MA Hit Hard By Proposed 2027 Rate Hike
The Trump administration threw Medicare Advantage (MA) for a loop tonight as it issued the 2027 Advance Notice of rates and set a meager projected hike. MA plans just weathered a three-year phase-in (2024 to 2026) of the new v28 model. By my calculation, that took about 7% out of rates. With skyrocketing utilization, plans had hoped for a 2027 hike that exceeded the rough 5% hike in 2026.
But Trump’s Center for Medicare and Medicaid Services (CMS) has now proposed two new risk adjustment reforms that take the almost 5% economic growth inflationary hike down dramatically – almost to 0. This will send stocks of major insurers dropping tomorrow for sure.
The draft calls for a 0.09% payment increase. That is an increase of roughly $700 million in MA payments for 2027 compared with $25 billion in 2026! When considering estimated risk score trends in MA driven by coding practices and population changes, the expected average change in payments will be 2.54%. But that is something plans reject as risk score trends at least in part recognize risk changes in the program from year to year.
What did CMS do?
Item 1: Additional changes to v28 model
— Use 2023 diagnoses to predict 2024 expenditures instead of 2018 diagnoses predicting 2019 expenditures.
— Use payment year 2024 vs. payment year 2020 for average per capita predicted expenditures to create relative factors in the model.
These changes essentially update years in the model to address emerging differences between MA and Original Medicare coding.
Overall, this first item reduces the rate hike by 3.32% with the normalization factor included (1.82% without normalization.)
Item 2: Eligible submissions
— Exclude diagnoses from audio-only services to align with MA diagnosis submission policy.
— Exclude diagnoses that appear in chart reviews but are not supported by corresponding medical encounters from how it calculates risk scores. CMS says MA plans received about $7.5 billion in 2023 for diagnoses that appeared only in risk assessments and related chart reviews but not on a medical encounter.
This second change reduces the rate hike by 1.53%. The agency said plans that rely more heavily on unlinked chart reviews to report risk-adjustment eligible diagnoses will see a greater payment impact. This would be the largest plans out there.
This will be very disappointing to MA plans, but what is likely to happen? As more FFS claims come in, we should see the economic growth rate increase. Last year, it increased by almost 3% between the advance and final. This is dependent on included timeframes, but utilization remains high so something should happen again. The administration could offer some relief from the risk adjustment proposals, including abandoning some or phasing them in. But I would not count on this last point.
I will cover much more on the rate hike and Star changes in a blog later this week.
Additional articles: https://www.modernhealthcare.com/politics-regulation/mh-cms-medicare-advantage-pay-2027-proposal/ and https://www.beckershospitalreview.com/finance/cms-proposes-nearly-flat-medicare-advantage-payments-for-2027-5-notes/ and https://www.cms.gov/newsroom/fact-sheets/2027-medicare-advantage-part-d-advance-notice and https://www.cms.gov/newsroom/press-releases/cms-proposes-2027-medicare-advantage-part-d-payment-policies-improve-payment-accuracy-sustainability
(Some articles may require a subscription.)
#medicareadvantage #cms #rates #overpayments #riskadjustment
https://www.fiercehealthcare.com/regulatory/cms-proposes-flat-ma-rates-risk-adjustment-updates-2027
Some Hospitals Enter MA As Insurers
Faced with challenges from Medicare Advantage (MA) insurers, some hospitals have entered the MA market by obtaining a state insurance license and competing. Hospital-owned plans are only a sliver of the MA market, but their enrollment continues to grow. This is in part due to the general increase in MA enrollment compared with traditional Medicare. But I note that with the massive contraction in national plans in 2025 and 2026, other players, including hospital plan entrants, have gained ever so slightly. Enrollment in MA plans owned by hospital systems grew faster than traditional Medicare enrollment for the first time in 2023.
#medicareadvantage #hospitals
Funding Deal Could Fall Apart Over Violence In Minnesota
Despite what was agreement on almost all funding matters between Democrats and Republicans to avoid a partial government shutdown, the deadline looms and the senate may not have enough votes to pass the measure. This is due to the violence in Minnesota that has led to two deaths at the hands of federal law enforcement during ongoing protests over the surge of immigration enforcement activities in Minneapolis.
Democrats are demanding that the Homeland Security funding bill be modified with guardrails for immigration enforcement. Republicans are right now refusing to make changes. That could mean too few Democrats vote for the funding measures to reach 60 required votes. The House has already passed all bills and have adjourned until after the government shutdown deadline. So, if Democrats refuse to support the bipartisan compromise, the partial shutdown will undoubtedly occur. Even if Republicans agreed to Democratic demands, impacts would be felt until the House could revote on changes.
Additional article: https://www.modernhealthcare.com/politics-regulation/mh-shutdown-gop-dhs-ice-funding/
(Some articles may require a subscription.)
#governmentshutdown #congress #trump
NSA Dispute Process Still Broken
Providers and health insurers submitted almost 1.2 million cases to a federal portal meant to resolve No Surprises Act (NSA) disputes over surprise medical bills in the first half of 2025. This is almost 40% more than in the last six months of 2024. Many submitted disputes are actually ineligible for resolution and parsing through those is the primary cause of delays. The same handful of providers appear to be flooding the process with cases.
The process is broken. Providers win the lion’s share of awards and post-NSA costs are higher than before the law passed. Congress needs to act to reform it.
#nsa #transparency #nosurprisesact #surprisebilling
https://www.healthcaredive.com/news/no-surprises-disputes-idr-2025-cms/810525
More Evidence GLP-1s May Save
A multi-year study by Aon found consistent use of GLP-1s correlates with lower medical cost growth and fewer hospitalizations for cardiovascular events.
Aon looked at data for more than 50 million people, including 192,000 GLP-1 users, for a little over two years. By 30 months, medical cost growth was 6% lower for people with diabetes using GLP-1s compared to people with diabetes who didn’t use GLP-1s. The growth of medical cost was 9% lower for people with an 80% adherence to the medication. Results were similar for people using GLP-1s for weight loss.
Further, users for diabetes or weight loss both tended to need fewer hospitalizations for “major adverse cardiovascular events” such as strokes.
#glp1s #weightlossdrugs #drugpricing
https://www.healthcaredive.com/news/glp-1-benefits-plan/810463
— Marc S. Ryan
