Radar on Medicare Advantage

Medicaid drug spending shows no signs of slowing despite a drop in prescriptions, according to new research from KFF. Net spending on prescription drugs grew 47% to $43.8 billion from fiscal year (FY) 2017 to 2022. The average Medicaid enrollee had 11.4 prescriptions in FY 2017, with a net spend of $39 per prescription. In FY 2022, the number of prescriptions per enrollee dropped to 9.4, while net spending per prescription rose to $58. 

Meanwhile, Medicaid enrollment climbed to historic levels amid the COVID-19 pandemic, reaching 96.3 million lives in June 2023, according AIS’s Directory of Health Plans (DHP). With the end of the COVID-era continuous enrollment provision, states are now in the middle of a lengthy — and sometimes controversial — unwinding process. Yet utilization (the overall number of prescriptions) stayed under 2017 levels despite the enrollment boom. That could be because the number of days supplied per prescription has increased, with 90-day supplies becoming more common, in addition to lower utilization overall. 

A recent status report on the Medicare Advantage program presented by analysts with the Medicare Payment Advisory Commission led one MedPAC member to accuse leadership of producing a negative report for partisan political purposes. According to a MedPage Today writeup of a recent MedPAC public meeting, Brian Miller, M.D., of Johns Hopkins University said the report “appears to be slanted to arrive at a foregone conclusion in order to set up and provide political cover” before CMS issues its annual rate notice and “reads like attack journalism.” The report, which was presented on Jan. 12, showed that national market concentration in MA is nearing the Herfind,ahl-Hirschman Index (HHI) “highly concentrated” threshold, which the Dept. of Justice and the Federal Trade Commission use to review mergers. According to the presentation, the three largest MA insurers combined enroll 58% of MA members and in a typical market enroll roughly 80% of beneficiaries. That report also suggested that MA coding continues to generate excess payments relative to fee-for-service Medicare. Specifically, the MedPAC analysis of CMS enrollment and risk score files estimated that coding intensity will drive payments to MA organizations of $54 billion this year, up from $47 billion in 2023. “It is not lost on me that this discussion is occurring immediately prior to the CMS Medicare Advantage rate notice,” stated Miller, according to a transcript of the meeting. “The Chair has noted that he is in regular communication with CMS leadership. This gives the appearance that MedPAC as an independent and thoughtful policy organization is being hijacked for partisan political aims.” CMS’s annual preliminary rate notice is due out by Feb. 1. 

For our annual series of outlook stories on the year ahead in Medicare Advantage, AIS Health, a division of MMIT, spoke with more than a dozen industry experts on the challenges facing MA insurers and the potential strategies to stay ahead of them. One running theme from this year’s conversations is the sheer level of uncertainty MA organizations are facing in 2024 and beyond, from revenue headwinds driven by changes in risk scoring and the Star Ratings to yet-to-be-finalized proposals around broker compensation and supplemental benefits. And that’s all while managing an overhaul of the Medicare Part D benefit, thanks to the Inflation Reduction Act (IRA) of 2022. And many of these changes “could have substantial impacts on revenue, which impacts benefit design, supplemental benefits, and so on,” says Steve Arbaugh, managing principal and CEO with ATTAC Consulting Group.

Here, in no particular order, are the major challenges and unknowns facing MAOs in 2024 and beyond:

Thanks to the Inflation Reduction Act (IRA) of 2022, sponsors of Medicare Advantage Prescription Drug (MA-PD) plans and Prescription Drug Plans (PDPs) are preparing for the biggest Part D changes in the program’s 18-year history. As plans consider how they’ll manage an increasing share of responsibility for catastrophic drug costs, sources say they await critical outstanding information, such as an updated Part D risk adjustment model and additional guidance on the Medicare Payment Prescription Plan.

“The Inflation Reduction Act of 2022 will be ushering in many benefit parameters that will need to be carefully included in planning for 2025,” observes Debra Devereaux, R.Ph., principal and chief pharmacy/clinical officer with Rebellis Group. For starters, the IRA eliminates the coverage gap (a.k.a. the “donut hole”) for seniors in 2025, and plans will be responsible for 60% of drug costs in the catastrophic phase of coverage, which is triggered when enrollees exceed a new $2,000 for out-of-pocket cap. (Plans paid 15% of that share in 2023 and will pay 20% in 2024, while CMS will decrease its share from 80% to 20% in 2025, and manufacturer discounts will be introduced in the initial and catastrophic coverage phases).

The approval of Eli Lilly and Co.’s Zepbound (tirzepatide) in November capped off a banner year for glucagon-like peptide 1 (GLP-1) agonists and their use in weight loss management. And the fuss over these much-hyped obesity drugs — originally approved to treat diabetes — is likely just beginning. While employer groups and commercial payers are agonizing over the potential cost of coverage, industry leaders and legislators are pushing for Medicare to cover GLP-1s as weight loss therapies. Medicaid programs, meanwhile, are also weighing their options.

GLP-1s are now “the No. 1 driver of non-specialty pharmacy trend,” Mercer’s lead pharmacy actuary Jon Lewis told AIS’s Health Plan Weekly in November. Zepbound joins fellow GLP-1s from Novo Nordisk A/S, Wegovy (semaglutide) and Saxenda (liraglutide), in the obesity market basket. (As diabetes therapies, Zepbound is marketed as Mounjaro, while Wegovy is known as Ozempic.) Despite crackdowns on off-label use of the drugs’ diabetes iterations and a seemingly endless wave of shortages, many in the industry are clamoring for increased consumer access to the drugs. The American Medical Association on Nov. 13 passed a resolution asking “health insurers to provide coverage of available FDA-approved weight-loss medications, including GLP-1 medications, to demonstrate a commitment to the health and well-being of our patients.”