2015 Advance Notice: Changes to 2015 Medicare Advantage Payment Methodology and the Potential Effect on Medicare Advantage Organizations and Beneficiaries
February 27, 2014

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Changes to Payment Methodology for 2015

MA Benchmark Reductions Continue in 2015
The Affordable Care Act (ACA or the law), formally The Patient Protection and Affordable Care Act (Pub L. 111-148) (PPACA) and the Health Care and Education Reconciliation Act (Pub L. 111-152) (HCERA), makes several changes to how MAOs are reimbursed by CMS...Based on our models, we are estimating that the impact of moving benchmarks to percentages of FFS costs will be a total reduction in MA plan payment benchmarks of -2.4% for 2015.

Health Insurance Tax
The ACA also establishes an annual fee on the health insurance sector; this became effective for 2014. The new fee applies with some exceptions to any covered entity engaged in the business of providing health insurance (including private plans that participate in public programs), but does not include self-insured, employer-provided health plans. 

Changes Related to Risk Adjustment
MAOs are paid on a risk adjustment model that utilizes factors that reflect beneficiaries’ health status...The ACA, as revised by the American Taxpayers Relief Act of 2012, increased the 2014 coding intensity adjustment by setting it at a minimum of 4.91% and mandated an incremental increase in the adjustment annually starting in 2015 that should further reduce payments by -0.25% each year.

Ratebook Changes for 2015
The 2015 Advance Notice included significant reductions to both the 2015 National Per Capita Medicare Advantage Growth Percentage (NPCMAGP) and the 2015 Fee-for-Service (FFS) Growth Percentage. The NPCMAGP was the mechanism that CMS used in their pre-ACA benchmark changes to increase payment rates and reflects trends in total...we estimate the combined impact of the preliminary NPCMAGP and the FFS USPCC Growth Percentage will change MA payments by -1.9%.

Overall Reduction Calculation
...our estimate is for a reduction of -5.9%. Plans also face the possibility of other changes to payment policy that we have not included in our analysis due to the greater variability in potential assumptions and wider range of the possible results. 

Medicare Advantage Rate Cuts 

The report estimates that MA plans will see a 5.9% reduction in payment in 2015, which is comprised of a -3.9% reduction in payment, plus an average -2% reduction due to CMS' proposed policy on health risk assessments. 


Estimated Reduction in 2014 and 2015 for MAOs

  • Reduction 2014 
  • Reduction 2015