Fee-for-service Medicare

The City of New York and its retirees this month are experiencing déjà vu, and CVS Health Corp.’s Aetna is caught in the middle. The health insurer was slated to begin serving retired municipal workers and their eligible dependents on Sept. 1 via a Medicare Advantage PPO plan. But thanks to the latest court order in a years-long series of setbacks, the city’s plan to privatize retiree health coverage again is on hold.

Led by Mayor Eric Adams (D), the city was initially supposed to transition some 250,000 retirees and dependents to a private Medicare plan administered by Elevance Health, Inc., in January 2022. The move was delayed by a petition from retirees, and state Supreme Court Judge Lyle Frank ruled that the proposal violated city law by charging retirees $191 per month to maintain their fee-for-service Medicare coverage. Amid the legal challenges, NYC Comptroller Brad Lander declined to register the contract. After Elevance backed out of the deal, the city struck an agreement with Aetna to make its PPO plan the only premium-free coverage option.

As the FDA prepares to make a full approval determination on Alzheimer’s drugs such as Biogen Inc.’s Leqembi (lecanemab-irmb), CMS has released new details about its plan to collect real-world data on Medicare patients taking the drugs. To qualify for Medicare coverage of a drug with traditional FDA approval that may slow the progression of Alzheimer’s disease, patients’ physicians will have to participate in the collection of evidence about how the drugs work in patients through a registry. And they will be able to submit that information in an “easy-to-use format” through a nationwide, CMS-facilitated portal, the agency explained last month. CMS is working with multiple organizations preparing to launch their own registries, and once available, those will be listed online and clinicians may choose a registry for participation, the agency clarified on June 22. CMS also listed the various elements it intends to capture through the registry, including information related to questions in the National Coverage Determination, such as whether the drug meaningfully improves health outcomes (i.e., slows the decline of cognition and function) for patients in broad community practice, and whether the benefits and harms (e.g., brain hemorrhage and edema) associated with the use of the drug depend on the characteristics of patients, treating clinicians and setting. The FDA decision is expected by July 6.

Favorable selection associated with beneficiaries choosing Medicare Advantage — which now enrolls more than half of Medicare beneficiaries — in combination with more intense diagnostic coding by plans is leading to increased MA payments that may not accurately reflect the costs of providing care to those beneficiaries, asserts the Medicare Payment Advisory Commission (MedPAC) in its latest report to Congress. And the independent advisory body has some new takes on potential payment policies that aim to lessen the impact of favorable section by moving away from predictive-cost benchmarking that is based solely on fee-for-service (FFS) Medicare spending.

For the second time in recent history, New York City Comptroller Brad Lander is refusing to register the city’s contract with a Medicare Advantage insurer. But this time it’s not just legal challenges that has the comptroller questioning the city’s move away from fee-for-service (FFS) Medicare, but the broader trends in the MA industry. And CVS Health Corp.’s Aetna is ready to defend its positioning as an experienced provider of retiree health benefits.

After multiple delays, the city was planning to transition some 250,000 retirees and their eligible dependents on Sept. 1 to a PPO plan administered by Aetna. The contract is valued at $15 billion over the first five-plus years of the agreement.

As Medicare Advantage organizations prepare for the next bid cycle, each year seems to bring its own set of factors that threaten their ability to stay competitive amid potential cost increases. For the 2023 plan year, the expiration of COVID-related adjustments and expected decline in quality bonus payments had plans considering modest benefit enhancements. For the 2024 plan year, maintaining stable benefits and premiums amid anticipated rate cuts and uncertainty around Medicare Part D trends is the name of the game, according to actuaries who helped plans submit bids that were due on June 5.

After proposing substantial revisions to the CMS-Hierarchical Condition Categories (HCC) risk adjustment model that insurers argued would result in rate reductions, CMS on April 3 opted to phase in the changes starting with 2024. CMS at the time estimated that plans would, on average, see a 3.32% increase in risk adjusted revenue, although that will vary broadly by plan. CMS also estimated the combined impact of the risk model revision and fee-for-service normalization could reduce payments by 2.16%. However, given that the agency will apply a blended method to calculate risk scores next year, plans could see a 4.44% overall risk score trend.

After gaining accelerated approval from the FDA in January, Biogen Inc.’s Alzheimer’s treatment Leqembi (lecanemab-irmb) could receive full approval by July, thanks to a recent 6-0 advisory panel vote. And if the drug — which is subject to limited Medicare coverage per a national coverage determination (NCD) — does receive traditional approval, CMS recently vowed to “ensure availability” of new drugs that may slow the progression of Alzheimer’s disease if qualifying Medicare patients are monitored through a registry.

Leqembi would be the first drug to be covered under this type of arrangement, which has historically been reserved for new medical and diagnostic devices. But sources say uncertainty about both the registry and coverage of imaging associated with the drug makes it hard to predict uptake under the supposedly broader Medicare coverage and future costs to Medicare Advantage insurers.

After learning of a disturbing interaction between a Papa Inc. employee and a Medicare Advantage member, Capital District Physicians’ Health Plan (CDPHP) last year stopped all in-person visits from the supplemental benefits vendor and launched an investigation into Papa’s security protocols. The incident, which involved a Papa worker making lewd comments while visiting a homebound member, and CDPHP’s ongoing investigation was detailed in a Bloomberg article on May 30. After learning of the incident in early 2022, the New York-based insurer banned the “pal,” but eventually paused all future visits. Since then, it has been closely monitoring all customer service interactions to ensure the safety and wellbeing of members, a spokesperson tells AIS Health, a division of MMIT. CVS Health Corp.’s Aetna and Humana Inc. — two other insurers that have partnered with Papa — declined to comment when contacted by AIS Health.

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.