Fight Erupts Over CMS’s Near-Term Payment, Policy Plans for Medicare Advantage

March 8, 2023
A new controversy has erupted over the Medicare Advantage program, with partisans on the two sides praising or decrying CMS’s near-term payment and regulatory plans for MA

Controversy has erupted in the healthcare industry over the potential decision of officials at the Centers for Medicare and Medicaid Services (CMS) to implement payment and regulatory changes to the Medicare Advantage program. CMS officials are looking at a potential 1.03-percent average Medicare Advantage revenue increase for calendar year 2024, driven by a 2.09-percent growth rate, representing a major decrease from the 8.5-percent increase in MA rates that CMS had approved in the final rule the agency had released last April.

Last month, CMS officials released the advance notice of methodological changes for MA capitation rates and payment policies for MA and Part D. The proposed rule implements several changes to the risk adjustment model. “The commonsense proposals in the Advance Notice, coupled with the proposals in the MA and Part D rule released in December, ensure these important programs continue to meet the healthcare needs of all beneficiaries,” said CMS Deputy Administrator and Director of Medicare Meena Seshamani, M.D., Ph.D., in a statement on Feb. 1. CMS is expecting an effective growth rate of 2.09% and a 3.3% increase based on the MA risk score trend, which is the average increase in plan risk scores. But the agency has also estimated a 3.12% decline in payments after taking in changes to the risk adjustment model.

An important change in the agency’s proposed rule will be to shift from the ICD-9 system to ICD-10. CMS officials believe that the new risk adjustment model will better reflect current costs associated with specific diseases and conditions. Agency officials also want to try to make risk adjustment a more predictable process. And therein lies the controversy, as partisans on the two sides of the policy divide see either excessive spending on Medicare Advantage, or reimbursement that inadequately reflects the population health management and care management work that providers put into caring for health plan members in MA contracts.

Health plans and some provider associations whose medical groups participate in MA are complaining that the increase is simply insufficient given operating cost increases.

On March 6, AHIP released a statement attributed to Matt Eyles, the president and CEO of the association, which represents most of the commercial health plans operating in the U.S. “Our comment letter reiterates our serious concerns that CMS’ proposals would increase costs and reduce benefits in 2024 for tens of millions of seniors and people with disabilities,” Eyles said in the statement. “It also brings forward new data and research that shows how these cuts will specifically and significantly impact Americans who are ‘dual eligibles’ and qualify for both Medicare and Medicaid. These lower-income enrollees are more likely to have multiple chronic illnesses and complex care needs. We remain focused on strengthening and improving Medicare Advantage and urge the Administration to pull back its flawed payment model revisions for 2024 and work with health insurance providers and other stakeholders to ensure MA is able to continue providing innovative, high-quality care to enrollees.”

But Rick Gilfillan, M.D., who during 2010-2013 served as the first Director of the Center for Medicare and Medicaid Services (CMMI) in the Obama administration, has gathered together a coalition of healthcare leaders who believe that CMS should keep any pay increases in MA to a minimum. He and the collaborative of healthcare leaders allied with him published a press release that inveighed against a major increase in Medicare Advantage reimbursement. Gilfillan and his allies stated that “The CMS proposal projects a 1-percent increase in MA payments in 2024 on top of the 8.5-percent increase projected for 2023. The proposed 2024 adjustments just begin to address the vast subsidies provided to MA plans through the risk adjustment system and inflated MA benchmarks.  Nevertheless, MA plans and some affiliated providers have replied with dire warnings that this will force them to cut benefits and reduce care in ways that will selectively harm people of lower income.”

