The Centers for Medicare and Medicaid Services (CMS) released finalized guidance on Monday regarding Medicare Advantage (MA) rates for the 2018 plan year. The finalized guidance resulted in an average rate increase of 0.45%, up from the average rate increase of 0.25% from the proposed guidance released in February. CMS has also frozen the implementation of planned changes to the Employer Group Waiver Plans (EGWP or “Egg Whip”), which enroll roughly 3.3 million Medicare beneficiaries. In 2016, CMS finalized a 2.5% cut to EGWPs to bring those plans in line with other MA plans and set them to 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 payment rates for EGWPs will now be set at the 2017 levels and reflect a blend of non-employer plan bids from 2016 and EGWP bids from 2016, each weighted at 50%. Under the prior guidance, the previous EGWP bid process would be replaced with set payment amounts for EGWPs in each county. The prior guidance was designed to bring the EGWP plans in line with other MA plans as the employer plans are currently paid more, which would result in a cut for the EGWP plans. The Medicare Payment Advisory Commission claimed 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.

According to a study by the actuarial firm Milliman, this would reduce spending on these beneficiaries between $750 and $870 million, resulting in higher premiums or reduced benefits for beneficiaries. A study by the Coalition to Save Medicare Advantage Retiree Coverage found that the proposed rates would lead to a 2.1% average payment reduction, while a similar study found that beneficiaries of these plans would face increased costs of $250 per enrollee. According to the Kaiser Family Foundation, roughly half of all retirees that have Medicare coverage through their former employers are enrolled on MA plans.

Last December, the Better Medicare Alliance, of which NAHU is a member, sent a letter to President-elect Donald Trump and Vice President-elect Mike Pence outlining the coalition’s policy priorities and recommended that the new administration minimize disruption to beneficiaries, including those in EGWP coverage. A similar letter was also sent to Health and Human Services Secretary Tom Price, CMS Administrator Seema Verma, as well as Medicare-relevant committee members, committee staff and leadership.

The decision to slightly increase the rate from the proposals follows a trend in recent years of variations in rates from the proposed rule to the final rule. Last year, CMS proposed an average rate increase of 1.35% and finalized a rate increase of 0.85%. In 2015, CMS 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. MA currently enrolls more than 18 million individuals, or roughly one out of every three Medicare beneficiaries.