At a time when the revenue margins of patient care organizations are already razor-thin, even relatively small changes in reimbursement levels can be concerning. That is precisely the perspective that leaders of the Alexandria, Va.-based American Medical Group Association (AMGA), which represents more than 175,000 physicians practicing in larger medical groups nationwide, are sharing publicly in this moment. A press release posted to the association’s website on Feb. 1 began thus: “AMGA is concerned the proposed rate cut in the 2025 Medicare Advantage rate notice will adversely affect medical groups and health systems, who already are absorbing payment cuts in traditional Medicare at the same time they are facing increased costs. Under the proposed 2025 Advance Notice of Methodological Changes for Medicare Advantage (MA) Capitation Rates and Part C and Part D Payment Policies, the Centers for Medicare & Medicaid Services (CMS) is proposing a reduction in the benchmark rate, while continuing the phase-in of a modification to the risk adjustment model. These proposals would result in a 0.16-percent decrease benchmark rate. In isolation, the cut may not seem significant; however, providers are facing increased costs, in part due to increased labor costs and higher demands for medical services.”
“On paper, it may appear that Medicare Advantage plans can afford a little belt tightening,” said AMGA president and CEO Jerry Penso, M.D., in a statement contained in the press release. “But the providers they contract with already are facing cuts of more than 3 percent on the fee-for-service side. In addition, there are potential impacts to patient care, such as decreased access, a reduction in available services, and decreased programs that address social drivers of health. I think CMS is underestimating the ramifications of further payment reductions for providers and their patients.”
And the press release went on to note that “AMGA remains a strong supporter of the Medicare Advantage program and recently endorsed other CMS proposals intended to expand beneficiary use of supplemental benefits. AMGA believes Medicare Advantage will play a significant role in the transition to value-based care and in achieving CMS’ goal of having 100 percent of traditional Medicare beneficiaries in a value-based arrangement. However, payment policies related to Medicare Advantage need to establish stable and predictable financing that account for AMGA member providers’ increased expenses. AMGA is reviewing the proposal closely and will provide additional comments,” the press release concluded.
Shortly afterward, Healthcare Innovation Editor-in-Chief Mark Hagland spoke with Darryl Drevna, AMGA’s senior director, regulatory affairs, about the latest payment and policy developments in the Medicare Advantage program and in traditional fee-for-service Medicare, and how they are impacting AMGA’s member organizations and practicing physicians. Below are excerpts from that interview.
Could you begin by walking us through the latest developments around the reduction in the benchmark rate, along with the continuing phase-in of a modification to the risk adjustment model, in the Medicare Advantage program?
Certainly. On paper, it looks as though net revenues will increase for MA plans. However, combining the benchmark rate reduction and the changes in the HCC [Hierarchical Condition Categories Risk Adjustment Model] model—there’s a whole lot of uncertainty around that right now. And that uncertainty makes it really hard to plan and to budget, and so you start to circle the wagons, so to speak. And you’ve got a not-so-small contingent of members of Congress who see MA and think they’re paying too much compared to the fee-for-service side. And the plans, if they see this reduction in the benchmark rate—writ large, it looks like revenues will be up, but the reality is that it will be specific to an organization, and we think the health plans will ask providers to absorb some of those cuts. And our providers are already seeing claims being paid at a lower rate on the fee-for-service side. That’s already happened at the beginning of this month.
A 3.4-percent reduction in the Medicare conversion factor was finalized in the rule last November. We discussed that in our Stop the Cuts campaign. [On October 25, 2023, AMGA published a press release detailing some of the damage the association believed come arise out of the proposed reduction in the Medicare conversion factor, which in fact did go into place on Jan. 1 of this year. The press release began thus: “AMGA today called on Congress to act to reverse a pending cut in the Medicare conversion factor that would continue to strain medical groups and integrated systems of care. As part of its proposed physician payment rule for 2024, the Centers for Medicare & Medicaid Services (CMS) announced a reduction in the Medicare conversion factor by 3.4 percent. This reduction would continue the effects of four years of unsustainable cuts to Medicare Part B services on medical groups and integrated systems of care already overstretched by the continued COVID-19 pandemic, workforce shortages, and rising inflation. In a letter to Congressional leadership, AMGA emphasized the need for Congress to address the Medicare conversion factor cuts by the end of the year.” What’s more, the press release noted that “AMGA recently surveyed its membership on what actions they would be forced to take if these Medicare cuts were implemented. They also were asked about what actions they took in 2023 in reaction to those Medicare cuts. Twenty-four percent of AMGA respondents either furloughed or laid off employees in 2023. Forty-nine percent of respondents said they will be forced to furlough or lay off employees in 2024 if the cuts continue. Also, 44 percent of these provider groups eliminated services to Medicare patients in 2023, and 65 percent expect to continue doing so in 2024. Twenty-one percent of respondents instituted delays in social determinants of health investments, and 57 percent are expected to continue these delays in 2024.”]
