Reprinted with AIS Health permission from the 1/4/24 issue of Radar on Medicare Advantage

2024 Medicare Advantage Outlook

For our annual series of outlook stories on the year ahead in Medicare Advantage, AIS Health, a division of MMIT, spoke with more than a dozen industry experts on the challenges facing MA insurers and the potential strategies to stay ahead of them. One running theme from this year’s conversations is the sheer level of uncertainty MA organizations are facing in 2024 and beyond, from revenue headwinds driven by changes in risk scoring and the Star Ratings to yet-to-be-finalized proposals around broker compensation and supplemental benefits. And that’s all while managing an overhaul of the Medicare Part D benefit, thanks to the Inflation Reduction Act (IRA) of 2022. And many of these changes “could have substantial impacts on revenue, which impacts benefit design, supplemental benefits, and so on,” says Steve Arbaugh, managing principal and CEO with ATTAC Consulting Group.

Here, in no particular order, are the major challenges and unknowns facing MAOs in 2024 and beyond:

“In 2024, Medicare Advantage plans will face headwind pressures due to increased challenges with Stars and the subsequent impacts on reimbursement rates.…Plans with higher Stars scores will have an advantage going into the new year, and plans that have experienced declining Stars scores — which is most plans lately — will have to compete on the same field with lower revenue,” remarks Darren Ghanayem, a managing director at global management and technology consulting firm AArete. “Provider network relationships and incentive programs — which contribute to the Stars, and reimbursement rates — will be important in 2024. Payers must consider providers ‘team members’ with a shared goal of improving consumer health.”

Star Ratings and Health Equity

With CMS’s application of the Tukey outlier deletion methodology — which caused a significant drop in the number of 5-Star plans for 2024 — “going back and recalibrating and understanding where you are relative to Stars, whether you can grab that revenue piece going forward is a challenge,” says Arbaugh. “If you look at the 2025 Star Ratings, you really only have one measure left to be able to move that needle — your Consumer Assessment of Healthcare Providers & Systems [CAHPS] scores, which will be developed in the spring — so obviously people are very focused on that.”

A related challenge, he adds, will be around the implementation of the Health Equity Index (HEI), which will replace the current reward factor starting with the 2027 Star Ratings and reward insurers for their efforts to assess social risk factors and address disparities in certain quality measures. “The data gathering is starting in 2024 and will run into 2025, and our experience is that we don’t believe the plans have begun to analyze their data and break it down — and break down their membership and understand all the factors that are related to that quite yet,” Arbaugh tells AIS Health. And there’s more they could be doing in terms of segmenting their populations and understanding what interventions to apply. “What’s going to work in one part of their service area may not work in another part of the service area for the same low-income people because they have different characteristics. That detail of analysis is a shift that plans have to make in ’24 to begin to get their interventions in place…so that if they’re eligible for the HEI index for plan year ’27 that they actually can get some of those dollars.”

Broker Compensation, Supplemental Benefit Changes

“Speaking from a product and sales perspective, plans will need to solve for the impact of the IRA on their 2025 bids, as well as the potential disruption to distribution that could result from the 2025 proposed rule regarding broker compensation,” says John Selby, senior vice president with Rebellis Group. As plans seek ways to compensate for their increased Part D financial responsibilities, one target could be supplemental benefits. “Savings could be found by eliminating or reducing benefits, despite the fact that supplemental benefits are highly valued and influence beneficiaries’ decision making. We are also watching to see if the reporting burden proposed by CMS could dampen innovation in, or the growth of, supplemental benefits.”

Separate from a new reporting requirement on supplemental benefits, a November proposed rule included a requirement that MA plans send a midyear notification to enrollees about their unused supplemental benefits. “There’s a lot of money being spent” on supplemental benefits, points out Arbaugh. Could such a notification lead to an increase in the use of supplemental benefits? “Where plans may have been able to offer certain benefits in the past and had some relatively low utilization, all of a sudden, they may begin to say, ‘Well, what kind of change will that have in 2025 [after the first notification] and what do I need to do to adjust my bid? Plans may begin to look at their supplemental benefits in a different way.”

CMS in its November proposed rule also introduced new constraints on broker compensation that “as written, could radically change the relationship between FMOs [field marketing organizations] and plans,” points out Selby. “While most observers believe the final rule will include at least some compromises, FMOs could be forced to revisit their reliance on ‘administrative fees’ or overrides, and that could cause plans to have to take on more responsibility dealing with brokers. The rule presently is an over-reach — local brokers continue to be lumped in with TPMOs [third-party marketing organizations] that skirt or ignore the current rules — but CMS is rightly determined to protect seniors.” While the rule has yet to be finalized, “given the attention being paid to sales and marketing by CMS, Congress, and even the FTC [Federal Trade Commission], we would expect the 2025 final rule to include at some of the changes proposed, probably more than less,” he adds.

Continued Focus on Risk Adjustment

Another challenge this year relates to CMS’s implementation of changes to the CMS-Hierarchical Condition Categories (HCC) risk adjustment model. Beginning in 2024, CMS will remove thousands of diagnosis codes mapped to HCCs for payment and renumber several HCCs in response to certain diagnostic categories being coded more frequently in MA relative to FFS Medicare. But that transition will be phased in over three years, starting with a blend of 67% of risk scores derived under the current model and 33% of the risk scores under the finalized 2024 model. The impact of the transition “will likely vary by plan/population type and by the MAO’s historical coding completeness,” says Matt Kranovich, principal and consulting actuary with Milliman.

With the HHS Office of Inspector General (OIG) releasing a “toolkit” last month identifying the diagnosis codes most submitted without supporting medical records, plans will also need to identify whether they have these high-risk HCCs in their data and consider “how far back” to run the data and “get it clean,” advises Arbaugh.

Other Funding Challenges

“Medicare Advantage organizations are also affected by the changes to Medicare payment rates. Congress failed to move many of its typical year-end extensions of Medicare and Medicaid provisions [in 2023], leaving up in the air a range of provisions,” adds Jason Karcher, an actuary with Milliman. That includes a provision in the House’s Lower Costs, More Transparency Act (LCMTA) seeking to expand Medicare site-neutral payments, which “would reduce the cost for some services provided by hospital outpatient departments that look like services provided in a physician office,” he says.

The LCMTA, which passed the House on Dec. 11, also contains significantly expanded and more clearly specified provider and insurer transparency requirements. These “may be less likely to affect bottom lines but may affect administrative costs around the edges, with effects likely to be specific to each MAO’s current practices,” he advises. Additionally, community health centers (CHCs) could be adversely impacted if Congress does not extend funding (also included in the LCMTA) through the Community Health Center Fund, which is set to expire on Jan. 19. “This could have unpredictable effects on MA networks and ability to provide care in rural or underserved areas,” adds Karcher.