Why these payer CEOs are embracing Medicare Advantage pay cuts

As some major Medicare Advantage insurers look to shrink enrollments and exit markets, others say reimbursement cuts from CMS are a chance to refocus strategies and provide a better product to their members.

"If reimbursements are cut, it forces you to do more with less," SCAN Group CEO Sachin Jain, MD, told Becker's. "It forces you to be sharper and refine your thinking."

At the beginning of 2024, CMS began implementing Medicare Advantage risk adjustment changes, which the health insurance industry largely opposed. The changes are being phased in over three years.

Facing lower margins and rising utilization rates, large MA insurers such as CVS Health and Humana have said they will prioritize margins over growing their membership, even eyeing market exits in 2025. 

"I frequently say the golden days of Medicare Advantage are over," Dr. Jain said. "We're taking a hard look at our products and trying to understand what's really needed and what's not. Pressure is a privilege because there's an ability to ultimately use that pressure to drive a sharper approach to things."

Dr. Jain's comments echo those made recently by UnitedHealth Group's CEO Andrew Witty, who told investors in November the rate changes were a catalyst for UnitedHealth to redouble its efforts around value-based care and efficiency.

"The stimulus rate notice has been an incredibly positive and healthy event for UnitedHealth Group. Not because it gave us more money. It didn't," Mr. Witty said. "But because it gave us the stimulus to rechallenge ourselves on how we do things even more effectively going forward." 

In contrast to other large insurers, UnitedHealth Group's senior leadership said in May the company is not planning any major shakeups to its Medicare Advantage business in 2025. 

"We took the time to plan out a three-year response strategy," Mr. Witty said. "We're in year one of the three year response strategy, and it's playing out the way we planned." 

"We all have to get a little bit more competitive, a little bit tougher, and have our heads a little bit more fully in the game," Dr. Jain said.

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