Study: Cuts to Medicare Advantage payments may have modest impact on seniors' benefits

A new study claims that a decline in Medicare Advantage (MA) payments would only have a modest effect on the benefits offered to enrollees amid a fierce debate over reining in overpayments to plans. 

The study, published in Health Affairs on Monday, showed that an increase in benchmarks used to help calculate MA payments only led to a modest rise in certain benefits. The findings come as insurers claimed cuts to MA would lead to higher premiums for seniors and a reduction in benefits. 

“This analysis helps quantify what would be lost if payment to MA plans were cut,” the study said. “The ultimate decisions about payment will depend on how policymakers value those benefits and whether they can identify more efficient ways to provide them.”

Researchers collected data from public Centers for Medicare & Medicaid Services (CMS) files for all plans offered from 2012 through 2019. The study excluded some plans such as special needs or employer-sponsored plans, because the relationship between benchmarks that calculate MA payments and benefits is different in these types of plans. 

The study also extracted data on deductibles, copays and premiums. 

MA plans submit a bid to CMS that is compared against a benchmark, which is the historical fee-for-service spending in an area. If the bid comes in below the benchmark, the plan gets a rebate to be used to offer extra benefits.

Researchers looked at the relationship between the benchmarks and premiums, benefits and cost-sharing.

The study also examined the supplemental benefits offered by plans such as dental or hearing benefits and transportation or meals. 

The study found that the Affordable Care Act reduced benchmarks in 2012, but the cuts were offset by quality payments and changes to the risk adjustment model. The benchmark change led to a slight drop in plan rebates from 2012 through 2016, but from 2016 onward they grew rapidly. 

From 2012 through 2019, the study showed that when benchmarks increased the effect on specific benefits was relatively modest. 

“For every $1,000 increase in annual benchmarks during 2012-2019, the biggest effects were on preventive dental services (increase of 8.1 percentage points), comprehensive dental services (5.4 percentage points) and vision wearables such as eyeglasses (5.2 percentage points),” the study said. “We did not find a quantitatively large or statistically significant impact of changing benchmarks on some high-profile benchmarks such as transportation or meal services.”

On the other hand, premiums did fall in response to increases in the benchmark, but only modestly. It found that a $1,000 benchmark hike led to a $60 combined premium decline. 

“Higher benchmarks also led to reductions in cost sharing,” the study said. “For all findings, smaller benchmark changes would yield proportionately smaller impacts.”

The research does come with some limitations, including that the study couldn't assess how the added payments related to the "higher bids were used by plans or valued by patients," the study said.

The study comes amid a debate over how to address overspending in the MA program. The Biden administration recently introduced key changes to MA risk adjustment codes in an effort to clamp down on the practice, but the final rule got massive pushback from the insurance industry that claimed the administration was trying to cut the popular program.

Insurers took aim at the study. The Better Medicare Alliance pointed to a recent analysis from Avalere Health that showed the proposed MA pay rule could have a major impact on premiums and benefits for MA enrollees.