Ritter Insurance Marketing, Craig Ritter

MedPac Issues 2014 Annual Report to Congress

MedPac issued it’s 2014 report to Congress (click link to view entire report) on the state of the Medicare system along with it’s recommendations.  MedPac is the Medicare Payment Advisory Commission which is a non-partisan commission which offers Congress updates and recommendations on the Medicare program.  Generally, I focus on the Medicare Advantage Program report which is in Chapter 13.  The entire document is almost 400 pages long, but I recommend agents take a little time to at least read chapter 13 (it’s about 25 pages with a number of graphs).

Here is a brief summary of my notes from Chapter 13:

1.  Enrollment states.  You will find the enrollment stats on page 324.  MedPac looks at the growth of the MA program from November of one year to the next.  From 11/12 through 11/13, the overall MA program grew by 9% to 14.5 million.  This includes both individual and group MA plans.  All types of plans grew in excess of 9% (HMO, Local PPO, Regional PPO, SNP, Employer Group) with the exception of Private Fee for Service, which shrank by about 26%.

2.  Payments to MA relative to Medicare Traditional FFS.  In 2014, MedPac estimates MA will be paid approximately 106% of traditional Fee for Service Medicare.  This is the same as they projected for 2013, however, they believe their estimate for 2013 was too low due to them overestimating the cost of FFS Medicare.  Medicare costs for traditional Medicare came in lower than expected.  The entire table that breaks out the payments can be found on page 331.  The most efficient plans continue to be the HMO’s with an average bid of 95% of FFS Medicare.  The least efficient continue to be PFFS plans with an average bid of 110% of FFS Medicare.

HMO’s received the smallest payments at 105% of FFS Medicare.  PFFS receive the highest payments at 111% of FFS Medicare.  Interestingly, Local PPO’s and Employer Groups were not far behind at 110% and 109%, respectively.  Of note, a good portion of MedPac’s comments were about changing the bidding process for Employer Group MA (more on that later).

3.  Overall Payments.  MA plans were paid about $146 billion to cover A and B services.

4.  MA Availability.  About 84% of Medicare beneficiaries had access to a zero premium plan which included prescription drugs.  This is down slightly from the peak of 90% in 2011.  This percentage has been dropping by 2% every year since 2011.  The availability of Coordinated Care Plans (HMO’s or PPO’s, or CCP’s for short) has increased every year as MA is trying to get more efficient.  In 2005, on about 67% of Medicare beneficiaries had access to a CCP.  In 2014, that percentage grew to 95% (the same as 2013).

5.  Growth Relative to Overall Medicare.  The growth of MA outpaced the total Medicare system.  The entire Medicare system grew by 4% relative to the 9% growth in MA.  Therefore, the percentage of Medicare beneficiaries in MA plans increased from 27% to 28%.

6.  Breakout of Star Bonus Demonstration Program.  I don’t recall seeing the impact of CMS’ Demonstration Program for Star Ratings, however, MedPac provided a little insight on page 333.  In 2014, CMS will pay out $4.5 billion in bonus payments, but 2/3 of this total is related to the Demonstration program which ends in 2015.  Therefore, there is approximately $3 billion in bonuses paid in 2014 which will cease in 2015 (as far as we know today).

7.  Recommendation on Employer Group Plans.  MedPac explains the bidding process on pages 333 through 335 which highlights how Employer Group plans are bid.  Looking at historical data, Employer Group plans bid at 95% of the benchmark while individual plans bid at about 86% of the benchmark.  The rationale is that Individual plans need to bid lower in order to provide additional benefits to attract Medicare beneficiaries to their plans.  The Employer groups essentially have a “captive audience” so they attempt to bid in a way to maximize revenue (as close as possible to the benchmark while still providing actuarial evidence to support such a high bid).  MedPac is recommending that Congress should direct CMS to determine payment options for Employer Group Medicare Advantage plans in a manner more consistent with individual (nonemployer) Medicare advantage.  This likely would result in reduced reimbursements for Employer plans, if enacted.

8.  Notes on Star Ratings.  MedPac noted that almost 1/3 of an MA plans star rating is attributable to the Part D benefit included in MAPD plans, however, the Part D reimbursement is only about 1/9th of the total.  This means that star ratings give three times the weight to the Prescription Drug component of an MAPD plan based on reimbursement.  There wasn’t a clear recommendation here, but MedPac mused that it might make sense to give more weight to areas that impact member health that aren’t Prescription drug specific.

9.  Inclusion of Hospice in Medicare advantage.  MedPac is recommending that Hospice be included in the Medicare advantage benefit package beginning in 2016.  Currently, Hospice is carved out of Medicare advantage whereas if an MA member goes on Hospice, the Hospice benefit is covered under original Medicare.

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