The Centers for Medicare & Medicaid Services (CMS) has recently taken long overdue steps to address Medicare Advantage (MA) overpayments and oversight, including restrictive prior authorization and marketing misconduct. While we applaud these steps, we urge Congress and CMS to go farther with respect to reining in MA overpayments and instituting adequate oversight of MA plans; there is much more that needs to be done. Yet the Medicare Advantage insurance industry is pushing back even against these minor payment adjustments, calling them “unprecedented cuts” and characterizing improvements to consumer protections as “sweeping changes” that could harm beneficiaries. Policymakers should not be swayed by such false alarms.
Medicare Advantage Overpayments
This week, the comment period for CMS’ Advance Notice (AN) – which includes proposed payment rates for MA plans for 2024 – closed. Amidst changes to how MA payments are calculated, CMS has proposed a payment increase of 1.03% to MA plans. The Center submitted comments, available at https://medicareadvocacy.org/wp-content/uploads/2023/03/CMA-2024-Advance-Notice-comments.pdf. CMS is expected to finalize these rates by early April.
When CMS issued the Advance Notice along with a long-awaited rule concerning audits of overpayments already made to MA plans, the Center for Medicare Advocacy (the Center) issued a statement praising CMS for taking action concerning MA overpayments, but urged the agency to do more. While we support CMS’ proposed changed to MA payment methodology in the AN, the Center and other commenters expressed disappointment that the agency is not going further to address MA overpayment by using its discretion to employ higher coding intensity adjustment. As noted by the Medicare Payment Advisory Commission (MedPAC) in their comments to the AN:
For nearly a decade, the Commission has documented overpayments to MA plans due to coding intensity and has recommended policies to address the problem. Overpayments due to coding intensity are now tens of billions of dollars annually and are increasing by billions each year. The Commission’s recommendation and other proposals to address these overpayments are fully within the Secretary’s authority; yet, the Secretary has not taken significant action in response, except through modest adjustments to HCC coefficients as in the new v28 risk adjustment model that, while directionally correct, are insufficient to address the magnitude of excess Medicare spending related to MA coding intensity. Given the dire financial status of the Medicare program, it is imperative that CMS act now to fully account for the impact of coding intensity.
While CMS is taking some welcome steps to address some MA overpayment, its reluctance to use a higher coding intensity adjustment leaves the MA industry flush with unwarranted overpayments. The industry has dodged a more meaningful reckoning of its finances. Despite this fact, the industry continues to falsely claim that the Advance Notice’s proposed payment increase of 1.03% is instead a “cut.”
As discussed in a recent CMA Alert, the MA industry – led by AHIP and their paid supporters at the Coalition for Medicare Choices and the Better Medicare Alliance – have spent millions on an ad campaign to characterize CMS’ payment proposals as “unprecedented cuts” and have threatened that higher premiums and fewer benefits will necessarily result.
Independent analysts free from industry conflict, however, largely conclude that these minor payment changes will have little effect on overall MA spending, let alone impact plan benefits. See, e.g., MedPAC comments, Kaiser Family Foundation post, Center on Budget and Policy Priorities blog, Committee for a Responsible Federal Budget blog and comments to the Advance Notice submitted by a group of 38 health care experts, including former MedPAC and CMS officials.
Perhaps the most telling rebuttal to industry hyperbole comes from within: the second largest MA insurer by number of enrollees, Humana (which, as noted in a recent CMA Alert announced it is forgoing the employer insurance market to focus exclusively on more lucrative government (taxpayer)-funded programs). A Bloomberg Law article titled “Humana CEO Sees Upside in Medicare Changes That Industry Opposes” by John Tozzi (March 7, 2023), after mentioning the Better Medicare Alliance’s warnings that the proposed payment changes “would harm Medicare beneficiaries and providers who serve vulnerable patients”, notes that:
But Humana Chief Executive Officer Bruce Broussard said the company’s positioning sets it up “for a strong 2024, irrelevant of the rate notice” and reiterated Humana’s 2025 outlook for $37 in adjusted earnings per share.
Speaking to investors Tuesday at the TD Cowen Health Care Conference in Boston, Broussard dismissed concerns about how the changes would affect Humana. The company has prospered in other years when the government tightened payments, he said.
“What we’ve found in those years is that actually we do better,” he said. “We usually grow greater than the market.”
Not only is the industry trying to MediScare beneficiaries with false claims about “unprecedented cuts”, they are trying to fend off – or at the very least, slow down – the implementation of important consumer protections.
