HHS Finalizes 3.32% Increase in 2024 Medicare Advantage Payments

March 31, 2023 - HHS has finalized the 2024 Medicare Advantage and Part D rate announcement, which includes a 3.32 percent increase in Medicare Advantage payments.

“Medicare should be providing equitable, high-quality affordable care that will be available for our children and grandchildren,” CMS Administrator Chiquita Brooks-LaSure, said in the press release. “Paying Medicare Advantage plans more accurately for the care they provide is how we ensure that people enrolled in Medicare Advantage, especially populations with the highest health disparities and people in underserved communities, can continue to access the care they deserve.”

The update reflects a 2.28 percent increase in the effective growth rate, a 1.24 percent decline in star ratings, a 2.16 percent decrease in the risk model revision and normalization, and a 4.4 percent increase in the Medicare Advantage risk score trend, according to a fact sheet.

The 3.32 percent increase, which translates to $13.8 billion, is steeper than the 1.03 percent revenue boost HHS and CMS proposed in the 2024 Advance Notice.

In addition to the payment increase, the rate announcement finalized changes to the Medicare Advantage and Part D payment methodologies, including technical and clinical updates to the risk adjustment model.

The risk adjustment model will transition from the ICD-9 coding system to ICD-10, which will help align Medicare Advantage payments with current healthcare practices and other federal healthcare programs, HHS said.

The announcement also finalized revisions that will remove certain codes from the hierarchical condition category (HCC) that have a wider variation in diagnosing and coding and thus do not predict costs as well.

“The policies finalized in this Rate Announcement will help make more accurate payments. This reduces incentives to cherry-pick healthy beneficiaries and discriminate against sicker patients,” the press release stated. “In addition, CMS will continue to pay more for someone who is dually eligible for Medicare and Medicaid than someone who is not when they have the same diagnoses.”

The Biden-Harris Administration committed to holding the industry accountable by starting to recover improper payments made to Medicare Advantage plans. Recovering the improper payments and returning them to the Medicare Trust Funds will help sustain Medicare and make the program stronger, the announcement stated.

The Administration also proposed policies to improve the Medicare Advantage managed care program and hold health insurance companies to higher standards. The policies include combatting abusive and confusing marketing schemes, addressing prior authorization practices that delay care, and facilitating access to behavioral healthcare.

The initial Advance Notice received backlash from payers and generated concerns that the proposed policies would negatively impact beneficiaries.

While some payer organizations remain wary about the rate announcement, they commended HHS and CMS for establishing a three-year timeline to implement changes.

“We appreciate that CMS recognized the serious concerns with several proposed policies in the Advance Rate Notice that would affect MA enrollees in 2024, including by phasing in changes over a period of 3 years,” Matt Eyles, president and CEO of AHIP, said in a statement.

“Health insurance providers will continue to focus on delivering affordable, high-quality, and competitive coverage choices to MA enrollees and evaluate the impact on our most vulnerable populations like dual-eligible Americans who are among the sickest and lowest-income members of our communities.”

The Alliance of Community Health Plans (ACHP) noted that, despite the welcome changes in the announcement, more transparency on Medicare Advantage data is needed.

“ACHP’s top priority remains an MA program that fosters fair competition and choice for seniors, raises the bar on quality performance, and promotes equity to serve the most vulnerable seniors,” the organization expressed in a statement. “We will monitor the impacts of the final policies in the Rate Notice and work with CMS to mitigate any impacts on consumers, especially vulnerable dual eligible seniors.”

Other groups, like Better Medicare Alliance, were more critical of the announcement.

“Better Medicare Alliance will continue to analyze the impact of the final rate announcement, especially on low-income beneficiaries, dual-eligible enrollees, and vulnerable populations. We appreciate that CMS moved to a phased-in approach, but the underlying policy is fundamentally unchanged. We remain concerned about the unintended consequences for seniors of this risk adjustment policy,”  Mary Beth Donahue, president and CEO of Better Medicare Alliance, said.

4/3/2023 - This article has been updated to include statements from AHIP, the Alliance of Community Health Plans, and Better Medicare Alliance.