Payers Say MA Rate Cut Puts Affordable Care At Risk

As expected, insurance-friendly groups are upset over the feds’ MA benchmark payment decision Monday.

Global strategy firm Capstone said the CMS decision most negatively impacts Humana, UnitedHealth Group, Elevance Health, Cigna and certain providers like Agilon that were expecting high utilization rates last quarter to be represented in the growth rate, which decreased compared to the advance notice in January.

“The rule is most negative for risk-bearing providers, who had hoped that in addition to a modest boost in payment rates, CMS might consider excluding certain diagnoses from the v28 risk model revision, namely diabetes and mild depression,” said the firm in an analysis. “Given that utilization management exists in MA but not in traditional Medicare and that most provider groups attributed the spikes to respiratory illness, it would make little sense that the same utilization trends did not occur in traditional Medicare.”

They heard from the Alliance of Community Health Plans in March that the disconnect between insurers and CMS on utilization increases may be because traditional Medicare providers have 12 months to submit claims, so last quarter’s utilization is not yet reflected in claims. Although the 2026 MA advance notice could correct for increased utilization, that leaves a lot of time until then.

The Better Medicare Alliance bemoaned the feds ignoring rising health costs as well, and said CMS did not listen to bipartisan members of Congress.

“Left unaddressed, CMS’ Final Rate Notice risks the stability of the affordable and dependable care more than 32 million Medicare Advantage beneficiaries rely on, especially those with lower incomes and from diverse communities, who may experience disruption to their benefits or premiums in the fall of 2024 when they choose their Medicare coverage,” said Mary Beth Donahue, president and CEO, in a statement.

Groups also felt changes to the risk adjustment model understate the cost of plans designed to help dually eligible individuals, arguing these plans operate on narrow margins.

“These small differences in rates and risk-adjustment accuracy make an outsized difference in their sustainability,” said Association for Community Affiliated Plans CEO Margaret Murray in a statement. “As our members assess the impact of this rate notice on their 2025 benefit offerings, we will continue to work with CMS to recognize the diversity of plans operating D-SNPs, and the impacts that changes to the rate components have on Safety Net Health Plans.”

CMS has been publicly keen to rein in Medicare Advantage in recent months. At a recent MedPAC meeting, analysts showed that Medicare is projected to overpay Medicare Advantage plans by $88 billion, compared to what traditional Medicare would’ve received.

Insurers will feel resentful Monday as the feds opted to not reverse its decision to decrease Medicare Advantage (MA) benchmark payments by 0.16%, the Centers for Medicare & Medicaid Services (CMS) announced.

CMS still maintains average payments to increase by 3.7% in 2025. The federal government expects to pay up to $600 billion in MA payments to private plans.

“CMS continues to take steps to maintain the stability of the Medicare Advantage and Part D prescription drug programs,” said CMS Administrator Chiquita Brooks-LaSure in a statement. “The finalized policies in the Rate Announcement and the Part D Redesign Program Instructions will make improvements to keep Medicare Advantage payments up-to-date and accurate, lower prescription drug costs, and ensure that people with Medicare have access to robust and affordable health care options.”

In January, CMS said payments to MA plans would increase by the same rate, good for a $16 billion increase over 2024. But the proposal called for setting benchmark payments at a slight 0.2% decrease that insurers found troubling. The coding intensity adjustment was set to remain at the statutory minimum of 5.9%.

It was previously unclear whether CMS would play ball with insurers and raise benchmark rates, as the agency has done in years past. The feds have faced criticism for increasing payments to insurers at a time when health plans are so profitable.

AHIP said the cost of care for its members is rising and said the cuts will be harmful, particularly as MA and Part D programs deal with the effects of a changing risk adjustment landscape.

“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 AHIP President and CEO Mike Tuffin in a statement shared with Fierce Healthcare.

Stocks dropped in after-hours trading for UnitedHealth Group, Elevance Health, Centene and CVS.

While there has been greater scrutiny on the business practices of MA organizations in recent months, with more support coming from Republican lawmakers, bipartisan support remains for the future of the program.

Before the proposed rate cut took place in January, a bipartisan group of senators including majority leader Chuck Schumer, D-New York, John Fetterman, D-Pennsylvania, Amy Klobuchar, D-Minnesota, Angus King, I-Maine, James Lankford, R-Oklahoma, Ted Cruz, R-Texas, and Rand Paul, R-Kentucky, voiced their support (PDF) for MA and asked for payment stability.

More letters, from Democrats and Republicans, defending MA rates have been released in the run-up to the final rule. A group of Democratic House members called on CMS to update payment rates to “fully reflect higher medical utilization trends” among other considerations.

CMS is also choosing to phase in the Part C risk adjustment model by blending 67% of the risk score calculated using the 2024 MA risk adjustment model with 33% of the score calculated under the old model. The blended risk score trend for the upcoming year is 3.86%.

Because a high percentage of people of people in Puerto Rico have MA plans, the feds will base the MA county rates on the costs of beneficiaries in traditional Medicare with both Parts A and B. It will also apply an adjustment “regarding the propensity of individuals with zero claims.”

“We appreciate the comments on alternate adjustment approaches that may be appropriate in Puerto Rico and share the concerns raised by several commenters about access to health care for U.S. citizens in Puerto Rico,” the agency said.

As for star ratings, a list of circumstances eligible for extreme disasters, as well as updated star ratings measures, were included in the final rate notice.


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