SeniorJournal.com

INDEX

FRONT PAGE

PAGE TWO
More Headlines

 • General Features

 • Find Help

 • SENIOR ALERTS

 • Baby Boomers

 • Odds & Ends

Health-Fitness

 • Fitness

 • Health/Medicine

 • Medical Research

 • Nutrition/Vitamin

Government

 • Politics

 • Medicare

 • Medicare Drug Program

 • Medicare Q&A - Dear Marci

 • Medicaid

 • Social Security

 • Social Security, Medicare Q&A

Enjoying Life

 • Books

 • Entertainment

 • Features

 • Grandparents

 • Senior Statistics

 • Senior Stars

 • Sex & Seniors

 • Sports

 • Travel

 • Senior Volunteers

On The Web

 • Links - Senior

 • Senior Friendly Business Links

 • Sites We Like

Elderly Issues

 • Elder Care

 • Assistance for Elderly

 • Housing

Money 

Thinking

 • Opinions

Get Instant Supplemental Medicare Insurance Quotes.

E-mail this page to a friend!

Medicare Continues the Push for Medicare Advantage Plans

Announces new plans for 2006, better rates for suppliers in 2007

Feb. 23, 2006 – The 2003 Medicare Modernization Act gave a big shot in the arm to the HMOs and PPOs in the Medicare Advantage Program in an effort to make more of these programs, which are usually less expensive than traditional Medicare, available to more senior citizens. Last Friday, the Centers for Medicare & Medicaid Services announced more Medicare beneficiaries are participating in Medicare Advantage plans this year. They also announced new incentive rates for the plans next year and the approval of 163 new plans for 2006.

Beneficiaries in every state now have access to Medicare Advantage plans. Health plan choices now widely available in Medicare include approved HMOs, preferred provider organizations (PPOs) and private fee-for-service plans.   

“Since the drug benefit began, we’ve seen an increase in Medicare Advantage enrollment of more than 460,000 beneficiaries,” said CMS Administrator Mark B. McClellan, M.D., Ph.D. 

“Medicare Advantage plans are providing enhanced drug coverage and additional benefits that are saving seniors about $100 a month, and these plans are much more widely available than ever before.”

Medicare Advantage plans are able to provide lower overall health care costs and substantial savings for beneficiaries, through better coordinated care and additional benefits, according to CMS. These up-to-date benefits include proven approaches to keep beneficiaries healthy and prevent complications from their chronic diseases.

Seventy percent of Medicare beneficiaries have access to a Medicare Advantage plan that does not require the beneficiary to pay a premium for their prescription drug coverage, and most Medicare Advantage beneficiaries have enrolled in plans that offer additional drug coverage beyond the basic Medicare benefit. 

Many Medicare Advantage plans also provide information on the quality and results of care so beneficiaries are better able to find the best care for their needs and providers are encouraged to improve quality.

CMS has approved 163 new Medicare Advantage plans to provide services this year The plans are currently providing significant monthly out-of-pocket savings for Medicare beneficiaries, particularly those with chronic illnesses.

Many Medicare Advantage plans now specialize in care for beneficiaries with chronic conditions like heart failure, diabetes, and frailty. The availability of Medicare Advantage plans in every state, along with their enhanced benefits and increased savings, are the results of the Medicare Modernization Act of 2003.

With the expansions, 74 percent of Medicare beneficiaries have access to HMO plans, 52 percent have access to a local PPO plan and 98 percent have access to private fee-for-service plans.

The vast majority of beneficiaries in rural areas have access to private fee-for-service plans, and nearly 20 percent of beneficiaries in rural areas have access to local coordinated care plans (HMOs or PPOs).

In addition, 87 percent of beneficiaries have access to a PPO plan that covers a single or multiple-state region.   Altogether there are more than 5 million beneficiaries currently enrolled in Medicare Advantage health plans, with an average of 50,000 beneficiaries per month joining the plans since 2004. 

Payment Rates 2007

As required by statute, CMS also issued the preliminary “45-day notice” of the methods that will be used to calculate Medicare Advantage payment rates for 2007.

This notice includes technical updates, the implementation of full “risk adjustment” of health plan payments, and, as previously announced by CMS and incorporated in the Deficit Reduction Act of 2005, the phasing out of the “budget neutrality” payment adjustment. 

(See analysis of Deficit Reduction Act below story.)

The technical adjustments include a preliminary estimate of a 6.9 percent increase in the national per capita Medicare Advantage growth percentage. This estimate is used to determine the minimum annual percentage increase in capitation rates for Medicare Advantage plans in all counties for Medicare Part A and B.

“Through a predictable payment system, we are seeing continued growth of health plans that are providing better benefits for people with Medicare,” said Dr. McClellan.

