So last week I wrote about the bipartisan effort to increase the Medicare Advantage payment rate for CY2014.  On February 15, CMS published its advance notice of the MA payment rates.  What they announced was a 2.3% reduction.  This raised some strong protests.

About an hour ago, CMS announced their final notice.  In this final notice, instead of seeing a decrease of 2.3%, the payment rates will increase by 2.96%.  That’s quite a swing.

So how’d it happen?

Let’s go back to a February 28 hearing before the Finance Committee. Testifying before the Committee that day was Jonathan Blum, Acting Principal Deputy Administrator and Director at CMS.  Sen. Hatch questioned Blum regarding the payment cuts called for in CMS’s advance notice of February 15th.  Hatch acknowledged that some of the cuts were governed by the statute, but also pointed out the CMS had considerable discretion over many of the policies that resulted in rate reductions.  Sen. Hatch’s specific question was whether Blum felt that it was within CMS’s discretion to assume that Congress would address the schedule physician payment cut.  Hatch remarked that assuming that Congress would fail to patch the scheduled physician payment cut – the “doc fix,” as it is known – has historically resulted in unrealistically low MA rates.

Blum responded to Sen. Hatch by saying that it is CMS’s long-term policy not to assume the cost of the Sustained Growth Rate (SGR) fix to the MA rate notice.  But he acknowledged that CMS had received comments asking them to take a second look.  And take a second look they did.

In CMS’s final rate notice it states that the “basis for the Growth Percentage for 2014 has been changed to incorporate an assumption that Congress will act to prevent the scheduled 25-percent reduction in Medicare physician payment rates from occurring.”  This reverses the long-term policy that Blum described to Sen. Hatch.  The rate notice goes on to say that the Office of the Actuary has been directed by the Secretary to use this assumption, but that “the assumption conflicts with the Office’s professional judgement that, as in all past years, the determination should be based on current law, not an assumed alternative.”

As reported by Politico’s Jennifer Haberkorn (I would link to it, but it’s behind a paywall), a group of more than 120 Democrats and Republicans followed Baucus and Hatch’s lead in lobbying CMS to to reconsider the rate cut announced in CMS’s advance notice.  The lobbying efforts by Congressmen and industry were successful in getting CMS to reverse its long-term position on rate setting, a move that CMS’s Office of the Actuary disagreed with, and alter the payment rate from a reduction of 2.3% to an increase of 2.96%. Bipartisanship!!