The Biden administration on Monday followed through on its proposal to cut next year’s base payments to Medicare Advantage plans an average of 0.16%, despite pressure from insurers and their allies in Congress.
Why it matters: While the plans will wind up seeing a net increase once payments are risk-adjusted to account for the health of their customers, the news sent shares of UnitedHealth, CVS Health, Humana and Centene falling amid predictions of continued financial pressure.
State of play: The base pay decrease stems from the continued phase-in of controversial changes to the risk adjustment coding system the Biden administration started last year to make MA payments more accurate.
- Insurers get more money if their enrollees have more documented health issues, and the policy changes aimed to stop abuses of that system. But the health plans maintain that’s akin to cutting seniors’ benefits.
- The plans are expected to see an average 3.7%, or $16 billion, increase in payment once risk scores are factored in, the Centers for Medicare and Medicaid Services said.
Zoom out: More than half of Medicare enrollees now get their coverage from Medicare Advantage plans, which experts say are overpaid and cost taxpayers tens of billions of dollars more than they should.
- Insurers administering benefits report rising costs due to higher demand for medical services as patients catch up on care they deferred during the pandemic.
The industry suggested this winter that benefits could be cut if CMS didn’t improve rates over the initial plan.
What they’re saying: “These policies will put even more pressure on the benefits and premiums of 33 million Medicare Advantage beneficiaries who will be renewing their coverage this fall,” said Mike Tuffin, CEO of the insurer trade group AHIP.
What we’re watching: Biden administration officials say enrollees’ benefits should remain stable next year, but plan bids due June 1 could show scaled-back benefits and premium adjustments, said Duane Wright, a senior research analyst at Bloomberg.
- “President Biden’s team is gambling that MA beneficiaries won’t realize before the election the benefits Biden’s team is causing them to lose come January 2025,” said Raymond James analyst Chris Meekins.