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Medicare Advantage stole the spotlight last week with a steady barrage of new reports, investigations, and Q2 payor results.

KFF kicked things off with its MA Enrollment and Key Trends Update, which showed that 54% of eligible Medicare beneficiaries – 32.8M people – are now enrolled in private MA plans.

That’s quite the jump from just 19% in 2007, and the CBO projects that percentage to continue climbing to 64% by 2034.

The report also underscored the high concentration of MA enrollment among a small number of firms, with UnitedHealthcare (29%) and Humana (18%) accounting for an eye-popping 47% of nationwide enrollees.

Things only heated up from there, with the Wall Street Journal publishing a home visit hit piece on the “one hour nurse visits that let payors collect $15 billion from Medicare.”

The investigation found that major Medicare Advantage players frequently push nurses to make diagnoses during home health assessments, which often involves inaccurate diagnostic tests or deliberate misinterpretation of questionnaires.

Right on cue, STAT scorched UnitedHealth with its own report on several of the same issues, particularly problems related to the QuantaFlo device used to identify peripheral artery disease during home visits.

CVS and Humana added to the action with their Q2 investor calls, which both highlighted headwinds for their Medicare Advantage operations.

CVS lowered its full-year forecast after its MA business saw elevated utilization across inpatient, benefits, and pharmacy, with CEO Karen Lynch stepping back into her old role at the helm of Aetna to oversee $2B in cost-cutting.

Humana also revealed that it will likely lose a “few hundred thousand” MA members next year after shrinking its benefits and exiting markets in an effort to improve margins, marking the first time the payor has predicted membership losses from culling its plans.

The Takeaway

There’s nothing like a few hit pieces and payors trimming their forecasts to lure out the Medicare Advantage doomsayers, but the MA program isn’t going anywhere, even if it isn’t quite the margin machine that it once was.

Medicare Advantage plans could be on track to reach over $75B in overpayments this year – nearly 3x prior estimates – causing researchers at the USC Schaeffer Center for Health Policy and Economics to issue a pressing call for policy reform.

The USC study found that traditional fee-for-service Medicare beneficiaries with lower-than-average expenditures are significantly more likely to switch to Medicare Advantage plans. Favorable selection at its finest.

For context, CMS sets MA rates based on the county-level expenditures of those in traditional FFS Medicare, and they’re intended for beneficiaries with average expenditures – not systematically below average.

As a result, risk-adjusted expenditures for the 16.9M new MA beneficiaries who made the switch from traditional Medicare between 2006 and 2019 were substantially below average, causing large overpayments due to the favorable selection effect.

This pattern of favorable selection more than doubles the $27B (6%) overpayment estimate from MedPAC for 2023, which primarily reflected “coding intensity” ($23B) and Star Rating (quality) bonuses, but didn’t include an adjustment for selection bias.

The researchers estimate that favorable selection alone could cause overpayments to the tune of 14.4%, which would surpass $75B when combined with MedPAC’s estimate of other factors.

The authors propose two potential strategies for improving the accuracy of MA rates:

Reform the current approach of linking MA rates to average expenditures of traditional Medicare beneficiaries by including measures to reduce the impact of aggressive coding and mandating new data reporting requirements to improve comparability.

Abandon the current approach and institute competitive bidding by MA plans to let market forces determine rates with the aim of capturing efficiency gains for taxpayers instead of increasing revenue for MA plans.

The Takeaway

Medicare Advantage enrollment has been skyrocketing over the past decade, and over half of all eligible beneficiaries are now enrolled in a private plan. As traditional Medicare enrollment continues to decline, basing MA rates on FFS expenditures will only grow increasingly problematic, and this study does a great job underscoring the need for some serious reform.

Tag: ma

Spotlight on Medicare Advantage, Q2 Results

Medicare Advantage’s Favorable Selection Problem

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