Medicare Advantage (MA) plans are overpaid by billions each year despite their promise of offering higher value care at a lower cost. The Medicare Payment Advisory Commission (MedPAC) estimates overpayments to MA plans from plans’ coding practices alone exceed $50 billion in 2024. With more than half of Medicare beneficiaries now enrolled in MA, there is a need for greater oversight to ensure these plans are delivering high-quality care and to address waste and abuse within the program.
In January 2024, the Centers for Medicare and Medicaid Services (CMS) released their yearly Advance Notice of proposed technical changes to the MA and Medicare Part D programs. These proposals involve continued implementation of changes to CMS’ risk adjustment system and incorporate the Medicare Part D redesign as required by the Inflation Reduction Act. In response to CMS’ proposals, AV made the following recommendations:
- Apply a higher coding adjustment factor than what is minimally required in statute to fully account for plan upcoding. CMS’ coding intensity adjustment remains far below what is needed to account for MA plan upcoding on average. Given variation in coding across MA sponsors, we urge CMS to use its authority to increase the coding intensity adjustment in a way that addresses variation and targets MA plans that code most intensely.
- Continue phasing in the revised risk adjustment model finalized in CY 2024 and take additional steps to address MA overpayments. We strongly support CMS’ proposal to continue implementing the revised risk adjustment model; a critical first step in addressing the problem of overpayments to MA plans. The evidence is clear that much more needs to be done. We encourage CMS to go further by contemplating additional reforms and larger scale changes to risk adjustment.
- Continue improving the Medicare Part D RxHCC model to better account for differences between stand-alone Prescription Drug Plans and MA Prescription Drug Plans (MAPDs). We strongly support the proposed updates to the RxHCC model that account for the Part D Benefit Redesign in 2025 including an adjustment for overestimates of MAPD drug costs. We also recommend that in future years the risk adjuster be based on net drug costs rather than gross drug costs.
We applaud CMS for moving in the right direction to reduce overpayments to MA plans. However, the evidence shows that larger reforms are needed to ensure MA delivers value to beneficiaries and taxpayers.
You can read our full set of recommendations here.
