The Obama administration has retreated from a proposed cut in Medicare payments to Medicare Advantage plans opposed by the insurance industry. It also delayed proposed changes in the quality rating system for awarding bonuses to plans.
 
Under the rating system, Medicare Advantage plans are rated from one star to five stars, with five being the best. The star scores are based on how well plans do on more than 50 performance measures, and in 2012, the plans began receiving bonuses based on these ratings. Most enrollees are in plans with at least three or three-and-a-half stars.
 
CMS proposed a new method for computing the star scores that got a cold shoulder from both insurers and members of Congress. In a March 27 letter, House members protested that the CMS proposed change could mean some popular plans would find it harder to achieve four or five stars, and they asked the agency to delay implementing the new policy.
 
In a response issued April 1, CMS agreed that a better performance measure is needed for plans but that it’s delaying changes until more research can be done.
 
As part of the same announcement, CMS surprised many observers by announcing that Medicare payment rates to the private plans would rise by 3.3 percentage points in  2014 rather than fall by 2.2 percentage points. That shift was as a result of the way “growth factors” were calculated, based on changes in per capita Medicare fee-for-service spending.
 
Other factors will affect the final 2014 rate, such as cuts under the health law (Pl 111-148, PL 111-152) and under the budget sequester. But the announcement represented a 5 percentage point shift in direction from the red to the black for Medicare Advantage plans. It occurred because CMS departed from past practice and assumed that Congress would act later this year to block a scheduled 25% cut in payments to physicians under Medicare’s sustainable growth rate (SGR) formula.
 
In the past, CMS has made its estimates of future fee-for-service spending, which affects plan payments, based on current law. In fact, the CMS Office of the Actuary advised doing it that way this time as well, but HHS Secretary Sebelius disagreed.
 
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