Changes in CMS' risk model for Medicare Advantage and rising medical costs among the Medicare population could lead to changes in benefit design, payer executives told investors in second-quarter earnings calls.
In March, CMS finalized new risk adjustment regulations that will change how some high-risk conditions are reimbursed. Payer groups said the changes amounted to a funding cut for the program.
Executives told investors the changes were factored into 2024 bids, but they were able to maintain key benefits.
Tim Noel, CEO of UnitedHealthcare's Medicare and retirement business, said the new risk model had more of an effect on the company's 2024 Medicare Advantage bids than rising utilization.
"Certainly, we've been talking a lot about care patterns, but that has far less of an impact on the benefits filed and is really one of many assumptions that we make inside of our bids," Mr. Noel said on a July 14 call with investors.
"We feel very confident in our ability to provide stability to the benefits that seniors value most, things like zero copays for primary care visits, zero copays for tier 1 drugs," Mr. Noel continued. "Keeping zero monthly planned premiums where we had them in the past and keeping level out-of-pocket maximums are very important things for benefits for stability. And we are able to preserve those, so we're really happy about that."
Felicia Norwood, president of government health benefits at Elevance Health, said the company considered the rate notices in its bid process and feels good about its offerings for 2024.
"As we put our bids together each year, we're always taking a very balanced approach between our aspirations for growth as well as with respect to margins. And I think that we have landed in a place where we're going to be offering attractive plans for our seniors that provide sustainable economics for us for the long term," Ms. Norwood said on a July 19 investor call.
Sarah London, CEO of Centene, told investors on a July 28 call that the company is shifting its focus to serving dual-eligible and lower income Medicare Advantage beneficiaries.
"Medicare Advantage provides Centene with an important opportunity to serve low-income and medically complex seniors," Ms. London said. "It also represents a significant long-term earnings opportunity as we strengthen the overall performance and trajectory of our program."
The company has been working to improve its Medicare Advantage star ratings. Ms. London told investors the company could lose its last four-star Medicare Advantage contract, which comes with bonus payments from CMS, at the end of 2023.
"Put simply, star strategy is different when you're managing complex and [dual eligible] populations. Strong performance at 3.5 stars with Centene's target member mix will give our Medicare business the economics necessary to serve these populations well and support our multiyear performance goals," Ms. London said.
Bruce Broussard, CEO of Humana, said the company has carefully researched what benefits matter most to different populations in Medicare Advantage.
"We don't have to lead the industry in every benefit. We have to be close. And what we see when we do that as a result of our stability of our platform that we are able to take a significant amount of the market share there," Mr. Broussard said. "So, benefits are important, but I would just emphasize, we've never prided ourselves on being the cheapest."
The company boosted its Medicare Advantage outlook for the year, expecting to add 825,000 members in 2023.
As medical costs rise, the company is looking to cut some administrative expenses, CFO Susan Diamond added.
Shawn Guertin, CFO of CVS Health, said increasing Medicare Advantage costs were one of the factors that led CVS to revise its 2024 earnings-per-share guidance from from $9 to $8.50 to $8.70.
The main driver of increasing Medicare costs is rising utilization of outpatient services, Mr. Guertin told investors Aug. 2.
"It's important to keep in mind that Medicare is more than 50 percent of our premium revenue now," Mr. Guertin said. "I want to be clear that commercial, Medicaid and exchange all performed consistent or even slightly better than our expectations in the quarter, but as we closed the month of May, in mid-June it became apparent that the Medicare costs were higher than we had anticipated in Q1, and that pressure was continuing into the second quarter."