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CMS Shaves Estimated 2017 Medicare Advantage Pay Increase

By Kerry Young, CQ Roll Call

April 4, 2016 -- Medicare officials on Monday shaved their estimate for an expected increase in payments next year for insurer-run Advantage plans, but allowed a longer transition to reimbursement changes in a program in which some retirees benefit from contributions by their former employers.

The average base payment increase for each person covered by Advantage plans in 2017 will be little changed from this year at 0.85 percent. That will rise to about 3.05 percent after accounting for additional payments allowed in the system, said Sean Cavanaugh, the director of Medicare, on a conference call with reporters. This is less than an earlier proposed increase of 1.35 percent in base payments and total increase of 3.55 percent that Centers for Medicare and Medicaid Services (CMS) had suggested in February. The change is due largely to new calculations regarding risk adjustment factors, CMS officials said.

In the past, unlike this year, CMS officials' final version had provided more funds for insurers in the final policy than in the proposed version.

CMS also said that there will be a two-year transition to the new payment approach for what are called employer-group waiver plans. There's been considerable opposition to proposals to overhaul the employer-group plans, which critics have said could make it more difficult for firms to offer this coverage. Under the new policy, the costs of these plans will be tied more to the cost of other Medicare Advantage plans, which don't have the retiree subsidies. About 3.2 million people are enrolled in these employer-group waiver plans.

The eight House lawmakers with the most influence over Medicare last month questioned CMS' plan to change the approach for the employer-subsidized Advantage plans. The signers of this letter were Ways and Means Chairman Kevin Brady, R-Texas, and the ranking Democrat on that committee, Sander M. Levin of Michigan; Energy and Commerce Chairman Fred Upton, R-Mich., and the ranking Democrat, Frank Pallone Jr. of New Jersey; Pat Tiberi, R-Ohio, chairman of the Ways and Means health subcommittee and the ranking Democrat, Jim McDermott of Washington; and Joseph R. Pitts, R-Pa., the chairman of Energy and Commerce's health subcommittee and the panel's ranking Democrat, Gene Green of Texas.

"We are concerned that the proposed changes to the methodology may harm employers' ability to provide retiree benefits through a consolidated health plan encompassing both Medicare benefits and supplemental retiree offerings," the lawmakers wrote.

An annual flurry of intense lobbying has developed around Medicare's attempts to refine its Advantage payment policies. The program is popular with lawmakers in both chambers and parties.

Many older Americans are attracted to the Medicare Advantage program because it can offer extra benefits, such as dental care, that the traditional program doesn't offer.

America's Health Insurance Plans, an industry trade group, has worked to build an active network of supporters through its Coalition for Medicare Choices. Separately, the nonprofit Better Medicare Alliance does similar work on behalf of insurers Aetna, Humana and UnitedHealth as well as medical specialty and business groups.

Also working to block reductions to Medicare Advantage is the nonprofit conservative American Action Network. This group last month announced a $500,000 ad campaign to target lawmakers, with an aim of stopping the proposed changes to the Advantage plans to which employers contribute.

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