Both Republicans and Democrats want major Medicare Advantage reform.
The July 22, 2025 hearing on Medicare Advantage (MA) by the House Ways and Means Subcommittees on Health and Oversight should be a wakeup call for MA plans. Of late, Capitol Hill has become far more active on MA issues. Democrats on the committee spoke of their usual gripes – overpayments to MA plans with little or no benefit and the need to augment the traditional Medicare fee-for-service (FFS) program. The striking change was the stance of Republicans, who generally supported the program but were on board for many of the same reforms Democrats proposed.
Committee members on both sides cited what I think is the hyperbolic statistic from congressional policy arm MedPAC that MA is paid over $80 billion a year (over 20%) more vs. FFS. Democrats and some Republicans argued that MA was not saving the country money as promised.
What did lawmakers cover?
They examined the following areas at the hearing:
Risk adjustment – Even if overpayments are far less than articulated by opponents, overpayments clearly do exist. The Centers for Medicare and Medicaid Services (CMS) have introduced two major reforms of late. The first under the Biden administration is the v28 risk model, which is aimed at refining the risk adjustment system to remove incentives to overcode. The model will take over 7% out of rates when fully rolled out in 2026. The second under the Trump administration is 100% Risk Adjustment Data Validation (RADV) audits each year for each contract. I have issues with the RADV rule promulgated under Biden in 2023 as well as the Trump RADV audit approach. But generally speaking, auditing plans consistently yet fairly is important.
Supplemental benefits – Lawmakers also complained about growing rebates in the rate-setting system (in part due to the overcoding) and argued that the supplemental benefits the additional revenue are supposed to pay for are not truly being spent on enrollee care. There is little question that the rebates fill big holes in the traditional program benefit, but too few are accessing the supplemental benefits in the MA plan designs. In essence, lawmakers are asking where all the money is going and could MA plans be forced to ensure robust utilization of the add-ons. The truth is that the rebates must go to enrollees not to plan profits. Any underspending would be reflected in a too low medical loss ratio (MLR), mandating a payback to Medicare. Further, a look at recent health plan MA MLRs would show negative or slim margins. But I see the point about accountability and transparency related to supplemental benefits.
Another theme was the complexity of the benefits offered by the MA plans. Lawmakers and others asked whether benefits, including supplemental ones, should be standardized as opposed to every plan having customized offerings (even within their many products).
Marketing and enrollment – The federal investigation over alleged marketing abuse by several big plans hung over the hearing. Lawmakers and MA executives pitched the idea of multi-year enrollment to stop marketing abuse, major administrative expense, and to promote care management through longer tenure.
Prior authorization (PA) and claims denials – Of course, PA and claims denials were cited as the biggest concern by providers. Special attention was put on rural providers and the burden and lower revenue they see in MA vs. FFS. Many argued the effect of PA was care delays or denials for enrollees. My question is how much has this issue truly calmed down with the 2024 CMS rule that requires plans follow FFS coverage criteria. Is this a lot of hype by providers given all the reforms already laid out?
Forward-looking VBC – Some argued that value-based care (VBC) payment mandates could promote the recovery of independent primary care practices. Some good attention was put on the fact that hospitals now control most physicians’ practices and aberrant practice patterns are emerging which push services to expensive hospital-owned sites. This is potential support for site neutral payment reform.
Attack on big plans – A new theme is emerging. The MA plan participants at the hearing were smaller plans – at least smaller than the big national ones. A distinction was made between these plans and the big national plans, the latter of which lawmakers feel are abusing the system with aggressive overpayments, marketing abuse, and big PA and claims denial focuses.
MA reform bills in Congress
A number of bills have been filed to respond to these concerns, including:
- PA reforms and electronic, real-time transactions. I note, too, that the industry has voluntarily endorsed changes to avert further regulatory reform.
- Claims payment reforms, including faster payment.
- Payment protections, where MA plans would have to pay at least the FFS rate to a provider.
- Mandating that VBC payments be adopted.
- Reforming risk adjustment upcoding.
- Marketing reforms.
- Transparency and reporting.
- Opt-out auto-enrollment in MA for new beneficiaries.
- Hospice coverage by MA plans (now it is provided in FFS).
- Allowing the Veterans Administration to bill MA plans as they do in FFS.
The truths about MA
There are two truths about MA that did not come through at the hearing despite the best efforts of MA executives — at least the points they made did not change most lawmakers’ minds. The two truths: MA actually saves both Medicare and consumers quite broadly, and quality is markedly better.
