Proposed Medicare Advantage cuts would increase premiums, decrease growth rate, BMA says

Better Medicare Alliance President and CEO Mary Beth Donahue speaks with reporters during a Zoom call on Wednesday.

Photo: Jeff Lagasse/Healthcare Finance News

Insurers expect that the Centers for Medicare and Medicaid Services' recent advance notice for Medicare Advantage and Part D plans for the 2024 coverage year will result in a 2.27% cut to plans if finalized, and this could have a negative impact on members' premiums and benefits, as well as slow MA growth, according to a new Avalere study commissioned by Better Medicare Alliance.

On a Zoom call with reporters Wednesday, BMA President and CEO Mary Beth Donahue said the rule would raise costs and cut benefits for the roughly 30 million seniors and people with disabilities who are on Medicare Advantage.

Payers' estimates of a more than 2% payment cut contradict projections from CMS, which said it expected a 1.03% increase for plans after factoring in a decline in payments when accounting for risk adjustment changes.

CMS has pushed back, but payers are adamant the changes would result in cuts.

"Unfortunately for these seniors who rely on Medicare Advantage, we see that with these proposed changes, the reduced funding will have an impact in (raising) their premiums or lessening their benefits," Donahue said during the call.

The study estimated average 2023 plan rebates nationally and for the top 10 metropolitan areas by MA enrollment. It then compared them to what rebates could be in 2024 if CMS finalizes the policies in the advance notice.

Across plans nationwide, the estimated decreases in rebates could result in an average increase in premiums, or a decrease in supplemental benefits, of nearly $45 per member per month, data showed. 

This impact would likely vary by geography and by plan. Houston, Texas, for example, would see an estimated 63% reduction in rebates. Atlanta, Georgia would see a 38% decrease. Los Angeles, California would see a 19% decrease, the smallest decrease among the 10 largest metropolitan areas.

Nationally, the reduction is estimated at about 29%.

The Avalere study highlighted a few other potential negative consequences of the rule, if finalized. Until 2023, for example, CMS included MA-related indirect medical education (IME) and direct graduate medical education (DGME) in the calculation of the fee-for-service per capita baseline costs, which informs the MA growth rate. For 2024, said Avalere, CMS is proposing a one-time change to remove MA-related medical education costs from the historical costs used for their projections.

The removal of IME and DGME will lower FFS spending and the corresponding FFS growth rate for 2024 by 2.13%, the data showed. The MA growth rate will be reduced by 1.06%.

CMS is also proposing a clinical reclassification of the Hierarchical Condition Categories (HCCs) using the ICD-10-CM codes for the risk adjustment model. Avalere said that the risk adjustment changes, combined with the proposed normalization factor, will result in a 3.12% reduction to 2024 plan payments.

The agency assessed conditions that are coded with more frequency in MA as compared to FFS, and is proposing to remove certain diagnoses from the CMS-HCC model. According to Avalere, the number of payment HCCs will increase from 86 to 115 due to changes in the structure and clinical specificity of codes changing from ICD-9 to ICD-10, as well as changes in clinical concepts for certain conditions.

But for Donahue, the main takeaway from the proposed changes is the potential effect it would have on MA beneficiaries.

"We ultimately see for the individual MA beneficiary that they would see, on average, a $540 decrease per beneficiary per year," she said. "Or for a couple, $1,080. As we look at the complexity, it's important to take note of what that means for the average Medicare Advantage beneficiary."
 

Twitter: @JELagasse
Email the writer: Jeff.Lagasse@himssmedia.com