On February 1, the Centers for Medicare & Medicaid Services (CMS) released the 2018 Advance Notice for Medicare Advantage Capitation Rates. New analysis by the Oliver Wyman Actuarial practice reveals that the payment rates will not keep pace with healthcare cost inflation, and the proposed payment changes will lead to a drop in net revenue of about 2 percent for Medicare Advantage Organizations (MAOs).
The analysis was performed at the request of America’s Health Insurance Plans (AHIP). Glenn Giese, FSA, MAAA, of Oliver Wyman Actuarial practice joined representatives of AHIP and other health insurance companies at a congressional briefing on the topic on February 22.
According to the new Oliver Wyman report, the negative impact is due in part to the reinstatement of the Health Insurer Tax (HIT) for 2018 which MAOs will likely build into their bids 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.
The result of the drop in revenue could disrupt beneficiaries in the MA market. As a result, absent changes in CMS policy in the Final Announcement, beneficiaries enrolled in MA plans could face higher premiums and costs or reduced benefits.
Read the full report here.