March 22, 2023

At Hearing, Warren Defends Medicare Advantage Proposed Payment Rule, Pushes Back Against Insurance Industry’s Scare Tactics

Medicare Advantage Plans Abuse Existing Payment Rules to Squeeze Billions Extra from Medicare; New Payment Rule Ensures Payments More Accurately Reflect Cost of Care

HHS Secretary Becerra: “The numbers show that it costs more to provide care to seniors in… (the) Medicare Advantage program, than through the traditional program.”

Hearing Exchange (YouTube)

Washington, D.C. – At a hearing of the Senate Finance Committee, U.S. Senator Elizabeth Warren (D-Mass.) defended the Centers for Medicare and Medicaid Services (CMS) proposed adjustments to the Calendar Year 2024 Medicare Advantage (MA) payment rates, pushing back against giant insurance companies and their lobbyists who are peddling misinformation to protect their billions in profits and scare beneficiaries into opposing the rule. Senator Warren debunked industry talking points and exposed how MA plans take advantage of loopholes to squeeze billions of additional dollars out of the Medicare program, resulting in profit margins that are double those for other types of insurance. Senator Warren further clarified that, despite industry promises to provide Medicare benefits for less, the private insurance companies running MA have never delivered health care at a lower cost than traditional Medicare in the entire history of the program. 

In response to Senator Warren’s questions, Health and Human Services Secretary Xavier Becerra confirmed that overall payments to MA plans will increase under the proposal and that premiums and benefits will remain stable in 2024. Secretary Becerra also noted that “the numbers show” that it costs more to provide care for seniors in the Medicare Advantage program than through traditional Medicare. 

Numerous economists, advocates, and health policy experts have also pushed back on the insurance industry’s false claims:

“Various advocacy organizations working on behalf of Medicare Advantage plans have argued that this is in effect a payment cut and have funded research that argues that plans will reduce benefits or increase premiums as a result. However, based on our collective research and interpretation of the academic literature, we do not agree with that characterization and believe that these changes are reasonable due to well documented overpayments to MA plans, and unlikely to substantively affect the generosity of MA plan benefits.” – David Meyers et al., [Link]

“CMS’s normal annual rate setting – which is based on changes in traditional fee-for-service Medicare, demographics, and beneficiary health care costs – is being falsely labeled a “cut” to Medicare benefits. Specifically, CMS recently proposed to pay insurance companies what they estimate will add up to a 1 percent increase in 2024” – Committee for a Responsible Federal Budget, [Link]

“Advantage plans have responded to payment changes in the past by reducing their profits or lowering administrative costs. And plans have more money than ever to pay for extra benefits.” – Center for Medicare Advocacy, [Link]

“The proposed reforms resulting in a limit of 1% increase is still an increase, which we understand is being opposed by the [Medicare Advantage] industry and their associations, and being mischaracterized as a cut. It is a cut only as far as it doesn’t replicate the huge 8% increase granted last year.” – California State Retirees, [Link]

“The proposed technical adjustments are, in our assessment, fully appropriate. Indeed, some elements appear too generous to MA plans.” – James G. Kahn, Richard Kronick et al., [Link]

“The government will continue paying Medicare Advantage plans significantly more per enrollee than Traditional Medicare. Medicare Advantage plans will continue to amass billions of dollars in profits.” – Social Security Works, Just Care USA, Public Citizen and the Center for Health and Democracy, [Link]

“MA plan organizations will continue to have ample funding that will allow them to continue to provide care and coverage for lower income communities.” – Scott Armstrong et al., [Link]

“Coding intensity now generates tens of billions of dollars in excess payments to MA organizations annually. The cost of those payments is borne by the taxpayers, Medicare beneficiaries, and state Medicaid agencies who fund the Medicare program. The evidence documented by the Commission and others over many years indicates that stronger action is needed…We urge the Secretary and CMS to increase the coding intensity adjustment to more fully reflect the magnitude of this excess spending.” – Medicare Payment Advisory Commission, [Link]

“We encourage CMS not to give in to industry lobbying pressure, and to implement the proposed changes without compromising, and we believe even stronger measures are needed.” – Physicians for a National Health Program, [Link]

“We support the current changes that will begin to correct the overpayment of Medicare Advantage plans by tens of billions of dollars per year due to exaggerated diagnostic coding. These massive excessive payments are depleting the Medicare Trust fund in order to feed huge profits for health insurers.” – National Nurses United, [Link]

Transcript: The President’s Fiscal Year 2024 Health and Human Services Budget
U.S. Senate Committee on Finance 
Wednesday, March 22, 2023

Senator Elizabeth Warren: I want to talk today also about Medicare Advantage. You know, every February, the federal agency that runs the Medicare program releases a report outlining how Medicare Advantage or MA insurers are going to be paid for the following year. 

