Fact v. Fiction: Biden-Harris Administration is Strengthening Medicare; Private Industry Must Share Obligation to Deliver Quality Health Care for America’s Seniors

The Biden-Harris Administration is committed to protecting and strengthening Medicare and holding health care companies accountable to delivering quality health care for all seniors. While Congressional Republicans support measures to put Medicare on the chopping block and roll back increased benefits offered to seniors and people with disabilities through the Inflation Reduction Act, the Administration’s commitment to the 65 million Americans with Medicare, and all the beneficiaries in the future, is unwavering.

Despite industry-funded reporting indicating otherwise, the Biden-Harris Administration is not proposing cuts to Medicare Advantage. In fact, the Administration is proposing to increase Medicare Advantage payments this year by 1%, on top of an 8.5% increase in Medicare Advantage payments last year. The Administration also announced efforts to strengthen Medicare and hold industry accountable. This year, it will start recovering improper payments made to insurance companies in Medicare Advantage through audits. Recovering these improper payments and returning this money to the Medicare Trust Funds will protect the fiscal sustainability of Medicare and allow the program to better serve seniors and people with disabilities, today and in the future.

The Administration’s proposed policies to strengthen Medicare Advantage will hold health insurance companies to higher standards for America’s seniors by

• cracking down on abusive and confusing marketing schemes,
• addressing problematic prior authorization practices that prevent timely access to needed care,
• and making it easier for seniors to access vital behavioral health care.

These efforts to strengthen Medicare Advantage are bolstered by the Inflation Reduction Act. Because of the President’s law to lower prescription drug costs, people with prescription drug coverage through their Medicare Advantage plan can now access more preventive vaccines for free, and insulin costs are capped at $35 for a month’s supply of covered insulin. Congressional Republicans have already proposed legislation to undo the Inflation Reduction Act, which would increase the deficit and increase health care costs for America’s seniors.

Taken together, these actions will make the Medicare program stronger.

Biden-Harris Administration Proposed to Increase Payments to Private Insurance Companies
2024 Medicare Advantage Advance Notice

The Centers for Medicare & Medicaid Services (CMS) contracts with private insurance companies to offer Medicare benefits as an option for seniors and people with disabilities; this option is known as Medicare Advantage. Every year, CMS is required by law to update how payments are calculated for insurance companies that offer Medicare Advantage, and every year, CMS updates payments based on current costs and trends. Through this process, CMS ensures that payments to insurance companies accurately reflect what it costs to provide services and benefits to Medicare Advantage enrollees.   

On February 1, 2023, CMS released its annual proposed Medicare Advantage payment update, which included an increase in payments to insurance companies that offer Medicare Advantage for 2024. The proposals in the 2024 Advance Notice include routine technical updates that fulfill CMS’ statutory requirement to ensure accurate payments. In last year’s payment notice and in the current proposal, the Biden-Harris Administration has increased payment to insurance companies offering Medicare Advantage by nearly 10%, which far outpaces the payment updates other health care providers have received through the traditional, fee-for-service Medicare program.

Increasing payments

• CMS finalized an increase in payment to private insurance companies offering Medicare Advantage plans for 2023.
• Private insurance companies that offer Medicare Advantage plans are expected to see a 1.03% year-to-year increase in revenue from 2023 to 2024; from 2022 to 2023, private insurance companies offering Medicare Advantage received an 8.5% increase.

Ensuring accurate payments
As required by law, CMS adjusts its payments to insurance companies offering Medicare Advantage to reflect expected health care costs of their enrollees based on disease factors and demographic characteristics through a process known as “risk adjustment.” CMS routinely makes updates to the Medicare Advantage risk adjustment model to reflect more recent utilization and cost patterns and pay accurately for sick patients. 

