The proposed Medicare Advantage cuts would increase premiums and slow growth, the BMA said.

Better Medicare Alliance President and CEO Mary Beth Donahue speaks during a Zoom call on Wednesday.

Insurers expect Centers for Medicare and Medicaid’s recent advance notice of Medicare Advantage and Part D plans for 2024 coverage will result in a 2.27% reduction in plans if they are terminated, and this could have a negative impact on members’ premiums and benefits , as well as the slow rise of MA, according to a new Avalere study commissioned by the Better Medicare Alliance.

Speaking to reporters on Zoom on Wednesday, BMA President and CEO Mary Beth Donahue said the rule would increase costs and cut benefits for the approximately 30 million seniors and people with disabilities who receive Medicare Advantage.

Payers’ estimates of a payment cut of more than 2% conflicted with forecasts from CMS, which said it expects plans to increase by 1.03% after factoring in payment cuts when adjusted for risk adjustment.

CMS has retreated, but payers are adamant the change will lead to cutbacks.

“Unfortunately for these seniors who rely on Medicare Advantage, we see that with these proposed changes, funding cuts will affect (increase) their premiums or decrease their benefits,” Donahue said during the call.

The study assessed average plan discounts for 2023 nationwide and for the top 10 metropolitan areas by graduate enrollment. They then compared them to what discounts could be in 2024 if CMS ended the policy in advance notice.

The data showed that in plans across the country, the anticipated reduction in discounts could result in an average increase in premiums or reduction in fringe benefits by nearly $45 per member per month.

This impact is likely to vary by geography and plan. For example, in Houston, Texas, discounts will be reduced by about 63%. Atlanta, Georgia will see a 38% decline. Los Angeles, California will experience a 19% decline, the smallest decline among the top 10 metropolitan areas.

At the national level, the reduction is estimated at around 29%.

Avalere’s research has identified several other potential negative effects of the rule if it is further developed. Until 2023, for example, CMS included master’s degree-related indirect medical education (IME) and direct postgraduate medical education (DGME) in the calculation of the base per capita service costs that determine the growth rate of the master’s degree. For 2024, Avalere said, CMS is proposing a one-time change to exclude medical education costs associated with a master’s degree from the historical costs used for their projections.

The data showed that the removal of IME and DGME would reduce FFS spending and the corresponding FFS growth rate in 2024 by 2.13%. The growth rate of MA will decrease by 1.06%.

CMS also offers a clinical reclassification of hierarchical condition categories (HCCs) using ICD-10-CM codes for a risk adjustment model. Avalere said the risk-adjustment changes, combined with the proposed normalization factor, would result in a 3.12% reduction in payouts for the 2024 plan.

The agency has evaluated conditions that are coded more frequently in MA than in FFS and proposes to remove some diagnoses from the CMS-HCC model. According to Avalere, the number of paid CSCs will increase from 86 to 115 due to changes in the structure and clinical specificity of codes in the transition from ICD-9 to ICD-10, as well as changes in clinical concepts for certain conditions.

But for Donahue, the main takeaway from the proposed changes is the potential impact they will have on MA’s beneficiaries.

“Ultimately, we see that for individual MA recipients, they will see an average reduction of $540 per recipient per year,” she said. “Or for a couple, $1,080. When we look at complexity, it’s important to take note of what this means for the average Medicare Advantage recipient.”

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