CMS finalizes 2024 Medicare Advantage Rate Notice

On Friday, the Centers for Medicare and Medicaid Services announced an update to the system used to pay for Medicare Advantage Plans.

CMS predicts that health insurance companies that cover Medicare Advantage members will see 3.32% a net increase in program revenue in 2024 above the 1% projected in the preliminary rate notice due to a three-year phased modification of the risk adjustment program. Insurers described the earlier iteration of the policy as a blow to the increasingly popular program that would force them to cut payouts.

A major objection from the health insurance industry is the CMS approach to the risk adjustment program that carriers use to measure the health of members and report back to the agency. Insurers that cover sicker patients get higher payouts. Critics say this creates an incentive for Medicare Advantage plans to exaggerate the health status of their insurers and register as many risk codes as possible to overcharge.

CMS will eliminate over 2,200 risk codes that it claims are most responsible for apcoding.

Medicare Advantage insurers overpaid about $17 billion in 2021, according to the latest figures from the Medicare Payments Advisory Panel, which advises Congress on policy. Last month, CMS announced it would reimburse $4.7 billion over 10 years from Medicare Advantage insurers that the agency believes overpaid. CMS has also reduced the base pay that Medicare Advantage insurers receive by stopping paying for the indirect costs of medical education.

While CMS describes 2024 rates as a net increase over this year, the insurance industry sees things differently. Combined with the impact of a separate move to make star rating bonuses harder to earn, Medicare Advantage carriers will face a net reduction in benefits next year, according to the industry. CMS is tightening up its star ratings program after a record number of insurers received bonuses during the COVID-19 pandemic last year, and that trend has reversed this year.

This is an evolving story. Please stay tuned for updates.