The Centers for Medicare & Medicaid Services (CMS) has issued proposed Medicare Advantage (MA) and Part D payment rates for 2025. As discussed below, the insurance industry is already trying to pressure the agency to increase their payment in the final announcement. In addition, there have been other recent MA policy developments, including a request for information concerning data and transparency, and updates to prior authorization policy. These developments are discussed in detail below.
Proposed MA Payments for 2025
As noted in a recent CMA Alert (Feb. 1, 2024), CMS released an Advance Rate Notice for 2025 proposing an overall pay increase to MA plans of 3.7% (see CMS fact sheet here). Comments to the Rate Notice are due March 1, 2024. The final 2025 Rate Notice will be published no later than April 1, 2024.
According to CMS, “This is over a $16 billion increase in expected MA payments for next year.” On one hand, CMS appears to continue to phase-in risk adjustment model updates implemented last year (which the insurance industry opposed); on the other hand, if finalized, this will be a payment increase at a time when MA plans are already significantly overpaid. As discussed further below, the insurance industry is currently engaging in its annual ritual to pressure CMS to pay MA plans more and regulate them less.
MA Overpayments
It is well established that MA plans are significantly overpaid relative to what traditional Medicare spends on a given beneficiary. Estimates of such overpayment range from $88 billion in 2024 (according to the Medicare Payment Advisory Commission, January 2024) to $140 billion annually (according to Physicians for a National Health Program, October 2023).
These overpayments strain the Medicare program’s finances. As noted by Inside Health Policy in a recent article titled “CBO: MA, Part D Drive Higher Medicare Spending In 2024; Medicaid Spending Dips Due To Unwinding” by Amy Lotven (Feb. 7, 2024), “Spending on Medicare will increase by about $65 billion in 2024 due to larger payments to Medicare Advantage and Part D payments, the Congressional Budget Office says”. The article continues:
Outlays for Medicare will reach $896 billion in 2024, CBO predicts, which is $65 billion more than in 2023 and reflects a $76 billion increase in spending — minus $12 billion in premium receipts. The growth in Medicare benefit spending is largely concentrated in large payments to Medicare Advantage and Part D plans, CBO says. Fee-for-service spending is projected to slow because of the continued growth in Medicare Advantage. For 2024, CBO projects Medicare enrollment will go up by 1 million beneficiaries, reflecting 2 million more MA enrollees and 1 million fewer enrollees in FFS.
The rate of increased enrollment in MA, coupled with significant MA overpayments, is simply unsustainable for the Medicare program. While CMS is making some minor adjustments to MA payment rates, MA plans want more.
Industry Response to Proposed Rate
Despite CMS clearly stating that they expect plans to receive an overall increase in payment, the industry, of course, is unsatisfied. Last year, CMS proposed revisions to the way that risk-adjusted payments are calculated and proposed an overall 1.03% payment increase for MA plans for 2024, which the insurance industry misleadingly characterized as “unprecedented new cuts.” As discussed in several CMA Alerts (see, e.g., here, here and here) insurers launched a massive, well-funded advertising campaign to pressure CMS to change course. When CMS finalized a 2024 rate notice in March 2023, it revised its initial proposal and projected that plans would see a 3.32% overall pay bump and proposed payment changes were phased in over 3 years rather than at once.
The cycle of industry complaint and pressure has begun again this year. For example, an Axios article titled “Health insurers balk at proposed Medicare Advantage rates” by Tina Reed (Feb. 8, 2024) notes that carriers such as CVS Health and Centene are complaining that the proposed 2025 rates “aren’t ‘sufficient’ and hinted they could cut benefits if the federal government finalizes the rates as is.” As noted in another Axios article titled “Humana warns of higher medical costs as patients use insurance more often” by Nathan Bomey (Jan. 18, 2024), increased costs for plans is being blamed in part, on people using health care services; the reporter notes “Health insurers are feeling the pain as patients are getting treated at higher rates than expected.”
