- The Centers for Medicare and Medicaid Services on Monday said that payments to insurers for Medicare Advantage plans would increase by 1.25% in 2016. According to the agency, insurers will likely see overall revenue increase by about 3.25%.
- The rate hike represents a departure from the 0.95% cut proposed in February, which CMS Sean Cavanaugh called a "modest and reasonable adjustment to plan payments."
- The shift is a result of revised expectations for MA spending, rather than a significant change in policy. The government originally anticipated 1.7% growth in the program, but now sets that figure at 4.2%.
Also notable in today's announcement: The agency revealed that it will transition wholly to a new risk-adjustment methodology, despite widespread industry opposition.
The rate hike is certainly welcome news to issuers, but it's important to remember that these are average figures. Geography and five-star ratings, among other things, will have a big impact on whether an individual MA plan will receive a cut or a raise. In 2016, plans that earn at least four stars will earn a 5% bonus payment, but 3.5 stars or fewer will receive no additional payments.