An extensive lobbying push from the insurance industry to change regulations for Medicare Advantage fell short as the Obama administration left intact several planned moves.
The Centers for Medicare and Medicaid Services proposed 2017 rates for Medicare Advantage and Medicare Part D, the program’s prescription drug plan, on Monday. CMS proposed raising rates 0.85 percent for Medicare Advantage, which allows seniors to buy private health plans.
However, the insurance industry fought to eliminate several provisions.
CMS proposed in February eliminating the retiree coverage bid process, which is used by state and local governments and unions to give coverage to their retirees. Such plans serve a specific employer group and are often negotiated between Medicare Advantage plans and employer groups or the employer directly, CMS said.
Such retiree plans don’t “compete against other plans through the bidding process, and therefore have little incentive to submit lower bids,” the CMS said in February.
Sean Cavanaugh, Deputy CMS director, said in a call with reporters that the change is important because the costs to Medicare are much higher for such retiree plans than non-Medicare bids.
After an outcry from insurers, CMS decided to phase in the change. It created a two-year transition process to eliminate the bidding process.
The Better Medicare Alliance argues the change will result in a reduction in Medicare Advantage payments of 2.5 percent to 2.8 percent. The change would discourage employers not to provide Medicare Advantage offerings, according to the alliance.
The alliance is a coalition that includes insurance giants such as Humana and UnitedHealth and business groups such as the U.S. Chamber of Commerce. It also has some national advocacy groups such as the Alliance for Aging Research and American Benefits Council.
The Chamber said about 19 percent of all Medicare Advantage plans are retiree plans affected by the change.
CMS argued that the two-year transition would help to ease that change.
“It does mitigate the effect somewhat in that 2.5 percent effect would be spread out over two years,” said Sean Cavanaugh, Deputy CMS director, during a call with reporters. “The retiree plans would expect to see only half of that effect next year.”
Medicare Advantage, which allows seniors to get private health plans, has become a popular option and is used by about 40 percent of all Medicare beneficiaries.
Overall, Medicare Advantage payment rates will increase by 0.85 percent.
The industry also unsuccessfully fought a proposed change to the program’s risk adjustment model for dual eligible beneficiaries, or people who receive both Medicare and Medicaid.
A report from America’s Health Insurance Plans, the insurance industry’s leading lobbying group, argued that the changes would reduce funding for Medicare Advantage by 2.1 percent.
CMS said it is required by law to make changes to the risk adjustment model. It decided to keep the changes to the model the same as the February draft.
Obamacare had included cuts to Medicare Advantage payments in an effort to bring the program’s payments in line with traditional Medicare. However, the move has gained major pushback from the insurance industry.
A move to cut rates last year was halted after a significant lobbying effort from the industry.
