Who’s putting profits before patients now?
- Medicare Advantage (MA) plans, which manage care for millions of seniors, have been criticized for denying crucial post-acute care services to increase profits, forcing seniors into difficult decisions regarding their care and financial burden.
- MA insurers report significantly higher profits compared to other markets, yet face declining profitability due to increased utilization, medical costs, and reimbursement rate adjustments. Insurers employ questionable practices such as upcoding and favorable selection to bolster reimbursements, leading to substantial overpayments.
- A Senate report calls for urgent reform in the MA industry to prioritize patient care over profits, suggesting actions for CMS like collecting detailed prior authorization data and strengthening regulations on utilization management, amidst concerns regarding CMS's slow response and enforcement capability.
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In recent years, the healthcare industry has faced numerous criticisms for prioritizing profits over patient care. However, a new report from the Senate has shed light on a particularly egregious example: the nation's largest Medicare Advantage companies. These insurers, which manage care for millions of seniors, have been accused of denying critical post-acute care services to boost their bottom lines. The situation has led to a dire scenario where seniors and their families are forced into impossible decisions, either shouldering crushing out-of-pocket costs or returning home prematurely, where they may lack the support needed for a full recovery.
The Medicare Advantage Industry: A Complex and Troubled Landscape
Medicare Advantage (MA) plans have become increasingly popular among seniors, enrolling more than half of the eligible Medicare population. These plans offer a range of supplemental benefits, including dental, vision, and hearing services, which attract many beneficiaries. However, the allure of these extra perks comes at a significant cost for taxpayers and patients alike.
High Profits but High Costs
Medicare Advantage insurers make substantial profits compared to other insurance markets. According to a report by the Kaiser Family Foundation (KFF), in 2021, MA insurers reported gross margins averaging $1,730 per enrollee, which is at least double the margins reported by insurers in individual/non-group markets and fully insured group/employer markets.
Despite these high margins, the profitability of MA plans is declining. Moody's Investors Service has reported that the profit margin in MA plans decreased from 4.9% in 2019 to 3.4% in 2022, while earnings per member declined by 28% over the same period. This decline is attributed to increased utilization among seniors, higher medical costs, and reimbursement rate adjustments.
The Dark Side of Medicare Advantage
While MA plans market themselves as offering better, more affordable coverage than traditional Medicare, the reality is far more complex. Insurers like UnitedHealthcare, Humana, and CVS have been accused of using AI-powered tools to reject more claims, thereby denying necessary post-acute care services. This practice has led to a significant increase in the number of denials for skilled nursing facility admissions, with UnitedHealthcare’s denials skyrocketing ninefold between 2019 and 2022.
The Impact on Seniors
The denial of post-acute care services forces seniors and their families into difficult decisions. They must either remain in a facility and bear crushing out-of-pocket costs or return home prematurely, potentially without the necessary support for a full recovery. This situation is a lose-lose scenario for those most in need of care.
Overpayments and Administrative Costs
Another issue plaguing the MA system is overpayment. A report by Physicians for a National Health Program (PNHP) estimates that Medicare Advantage plans cost the government and taxpayers billions of dollars more than traditional Medicare, with overpayments ranging between 22% and 35% in 2022. These overpayments are due to several factors, including favorable selection, upcoding, and gratuitous bonuses.
Favorable Selection: Luring Healthier Beneficiaries
One of the primary mechanisms for overpayment is favorable selection. Insurance companies lure healthier-than-average beneficiaries away from traditional Medicare, but Medicare pays them as if they enrolled beneficiaries in average health. This practice results in an overpayment of 11% to 14%.
Upcoding: Making Enrollees Look Sicker
Another method insurers use to increase reimbursement is upcoding. By adding diagnoses to patient medical records that are either false or irrelevant to the treatment given, insurers can make their enrollees appear sicker and therefore warrant higher reimbursement. This practice accounts for an additional 5% overpayment.
Pointless Bonuses: High Scores and Rural Incentives
The Medicare Payment Advisory Commission (MedPAC) has called for the termination of the scoring system used to calculate bonuses for high-performing MA plans. These bonuses are often based on inaccurate metrics and result in unnecessary overpayments of 4%.
Favorable Deselection: Driving Sicker Enrollees to Traditional Medicare
Insurers also engage in favorable deselection, which involves denying necessary services to sicker Medicare Advantage enrollees, thereby driving them back to traditional Medicare. This practice is another method by which insurers avoid high costs associated with caring for sicker patients.
The Senate Report: A Call for Action
The recent Senate report on the practices of MA insurers has highlighted the need for immediate action. The report calls on the Centers for Medicare and Medicaid Services (CMS) to take several steps, including:
- Collecting prior authorization data broken down by service category
- Conducting targeted audits if insurer prior authorization data reveals significant increases in adverse determinations
- Expanding regulations on insurers’ utilization management committees to ensure predictive technologies don’t unduly influence human reviewers
Implementation and Impact
While these recommendations are crucial, their implementation is uncertain. The CMS has a history of slow response to such issues, and it remains to be seen whether these proposals will be enacted and effectively enforced.
The Future of Medicare Advantage
In light of these findings, it is clear that the Medicare Advantage industry must undergo significant reforms. The current system, where insurers prioritize profits over patient care, is unsustainable. The future of MA plans should focus on providing high-quality, affordable care rather than maximizing profits.
Conclusion
The situation with Medicare Advantage companies is stark. While these plans offer attractive benefits to seniors, the practices employed by insurers to maintain high profits come at a significant cost to taxpayers and patients. It is imperative that regulators and policymakers take immediate action to address the issues highlighted by the Senate report. By doing so, we can ensure that healthcare services are prioritized over profits, and that seniors receive the care they deserve.
