CMS proposes new Medicare Advantage cuts

The Centers for Medicare & Medicaid Services proposed a 2015 reduction in payments to insurers for Medicare Advantage plans to align Medicare Advantage benchmarks with Medicare fee-for-service costs pursuant to Affordable Care Act requirements and lower Medicare spending, CMS announced Friday.

The agency based the proposed cuts on an assumption that Medicare Advantage spending per beneficiary will fall 3.55 percent next year, Reuters reported.

But many factors affect Medicare Advantage payouts to insurers, and no single number in the CMS announcement quantifies the cumulative impact of the government's payment update on rates, according to America's Health Insurance Plans.

"Last year's 6 percent cut to Medicare Advantage rates resulted in higher premiums, reduced benefits, fewer coverage options, and loss of provider choices for seniors," AHIP President and CEO Karen Ignani said Friday in a statement. "Another round of payment cuts would be devastating to the more than 15 million seniors and people with disabilities that have chosen to enroll in Medicare Advantage for the better benefits and higher quality coverage those plans provide."

Republican leaders also criticized proposed reductions. "These Medicare Advantage cuts are misguided, threaten a successful program for seniors, and must be overturned," Sen. Orrin Hatch (R-Utah) said in a statement, Reuters quoted.

CMS announced the proposed cuts over the objections of the U.S. Chamber of Commerce, which urged the agency not to lower Medicare Advantage payments due to possible negative effects on retirees, as FierceHealthPayer reported. The agency said it will issue the final rate announcement on April 7.

Before ACA implementation, the government overpaid Medicare Advantage plans by more than 10 percent compared to fee-for-service Medicare, costing the program more than $1,000 per beneficiary annually, according to CMS.

But if the cost of financing healthcare exceeds government payments, insurers make up the difference, which undermines the profitability of doing government business, Reuters noted.

For more:
- here's the CMS announcement
- read the Reuters article
- see the AHIP statement

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