April 13, 2023

CMS Finalizes Policies to Crack Down on Medicare Advantage Health Plans

The Centers for Medicare & Medicaid Services (CMS) recently took a major step forward in addressing some of the most egregious practices that Medicare Advantage (MA) private health plans are routinely employing. As you may recall from a previous Regs & Eggs blog post, ACEP responded to two MA proposed regs earlier this year that attempted to tackle the major criticisms that MA plans have faced recently: overpayments, extensive use of prior authorization, and deceptive marketing practices. To CMS’ credit, the agency decided to finalize most of the proposals concerning these issues (with some exceptions) in two final regs released last week.

In the first final reg, the 2024 MA rate announcement, CMS finalizes a change to the risk adjustment methodology that is used for MA health plan payments. As background, CMS has documented a pattern of health plans “over-coding” diagnoses for the patients they treat. Basically, the more diagnoses that health plans can attribute to patient encounters (i.e., the sicker they make their patients out to be), the more they get paid. In the initial proposed reg, CMS had proposed to remove some of the diagnosis codes from which health plans could select—a proposal that would save billions over the next decade. It is important to note that although MA health plan payments would decline relative to their current trajectory, in absolute terms, overall payments would still increase each year. In fact, CMS had estimated that plan payments would still increase by 1 percent in 2024 relative to 2023 even if the risk adjustment changes were implemented immediately. ACEP supported the proposal and noted that health plan payments were still increasing even when CMS had finalized decreases to physician payments. Still though, the health insurance industry pushed back strongly against the proposal, noting that payment reductions would affect their ability to serve their Medicare enrollees.

CMS ultimately decided to finalize the changes to the risk adjustment model (which is good!), but instead of implementing the changes in one year, the agency decided to phase them in over three years. Since the risk adjustment changes are now going to be transitioned in, the effect on health plans is not as great. Thus, instead of the 1 percent payment increase that was initially estimated, CMS now estimates that MA health plan payments will increase by 3.3 percent in 2024. So overall, CMS did cave a little bit, but all things considered, stayed relatively strong and is going forward with this significant change.

The other final reg that just came out, the MA and Part D final reg, made a number of noteworthy modifications to the MA program—the largest of which focused on prior authorization and marketing practices.

  • Prior Authorization: CMS finalized sweeping changes to its prior authorization policies, much of which ACEP believes are basic common sense. For example, CMS is prohibiting MA plans from making up their own coverage rules and denying coverage for services that are covered by Traditional Medicare. Prior authorization can only be as a means to ensure that services meet Medicare coverage rules and that care is medically necessary. Further, CMS is requiring that prior authorization approvals must remain valid for the entire episode of care for patients as long as the care is medically necessary. This will help avoid disruptions in care. CMS is also requiring denials of coverage based on medical necessity to be reviewed by health care professionals with relevant expertise before a denial can be issued.

    With respect to medical necessity, CMS did not go as far as ACEP would have wished. In our comments, we asserted that care delivered in the emergency department (ED) is inherently medically necessary—specifically due to two existing and long-standing federal laws pertaining to emergency care that require the delivery of diagnostic services and stabilizing care: the Emergency Medical Treatment & Labor Act (EMTALA) and the Prudent Layperson Standard. We argued that EMTALA's requirements for hospitals to provide a medical screening examination to every individual who “comes to the emergency department” seeking examination or treatment fundamentally establishes medical necessity. Further, if the Prudent Layperson Standard applies (which happens almost all the time), we believe that the care provided to patients meets the requirements of medical necessity and therefore, should be covered by MA plans and other insurers.

    CMS does not directly address our comment in the final reg and therefore does not establish a clear policy that all ED care is medically necessary. However, as a silver lining, the agency does include some beneficial language around the Prudent Layperson Standard. Specifically, CMS states that coverage of emergency services includes payment for those services, and that emergency services “must be covered regardless of the final diagnosis […] so the services needed to treat the emergency medical condition as presented therefore may not be retrospectively denied payment by the MA plan.” Having CMS state unequivocally that retroactive payment denials based on a list of diagnosis codes is a violation of the Prudent Layperson Standard in the MA program is useful in our ongoing advocacy around the enforcement (or lack thereof) of this critical law.
  • False Marketing Practices: In the final reg, CMS institutes a number of policies to crack down on fraudulent marketing practices that MA plans are currently utilizing. For example, CMS is prohibiting advertisements (which we often see on TV) that do not mention a specific plan name, or that use the Medicare name, CMS logo, and products or information issued by the Federal Government, including the Medicare card, in a misleading way. ACEP strongly supports these policies, as we believe that it is critical that seniors receive accurate information and fully understand their coverage options. If individuals enroll in a more expensive plan than they can afford, they may wind up delaying necessary care and, after their disease has progressed, be forced to go to the ED to seek treatment

The MA final reg also finalizes an important change to the definition of “emergency medical condition.” CMS modifies current regulations to clarify that an emergency medical condition can include both physical and mental conditions. We STRONGLY SUPPORT this modification to the regulation and agrees wholeheartedly with CMS that an emergency medical condition includes both physical and mental health emergencies and that the Prudent Layperson Standard protection should be attributable to all types of emergencies.  

Overall, ACEP is pleased that CMS has finally instituted some much-needed MA reform. Both MA payments and MA enrollment have been growing exponentially, and the current trajectory was simply unsustainable. As noted in the U.S. Department of Health and Human Services (HHS) Fiscal Year 2024 Budget-in-Brief, payments to MA plans are 106 percent of what they would be to provide benefits in Traditional Medicare, negatively affecting the solvency of the Medicare Part A Trust Fund and increasing premiums for beneficiaries.

However, despite this progress, both CMS and Congress still have their work cut out for them to ensure that all payments are fair and adequate in order to achieve its two goals: 1) protect the Medicare Trust Funds; and 2) ensure that Medicare beneficiaries continue to have access to high quality care. And that’s not only our view—it’s the view of Administration officials themselves. The Medicare Trustees (which include the Secretaries of the Treasury, the Labor Department, and HHS as well as the Social Security Commissioner) recently issued the 2023 Medicare Trustees Report, an annual report which evaluates the current status of the two Medicare Trust Funds and provides financial projections for the next 75 years. Like last year’s report (actually the last few reports!), this report acknowledges that annual updates for physicians do NOT keep pace with the average rate of physician cost increases. The Trustees believe that, absent a change in the delivery system or legislative update to physician rates, access to Medicare-participating physicians will become a significant issue in the long term.

Tackling physician payments should be the next step in CMS’ and Congress’ effort to create a more sustainable Medicare program! We shall see if CMS and/or Congress decide to take on this extremely important task.

Until next week, this is Jeffrey saying, enjoy reading your regs with your eggs!

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