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Taking Advantage: Sending a Message to Medicare Advantage

March 27, 2024

We’re supposed to play by the rules but not everybody does. That’s especially disappointing when that person works for the government. Recently, a former state insurance commissioner pleaded guilty to healthcare fraud. How ironic—the very person entrusted with safeguarding the consumer against insurance fraud goes on to engage in a $2.5 million scheme involving false insurance claims. But what happens when it’s not just one government official refusing to play by the rules and taking advantage of others but an entire federal insurance program?

A Growing Trend

According to a Becker’s CFO Report over this past weekend, more than 100 hospitals, health systems and providers added their names to a letter sent to the Centers for Medicare and Medicaid Services (CMS), urging the agency to address what they see as a worrisome rate of claim denials within the Medicare Advantage (MA) program.  Private insurance companies receive a set amount of federal Medicare funding for providing Part A and Part B coverage through Medicare Advantage plans. Each insurance company is approved and contracted by Medicare and must fulfill guidelines for coverage as established by the government. In other words, MA plans are, in a sense, a federal healthcare program, falling under the ultimate aegis of CMS. It is for this reason that the above-referenced letter was sent to CMS, outlining the health sector’s concerns.

Members of Premier, a healthcare services company, penned a letter to CMS administrator Chiquita Brooks-LaSure on March 21, requesting CMS to collect more data on claims denied by Medicare Advantage plans and take enforcement action against plans not following the coverage rules set out by Medicare.  A survey conducted by Premier found that Medicare Advantage claims had an initial denial rate of 15.7 percent, which is slightly higher than the 15-percent denial rate for commercial claims.  In addition, the survey found that Medicare Advantage denials tended to be more prevalent for higher-cost treatments.

A Building Resentment

The situation is getting so bad that nearly half of the nation’s health systems are considering dropping Medicare Advantage plans within the next year or so; 16 percent have already made definite plans to drop one or more MA plans. According to one study of 135 health system CFOs in January, onerous authorization requirements and high denial rates connected with MA plans are among the reasons for the industry’s souring on these alternatives to straight Medicare.

As an example of this trend, Chris Van Gorder, president and CEO of San Diego-based Scripps Health, said: “it’s becoming a game of delay, deny and not pay.” Scripps terminated its Medicare Advantage contracts on Jan. 1. Van Gorder said the health system was facing an annual loss of $75 million in MA contracts.  

Earlier this month, Connecticut-based Bristol Health announced it was eliminating 60 positions. CEO Kurt Barwis laid the blame squarely on Medicare Advantage, noting that 68 percent of patients at Bristol Hospital had MA plans. Mr. Barwis told a local news outlet that Medicare Advantage has been denying claims more frequently; and, when approving claims, the payments are delayed. “The Medicare Advantage abuse is outrageous,” is a Barwis quote that evinces quite clearly the CEO’s frustration with the government-associated program.

Not only are payments delayed, according to Barwis and others, but it costs more to get them paid. Yes, according to the Premier survey, 52.7 percent of MA denials were eventually overturned on appeal, but those appeals are costly. Hospital staff who fought the MA denials did so at an average administrative cost of $47.77 per claim, while only spending $43.84 per claim in connection with private insurance appeals.

While the resentment among providers and facilities is building, there are indications that beneficiaries of MA plans are feeling just fine. According to the Better Medicare Alliance’s 2023 “State of Medicare Advantage Report,” 95 percent of Medicare Advantage members are satisfied with their healthcare quality. And MA appears to be growing. Medicare Advantage total enrollment is expected to be 33.8 million in 2024, representing more than half of the Medicare population. In 2023, total MA enrollees was over 31 million.

So, what we have is a coming clash: while MA is massive and growing in market share, more facilities are cutting their ties with such plans. That’s why the Premier letter sent to CMS last week is needed. The agency is being put on notice that they must do something about MA denials. The health of millions of American patients and fairness to large numbers of providers and hospitals hang in the balance.

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