As dictated by the recently passed health care reform bill, CMS has announced that Medicare Advantage reimbursement rates will remain flat in 2011. This reverses the planned 1.38% increase CMS had announced in March.
What does this mean for Medicare Advantage plans?
The good news is that MA plans don't face any immediate cuts — as they did last year. The bad news, of course, is that a 0% increase is certainly not going to keep up with rising costs, which means some companies will be forced to cut benefits and raise premiums to maintain their profit margins.
Beginning in 2012, the payment methodology will change for insurance carriers. Counties will be classified in one of four county quartiles with some rural and suburban areas receiving up to 115% of the traditional Medicare amount and more urban, populous counties as low as 95% of standard Medicare rates. In 2010, 34% of Medicare Advantage beneficiaries are in counties slated to receive the higher reimbursement rates in the future.
Additional changes are coming in 2014, when the 85% minimum loss ratio kicks in. This will be an additional squeeze on profits, forcing carriers to again figure out how to operate on lower expenses.