Insurers were furious about a recently proposed rate cut for Medicare Advantage, a reaction met with a collective eye roll from providers accustomed to slashed reimbursement rates.
Medicare Advantage plans generate billions of dollars for payers as they woo members with $0 premiums and supplementary benefits. Enrollment for the 2024 plan year grew nearly 3% to about 33 million members, with Aetna, UnitedHealthcare and Humana reporting the largest increases.
Related: Winners and losers in Medicare Advantage 2024 enrollment
The proposed rule issued last month by the Centers for Medicare and Medicaid Services would decrease the Medicare Advantage benchmark rate by 0.16% in 2025.
Insurance companies, facing higher utilization rates and increased medical costs, immediately pushed back on the proposal and are expected to lobby Congress for relief and payment stability.
Physicians, meanwhile, are already facing a 3.4% cut under this year's Medicare fee schedule, equating to a nearly 10% reduction in payments over the past four years, according to the American Medical Association. CMS finalized the 3.4% decrease in November.
With that reduction in mind, providers are growing concerned about how a 0.16% rate cut for insurers could further affect their operations and what the change could potentially mean for patient care.
And they aren't buying insurers' complaints.
“I was trying to think of the right word to describe the situation from the perspective of a physician, and I came up with a couple. ‘Shameful’ is the first one, ‘ridiculous’ is the second, and I think ‘absurd’ is probably the most accurate,” said Dr. Gary Price, president of the Physicians Foundation, a nonprofit that supports physician leaders.
CMS tries to control Medicare Advantage spending
The 0.16% rate decrease, which excludes risk adjustment, would mark the second consecutive year of lower benchmark rates. It is part of a multiyear adjustment process to tighten the federal government's oversight on insurers.
But many in healthcare argue Medicare Advantage payments are still imbalanced and driving up healthcare costs, rather than spurring spending reductions, as intended. The federal government could end up paying Medicare Advantage plans $88 billion more this year than if those plan members had traditional Medicare coverage, according to a January report from advisory group MedPAC.
Under the Biden administration, CMS has implemented a series of policies to control the federal government's Medicare Advantage spending and protect consumers from predatory marketing tactics.
“What this rate notice reflects is a long-overdue course correction that does not go far enough,” said David Lipschutz, associate director at the Center for Medicare Advocacy, a nonprofit organization that works to expand patient access to Medicare coverage.
Some providers also point to CMS’ projected 3.7% average increase in overall Medicare Advantage revenue for 2025 as evidence that insurers should not be worried, though actual revenue changes will vary based on the individual insurer.
“I don’t have a lot of sympathy for [insurers’] whining about a minuscule clip,” said Chip Kahn, president and CEO of the Federation of American Hospitals, a trade group representing for-profit hospitals. “CMS is just carrying out the law, and so CMS is in a sense not really cutting [the rate]. CMS is bringing them in line with appropriate compliance with the program.”
Providers worry about rate cut implications
CMS plans to finalize the benchmark rate rule by April 1. In the meantime, providers are watching for what pullbacks could come from payers.
Some insurance executives have already brought up the possibility of benefit cuts.
Centene executives told analysts on a fourth-quarter earnings call earlier this month that it may reduce benefits if the rate cut goes into effect. “Our product may be a little less attractive for seniors if we don’t make progress on rates," Centene Chief Financial Officer Drew Asher said on the call.
A day later on its call, Aetna President Brian Kane hinted at similar actions.
Supplemental benefits such as transportation, food programs or coverage for dental, hearing and vision care could be in danger, said Jack Hoadley, research professor emeritus in the Health Policy Institute of Georgetown University's McCourt School of Public Policy. He said payers could also increase premiums or tighten their networks.
Stuart Kilpinen, senior vice president for payer strategy and product development at Livonia, Michigan-based Trinity Health, said government programs like Medicare already fail to fully cover the costs of care, so the system is sensitive to additional negative impacts. Trinity offers its own Medicare Advantage plans to patients in Ohio, Idaho and Iowa through nonprofit MediGold.
Kilpinen said payers could absorb additional costs by reducing reimbursements to providers by denying more claims or saying certain procedures no longer meet pre-certification policies.
If insurers do take these actions, patients’ access to care could be affected, providers and industry watchers say.
“[Cutting benefits] is not inevitable. It is a choice," Michelle Millerick, senior associate director of health insurance and coverage policy at the American Hospital Association, said in a statement. "These Medicare Advantage plans are choosing to prioritize shareholders over their enrollees by cutting healthcare benefits in order to meet profit demands by investors."
