Medicare Advantage Payment Changes
Medicare Advantage payment changes for 2024 have been a hot topic in the healthcare industry lately. The Centers for Medicare & Medicaid Services (CMS) released an advance notice of planned changes, causing some concern among Medicare Advantage beneficiaries. However, despite allegations by the health insurance industry, the updated payment rates are unlikely to affect the Medicare program or its beneficiaries.
Medicare Advantage plans operated by private insurers are paid a specified amount for each enrollee, adjusted for health risk. The estimated change in Medicare Advantage plans’ revenues is the net effect of four factors, including revisions to Medicare’s risk adjustment model and changes in bonuses for plans with higher quality ratings.
Even if payments to Medicare Advantage plans fell slightly in 2024, the effect on Medicare Advantage beneficiaries is likely minimal. According to the Kaiser Family Foundation (KFF), MA plans have high gross margins, giving them room to respond to payment changes by reducing their profits or administrative expenses. This is how insurers have responded to payment changes in the past, and KFF noted that “plans have more money than ever to pay for extra benefits.”
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Moreover, the proposed improvements in the risk adjustment model and other payment updates would go partway toward curbing the abuses in overpayments to Medicare Advantage plans. The Medicare Payment Advisory Commission estimates that Medicare overpays Medicare Advantage plans by at least 4.9 percent compared to traditional Medicare, generating $23 billion in excess payments to MA plans in 2023 alone. These proposed updates would not affect Medicare Advantage enrollees negatively, but they would curb overpayments and promote fair pricing.
In conclusion, Medicare Advantage payment changes for 2024 are unlikely to affect the Medicare program or its beneficiaries. Medicare Advantage plans have significant room to respond to payment changes, and improvements in the risk adjustment model and other payment updates would curb overpayments to MA plans. Overall, Medicare Advantage enrollees should not be overly concerned about the impact of these payment changes on their health coverage.
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