Similarly, Healthcare Dive notes in an article titled “Insurers brace for continued Medicare Advantage medical costs” by Rebecca Pifer (Feb. 20, 2024):
Even payers that emerged from 2023 with their financial outlooks unscathed said they plan to cut benefits or raise premiums this year. The plan redesigns are to protect margins in MA — a business that historically generates significant profits, but is facing challenges that threaten to kill the golden goose.
Noting MA plans’ complaints about higher utilization of services and grumbling about payment rates, the Wall Street Journal in an article titled “Your Medicare Plan Might Not Include as Many Freebies Next Year” by David Wainer (Feb. 11, 2024) states that insurance companies “will need to make some tough decisions about their plans next year – either sacrifice profit margins to continue growing or pull back on benefits to boost profitability.”
Not all industry forecasts about ongoing profitability are so gloomy. An article in Fierce Healthcare titled “Medicare Advantage headwinds didn’t prevent payers from turning a profit in 2023” by Paige Minemyer (Feb. 9, 2024) states “Though a spike in utilization among seniors slammed payers last year, particularly in the fourth quarter, each of the six major national firms turned a profit in 2023.” Despite increased utilization and industry concerns about payment rates, the financial outlook for plans seems to be just fine:
Analysts at Fitch Ratings and Moody’s Investors Service both noted, though, that major insurers are positioned to weather these challenges in the long term even as they feel the pain now. Fitch analysts said earlier this week that they expect both the spike in MA utilization and the potential rate cuts to be credit neutral.
Alluding to the annual dance between the regulator and the regulated, the Wall Street Journal article referenced above notes that “The rates offered by CMS to plans typically go up after lobbying from insurance giants around this time of the year, so the industry’s talk of cutting benefits should be seen as part of an effort to prod CMS to increase rates” [emphasis added].
In the end, it appears that the industry’s priority is making business decisions rather than health care decisions; the Journal article quotes the president of Aetna: “‘We are first and foremost focused on recovering margin, and market share gains is a secondary consideration’”; similarly, the CFO of Centene is quoted as saying “‘We’re trying to ultimately recover margin [in the] back half of the decade. And so we’ll just adjust the bids accordingly.’”
Providers who work with MA plans “aren’t buying insurers’ complaints,” notes reporter Caroline Hudson in a Modern Healthcare article titled “Providers unmoved as insurers decry Medicare Advantage rate cut” (Feb. 16, 2024). For example, Hudson quotes a hospital industry expert:
“[Cutting benefits] is not inevitable. It is a choice,” Michelle Millerick, senior associate director of health insurance and coverage policy at the American Hospital Association, said in a statement. “These Medicare Advantage plans are choosing to prioritize shareholders over their enrollees by cutting healthcare benefits in order to meet profit demands by investors.”
The Future of Medicare
The Center for Medicare Advocacy applauds CMS for taking steps to both rein in MA overpayments and increase accountability and oversight of plans. At the very least, we urge CMS to hold the line and not give in to industry pressure to reverse course. These efforts, however, do not go far enough to right the imbalance between MA and traditional Medicare.
Becker’s Payer Issues recently published an article titled “Former CMS administrator: ‘I would like to see Medicare Advantage slowed or stopped’” by Jakob Emerson (Feb. 8, 2024) which interviews former CMS administrator Dr. Don Berwick. Among other things, the interviewer asked him about what the future of Medicare will look like. Dr. Berwick replied:
Given current growth rates and without substantial changes in the systems of payment, risk adjustment and transparency, I believe there’s a big threat that traditional Medicare as we know it will be atrophied significantly and that only the patients least desirable for insurers will end up with traditional Medicare. I’m very concerned and it’s highly unstable right now.
[…] I would like to see Medicare Advantage slowed or stopped right now, or at least forced to have better carriers. Insurers need to be held accountable for lowering costs and improving quality at the same time — and lower costs are lower costs, not a calculation game of revenue that leads to an unfair distribution of Medicare expenditures.
The other part of the solution is to improve traditional Medicare with benefits expanded to be on par with Medicare Advantage. It should be cost neutral to beneficiaries as to which they choose. The money needed to improve traditional Medicare would be readily accessible by clawing back the excess subsidies that have accumulated for Medicare Advantage. Let’s have a fair comparison of traditional Medicare under public guidance with free choice for members to go any way they want and with reporting and quality standards that are enforced directly by CMS.
