Proposed Cuts To Medicare Advantage May Disrupt Seniors

by Oliver Wyman

February 22, 2017

Introduction

On February 1, 2017, the Centers for Medicare & Medicaid Services (CMS) released the Advance Notice of Methodological Changes for Calendar Year 2018 Medicare Advantage Capitation Rates and Part C and Part D Payment Policies (the 2018 Advance Notice).  The Advance Notice outlines the planned changes to Medicare Advantage (MA) capitation rates applied under Part C and Part D for calendar year (CY) 2018 and other regulatory changes that will affect plan reimbursement.

Given the implications of the 2018 Advance Notice for the MA program, America’s Health Insurance Plans (AHIP) engaged the Actuarial Practice of Oliver Wyman to evaluate the impact of these potential changes in 2018.  In this document, we describe and estimate the value of the changes reflected in the 2018 Advance Notice along with those being implemented due to the Affordable Care Act (ACA).

What we found:

  • This report estimates that MA plans will see a reduction in net revenue of -1.8 to -2.0 percent in 2018.
  • This negative impact is due in part to the reinstatement of the Health Insurer Tax (HIT) for 2018, which will take effect unless legislative action is taken to extend the one-year moratorium or permanently repeal the tax prior to the bid deadline.
  • Although the HIT is not a reduction in payment rates, it does serve as a reduction in net revenue to the MA program by imposing an additional cost on MAOs.
    Another cause of the negative impact is CMS’ change in the normalization factor used to adjust risk scores.