MA Overpayment
As discussed in a recent CMA Alert (Feb. 22, 2024), the Centers for Medicare & Medicaid Services (CMS) has issued proposed MA payment rates for 2025 (“Rate Notice”), which will be finalized by April 1, 2024. As described in the Alert, it is well established that MA plans are significantly overpaid relative to what traditional Medicare spends on a given beneficiary, and such overpayments strain the program’s overall finances. While CMS has proposed to maintain a phase-in of changes to risk adjustment calculations which will more accurately pay plans, CMS has proposed an overall pay increase to MA plans of 3.7%. As also discussed in the Alert, and below, the insurance industry is trying to push CMS to give them even more.
Journalist Merrill Goozner, in his GoozNews article titled “CMS finally proposes a small cut in privatized Medicare” (March 4, 2024), outlines CMS proposal and the insurance industry’s response. Goozner notes:
Most Americans, including the 33.7 million seniors who just signed up for 2024 MA plans, have no idea that MA plan insurers receive more than the average cost of care compared to seniors who remain in traditional Medicare. That means taxpayers are paying more to private insurers than they would pay if the government directly paid for those seniors’ medical bills.
This situation persists despite MA insurers having come under withering criticism from the Medicare Payment Advisory Commission, advocacy groups and academic researchers for their systematically overcharging CMS. The industry bases its claims on the alleged risk of the patients under their care.
This overcharging is done, in part, by MA plans engaging in “upcoding,” which Goozner describes as “finding ailments in patient records that aren’t being treated.” Goozner notes that the Office of Inspector General (OIG) “has consistently found that upcoding is widespread.”
Upcoding might not be limited to Medicare Advantage plans but may also occur in other forms of health care delivery where payment is risk adjusted. A recent KFF Health News article cites a new lawsuit which “appears to be the first to allege upcoding within accountable care organizations” or ACOs. According to CMS, ACOs are “groups of doctors, hospitals, and other health care providers, who come together voluntarily to give coordinated high quality care to the Medicare patients they serve.” ACOs are often described as an alternative to MA plans within traditional Medicare. In an article titled “Whistleblower Accuses Aledade, Largest US Independent Primary Care Network, of Medicare Fraud” (March 5, 2024), reporter Fred Schulte states: “[a] Maryland firm that oversees the nation’s largest independent network of primary care medical practices is facing a whistleblower lawsuit alleging it cheated Medicare out of millions of dollars using billing software “rigged” to make patients appear sicker than they were.”
Industry Urges “Stability”
In the face of increased scrutiny, and new rules ranging from marketing to prior authorization to changes in the way that MA plans are paid, the insurance industry is pleading for “stability.” For example, in a press release relating to their submitted comments to the 2025 Rate Notice (dated March 1, 2024), industry group AHIP described “the urgency and importance of Congress and the Administration maintaining stability across the MA program.” An earlier AHIP statement re: the Rate Notice (dated Feb. 12, 2024) complains about all of the seeming burdens that have been placed on the industry as a “backdrop that the Medicare Advantage policies recently proposed by CMS for 2025 must be evaluated”:
Given the far-reaching reforms to Medicare Advantage still being implemented, the complex changes to seniors’ prescription drug coverage going into effect next year, and growing evidence that seniors will have elevated care needs in 2025, it is essential that funding keep pace to ensure stability and prevent erosion in the benefits and affordability seniors count on in Medicare Advantage.
Similarly, an industry-supported Senate letter (dated Jan. 26, 2024) to CMS states “we request that you ensure payment and policy stability for the Medicare Advantage program.” Industry ads promote a similar theme. A Better Medicare Alliance online ad on the Axios website (viewed March 6, 2024) states “Protect Medicare Advantage” and says “Proposed changes to Medicare Advantage put the stability of the program at risk.” A second online ad by the same industry group in the same publication on the same day leads. “Healthcare leaders agree: Medicare Advantage’s stability is at risk.”