MA is a program that allows private insurance plans to offer Medicare benefits. Now, taxpayers pay these insurance companies a set amount per beneficiary, and this amount can go up if the beneficiary is sicker. The more diagnosis codes that a beneficiary has, the higher the payment, and whatever insurers don't spend on care they actually get to keep. These companies have built entire businesses around making beneficiaries look as sick as possible. And unsurprisingly, government watchdogs have discovered widespread abuse. 

This year, CMS made a few updates to ensure that the government's payments more accurately reflect what it actually costs to pay for the care for beneficiaries in this program. And in response, the insurance industry has kicked into overdrive, sending an army of lobbyists to claim that the changes will hurt Medicare. So let's go through this. Let's start with the basics, Mr. Secretary. Under your proposal, will total payments to insurance plans that run Medicare Advantage go up or down?

Xavier Becerra, Secretary of Health and Human Services: Total payments will go up. 

Senator Warren: So they will go up. CMS is proposing to increase payments to MA plans next year. In other words, the insurance companies overall are going to get more taxpayer dollars, not fewer. But insurance companies want a lot more taxpayer dollars, not just a little more. So they're kicking and screaming, and they even shelled out millions of dollars for a prime-time Super Bowl ad opposing the proposal. Now, these Medicare Advantage companies are also peddling industry-funded studies that claim Medicare premiums would go up and benefits would be cut if your proposal is finalized. Mr. Secretary, are those claims accurate?

Secretary Becerra: No, they are not. Benefits are not cut. 

Senator Warren: All right. So numerous experts agree with HHS's assessment. When Medicare Advantage was created, the insurance companies argued that they could provide better care than the federal government at a lower cost. But for years now, MA plans have been using a long list of tricks and games to take advantage of loopholes in the government's payment rules to squeeze literally hundreds of billions of extra dollars out of the program. 

Researchers at the Kaiser Family Foundation found that profit margins for MA plans are double those for other kinds of insurance. In other words, because of lax rules, running Medicare Advantage plans is a lot lot more profitable than running any other type of insurance plan. And the insurance companies don't want the party to end. 

So Mr. Secretary, are the private insurance companies that run Medicare Advantage actually delivering health care for seniors at a lower cost than traditional Medicare programs run by the federal government? 

Secretary Becerra: The numbers show that it costs more to provide care to seniors in Medicare, through the managed care, Medicare Advantage program, than through the traditional program called fee-for-service.

Senator Warren: So the cheaper way to do this is actually just to run people through the Medicare program. It's not to say there aren't some programs that work with Medicare Advantage. But overall, that's what the data show. 

Secretary Becerra: Yeah, we're talking overall. So if you lump everyone who's in the Medicare Advantage Program, the managed care program within Medicare, and those who are in the traditional Medicare program called fee-for-service, the per beneficiary cost is higher under managed care, or what we call Medicare Advantage. 

Senator Warren: Okay, exactly the reverse of what they promised they would deliver. They said, hand it over to us and we'll do this cheaper. You know, in fact, according to the Medicare Payment Advisory Commission, which is the independent congressional agency that studies Medicare, the private insurance companies running MA have never delivered health care at a lower cost than traditional Medicare in the entire history of the program. 

So I just want to say I urge CMS to finalize this proposal. I can't get an ad on the Super Bowl, but I hope that having you at this hearing will have some influence on this. It's important to take the steps to strengthen Medicare. I also want to say I don't think it's enough. CMS needs to double down on its efforts to crack down on industry abuses in the MA program. I stand ready to work with you and to help you do that to ensure that Medicare beneficiaries get the care that they have rightly earned. Thank you, Mr. Secretary.