Given the outcomes of two legal challenges to CMS’s application of a new Star Ratings methodology last year, CMS on June 13 confirmed plans to recalculate the 2024 Star Ratings — and notified all Medicare Advantage organizations of a “limited opportunity” to resubmit their bids for the 2025 plan year. As a result, plans that stand to benefit from the recalculations and their actuaries are now scrambling to get changes into CMS by its June 28 deadline.

In what industry experts agree is an unprecedented situation, CMS’s decision came shortly after the U.S. District Court for the District of Columbia agreed with SCAN Health Plan that CMS’s failure “to follow its own regulation” resulted in the not-for-profit MA insurer receiving an incorrect 2024 Star Rating, which cost the plan nearly $250 million in quality bonus payments (QBPs) for 2025. That same court also ruled that CMS must recalculate Anthem Blue Cross and Blue Shield of Georgia’s Star Ratings. Elevance Health, Inc., the parent company of the Anthem Georgia plan, filed a lawsuit against HHS in December and disclosed in March that CMS had updated its original ratings, which will lead to an additional $190 million in revenue for plan year 2025. SCAN filed a similar suit in December.

Compounded by known challenges in estimating Medicare Part D costs stemming from the Inflation Reduction Act (IRA), the process of finalizing Medicare Advantage insurers’ bids for the 2025 plan year was an “extra wild ride” due to a variety of unknowns, according to Matt Kranovich, principal and consulting actuary with Milliman. And while national insurers in recent months have publicly disclosed their intent to skinny down their MA offerings through things like benefit adjustments and strategic exits, similar reactions to revenue headwinds may play out across the country and lead to more market consolidation than CMS would care to see, warns Tim Murray, principal with Wakely, an HMA company.

As Medicare Advantage insurers contemplate 2025 bids in an unfavorable funding environment, select firms that reported first-quarter 2024 earnings at press time indicated their preference for margin recovery versus growth and the likelihood of service area/benefit reductions next year.

For the quarter ending March 31, 2024, CVS Health Corp. on May 1 reported consolidated revenues of $88.4 billion, reflecting year-over-year revenue growth of 3.7% that would have been larger if not for a decline in the Health Services segment. Meanwhile, first quarter adjusted earnings per share (EPS) dropped from $2.20 a year ago to $1.31, which the company attributed to utilization pressure in the Health Care Benefits segment’s MA business. That segment’s medical loss ratio (MLR) was 90.4%, compared with 84.6% in the prior-year quarter, while higher-than-expected medical costs of approximately $900 million — primarily driven by MA — were due to seasonal factors or items specific to the quarter, the company clarified.

Amid concerns about utilization trends, a disappointing final rate notice and ongoing regulatory changes, “headwinds” has been the dominant buzz word in Medicare Advantage for months. To gain a better understanding of the cost-containment levers MAOs can pull in the face of cost pressures, AIS Health, a division of MMIT, spoke with AArete Managing Director Paul Schuhmacher. In his work with the global management and technology consulting firm, Schuhmacher co-leads the payer practice, which supports approximately 120 plans across the U.S.

Editor’s note: This interview has been edited for length and clarity.

The April 1 release of final rate projections for Medicare Advantage and Part D plans was largely uneventful as CMS maintained the same all-in estimate of what plans can expect to see, on average, in terms of a reimbursement update next year. But the market did not respond well: MA-exposed insurers’ shares took a tumble and equity analysts warned that a revenue decline — before coding trend — could lead to benefit cuts and footprint reductions.

Industry trade groups did not respond favorably, either. In a statement released immediately after the rate announcement, AHIP President and CEO Mike Tuffin said the finalized policies would “put even more pressure on the benefits and premiums of 33 million Medicare Advantage beneficiaries who will be renewing their coverage this fall,” particularly as the MA and Part D programs face regulatory and legislative changes.

