Radar on Medicare Advantage

The approval of Eli Lilly and Co.’s Zepbound (tirzepatide) in November capped off a banner year for glucagon-like peptide 1 (GLP-1) agonists and their use in weight loss management. And the fuss over these much-hyped obesity drugs — originally approved to treat diabetes — is likely just beginning. While employer groups and commercial payers are agonizing over the potential cost of coverage, industry leaders and legislators are pushing for Medicare to cover GLP-1s as weight loss therapies. Medicaid programs, meanwhile, are also weighing their options.

GLP-1s are now “the No. 1 driver of non-specialty pharmacy trend,” Mercer’s lead pharmacy actuary Jon Lewis told AIS’s Health Plan Weekly in November. Zepbound joins fellow GLP-1s from Novo Nordisk A/S, Wegovy (semaglutide) and Saxenda (liraglutide), in the obesity market basket. (As diabetes therapies, Zepbound is marketed as Mounjaro, while Wegovy is known as Ozempic.) Despite crackdowns on off-label use of the drugs’ diabetes iterations and a seemingly endless wave of shortages, many in the industry are clamoring for increased consumer access to the drugs. The American Medical Association on Nov. 13 passed a resolution asking “health insurers to provide coverage of available FDA-approved weight-loss medications, including GLP-1 medications, to demonstrate a commitment to the health and well-being of our patients.”

The Dept. of Justice on Dec. 15 filed a motion to transfer or dismiss Humana Inc.’s case against the federal government and its use of extrapolation in Risk Adjustment Data Validation (RADV) audits of Medicare Advantage insurers. After CMS in January finalized plans to begin extrapolating RADV audit findings in recovering improper payments starting with payment year 2018, Humana on Sept. 1 filed a lawsuit asking the U.S. District Court for the Northern District of Texas to vacate the rule and therefore stop CMS from applying its new audit policy. By excluding a “fee-for-service adjuster” that the agency had once promised would be used in the audits, the RADV audits “do not observe any actuarial standards at all,” the MA insurer argued in Humana Inc. et al v. Becerra et al (No. 4:23-cv-909-O). In its response filed in the Fort Worth division of the District Court, HHS argued that Humana hasn’t been harmed because CMS has not begun any audits under the challenged rule. Moreover, there is no certainty that Humana will be subject to audits under the new rule because CMS hasn’t “chosen the contracts to be audited under the rule for any payment year, nor selected a statistical sampling and extrapolation methodology for any such audits,” stated the response, which was obtained and posted by STAT.

With the filing of a proposed class action lawsuit this month, Humana Inc. became the third major insurer in recent history to be accused of using artificial intelligence to wrongfully deny patients’ care and the second insurer to face allegations specific to Medicare Advantage members. While industry experts agree that AI holds promise for improving the patient experience, it also comes with risks, and lawsuits and other regulatory actions offer a warning to insurers of all types to come up with a proper risk mitigation strategy as they increasingly deploy AI to streamline certain operations.

In the Dec. 12 complaint, which was filed in the U.S. District Court for the Western District of Kentucky, Humana MA members accuse the insurer of relying on the nH Predict AI model to make “rigid and unrealistic” projections for how long a patient will require post-acute care after an inpatient hospital stay. The AI model was developed by naviHealth, a subsidiary of UnitedHealth Group, and was the subject of a highly critical investigation published by STAT in November and subsequent lawsuit filed against UnitedHealth by the estates of two deceased MA members.

Recognizing the “promise and peril” of artificial intelligence, President Joe Biden in October issued an executive order advancing a coordinated approach to ensuring the safe and responsible use of AI across multiple sectors. While HHS puts together a task force aimed at developing a regulatory action plan regarding the use of AI in health care, the White House on Dec. 14 unveiled the names of 28 payer and provider organizations committed to ensuring the safe and appropriate use of AI. Those included Medicare Advantage plan operators, such as CVS Health Corp., Allina Health (which has a cobranded PPO with CVS Health’s Aetna), Devoted Health, Geisinger, Health First (Florida), Oscar Health, Inc. and Premera Blue Cross.

While lawmakers continue to point fingers at risk adjustment and coding practices in Medicare Advantage for increasing plan payments relative to traditional fee-for-service (FFS) Medicare, a new analysis published in JAMA puts a spotlight on the “intended payment differences” created by the quartile structure currently used to set MA payment benchmarks. The Medicare Payment Advisory Commission (MedPAC) has previously recommended replacing the four-tiered system and “rebalancing” MA pay. Researchers now estimate that this system has generated an additional $46.7 billion in additional payments to MA plans, which could fuel the desire of progressive lawmakers to overhaul how MA plans are paid.

