CMS finalizes Medicare Advantage 2024 rate notice


The Centers for Medicare and Medicaid Services announced a revamp of the system used to pay Medicare Advantage plans on Friday.

CMS projects that health insurance companies covering Medicare Advantage enrollees will see a 3.32% net increase in revenue from the program in 2024, higher than the 1% projected in a draft version of the rate notice thanks to a three-year phase-in risk-adjustment program modifications. Insurers characterized the earlier iteration of the policy as a blow to the increasingly popular program that will force them to reduce benefits.

The health insurance industry’s primary objection is CMS’ approach to the risk adjustment program, which carriers use to measure and report members’ health status to the agency. Insurers that cover sicker patients receive higher payments. Critics say this creates an incentive for Medicare Advantage plans to exaggerate their policyholders’ health conditions and log as many risk codes as possible to inflate payment.

CMS will eliminate more than 2,200 risk codes it contends are most responsible for upcoding.

Medicare Advantage insurers generated an estimated $17 billion in overpayments in 2021, according to the most recent data from the Medicare Payment Advisory Commission, which makes policy recommendations to Congress. CMS announced last month it would recoup $4.7 billion over 10 years from Medicare Advantage insurers the agency concluded were overpaid. CMS also reduced the benchmark payment Medicare Advantage insurers receive by ending payment for indirect medical education expenses.

Despite CMS describing the 2024 rates as a net increase over this year, the insurance industry sees things differently. When combined with the consequences of a separate move to make star rating bonuses harder to earn, Medicare Advantage carriers face a net reduction in payments next year, according to the industry. CMS is tightening the star ratings program after a record number of insurers received bonuses during the COVID-19 pandemic last year, a trend that reversed this year.

This is a developing story. Please check back for updates.



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