The federal Centers for Medicare & Medicaid Services wants to stop private companies from making Medicare managed care plans better in the middle of the year.

The CMS has published a proposed rule that would ban midyear Medicare managed care plan benefit enhancements today in the Federal Register.

In theory, allowing mid-year improvements might sound like a good thing for beneficiaries, but it could end up hurting them by disrupting the bidding system that insurers, health maintenance organizers and other private carriers use to establish the prices they charge participants in the Medicare Advantage plan program, CMS officials argue.

Today, Medicare managed care “organizations compete with one another by submitting plan bids that specify the revenue requirements for offering the various components of their health plans,” officials write in the preamble to the proposed rule. “We believe that permitting [midyear benefit enhancements] could undermine the integrity of the bidding process as [Medicare Advantage] organizations, knowing that they could alter their benefit packages after the bidding practice was complete, could misrepresent their actual costs to provide benefits [overbid] and noncompetitively revise their benefit packages later in the year.”

Allowing midyear enhancements could lead carriers to overbid by an average of 2% to 3%, officials estimate.

Moreover, carriers could use midyear adjustments to make themselves look more appealing to the youngest, healthiest Medicare beneficiaries, officials write.

The CMS banned midyear enhancements in 2005, but it ended up allowing companies to make some adjustments in 2006, because 2006 was a year of major changes in the Medicare Advantage program bidding process.

The initial transition phase has passed, and now the CMS should focus on protecting the integrity of the bidding process, CMS officials write.

Public comments on the proposed rule are due Oct. 31.

A copy of the proposed rule is on the Web at Document Link