Supplemental Benefits

New data from Deft Research suggests that Medicare Advantage plans continue to struggle with retaining their dual eligible members, mainly because of problems associated with the supplemental benefits offered to address social needs. Published on June 29, Deft’s 2023 Dual Eligible Retention Study found that duals switch plans at about twice the rate of other MA beneficiaries. And while Deft says duals “absolutely depend” on supplemental benefits such as dental care, grocery allowances and utility assistance, duals’ reported issues with their current health coverage often stem from these enhanced offerings, whether they be a source of confusion or just prove difficult to use.

An estimated 30% of dual eligibles make a coverage change over the course of a year, and 8% of duals have already made a switch this year as of mid-May, according to Deft. (Dual eligibles can enroll in or switch dual plans once per quarterly Special Enrollment Period or during the Medicare Annual Election Period). By contrast, Deft in its 2023 Medicare Shopping and Switching Study, which is based on the responses of about 5,000 Medicare beneficiaries, observed that switching by “full pay” (i.e., those receiving no extra help) MA beneficiaries shot up to 15% this past AEP, compared with 12% in the prior two periods.

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.

From CMS’s expanded definition of primarily health-related supplemental benefits to the introduction of Special Supplemental Benefits for the Chronically Ill (SSBCI), Medicare Advantage plans have gained increasing flexibility over the last few years to offer supplemental benefits that can address social needs. Through the ongoing MA Value-Based Insurance Design (VBID) model — the only MA-focused demonstration being tested by the CMS Innovation Center — MA organizations have even more flexibility to target and tailor a variety of interventions. During a recent virtual panel of the Fourth National Medicare Advantage Summit, several longtime participants of the model agreed that such flexibility is critical to meeting beneficiaries’ evolving health-related and other social needs.

CMS first tested the model on a limited basis in 2017, allowing sponsors to offer reduced cost sharing for medications and offer high-value services to beneficiaries with select chronic conditions. Today, the model allows MAOs to tailor their MA plan offerings using several approaches and has 52 MAOs offering services to an estimated 6 million enrollees.

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.

In the first year of the COVID-19 pandemic, when many people were having trouble accessing basic personal protective equipment, Highmark Blue Cross Blue Shield began sending out care kits including PPE and other items to support seniors at home. The response from Medicare Advantage members was so positive that what started out as a feel-good gesture has become a full-blown supplemental benefit, and the insurer continues to refine the kits to meet members’ evolving needs and ensure continued satisfaction with the plan.

Starting with plan year 2022, eligible Highmark members were given the option to receive one of 17 condition care kits. Commonly referred to as the “big blue box,” each kit is filled with a variety of items tailored to a specific condition, with a focus on member choice and high quality, speakers from Highmark and its strategic partner RR Donnelley explained during the 14th Annual Medicare Market Innovations Forum, held on March 28 and 29 in Orlando. RR Donnelley, a firm that provides marketing and business communications, commercial printing, and related services, has assisted CVS Health Corp.'s Aetna and Humana Inc. with similar initiatives.

As the Medicare Advantage program saw slower enrollment during the 2023 Annual Election Period (AEP) than previous years, many insurers that enriched their benefits while maintaining affordability and effectively communicated these changes saw above-average growth. AIS Health, a division of MMIT, spoke with several plans that credited their localized approach, enhanced relationships with sales agents and new supplemental benefits with helping to increase their membership over the AEP.

Meanwhile, during the Open Enrollment Period (OEP) that allows MA enrollees to make a one-time coverage switch and ends on March 31, insurers have been working hard to ensure a positive experience, hosting member welcome calls and events and educating members on how to use their new benefits. According to AIS’s Directory of Health Plans, MA enrollment from February 2022 to February 2023 grew by 7.4%, compared with 8.5% in the year prior.

