It could have been worse — and it may yet be. The last-minute deal that Congress staggered to approve to avoid a plunge off a fiscal cliff of tax hikes and spending cuts Jan. 1 did indeed use Medicare Advantage as a piggybank, but only a relatively small one. The law that ended the "cliffhanger" will boost the coding-intensity adjustment, which reduces CMS payments to MA plans, by 0.2 percentage points each year. Although the cumulative effect of that over 10 years is a hefty $2.5 billion, according to the Congressional Budget Office, the impact for the next year amounts to "just another little hit" for the MA industry as a whole, as Pat Dunks, principal and consulting actuary at Milliman, puts it. The plans can try to offset it by cutting benefits or raising premiums, he notes. Moreover, the same new law furnishes a one-year reauthorization for both MA Special Needs Plans and "cost" plans — through 2014 and 2013, respectively, ending for now other cliffhangers for those sectors.
However, other sectors (especially hospitals) took a bigger hit in the new statute, and they may try to offset part of the impact by charging MA plans more. In addition, this was just round one of the budget-deficit bout, and the punches in the next round could hurt MA a lot more if Republicans insist on major spending cuts as the price for allowing another hike in the federal debt ceiling as well as continued funding of the federal government, which as of now will run out of money for operations March 27. Couple this with coming developments that we already know about for 2014 — such as that the coding-intensity adjuster for MA must go up from the current 3.41% to at least 4.71% (excluding the new hike from the cliff law) and that MA plan payments will go down under terms of the health reform law — and the scenario changes pretty dramatically.
What do you think will be the impact of the interim and final fiscal-cliff, debt-ceiling and sequestration resolution on MA? Is 2014 finally going to be the year in which MA benefits are cut substantially and/or premiums jump to make up for some of the new provisions in the statute? Or will the continuing growth of the MA market be sufficient that plans will wind up absorbing most of the costs amid the intense competition for customers? Have MA plans escaped with a relatively light "sentence," or did they just get a short "reprieve"?
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