CMS to hike pay for Medicare Advantage plans

CMS plans a slightly higher raise for Medicare Advantage plans than had been expected. The agency is expected to announce that it will pay 6.5 percent increase to private health plans for Medicare members this year. That's in contrast to lower price rises for fees for physicians and hospitals. On the other hand, after 2007 CMS will move toward budget neutrality, with perhaps just a 2 percent increase. At that time there will also be risk-adjustment between Medicare Advantage plans; Plans with sicker people will get an adjustment up, while those with healthier ones will get less. This leads to the prospect of a repeat of the very early years of this decade where private plans, having rushed into Medicare when payments were high in the mid-1990s, started cutting benefits and leaving the program. Given the stated intention of CMS officials in having private plans transform (at least part of) Medicare, the financial performance of Medicare Advantage plans in the next few years will prove interesting.

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