President Joe Biden’s fiscal year 2024 budget proposal, released on March 9, made headlines for its efforts to preserve the Medicare Trust Fund with several drug pricing proposals, such as expanding the number of drugs eligible up for negotiation between Medicare and pharma and extending a $35 insulin cost-sharing cap in Medicare to commercial plans. Beyond the headlines, however, the budget includes several items targeting Medicare Advantage and Medicaid insurers, such as a proposal to establish new medical loss ratio (MLR) requirements for supplemental benefits in MA.

Largely seen as a wish list, the president’s budget hinges on whether he can convince a divided Congress to put the proposals into legislation. “Many of the proposals ultimately offered in the President’s budget are likely to turn out to be more ‘headline’ than reality,” suggested Citi analyst Jason Cassorla in a recent research note. “While we are not completely dismissive of the White House’s efforts to shore up Medicare, we view the implicit savings constructs (without cutting benefits) and redirection to Medicare as more of a messaging document at this juncture.”

As expanded supplemental benefits offered by Medicare Advantage plans continue to grow and attract enrollees, a new report from the Government Accountability Office (GAO) observed that there is still limited data on the extent to which beneficiaries are using these benefits. GAO suggested that CMS could do more to collect data on supplemental benefit use from MA organizations and recommended that it issue clarification on current encounter data reporting requirements.

“We’ve heard CMS Administrator Chiquita Brooks-LaSure say at pretty much every recent public appearance that they want to understand where the dollars are going, making sure that they’re getting good value for their investments,” remarks Tim Murray, a principal with the actuarial and consulting firm Wakely Consulting Group, an HMA company. “I think that has some read-through for risk adjustment, which is already playing out, but also of equal importance for the supplemental benefits. And I think if Medicare Advantage as an industry is going to be able to make a data-driven case that these supplemental benefits are actually driving sustainable value for members beyond marketing sizzle, then this issue will need to be addressed and remedied.”

Two weeks ago, CMS in its 2024 Advance Notice projected that Medicare Advantage organizations can expect an average estimated change in revenue of 1.03%, when accounting for underlying factors. Although the industry had been bracing for a much smaller rate increase than the robust 8% CMS predicted this time last year, a deeper dive into the notice has plan sponsors and providers understandably concerned about potential rate reductions. That’s largely because the annual rate notice, which often includes proposed changes to the risk adjustment model used to determine plan payments, proposes a substantial redesign of the model.

“This is the most radical change to the risk adjustment model since it started,” asserts risk adjustment consultant Richard Lieberman, who estimates that the Part C CMS-Hierarchical Condition Categories (HCC) model has gone through “four major iterations” since it was first used to adjust plan payments in 2004. One significant change in the proposed 2024 CMS-HCC model is that it has 115 payment HCCs, up from 86 in the current model, which was updated in 2020. In addition, CMS proposed moving from using ICD-9 diagnoses codes to the “more commonly used” ICD-10, as well as shifting to more recent underlying fee-for-service (FFS) Medicare data years to reflect 2018 diagnoses and 2019 expenditures (from 2014 diagnoses and 2015 expenditures).

A new report from the CMS Innovation Center identified redesigning financial benchmarks and risk adjustment to improve model test effectiveness as a priority going forward. In its annual report to Congress, the Innovation Center noted that “[m]any financial benchmarks and risk adjustment methodologies have created opportunities for potential gaming and upcoding among participants — and have therefore reduced savings for Medicare.” The Innovation Center largely tests models serving fee-for-service Medicare beneficiaries and has relied on risk adjustment as a critical component of its models, including all accountable care organization (ACO) based models. The agency added that it has launched “an examination of its benchmarking and risk adjustment approaches to provide incentives to encourage participation, especially among providers caring for underserved beneficiaries and ACOs with varying levels of experience, as well as ensure payment accuracy.” The report also highlighted health equity as an ongoing focus and observed ways to improve communications with potential hospice benefit enrollees, referring to one component of the ongoing Medicare Advantage Value-Based Insurance Design model, to ensure that hospice and palliative care are accessible to all beneficiaries.