In the past, the Centers for Medicare & Medicaid Services’ (CMS) annual release of proposed Medicare Advantage (MA) payment rates triggered a yearly ritual on Capitol Hill – the insurance industry rounded up support from lawmakers, getting them to sign on to letters protesting any reductions in MA payment rates.
This ritual usually played out over several months, between February when proposed rates are traditionally released, and early April when they are finalized. This year, however, the outgoing Trump Administration released the final 2022 payment amounts in January 2021. According to a January 15, 2021 CMS press release announcing the rates,
“[t]his announcement is being made nearly three months earlier than usual to provide MA organizations and Part D sponsors more time to take this information into consideration as they prepare their bids for 2022. The earlier release will help MA and Part D plans to better project and plan for 2022 plan costs, in light of the uncertainty associated with the coronavirus disease 2019 (COVID-19) pandemic.”
This is despite the fact, as articulated in a December 2020 Kaiser Family Foundation report, that “health insurers in most markets have become more profitable during the pandemic”. With their 2022 rate increase secured, one might think the MA industry would relax their efforts to publicly pressure lawmakers to preserve MA payment rates. But they have not been silent.
Medicare Advantage Overpayments
On February 24, 2021, America’s Health Insurance Plans (AHIP), the national association of insurance plans, issued a blog post entitled “Correcting the Record: Medicare Advantage Costs Far Less than Fee-for-Service Medicare” wherein they take issue with the way that the Medicare Payment Advisory Commission (MedPAC) has characterized payment to MA plans. Among other claims, AHIP asserts that,
“[a] fair comparison of MA and the traditional Medicare program, or Fee-for-Service (FFS), clearly shows that spending in MA is lower than spending in the FFS program, and a better value for Americans.”
AHIP stresses that,
“[u]nderstanding this is critical so policymakers have a clear and accurate assessment of MA and FFS spending—as well as the value derived from that spending—when considering the best approach for delivering high-quality, efficient care to the Medicare population.”
AHIP’s blog post garnered a rare rebuttal from MedPAC, which issued its own blog post on March 3, 2021, entitled “For the record: MedPAC’s response to AHIP’s recent “Correcting the Record” blog post”. In the post, MedPAC concluded that it,
“continues to find that Medicare pays more for beneficiaries enrolled in MA compared to similar beneficiaries enrolled in [traditional Medicare], which reflects program rules and other institutional features. Given the fiscal pressures facing the Medicare program, it is essential that Medicare pay plans appropriately so that the Medicare program and taxpayers can share in the greater efficiency in care delivery associated with MA plans.”
On March 15, 2021, MedPAC released its annual report to Congress. According to a press release announcing the report, Medicare paid MA plans an estimated $317 billion in 2020 (not including payments to cover Part D expenses). MedPAC states:
“This level of payment reflects Medicare payments that were higher for MA enrollees than the program would have spent for similar beneficiaries in traditional FFS Medicare, continuing a long-standing trend. Using plan bid data for 2021, we estimate that MA payments will be 101 percent of FFS spending. However, for several years, the Commission has expressed concern that enrollees in MA plans have higher risk scores than similar beneficiaries in FFS because of plans’ more intensive coding practices that result in excess payments to plans. Accounting for coding intensity, in 2021, we estimate that Medicare payments to MA plans actually average 104 percent of FFS spending (quality bonuses in MA account for an estimated 2 to 3 percentage points of MA payments in 2021). Medicare payments to MA plans continue to exceed FFS spending levels, despite the fact that plan bids in 2021 decreased to 87 percent of FFS, in aggregate—a record low.
In prior work, we identified some MA policies that need immediate improvement. The Commission previously recommended in 2017 that CMS reduce excess payments stemming from plans’ coding practices, which would improve equity across plans and produce savings for Medicare. In 2020, the Commission also recommended replacing the MA quality bonus program with a value incentive program that would more accurately characterize the quality of care in MA. Currently, the Commission is assessing an alternative MA benchmark policy that would improve equity and efficiency in the MA program. [emphasis added]”
Medicare Fiscal Solvency
A renewed focus on Medicare’s fiscal solvency may partially explain the insurance industry’s pushback against consistent and overwhelming findings that Medicare payments to MA plans are higher than what the program spends for similar beneficiaries in traditional Medicare. Last year, the Medicare Trustees projected that the Part A Trust Fund would become insolvent in 2024 (more recently, the Congressional Budget Office (CBO) has projected the date to be 2026). Members of Congress, including those on committees with jurisdiction over Medicare, have indicated an interest in discussing the topic of the program’s finances.
Anticipating this debate, the Journal of the American Medical Association (JAMA) published a paper in January 2021 by Richard Frank and Tricia Neuman entitled “Addressing the Risk of Medicare Trust Fund Insolvency”. The paper outlines several policy options for addressing the shortfall, including some that “would reduce payments to Medicare Advantage plans, which have experienced strong growth and relatively large margins, especially during the pandemic.” The paper continues: “[t]he Medicare Advantage program is growing quickly and is projected to account for nearly half of all Medicare spending within the decade. Approximately 43% of Medicare Advantage spending comes from the Medicare HI Trust Fund.”
Similarly, in February 2021 the Commonwealth Fund released a series of papers entitled Options for Extending Medicare’s Trust Fund: The Commonwealth Fund Solvency Series authored by a range of experts with varying backgrounds who offer proposals to address the trust fund’s solvency. Among the range of policy proposals that explore both spending reductions and revenue gains, several of the experts point out Medicare Advantage payment as an area ripe for discussion.
