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Medicare managers: Our demographics look good

By Allison Bell

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Officials at the Centers for Medicare & Medicaid Services (CMS) say enrollee shifts are helping to hold down Medicare hospitalization program costs.

CMS officials talk about underlying cost trend factors in a package of documents aimed at insurers that hope to sell coverage through the Medicare Advantage program in 2015.

CMS officials said yesterday that they believe the assumptions they are building into the “final call letter” and other bid package documents translate into an average federal Medicare Advantage funding increase of 0.4 percent per enrollee for all plans, at all quality levels, in all markets.

Originally, officials said, the agency had proposed a 1.9 percent per-enrollee decrease.

CMS scraped up the increase by slowing use of a new risk-management strategy.

Health insurers are still digesting the numbers in the bidder package and trying to figure out what the CMS assumptions for them are. Humana Inc. (NYSE:HUM), for example, has said the final version of the call letter could mean a 3 percent cut for their plans.

Commenters on an “advance notice,” or draft of the package released earlier this year, noted that CMS was assuming that various factors would lead to a negative 3.7 percent five-year cost trend for the Medicare hospitalization program from 2010 through 2015.

CMS officials will explain how it came up with that figure later, during a user group conference call, but it has no statutory authority to phase in trend corrections, officials say.

Factors other than demographics appear to account for 0.9 percentage points of the trend, and changes in population characteristics — or demographics — account for 2.9 percentage points of the impact, officials say.

Officials acknowledged that many commenters said CMS was being too tough on the bidders.

“Commenters raised concerns that the payment reductions described in the advance notice would lead to significantly higher MA premiums, significantly reduced benefits, or both,” officials write. “Some commenters argued that these cuts would lead to MA plans exiting the market.”

CMS officials believe that the program has stayed strong, even as CMS has moved to narrow the gap between Medicare Advantage and traditional Medicare program per-enrollee funding levels, officials say.

“Today, nearly 30 percent of Medicare beneficiaries are enrolled in a Medicare Advantage plan and benefits remain stable,” officials write.

Elsewhere in the package, officials say they have concerns about Medicare clinics advertising nonhealth-related services.

“Medicare Advantage organizations may not advertise nonhealth related items or services as plan benefits,” officials say.

In a comment on “memory fitness activities,” officials say Medicare Advantage plans can offer memory fitness activities in a supplemental health education benefit but cannot offer a stand-alone memory fitness benefits program as a supplemental health benefit.

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