Medicare Advantage documents

Federal efforts to rein in Medicare Advantage spending and recoup payments awarded for improper diagnoses will likely lead to even more financial pressure on nursing homes that serve plan beneficiaries, according to experts who monitor managed care.

The latest blow for insurers came Wednesday evening, when the Centers for Medicare & Medicaid Services announced its proposed payment notice for 2024. It would effectively cut average pay to MA plans by 2.3% next year when factoring in coding and data conversions.

Just two days earlier, CMS announced its new audit approach, which is expected to allow the agency to claw back about $479 million annually from overpayments starting with calendar year 2018. Those can’t be collected until new audits are conducted, and some major insurers have already said they are keeping open their legal options.

Despite the potential legal wrangling and the fact that little of the proposed regulation affects skilled nursing directly, it’s still likely bad news for operators. Any changes that affect insurers’ bottom lines will hit providers — almost all of whom participate in MA plans as they now cover nearly 50% of Medicare patients — in the form of tighter contracts, fewer referrals or reduced benefits, experts told McKnight’s this week.

“They’re going to try and lower the rates they pass us,” predicted Susie Mix, founder of Mix Solutions, a contract management and consulting firm specializing in skilled care. “That’s my fear, if they’re going to be scrutinized.”

Mix noted that per-patient day spending under contracts is already declining significantly as MA plans win more market share. That gives them more power to negotiate favorable contracts, and they’ll be motivated to lean into that approach even more if they expect less revenue from the government, she said.

Others could double down on their efforts to keep more patients out of the skilled care setting, where they typically spend more for care versus home care.

“The sentinel effect of these policies could be extensive for MA plans, and we may see significant changes to plan offerings and design in response to the new RADV rule,” Tyler Overstreet Cromer, ATI Advisory principal and head of the firm’s Medicare innovation practice told McKnight’s Home Care this week.

One area where she sees plans making major adjustments is in the area of supplemental benefits. Many nursing homes only recently began to see more benefit from those extras with an increased focus among Institutional-Special Needs Plans, a Medicare Advantage model for nursing home residents.

The Better Medicare Alliance, an advocacy organization representing Medicare Advantage stakeholders, itself acknowledged that, if approved, the CMS payment reductions would likely trigger financial implications for parties involved with plans.

“If finalized, this proposal to cut Medicare Advantage by 2.3% would raise costs and cut benefits for 30 million American seniors who rely on Medicare Advantage, a vital part of Medicare,” said President and CEO Mary Beth Donahue in a statement urging the agency to revise its final policies “to keep the promise of stability for 30 million Medicare beneficiaries.”

MA has been increasingly under scrutiny by both regulators, lawmakers and the media who have noted the insurers record revenues amid widespread consumer and health partner dissatisfaction.

In December, CMS issued two rules attempting to address some of the ongoing criticisms, including tenants meant to improve interoperability and the prior authorization process. This week’s payment notice furthers policy and technical changes proposed on Dec. 14 to make “impactful changes to address these concerns to ensure enrollees have timely access to medically necessary care.”

It was developed, in part, in response to a highly critical Office of Inspector General report on the MA program, and reflected feedback from a summer request for comment.

The Wednesday proposal would tweak the MA risk adjustment model to update it and improve payment accuracy, such as by fully transitioning to the Internal Classification of Diseases, or ICD-10 system, which has been in use broadly since 2015. That change is expected to reduce payments for some conditions, and in combination with other factors, would negate an average per-plan revenue bump of 1.03% next year.

Even that 1% was a significant reduction from the 2023 payment update, which delivered an average increase of 8% per plan.