Bidding Strategies Are Seen as Being Crucial for Medicare Advantage Plans That Face ‘Tough Times’ Ahead


Reprinted from MEDICARE ADVANTAGE NEWS, biweekly news and analysis on the Medicare (and Medicaid) managed care programs.

By Judy Packer-Tursman (

To illustrate what he calls the “tough times” that Medicare Advantage (MA) plans face in 2010, consultant William MacBain told a recent audioconference to look at what will happen to MA payment rates in Montgomery County, Md., an affluent suburb of Washington, D.C. The county’s 2009 MA benchmark payment rate of $818.77 will plummet to $755.46 for 2010 after the first-ever coding-intensity adjustment and other technical adjustments are factored in (assuming the plan has identical risk scores from one year to the next). And that doesn’t take into account a change in Medicare Secondary Payer (MSP) methodology that could drop next year’s MA rates by perhaps another 3% on average.

What are the implications for MA plans’ 2010 bids due June 1? Organizations cannot re-engineer plans, but there are certain items to focus on, William MacBain, senior vice president of finance for Gorman Health Group, LLC, told an AIS-sponsored audioconference on the MA rates outlook May 7.

For those MA plans bidding below the 2010 benchmark, the good news is that for every $1 CMS takes away, the rebate is reduced by only 75 cents, MacBain pointed out. The bad news? There will still be less money to fund other benefits, he noted.

“You either have to look at benefit changes or increase premiums, or it’s going to hit your profits,” though by how much will depend on the strength of your brand and other factors, he said. “Make sure you’re doing a careful job of pricing out benefit changes, and when you’re done, look at how that affects premiums.”

According to MacBain, as a last-minute bid strategy MA organizations ought to check on the accuracy of historical data — including validation of the year-end 2008 incurred but not reported (IBNR) loss calculation — and also look at how realistic a plan’s anticipated savings are.

After June 1, MacBain said, all bets are off as the Obama administration and Congress hash out a wide range of MA payment reform options. These include various proposed models of competitive MA bidding — more details of which were recently unveiled by the Senate Finance Committee — and alternatives, such as lowering the MA benchmark to equal Medicare fee-for-service costs. The Senate finance panel seems to be coming down on the side of using weighted average MA plan bids to set the benchmark, he said.

In response to this dynamic MA rate environment, plans ought to focus on risk adjustment, and on trying to keep ahead of the coding-intensity factor, MacBain said. “Make sure your average risk score is moving up a couple years ahead of the risk factor,” he told the audioconference.

Plans Urged to Focus on ‘Medical Homes’

MA plans also should focus on “medical homes,” with or without a federal subsidy, to better manage care, he said. MacBain cited a recent study indicating that patients of a primary care physician (PCP) with an active Medicare practice collectively might see another 200 providers. “Data management is pretty daunting, and the only place this comes together is the health plan, because it’s got the claims,” he said. “So it’s a real opportunity for the plan to work with doctors who are ‘medical homes.'”

During a question-and-answer session, MacBain was asked how MA plans should deal with discrepancies between CMS and plan data on members with MSP status. He said his firm urges plans to look at daily data and, if there is a discrepancy, to ask the member directly and appeal to CMS to reconcile data. “It’s ultimately your responsibility to members and your responsibility in running the plan to make sure you’re paid appropriately and following up on cases,” he said.

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