CMS Proposes Medicare Advantage Rate Hike

Medicare Advantage plans would receive a 1.35 percent net payment increase, on average, in calendar year 2017, according to a proposal released Friday by the Centers for Medicare & Medicaid Services (CMS). The agency also floated changes in how risk adjustment would be calculated for MA plans that serve many seniors dually eligible for Medicare and Medicaid.

Enrollment in Medicare Advantage—in which private insurance companies such as Humana (NYSE: HUM) and UnitedHealth Group (NYSE: UNH) receive payments from the government for managing Medicare populations—has skyrocketed in recent years. In fact, enrollment in Medicare Advantage has grown more than 50% since the 2010 passage of the Affordable Care Act, CMS noted in its rate announcement. Major home health companies have been adjusting their strategies accordingly.

One issue potentially constraining Medicare Advantage has been regarding dual eligible beneficiaries—those who are eligible both for Medicare and Medicaid. This is an especially vulnerable population with low income and complex health needs. Some have argued that insurers have not been incentivized to take on this beneficiary population because risk adjustments have not been appropriate.

In response, CMS now is making changes, namely by having separate coefficients for partial benefit dually eligible beneficiaries, full benefit dually eligible beneficiaries, and non-dually eligible beneficiaries.

“These proposed changes will improve the precision of the payments made to plans, including increases in payments for plans serving full benefit dually eligible beneficiaries,” CMS stated.

Medicare Advantage plans also are subject to a star ratings system, with plans that rate highly eligible for bonus payments. CMS now is adjusting how stars are awarded, on an interim basis. The changes will affect plans serving dually eligible enrollees and/or enrollees receiving the low income subsidy, as well as enrollees with disabilities, and are meant to more accurately capture plan performance.

The dual eligible population is one that home health providers have eyed in particular; they account for a disproportionate share of Medicare costs, and so offer an opportunity for high-performing home health companies to bend the cost curve substantially by providing high-quality, coordinated care.

One of the largest home health providers in the country, Amedisys (NASDAQ: AMED), recently entered the private duty home care space for the first time by acquiring a company in the Boston area. Part of the rationale for this move is that the private duty company effectively serves a dual eligible population, Amedisys CEO Paul Kusserow recently told Home Health Care News.

Prior to taking the helm at Amedisys, Kusserow worked with Humana, and he saw how the addition of private duty services with the company’s Humana Care home health services was an effective strategy.

The proposed new Medicare Advantage rates are slated to be finalized by April.

Written by Tim Mullaney