New Humana CEO Jim Rechtin made some waves recently when he made a compelling case on his Q2 2024 investor call that Medicare Advantage (MA) needs to transform and be more accountable to the government and the Americans it serves. Several other prominent MA executives, including Andrew Toy of Clover Health, John Kao of Alignment Healthcare, and Sachin Jain of Scan Health Group, also have signaled views that are similar.
Rechtin made the case that greater collaboration with the Centers for Medicare and Medicaid Services (CMS) is needed and that the industry must better show its value and have some of it accrue back to CMS, Medicare, and Medicaid.
Read closely, Rechtin is saying that MA has to be willing to allow Medicare to realize more of the savings. I think Rechtin is right.
Let’s break the issue down a bit.
Today, MA plans are in a cat-and-mouse game with CMS.
First, as Rechtin noted, MA has clear value over the traditional Medicare fee-for-service (FFS) program. A lot goes into this, but it has a well-documented record of saving, better quality, and satisfaction among enrollees. It serves a disproportionate number of people of color and those who are lower income. As I say, MA has become the greatest social safety net program in America, saving seniors and those with disabilities thousands, sometimes tens of thousands, a year.
Second, at the same time, MA may have too much of an advantage against the traditional program. Admittedly, most of the advantage was created by the government itself. Here are two good examples:
- The Star program has additive funding as opposed to almost all other quality programs that are budget neutral (where the budget is set and quality dollars go to higher performing entities at the expense of the rates of lower ones.
- Rates in certain counties, usually more rural ones, are above the FFS costs to incentivize plans to offer MA in those areas.
Third, CMS has put a bunch of obstacles in front of MA plans and the program of late:
- While reform of risk adjustment is important, a new model rolled out over three years and will take 7% out of the rate-setting system.
- CMS unfairly attempted to implement a major Star change without being honest and upfront with plans.
- A new risk adjustment rule, while needed, has a number of unfair provisions.
- CMS’ 2024 prior authorization rules essentially ignore the benefits of utilization management in managed care.
Fourth, MA has a bright light shining on it due to some questionable practices. Among them are:
- Aggressive risk adjustment practices: While I do believe much of the difference in risk scoring between MA and FFS is because FFS providers just don’t understand risk adjustment and MA plans do, there is also the fact that a small number of plans do practice unseemly activities that drive risk scores and revenue up. This has led to attacks from opponents that MA is greatly over-reimbursed. Most of the numbers used are ridiculous. But the fact remains there are problems. This needs to be reformed, including aggressive audits of plans and the stopping of health risk assessments and manual chart reviews to increase scoring. Plans should be able to submit encounters from providers for every diagnosis.
- Questionable supplemental benefits record: Supplemental benefits in MA are prolific and there is a good deal of evidence that utilization is low (perhaps deliberately). Plans need to drive use of these benefits so they are not accused of taking lucrative rebates simply to enroll more people and not using them adequately on benefits.
- A rotten broker-agent system: With CMS, plans have to reform the marketing and enrollment system for MA. CMS and plans have to rein in the activities of the third-party marketing organizations (TPMOs) and MA plans must dedicate themselves to accountability and not steer customers. Plans need to make investments in transparent enrollment systems and relationships.
So what should the future be?
In Rechtin’s long view, MA reform is needed and plans enter into a compact to save the Medicare system dollars and drive the best quality possible. It logically means reforms in how MA plans are paid, how the Star program is set up, and how benefits are delivered. It means far more transparency and accountability.
It makes a great deal of sense when you compare it to the current construct. Plans are struggling today in large measure because MA policy has become politicized. Without MA plans offering comprehensive reform proposals and having a willingness to change how they do business, the industry will be victim of unwise and over-reaching changes, such as the risk adjustment data validation (RADV rule), PA changes, and rate-setting changes.
In the end, creative reforms would mean an MA 2.0, thoroughly endorsed by CMS and lawmakers, with quality and cost-savings as featured values of the program and members at the forefront. While MA will continue to grow because of the better economics for beneficiaries, MA 2.0 would bring an acceleration of growth, bringing value to beneficiaries, the Medicare program and MA plans alike.
Rechtin calls it “a long-term value proposition for taxpayers that creates real stability” for Medicare and Medicaid. He noted: “We need a regulatory environment that allows that value to be fully realized and that requires constant collaboration and adjustment. We need to be a proactive partner with CMS in that process, and we need to do this to make sure that we’ve got a long-term, stable Medicare, Medicaid program.” As he notes further: “How do we actually collaborate with CMS to make sure that the regulatory environment allows that value to accrue back, or some of that value to accrue back? None of that should be harmful to the MA sector.”
The alternative would be MA plans on the defensive and the continued cannibalization of funding and operational and clinical independence. Many in CMS and Capitol Hill would like to make MA more like FFS. That is the biggest threat to MA and the members it serves. That means MA-led reform is important.
#medicareadvantage #medicare #cms #healthplans
— Marc S. Ryan
