Fee-for-service Medicare

Over the next few years, Medicare Advantage organizations face a host of new requirements around the use of prior authorization (PA), including recently finalized policies that take effect next year. While some of the changes promulgated by CMS aim to curtail the use of PA, they’re not likely to satisfy lawmakers who are keeping a close watch on the MA industry, especially as the program serves more and more seniors.

For one, the proposed 2022 Interoperability and Patient Access Rule, which was first issued in 2020 and later updated to include MA organizations and new implementation timeframes, establishes various application programming interfaces (APIs) for the sharing of patient information. That rule also aims to automate certain PA functions with the implementation of a Fast Healthcare Interoperability Resources Prior Authorization Requirements, Documentation, and Decision API.

Still intent on standing apart from established Medicare Advantage competitors with their use of technology, Medicare-focused “insurtechs” Alignment Healthcare, Inc. and Clover Health Investments Corp. recently reported first-quarter 2023 earnings that showed shrinking losses and increasing insurance revenue. While both insurers are focused on retaining and/or growing their MA membership, fellow startup Bright Health Group, Inc. will soon shed its MA business — its last insurance asset — to continue growing its noninsurance segment focused on value-based care (VBC) delivery.

Declaring a “strong start to the year,” Alignment Healthcare, Inc. on May 4 posted first-quarter revenue of $439.2 million, reflecting year-over-year growth of 27.1%. That was aided largely by a nearly 21% jump in health plan premium revenue to $399.7 million as MA membership climbed 16% to 109,700 lives, the company reported.

Whether Medicare Advantage insurers like it or not, a host of changes are coming their way that will impact risk adjusted revenue starting in 2024 and could have downstream effects on beneficiaries and providers. The forthcoming overhaul of the CMS-Hierarchical Condition Categories (HCC) risk adjustment model, which will be phased in over three years starting in 2024, was arguably the hottest topic over four days of sessions at last month’s Fourth National Medicare Advantage Summit, where industry experts’ views on the model ranged from supportive to reproving.

MA plans next year can expect to receive, on average, a 3.32% increase in risk adjusted revenue, driven in part by an underlying coding trend of 4.44%, CMS estimated in a fact sheet on the final 2024 MA and Part D rate notice. With that notice, CMS finalized plans to remove thousands of diagnosis codes mapped to HCCs for payment, transition to the use of ICD-10 codes and update the underlying fee-for-service (FFS) Medicare data years. CMS has explained that the new model is intended to reflect the cost of care more accurately by using the more commonly used ICD-10 system and addressing discretionary coding (i.e., upcoding) that leads to wasteful spending.

As CMS takes multiple steps to steer managed care organizations and states toward advancing health equity across government programs, the agency’s Office of Minority Health recently put out its annual report illustrating persistent disparities in Medicare Advantage. Released for National Minority Health Month and produced in collaboration with The RAND Corp., the 2023 Disparities in Health Care in Medicare Advantage by Race, Ethnicity, and Sex report showed some modest improvements on clinical care measures for a few groups, but a substantial proportion of clinical care scores continued to fall below the national average for American Indian/Alaska Native (AI/AN), Black and Hispanic MA enrollees.

Compared with the traditional, fee-for-service Medicare program, the MA program serves a larger proportion of minority enrollees. The April report compared care for six groups across 44 measures: (1) seven patient experience measures based on responses to the 2022 Consumer Assessment of Healthcare Providers and Systems (CAHPS), which was conducted between March and May of last year and asked respondents about care received in the six months prior to the survey, and (2) 37 clinical care measures based on the Healthcare Effectiveness Data and Information Set (HEDIS) that is collected from medical records and administrative data and reflects care received in 2021.

A Senate Finance Committee “secret shopper” investigation of Medicare Advantage plan provider directories turned up inaccurate, nonworking phone numbers or unreturned calls in 33% of 120 provider listings. Staff reviewed directories of 12 different plans in a total of six states and called 10 systematically selected providers from each plan for a total of 120 calls, according to the May 3 report. Furthermore, more than 80% of the supposedly in-network mental health providers that were contacted by reviewers were unreachable, not accepting new patients or out of network. In remarks given at a May 3 hearing to discuss the issue, Committee Chairman Ron Wyden (D-Ore.) called these so-called ghost networks a “breach of contract” by health insurers and vowed to “use all resources” at his disposal to “get some real accountability.” When insurers host such ghost networks, “they are selling health coverage under false pretenses, because the mental health providers advertised in their plan directories aren’t picking up the phone or taking new patients,” he stated. “In any other business, if a product or service doesn’t meet expectations, consumers can ask for a refund.” He also pointed out that CMS performs regular audits of MA plans to ensure that they meet minimum standards but does not routinely audit MA provider directories. "[T]he results speak for themselves. It’s time for that to change," he added.

UnitedHealth Group on April 14 said revenue for the first quarter of 2023 rose 15% from the prior year to $92 billion, reflecting double-digit growth at both Optum and UnitedHealthcare. The insurance segment, which served about 1.2 million more people in the first three months of the year with broad-based growth across its commercial, Medicare and Medicaid lines of business, saw revenues climb 13% to $70.5 billion, according to the company’s earnings press release. And the insurer said it expects to “exceed the upper end” of its Medicare Advantage membership growth expectations for the year. The company stated in November that it anticipated adding between 800,000 and 900,000 new MA members in 2023. As of March 31, the company served more than 7.54 million MA enrollees, compared with 6.89 million a year ago. UnitedHealth recorded first-quarter adjusted earnings per share of $6.26, an increase of 14% from first quarter 2022, and raised its full-year adjusted EPS outlook to between $24.50 and $25.00. During an April 14 conference call to discuss first quarter earnings, CEO Andrew Witty commended CMS for deciding to phase in changes to the MA risk adjustment system. “The phase-in will allow for more time to minimize impacts on beneficiaries as we lean on the multiple levers available to us, including our ability to manage costs and our relentless focus on member and patient needs,” he stated, according to a transcript of the call from The Motley Fool.

In a final rule making policy and technical changes for contract year 2024, CMS on April 5 finalized multiple provisions aimed at ensuring continuity of care for Medicare Advantage members, improving health equity and easing behavioral health access. And while the rule finalized most of the Biden administration’s proposals around misleading marketing practices in MA, industry experts say CMS walked back and modified a few proposals as it waits to see how some of the new requirements play out in practice.

In a fact sheet on the final MA and Part D rule, CMS said it finalized 21 out of 22 marketing provisions that appeared in the proposed rule. But CMS left out one notable provision that would have potentially disrupted a plan’s ability to purchase leads from third parties and indicated it will consider it in future rulemaking.

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.

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.