On February 19, 2016, CMS proposed to raise net payment rates for Medicare Advantage plans by 1.35 percent for 2017.  That would translate to a 3.55 percent increase in revenue for MA plans next year once risk coding tendencies are accounted for, according to a CMS release.  CMS will accept comments on its proposed 2017 MA changes until March 4, 2016, and will publish its final rate announcement on April 4, 2016.  The proposal is available here.

MA enrollment has soared since the passage of the Affordable Care Act, reaching an all-time high of 17.1 million beneficiaries in 2016.  MA beneficiaries account for nearly 32 percent of all Medicare enrollees, making the 2017 proposed rate increases an important development for insurers looking to expand their revenue base.  In 2015, MA plans received about $170 billion.  Those expenditures amounted to an average payment of $754 per month per member to MA plans.

In addition to the rate hikes, CMS proposed changes to its risk assessment model.  The model calculates scores for patients based on their health status in a base year to predict health care costs for the following year.  CMS pays more to MA plans for members with higher scores because the higher score indicates a sicker beneficiary.  In an effort to make these scores more accurate, CMS proposed creating six separate model segments to replace the current single community segments.  Those segments would take into account whether a beneficiary is dually eligible because CMS noted that on average, dual-eligible beneficiaries cost more.  The model also would take into consideration the beneficiary’s age, disability, and whether he/she is on full or partial benefits.

CMS also proposed adjusting how it calculates an MA plan’s star rating, which determines whether that plan is eligible for Quality Bonus Payments.  An MA plan’s star rating is meant to measure the effectiveness of a plan’s care for an enrollee.  This portion of CMS’s proposal would take into account whether an MA plan’s enrollees receive a low-income subsidy, are dually eligible, or have disabilities to more accurately reflect a plan’s true performance.

Reporter, R.J. Cooper, Sacramento, + 1 916 321 4809, rcooper@kslaw.com.