CMS issues higher-than-expected MA rates

CMS on Monday released a final rule revising its Medicare Advantage (MA) Star Ratings system giving MA insurers a 2.48% payment increase in 2027, which is expected to give insurers $18.6 billion over the next decade.

In January, CMS proposed increasing MA payments by an estimated 0.09%, which would have marked roughly flat rates for insurers and been worth around $700 million to the MA industry.

The revised final rule bumped that rate up to 2.48% and walked back several payment and policy proposals for MA carriers, including a proposal that would have used more updated data in the payment process. Scrapping that proposal "will allow the MA market more time to adjust to the recently completed phase-in," according to a CMS fact sheet.

Chris Klomp, director of Medicare and chief counselor at HHS, said the announcement "improves payment accuracy and strengthens competition based on quality — not on coding practices — helping put the program on a more sustainable path for the long term."

"We're ensuring that the money that we spend on Medicare flows directly to better care and more access for our seniors, not to administrative waste or gaming of the system," Klomp added.

Mary Beth Donahue, president and CEO of Better Medicare Alliance, said in a press release that the final rate announcement "reflects an improvement from the initial proposal. This is a direct response to the thousands of beneficiaries and hundreds of organizations who spoke out to urge that Medicare Advantage be fully funded."

(Morse, Healthcare Finance, 4/6; Japsen, Forbes, 4/7; Herman, STAT+ [subscription required], 4/6; Early, Modern Healthcare, 4/6)

Trump administration proposes cutting HHS spending by 12%

The Trump administration proposed cutting HHS spending by 12% in its proposed budget released Friday. It included significant cuts to NIH, the elimination of the Agency for Healthcare Research and Quality, and the establishment of a new agency devoted to chronic diseases called the Administration for a Healthy America (AHA).

The proposed budget is similar to the administration's proposed budget from last year, which also included the establishment of AHA and was ultimately rejected by Congress.

This year's proposed budget would cut $5 billion from NIH's budget as well as $356 million from the Administration for Strategic Preparedness and Response. In addition, the proposed budget would move the 340B program from the Health Resources and Services Administration into CMS and seek additional funding for preventive telehealth care programs.

CMS proposes payment increases for nursing homes and hospices

CMS last week issued a series of proposed rules that would increase pay for nursing homes, hospice providers, inpatient rehabilitation facilities, and inpatient psychiatric facilities.

Under the proposed rules, nursing homes, inpatient rehabilitation facilities, and hospices would see a 2.4% Medicare payment increase for fiscal year 2027, and inpatient psychiatric facilities would see a 2.3% increase.

CMS also proposed a new fraud prevention effort for hospices, which CMS Administrator Mehmet Oz said will "make it easier for CMS and others to identify hospice providers that misuse Medicare dollars, cut off their funding, and refer them to law enforcement for criminal prosecution."

Comments on the proposed rules are due by June 1.

(Early, Modern Healthcare, 4/2)

131 hospitals file lawsuit against HHS over Disproportionate Share Hospital rates

A lawsuit has been filed by 131 hospitals against HHS over how the federal government calculates payments to hospitals that treat a large share of low-income patients.

The lawsuit, which was filed last week in the District of Columbia's federal court, specifically calls out a rule that was proposed in 2023 and finalized the following year. The rule retroactively adjusted how CMS counts MA patients treated by hospitals when determining the Medicaid fraction and Supplemental Security Income fraction. These two percentages are combined to calculate a hospital's disproportionate patient percentage, which then determines whether the hospital qualifies for a Disproportionate Share Hospital (DSH) payment.

When CMS issued the rule, it argued the change was intended as a methodology clarification and wouldn't bring any new changes to hospitals' DSH payments "because those payments were made under the policy reflected in" a 2004 rule, which was later vacated following legal challenges.

According to the lawsuit, this adjustment reduces each fraction and therefore "results in thousands of safety-net hospitals losing billions of dollars in funding that has been illegally withheld for years."

The hospitals in the suit have asked the court to vacate CMS' 2023 rule and require the department to recalculate Medicare DSH payments under the pre-2004 policy.

(Muoio, Fierce Healthcare, 4/1)