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If you visited Washington’s Union Station in the past month and checked the monitor listing train departure times, you would be unable to miss the large billboard behind it, from an organization called the Coalition for Medicare Choices. It features two worried-looking seniors warning against cuts to Medicare Advantage, the privately administered insurance program that covers nearly 30 million U.S. seniors. Despite billing itself as a grassroots organization with two million members, the Coalition for Medicare Choices was founded in 2009 out of the same offices as America’s Health Insurance Plans (AHIP), a leading industry lobbying group.
And if you watched this year’s Super Bowl, you might have seen an ad from the Better Medicare Alliance, “the leading voice for Medicare Advantage,” featuring seniors bowling while fretting about Medicare Advantage cuts. Better Medicare Alliance’s membership includes Medicare Advantage insurers Aetna, Humana, and UnitedHealth, whose CEO personally lobbied lawmakers in Washington.
Better Medicare Alliance spent over $13.5 million on its ad campaign, while the American Action Network, a dark-money group backed by pharma money, piled on with $2 million in ads of its own. The groups unleashed thousands of comments to regulators and members of Congress, often with identical language taken from a form letter.
Since the famed “Harry and Louise” ads that helped sink Hillarycare in the 1990s, the insurance industry has a playbook for whenever Washington threatens its profit model: depict it as a scheme from Washington bureaucrats to hurt your health care. This has almost always produced industry-favored results. Sure enough, it worked this year yet again.
On February 1, the Centers for Medicare & Medicaid Services (CMS) proposed changes to Medicare Advantage, specifically to curb fraudulent and systematic overbilling costing the government tens of billions of dollars, as well as rampant denials in coverage. The proposal attacked “upcoding,” where companies layer on multiple dubious or irrelevant diagnoses to rake in risk-adjusted payments that give more to insurers who care for sicker patients. Thousands of codes that do not require additional care would be eliminated, and reimbursement rates would be lowered.
Two months later, CMS issued its final payment rate rule. Instead of implementing the new formula and coding changes immediately, payments would be gradually reduced over three years, and the codes most susceptible to manipulation also phased out slowly. Next year, Medicare Advantage plans will get a 3.3 percent increase in their reimbursement rates, more than triple the 1 percent CMS initially proposed.
CMS administrator Chiquita Brooks-LaSure actually told The New York Times that the agency “wanted to be responsive” to insurer demands for a slower policy rollout. Loosely translated, this means that the industry insisted they couldn’t survive without ripping off the government, so the government allowed the rip-offs to go on a bit longer.
A separate final rule on Medicare Advantage prior authorization policies, which can delay or deny needed care, offers no public transparency on which plans rely on prior authorization the most, nor does it threaten the contracts of plans with bad records. Thousands of insured seniors die annually from lack of health care access, according to a National Bureau of Economic Research study, in large part because of these practices.
Jarod Facundo
An electronic billboard sponsored by Coalition for Medicare Choices at Washington’s Union Station
This all sounds terrible: Industry pushback cowed a well-intentioned effort to prevent Medicare Advantage fraud and protect patient lives. Yet advocates who have spent decades fighting Medicare Advantage’s dominance are taking it as a kind of victory. That should tell you how powerful this industry has been historically.
DIANE ARCHER, PRESIDENT OF JUST CARE USA, first started raising alarms about Medicare Advantage in the early 1990s. “There are very few people who even understand the difference between Medicare and Medicare Advantage, or how Medicare Advantage works,” Archer told the Prospect.
Let’s try to explain. Medicare is administered by the federal government; Medicare Advantage, by private insurance plans. Medicare is a “fee-for-service” operation that pays providers about 80 percent of most treatments; that leaves large co-payments for seniors, and sends most looking for supplemental coverage. Medicare Advantage, through the risk-adjusted model, receives government payments on a fixed per-patient basis, also known as “capitation.” They are supposed to earn profits by lowering system costs under that capitated rate. But the myth that private enterprise always acts more efficiently is evident in how Medicare Advantage operates.
Medicare Advantage has gradually gobbled up the market—covering nearly half of all seniors today, as opposed to just 22 percent in 2008—with heavy advertising promising lower premiums and co-payments, as well as by offering coverage Medicare doesn’t (like vision and dental benefits), gym memberships, and other wellness programs. But gross margins for health insurers in their Medicare Advantage plans are twice the average margins they earn on patients in the individual and group markets; something about Medicare Advantage is much more lucrative.
Insurers do it through two different mechanisms: the risk-adjustment maneuvers to earn more on sicker patients, and lower payouts for treatment. Medicare Advantage enrollees enter the program with $1,253 less in spending per patient than on the traditional version on medical care, according to the Kaiser Family Foundation, despite claiming to have a sicker and lower-income population. Part of that comes from selection bias, as Medicare Advantage targets healthier seniors who need less care. (Nobody who is too sick to work out will jump on an insurance plan with a free gym membership.)
But increasingly, Medicare Advantage is also delaying and denying care. The inspector general of the Department of Health and Human Services found last year that Medicare Advantage plans often prevent beneficiaries from seeking necessary care.
For years, advocates tried to explain the downsides of Medicare Advantage to policymakers, but ran into resistance. The program is popular among millions of senior constituents who represent a major voting bloc. “Medicare Advantage was absolutely untouchable,” said Alex Lawson of Social Security Works, which has been active in fighting Medicare Advantage practices.
Compounding the difficulties is the fact that the American Association of Retired Persons (AARP), one of the most powerful lobbies for U.S. seniors, co-brands a Medicare Advantage plan with UnitedHealth, earning residuals in the process. This is a huge conflict with AARP’s role as a voice for seniors who have been wronged, according to Archer. “They make big money off of it,” she said. “As a result, they’re not speaking out as much about the problems in Medicare Advantage.”
