Feb 1, 2024 - Health

Medicare Advantage insurers to see small base pay decrease

Illustration of a first aid bag filled with cash.  

Illustration: Aïda Amer/Axios

Insurers who administer private Medicare plans would see their base payments cut slightly next year, by 0.16%, under a federal proposal announced Wednesday.

  • But the insurers still could see $16 billion more in 2025 revenues once payments are adjusted based on how sick their enrollees appear, Medicare officials said.

Why it matters: More than half of Medicare enrollees now get their coverage from Medicare Advantage plans. But experts say the plans are overpaid and that coverage costs taxpayers tens of billions of dollars more than it should.

Catch up fast: The base pay decrease largely stems from the continued phase-in of controversial changes to the risk adjustment coding system the Biden administration initiated last year to make payments more accurate.

  • Medicare Advantage insurers get more money if their enrollees have more documented health problems. The policy changes aimed to stop abuses of that system. But insurers protested, arguing they amounted to cutting seniors' benefits.

Between the lines: The update issued Wednesday is a relatively small one for insurers and comes as President Biden's reelection campaign heats up.

The other side: The proposals "make Medicare Advantage less susceptible to gaming and protect the long-term stability of the Medicare program," Centers for Medicare and Medicaid Services deputy administrator Meena Seshamani said in a statement.

  • CMS expects beneficiaries’ premiums and benefits to remain stable if the proposal is finalized.
  • Insurers on Wednesday evening said they were still reviewing the proposal.

What we're watching: Humana and other insurers reported higher-than-expected costs from the end of 2023 as patients began catching up on care they deferred during the pandemic.

  • The proposed MA pay cut "could be viewed as another headwind for a sector facing higher utilization costs," Duane Wright, an analyst for Bloomberg Intelligence, wrote in an email. But enrollment growth could ease some financial pressures, he said.
  • Medicare will incorporate updated cost trends into the final rate, which could improve base pay a bit.
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