payments to insurers offering Medicare Advantage plans will increase by an average of 0.45 percent, according to the final rate notice issued by CMS, above the 0.25 percent bump in pay the agency had previously proposed.

When taking into account how plans code the diagnoses of its members, the average payment rate will increase by 2.75 percent.

“Medicare is committed to strengthening Medicare Advantage and the Prescription Drug Program by supporting flexibility and efficiency,” CMS Administrator Seema Verma, MPH, said in a statement. “These programs have been successful in allowing innovative approaches that give Medicare enrollees options that best fit their individual health needs.”

In a change from the proposed rates, the 2018 plan year won’t incorporate increased user of encounter data in plans’ risk adjustment calculation. CMS had initially proposed using 25 percent encounter data and 75 percent fee-for-service (FFS) data to determine risk scores, but after negative comments from groups like the American Hospital Association, the mix will be 85-15 in favor of the traditional FFS information.

The changes and better-than-expected payment increase were praised by stakeholder groups like the American Medical Group Association (AMGA).

“It is important that any risk adjustment in MA is fair and accurate,” Chet Speed, AMGA’s vice president of public policy, said in a statement to HealthExec. “With the flaws in the current Encounter Data System, CMS made the right choice in dropping the weight to 15%.”

In another win for the insurer, the 2018 rate announcement and call letter delayed the transition to terminate bidding on “employer group waiver plans” for employers and union which offer retirees Medicare Advantage coverage. Payment would instead be a lump sum based on county-level bids.

Rather than complete the two-year phase-in of this switch, CMS said 2018 will continue the formula utilized in 2017, a bid-to-benchmark ratio with employer plan payments based half on their bids and half on the county-level benchmarks.