Despite Republicans liking Medicare Advantage, major funding and structural changes could occur
Some of you have written me asking why I am so convinced that the Trump administration and a GOP Congress will continue to target Medicare Advantage (MA) for savings. It is true that Donald Trump likes private healthcare and MA as a program. His healthcare nominees, including incoming Health and Human Services (HHS) Secretary Robert F. Kennedy, Jr., and Dr. Mehmet Oz, who is slated to be the Centers for Medicare and Medicaid Services (CMS) administrator, favor the program. Trump and the GOP Congress could even opt for future Medicare beneficiaries to default to MA versus the traditional fee-for-service (FFS) program. They could offer some short-term relief in terms of MA rates and pull back on the misguided Inflation Reduction Act’s (IRA) Part D out-of-pocket cap and cost-sharing changes.
But many of the folks with influence over Trump on healthcare hail from a conservative cadre of policy wonks who have long had MA’s overpayments in their gunsights. These include Office of Management and Budget Director Russel Vought. He was one of the contributors to The Heritage Foundation’s Project 2025. Other conservative policymakers have joined the administration as well or have outside influence given relationships with Trump and his key advisers. Paragon Heath Institute President Brian Blase was in the Trump 45 administration. Several of his policy staffers or fellows are joining the White House or CMS in Trump 47.
These policymakers do like MA and propose various expansions of the program. At the same time, they might be characterized as wonks who hate corporate welfare. Unreasonable subsidies to the private sector are anathema to the efficient functioning of government. There are GOP lawmakers with the same philosophical bent. That is why I have said the MA will see positive and negative developments under Trump 47.
Let’s review some of what Project 2025, the Paragon Health Institute, and others (both conservative policy outfits and beyond) have recommended to reform MA and make it more accountable. They save tens of billions if not hundreds of billions over ten years. There are a number of permutations to many of these proposals, but I am summarizing them here:
Capping or lowering benchmarks: Congress made a deliberate decision to set MA benchmarks in each county at a range of 95% to 115% of FFS costs to promote MA growth, especially in suburban and rural areas. But the conservative policy wonks say that this has to change now that MA has grown so much. They would:
- Lower the county benchmarks and perhaps cap them at 100% of the FFS program costs in each county if there is sufficient MA penetration in a given county
- Lower urban rates below 95% of FFS costs
- Blending national and local benchmarks
In a calculation change, the policy wonks would calculate county benchmarks based on beneficiaries in FFS with both Parts A and B – not A or B. This would actually cost about $440 billion over ten years and add 5.9% to rates. But they see this as a fairer method, especially if other cuts occur.
Further MA rate changes: This could take several possible routes, including:
- Taking a 10% or more cut to rates
- Blending MA encounters with FFS experience to set rates
- Moving solely to MA encounter data
- Moving to a full competitive bid for MA
The wonks are concluding that FFS rates are no longer a good way of setting MA rates as the program grows. They may be right.
Risk adjustment changes: Disease states and conditions are analyzed for each member and a risk score is set. This is combined with rates to boost or lower the amount given the MA plan to cover the care of a member. It is theoretically based on the health risk of each member. But we do know that some MA plans are bad actors and abuse the system by engaging in overcoding in various ways. I continue to believe a subset of plans do this and gain a disproportionate amount of revenue. They give the whole program a bad name.
Numerous risk adjustment and coding intensity changes could be adopted. These include:
- Increasing the negative coding intensity factor globally
- Increasing the negative coding intensity factor on a plan-by-plan basis, taking into account each plan’s relative coding intensity
- Further refining the risk adjustment model to reduce overcoding
- Investing in aggressive risk adjustment data validation (RADV) audits
- Blending two years’ worth of diagnostic data before setting risk scores
- Eliminating diagnoses derived solely from manual chart reviews and health risk assessments (HRAs)
- Clear regulations related to risk adjustment changes as well as RADV. The current RADV rule is being challenged in court, in part because of some legally questionable provisions put in by Biden’s CMS.
- Refine risk adjustment to include both prospective and retrospective components
- Enact penalties for plans that do not provide complete, accurate, or timely encounter submissions
I am especially fond of reforms tied to HRAs and manual chart reviews as well as a workable RADV audit process. I am intrigued by the plan-by-plan coding intensity concept. I think CMS is beginning to develop better risk models. Using two years of data has merit as well.
End Star bonuses or make them budget neutral and revamp the quality program: The wonks object to the additive dollars put in for MA plans if they perform well in the Star program, which evaluates MA plans on 40-plus clinical, drug, operational, and member survey measures. MA Star is the only program where quality bonus dollars are added to rate dollars. They recommend:
- Ending the Star bonuses altogether
- Making them budget neutral
- Removing the rate rebate increases related to Star performance (thus limiting bonuses just to 4 Star and above plans)
- Ending double bonus counties
- Convert to assessing performance at the local level and with peer groupings
Make MA subject to the same budget neutrality for administrative changes as the traditional program: MA does have several advantages here, which amounts to adding dollars again.
Move toward the standardization of core and supplemental benefits with tiers: These changes are meant to avoid enrollee confusion as membership grows and reduce administrative costs.
Make MA plans responsible for all benefits: Hospice is the big area where MA plans do not provide coverage.
Conclusion
Not all of the proposed changes will be adopted in a budget reconciliation bill. But the general views of the conservative policy wonks in the Trump administration, the anti-corporate welfare mentality in Congress among conservatives, and the need for cuts to pay for the 2017 tax cut extension will come together to mean some changes in MA. How deep those cuts are immediately is an open question, especially if MA plans prevail on the administration and Congress for some relief given the current financial state of MA. But the accountability push in the Trump administration and Congress will mean changes in MA over time. MA plans should get ready and see how they continue to thrive with a tighter belt.
#medicareadvantage #savings #budgetreconciliation #congress #trump #riskadjustment #rates #stars #quality
— Marc S. Ryan
