Medicare Advantage reforms

Medicare Advantage News examines possible changes to Medicare Advantage (MA) plans if the president’s proposal is enacted. Here is an excerpt from the AIS analysis:

The proposal, designed for use in the Feb. 25 “summit” with congressional leaders on health reform, includes only two paragraphs under the heading “Improve Medicare Advantage Payments.” The first paragraph asserts that MA plans are significantly overpaid.

The second paragraph states, “The president’s Proposal represents a compromise between the House and Senate bills, blending elements of both bills, while providing greater certainty of cost savings by linking to current fee-for-service costs. Specifically, the president’s Proposal creates a set of benchmark payments at different percentages of the current average fee-for-service costs in an area. It phases these benchmarks in gradually in order to avoid disruption to beneficiaries, taking into account the relative payments to fee-for-service costs in an area.”

The paragraph continues, “It provides bonuses for quality and enrollee satisfaction. It adjusts rebates of savings between the benchmark payment and actual plan bid to take into account the transition as well as a plan’s quality rating; plans with low quality scores receive lower rebates (i.e., can keep less of any savings they generate). Finally, the president’s Proposal requires a payment adjustment for unjustified coding patterns in Medicare Advantage plans that have raised payments more rapidly than the evidence of their enrollees’ health status and costs suggests is warranted, based on actuarial analysis. This is the primary source of additional savings compared to the Senate proposal.”

Industry consultants and executives were muted in their comments on that section because of the lack of details. Pat Dunks, a consulting actuary in the Milwaukee office of Milliman, for instance, says it is unclear how big a pay cut might result and where.

The full article is here.  Here is an article about MA plan profitability.

And remember this is not the first time Medicare Advantage has faced a big change, as evidenced by this 2005 article by Pat Dunks.