Medicare Advantage plans could see net rate cut in 2024

Medicare Advantage plans are in line for a 2.09% rate increase in 2024, the Centers for Medicare & Medicaid Services said in a notice on Wednesday.

Why it matters: The adjustment is driven by growth in Medicare fee-for-service costs. But analysts said the bump is offset by other policy changes that would translate into a net reduction of 2.27%.

• The notice comes as private Medicare plans continue to draw enrollees away from traditional Medicare with promises of capped out-of-pocket costs, vision and dental benefits, and perks like fitness classes.
• The average change in revenue for Medicare Advantage plans will be 1.03% next year, CMS said.

Yes, but: Plans are concerned about the notice, and the final rates that will be published no later than April 3

• "CMS should not finalize payment policies that increase costs and/or reduce benefits for MA enrollees, especially when health care cost and inflationary pressures remain high," Matt Eyles, president and CEO of AHIP, the insurer trade group, said in a statement.
• "There is no real way to sugar coat this as anything other than a bad rate update for MA plans," Raymond James & Associates' note on the policy says.
• Cowen analysts predicted plans will reduce benefits to protect their margins.

Go deeper: Beyond the rate adjustment, CMS will implement changes brought by the Inflation Reduction Act, including a cap on out-of-pocket spending on insulin and the elimination cost-sharing for recommended preventive vaccines.

• It also reflects changes the IRA brought to Medicare's Part D drug program, such as the elimination of cost-sharing for Part D prescription drugs in the catastrophic phase expanded eligibility for premium subsidies.

Between the lines: CMS in the notice proposed a series of technical updates to the Medicare Advantage risk adjustment model, to improve payment accuracy.

• The moves comes the same week the agency finalized a plan to increase audits of Medicare Advantage insurers and claw back about $4.7 billion in overpayments.

Of note: CMS again proposed to use the minimum required rate for adjusting diagnostic coding in the Medicare Advantage program.

• Experts, including the Medicare Payment Advisory Commission, say increasing the adjustment factor would ease coding abuse problems in Medicare Advantage that have cost the federal government billions of dollars.