• The Medicare Advantage risk adjustment model is currently calibrated to data that is nearly a decade old. CMS is proposing to update the payment model to use more current data about costs and utilization.
• While other programs (such as the Affordable Care Act market and Medicare Part D) have been updated to use the ICD-10 system, the Medicare Advantage model is currently based on the ICD-9 coding system, which is not currently used by health care providers.
• The changes in risk adjustment payment policies to insurance companies offering Medicare Advantage were constructed in close collaboration with expert clinicians to reflect how doctors and other health care providers diagnose and care for their patients.
• Modernizing the Medicare Advantage model by aligning it with the ICD-10 system that’s been in use for over 7 years will ensure the payment models are using more up-to-date data – bringing Medicare Advantage payments in line with current health care practices and making them consistent with other federal health care programs.
• This will help ensure CMS pays plans more when they enroll sicker beneficiaries, which reduces incentives to cherry-pick healthy beneficiaries and discriminate against sicker patients.
• CMS has also identified diagnosis codes that are not used consistently across the industry. These codes can involve situations where a patient’s diagnosis is ambiguous or where there aren’t clear treatment guidelines associated with the diagnosis. As in past years, CMS has proposed to address these inconsistencies in order to ensure insurance companies offering Medicare Advantage are not gaming the system.

Biden-Harris Administration Protects Medicare and Fulfills Statutory Requirements by Recovering Overpayments to Insurance Plans
Medicare Advantage Risk Adjustment Data Validation Audits Final Rule

CMS is responsible for serving as a good steward of the Medicare program, ensuring taxpayer dollars are well spent, and overseeing the financial integrity of the Medicare Trust Funds.

This year, the Biden-Harris Administration announced it will start recovering improper payments made to Medicare Advantage plans through audits for the first time since 2007. Studies and audits done by CMS and the HHS Office of Inspector General (HHS OIG) have shown that private insurance companies have charged billions of dollars in overpayments to Medicare Advantage plans and increased costs to the Medicare program – as well as taxpayers.

Eight of the 10 largest Medicare Advantage insurers — representing more than two-thirds of the market— have submitted information to inflate payments, according to the federal audits, and four of the five largest Medicare Advantage plans have faced federal lawsuits alleging fraudulent coding practices, according to the New York Times. HHS OIG has released several reports that demonstrate a high risk of improper payments to insurance companies offering Medicare Advantage, and for several years has identified Medicare Advantage as one of the top management and performance challenges facing HHS due to the high amount of improper payments.

Auditing the insurance companies that offer Medicare Advantage and recovering overpayments will put money back in the Medicare Trust Funds. This will strengthen the Medicare program’s ability to serve current beneficiaries while improving the long-term sustainability of the program.

CMS is required to conduct audits of its programs

• Audits are unequivocally not cuts.
• Audits are a standard practice and normal, appropriate oversight of a program.
• By law, CMS must administer a variety of Medicare statutory program requirements designed to ensure accurate payments and prevent fraud, waste, and abuse.
• In addition, CMS is obligated under federal authorities to identify Medicare improper payments and to recover debts.
• In its administration and oversight of the Medicare Advantage program, CMS is bound by a variety of statutory authorities to ensure accurate payments and prevent fraud, waste, and abuse including, section 1128J(d) of the Social Security Act (the Act) (the reporting and returning of overpayments provision), and sections 1857(d) and 1859(i) of the Act (Medicare Advantage oversight provisions).

Basic Medicare Advantage facts

• Due to growing enrollment, Medicare Advantage now represents about half of the Medicare program.
• Medicare Advantage plans receive more than $420 billion in payments each year.

Studies and Audits by the HHS Office of the Inspector General
The following 24 OIG reports identify or estimate overpayments made to Medicare Advantage plans, as well as plan behavior that may have resulted in improper payments.  All 24 reports examined risk adjustment payments to Medicare Advantage plans.  These reports were issued from 2019 thru January 2023.  The plan years covered by the reports vary, but the coverage goes as far back as the 2012 plan year.

OIG studies:

1. Some Medicare Advantage Companies Leveraged Chart Reviews and Health Risk Assessments To Disproportionately Drive Payments (Sep. 2021) (OEI-03-17-00474)
2. Billions in Estimated Medicare Advantage Payments From Diagnoses Reported Only on Health Risk Assessments Raise Concerns (Sep. 2020) (OEI-03-17-00471)
3. Billions in Estimated Medicare Advantage Payments From Chart Reviews Raise Concerns (Dec. 2019) (OEI-03-17-00470)

OIG audits:

*These are identified overpayments in the audit sample and do not reflect extrapolated amounts