CMS Finalizes 2024 Medicare Advantage Payment Policies

The 2024 Advance Notice released last week by the Centers for Medicare & Medicaid Services (CMS) makes small but important adjustments to Medicare Advantage (MA) payment methodology. The Medicare Rights Center welcomes the provisions that would begin to rein in soaring, unnecessary MA costs and continues to urge additional, comprehensive reforms.

CMS projects its updates will increase MA payments by 3.32% in 2024. Though greater than initially proposed, this is a lower growth rate than in recent years—an essential step towards correcting the decades-long problem of MA overpayments.

The amounts inappropriately paid to MA plans are significant. The Medicare Payment Advisory Committee cataloged $140 billion in overpayments during the past 12 years, and CMS estimates that in 2021 alone, plans improperly received $23 billion. Independent research consistently finds these excess payments are negatively impacting Medicare’s finances and long-term sustainability, as well as driving up beneficiary premiums and taxpayer costs. Addressing this wasteful spending becomes more urgent by the day. Expert analysis indicates overpayments will only grow as MA plan and enrollment numbers do, and both are surging.

Policymakers must effectively respond to these realities and to the concerns many current and future beneficiaries have about rising Medicare costs, the program’s future, and the need for solutions.

In our comments on the draft Advance Notice, we encouraged CMS to do just that by adopting key MA Risk Adjustment Model changes and more sufficiently accounting for coding differences between Original Medicare and MA.

While CMS finalized the Risk Adjustment changes, the agency has decided to phase them in over three years instead of one, allowing problematic overpayments to continue in the interim. Once fully in place, these modernizations will more closely align MA with current health care practices and yield more accurate payments.

We were also disappointed that CMS will again apply the 5.9% statutory minimum coding intensity adjustment in 2024. Unchanged since 2018, this minimum amount is not keeping pace with coding intensity or the resulting excess plan payments. In 2020, risk scores for MA enrollees were already 9.5% higher than they should have been, generating $12 billion in overpayments. By 2021, the scores and payments had jumped to 11% and $17 billion, respectively. Due to the inadequate 5.9% coding intensity rate, Medicare is projected to overpay plans by $44 billion in 2022 and 2023 and by $25 billion in 2024. CMS must meaningfully intervene without delay.

We applaud CMS for finalizing a 2024 Advance Notice that largely recognizes beneficiary priorities and flaws in MA financing. We strongly urge the Biden administration and Congress to build upon these policies to more fully improve payment accuracy, insurer accountability, and access to care.