Here We Go Again on MA Pay — and at a Bad Time

By James Gutman - January 27, 2012

The report issued by the Government Accountability Office (GAO) Jan. 26 on Medicare Advantage plan payment levels is a big problem for MA plans not only because of what it says but also when it comes. The report, requested by House Democrats, finds Medicare's methodology for paying MA organizations is flawed since beneficiary risk scores are much higher than they would be if the same beneficiaries were enrolled in fee-for-service. The higher risk scores, according to GAO, were equivalent to $3.9 billion to $5.8 billion in extra payments to MA plans in 2010, and these amounts may have increased in 2011 and 2012.

There are numerous ways in which MA plans could explain and respond to the findings, which CMS declined to comment on other than to call them "informative." But whatever they say, the fact is this will provide ammunition for those in Congress and the Obama administration now frantically looking for ways to cut the budget deficit. And the fact that the report comes three weeks before CMS must come out with its "45-day letter" with preliminary MA pay rates for 2012 only magnifies the potential peril for the plans. If there is an easy target for supplying hundreds of millions of dollars to ease the budget crisis, that target may not be able to emerge unscathed.