Ripple effects of Medicare Advantage rate freeze
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The Trump administration's surprise decision to freeze payments to private Medicare plans is likely to supercharge tensions between physicians and insurers and create new barriers to senior care.
Why it matters: Limiting revenue in a core business for major health insurers will set off a chain reaction that ultimately affects the more than 34 million beneficiaries in Medicare Advantage plans.
- "Plans are genuinely being squeezed here, and they don't have any alternative but to really squeeze providers," said Susan Dentzer, CEO of America's Physician Groups. "That bodes very poorly for patients."
State of play: Medicare administrators last month proposed an average rate increase of 0.09% next year — a sharp departure from recent years.
- The proposal caught industry and investors off guard and sent health insurer stocks spiraling.
- Insurers and Medicare Advantage lobbyists say it doesn't keep up with rising medical costs and will make it harder to keep premiums low and offer supplemental benefits like vision care.
The concern extends to physician groups and hospitals that contract with MA plans, who are bracing for lower payments and, possibly, more reviews on doctor-ordered care. Some could drop out of the program and threaten the stability of insurers' networks.
- More "prior authorization" reviews add red tape to the health system and can keep patients from getting timely care, said Anders Gilberg, senior vice president of government affairs for the Medical Group Management Association.
- "It's already hard enough to get paid," Gilberg said. "Is this going to make it harder, because the plans are going to fight tooth and nail to hold on to every dollar?"
Physician groups partnered with MA plans and paid a fixed monthly amount per patient to manage care worry that proposed changes in risk adjustment payments could reduce the resources that support those models over time.
- "We believe it's going to impair our the ability of our groups to run these advanced primary care systems," said Dentzer of APG, which represents medical groups in these so-called value-based contract arrangements.
There could be more contract disputes between providers and private Medicare plans if the proposed 2027 rates aren't changed.
- Seniors in MA already have access to less than half of the physicians in their area available to their peers in traditional Medicare, per a recent analysis from KFF.
- Becker's Hospital Review lists 40 health systems that left insurer networks or announced plans to do so last year, including Mayo Clinic. An acceleration of the trend could leave many more patients in the lurch as their doctors pull out of networks.
- "I think those questions are only going to grow in frequency and intensity over the next couple of years," said Sachin Jain, CEO of nonprofit insurer Scan Health Plan.
The other side: Medicare advisers to Congress estimate that the federal government will overpay Medicare Advantage plans billions of dollars this year.
- Some health policy experts and patient advocates see the Trump proposal as an important step towards rightsizing program payments.
- A Centers for Medicare and Medicaid Services spokesperson said the proposed payment change would orient the market toward competition and ensure plans are focused on improving their value to enrollees.
- The agency will consider public input before finalizing anything, CMS said.
What's ahead: The administration is due to finalize 2027 payments in early April and could still opt to give the insurers more money.
- Election-year pressure and the prospect of service reductions or higher health costs for seniors right before the midterms could play a part in the final policy.
- "We're kind of used to these initial scares, and all of a sudden, in the final rule, quite a lot of change can occur," Gilberg said.
