CMS cuts payments for Medicare Advantage

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The Centers for Medicare & Medicaid Services (CMS) has released its 2010 Medicare Advantage payment rates and Medicare Advantage (MA) and Part D prescription drug benefit payment policies.

"The announcement provides Medicare Advantage and prescription drug plans the information they need to structure their benefits and beneficiary cost sharing and prepare their bids for the 2010 plan year," said Jonathan Blum, acting director of CMS' Center for Drug and Health Plan Choice.

By law, the agency annually updates the MA capitation rates by a growth percentage that reflects growth in all Medicare expenditures, including expenditures under Part A and Part B payment rules. Therefore, the growth percentage, which reflects the projected reduction in 2010 physician payments provided for under Part B payment rules, will be 0.81 percent in 2010--more than the 0.5 percent previously estimated, according to CMS.

For prescription drug program enrollees, the decision includes information about the 2010 Part D deductible, initial coverage limit, out-of-pocket threshold and related parameters for the standard benefit. The annual percentage increase in average per capita Part D spending--used to update the deductible, initial coverage limit and out-of-pocket threshold for the defined standard benefit for 2010--is now 4.66 percent.

For the first time, for plan year 2010, CMS will make a "coding pattern differences adjustment" to MA risk scores, reducing payment rates to account for differences in disease coding patterns between MA organizations under Part C and the Original Medicare program (Parts A and B).  The adjustment will be applied as a uniform 3.41 percentage reduction to all Medicare Advantage plans' Part C risk scores in 2010.

In addition, the 2010 rates announced reflect a provision in recently enacted legislation requiring a multi-year phase-out of the inclusion of costs of indirect medical education in MA rates. The maximum reduction as part of this phase-out is approximately 0.6 percent per year. 

With adjustments, reimbursements to MA plans could decline by 4 percent to 5 percent in 2010, according to various analyst estimates, reported the Wall Street Journal.

These updated changes make final provisions of the Advance Notice that CMS released on Feb. 20.