Established by the Affordable Care Act, the quartile system pays plans more for serving counties with the lowest FFS spending by applying a statutorily determined percentage to the per capita FFS estimates of spending for each county. The adjustments range from 95% for the highest-spending counties to 115% for the lowest-spending counties. Benchmarks are calculated before plans submit their bids and are also adjusted based on a plan’s Star Rating.

Nearly 32 million people were enrolled in Medicare Advantage plans as of December 2023, up from about 29.5 million in December 2022, according to AIS’s Directory of Health Plans. And while the six national carriers led by UnitedHealthcare currently enroll 69.8% of the market, regional Blues affiliates, provider-sponsored payers and other locally focused insurers have largely continued to grow alongside them. Tech-enabled startup insurers, meanwhile, saw some of the most explosive gains — and losses — in 2023. See the year-end enrollment wrap-up in the graphics below.

While major Medicare Advantage insurers are bracing for potential revenue reductions stemming from upcoming changes to the risk adjustment model, three insurers presenting at their recent investor conferences appeared bullish on the prospect of continued growth in MA, and in particular, the sizable opportunity to serve people who are dually eligible for Medicare and Medicaid. According to a recent analysis from AIS’s Directory of Health Plans, roughly 5.6 million out of an estimated 13 million dual eligibles in the U.S. are enrolled in a Dual Eligible Special Needs Plan (D-SNP).

Although managed Medicaid and the exchanges remain its No. 1 and 2 revenue drivers, Centene Corp.’s MA business — which has a large concentration of D-SNP members — will be an “important growth driver for Centene long term,” CEO Sarah London told investors on Dec. 12.

Just a few weeks after reports surfaced that The Cigna Group was looking to offload its Medicare Advantage business, reports emerged of a possible transaction with Humana Inc. that would create a diversified health insurance giant in the same weight class as CVS Health Corp. and UnitedHealth Group. Wall Street analysts agreed such a deal would invite scrutiny from regulators, partly because of Cigna’s substantial MA overlap with Humana, although multistate Blues insurer Health Care Service Corp. (HCSC) is reportedly interested in picking up Cigna’s MA book. To complete the square dance, rumors have also resurfaced of Walmart’s interest in purchasing Humana.

Reuters on Nov. 6 first reported that Cigna was exploring a sale of its MA business, which represents about 3% of its overall medical membership. Sources told the news outlet that the insurer was working with an investment bank to evaluate its options and that the potential sale could bring in several billions of dollars. Analysts at the time suspected that the move was an effort to preempt the intense antitrust scrutiny Cigna might face if it sought to merge with a government-focused firm such as Humana or Centene Corp.

Leading up to the 2024 Annual Election Period (AEP) that started on Oct. 15 and concluded on Dec. 7, major Medicare Advantage insurers unveiling geographic expansions signaled their continued pursuit of dually eligible Medicare-Medicaid beneficiaries. A new analysis of the 2024 Special Needs Plan landscape confirms that more SNPs designed specifically for dual eligibles will be available next year, while interest in Institutional SNPs (I-SNPs) appears to be waning after experiencing a short burst of growth. The Chronic Condition SNP (C-SNP) market, meanwhile, will remain relatively stable.

There will be 1,368 SNPs on the market in 2024, up from 1,320 in 2023 — a modest increase compared with the 10% jump between 2022 and 2023, according to the analysis from Clear View Solutions, LLC. Within the total, however, Clear View observed a notable increase in the number of D-SNPs. In 2024, there will be 874 D-SNPs available — including 698 plans that were available in 2023 and 176 new plans — compared with 809 in 2023 and 401 in 2018, before the Bipartisan Budget Act (BBA) of that same year granted permanent authorization to all SNP types. There are also more D-SNPs being added than dropped next year, which could be due to some plan consolidation, observes Clear View.

As part of new actions to lower health care and prescription drug costs by promoting competition, the Biden administration on Dec. 7 said it aims to further improve Medicare Advantage transparency. Noting that the MA program now serves roughly half of Medicare-eligible beneficiaries, the Biden administration in a fact sheet said it is committed to ensuring that MA plans “best meet the needs of people with Medicare, there is timely access to care, and the market has healthy competition.” Therefore, early next year HHS will solicit from the public “programmatic data” to better understand “the effects of market shifts on consumers and care outcomes.” When asked during a Dec. 6 press call for more details on this effort, a senior administration official responded: “We’ll be seeking additional information that will allow the agency to explore new policies and learn more about this really important program for seniors and people with disabilities.” Additionally, the administration said it will build on recent steps “[c]racking down on anticompetitive and anti-consumer practices” in MA and continue to implement updates to MA payment “that improve payment accuracy, address gaming, and recover overpayments.”