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Volume 12 Number 36 Lead Report: Medicare Medicare payments to Medicare Advantage plans in 2009 will rise by an average of 4.8 percent, the Centers for Medicare & Medicaid Services said in a preliminary estimate released Feb. 22. The 4.8 percent per capita rate is the national growth percentage for aged and disabled beneficiaries, an average based on projections of Medicare fee-for-service (FFS) cost growth, according to the advance notice. The final percentage change, to be announced in 45 days, could be higher or lower depending on the effect of future data calculations. Last year, the proposed 2008 rates were projected to increase by 4.1 percent and the final rates actually rose by 3.5 percent. In 2009, CMS is continuing its pattern of rebasing the FFS rates every other year, and the MA rate is likely to be higher in such years. Rebasing involves recalibration of each county's average per capita expenditures for original Medicare services, using the most recent fee-for-service spending data. The county capitation rates define the upper limit for payments to MA health plans. For years when CMS is rebasing, MA capitation rates are based on the greater of 100 percent of FFS costs or an increase which is the greater of 2 percent or the national per capita MA growth percentage. Budget Neutrality Final rates vary by plan, depending on such factors as the health status of enrollees. Payments to plans also are impacted by the continued phasing out of budget neutrality payments. Between 2003-2006, budget neutrality has been used to lessen the impact of risk adjustment on health plans by taking the savings from risk adjustment and redistributing it among the participating health plans. CMS implemented risk adjusted payments by applying to the risk rates 100 percent of the budget neutrality factor. However, the Deficit Reduction Act of 2005 required that budget neutrality be phased out beginning in 2007. In 2009, 25 percent of the budget neutrality factor will be applied to the risk rates, and by 2011, plans will receive no budget neutrality payment adjustment. The notice also said that for 2009, the risk adjustment model for aged and disabled beneficiaries will be updated with more recent data to reflect newer treatment and coding patterns. CMS proposed a downward adjustment to risk scores based on a requirement in the 2005 law that CMS adjust risk scores to the extent that differences in coding patterns have been identified between MA plans and providers under FFS. CMS found that MA risk scores on average increased twice as fast as risk scores for FFS beneficiaries. "A significant portion of beneficiaries who join FFS are younger beneficiaries who are new to Medicare, while most of the beneficiaries who join MA are older and are switching from FFS," CMS said in its announcement. Part D Benefit Update On another issue discussed in the advance notice, under the Part D prescription drug benefit, CMS must update the statutory parameters for the defined standard benefit each year. These parameters include the annual deductible, initial coverage limit, and the annual out-of-pocket threshold. The annual percentage increase for 2009 is 7.54 percent. The Part D deductible would rise from $275 in 2008 to $295 in 2009; the initial coverage limit would rise from $2,510 to $2,700, and the out-of-pocket threshold would rise from $4,050 to $4,350. Comments on the advance notice are due March 7. Final MA rates will be released on April 7, along with county specific information. A bid conference is planned for April 10, in advance of the June 2 deadline for bid submission. The advance notice is available.
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