Radar on Medicare Advantage

Since the Feb. 1 release of the 2024 Advance Notice of Methodological Changes for Medicare Advantage Capitation Rates and Part D Payment Policies, MA insurers had been bracing for comprehensive risk adjustment changes that they argued would result in rate reductions, rather than the modest 1.03% improvement CMS had predicted. In its 2024 final rate notice, released on April 3, CMS finalized but chose to phase in changes to the risk adjustment model, leading to an average expected pay increase of 3.32%. This shift is not unique, as an exclusive look back at previous AIS Health coverage on previous rate notices shows that for much of the last decade, CMS has often left out certain unpalatable proposals from the Advance Notice and improved its payment forecasts.

After much delay, the City of New York appears to be moving forward with a plan to transition its retiree health care coverage to a group Medicare Advantage plan, having recently chosen CVS Health Corp.’s Aetna to administer a PPO plan starting Sept. 1. The contract is valued at $15 billion over the first five years and four months of the term agreement.

The city’s plan to transition some 250,000 retirees and their eligible dependents away from fee-for-service (FFS) Medicare coverage was initially supposed to begin on April 1, 2022, and be managed by Elevance Health, Inc. (in partnership with EmblemHealth). Retirees petitioned to block the move, and state Supreme Court Judge Lyle Frank in March 2022 ruled that the proposal violated city law by requiring retirees who opted out of the switch to pay $191 per month to maintain their FFS coverage. That July, Elevance backed out of the deal.

CMS on March 8 submitted its lengthy Medicare Advantage and Part D final rule making policy and technical changes for 2024 to the White House Office of Management and Budget (OMB), just 23 days after the comment period closed. “Not a good sign for those who submitted comments with the expectation that CMS would fully consider their concerns and suggested alternatives to some of the proposed regulatory changes,” remarked Epstein Becker & Green’s Helaine Fingold on LinkedIn. The proposed rule, published on Dec. 27, contained multiple marketing-related provisions and featured numerous health equity components, from the incorporation of a health equity index in the Star Ratings to new requirements around information provided to enrollees. The final rule at AIS Health press time was still pending OMB review.

North Carolina at press time was close to passing legislation that would allow it to become the 40th state to expand Medicaid under the Affordable Care Act. The state transitioned to a Medicaid managed care structure in 2021, but recent public comments from one state official suggest that ongoing issues between MCOs and providers could pose challenges as the state prepares for expansion.

House Bill 76, Access to Healthcare Options, would require the state to extend Medicaid coverage to individuals with income at or below 133% of the federal poverty level (FPL) starting Jan. 1, 2024, and establish a fund allowing the state to provide direct payments to acute care hospitals based on assessments of hospital costs. Democratic Gov. Roy Cooper has been advocating for expansion, which could reduce the uninsured population by 30%, or 346,000 people, according to an Urban Institute analysis from November.

As the Medicare Advantage program saw slower enrollment during the 2023 Annual Election Period (AEP) than previous years, many insurers that enriched their benefits while maintaining affordability and effectively communicated these changes saw above-average growth. AIS Health, a division of MMIT, spoke with several plans that credited their localized approach, enhanced relationships with sales agents and new supplemental benefits with helping to increase their membership over the AEP.

Meanwhile, during the Open Enrollment Period (OEP) that allows MA enrollees to make a one-time coverage switch and ends on March 31, insurers have been working hard to ensure a positive experience, hosting member welcome calls and events and educating members on how to use their new benefits. According to AIS’s Directory of Health Plans, MA enrollment from February 2022 to February 2023 grew by 7.4%, compared with 8.5% in the year prior.

Since CMS proposed a modest rate increase and substantial changes to the risk adjustment model used to pay Medicare Advantage plans, insurers and their allies have come out swinging with very public responses. Industry-aligned Better Medicare Alliance (BMA) has been particularly vocal about its opposition to the proposals, spending $4.4 million on an ad campaign urging seniors to call the White House in opposition to potential MA cuts and commissioning a study estimating the detrimental effect the proposed changes could have on premiums and benefits. And while a recent BMA press release highlighted the formal comments submitted by dozens of groups urging CMS to delay the proposed changes, industry experts including scholars, policy experts and former CMS administrators have come out in support of the proposals they say address only some of the problematic elements of MA.

