The Advantage Plan Payment Controversy
Advantage Plans have been making the headlines of late with very unflattering coverage. A Kaiser Family Foundation article from April reported:
The federal government spent $321 more per person for beneficiaries enrolled in Medicare Advantage plans than for those in traditional Medicare in 2019, a gap that amounted to $7 billion in additional spending on the increasingly popular private plans that year, (finds a new KFF analysis).
Unfortunately, this issue affects EVERYONE because it leads to higher spending for Medicare Part B beneficiaries. This affects all taxpayers because most of the cost of Medicare Part B is funded by federal taxes although those on Medicare Part B also pay a premium.
According to recent reports, the main culprit is the risk adjustment process which allows Plans to have higher reimbursement intended to compensate them for higher-cost enrollees. Government audits suggest the Plans have been overpaid due to coding practices such as inflating the intensity of services provided or adding codes for diagnoses not actually treated. As a result, the federal government has filed lawsuits against a number of insurers claiming fraud. It is likely that these practices have contributed to the fact that Advantage Plans have much higher than average gross margins compared to other types of health plans, per a Kaiser Family Foundation report released in February.
Earlier this year the Biden administration released proposed rules to reduce payments to Advantage Plans and a lobbying furor resulted. Reduced payments are being phased in over a longer period of time but payments are being reduced so it appears the insurers had minimal success in turning the tide of opinion which is largely critical of them.
As for the litigation, the situation does not look good for Advantage Plans. Whistleblower claims and damning emails have resulted in compelling evidence of questionable practices and little sympathy for the insurers who offer these Plans. Of course, this is also a failure of regulation because the situation should not have become this severe.
It is not clear, of course, what might happen as a result of lower payments but it is likely that Plans will be forced to consider reduced benefits, slower claims processing, more aggressive denials and more aggressive care management. It is always good practice to review how your Plan’s benefits have changed at annual open enrollment. It will be even more important over the next several years.
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