Medicare Advantage could see sizable payment shifts

The government's proposed changes to its risk-adjustment model for Medicare Advantage plans could result in large payment increases and decreases depending on where seniors live, according to an analysis by Avalere Health.

The proposed modifications by the Centers for Medicare & Medicaid Services (CMS) could result in large changes in payments in certain geographic areas, according to Avalere. For instance, the analysis found that seniors living in almost all of the counties in California are likely to see large payment decreases, while those living in Florida could see increases, except for those in Miami-Dade County.

CMS announced proposed changes to the risk-adjustment model for Medicare Advantage in October. The model is used to adjust payment for Medicare Advantage plans based on the risk of each plan's enrollees. The changes were proposed in order to address underpayments for "dual eligibles", low-income Medicare beneficiaries who tend to have higher medical costs, Avalere said.

Differences in how states cover dual eligibles will result in some increased payments for seniors covered by some plans and dramatic reductions for others, depending on their location, Avalere found. Reduced payments could lead to reduced benefits for some seniors, the analysis adds.

"The proposed payment changes from CMS could introduce volatility into the Medicare Advantage market with unintended consequences on beneficiaries in some regions," said Tom Kornfield, vice president at Avalere. "While payment accuracy is critical, CMS policy also needs to ensure stability for Medicare beneficiaries." 

One way the risk-adjustment model works is to create "county benchmarks" or geographic adjustments in payment to account for regional differences in the cost of healthcare. CMS does not plan to publish the 2017 county benchmarks until April 2016, the analysis said. Avalere's senior vice president Caroline Pearson advised Medicare Advantage plans to ask CMS for that information earlier so they can determine the potential impact of the changes and whether it could have an adverse impact on seniors.

Medicare Advantage plans are becoming increasingly popular. Contrary to predictions, its enrollment has grown 42 percent since 2010 and is expected to reach 30 million by 2025, FierceHealthPayer has reported.

A recent Kaiser Family Foundation report, which looked at Medicare Advantage plans offered in 2016, found 2,001 of these plans will be available nationwide for individual enrollment in 2016, which is 56 more than were available in 2015. 

To learn more:
- read the analysis

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