CMS Releases Medicare Advantage Rates for 2014

Yesterday was the deadline for the Department of Health and Human Services (HHS) to release the Medicare Advantage Rates for 2014. In past years, the agency used the sustainable growth rate (SGR) formula to determine the increase or cut in reimbursement rates for private insurers participating in the Medicare Advantage plans. For the past 11 years, however, Congress has acted to override the scheduled SGR when it suggested a reduction in physician fees.

In response to the upcoming deadline, 98 member of Congress urged the agency to make funding recommendations based on the assumption that Congress would act to stop any proposed rate cuts.This letter was backed up by a Congressional Research Service (CRS) memo stating that “at this point in time, given 11 years of consistent congressional action to override the physician fee schedule reduction, along with the increasing magnitude of the required SGR reduction, the foreseeability of congressional action makes such an assumption both authorized and reasonable.” The memo also provided CMS with justification if the rate proposals were determined without taking the assumption into account.

If the Centers for Medicare and Medicaid Services (CMS) proceeded under current law, as they have in the past, the SGR proposed rates would cut reimbursements cuts at or above two percent. 

CMS and the Administration responded to the letter and the CRS memo by preemptively assuming Congressional action, and for the first time not issues guidance based on the SGR. According to CQ, CMS decided to grant a 3.3 percent payment increase to insurers in the plan, in sharp contrast to early reports that they would cut rates by 2.2 percent. In addition, CMS lowered the deductible for the Part D prescription drug plan for the first time in history. The projected deductible for 2014 will be $310, a decrease from $325 in 2013.

The decision seemed to satisfy both members of Congress and interested groups who were concerned about rate cuts. Some of those groups saw this as an example to call for an end to the use of the SGR formula.