Industry trade group AHIP did an excellent job recently about the benefits of MA. The blog is here: https://www.ahip.org/news/articles/the-facts-on-ma-delivering-greater-value-for-seniors-taxpayers-than-fee-for-service-medicare .
Among the best points are:
- MA beneficiaries report spending $3,486 less on out-of-pocket costs and premiums compared to FFS beneficiaries.
- MA beneficiaries with 3+ chronic conditions spend on average $4,120 less than FFS beneficiaries.
- MA beneficiaries spend 46% less than FFS beneficiaries in out-of-pocket costs and premiums.
- Based on a comparison of beneficiaries with similar clinical, demographic, and social risk factors who enroll directly into MA versus FFS, if the FFS enrollees had instead received care under MA, their average costs would have been 11% lower.
- Across 10 HEDIS clinical quality measures, MA outperformed FFS in all but one. This includes: cancer screenings, cardiovascular disease, diabetes, musculoskeletal disease, and COPD care.
The Better Medicare Alliance (BMA) has come to similar conclusions on MA’s benefits. The site is here and has many great studies that dovetail with AHIP’s statistics: https://bettermedicarealliance.org/policy-insight/resource-library/ .
Both AHIP and BMA do a good job of underscoring that a greater proportion of lower income (at or below 200% of the federal poverty level) and minorities choose MA and derive great benefits. Without MA, these folks would be choosing between healthcare and food or shelter. As I always say, MA has become the single greatest social safety net in America. Without it, many seniors would be spending thousands, in some cases tens of thousands, more per year on healthcare. Whatever potential reforms are needed in the area of supplemental benefits – some are rolling out now – there is no denying that MA lowers Part B and D premiums and cost-sharing as well as closes in whole or part the inpatient gap that bankrupts seniors and the disabled.
BMA also released the following statement for the record, which touches on the value of MA for members and more broadly: https://bettermedicarealliance.org/advocacies/statement-for-the-record-hearing-on-medicare-advantage-past-lessons-present-insights-future-opportunities/
In the BMA statement is a link to a study done by the Elevance Health Public Policy Institute on how MA growth is associated with lower total Medicare spending. I have discussed this study before. It is here: https://www.elevancehealth.com/content/dam/elevance-health/articles/ppi_assets/reports/ELV_PPI_MA_Penetration_Medicare_Spending.pdf . It notes that: “This research adds to the merits of MA, pointing to a significant association between higher MA penetration and lower total Medicare spending. This correlation may well be a key driver behind the slowdown in Medicare spending.” Indeed, baseline spending from 2010 to 2020 in Medicare as a whole (MA and FFS) was markedly below predictions. The savings against the baseline came as MA began to grow considerably. There is no question there is a halo effect on the FFS program as MA penetration grows. Medicare has a precarious fiscal state right now, but where would we be without MA changing some of the behavior in traditional FFS over the years?
A schizophrenic CMS
I thought it was ironic that just as CMS and lawmakers were laying down aggressive PA rules in MA and attacking plans for obscene utilization practices, CMS was just concocting a scheme to slowly but surely introduce PA in the traditional Medicare program. CMS recently announced the Wasteful and Inappropriate Service Reduction (WISeR) Model. CMS says the new model will test whether enhanced technologies, including AI, can improve and expedite the prior authorization process for certain items and services within traditional Medicare.
The WISeR model will be tested in six states: New Jersey, Ohio, Oklahoma, Texas, Arizona, and Washington. It will be a six-year pilot starting January 1, 2026. WISeR will initially look at specific services prone to overuse or inappropriate use, such as skin and tissue substitutes, electrical nerve stimulators, and knee arthroscopy for osteoarthritis.
Providers can choose to submit PA requests for selected services or go through a post-service pre-payment review. Model participants also will receive payments based on their ability to reduce unnecessary or non- covered services (inappropriate utilization) and lower spending in Medicare.
In its announcement, CMS argued the model was needed to reduce waste in the system. It said wasteful spending is as much as 25% of all healthcare spending each year. But again the irony – in 2023, CMS finalized a rule that requires MA plans to use the wasteful traditional FFS coverage criteria. It will significantly hamstring MA plans on the cost-savings front, just as CMS rolls out PA in FFS. Go figure.
#medicareadvantage #priorauthorization #overpayments #riskadjustment #marketing #supplementalbenefits #radv #vbc #medicare
— Marc S. Ryan
