It is kind of an annual tradition. CMS issues the advance call letter giving proposed Medicare Advantage rates for the next year and America’s Health Insurance Plan’s, the trade association for many of the nation’s largest insurers, hires an actuary to whine about them, but under cover of a detailed analysis. So once again this year Oliver Wyman is designated to serve that function. (AHIP Report) According to OW’s analysis, beneficiaries could see “disruption” in the MA market because the firm projects a 3% growth in health care costs for MA plans, but the call letter would result in a 2% reduction in payments, creating a 5% “gap”. Presumably the plans might try to make this gap up by increasing beneficiary premiums or reducing extra benefits. Now the presence of that gap assumes the plans weren’t making money on MA, which is, uh, how do I say this, definitely not the case; the plans are making a lot of money on MA, and even under the advance call letter, which likely will be modified up, they will continue to make a whole lot of money.
Part of the gap is created by reinstatement of the reform law’s insurance tax, which was suspended for this year. It seems likely Congress is going to eliminate that tax as part of the changes to the reform law. The assumption of health care cost increases, at least as they affect the plans, is probably also flawed. The plans increasingly offload health care costs and the associated risk to providers via capitation and other methods, so in a way, what do the plans care what happens to health care costs, not really their problem. But my favorite whine is about risk-scoring data sources, methods and adjustments. It is pretty clear that the plans, as they are incented to do by the current method, have worked hard at coding and submitting every possible diagnosis for their MA members, resulting in much higher payments. Not clear that the higher risk scores are actually associated with much higher health costs, resulting in a lot of the MA plan profit. The recent action against UnitedHealth Group suggests regulators are going to take a harder line against these practices, probably overdue.
Medicare Advantage is a very good program; these plans clearly do a much better job of delivering and managing care for Medicare beneficiaries than the FFS program does. There is nothing wrong with MA plans making money delivering these good results, but no more whining about how much you are paid when you are generating a good profit off the business and some of your methods of increasing revenue are sketchy at best.