US Lowers Cut to Medicare Advantage Payments

After pushback from industry, the Centers for Medicare & Medicaid Services (CMS) announced on Friday a lower than expected 1.1% average cut of 2024 reimbursement rates for health insurers that offer coverage through the Medicare Advantage program. Insurers contended the government was cutting reimbursement rates by too much for them to adequately serve older people enrolled in their plans.

CMS announced its phasing in payment changes for privatized Medicare plans over the next 3 years. Total payments for next year are now expected to rise by 3.3% from 2023, or around $13.8 billion, up from its 1% initial estimate, and reduced drops on some costs resulting from rule changes. 

Health insurers operating Medicare Advantage plans have come under pressure after the government proposed new rules for an audit program last month to avoid overpaying them.

"The changes in risk adjustment payment policies finalized as part of this Rate Announcement were developed in collaboration with expert clinicians to take into account how well different conditions predict costs. The policies finalized in this Rate Announcement will help make more accurate payments. This reduces incentives to cherry-pick healthy beneficiaries and discriminate against sicker patients. In addition, CMS will continue to pay more for someone who is dually eligible for Medicare and Medicaid than someone who is not when they have the same diagnoses," CMS stated in their guidance.

CMS also stated that the Biden administration has also proposed policies to strengthen the Medicare Advantage managed care program that will hold health insurance companies to higher standards by:

• cracking down on abusive and confusing marketing schemes;
• addressing problematic prior authorization practices that prevent timely access to needed care;
• making it easier to access vital behavioral health care; and
• raising the bar on quality and driving toward more equitable care

The CMS guidance can be found here. The fact sheet can be found here.