We are pushing to have that fixed in Congress. But as of today, our members are being paid less on the FFS side. And then we’ve got a significant MA population, and you see the political side of this, and a phase-in in a reduction of the benchmark rates. And so the health plans are going to come to the providers and ask them to absorb some of that. And medical costs and supply costs are rising. And you’ve got pent-up demand coming out of the pandemic. Folks haven’t seen their cardiologists for a while, for example, so utilization is going up. And so in isolation, the 0.16-percent decrease in the benchmark rate sounds not bad. And CMS’s comments are that participation is good, plans are bidding, and enrollment is up. And that’s fair to say. But we’re taking a very focused look at the MA program and is factoring in these elements.
As you know, back in September 2021, Donald Berwick, M.D., and Richard Gilfillan, M.D., opened a heated debate, one that continues forward into the present moment, over some of the core elements of the Medicare Advantage program, accusing the federal government of allowing for, in their view, unnecessary and unwarranted federal spending from the Medicare program to private health insurers to manage the public health. But their argument tended to skip over the reality that traditional fee-for-service Medicare includes no built-in care management element. Do you think that that policy debate is still impacting the discourse around the policy, regulatory, and payment elements of Medicare Advantage now?
It’s important to remember that when one looks at how a Medicare Advantage plan assesses the health of its population, including through risk adjustment, that feature is one that simply isn’t present for fee-for-service Medicare recipients unless they’re being cared for through a value-based arrangement, such as in the Medicare Shared Savings Program (MSSP). We’re more or less blind as to what the medical risk level is on the fee-for-service side, so it’s hard to make an apples-to-apples comparison. And so whether it’s MSSP or a risk contract in MA, our providers are trying to get a more realistic look at patients.
The value is in how providers are working with plans to care-manage patients, correct?
Yes, care management is the be-all and end-all, in that regard. We’ve got an aging population with multiple chronic diseases, and it’s very labor-intensive to care-manage those patients. In Medicare Advantage, you can make sure that providers have the resources to care-manage. On the flip side, we’ve got providers who won’t code for care management under fee-for-service Medicare, because there’s a cost-sharing element involved—the chronic care management code. That code was created six years ago, but the complicating factor is that there is a cost-sharing element for any service provided. And what we’re seeing is that many physicians simply don’t want to charge patients for care management using that code, because patients get separate bills for the cost-sharing element, and it’s hard to explain to them what the charge was for, and it’s highly dissatisfying for patients when they get bills for elements that aren’t encompassed in a face-to-face encounter. So we’re finding out that providers are just eating the cost. We’re pushing Congress to end the cost-sharing for care management under that code.
More broadly, what does the near-term landscape look like for Medicare Advantage?
It’s going to continue to be popular with both providers and patients. There are issues that have to be addressed. And we’re trying to align as much as possible with the payer community. But prior authorization is really an issue for our members. And we really have to make sure that payment rates are adequate. And ultimately, if CMS and Congress want to hit their goal of getting all patients into value-based care, MA will have to be a part of that. And per some of the ideological perspectives, I don’t think those will go away; they’ll influence the debate. But MA will have the resources to care for patients.
HHS [the Department of Health and Human Services came up with the idea a couple of years ago that they wanted to get all Medicare patients into value-based care arrangements [CMS Administrator Chiquita Brooks-LaSure has repeatedly stated that her agency’s goal is to have all Medicare recipients cared for in value-based care arrangements by 2030]. Folks at CMMI [the Center for Medicare & Medicaid Innovation] are very invested in that goal. And we want to partner with them on that. But 2030 isn’t that far off. So it’s going to be challenging, and we have to make sure that all the different policy levers are lined up, in order for us to hit that goal. And between the proposal and the final rate, the figures always shift, so things might adjust a little bit. I know CMS will continue phasing in the risk adjustment.