AHIP asks CMS to change Medicare Advantage payment formula

AHIP office - Credit: Google Street View

America's Health Insurance Plans is asking the Centers of Medicare and Medicaid Services to change the way the agency calculates Medicare Advantage payment rates, ahead of a final notice due out Monday.

AHIP said it strongly believes CMS should update its benchmark calculation in the 2019 final notice. 

AHIP cited a March study by Epstein Becker & Green attorneys that said the current funding formula is flawed.

CMS currently calculates the MA payment rates based on the average, Medicare fee-for-service expenditures from each county. 

These reflect spending for enrollees with only Medicare Part A for care in hospitals and other facilities, enrollees with only Medicare Part B, which covers physician visits and medical supplies and enrollees with both Medicare Parts A and B.

This method captures the expenditures of all Medicare beneficiaries, regardless of whether they're in Part A, B or both. MA plans are required to provide coverage for all services included under both Parts A and B.

AHIP said the cost data for beneficiaries who are only in Medicare Part A - for hospitalization - should be excluded from calculating MA payment rates.  

The Medicare Payment Advisory Commission has also recommended that CMS revise the calculation of benchmarks. 

MedPAC said certain counties are likely to have MA benchmarks based on fee-for-service spending that are inaccurately measured under CMS's current calculations, because of CMS's current inclusion of costs attributable to beneficiaries only in Part A.

MedPAC said it would be more equitable for CMS to exclude Part A only beneficiaries from its calculations.

"In a nutshell, current benchmarks rates reflect individuals who are ineligible for Medicare Advantage, which leads to the wrong payment rate for Medicare Advantage plans," said Tom Kornfield and Greg Berger, vice president and executive director, respectively, of Medicare Policy. "This is not how the law intended for CMS to calculate the benchmarks."

The Medicare Advantage market is a big one for insurers and for consumers 

At least two-thirds of seniors are estimated to be in an MA plan rather than fee-for-service Medicare.

"We strongly believe CMS should update its county benchmark calculation in the 2019 Final Notice, which will be published April 2, to exclude claims experience for Part A enrollees," AHIP said. "It's time to fix the incorrect funding formula for Medicare Advantage plans."

Twitter: @SusanJMorse
Email the writer: susan.morse@himssmedia.com