BMA in the News
May 17, 2017

Report Finds Decreased MA Funding Led to Drop In Value of Plan Benefits

Various legislative and regulatory changes have eroded the value of extra benefits offered by Medicare Advantage (MA) plans over the past few years, “thereby reducing the affordability and access of these services for some Medicare beneficiaries,” according to a report released Feb. 19 by the actuarial firm Milliman Inc.

“As funding of the Medicare Advantage program decreases, MA [organizations] must consider removing the coverage of some of these benefits,” it said.

The report, commissioned by the Better Medicare Alliance, an MA advocacy group, was distributed the day before the Centers for Medicare & Medicaid Services (CMS) expected release of its proposed MA rates for 2016.

The proposal, which offers 45 days to comment on the rates, will estimate the net change to plan capitation rates between 2015 and 2016.

Lobbying Efforts

Groups have been undertaking lobbying campaigns aimed at the CMS and Congress to keep rates stable in 2016 (30 DER C-1, 2/13/15).

More than half the Senate signed a Feb. 18 letter to CMS Administrator Marilyn Tavenner, asking for stable rates and consistent policy changes to minimize disruptions on beneficiaries and plans.

Led by Sens. Charles E. Schumer (D-N.Y.) and Michael D. Crapo (R-Idaho), the bipartisan letter from 53 senators praised MA plans for offering preventive care, including in-home health assessments.

The U.S. Chamber of Commerce, the National Association of Manufacturers (NAM) and several business groups also sent letters Feb. 18 to Tavenner.

One letter, from the chamber, NAM and other groups, said “ongoing cuts to the program jeopardize an employer’s ability to adequately cover retired employees.”

Another letter, from 34 state chambers of commerce and manufacturer associations, discussed the affordability and “innovative integrated care provided” by MA plans and asked the agency and Congress to avoid “coverage harm and disruption” that could occur through program cuts.

Decline in Value Added

The Milliman report said MA plans aren’t offering the benefits they used to offer that are beyond those in fee-for-service Medicare. Although premiums have also gone down, the “value add” for benefits under the Part C (medical management) portion of the MA benefit has been dropping faster. The report defined “value add” as the value of benefits provided to a plan’s beneficiaries above traditional Medicare that isn’t funded through member premiums.

For the Part D drug benefit portion of MA, “benefit values have not decreased as sharply as Part C, but premiums have increased each year even as benefit levels have fallen,” the report said.

Overall, enrollees have experienced a cumulative decline in the annual value add of their coverage by as much as $180 from 2012 to the present, the report said.

During a teleconference on the report Feb. 19, Brett Swanson, consulting actuary and co-author, said the $180 takes into account enrollees who switched plans. If the enrollee stayed in the same plan, the decline would be $295 since 2012, he said.

Fewer Counties

According to the report, in 2015, 211 counties have no general enrollment MA plans, up from 55 counties in 2012.

“This is just going to grow more,” if cuts occur, Krista Drobac, the Better Medicare Alliance interim executive director, said during the call.

The Affordable Care Act phased in changes to the MA payment formula with the goal of bringing down payments to the level—or 100 percent—of fee-for-service payments.

Other laws and regulations, including the end of the CMS quality bonus demonstration and sequestration, have “increased pressure on MAO revenue,” according to the report.

The Medicare Payment Advisory Commission has said that, in 2015, MA plans will be paid an estimated average of 2 percent more than traditional Medicare.

To contact the reporter on this story: Mindy Yochelson in Washington at

To contact the editor responsible for this story: Ward Pimley at

For More Information

The Milliman report is at

The senators’ letter is at

The U.S. Chamber of Commerce letter is at

The state chambers’ letter is at

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