CMS finalizes 0.45% rate increase for Medicare Advantage plans

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After accounting for the “expected growth in coding acuity,” Medicare Advantage plans can expect a total change of 2.95% in revenue next year.

The federal government on Monday finalized its 2018 payment rates for Medicare Advantage plans, settling on an average rate increase of 0.45% after initially proposing a 0.25% increase.

After accounting for the “expected growth in coding acuity,” MA plans can expect a total change of 2.95% in revenue, according to the Centers for Medicare & Medicaid Services. Under the agency’s initial rate proposal, that figure would have been 2.75%.

Last year, the CMS approved a rate increase of 0.85% after proposing a 1.35% payment bump.

The CMS says the updated policies included in this year's rate announcement give MA organizations the incentive to develop new plan offerings with "innovative provider network arrangements" that may further encourage enrollees to access high-quality healthcare services.

“Medicare is committed to strengthening Medicare Advantage and the Prescription Drug Program by supporting flexibility and efficiency,” CMS Administrator Seema Verma said in the announcement.

The rate announcement also makes other policy changes in response to industry feedback regarding the 2018 advance notice. For example, the government will slow the phase-in of the use of encounter data to calculate enrollee risk scores, using that data for just 15% of the risk adjustment payment to MA plans in 2018 instead of the initially proposed 25%.

The policy drew the approval of AMGA, a trade group that represents multispecialty medical groups and integrated systems of care.

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

The Alliance of Community Health Plans, which represents nonprofit insurers, said in an emailed statement that it is happy that MA plans’ average revenue will slightly increase and that the CMS responded to concerns about some technical aspects of payment policy.

“We are disappointed, however, that CMS did not take steps to restore quality payments that have reduced benefits for 2.5 million seniors under the benchmark cap,” Ceci Connolly, the group’s president and CEO, said in the statement.