Despite the industry’s claims that “stability” is at risk, enrollment in MA plans continues to grow, and profits are stable. While the rate of enrollment growth is slowing, Healthcare Finance in an article titled “Medicare Advantage seeing enrollment gains, but growth is slowing” by Jeff Lagasse (March 6, 2024) notes that the MA market “grew by 1.7 million beneficiaries (5.4%) in 2023.” This growth has been concentrated among the for-profits; Lagasse notes: “For-profit carriers such as UnitedHealthcare, Humana and Aetna collectively captured 1.4 million new members, representing 86% of the market’s growth in the past year.”
As noted in a recent CMA Alert (Feb. 22, 2024), the financial outlook of the industry appears to be brighter than they are trying to portray (see, e.g., this Fierce Healthcare article citing analysts at Fitch Ratings and Moody’s Investors Service, who noted that “the major insurers are positioned to weather these changes in the long term even as they feel the pain now”). Similarly, a recent article in Modern Healthcare titled “Medicare Advantage anxieties obscure insurer strengths” by Lauren Berryman (March 1, 2024) states:
The bleak picture some health insurance companies have painted, and the way Wall Street reacted, may create an impression that the Medicare Advantage party is over after enriching the industry for decades or that the sector is in dire straits.
Not so, said Paul Ginsburg, senior fellow at the University of Southern California Schaeffer Center for Health Policy and Economics. “We’re not talking about any risk to the financial integrity of these companies at all,” he said.
The article goes on to quote a report issued by credit rating agency AM Best that “projects that health insurance company market capitalizations will rise this year even as profits from Medicare and Medicaid ‘return to more normal levels.’”
Some Policymakers Challenging Status Quo
As the scope of MA overpayments and the problems faced by MA enrollees are getting harder to ignore, some policymakers are calling on the federal regulator to engage in more oversight of the industry. Reps. Jayapal, DeLauro and Schakowsky recently led a congressional letter to CMS (dated Feb. 29, 2024) signed by 60 members of the House. As outlined in a press release titled “Jayapal, DeLauro, Schakowsky Lead Effort to Protect Enrollees on Medicare Advantage” (Feb. 29, 2024), the lawmakers noted:
“By strengthening Traditional Medicare and taking actions to protect beneficiaries from MA, CMS could save hundreds of billions of taxpayer dollars annually, money that could in turn be used to decrease the cost of Traditional Medicare for seniors and people with disabilities.
The Members are calling on CMS to:
- Ensure insurance companies do not prevent enrollees from getting care by putting up obstacles such as prior authorization, artificial intelligence (AI) algorithms, and limited networks;
- Strengthen provider encounter and patient data collection and transparency;
- Rein in overpayments to insurers by adjustment benchmarks and cracking down on deceptive tactics by private companies;
- Strengthen Medicare through administrative actions, such as lowering Medicare premiums, and support legislative efforts to cap out-of-pocket costs and adjust the physician fee schedule to account for increases in provider costs.
Similarly, Senators Warren and Brown led a letter in the Senate (dated March 4, 2024) signed on to by 8 other Senators, as discussed in a press release titled “Warren, Brown, Senators Urge HHS and CMS to Protect Seniors, Hold Insurance Companies Accountable for Abuses in Medicare Advantage” (March 5, 2024). As noted in the press release, the Senators “proposed five key areas of focus for increasing care and coverage for enrollees:
1) prevent insurance companies from imposing barriers to care, such as onerous prior authorizations, Artificial Intelligence (AI) algorithms, or limited networks;
2) strengthen transparency to improve public understanding of the effects of insurer-run Medicare Advantage plans on patients and the Medicare program;
3) crack down on upcoding and other deceptive tactics to rein in overpayments to insurance companies in MA;
4) address misleading and deceptive marketing practices; and
5) use administrative action to strengthen TM.
