Private Medicare plans face few threats from 2020 proposal
The Trump administration's proposed 2020 payment policies for Medicare Advantage seem unlikely to blunt the program's sustained growth. The proposal issued last week contained few unwelcome surprises for insurers, though it's likely to rekindle annual lobbying battles that have intensified as the program has grown to over $200 billion a year. CMS proposed to hike rates a modest 1.59 percent for 2020, but some analysts think a two-month lobbying effort from insurers could nudge that figure higher.
Financial analysis firm Heldman Simpson Partners predicts that the average rate hike will end up somewhere between 1.5 and 2.5 percent when CMS finalizes payments in early April. "We think this is a range that will still make Advantage an attractive line of business from an insurer and investor perspective," the firm's analysis concludes. Humana, the second biggest private Medicare plan, didn't raise any red flags about the proposed 2020 rate notice on a call with investors Wednesday morning. Company officials appeared more concerned by the return of Obamacare's health insurance tax in 2020 after a one-year hiatus. "[It's] too early to give 2020 guidance," said Brian Kane, Humana's chief financial officer. "We'll see where the rate notice finishes up." More than a third of all Medicare beneficiaries — 22.4 million seniors — are now enrolled in private plans.
That's more than double the number of enrollees a decade ago. The Trump administration has been unabashedly bullish on Medicare Advantage, extolling the program for expanding coverage options for seniors. But the rapid growth of private Medicare plans has also strengthened bipartisan support for the program on Capitol Hill, with lawmakers from both parties wary of antagonizing a demographic that votes in disproportionately high numbers. The Obama administration routinely scaled back payment proposals that were opposed by insurers and their congressional allies. The current administration has tried to emphasize greater flexibility around benefits, winning plaudits from insurers. The trend started last year with CMS giving health plans more leeway to offer services that aren't directly related to medical care, such as meal delivery or transportation. In addition, last month CMS announced a demonstration project through its innovation center allowing private Medicare plans to offer benefits designed to help poorer beneficiaries who face barriers to accessing consistent medical care. In the 2020 guidance, CMS is proposing additional flexibility around benefits for chronically ill patients, a change required by a budget deal enacted by Congress last year. The Better Medicare Alliance, an industry group with insurer and provider members, points out that more than half of Medicare Advantage customers have annual incomes of less than $30,000. That means they may face financial barriers to accessing preventive care or making healthy lifestyle choices.
"Many of them do without access to cars, or access to healthy foods," said Allyson Schwartz, president of the advocacy group. There's limited data on how much uptake there's been by insurers in expanding benefits under the new 2019 rules. An analysis by the law firm Faegre Baker Daniels found that just 153 Medicare Advantage plans — less than 5 percent of the total — offered 824 additional benefits under the more flexible rules this year. Nearly half of those benefits are aimed at Medicare enrollees with congestive heart failure or diabetes. The most popular services for 2019 are meal benefits and reduced costs for specialist care. Michael Adelberg, a principal with the law firm's consulting arm, pointed out that insurers last year had limited time to understand the new rules and develop 2019 health plans. He expects more insurers to embrace alternative benefits going forward, and points to reduced costs for seeing primary care doctors as a change that more health plans are likely to embrace. "There's a real good business case for getting people in to see their primary care docs," said Adelberg, a former director of Medicare Advantage operations at CMS.
"There's good evidence to suggest that more primary care visits not only result in better health outcomes, but [also] save money." America's Health Insurance Plans, the leading industry group, agrees that 2019 provides an imperfect snapshot of insurer interest in adding benefits due to the time crunch. "It's likely you'll see more plans offering more types of supplemental benefits for 2020 than you saw in '19 just because they've had an extra year to assess and process last year's guidance," said Mark Hamelburg, AHIP's senior vice president of federal programs. "The full value of this is going to take some time to play out." Insurers aren't enthusiastic about all of the changes proposed by the Trump administration. In particular, they continue to be wary of an ongoing push to use "encounter data" — essentially medical claims — as a greater share of the formula for calculating risk scores that determine how much insurers are paid to cover beneficiaries. The Trump administration is proposing to boost the share of the formula based on encounter data from 25 percent to 50 percent, continuing a conversion that started under the Obama administration. But insurers have raised concerns about the accuracy of that data and whether it will result in lower payments than warranted by their customers' medical needs. "We're going to take another close look at this, as we do each year," Hamelburg said, "but it wouldn't be surprising if we were to raise similar concerns."