And their press release quoted Elaine Batchlor, the CEO of MLK Community Health system in Los Angeles as stating that “I may not be an expert on the intricacies of Medicare, but here’s what I know from experience: every public dollar enlarging for-profit health plans is a dollar that won’t be spent to address the unmet needs of  underserved communities.” The press release went on to state that, “As reported by MedPAC, profits on Dual Special Needs Programs  that provide coverage for lower-income individuals with both Medicare and Medicaid coverage are twice as high as standard MA plans.” And it quoted Gilfillan as saying that “These increases and ongoing subsidies leave ample funding in the system for Plans and providers to continue to provide benefits and appropriate care for MA beneficiaries. The CMS approach actually redistributes spending away from high coding plans with excessive profits towards community-based plans that serve lower income populations.”

Paul N. Van de Water, a senior fellow at the Washington, D.C.-based think tank the Center on Budget and Policy Priorities, agrees with Gilfillan. In a March 6 blog posted to the Center’s website, Van De Water wrote that “MA plans and their trade associations have noted that, if one excluded the growth in risk scores from the calculation, the projected change in revenues of MA plans would be a small decrease instead of a 1.03 percent increase. But there’s no good reason to omit this factor. Although the projected growth in risk scores is an estimate and would not apply equally to all MA plans, the same is true of other factors determining the projected growth in MA revenues.”

What’s more, Van de Water wrote on March 6, “Even if—contrary to the CMS estimate—payments to MA plans fell slightly in 2024, the effect on MA beneficiaries is likely to be minimal. The MA industry has pointed to a commissioned study that assumes that any reduction in plans’ revenues would result in an increase in premiums or a decrease in benefits. But that’s not necessarily the case. CMS’ proposed changes are small, and insurers have significant flexibility in deciding how they will respond to changes in payments. The way he sees it, “Gross margins of MA plans (the excess of premiums over benefit costs) averaged $1,730 per beneficiary in 2021 — more than twice as high as in other lines of health insurance. This gives MA plans considerable room to respond to payment changes by reducing their profits or administrative expenses” And he adds that “The Medicare Payment Advisory Commission estimates that Medicare overpays MA plans by at least 4.9 percent compared to traditional Medicare because MA plans generally overstate their enrollees’ health conditions, generating $23 billion in excess payments to MA plans in 2023 alone. The improvements in the risk adjustment model and other payment updates that CMS is proposing would go partway toward curbing these abuses while having little or no effect on Medicare Advantage enrollees.”

But the leaders of the Alexandria, Va.-based AMGA—American Medical Group Association—whose association represents most of the large multispecialty medical groups involved in value-based contracting, including Medicare Advantage, strongly disagree. In a press release that the association’s leaders posted to their website on March 6, they stated that “AMGA today recommended the Centers for Medicare & Medicaid Services (CMS) not move forward with its proposed changes to the Hierarchical Condition Categories (CMS-HCC) model, which informs payments to Medicare Advantage (MA) plans. The Advance Notice comment period offers little time to model and analyze a major change to risk adjustment in the MA program. In addition, AMGA disagrees that removing codes from the HCC model addresses discretionary coding variation, but instead would remove distinct clinical differences from the model. CMS should not move forward with its proposed change until stakeholders understand what the impacts of these changes will mean to MA plan design and care delivery, particularly to patients with chronic conditions such as diabetes and congestive heart failure.”

“Modifying the HCC model is not a simple technical update or revision,” AMGA president and CEO Jerry Penso, M.D., said in a statement contained in the press release. “It’s likely to have significant ramifications, affecting both plans and providers. CMS should recognize that stakeholders can’t provide substantive, constructive feedback in such a short timeframe.”

The press release went on to state that, “In addition, AMGA endorsed a proposal to align quality measurement across Medicare. The CMS Universal Foundation measurement proposal is similar to an AMGA 2018 initiative, which developed a streamlined set of quality measures designed to simplify the reporting process and limit the burden on providers and group practices, while still reporting clinically relevant and actionable data.” “AMGA members report hundreds of measures to a variety of payers, often with little to no actual clinical benefits,” Penso added. “CMS’ recognition of this issue and willingness to rethink how Medicare uses quality measures are a welcome development.”

