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Medicare Advantage rates, policies mostly unchanged for 2018

Jim Cole / AP

Medicare Advantage and Part D payment rates will increase by 0.45% on average for 2018, barely above the 0.25% that the Centers for Medicare and Medicaid Services proposed in February. The average rate will go up by 2.95% after estimating how health insurers and pharmacy benefit managers code the health risks of their Medicare members, CMS said Monday.

Between the lines: Not much changed between the final 2018 guidance and the proposal for Medicare Advantage, which spends about $200 billion per year. This was the last Medicare policy document from the Obama administration, and President Trump's team didn't have a lot of time to make its own changes. But the 185-page final notice contains some wins for the insurance industry.

  • Encounter data. This one is wonky and involves how CMS calculates risk scores, which describe how sick a Medicare member is. A higher risk score means the person is sicker, and consequently the government pays the health plan more. For 2018, CMS will pay out risk scores based 15% on encounter data (which are supposed to be more accurate claims data) instead of the proposed 25%.
  • Why it matters: Insurers don't want to use encounter data at all, arguing the data aren't ready to be used, but a reduction in the proposed blend still helps their payments.
  • Retiree Medicare Advantage plans. No change from the proposal, which means payments to Medicare Advantage plans sponsored by employers won't be capped by the government. Instead, the government will use a blended rate next year and will ask for input again on this for 2019.
  • Why it matters: The industry wanted this proposal dumped completely — they'd just as soon have no limits at all, either through caps or blended rates. Employer Medicare Advantage plans are profitable, and administratively setting rates would erode those profits.
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