CMS is seeking input on whether its risk adjustment system disadvantages smaller Medicare Advantage plans, and one regional plan CEO says the answer is an emphatic yes.
In its 2027 proposed MA rule, CMS said it recognizes the current risk adjustment system “may disadvantage smaller, newer, and less well-resourced plans” and may incentivize plans to prioritize coding activities over care management. The agency said it is exploring a next-generation risk adjustment model that could leverage artificial intelligence and alternative data sources.
Sachin Jain, MD, president and CEO of SCAN Group, told Becker’s that CMS has blind spots when it comes to understanding how national plans are squeezing out regional competitors.
“I frequently say we’re in a David versus Goliath battle for the soul of American healthcare, and Goliath is winning 100 to 1,” Dr. Jain said. “If you’re a regional plan and a major national decided that they just wanted to take over your market, they could just come to market with ultra-rich benefits one year and put most regional plans out of business.”
UnitedHealthcare and Humana together hold nearly half of all MA enrollment nationwide, and one or both insurers dominate 66% of all U.S. counties, according to KFF. In 2024, 90% of Medicare beneficiaries lived in a county where at least half of MA enrollees were in plans sponsored by just one or two insurers.
Meanwhile, regional and nonprofit health plans are falling behind, with 71% recording an operating loss in 2024 and more than half having two years or less before regulatory intervention is triggered, according to a September report from HealthScape Advisors.
Dr. Jain agreed that “projections don’t look good for the bulk,” of regional and nonprofit plans, and that CMS should consider paying smaller insurers differently to maintain a competitive marketplace.
One idea he suggested is a point or two difference in per-member-per-month compensation based on scale or tax status to help level the playing field.
“If you’re paying $1,000 PMPM, maybe you give a point or two difference. You pay the not-for-profit a little bit more and you pay the for-profit a little bit less on a balanced budget,” Dr. Jain said. “There’s a rationale to keep a level playing field. Otherwise you end up with three or four plans administering the whole thing.”
“One idea that I’ve heard that could be very interesting is a government option MA plan,” he added. “That’s another option to contemplate, which could counteract some of the dominance of the for-profit.”
Dr. Jain said CMS is right to explore AI and alternative data sources for risk adjustment, arguing the current system is outdated and has distorted plan incentives.
“The truth is that risk adjustment is always two years in arrear. I think the idea of more real-time adjudication of risk is better,” he said. “There is a big reboot that’s needed.”
“There’s an opportunity to get the whole industry refocused on actually taking care of these patients and creating a more cohesive healthcare experience for them, and driving the chronic disease management and prevention that will lead to lower total cost of care over time,” he added. “We have to go back to the origin story of MA in that regard.”
