Democrats eye Medicare Advantage as potential reconciliation offset

Lobbyists for the insurance industry are concerned about the threat of payment cuts

House Ways and Means Chairman Richard E. Neal, left, last week said Medicare Advantage adjustments weren’t under discussion in his committee, while Energy and Commerce Chairman Frank Pallone Jr. declined to say whether they were on the table. (Bill Clark/CQ Roll Call file photo)
House Ways and Means Chairman Richard E. Neal, left, last week said Medicare Advantage adjustments weren’t under discussion in his committee, while Energy and Commerce Chairman Frank Pallone Jr. declined to say whether they were on the table. (Bill Clark/CQ Roll Call file photo)
Posted October 26, 2021 at 3:02pm

Democrats are considering payment reductions for private Medicare Advantage plans to help offset the cost of a multitrillion-dollar budget bill, according to three sources with knowledge of the talks, triggering a lobbying fight from the insurers.

The insurance industry is closely watching lawmakers’ search to pay for a sweeping jobs and social spending bill expected to cost around $2 trillion over a decade. The House version of the bill didn’t include any changes to the Medicare Advantage program, and the Senate has not yet introduced its own text, but lobbyists are concerned about the threat of payment cuts.

Democratic leaders and committees in both chambers are considering using MA savings to help fund the cost of adding dental, vision and hearing benefits to the traditional Medicare program, the sources said, although talks have shifted to the Senate as the chamber attempts to write a bill that will earn all 50 Democratic votes. Democrats are struggling to find offsets to pay for the bill amid disagreements over a provision to let Medicare negotiate prices directly with drugmakers and overhaul how drug prices are regulated.

Spokespeople for the committees of jurisdiction in the House and Senate declined to comment. House Energy and Commerce Chairman Frank Pallone Jr., D-N.J., last week declined to say whether MA adjustments were on the table. Ways and Means Chairman Richard E. Neal, D-Mass., meanwhile, said they were currently not under discussion in his committee.

“We’re not talking about it right now,” he told CQ Roll Call on Oct. 21. “No, we’re not talking about it at the moment.”

In a bid to appease moderate Democrats, leaders and the White House are working to trim the health care measures as they pare back the bill’s overall cost. Democrats previously expected to use the savings from lowering drug prices, originally estimated to be as much as $700 billion over 10 years, to pay for provisions expanding Medicare, Medicaid and the insurance exchanges created under the 2010 health care law. 

Altogether, the health care costs may approach $1 trillion over a decade. The Congressional Budget Office on Oct. 19 estimated that measures to permanently fund recently expanded insurance subsidies and establish a program to close the Medicaid gap in states that have not expanded would cost $553.2 billion over 10 years.

Adding Medicare dental, hearing and vision benefits would cost another $358 billion, according to a previous CBO estimate, although that number could be lower after taking into account a three-year delay from the previous bill’s language on dental benefits. A proposed rule to allow hearing aids to be sold over the counter could also bring that number down.

Democrats are also considering $800 dental vouchers as a potential alternative if negotiations on the broader program fail, President Joe Biden said in an Oct. 21 town hall meeting.

The main offset on the table would increase an existing reduction to Medicare health plan reimbursements based on coding intensity, sources say. Scrutiny has increased in recent years on MA plans’ practice of “upcoding,” in which they seek to maximize patient diagnosis codes in order to get higher Medicare payments, which are based on individual patients’ health statuses.

Patients’ risk scores for MA enrollees were on average 9 percent higher than traditional Medicare patients in 2019, according to the Medicare Payment Advisory Commission. Medicare already reduces the difference by 5.9 percent, meaning net scores were roughly 3 percent higher. 

Democrats see the issue as a program integrity adjustment. Medicare plans make healthy profits while still being able to fund supplemental benefits like dental, vision and hearing that are not included in the traditional program.

Democrats’ idea could result in tens of billions of dollars in savings, although the final number could vary widely depending on the proposal. Industry groups view any coding adjustment as a cut, arguing that MA differs from traditional Medicare and warning that across-the-board reductions would unfairly penalize smaller community plans.

Other potential changes by Democrats could include restricting the use of codes gathered from health risk assessments and reducing bonuses paid for high-quality scores, two longtime recommendations from the Medicare advisory committee.

Democrats appear unlikely to tinker with Part B outpatient care benchmarks used to determine payments, sources said, which the industry initially feared. The House version of the bill would not carve out the new vision, dental and hearing benefits, meaning the additional cost would be factored into the benchmark and insurance bids. Some scholars have floated the idea as a way to reduce the bill’s cost.

Industry’s efforts

Medicare Advantage cuts are often seen as an enticing legislative option, but it’s unclear whether lawmakers have enough support for them. The program is increasingly popular, now accounting for more than 40 percent of Medicare enrollees.

Sens. Tim Scott, R-S.C., and Kyrsten Sinema, D-Ariz., led a recent bipartisan letter to Centers for Medicare and Medicaid Services Administrator Chiquita Brooks-LaSure vowing to stand against any Medicare Advantage cuts. 

Some industry sources saw the letter as a specific pushback against the current discussion, which is how Scott’s office framed it, but others likened it to more routine support letters that lawmakers send every year. Spokespeople for Sinema and five other Democrats who signed the letter, as well as Sen. Angus King, I-Maine, did not elaborate on what specific changes they oppose.

Industry groups have been lobbying against any cuts for months, underscoring their perception of the threat. 

AHIP, the Blue Cross Blue Shield Association and the Alliance of Community Health Plans spent a collective $4.1 million in lobbying efforts in the third quarter. All three groups reported lobbying on the reconciliation bill or dental, vision and hearing benefits.

ACHP sent a letter to congressional leadership on Oct. 21, urging them to keep MA legislation separate from reconciliation talks.

“ACHP believes that there are balanced, bipartisan approaches to improving the program that Congress could consider at a future time,” the group wrote. “Legislative efforts that advance quality in the program, for instance, are ripe for discussion. But any programmatic changes should be considered outside of the current reconciliation construct.”

The Coalition for Medicare Choices, a group backed by America’s Health Insurance Plans, and the Better Medicare Alliance have been proactively running ads urging viewers to call their representatives, even though specific legislative proposals haven’t been publicly released.

“You thought you could sneak this through?” asks one older man in an ad from Better Medicare Alliance.

“We’re watching you,” another woman says.