Medicare Advantage Insurers Poised for $13 Billion Boost Under New CMS Proposal
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Washington D.C. – A proposed rule change by the Centers for Medicare & Medicaid Services (CMS) could deliver a considerable financial windfall, estimated at $13 billion, to health insurers participating in the Medicare advantage program, according to a STAT analysis published November 29, 2023. The proposal, finalized November 27, 2023, adjusts how CMS calculates risk scores – a key factor in determining insurer payments – perhaps leading to increased revenue for these companies.
This adjustment arrives as Medicare Advantage plans, covering over 30% of Medicare beneficiaries, face scrutiny over denials of care and concerns about accurate risk assessment. While the overall Medicare Advantage program is projected to cost over $750 billion in 2028 according to CMS projections, this relatively small change in calculation methodology represents meaningful additional funds for insurers seeking to improve their profit margins within the program. The rule is slated to take effect January 1, 2025.
How the Change Impacts Insurers
The CMS proposal centers on refining the methodology used to account for county-level contract language
when calculating risk scores. Risk scores reflect the health status of a plan’s enrollees, with higher scores triggering increased payments from the government. Insurers argue that current methods underestimate the health risks of their members, while CMS has sought to ensure accurate and equitable payments. The new rule aims to address discrepancies in how these risk adjustments are applied across different geographic areas.
Did You Know? …
Medicare Advantage plans are offered by private companies approved by Medicare. They provide an option to Original Medicare,ofen including extra benefits like vision,dental,and hearing coverage.
A Closer Look at the Numbers
The $13 billion figure represents an estimated increase in payments to Medicare Advantage plans over the next decade.While seemingly a small fraction of the program’s overall cost, it translates to substantial gains for individual insurers.The impact will vary depending on a plan’s enrollment and the health characteristics of its members. Industry analysts predict that larger insurers with significant Medicare Advantage market share will benefit the most from the change.
| Year | Estimated Increase (Billions USD) |
|---|---|
| 2025 | $1.2 |
| 2026 | $2.1 |
| 2027 | $2.8 |
| 2028 | $3.1 |
| 2029 | $3.8 |
Concerns and Criticisms
The proposed rule has drawn criticism from some consumer advocates who fear it could incentivize insurers to enroll healthier beneficiaries, leaving sicker individuals in customary Medicare. They argue that the increased payments should be directed towards improving care quality and reducing barriers to access, rather than boosting insurer profits. We need to ensure that any changes to the risk adjustment system prioritize the needs of beneficiaries, not the bottom line of insurance companies,
stated a representative from the medicare Rights Center.
Pro tip: …
To learn more about Medicare Advantage plans and find one that fits your needs, visit the official Medicare website at https://www.medicare.gov/.
What Happens Next?
The final rule was published on November 27,2023,and insurers are now preparing to implement the changes. CMS will continue to monitor the impact of the rule and make adjustments as needed. The agency is also exploring other potential reforms to the Medicare Advantage program, including measures to address concerns about prior authorization and denial rates. the implementation of this rule will be closely watched by policymakers, insurers, and consumer advocates alike.
What impact do you think this rule change will have on the quality of care for Medicare Advantage beneficiaries? And how should CMS balance the financial interests of insurers with the needs of the people they serve?
background on Medicare Advantage
Medicare Advantage (MA) plans have grown significantly in popularity since their inception in the 1990s. Originally designed as a cost-saving alternative to traditional Medicare, MA plans now cover over half of all medicare beneficiaries in many parts of the country. These plans are offered by private insurance companies and are required to provide at least the same level of coverage as Original Medicare. Though, MA plans frequently enough include additional benefits, such as dental, vision, and hearing care, as well as wellness programs and other services. The growth of MA has been driven by factors such as increased competition among insurers, the availability of supplemental benefits, and the convenience of having all Medicare benefits in one plan.
Frequently Asked questions about the Medicare Advantage Rule
- What is Medicare Advantage? Medicare Advantage plans are offered by private companies approved by Medicare, providing an alternative to Original Medicare with potential extra benefits.
- What are risk scores in Medicare Advantage? Risk scores reflect the health status of a plan’s enrollees,influencing the payments insurers receive from the government.
- How will this rule change affect Medicare beneficiaries? The rule change is not expected to directly impact beneficiaries’ coverage or benefits, but could influence the financial health of their plans.
- What is CMS doing to address concerns about Medicare Advantage? CMS is exploring reforms to address prior authorization issues, denial rates, and ensure equitable payments to insurers.
- When does this new rule take effect? The rule is slated to take effect January 1, 2025.