As Medicare Advantage organizations continue to face intense scrutiny — from the government’s latest probe into UnitedHealthcare to the Medicare Payment Advisory Commission calling attention to the cost of higher coding in MA — a new report underscores the power of whistleblower lawsuits in enforcing program requirements. Recent False Claims Act (FCA) settlements with the Dept. of Justice reflect a continued focus on MA insurers submitting inaccurate diagnosis information for the purposes of inflating reimbursement, and while the DOJ isn't involved in proposed class action lawsuits accusing major insurers of using artificial intelligence to wrongfully deny claims, such litigation “bears continued watching as it progresses.”

In its latest report to Congress, the Medicare Payment Advisory Commission (MedPAC) asserted that the federal government now pays approximately 22% more for Medicare Advantage enrollees than it would if they were enrolled in traditional fee-for-service (FFS) Medicare, for projected higher spending of $83 billion in 2024. That figure came in slightly below projections provided at a January meeting but higher than MedPAC’s previously estimated differences in spending, largely because it accounted for favorable selection. And while the commission said it “strongly supports the inclusion of private plans in the Medicare program,” it maintains that the current payment system is ripe for reform.

According to MedPAC’s latest Report to the Congress: Medicare Payment Policy, released March 15, the federal government in 2023 paid MA plans roughly $455 billion for serving approximately 31.6 million enrollees — 52% of Medicare beneficiaries with both Parts A and B coverage.

A recent report commissioned by the Better Medicare Alliance (BMA) estimated that Medicare Advantage per-member per-month (PMPM) payments could drop by 1.0% if CMS finalizes proposals contained in the 2025 Advance Notice. It also estimated that the PMPM value of supplemental benefits, or reductions to premiums and cost sharing, would decline by an average of $33 or more. In its preliminary rate notice released in January, CMS projected that MA plans could see an average revenue increase of 3.70%, which included an estimated a -2.45% revenue decline due to a combination of risk model changes that are being phased in and fee-for-service Medicare normalization, an effective FFS growth rate of 2.44%, and an average risk score trend of 3.86%. The report, prepared by Berkeley Research Group (BRG), projected that MA medical cost inflation will rise by 4% to 6% in 2025 and that CMS’s estimated pay increase will not adequately cover increased medical expenses. Citing a National Association of Insurance Commissioners analysis, BRG pointed out that PMPM medical costs in MA increased by an estimated 7.3% for the first nine months of 2023, while recent insurer earnings reports suggest medical costs will continue to grow in 2024.

The U.S. Dept. of Justice (DOJ) has opened an antitrust investigation into UnitedHealth Group, according to an internal company document shared with AIS Health and a Wall Street Journal report citing unnamed people familiar with the matter.

Federal regulators are reportedly seeking information about how the Minnesota-based company’s UnitedHealthcare insurance arm interacts with the many provider acquisitions that its Optum division has made in recent years — and how that relationship affects competition.

One health care economist says that while many unanswered questions remain, the result of a different investigation into provider consolidation suggests that the DOJ’s probe of UnitedHealth could end in an antitrust lawsuit.

As CMS proceeds with its planned phase-in of changes to the CMS-Hierarchical Condition Categories (HCC) risk adjustment model starting this year, the agency on Jan. 31 projected that Medicare Advantage plans next year can expect to receive an average increase of 3.70% in risk adjusted revenue. After picking apart the various factors that go into that assumption, however, the industry is bracing for an effective rate reduction, along with significant changes to the Part D benefit that incited proposed updates to the RxHCC risk adjustment model used to calculate direct subsidy payments to Part D plans.

CMS this time last year projected an all-in rate increase of 1.03%, which included an effective growth rate of 2.09% and expected revenue declines of -3.12% — stemming from changes to the CMS-HCC risk model and fee-for-service (FFS) normalization — and -1.24% due to changes in Star Ratings from the prior year. The agency also estimated an underlying MA risk score trend of 3.30%. Subsequent studies suggested that the removal of thousands of diagnosis codes, renumbering of several HCCs, and other technical changes would reduce plans’ risk scores by anywhere from 2% to 14%. In the final rate notice, CMS revised its all-in rate increase projection to 3.32% after deciding to phase in the risk model changes over a three-year period.