The preliminary estimate will be updated before final 2007 capitation rates for all counties are announced in April. Actual capitation rate increases also depend on the amount of the budget neutrality adjustment, which will be announced when the final rates are announced in April.

The preliminary estimate of the growth trend was provided in the Advance Notice of Methodological Changes for Calendar year 2007 Medicare Advantage Payment Rates and Part D Payment.

By law, annually on the first Monday in April (this year April 3), CMS is required to announce the capitation rates for Medicare Advantage plans for the following calendar year.  In addition, 45 days prior to the April 3 announcement, the law also mandates that CMS publish the Advance Notice, which describes any changes to the payment methodology for the upcoming year.

The preliminary estimate of 6.9 percent for 2007 for aged and disabled beneficiaries combined is calculated from the 2007 trend change of 2.5 percent for Medicare, multiplied by revisions to underestimates of Medicare spending in 2004, 2005 and 2006 of 1.3 percent, 1.8 percent and 1.1 percent, respectively, because Medicare spending increased more than previously estimated in those years.

The Medicare trend increase and the related revisions for earlier underestimates or overestimates of the growth trend are actuarial calculations based on actual Medicare spending and are required by the Medicare law.

By law, the annual capitation rate for a county is the greater of the previous year’s rate increased by 2 percent or the national per capita Medicare Advantage growth percentage. This rate is called the minimum percentage increase rate. The rate can be higher in years that CMS rebases the fee-for-service rates.

Rebasing involves retabulating the average per capita fee-for-service expenditures using more recent fee-for-service spending data. In a rebasing year, the capitation rate is the greater of the minimum percentage increase rate or the fee-for-service rate. CMS is rebasing fee-for-service rates for 2007, and may rebase annually in future years to pay more accurately.

The notice also describes changes in risk adjustment of payments to Medicare Advantage plans. All parts of the risk adjustment system will be updated with more recent data to reflect newer treatment and coding patterns, including community, long-term institutional, new enrollee, and end-stage renal disease models.

In 2007, Medicare will be paying a 100 percent risk adjusted payment for all Medicare Advantage plans, up from 75 percent in 2006, except for Program of All-Inclusive Care for the Elderly (PACE) organizations and certain demonstrations. In addition, CMS will begin phasing out the budget neutrality adjustment by moving from 100 percent to 55 percent adjustment, as announced last year and now required by the Deficit Reduction Act.

Beginning in 2007, CMS is authorized to pay entry and retention bonuses from the Stabilization Fund to Medicare Advantage regional plans. CMS states in the notice that it will issue subsequent guidance on implementing the fund.

CMS is asking for comments and input within the next two weeks on the provisions and proposals contained in the advance notice.

The 45-day notice can be found at http://new.cms.hhs.gov/MedicareAdvtgSpecRateStats/

Comments must be submitted by 5 p.m., March 3. Comments may be submitted by e-mail to AdvanceNotice2007@cms.hhs.gov.

Impact of Deficit Reduction Act on Medicare Advantage (Section 5301)

An analysis of the impact on Medicare Advantage Organizations by the recently passed Deficit Reduction Act was included in a report by Lena Robins, and others, of Foley and Lardner LLP on the Mondaq Website. (click for full report)

This provision relates to Medicare Advantage plans under Part C. Following a recommendation by the Medicare Payment Advisory Commission ("MedPAC"), the Act implements a phase out of the "hold harmless" policy that offsets the impact of lower payments to Medicare Advantage plans ("plans") from risk adjustment. Under risk adjustment, plans are paid based on the health of their enrollees, with lower payments for those plans with healthier enrollees. Under the budget neutrality provisions, the savings from risk adjustment are funneled back into the Medicare Advantage program and redistributed among the plans, with the result that overall payments to the plans are not reduced. The Act phases out the budget neutrality provision over four years. The Congressional Budget Office has estimated that this will save $6.5 billion between 2006 and 2010.

Notably, the Act did not eliminate the Medicare Advantage stabilization fund, an area of some controversy during the conference process. The conference eliminated a provision in the Senate passed bill which would have terminated a $10 billion regional preferred provider organization stabilization fund for the plans. The Medicare Modernization Act of 2003, which created the Medicare Advantage program, provides for an initial $10 billion regional plan stabilization fund, to be used between 2007 and 2013, to help encourage plan entry and retention in areas where there is a lack of plans, by increasing payments to the plans.

However, because plan participation has been stronger than predicted, many have argued that the stabilization fund is no longer necessary. Indeed, Med- PAC’s June 2005 report recommended that Congress eliminate the fund because there should be a "level playing field" between fee-for-service Medicare and the Medicare Advantage program. Despite this opposition, the stabilization fund survived the conference process.

Click here to Search SeniorJournal.com for more on this subject

Click to More Senior News on the Front Page

Copyright: SeniorJournal.com