CMS Increases Medicare Advantage Funding by 1.38% for 2011

Aug

2010

CMS Increases Medicare Advantage Funding by 1.38% for 2011

Written by Dana Cutter

Sunday, 07 March 2010 18:26

CMS Annouces Rate Increases for 2011 Private Medicare plans, a major source of business for many health insurers, may see a small increase of 1.38% in funding from the federal government for 2011. (rates released Friday, February 19th).

These estimates are preliminary, final rates will not be published until early April. Wall Street and the Analyst community all have mixed reactions, but last year's reduction in payment (4.8%) to private Medicare plans resulted in upwards of nearly 50% increase in premiums to Medicare Advantage plan members for 2010. The average health plan receives about $900 per member per month and these cuts resulted in a reduction in revenue of nearly $45 per member per month. Many insurers simply passed the loss onto their members through rate increases.

February's announcement from CMS may result in premiums largely remaining flat for 2011. This is good news for many Medicare Advantage members struggling with increased premiums this yeaar. A $13 rate increase really isn't much when you consider many plans claimed decreased revenue last year due to H1N1 vaccinations and will likely claim an increase of at least 5% in medical costs at the close of business this year.

The estimate comes as the Obama administration and congressional Democrats discuss cuts in payments to Medicare Advantage plans as a way to help pay for a broader health-care overhaul. The rates announced by CMS are not affected by those proposals.

Medicare Advantage PFFS Plans

Those of you enrolled in Medicare Advantage Private Fee for Service Plans (PFFS) may be hit with a double wammy. Last year CMS announced that all PFFS plans must now have a contracted network of physicians and hospitals. Over 1/2 of the Medicare PFFS plans terminated their contract with CMS last year because of the new requirement. Those that remain will likely do the same by October of this year. Afterall, Medicare already offers HMO and PPO plans, both of which include networks of doctors and hospitals. It is not likely that PFFS plans will compete with established product lines.

Medicare Part D Plans

Every year CMS is required to update the standard Part D prescription drug benefit. Due to rounding, all of the 2011 Part D benefit are virtually unchanged from the 2010, with the exception of a small increase in the Initial Coverage Limit.

Part D Benefit Parameters	2010	2011
Defined Standard Benefit
Deductible	$310	$310
Initial Coverage Limit	$2,830	$2,840
Out-of-Pocket Threshold	$4,550	$4,550
Minimum Cost-sharing for Generic/Preferred Multi-Source Drugs in the Catastrophic Phase	$2.50	$2.50
Minimum Cost-sharing for Other Drugs in the Catastrophic Phase	$6.30	$6.30
Retiree Drug Subsidy
Cost Threshold	$310	$310
Cost Limit	$6,300	$6,300

These initial announcements are very encouraging and could mean some relief for those enrolled in Medicare Advantage plans. We'll know more in early April.

About the Author:

My name is Dana Cutter and I am Founder and Editor of Medicare Sherpa. Our staff spends their days searching the Internet for the best content and advice on retirement. On our site you will find articles on Social Security, Medicare Benefits, Prescription Drug Benefits and more. Please feel fee to send me an email with ideas for content, site improvements or general help launching your online persona. I hope you will consider joining and I am looking forward to reading more about you online.