CMS boosts Medicare Advantage rates, adjusts risk score calculations despite concerns

Medicare Advantage plans will see a 3.4% payment boost next year, much higher than the 1.84% increase originally proposed by the White House in February. 

final rule issued Monday by the Centers for Medicare & Medicaid Services (CMS) also altered the way it calculates Medicare Advantage risk scores, increasing the portion of encounter data from 15% to 25% for 2019. The remaining 75% will be based on fee-for-service data. The agency defended the move by saying the quality of encounter data has improved.

Additionally, CMS made changes to drug payment policies, finalizing a reduction in the maximum amount that low-income Medicare beneficiaries pay for biosimilars. That change is expected to save the government about $10 million.

Several other policies aimed at lowering drug prices include allowing certain low-cost generic drugs be substituted onto plan formularies at any point during the year. 

In total, the final rule is expected to result in $295 million in savings a year for the government over the next five years.

“The Trump Administration is taking steps for seniors with Medicare to save money on prescription drugs,” CMS Administrator Seema Verma said in an accompanying statement. “The steps we are taking will drive more competition among plans and pharmacies to meet the needs of seniors and lower costs.”

RELATED: CMS proposes 1.84% rate increase for Medicare Advantage plans, other policy changes

Industry reaction to the rule was mixed. Incoming CEO of America's Health Insurance Plans Matt Eyles praised the new rule in a statement, adding that by "finalizing many of its innovative proposals, CMS has acknowledged the value of private sector solutions for Medicare enrollees."

The American Hospital Association, however, has previously expressed (PDF) concerns about the use of encounter data when calculating risk scores, arguing it could lead to inaccuracies. The group did not immediately respond to a request for comment.