Recently, the Committee for a Responsible Federal Budget, Arnold Ventures, and West Health issued a series of papers as part of a “Health Savers Initiative” aimed at exploring policy options to reduce health care costs. One of the three issues briefs released in February 2021 exploring Medicare policy proposals is titled “Reducing Medicare Advantage Overpayments”. The paper notes that overpayment to MA plans “stem[s] from incentives that lead MA plans to report enrollee diagnoses more completely than physicians billing [traditional] Medicare. MA plan beneficiaries thus appear sicker than they are relative to [traditional Medicare] beneficiaries, which leads to higher payments.” The paper offers a method for adjusting coding intensity in order to tackle the overpayments, and states that:
“Addressing this problem would improve the solvency of the Medicare trust fund and reduce the federal budget deficit. Given the high and rising costs of health care, a number of bold policy changes will be needed to assure long-term affordability and sustainability. In this context, fully adjusting for MA coding practices that result in overpayment could be considered an obvious option, particularly because this problem is well known and adjustments are already made; they are just inadequate.”
We can only assume that the insurance industry is well aware of policy proposals to rein in current overpayments. In a recent article entitled “This Latest Under-The-Radar Program Could Push Medicare Deeper Into Private Hands,” published by the Center for Health Journalism, journalist Trudy Lieberman notes that “[b]usiness interests with deep pockets and experience profiting from Medicare Advantage plans […] will likely have plenty to say” about the solvency of the Medicare trust fund. Lieberman notes:
“When it comes to Medicare, the Better Medicare Alliance, an organization that presents itself as a grassroots group to mask its corporate interests, has managed to gin up substantial support for in Congress for higher and higher rate Medicare Advantage increases. Two years ago, the Associated Press found that the Alliance was financed by three of the biggest sellers of Medicare managed care plans: UnitedHealthcare, Aetna, and Humana. The group is known for organizing networks of seniors across the country to talk about their positive experiences with Medicare Advantage plans.”
Recently, the Center for Medicare Advocacy has noticed that the Better Medicare Alliance (BMA) has placed paid online ads in publications such as Politico and Health Affairs, that, among other things, tout the MA program’s popularity. One such ad touts that “Medicare Advantage isn’t just better health coverage for seniors, it’s a winning issue for policymakers. A new poll shows that Medicare Advantage has a 98% satisfaction rating and 93% of beneficiaries agree that a candidate’s support for Medicare Advantage is important to earn their vote […]”
A link in several of these BMA ads soliciting readers to “Learn More” leads to a January 2021 BMA press release announcing a poll reflecting high Medicare Advantage satisfaction. The subheading of the press release reminds readers that “Beneficiaries report near-universal satisfaction with Medicare Advantage’s coverage, provider networks, and COVID-19 response while 93% say a candidate’s support for MA is important to their vote.” [emphasis is original].
In case there was any doubt regarding the intended audience, the press release continues: “Three quarters (77%) of seniors on Medicare Advantage strongly oppose the federal government reducing the amount of money paid to Medicare Advantage, even if such cuts are billed as necessary to lower costs to taxpayers or reduce the national debt.” [Emphasis in original.]
And, just to make sure the point is clear for anyone who might have missed it, the release goes on to quote BMA’s leader, a former member of Congress, as saying:
“The results of this poll depict a rapidly growing beneficiary population that is highly pleased with their health coverage and ready to take action to ensure it is protected. 93% of beneficiaries said a candidate’s support of Medicare Advantage is important to their vote and 77% of beneficiaries ‘strongly oppose’ any cuts to Medicare Advantage. With these numbers in hand, Better Medicare Alliance and our grassroots beneficiary advocates will work to ensure lawmakers know that standing up for Medicare Advantage is good politics and good policy.” [Emphasis in original.]
Conclusion
For those who control the federal budget, achieving payment parity between Medicare Advantage and the traditional Medicare program should be low-hanging fruit. But the insurance industry does not want the conversation about Medicare fiscal solvency to include the topic of Medicare Advantage overpayment. They are clearly trying to warn policymakers to stay loyal to the private program or face the wrath of voters that they will help foment.
There is a growing imbalance between Medicare Advantage and traditional Medicare, not only with respect to payment, but also relating to the scope of coverage and access to coverage options within the Medicare program. Policymakers must demonstrate the courage to act on behalf of all Medicare beneficiaries and work to rebalance this growing inequity.
The Center for Medicare Advocacy is not opposed to spending more on the Medicare program; in fact, some of the policies and changes in law we advocate for could increase Medicare spending, with corresponding positive impacts for all Medicare beneficiaries. Reining in MA overpayments will not, by itself, solve Medicare’s financing challenges. But we cannot countenance private plans getting paid more than traditional Medicare spends on each beneficiary, particularly combined with the myriad other ways in which such private MA plans have been favored by policymakers. Traditional Medicare should remain a strong, viable option available to all; this may not be the case if current trends continue.
As the Center for Medicare Advocacy has previously stated in in our efforts to push for parity between MA and traditional Medicare,
“instead of continuing to favor Medicare Advantage regardless of cost, we urge policymakers to advance complete equity between MA and traditional Medicare, including both the scope of services provided and programmatic spending. Wasteful spending on MA should be reinvested into the Medicare program to the benefit of all enrollees, not just those who choose to enroll in private plans.”
March 18, 2021 – D. Lipschutz