The press release added that, “In 2018, AMGA selected a core set of 14 measures to address the flaws with the current quality measurement and reporting system, which suffers from duplicative measures and a lack of data standardization. AMGA is pleased that CMS has endorsed this concept in its 2024 Medicare Advantage Advance Notice. As CMS continues to develop its Universal Foundation model, AMGA and its members are prepared to offer insights and support to this important work.”

Meanwhile, leaders at the Washington, D.C.-based NCQA (National Committee for Quality Assurance) are weighing in as well. In a Feb. 13 letter addressed to CMS Administrator Chiquita Brooks-LaSure, NCQA president Margaret E. O’Kane wrote that “NCQA agrees with the CMS National Quality Strategy’s aim to create a more equitable, safe, outcomes-based and person-centric health care system, and we are encouraged by the inclusion of “Advancing Equity” as the first pillar of the 2022 CMS Strategic plan. We strongly encourage CMS to require NCQA Health Equity Accreditation for Medicare Advantage plans to help achieve this goal. Accreditation is a set of standards that organizations, such as Medicare Advantage plans, can use as an actionable framework for improving quality. NCQA’s Health Equity Accreditation programs—Health Equity Accreditation and Health Equity Accreditation Plus—focus on the foundation of health equity work, and can support Medicare Advantage plans’ internal culture and external efforts to advance equity and embed standardized processes, structures and reporting into sustainable business practices. We believe Accreditation can be a primary lever to advance health equity and create the necessary data collection and quality improvement processes to measure, report and improve outcomes for all Medicare Advantage enrollees.”

Further, O’Kane wrote to Brooks-LaSure, “We know there is a high level of disparities in Medicare Advantage, and we are seeing greater enrollment of racial and ethnic minorities and other traditionally marginalized groups into the program. With over 50 percent of the eligible Medicare population expected to enroll in Medicare Advantage within the next year, it is imperative that CMS include requirements to meet the increasingly diverse needs of enrollees. We applaud the proposed enhancements to Medicare Advantage and the Medicare Prescription Drug Benefit program to address these needs, and we agree with CMS that existing quality improvement (QI) programs are optimal vehicles to advance health equity. Medicare Advantage plans can leverage NCQA’s Accreditation programs to embed equity into these programs. At the very least, health plans should be rewarded for their commitment to advancing health equity through Accreditation, and should be deemed for the new expectations outlined in the proposed rule if they achieve NCQA’s Health Equity Accreditation.”

In the letter, O’Kane also wrote that “We support inclusion of a Health Equity Index (HEI) in Medicare Advantage to incentivize plans to reduce disparities, but we have concerns that omitting race and ethnicity from the index may mask or exacerbate existing inequities.” And she stated that “We encourage CMS to mandate Health Plan Accreditation to enhance utilization management and quality oversight,”

The American Hospital Association (Chicago and Washington, D.C.) has also weighed in, with the AHA sending a letter to Administrator Brooks-LaSure under the signature of executive vice president Stacey Hughes on Feb. 13. In the letter, Hughes stated that “The proposed rule includes important protections for MA beneficiaries and clarifications for Medicare Advantage Organizations (MAOs) that will improve how coverage works for enrollees, promote more timely access to care, strengthen behavioral health provider networks, help patients understand their Medicare coverage options and reduce the administrative burden of health plan requirements on health care providers. The AHA strongly supports the proposed changes intended to strengthen consumer protections and oversight of MAOs, which are critical and urgently needed, and we encourage the agency to expeditiously finalize these important program updates. We also share CMS’ strong commitment to advancing health equity and improving access to behavioral health services, and thus support the proposals designed to better address social determinants of health, ensure culturally competent care and ensure MAOs maintain adequate behavioral health provider networks.”

