Section 101 of the Tax Relief and Health Care Act of 2006 (MIEA-TRHCA) provided a 1-year update of 0% for the conversion factor for CY 2007 and specified that the conversion factor for CY 2008 must be computed as if the 1-year update had never applied. Section 101 of the Medicare, Medicaid, and SCHIP Extension Act of 2007 (MMSEA) provided a 6-month increase of 0.5% in the CY 2008 conversion factor, from January 1, 2008, through June 30, 2008, and specified that the conversion factor for the remaining portion of 2008 and the conversion factors for CY 2009 and subsequent years must be computed as if the 6-month increase had never applied. Section 131 of the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) extended the increase in the CY 2008 conversion factor that was applicable for the first half of the year to the entire year, provided for a 1.1% increase to the CY 2009 conversion factor, and specified that the conversion factors for CY 2010 and subsequent years must be computed as if the increases had never applied.
Reductions in Medicare Advantage Payments: Impact on Seniors
This is slightly different conceptually from the elasticities explained in elementary economics textbooks. Those elasticities are typically the “price elasticity of supply” and the “price elasticity of demand,” which measure the effect of a change in price on either supply or demand in isolation from the other. The price elasticity of demand is the ratio of the percent change in the quantity demanded to the percentage change in the price, assuming the supply function stays the same. Likewise, the elasticity of supply assumes the demand function remains unchanged. However, this study follows the example of the CMS actuary and calculates a “benchmark elasticity of enrollment,” a combined elasticity that is the ratio of the percent change in the MA benchmark to the percent change in MA enrollment. This elasticity captures both the supply effect and the demand effect. The supply effect results from lower revenue to MA plan providers, and the demand effect results from MA plans having to provide less generous benefits.
Replace Medicare Advantage Cuts with Market
Use market-based bids for benchmark payments. Congress should delink benchmark payments from FFS and instead base payment solely on the bids that MA plans submit to the CMS to provide the traditional Medicare benefit (Parts A and B) to MA beneficiaries. There are a variety of ways to do this. For example, the new MA benchmark payment could be based on the weighted average bid of all plans in each county. Under this method, each bid would be weighted by the proportion of beneficiaries enrolled in that plan in the preceding year. The benchmark payment could also be set at the levels proposed under various premium support proposals, such as the second-lowest cost plan or the average of the three lowest-cost plan bids. Bids would reflect the cost of providing benefits for a beneficiary in average health, and insurers would receive larger or smaller risk-adjusted payments from the government if an enrollee’s health was worse or better than average. If a plan were to bid higher than the benchmark payment, enrollees would pay the difference through increased premiums. If a plan were to bid below the benchmark payment, enrollees would receive the difference in a plan rebate.
Medicare.gov: the official U.S. government site for Medicare
Selected CBO Publications Related to Health Care Legislation, 2009
In March 2010, the Congress passed and the President signed into law legislation that makes major changes to the U.S. health care and health insurance systems. That legislation came in two parts: the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010. Among other things, those laws will establish a mandate for most legal residents of the United States to obtain health insurance; create insurance exchanges through which certain individuals and families will receive federal subsidies; significantly expand eligibility for Medicaid; reduce the growth of Medicare’s payment rates for most services; impose an excise tax on insurance plans with relatively high premiums; impose certain taxes on individuals and families with relatively high incomes; and make various other changes to the federal tax code, Medicare, Medicaid, and other programs. (In addition, the Reconciliation Act substantially alters federal programs governing loans and grants for postsecondary education.)