Radar on Medicare Advantage

As CMS proceeds with its planned phase-in of changes to the CMS-Hierarchical Condition Categories (HCC) risk adjustment model starting this year, the agency on Jan. 31 projected that Medicare Advantage plans next year can expect to receive an average increase of 3.70% in risk adjusted revenue. After picking apart the various factors that go into that assumption, however, the industry is bracing for an effective rate reduction, along with significant changes to the Part D benefit that incited proposed updates to the RxHCC risk adjustment model used to calculate direct subsidy payments to Part D plans.

CMS this time last year projected an all-in rate increase of 1.03%, which included an effective growth rate of 2.09% and expected revenue declines of -3.12% — stemming from changes to the CMS-HCC risk model and fee-for-service (FFS) normalization — and -1.24% due to changes in Star Ratings from the prior year. The agency also estimated an underlying MA risk score trend of 3.30%. Subsequent studies suggested that the removal of thousands of diagnosis codes, renumbering of several HCCs, and other technical changes would reduce plans’ risk scores by anywhere from 2% to 14%. In the final rate notice, CMS revised its all-in rate increase projection to 3.32% after deciding to phase in the risk model changes over a three-year period.

Seniors who experienced fluctuations in eligibility for Medicare Part D’s low-income subsidy (LIS) spent more money on prescription drugs and filled fewer prescriptions overall, according to new research published in JAMA Health Forum. While researchers said questions remain about whether these temporary losses can impact medication adherence and health outcomes — particularly among non-white seniors — policymakers should consider streamlining LIS eligibility systems to reduce administrative barriers. 

In 2023, 13.4 million Part D beneficiaries received full or partial LIS benefits. The program provides assistance with paying premiums and deductibles, and it reduces any post-deductible cost sharing for beneficiaries. The majority of LIS beneficiaries are “deemed,” meaning they are automatically enrolled in the program based on dual eligibility with Medicaid and/or enrollment in a Medicare Savings Program (MSP). (This also includes non-duals who receive Supplemental Security Income.) But 17% of LIS beneficiaries are “nondeemed,” meaning they are not enrolled in Medicaid or an MSP and must apply for LIS themselves. All LIS beneficiaries undergo annual redeterminations, but the process for deemed beneficiaries is automatic, leaving the nondeemed population to face potential administrative challenges and unnecessary coverage loss. 

Physician-administered drugs could catch some windfall due to the Inflation Reduction Act’s Medicare Part D redesign.

Much time and energy has been focused on thinking about how drug pricing, rebating and Part D plan design may shift due to changes set to finish taking effect in 2025 including new caps on enrollee out-of-pocket spend and more liability falling on plans rather than taxpayers.

But a “sleeper issue here is what all of this is going to mean for Medicare Part B drugs,” said Avalere’s Kesley Lang on a January webinar on the health policy outlook for the new year.

After reportedly vying with Elevance Health, Inc. for the purchase of The Cigna Group’s Medicare Advantage business, Health Care Service Corp. (HCSC) will buy Cigna’s MA, Medicare Supplemental, Medicare Part D and CareAllies assets for a total transaction value of $3.7 billion. HCSC has been aggressively growing its MA business through service area expansions; the addition of Cigna’s MA lives would boost its current share of the segment from 0.62% to 2.40%, according to AIS’s Directory of Health Plans.

In a press release unveiling the deal, the Chicago-based insurer said the acquisition will accelerate its growth in “an important market segment” and “bring many opportunities to HCSC and its members - including a wider range of product offerings, robust clinical programs and a larger geographic reach.” HCSC is customer-owned, meaning policyholders and not stockholders are the owners, and is an independent licensee of the Blue Cross and Blue Shield Association. Its Blues plans currently enroll 204,638 members across five states: Illinois, Montana, New Mexico, Oklahoma and Texas.