Volatile. n. Fickle, inconsistent, easily vaporized.
Thanks to the Affordable Care Act, Medicare Advantage finances are going to be volatile. Unwary actuaries may be easily vaporized.
The new benchmarks, the “specified amount” under the ACA, are based on which quartile a given county is in. Quartiles are defined by average FFS costs. ACA benchmarks range from 95% to 115% of local anticipated Medicare FFS spending in the county, depending on which quartile a county is in. Every time CMS rebases the FFS calculations, a county can change quartiles. The preliminary list of quartile-jumpers for 2013 moves 27% of all US counties, with about 27% of MA beneficiaries, from one quartile to another. Depending on which quartile you start in and where you end up, that’s a change in payment of 5% to 7.5% — or more in the few counties that move more than one quartile. That’s a lot of money to have to cut, if you go the wrong direction. Or a lot to have to quickly absorb in new benefits if you go the other way — since, with the 85% loss ratio floor coming up in 2014, a plan can’t simply stash the extra cash in profit.
We won’t have the final list of the new quartiles until April 2. And bids are due June 4! That’s a scant 2 months to figure out how to either (a) cut 5% or more out of your bid, or (b) add new benefits to absorb the windfall.
When adding benefits, plans will need to keep in mind that the process can reverse with the next rebasing — in 3 years or less. Added benefits need to be planned like chess moves. What can we add that will help us now, but which won’t hurt too much if we have to withdraw them later?
Plans should be doing some serious contingency planing, so they are ready when the rates and quartiles get recalculated. For 2013, the time to start planning is immediately after reading this blog. The preliminary list of county quartiles is a start, but remember that it’s subject to change. Any plan with a significant number of members in counties close to the bubble between quartiles should be getting ready now, in case they have to make some quick decisions when preparing their bids.
To add to the fun, double bonus counties can change, too, based on their newly re-based FFS costs relative to the national average. For some plans that qualified for a double bonus in 2012, the rebasing of FFS could make half the bonus disappear in 2013 in some counties. Or, your bonus could double in 2013 in counties that newly qualify for the double bonus. That’s more chaos in the bid building process.
The more i think about the quartile system, the more I’m beginning to like competitive bidding as an alternative. Works for part D, after all.