Feds seek 1 percent cut in Medicare Advantage

The Obama administration is seeking a more modest rate cut to the popular Medicare Advantage program next year compared to 2015, proposing a reduction of just under 1 percent.

Medicare Advantage, which covers about one-third of Medicare beneficiaries, is a program that runs on federal dollars but is managed by private healthcare   providers. Doctors are reimbursed based on a risk-adjusted, per-person payment formula from Medicare that the government updates every year.

The new rate proposal announced Friday would decrease payments “modestly” by about 0.95 percent, said Sean Cavanaugh, deputy administrator and director of the Center for Medicare and Medicaid Services (CMS).


This year’s proposed rate reduction is less than last year’s 1.9 percent. That full cut never went into effect, however, after an aggressive lobbying effort by the medical industry.

Cavanaugh added that all health plans would be affected differently, but the average plan would see an increase in revenue of about 1.05 percent because of a new emphasis on quality of care.  

“On average, plans that are increasing quality of care would experience higher revenue growth,” he said in a call with reporters Friday afternoon.

Participation in Medicare Advantage is at an all-time high, according to CMS data. Enrollment has swelled more than 40 percent since passage of the Affordable Care Act, with premium costs also declining by about 6 percent.

The more modest reduction in rates comes as more lawmakers are trying to shield Medicare Advantage from steep cuts.


A bipartisan group of 53 senators sent a letter this week urging the Obama administration not to cut payment rates.

"Regulatory policy changes that affect the program's funding, year after year, are creating disruption and confusion among beneficiaries who are looking for consistency and predictability and can damage a program that offers value for beneficiaries," they wrote in a letter to the CMS.

The Medicare Advantage network carries heavy weight on Capitol Hill. The program has nearly entirely escaped cuts in recent years after intense pushback from members of Congress, in part thanks to former Rep. Henry Waxman (D-Calif.).

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