Proposed Rules re: MA Prior Authorization and Marketing
After many years of regulatory neglect, at the same time that CMS is trying to partially correct for MA overpayment, CMS has proposed other changes concerning MA oversight that, if finalized, will significantly help MA enrollees. For example, as noted in this CMA Alert, CMS issued a proposed Part C & D rule in December 2022, now closed for comment and expected to be finalized next month, that would, among other things, prohibit MA plans from denying coverage of a Medicare-covered item or service based on internal, proprietary, or external criteria not found in traditional Medicare coverage policies. In addition, the rule aims to crack down on misleading advertising, enhance requirements that agents and brokers explain coverage options, and better protect consumers from unwanted contact. Despite these positive steps, far more action is needed in order to provide adequate consumer protections and meaningful oversight of industry conduct. The Center’s comments to the proposed rule are available here.
Not surprisingly, those who benefit the most from the status quo wish to preserve it. AHIP, in their submitted comments to the same proposed Part C&D rule, asserted that these minor course corrections are just too much for the industry to bear. In their introductory remarks, they state:
the sweeping changes under consideration here, when combined with recent statutory changes and other payment and regulatory changes either finalized or proposed elsewhere, will increase financial and operational uncertainties and create new barriers to the continued availability of high-value, affordable coverage. Accordingly, we urge CMS to consider how the combined impacts of these numerous changes could inhibit innovation, increase confusion and complexity, and ultimately harm seniors and people with disabilities. We also urge CMS to consider regulatory approaches that will ensure stability and value for the tens of millions of people these programs serve [emphasis in original].
With respect to the proposed prior authorization changes, AHIP notes that while it supports some of CMS’ proposals, “we urge CMS to retain long-permitted flexibilities in the MA program so plans can encourage the delivery of high-quality care in safe, cost-effective alternative settings that are covered in the original Medicare program” and it also expresses concern about the feasibility of implementing such changes next year. With respect to the proposed marketing changes, AHIP offers support for some of the proposals that largely target third-party entities, including agents and brokers, but urges CMS to reconsider other proposals which “could unduly inconvenience seniors and people with disabilities” and – more importantly from the plans’ perspective – “we believe certain proposals require longer implementation timelines than CMS has proposed given the need for additional CMS guidance, revised materials and/or updated training.”
The subsequent pages of AHIP’s comments to CMS’ proposed rule are filled with predictions of Dickensian woe sure to befall MA enrollees should all of these changes be implemented, including “more confusion and complexity for enrollees, family members, agent/brokers, and providers” and a prediction that the combined impact of these changes that will “increase program costs, limit choice, reduce supplemental benefits, and/or increase premiums.” The comments focus even more on pity-inducing claims of overwhelming administrative burden all coming at once that will swamp put upon insurance companies. Claims abound of “the sheer magnitude of changes” (also described as “sweeping”, “significant” and “major”) leading to “so much uncertainty and change” while highlighting “significant resources” plans must devote “each year to implementation, training, provider contracting, communications, and other actions”, amidst the resulting “tremendous uncertainty that inhibits planning and investments in long-term innovations”, along with the concern about “expand[ing] situations in which MA plans must proactively conduct outreach to members”, and the increased cost and “focusing organization time and resources” on implementation of the Inflation Reduction Act, and the “higher administrative costs” and other factors “outside of plan control” all of which makes “compliance … more challenging.” In short, AHIP “recommend[s] that CMS seriously consider options to bring more stability to the program by limiting the number and scope of changes, extending implementation timelines, and other approaches.”
Despite CMS’ cautious proposals addressing MA problems that have long been identified but unrectified, the plans assert, essentially, that all of this amounts to too much, too soon, and they can’t possibly be expected to comply (and accept even marginally less of an annual raise to do so).
Every year, insurance plan sponsors make business decisions about whether they want to contract with Medicare the following year, and, if so, what their plan benefits will be. Every year, Medicare beneficiaries are correspondingly encouraged to review their coverage options (although most don’t), including how their current coverage might be changing. As noted above, plans are currently overpaid handsomely to participate in the Medicare program. Both the payment changes and consumer protections proposed by CMS are important, but limited, course corrections that will improve the Medicare program. These changes will not “harm seniors and people with disabilities” – as AHIP asserts – but rather help people with Medicare by strengthening consumer protections and instituting stronger fiscal stewardship over wasteful programmatic spending.
Insurance companies do not have a permanent right to participate in and profit from Medicare. If insurance companies cannot offer a plan in compliance with program rules that are meant to ensure that they adequately protect the health of those whom they are entrusted to serve without being overcompensated, then they are free to decline to participate in the Medicare program.
March 9, 2023 – D. Lipschutz