CMS proposes 0.25% rate hike for Medicare Advantage plans in 2018

Last year, CMS raised Medicare Advantage payment rates by an average of 0.85%, lower than the 1.35% the agency originally proposed.

The federal government has proposed an average 0.25% increase in payments to Medicare Advantage plans for 2018.

Factoring in expected upcoding by MA health plans, carriers will likely see their overall revenue increase about 2.75%, according to the Centers for Medicare & Medicaid Services’ annual rate notice (PDF).

The increase is “modestly lower” than expectations, which suggested it would be anywhere from flat to 1%, according to a research note (PDF) from Leerink Partners analyst Ana Gupte. However, she predicted that the final rate will be higher since the Trump administration “actively supports privatization of Medicare to MA through deregulation.”

Last year, CMS raised payment rates by an average of 0.85%, lower than the 1.35% the agency originally proposed—a change it mainly attributed to technical updates in the risk adjustment normalization factor.

Ipsita Smolinski, managing director at the consulting firm Capitol Street, told Reuters that health plans may push for a greater increase in payment rates during the comment period. "The 2018 update is only a smidge better than flat, which I suspect may anger some plans," she said.

In fact, America’s Health Insurance Plans executed a lobbying campaign last January to push back against changes to the MA risk adjustment model, which it said resulted in payment cuts that jeopardized seniors’ benefits.

As for this year’s proposed rates, “AHIP is carefully reviewing this advance rate notice to ensure that the program is protected from harmful cuts,” AHIP spokeswoman Kristine Grow wrote in a statement. “We are committed to ensuring that seniors continue to have access to affordable, high-quality care, and that Medicare Advantage is positioned for long-term stability.”

Still, the absence of any major changes to this year’s rate proposal is likely to have a “nice calming effect” on an insurance industry that is facing uncertainty in other markets due to the change in political power, healthcare industry consultant John Gorman told the Wall Street Journal. “This thing looks totally routine,” he said.