In addition, echoing an earlier interview in Becker’s Payer Issues, former CMS Administrator Dr. Donald Berwick was interviewed about Medicare Advantage by Cheryl Clark for MedPage Today in an article titled “Obama CMS Chief: Medicare Advantage Plans Game the System”(March 1, 2024). Among other insights, Dr. Berwick stated:
I think MA growth should be slowed or stopped, at least until we end the extraordinarily high subsidies for MA plans, which are unfair to traditional Medicare and burdensome to the public treasury and many beneficiaries. Many beneficiaries can get better care for themselves and greater choice through traditional Medicare, and that option should remain robust and available.
The lesser care for Medicare Advantage enrollees has recently been highlighted in a glaring way for people in need of home health care, as detailed below.
Amidst All This, a New Study Finds Fewer Home Health Services and Worse Functional Outcomes in MA
In a CMA Alert titled “Insurance Industry Group Issues Misleading Medicare Advantage Report” (Dec. 7, 2023), we profiled an industry-funded report that provided a comparison with traditional/original Medicare (sometimes called fee-for-service, or FFS) relating to Part A covered services in the hospital, skilled nursing facility (SNF) and home health (HH) care settings. Specifically, the report shows that “MA utilization, as measured by patient days, was lower than FFS. Between 2018 and 2019, the differences between MA and the alternative, utilization-based scenario were 36% for inpatient, 14% for SNF, and 28% for HH.” In the report, the industry clearly states that it covers less care in Part A care settings, and suggests that if traditional Medicare used the same utilization rates, the program would save money.
This industry admission that it generally provides less care in the home health setting comports with the findings of a survey the Center for Medicare Advocacy conducted in 2021: “Center For Medicare Advocacy Home Health Survey: Medicare Beneficiaries Likely Misinformed and Underserved” (Dec. 2021). In a survey of 217 Medicare-certified home health agencies (HHA) in 20 states to learn what beneficiaries may experience when seeking home care, we found – in addition to our own experiences serving beneficiaries – that in practice, MA plans provide less care than traditional Medicare.
A recent study confirms not only that MA plans provide less home health services than traditional Medicare, but also that MA enrollees have worse functional outcomes. JAMA Health Forum recently published an article titled “Differences in Home Health Services and Outcomes Between Traditional Medicare and Medicare Advantage” by Rachel A. Prusynski, DPT, PhD; Anthony D’Alonzo, DPT, MBA; Michael P. Johnson, PT, PhD; et al (March 1, 2024).
In a cross-sectional study, the authors found that:
Medicare Advantage patients had shorter home health lengths of stay and fewer nursing, therapy, and aide visits compared with similar patients with traditional Medicare. Medicare Advantage patients were more likely to be discharged to the community compared with Traditional Medicare but had lower likelihoods of improving in self-care and mobility function.
In short, “The results of this study suggest that Medicare Advantage patients receive fewer home health visits and have worse functional outcomes compared with traditional Medicare” [emphasis added].
As noted in an Axios article about the study titled “Medicare Advantage patients get less home health care: study” by Tina Reed (March 4, 2024), the study “matters” because “With more than half of Medicare beneficiaries in MA plans, there’s growing concern about how the plans are run, including whether their guardrails around coverage are reducing access to care.” The “bottom line,” notes the article: “Differences in home health services can weigh heavily on MA patients, who are likelier to live alone with less support and often don’t need the care until they’re in dire medical straits.”
Conclusion
In recent years, CMS has taken steps to both improve the accuracy of payment to MA plans and strengthen consumer protections, including with respect to prior authorization and marketing misconduct. These are long overdue course corrections, but far more is needed in order to both adequately protect MA enrollees and level the playing field between MA and traditional Medicare. The last thing the Medicare program needs is status quo regarding Medicare Advantage. We simply can’t afford MA “stability” as the industry suggests.
March 7, 2024 – D. Lipschutz