With all the craziness early October brought with health exchanges, website glitches and the federal government shutdown, it was easy to overlook the start of the new seven-week enrollment period for Medicare Advantage and Part D plans.

But October 15 came and went, and seniors are being encouraged to carefully weigh their options and consider alternatives as some Part D premiums have increased and plan designs have changed.

Beneficiaries will see fewer PPO options for 2014, as managed care organizations are increasingly favoring HMOs in an effort to increase utilization control. While Medicare officials credit reductions in Part A (due in part to a decrease in hospital readmissions) and Part D (attributed to a larger focus on generics) with helping lower the overall costs of Medicare, a leveling off of Part C (Medicare Advantage) costs in recent years has also contributed to the program's improved solvency. Part C is Medicare Advantage, which uses health insurance plans to provide care rather than direct fee for service with providers.

Officials like what they see of the direction Part C is heading in, and stated as much at a conference in Washington, D.C. in late September hosted by America's Health Insurance Plans (AHIP).

Jonathan Blum, deputy administrator and director for the Center of Medicare at the Centers for Medicare & Medicaid Services (CMS), noted how per-person spending for Medicare beneficiaries increased by an average of 3.8 percent between 2007 and 2010, down considerably from an average growth rate of 7.1 percent from 2000 to 2005. He credits managed care organizations with helping answer some of the cost challenges that have plagued Medicare In addition, Medicare Advantage enrollment has swelled from 11.1 million members in 2010 to 14.4 million in 2013.

According to figures from the Medicare Payment Advisory Commission (MedPAC), bids from MCOs translated to 96 percent of fee-for-service rates in 2013, compared to 102 percent in 2009. When just MA HMO plans are factored in, the bids equaled 92 percent of fee-for-service.

This slowdown in Medicare per capita spending parallels a greater emphasis on star ratings, which provide officials their greatest benchmark to monitor effectiveness since Medicare Advantage was created in 1997. The number of plans scoring 4 (above average) or 5 stars (excellent) has increased dramatically, from 16 percent of plans in 2009 to 37 percent today. In 2014, 55 percent of Medicare Advantage plans are expected to have a rating of 4 or higher.

Quality bonus payments tied to the ratings means MCOs are focusing more on providing comprehensive care to manage chronic conditions, enhancing preventives services and reducing re-hospitalizations. MA plans that have been scoring a 3 average on the 53 measures used to gauge the star ratings have been receiving quality bonus payments. In 2015, only those plans with a rating of at least 4 stars out of 5 will receive a bonus, so average star ratings are sure to increase.

Expect to see an increase in the consolidation of Medicare Advantage MCOs, as CMS continues to aggressively promote star ratings and target plans with low-performing icons (LPI). More deals like Cigna purchasing Nashville-based HealthSpring are likely to occur, and look for more product launches like AmeriHealth's Medicare Advantage special needs plan for dual eligible beneficiaries in the District of Columbia in October 2013.

Looking ahead, MCOs have expressed an interest in greater flexibility in offering rewards/incentives designed to improve beneficiary health a concept CMS is encouraging them to pursue.

CMS is also eager to see new concepts surrounding tele-monitoring applications, web-based technologies, re-admission prevention strategies and enhanced disease management services all areas that MCOs should be able to do better than the fee-for-service system.

MedPAC, which makes recommendations to Congress on how to improve Medicare, would also like to see an increase in innovation, especially regarding special needs plans for dual eligible beneficiaries. MCOs should heed these calls for increased ingenuity on their part, considering that plans will have to work harder under reimbursement pressures to maintain or increase their attractiveness to consumers.

Follow Chris Silva on Twitter @ChrisSilvaHLI

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