Dr. Berwick outlines what could be done to start remedying the imbalance between MA and traditional Medicare. There are other policy proposals advanced by some, however, that would greatly increase the imbalance.
A recent Rolling Stone article titled “Republicans Are Planning to Totally Privatize Medicare — And Fast” by Andrew Perez (Feb. 5. 2024) highlights the “GOP policy agenda” by the Heritage Foundation titled “Project 2025”. Among other things, if implemented in a new administration, this proposal:
would have a monumental impact on the health of America’s seniors and the future of one of America’s most popular social programs: a call to “make Medicare Advantage the default enrollment option” for people who are newly eligible for Medicare.
The article, in which the Center for Medicare Advocacy is quoted, notes that “[s]uch a policy would hasten the end of the traditional Medicare program, as well as its foundational premise: that seniors can go to any doctor or provider they choose.” As noted by the Center, it would both “‘greatly accelerate’ Medicare privatization” and “‘accelerate program insolvency because Medicare Advantage [costs] so much more than traditional Medicare.’”
Policymakers must act in the best interests of the Medicare program and those that it serves – not the best interests of insurance companies making hefty profits off of taxpayers.
Other Medicare Advantage Updates
In addition to the proposed MA payment rate for 2025, the Centers for Medicare & Medicaid Services (CMS) has recently issued other policies relating to Medicare Advantage, including a Request for Information and updates to MA prior authorization policies, discussed below.
MA RFI – Request for Information on Medicare Advantage Data
In January 2024, CMS published a Request for Information (RFI) seeking public input concerning MA data. Fed Reg – 89 Fed Reg 5907 (Jan. 30, 2024); also see CMS Fact Sheet (Jan. 25, 2024). According to CMS’ Fact Sheet, “The information solicited by this RFI will support efforts for MA plans to best meet the needs of people with Medicare, for people with Medicare to have timely access to care, to ensure that MA plans appropriately use taxpayer funds, and for the market to have healthy competition.” Comments are due May 29, 2024.
CMS Issues FAQ on 2024 MA Prior Authorization Provisions
On April 12, 2023, CMS published a final rule for 2024 regarding Medicare Advantage (MA) and Part D. The final rule is available in the Federal Register at 88 Fed Reg 22120 (April 12, 2023) here, and is summarized in a CMS Fact Sheet available here. The Center for Medicare Advocacy drafted a summary of many of the provisions of the rule, focusing on improvements to the MA prior authorization process, as well as additional consumer protections applicable to MA and Part D marketing. The Center’s May 2023 Special Report is available here.
As discussed in our Special Report, the final rule included a number of significant improvementsto the rules surrounding MA plans’ use of prior authorization to restrict access to services. The rule indicates a clear intent by CMS to limit plans’ ability to inappropriately deny care to enrollees.
In summary, the new rules include the following requirements:
- Prior authorization may only be used for one or more the following purposes:
- To confirm the presence of diagnoses or other medical criteria that are the basis for coverage determinations for the specific item or service; or
- For basic benefits, to ensure an item or service is medically necessary based on standards specified in § 422.101(c)(1), or
- For supplemental benefits, to ensure that the furnishing of a service or benefit is clinically appropriate.
- When Medicare coverage rules are clearly established, plans cannot deny coverage of the item or service on the basis of internal, proprietary, or external clinical criteria that are not found in traditional Medicare coverage policies.
- Continuity of care and course of treatment guidelines: Approval granted through prior authorization processes must be valid for as long as medically necessary to avoid disruptions in care in accordance with applicable coverage criteria, the patient’s medical history, and the treating provider’s recommendation. Further, plans must provide a minimum 90-day transition period when an enrollee who is currently undergoing an active course of treatment switches to a new MA plan.
- Plans must disclose internal criteria they rely upon to make decisions.
If appropriately followed and implemented, these rules could go a long way towards curbing some of the worst MA plan behavior. Our Special Report also noted that, as with most consumer protections, the efficacy of these new rules will depend on plan compliance and CMS oversight and enforcement.
