CMS cost measure makes some Medicare Advantage plans pricier
- Some enrollees in Medicare Advantage plans are paying higher premiums due to a distortion in the way CMS determines payment for the plans, a new Health Affairs analysis finds.
- MA payment is based on county-level benchmarks that average Medicare’s per capita fee-for-service costs for Part A and Part B and then add them together. When beneficiaries opt out of Part B, that skews the cost measure, resulting in lower payment rates.
- To remedy the problem, CMS should base MA benchmarks on fee-for-service costs for beneficiaries enrolled in both Part A and Part B only, the authors say.
A review of 2015 Medicare claims found Part A per capita costs for beneficiaries enrolled in both Part A and Part B were more than threefold those enrolled in Part A only. Enrollees who were still working and had Medicare as their secondary payer caused an even greater distortion.
On average, about 10% of fee-for-service beneficiaries lack Part B, but that varies across states from a low of 7% in Mississippi, South Carolina, Kentucky and Delaware to a high of 22% in Hawaii, according to the analysis.
“Because Part B is required to enroll in an MA plan, as more beneficiaries choose Medicare Advantage in a county, the relatively fixed number of people opting out of Part B is spread over a declining fee-for-service population, the authors say. The result is a “perverse dynamic in which the more growth in MA membership an area achieves, the more downward bias it will suffer in its benchmarks,” they add.
As a near-term fix, the authors recommend changing the cost measure to reflect only data for beneficiaries enrolled in both Part A and Part B. This would increase benchmark payments generally across counties and get rid of the downward trajectory when data from beneficiaries lacking Part B is included. The Medicare Payment Advisory Commission urged this approach in its report to Congress last year, and it could be implemented as early as 2019, the report says.
Longer term, they suggest also using fee-for-service claims files to sort out whether Medicare is a beneficiary’s primary or secondary insurance.
Roughly a third of all Medicare beneficiaries are in MA plans. According CMS’ Star Ratings released in October, the number of MA enrollees in plans with four or more stars grew to about 73% versus 2016’s 69%.
The report comes as healthcare organizations are facing lower inpatient reimbursements, penalties for 30-day re-admissions and a push for more care delivery in outpatient setting. Payers have been flocking to the MA market recently, thanks in large part to its relative stability.