In March, AARP issued a brief and carefully worded comment letter on the proposed rate changes for Medicare Advantage, reiterating its support for “a robust choice of both traditional Medicare and MA.” While not outwardly opposing changes, it called for CMS to “monitor how well beneficiaries are being served in both Medicare Advantage and traditional Medicare in terms of costs, benefits, quality of care, patient outcomes, and access to providers.” Collecting and publishing all that data, as AARP recommended, would take significant time and resources.
Medicare Advantage has gradually gobbled up the market, covering nearly half of all seniors today.
Meanwhile, AARP’s partner, UnitedHealth, has been loudly vocal in opposing changes to Medicare Advantage. Its 34-page comment letter argued that the CMS proposal would “degrade the high-quality, affordable health care benefits that all seniors depend on,” and even suggested that it would disproportionately harm low-income seniors of color.
In a statement to the Prospect, AARP senior vice president Laura Segal said that the organization “does not have the data nor expertise to take positions on specific payment rates.” She said the proposal for data collection was for “improved accountability and understanding … Our focus is to ensure the strength of Medicare, regardless of consumer choice of plan.” Asked about the UnitedHealth partnership, Segal said that AARP “passively” licenses its name for royalty payments through a wholly owned subsidiary that has no input into its policymaking. She would not say whether AARP agreed with its partner UnitedHealth about the changes.
INDUSTRY POWER KEPT CHANGES to Medicare Advantage at bay for years. On a bipartisan basis, members of Congress would join hands to protect the program. Advocates changed tactics to penetrate this seemingly unbreakable coalition.
They started to focus on overpayments and under-delivery as symptomatic of “bad actors” in the program. This created two dynamics. First, targeting overpayments meant that, much like the dynamic with drug price negotiation, more aggressive action would save the government money. The Medicare Payment Advisory Commission, whose entire business is finding savings in Medicare, recommended a total overhaul of Medicare Advantage last year. The Biden budget in part hinges on reform of Medicare Advantage.
Second, it allowed members who previously supported Medicare Advantage to reconcile their position with reform by going after specific abuses, even if practically the whole industry engaged in them.
“When people on the Hill say to me, ‘My boss likes Medicare Advantage,’ I say, ‘That’s like saying she likes restaurants,’” said Archer. “You don’t want a restaurant serving you poisoned food.”
The first break came when six senators, led by Sen. Sherrod Brown (D-OH), asked for an investigation into Medicare Advantage overbilling in 2019. But the true test came when the Biden administration, for the first time, sought to truly fix the overbilling and under-delivery problems.
Rep. Pramila Jayapal (D-WA), chair of the Congressional Progressive Caucus, led 68 House Democrats on a letter in February supporting the CMS changes, flipping several members who previously signed letters defending Medicare Advantage. The letter was the first of its kind, and showed an actual constituency for fixing the problems in the program. While the bipartisan pro–Medicare Advantage letters went out this year, they were somewhat diminished in size, and more modest than in previous years. One representative letter from Republicans merely requested more information about the changes.
In a statement, Jayapal said, “It is now clear that Medicare Advantage is simply a profiteering venture that hurts patient care. Without a complete overhaul, it will be impossible to stop bad actors.” That echoes the message from advocacy groups that accompanied the change in strategy.
OBVIOUSLY, THE EFFORT WASN’T SUCCESSFUL on this round. The original Biden plans weren’t even seen by advocates as major improvements, and they still got rolled back.
But for the first time in many years, lobbyists didn’t get everything they wanted either. “We appreciate that CMS moved to a phased-in approach, but the underlying policy is fundamentally unchanged,” said Mary Beth Donahue, president and CEO of the Better Medicare Alliance. Donahue was formerly an executive vice president at AHIP, and before that, chief of staff to John Edwards on the 2004 Kerry-Edwards campaign.
The one organization that wholly embraced the new changes, the Alliance of Community Health Plans, is made up of smaller Medicare Advantage competitors that would welcome purging the bad actors from the system.
More important is what happens next year. Archer pointed out that the phase-in rule is actually reviewable next year, at a time when Joe Biden will almost certainly be running for re-election. That gives lobbyists a chance to delay payment changes even further. But it also gives the advocacy coalition the chance to push for more aggressive rules, with more congressional support.
In addition, Sens. Jeff Merkley (D-OR) and Bill Cassidy (R-LA) have authored legislation to overhaul the risk-adjustment mechanism in Medicare Advantage, which would exclude certain diagnoses from upcoding. A bipartisan bill on upcoding points to how the potential reform coalition doesn’t just include progressive members, but also moderates and even Republicans.
Separately, the Biden administration is trying to limit deceptive marketing for Medicare Advantage that preys on vulnerable people and even impersonates IRS agents. And another rule finalized in January would seek approximately $4.7 billion in overbilling penalties going back to 2018, though some advocates said it should have gone back further.
“If we continue down this payment path of paying the plans up front some fixed amount based on someone’s determination of the health risks of their members, we’re never going to be paying appropriately,” Archer said. But she sees opportunity as well, not just by reining in bad practices from Medicare Advantage plans, but also adding an out-of-pocket cap to most Medicare services, just like Congress did with Medicare prescription drug co-payments in the Inflation Reduction Act. The Congressional Budget Office has said an out-of-pocket cap would actually save the program money, and the Commonwealth Fund found that a cap or other enhanced benefits would bring a significant number of patients back to traditional Medicare.
Jayapal’s Progressive Caucus put reforms to Medicare Advantage in its new set of executive actions this year. “The administration must refuse to be bullied by health insurers,” Jayapal said, “and instead must side with patients when deciding future policies.”
