Medicare Advantage Benchmark Payment
Rates and Their Impacts
Deborah Healy, Ph.D.
Greg Pope, M.S.
Leslie Greenwald, Ph.D
John Kautter, Ph.D
Sarah Siegel, Ph.D
RTI, International
1
Acknowledgments
2

Research funded by CMS.

Any views expressed are the authors’ and not
necessarily those of CMS.
Purpose

To explore how the MA county benchmark and the
ratio of the benchmark to FFS cost impacts the
availability of MA plans and premiums

Focus on HMO and PFFS plans

3
83.2 percent of Enrollees
Methods
4

Compared beneficiary access to MA plans and plan
premiums across counties

Counties stratified by their benchmark rate and ratio of
the benchmark to the “FFS rate”

County benchmark data are available from the CMS
website.

Premium data analyzed were available from the CMS
Health Plan Management System (HPMS)
Methods
5

MA plans considered
 HMO, HMO with POS, and PFFS Plans included
 Employer only plans excluded
 Part B only plans excluded

Counties
 Alaskan counties aggregated to 4: Anchorage,
Juno, Fairbanks, and Rest of State
 Puerto Rico, Guam, and other US territories
excluded
Methods
6

2008 Benchmark Rate
 100% risk adjusted
 After budget neutrality adjustment

Benchmark to FFS ratio
 county benchmark before budget neutrality/county
FFS rate
 2007 data
 FFS rate not recalculated in 2008
 All counties received the minimum update
Distribution of County Benchmarks
County
type
7
Less than
$750
$750–800
Percentage
of counties
53.4%
29.6%
6.7%
4.2%
6.2%
100.0%
Large urban
0
67.1
13.3
7.3
12.3
100
Medium
urban
0
88.0
3.7
2.5
5.9
100
Small urban
68.7
19.1
4.3
4.0
4.0
100
Rural
70.2
14.4
6.2
3.8
5.4
100
$800–850
$850–900
$900+
All
benchmarks
Distribution of County Benchmark to FFS
Ratios
County type
Percent of counties
Large urban
Medium urban
Small urban
Rural
8
1
1 to
1.05
1.05 to
1.1
1.1 to
1.15
1.15 to
1.2
1.2 to
1.25
Greater
than 1.25
All rate
ratios
2.8%
19.0%
19.9%
20.5%
16.3%
9.8%
11.7%
100.0%
0.7
0.3
4.8
3.3
16.2
6.5
19.4
21.5
20.6
12.3
21.4
20.6
23.7
17.3
22.8
20.0
19.6
16.7
15.7
15.7
8.0
18.2
7.4
9.3
11.1
28.7
8.5
9.6
100
100
100
100
Plan Availability

As the 2008 County benchmark increased,
 On average beneficiary access to HMO plans increased from
less than 1 available plan to more than 11 plans in the
highest benchmark counties
 Beneficiary access to PFFS plans was unaffected
2008 Plan Availability by 2008 MA county benchmark
Plan type
HMO
PFFS
Less than
$750
0.9
$750–800
3.9
$800–850
5.3
$850–900
7.3
$900+
11.2
7.0
8.8
5.9
6.5
7.2
Note: Weighted by Medicare eligibles
9
Plan Availability

As the benchmark to FFS ratio increased,

On average, beneficiary access to PFFS plans increased
from less than 5 available plans to more than 10

Beneficiary access to HMO plans decreased from more than
6 available plans to fewer than 3
2008 Plan Availability by MA county Benchmark to FFS Ratio
Plan type
1
1.05 to
1.1
1.1 to
1.15
1.15 to
1.2
1.2 to
1.25
HMO
12.6
6.7
4.4
4.1
3.1
2.8
2.8
PFFS
4.4
4.8
7.0
8.5
10.1
10.7
9.7
Note: Weighted by Medicare eligibles
10
1 to
1.05
Greater
than
1.25
Plan Premiums

As the 2008 county benchmark increased,

Average HMO plan C+D premiums fell from more than $40
when the benchmark was less than $800 to under $8 for
counties with benchmarks over $900.

There was no correlation with PFFS plan premiums.
2008 Average C+D premiums, by MA county Benchmark
Less than
$750
$750–800
HMO (no SNP)
70.09
43.00
36.49
25.46
7.95
PFFS
23.32
29.62
86.38
61.64
38.81
Plan type
Note: weighted by Plan enrollment
11
$800–850
$850–900
$900+
Plan Premiums

As the county benchmark to FFS ratio increased,

Average PFFS plan premiums fell from more than $50
to less than $11.

There was no relationship with HMO plan premiums
2008 Average C+D premiums, by MA county Benchmark to FFS Ratio
Plan type
HMO (no SNP)
PFFS
1
2.73
51.95
1 to 1.05
24.92
83.92
Note: Weighted by Plan enrollment
12
1.05 to
1.1
37.72
48.48
1.1 to
1.15
25.85
30.98
1.15 to
1.2
40.40
20.60
1.2 to
1.25
35.47
16.07
Greater
than
1.25
58.48
10.47
Discussion and Conclusions
13

We found that the type of MA plan interacts with payment rates and
costs in affecting plan availability and premiums.

PFFS plans mimic traditional FFS – no provider network and often pay
providers Medicare FFS rates.
 PFFS plan costs may be highly correlated with Medicare FFS costs
such that the payment ratio is more important than the absolute
payment rate

HMO plans have a very different organizational structure than Medicare
- operate networks and through provider bargaining and utilization
review may control costs across areas, with greater cost saving
potential in some high cost areas
 HMO plan costs may have limited correlation with Medicare FFS
making the absolute payment the more relevant for plan profits
Discussion and Conclusions
14

PFFS network requirements
 2011, PFFS plans in counties with at least 2 local plans will need to provide
a network
 May raise costs and could lead to a withdrawal of PFFS plans from areas
with high provider costs

PPACA and HCEARA - (Health Reform Act of 2010)
 No increase in MA benchmarks for 2011
 Only one year, but could lead to a temporary increase in premiums, or
reduction in “extra benefits”
 Gradual compression of bencharks
 Highest cost areas 95% of FFS
 Lowest cost quartile 115% of FFS
 What will be the impact on HMO plans? PFFS plans?
 Quality Bonuses
 New benchmarks can not be higher than benchmarks under the “old” MMA
calculation