April 17, 2015

Below the Fold: New Medicare Law Includes Boosts for Medicare Advantage

On April 14, 2015, the U.S. Senate passed the Medicare Access and CHIP Reauthorization Act (MACRA) that would fix a long-term problem in the Sustainable Growth Rate (SGR) methodology Medicare uses to pay physicians in Part B. Nicknamed “doc fix,” the so-called SGR bill enjoyed strong bipartisan support and passed by a 92-8 vote. Eight Republicans voted against it because the “doc fix” is not fully paid for by other parts of the bill. It had previously passed in the House; President Obama supports for the bill, and his signature is expected early next week. “Doc fix” is already the subject of numerous articles, and additional articles have focused on other prominent provisions of the bill, including: (1) the two-year extension of the Children’s Health Insurance Program, or CHIP; (2) Additional payment reforms to the traditional Medicare programs beyond the “doc fix,” and (3) Increased beneficiary means testing in the Medicare program.

But that is not the entirety of the bill. Below is a brief discussion of three MACRA provisions that have received less attention. One end result of MACRA will be its helpful impact on the Medicare Advantage program, although these MA-friendly provisions are receiving almost no media attention.

Medicare Advantage-Friendly Provisions

Extension of SNPs: Medicare Advantage Special Needs Plans, which would have expired at the end of 2016, will be extended through 2018. There are approximately 250 SNPs operating in more than 40 states and serving more than one million beneficiaries, most of whom are Medicare-Medicaid Dual Eligibles. The extension of the SNPs, while expected, is a necessary step toward keeping the Medicare Advantage environment stable and assuring continuity of coverage for a particularly vulnerable population.

Cost Plan Transitions: The bill also extends Medicare Reasonable Cost Plans through 2018, extending this program which operates parallel to Medicare Advantage for another two years. In previous laws, Congress has capped the expansion of Reasonable Cost Contracts but has stopped short of sun-setting the program despite its reportedly high cost to the Medicare Trust Fund. MACRA encourages Cost Plan insurers to transition their members into Medicare Advantage. Cost Plans that choose to do so are allowed to “passively enroll” their members into a Medicare Advantage plan run by the same company if CMS judges the plan benefits and services to be similar.

Medigap Changes: Starting in 2020, Medicare Supplemental insurance policies (often called “Medigap”) will not be permitted to cover the Part B deductible for new beneficiaries (currently $147). This provision was likely put in place to discourage Part B utilization and, therefore, save the money for the Medicare Trust Fund. As noted in a recent study by the Kaiser Family Foundation and other sources, the percentage of Medicare beneficiaries with Medigap plans has declined in recent years, principally due to climbing premiums. The decline of Medigap is frequently cited as one of the drivers of growth in Medicare Advantage. This change to Medigap plans in 2020 would have the practical impact of further exacerbating a trend that is already underway.

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