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New Study: Formula Changes To Medicare Advantage Could Double Premiums, Slash Benefits For Seniors

posted by David Allen

on September 28, 2021

WASHINGTON, D.C. – More than 27 million Americans choose Medicare Advantage (MA) because it delivers better services, better access to care, and better value.  But as part of their continuing budget negotiations, it has been reported that Congress may be considering changes to MA payment formulas that could either raise premiums and/or and significantly reduce benefits for seniors and people with disabilities who depend on MA for their health care needs.  Specifically, a new study from Avalere finds that an increase to the coding intensity factor could increase premiums by $9 to $25 per month, or 43% to 115%, or lower benefits by $30 to $44 per month, or 22% to 33%.

To better understand how changes to coding intensity in MA would impact seniors, Avalere examined the results of increasing coding intensity to 7%, 8%, or 9%, compared to the current 5.9% adjustment.  Among other key findings, the Avalere study found that if the coding intensity factor increased to 9%, MA premiums could double.  And conversely, the proportion of MA enrollees paying a monthly premium at or below $25 could decrease from 68% to 3%.

“MA plans are more efficient and effective than original Medicare,” said Matt Eyles, AHIP president and CEO.  “And 40% of Medicare Advantage enrollees make less than $25,000 per year.  Increasing premiums or lowering benefits could have a devastating impact on the affordability of this critical lifeline to helping America’s seniors get and stay healthy.”

MA plans are compensated based in part on the expected health care costs of their enrollees, with higher payments for enrollees who have chronic conditions or serious illnesses. This is one way in which MA plans are incented to coordinate care and offer benefits and services to help improve the health of more at-risk seniors and people with disabilities.

Coding intensity increases could also impact MA supplemental benefits (reduced cost sharing, transportation, nutrition support, in-home services, etc.).  Today, over half of MA enrollees pay no premium (beyond their mandatory Part B premium) for their combined MA and Part D benefit. A coding intensity increase to 7% or more could mean no plans with a $0 MA premium would be available if they maintained current levels of supplemental benefits.  Alternatively, if plans maintained the same level of premiums, then supplemental benefits could decrease by $30 to $44, or 22% to 33%.

“More complete coding is essential in identifying the health conditions of enrollees at the earliest opportunity to improve health. The data clearly show MA has delivered on its promise of lower costs and higher quality.  Average spending per original Medicare enrollee is 6.4% higher than average spending per MA enrollee.  In addition, Medicare Advantage serves a racially diverse population, outperforms original Medicare on several quality measures, and has seen a 34% decrease in premiums over the past four years,” Eyles continued.  “AHIP is committed to working with Congress and the Biden Administration to protect and strengthen MA for the tens of millions of seniors and individuals with disabilities who rely on it.”

Please click here to view and download the Medicare Advantage Coding Intensity analysis.

About AHIP

AHIP is the national association whose members provide coverage for health care and related services to hundreds of millions of Americans every day. Through these offerings, we improve and protect the health and financial security of consumers, families, businesses, communities and the nation. We are committed to market-based solutions and public-private partnerships that improve affordability, value, access, and well-being for consumers. Visit www.ahip.org for more information.