Final 2014 Rate Announcement for Medicare Advantage Plans

Earlier this week, the Centers for Medicare and Medicaid Services (CMS) announced the changes to Medicare Advantage (MA) Plan payment rates for 2014. In total, CMS will raise payments to MA plans by 3.3%, a drastic turn away from the 2.2% rate cut it proposed in an advance notice in February. There are two primary drivers of this reversal: First, public pushback to the proposed cuts resulted in many Members of Congress writing letters to CMS acting administrator Marilyn Tavenner, urging the agency to reconsider its position. And second, more importantly, in the final rate announcement CMS readjusted its methodology for calculating the growth rate by assuming that the Sustainable Growth Rate (SGR) formula (the 27% cut to payments that threaten physicians every year) will be either replaced or temporarily avoided, as it has been every year for the past decade. This assumption had a significant impact on CMS’ projections.

There were concerns that the MA cuts originally proposed would be passed down in cuts to provider rates. Although this final announcement avoids such cuts, the actual payment rates to MA plans for 2014 are still unknown. MA plans are still subject to various rate cuts imposed by provisions in the Affordable Care Act (ACA) as well as by the 2% across-the-board rate cuts, known as the “sequester,” that became effective this month. The staff of the American Health Care Association is closely monitoring this issue and will continue to communicate important information to members, as it becomes available, in order to help prepare for 2014 rate negotiations.