MedPAC update of Medicare Advantage overpayments
Medicare Advantage benchmarks and payments compared with average Medicare FFS spending
MedPAC
Medicare Briefs
The purpose of this report is to present data on the level of Medicare Advantage (MA) payments for Parts A and B services relative to the spending on similar beneficiaries in Medicare’s traditional fee-for-service (FFS) program. This responds to requests from Congressional committees to update our past analyses.
CMS no longer determines MA plan payments based solely on administratively set payment rates. Plans now submit formal bids, and then CMS compares the bids with benchmarks to determine payment. Medicare’s payment declines if bids are lower than the benchmarks.
Plan service areas have expanded to more rural and other areas with benchmarks that are high relative to Medicare FFS spending. The benchmarks were relatively high because these areas were given increases in payment rates under earlier law.
Finally, the risk adjustment system has changed payment rates. In 2004, the Centers for Medicare & Medicaid Services (CMS) adjusted plan payments with a blend of 70 percent demographic factors and 30 percent health risk factors.
For 2006, 25 percent of each payment is based on the demographic factors and 75 percent is based on the health risk factors. By 2007, payments will be based 100 percent on risk-adjusted rates.
With the introduction of risk adjustment, the payment system now explicitly takes into account the relative disease burden of the MA population. Risk adjustment (applied to 75 percent of payments in 2006) generally would lower payments to plans if they enrolled beneficiaries who were healthier. But CMS has taken steps to prevent overall payments to plans from going down. A hold-harmless adjustment increases the benchmark rates in 2006 by the amount that CMS expects payments would fall because of risk adjustment.
We find that the combined benchmarks are set at an average of 115 percent of FFS Medicare in 2006. After taking into account the amount that plans return to the trust fund through the bidding process, the 115 percent figure falls to 111 percent. In sum, this 111 percent includes all three factors we have discussed: the relationship of the MA benchmarks to FFS rates, the effect of bidding and returning funds to the trust funds, and the hold-harmless provisions.
http://www.house.gov/stark/news/109th/pressreleases/20060606_MedPAC.pdf
Comment:
By Don McCanne, M.D.
Hold-harmless!?
The private Medicare plans have always benefited by their ability to selectively market their products to healthier Medicare beneficiaries, even though they have received payments at a higher level that assumes that they enroll their fair share of those in poor health. Congress and the administration have promised us, and have now required by law, that the payments to the plans would be adjusted to reflect the risk based on the level of health of the enrollees.
The required risk adjustments are now in place. But what has CMS done? By giving back to the plans the required adjustments, CMS is ensuring that the plans will not be harmed by their success in excluding, by selective marketing, the higher-cost Medicare patients with greater health care needs.
“Hold-harmless” is yet another abuse of rhetoric that characterizes this administration. Granting a gift of taxpayer funds to the private Medicare Advantage plans certainly harms the taxpayer.
Worse, they promised to us and enacted measures that would establish fairness by adjusting for risk. They lied to us!