Medicare Advantage (MA) plans got a better-than-anticipated pay hike this week, as the Centers for Medicare & Medicaid Services (CMS) released its final 2020 policy and payment updates for the private coverage program for seniors. MA payments will increase by an average of 2.53 percent in 2020, higher than the 1.59 percent initially proposed by CMS earlier this year, reflecting CMS’s expectation that MA services will grow faster than it initially thought.
With the announcement, CMS is also finalizing plans to allow reimbursement for supplemental, non-clinical services covered by MA plans, such as transportation, nutrition support, and housing improvements, as long as those services are intended to improve health status. The final update also confirms CMS’s intent to continue updating its risk-adjustment methodology to more accurately reflect the intensity of services delivered to beneficiaries, a change that has been controversial among insurers, who fear the new methodology will result in lower payments from the government.
Despite these concerns, shares of MA insurers traded higher after the CMS announcement, and health plans will no doubt be pleased with yet another year of good news from CMS on MA rates. Given continued strong enrollment growth, robust rate increases, and a pipeline of millions of aging Baby Boomers poised to become eligible for Medicare, large insurers (and increasingly, providers) will view MA as their primary source of growth for the next decade or more.