The AHA letter also stated that “Hospitals and health systems nationwide are increasingly concerned about certain MAO policies that restrict or delay patient access to care, while adding cost and burden to the system. These include misuse of utilization management programs, inappropriate denial of medically necessary services that would be covered by Traditional Medicare, requirements for unreasonable levels of documentation to demonstrate clinical appropriateness, inadequate provider networks to ensure patient access and unilateral restrictions in health plan coverage in the middle of a contract year, among others. These practices harm the health of Medicare beneficiaries and are a major driver of health care worker burnout, while also adding billions of wasted dollars to the health care system.1 In response to these persistent challenges, we commend CMS for its proposals designed to increase oversight and accountability of health plans and protect patients, and we urge these changes be finalized.”

One provider association has actually done research—the leaders of APG, America’s Physician Groups, based in Los Angeles and Washington, D.C., and representing hundreds of multispecialty physician groups involved in value-based contracting, including in the Medicare Advantage program. A press release that APG posted to its website on March 9 began thus: “Changes that the Centers for Medicare & Medicaid Services (CMS) proposes in risk adjustment for Medicare Advantage (MA) could negatively affect primary care physicians and those caring for disadvantaged Medicare beneficiaries, according to a new ATI Advisory analysis. Overall, the analysis finds that the proposed changes to risk adjustment could result in substantial redistribution of payments across different groups of Medicare beneficiaries and physicians. The ATI analysis was commissioned by America’s Physician Groups (APG), which has separately told CMS that many of its member groups anticipate similarly negative results.”

What’s more, the press release stated, “The ATI Advisory study examined the effect of the risk adjustment changes on Medicare beneficiaries in the fee-for-service part of the program, so as to control for any coding effects specific to MA enrollees and to obtain more information about the effect of the changes across different demographic groups. The study considered the effect on beneficiaries with 51 health conditions grouped into 6 condition categories (diabetes, vascular, psychiatric, musculoskeletal, heart disease, and diabetes). The findings indicate that the proposed changes will impact some beneficiaries and physicians more than others. For example, risk adjusted payments will be reduced for two-thirds (67 percent) of Medicare beneficiaries with diabetes. These affected beneficiaries with diabetes are more likely than the average Medicare beneficiary to be age 75 years or older, Black or Hispanic/Latino, and dually eligible for Medicaid. They are also more likely to have low income, have lower levels of education, and experience food insecurity,” the press release stated.

And it quoted APG president and CEO Susan Dentzer as stating that “The ATI study underscores the potential effects that our groups have reported, in that they could sharply reduce payments to MA plans and our groups caring for the most disadvantaged Medicare beneficiaries,” said APG President and CEO Susan Dentzer. “Although the overall effects will be felt unevenly across plans and medical groups, those hardest hit will be the entities making the greatest efforts to serve these populations and maintain their health and wellbeing. These unintended consequences are the reason that APG has asked CMS to put the proposed changes on hold for a year to further understand the effects and craft better approaches to addressing the agency’s concerns about risk adjustment,” Dentzer added.

The press release went on to state that “The ATI study identified that CMS’s plans to exclude diagnoses in the six condition categories from being used for coding linked to risk adjustment will result in fewer patient visits with physicians overall actually counting toward risk adjustment. Primary care physicians could expect significant reductions in the share of visits contributing to risk adjustment for one-third (33 percent) for patients with psychiatric conditions, more than one-third for patients with musculoskeletal conditions (38 percent) and kidney conditions (39 percent), and more than two-thirds (69 percent) for patients with vascular conditions.”

The APG press release concludes by stating that, “Because the reasons behind these effects are poorly understood, APG wants CMS to further study the variation in impact on Medicare beneficiaries and across groups that contract with MA plans. APG remains concerned that the changes could lead to serious harm to patients, especially those that are the most disadvantaged, and have devastating effects on physician practices focused on the care of the nation’s vulnerable older adults and disabled individuals. Some of APG’s physician group members have concluded that they will face revenue cuts ranging to as much as 17 percent in caring for their Medicare patients enrolled in MA. As a result, hundreds of thousands of vulnerable Medicare Advantage enrollees could lose needed access to care.”

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