Press Releases

MORE BENEFICIARIES PARTICIPATE IN MEDICARE ADVANTAGE AFTER PLAN APPROVALS IN 2005

More Medicare beneficiaries are participating in Medicare Advantage plans this year, following the approval of new and expanded plans in 2005 by the Centers for Medicare & Medicaid Services (CMS).

Beneficiaries in every state now have access to Medicare Advantage plans. Health plan choices now widely available in Medicare include approved HMOs, preferred provider organizations (PPOs) and private fee-for-service plans.   

“Since the drug benefit began, we’ve seen an increase in Medicare Advantage enrollment of more than 460,000 beneficiaries,” said CMS Administrator Mark B. McClellan, M.D., Ph.D.  “Medicare Advantage plans are providing enhanced drug coverage and additional benefits that are saving seniors about $100 a month, and these plans are much more widely available than ever before.”

Medicare Advantage plans are able to provide lower overall health care costs and substantial savings for beneficiaries, through better coordinated care and additional benefits. These up-to-date benefits include proven approaches to keep beneficiaries healthy and prevent complications from their chronic diseases. Seventy percent of Medicare beneficiaries have access to a Medicare Advantage plan that does not require the beneficiary to pay a premium for their prescription drug coverage, and most Medicare Advantage beneficiaries have enrolled in plans that offer additional drug coverage beyond the basic Medicare benefit. 

Many Medicare Advantage plans also provide information on the quality and results of care so beneficiaries are better able to find the best care for their needs and providers are encouraged to improve quality.

CMS has approved 163 new Medicare Advantage plans to provide services this year The plans are currently providing significant monthly out-of-pocket savings for Medicare beneficiaries, particularly those with chronic illnesses. Many Medicare Advantage plans now specialize in care for beneficiaries with chronic conditions like heart failure, diabetes, and frailty.  The availability of Medicare Advantage plans in every state, along with their enhanced benefits and increased savings, are the results of the Medicare Modernization Act of 2003.

With the expansions, 74 percent of Medicare beneficiaries have access to HMO plans, 52 percent have access to a local PPO plan and 98 percent have access to private fee-for-service plans. The vast majority of beneficiaries in rural areas have access to private fee-for-service plans, and nearly 20 percent of beneficiaries in rural areas have access to local coordinated care plans (HMOs or PPOs). In addition, 87 percent of beneficiaries have access to a PPO plan that covers a single or multiple-state region.   Altogether there are more than 5 million beneficiaries currently enrolled in Medicare Advantage health plans, with an average of 50,000 beneficiaries per month joining the plans since 2004. 

As required by statute, CMS also issued the preliminary “45-day notice” of the methods that will be used to calculate Medicare Advantage payment rates for 2007. This notice includes technical updates, the implementation of full “risk adjustment” of health plan payments, and, as previously announced by CMS and incorporated in the Deficit Reduction Act of 2005, the phasing out of the “budget neutrality” payment adjustment.  Because this information is market-sensitive, it is being released after financial markets have closed.

The technical adjustments include a preliminary estimate of a 6.9 percent increase in the national per capita Medicare Advantage growth percentage. This estimate is used to determine the minimum annual percentage increase in capitation rates for Medicare Advantage plans in all counties for Medicare Part A and B.

“Through a predictable payment system, we are seeing continued growth of health plans that are providing better benefits for people with Medicare,” said Dr. McClellan.

The preliminary estimate will be updated before final 2007 capitation rates for all counties are announced in April. Actual capitation rate increases also depend on the amount of the budget neutrality adjustment, which will be announced when the final rates are announced in April.

The preliminary estimate of the growth trend was provided in the Advance Notice of Methodological Changes for Calendar year 2007 Medicare Advantage Payment Rates and Part D Payment. By law, annually on the first Monday in April (this year April 3), CMS is required to announce the capitation rates for Medicare Advantage plans for the following calendar year.  In addition, 45 days prior to the April 3 announcement, the law also mandates that CMS publish the Advance Notice, which describes any changes to the payment methodology for the upcoming year.

The preliminary estimate of 6.9 percent for 2007 for aged and disabled beneficiaries combined is calculated from the 2007 trend change of 2.5 percent for Medicare, multiplied by revisions to underestimates of Medicare spending in 2004, 2005 and 2006 of 1.3 percent, 1.8 percent and 1.1 percent, respectively, because Medicare spending increased more than previously estimated in those years. The Medicare trend increase and the related revisions for earlier underestimates or overestimates of the growth trend are actuarial calculations based on actual Medicare spending and are required by the Medicare law.

By law, the annual capitation rate for a county is the greater of the previous year’s rate increased by 2 percent or the national per capita Medicare Advantage growth percentage. This rate is called the minimum percentage increase rate. The rate can be higher in years that CMS rebases the fee-for-service rates. Rebasing involves retabulating the average per capita fee-for-service expenditures using more recent fee-for-service spending data. In a rebasing year, the capitation rate is the greater of the minimum percentage increase rate or the fee-for-service rate. CMS is rebasing fee-for-service rates for 2007, and may rebase annually in future years to pay more accurately.

The notice also describes changes in risk adjustment of payments to Medicare Advantage plans. All parts of the risk adjustment system will be updated with more recent data to reflect newer treatment and coding patterns, including community, long-term institutional, new enrollee, and end-stage renal disease models. In 2007, Medicare will be paying a 100 percent risk adjusted payment for all Medicare Advantage plans, up from 75 percent in 2006, except for Program of All-Inclusive Care for the Elderly (PACE) organizations and certain demonstrations. In addition, CMS will begin phasing out the budget neutrality adjustment by moving from 100 percent to 55 percent adjustment, as announced last year and now required by the Deficit Reduction Act.

Beginning in 2007, CMS is authorized to pay entry and retention bonuses from the Stabilization Fund to Medicare Advantage regional plans. CMS states in the notice that it will issue subsequent guidance on implementing the fund.

CMS is asking for comments and input within the next two weeks on the provisions and proposals contained in the advance notice.

The 45-day notice can be found at www.cms.gov/Medicare/Health-Plans/MedicareAdvtgSpecRateStats/index.html

Comments must be submitted by 5 p.m., March 3. Comments may be submitted by e-mail to AdvanceNotice2007@cms.hhs.gov.