President Joe Biden’s fiscal year 2024 budget proposal, released on March 9, made headlines for its efforts to preserve the Medicare Trust Fund with several drug pricing proposals, such as expanding the number of drugs eligible up for negotiation between Medicare and pharma and extending a $35 insulin cost-sharing cap in Medicare to commercial plans. Beyond the headlines, however, the budget includes several items targeting Medicare Advantage and Medicaid insurers, such as a proposal to establish new medical loss ratio (MLR) requirements for supplemental benefits in MA.

Largely seen as a wish list, the president’s budget hinges on whether he can convince a divided Congress to put the proposals into legislation. “Many of the proposals ultimately offered in the President’s budget are likely to turn out to be more ‘headline’ than reality,” suggested Citi analyst Jason Cassorla in a recent research note. “While we are not completely dismissive of the White House’s efforts to shore up Medicare, we view the implicit savings constructs (without cutting benefits) and redirection to Medicare as more of a messaging document at this juncture.”

Most new drugs covered under Medicare Part D are subject to prior authorization (PA) requirements, largely due to their high launch prices. A recent study published in JAMA Health Forum observed that these policies are frequently inconsistent across payers and may prove too burdensome for patients and providers.

Researchers identified drugs approved between 2013 and 2017 and reviewed the 2020 formularies of the eight largest Part D payers, which cover about 90% of all Part D beneficiaries. They compared PA policies to each drug’s FDA-approved indications and noted if payers mirrored the approved labeling or were more restrictive than the drug’s label. Researchers observed substantial variation in the frequency and type of PA across payers, and they found that about 40% of the new drugs had PA criteria that went beyond the drug’s labeling.

Since CMS posted its 2024 Advance Notice for Medicare Advantage and Part D plans a month ago, the MA industry has been in a frenzied state trying to understand the impact of proposed risk model changes on revenue while vocalizing its displeasure prior to the March 3 end date of the comment period. While CMS projected that MA plans may see an average 3.3% increase in risk scores, a new analysis from Pareto Intelligence based on client data suggests that the impact to risk scores could vary widely, increasing at best by 2% and dropping by up to 14% — for an average decline of 4%.

CMS, in its annual Advance Notice of updates to Medicare Part C and Part D payment policies for the coming plan year, included significant changes to the risk model that is used to adjust MA plan reimbursement. In addition to removing thousands of diagnosis codes and renumbering several Hierarchical Condition Categories (HCCs) used to determine MA plans’ risk scores, the agency proposed moving from using ICD-9 codes to the “more commonly used” ICD-10. And in doing so, CMS explained that it removed certain diagnostic categories that are coded more frequently in MA relative to fee-for-service (FFS) Medicare. Specifically, the proposed 2024 CMS-HCC model (version 28) would contain 115 diagnostic HCCs, up from the 86 used in the current model (version 24), but use just 7,770 ICD-10 codes, down from 9,797 ICDs under the current model.

Medicare Advantage enrollment over the last year grew by 7.4%, reflecting slower growth than previous years and falling slightly below CMS’s expectations. According to the latest update to AIS’s Directory of Health Plans (DHP), the MA program enrolled nearly 31 million beneficiaries as of February. That data reflects the full outcome of the 2023 Medicare Annual Election Period (AEP), which ran from Oct. 15 through Dec. 7. Despite the slowdown in enrollment, insurers’ increased investments in Special Needs Plans (SNPs) appear to be paying off, while MA plans say their attempts to maintain affordability while enriching benefits contributed to their AEP successes.

“We are basically at the very tail end of the Baby Boomers aging into Medicare as of 2023,” remarks Rebellis Group CEO Betsy Seals, referring to the generational group whose births peaked in 1958. “Looking at the overall numbers, I think that we have a lot yet to discover about this next generation and how they’re going to shop and switch and enroll. So that’s going to be interesting.”