For our annual series of outlook stories on the year ahead in Medicare Advantage, AIS Health, a division of MMIT, asked multiple experts what they view as MA organizations’ “keys to success” in 2024 and what critical investments will help them unlock their goals. Responses ranged from using artificial intelligence and other digital tools to improve the member experience to strategically striking value-based agreements with providers.

“If health plans don’t do a good job of educating or empowering the members with information, then the member effort increases, which frequently leads to member churn,” observes Srikanth Lakshminarayanan, senior vice president of the Center of Excellence for Healthcare Engagement Services at Sagility, a tech-enabled business process firm that supports payers and providers. “With MA membership increasing literally day by day, it’s important for health plans to make a conscious effort at doing a good job on member onboarding and retention. People who come out of their commercial plan into a Medicare plan need handholding of a different kind. They often need to know how Medicare works, what’s the supplemental spend, etc.”

Medicare Advantage plans next year can expect to receive, on average, a 3.70% increase in risk adjusted revenue, according to the 2025 Advance Notice of payment changes for MA and Part D plans, released on Jan. 31. That’s when taking into account a 2.45% revenue decline stemming from CMS’s phased-in risk model revision and fee-for-service (FFS) normalization, an effective growth rate of 2.44% and an average increase in risk scores of 3.86%, according to a CMS fact sheet. CMS this time last year estimated that plans would see a modest rate increase of 1.03%, but revised that projection to 3.32% for 2024 after deciding to phase in changes to the CMS-Hierarchical Condition Categories risk adjustment model starting this year. CMS said it plans to proceed with the phase-in as described in last year’s rate notice and is “proposing updates to the Part D risk adjustment model to reflect the redesign of the Part D benefit as required by the IRA [Inflation Reduction Act].” CMS requested comments on the proposals by March 1; the final rate notice is expected to be released no later than April 1.

While publicly traded insurers’ fourth-quarter and full-year 2023 earnings reported thus far have highlighted concerning trends in Medicare Advantage, a new report from Moody’s Investors Services suggests that the MA market even prior to the current climate is showing “signs of weakening.” Nevertheless, with per-member earnings far greater than in other sectors, MA can still be profitable when properly managed and will stay competitive, suggests an analyst with the credit ratings firm.

Among the 10 insurers rated by Moody’s — which account for approximately two-thirds of all MA members — aggregate earnings stemming from MA decreased by 2% from $10.8 billion in 2019 to $10.6 billion in 2022, the most recent year available. During that same period, the aggregate MA earnings margin fell from 4.9% to 3.4% and earnings per member dropped by 28% ($732 to $526). While those earnings remain higher compared to other segments, earnings per member in the Medicaid and commercial segments increased, leading to an overall decline of 2.7% to $216 per member, according to the Jan. 23 Moody’s report.

With the recent filings of two proposed class action lawsuits against major Medicare Advantage insurers’ use of a computer algorithm to deny patient care, upcoming CMS audits of MA plans’ utilization management (UM) tactics and progressive lawmakers’ push for CMS to collect more data on coverage denials, the MA program is starting the year off under a microscope. And while major new policy developments are unlikely to come out of a split Congress this year, industry experts agree that prior authorization — along with risk adjustment and coding intensity — will continue to garner attention from lawmakers and regulators.

HealthScape Advisors Principal Cary Badger and Managing Director Alexis Seeder Levy point to three possible scenarios to watch for in 2024:

For our annual series of outlook stories on the year ahead in Medicare Advantage, AIS Health, a division of MMIT, spoke with more than a dozen industry experts on the challenges facing MA insurers and the potential strategies to stay ahead of them. One running theme from this year’s conversations is the sheer level of uncertainty MA organizations are facing in 2024 and beyond, from revenue headwinds driven by changes in risk scoring and the Star Ratings to yet-to-be-finalized proposals around broker compensation and supplemental benefits. And that’s all while managing an overhaul of the Medicare Part D benefit, thanks to the Inflation Reduction Act (IRA) of 2022. And many of these changes “could have substantial impacts on revenue, which impacts benefit design, supplemental benefits, and so on,” says Steve Arbaugh, managing principal and CEO with ATTAC Consulting Group.

Here, in no particular order, are the major challenges and unknowns facing MAOs in 2024 and beyond:

Thanks to the Inflation Reduction Act (IRA) of 2022, sponsors of Medicare Advantage Prescription Drug (MA-PD) plans and Prescription Drug Plans (PDPs) are preparing for the biggest Part D changes in the program’s 18-year history. As plans consider how they’ll manage an increasing share of responsibility for catastrophic drug costs, sources say they await critical outstanding information, such as an updated Part D risk adjustment model and additional guidance on the Medicare Payment Prescription Plan.

“The Inflation Reduction Act of 2022 will be ushering in many benefit parameters that will need to be carefully included in planning for 2025,” observes Debra Devereaux, R.Ph., principal and chief pharmacy/clinical officer with Rebellis Group. For starters, the IRA eliminates the coverage gap (a.k.a. the “donut hole”) for seniors in 2025, and plans will be responsible for 60% of drug costs in the catastrophic phase of coverage, which is triggered when enrollees exceed a new $2,000 out-of-pocket cap. (Plans paid 15% of that share in 2023 and will pay 20% in 2024, while CMS will decrease its share from 80% to 20% in 2025, and manufacturer discounts will be introduced in the initial and catastrophic coverage phases.)

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.

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.

The saga of Bright Health Group, Inc. became even more complex on Nov. 29, when the troubled health insurer's plan to remit unpaid risk adjustment fees to CMS was partially blocked by a Texas state judge at the prompting of the Texas Dept. of Insurance (TDI). The Texas court’s action will compel Bright to complete the receivership process for its Texas subsidiary and pay off creditors with claims in Texas before sending any capital to the federal government or other out-of-state creditors, experts say — that is, if there is any money to send somewhere in the first place.

"I know that there’s some talk now that Texas will be at the back of the line for purposes of CMS or any of the Texas plans that would have gotten the risk adjustment money, in terms of being able to collect on that,” Leah Stewart, an attorney at Reed Claymon PLLC, tells AIS Health, a division of MMIT. “I think politically they [Texas officials] probably don’t care that it impacts CMS’s deal with Bright Health. But I don’t know that they were actually angling for that, as opposed to just deciding that Bright Health of Texas doesn’t have enough money and taking it down the standard liquidation path.”

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.”