The insurance industry is worried an expected influx of new Medicare Advantage (MA) beneficiaries with end-stage renal disease (ESRD) will hammer profits unless Medicare changes how plans are paid.
Insurers issued comments Friday to a proposed 2021 MA rate notice, arguing that the Centers for Medicare & Medicaid Services (CMS) needs to alter how it calculates payments for MA plans. Insurers said that the payment methodology doesn’t factor in the increased enrollment of new patients with ESRD.
“This increases the risk that seniors and others eligible for Medicare will face higher premiums, higher cost-sharing and/or reduced supplemental benefits,” wrote insurance lobby America’s Health Insurance Plans (AHIP) in comments.
MA has become a lucrative source of profits for insurance companies, with increased enrollment a major contributor to big-name insurers generating $35.7 billion in profits last year. But a February 2019 report (PDF) from consulting firm Wakely found that profits could decrease by nearly 2% due to the influx of new ESRD customers unless insurers raised premiums.
Insurers are bracing for new eligibility for Medicare beneficiaries with ESRD to choose an MA plan. Currently, a Medicare beneficiary with ESRD can only sign up for MA if they were already in MA when they got diagnosed with kidney disease. But starting in 2021, thanks to a provision of the 21st Century Cures Act, a Medicare beneficiary with ESRD can enroll in an MA plan even if they weren’t in one before.
Only 25% of the more than 500,000 Medicare beneficiaries with ESRD is in an MA plan, but CMS expects that figure to increase to more than 30% next year. CMS will use 2014 to 2018 fee-for-service reimbursement and enrollment data for beneficiaries on dialysis to create the benchmarks that will guide MA plan payments, according to the proposed rule.
But insurers are worried that approach is flawed and that payments to insurers won’t cover claim expenses. A major difference between traditional Medicare and MA is the contours of the dialysis provider market, which is heavily concentrated. A concentrated market can leverage a more favorable contract from an MA plan.
“This can result in MA plans incurring costs for dialysis services well above [fee-for-service] Medicare rates,” AHIP said.
Another factor is the maximum out-of-pocket limit.
Currently, an MA plan must limit the out-of-pocket costs for all members regardless of whether they have ESRD. This year the mandatory limit was $6,700 for any in-network services.
"Due to high overall spending, out-of-pocket costs for beneficiaries with ESRD in [fee-for-service] Medicare are significantly higher than for non-ESRD benefits,” AHIP said.
The group cited a recent study from consulting firm Health Management Associates that found the average ESRD beneficiary in fee-for-service Medicare accrues $13,000 in out-of-pocket costs, much higher than the $6,700 limit. CMS did propose to increase the mandatory out-of-pocket limit to $7,550 for ESRD beneficiaries, but insurers claim in comments that won’t be enough.
The Better Medicare Alliance, an advocacy group that counts insurers among its members and a major proponent of MA, said in comments that CMS also needs to support the use of telemedicine for routine dialysis-related checkups.
CMS also needs to fix how it calculates the benchmark rate for ESRD services, which determines how much MA plans get paid, to “reduce year-over-year volatility, reflect actual costs and ensure accurate and adequate payment for the ESRD population," the alliance said.