On Monday, the Centers for Medicare and Medicaid Services (CMS) released finalized guidance regarding Medicare Advantage (MA) rates for the 2017 plan year. The finalized guidance resulted in an average rate increase of 0.85%, down from the proposed average rate increase of 1.35% from the proposed guidance released in February. The guidance also addressed proposed changes to the roughly 3.3 million Medicare beneficiaries who are enrolled in Employer Group Waiver Plans (EGWP or “Egg Whip”) by noting that these will be phased-in over two years. NAHU advocated against these changes and joined the Coalition to Save Medicare Advantage Retiree Coverage in this effort.

The Administration will be moving forward with its projected 2.5% cut to EGWPs, but will help ease the impact of the cuts by providing a two-year transition period. The cuts stem from what the Administration deemed a “coding trend” to realign rates throughout the program to adjust for discrepancies in the program and that the effected increase would be 3.55%. This would bring the EGWP plans in line with other MA plans as the employer plans are currently paid more, resulting in a cut for EGWP plans. The Medicare Payment Advisory Commission claims that the average payment for an EGWP enrollee was 106% of that of a traditional fee-for-service beneficiary, and 102% for individual MA plans. CMS is estimating that the EGWP changes will result in a 1.25% cut in 2017.

The cuts to MA have been met with a chorus of criticism from more than two million beneficiaries, coalition members like NAHU, and nearly 400 senators and representatives, all who actively lobbied against the cuts. Following the announcement of the finalized guidance this week, Senate Finance Committee Chairman Orrin Hatch (R-UT) admonished the Administration for acting “unilaterally to undermine an important, market-based health program by phasing in cuts over two years.” Similarly, House Ways and Means Committee Chairman Kevin Brady (R-TX) and Health Subcommittee Chairman Pat Tiberi (R-OH) said, “CMS failed to address many of the policy recommendations we made on behalf of MA beneficiaries, including our calls to abandon changes to the Employer Group Waiver Plans and changes that will negatively impact low-income seniors.”

As for the overall rate increase of 0.85%, the Administration noted that it was able to reduce the impact from its originally projected 1.35% increase by increasing the use of medical claims data to determine payment rates. The Administration is planning to increase the use of medical claims data to 100% of the payment formula by 2020. The final MA rates compared to their proposals follow a trend in recent years of the Administration reducing the impact of initially proposed MA rates through the final guidance. Last year, the Administration initially proposed a 0.9% cut in rates, but final guidance resulted in a 1.25% increase. In 2014, the proposed cut was 1.7%, but the finalized rate was a 4.2% increase. In 2013, the Administration planned to cut MA rates by 2.3%, but instead went with a 3.3% increase in its final rule.