As discussed further in a CMA Alert (Dec. 7, 2023), many provider groups have expressed concerns that MA plans do not intend to follow these new rules. In addition to hospital groups, associations of providers in the nursing home, home health, long-term care hospital and other settings have expressed concern with MA plans’ coverage in these areas, and the need to ensure that plans follow the new prior authorization rules. The Center for Medicare Advocacy joined several provider organizations, including LeadingAge, American Health Care Association (AHCA), National Association for Home Care & Hospice (NAHC), American Medical Rehabilitation Providers Association (AMPRA) and The National Association of Long-Term Care Hospitals (NALTH) in sending a letter (dated November 29, 2023) to CMS requesting additional sub-regulatory guidance to clarify provisions of the final 2024 Part C &D rule.
In response to these concerns, in part, on February 6, 2024, CMS issued a memo to MA plans titled “Frequently Asked Questions related to Coverage Criteria and Utilization Management Requirements in CMS Final Rule (CMS-4201-F)”. The memo states: “Since the issuance of this [final 2024 Part C & D] rule, CMS has received questions about the application of these rules once they are effective. In this memo, we provide clarification about how we expect MA plans to comply with these new rules.”
Among other things, the memo highlights:
- With respect to MA plans using algorithms or artificial intelligence to make coverage decisions, “an algorithm that determines coverage based on a larger data set instead of the individual patient’s medical history, the physician’s recommendations, or clinical notes would not be compliant with § 422.101(c). In an example involving a decision to terminate post-acute care services, an algorithm or software tool can be used to assist providers or MA plans in predicting a potential length of stay, but that prediction alone cannot be used as the basis to terminate post-acute care services.”
- With respect to public availability of internal coverage criteria used by an MA plan, “the internal coverage criteria used by plans must be accessible via a website and cannot be behind a paywall or require a subscription for access. The information must be available to all in the public (not just enrollees and/or contracted providers of the MA plan) and may be hosted on the MA plan’s website or a delegated vendor’s website that is accessible from the MA plan’s website.”
- And, concerning how CMS will enforce these new rules, the agency “will conduct both routine and focused program audits of organizations in 2024 to assess compliance” and “Through this combination of routine and focused audits in 2024, CMS expects to evaluate the UM-related performance of plans serving approximately 88% of people with MA.” CMS adds: “CMS has increased its scheduled program audit activities to help make sure that MA beneficiaries get the care they need without excessive burden or delays and have access to the benefits and services to which they are entitled.
We will be monitoring closely whether MA plans are utilizing and applying internal coverage criteria that are not found in Medicare laws, NCDs, or LCDs, and whether the internal coverage criteria are publicly accessible and coverage policies meet the regulatory requirements.”
New Prior Authorization Rule
In January 2024, CMS issued an Interoperability and Prior Authorization Final Rule (CMS-0057-F) aimed at improving the electronic exchange of health information and prior authorization processes for medical items and services related to Medicare Advantage (MA) organizations, Medicaid and the Children’s Health Insurance Program (CHIP) fee-for-service (FFS) programs, Medicaid managed care plans, CHIP managed care entities, and issuers of Qualified Health Plans (QHPs) offered on the Federally-Facilitated Exchanges (FFEs). The final rule is available here (89 Fed Reg 8758, Feb. 8, 2024); also see a related CMS Fact Sheet (Jan 17, 2024). Note that the final rule does not apply to prior authorization decisions relating to prescription drugs.
Among other things, as noted in the Fact Sheet, primarily beginning in 2026, MA plans:
- “[W]ill be required to send prior authorization decisions within 72 hours for expedited (i.e., urgent) requests and seven calendar days for standard (i.e., non-urgent) requests for medical items and services.” (Note that current rules require MA plans to issue expedited organization determinations within 72 hours (or 24 hours for Part B drugs) – see 42 C.F.R. §422.572; MA plans must issue standard organization determinations within 14 days – see §422.568.)
- “[I]include a specific reason for denying a prior authorization request, which will help facilitate resubmission of the request or an appeal when needed.” and
- “[P]ublicly report prior authorization metrics, similar to the metrics Medicare FFS already makes available.”
February 22, 2024 – D. Lipschutz