Senators pinpoint MA oversight, cutting drug costs to address looming Medicare insolvency

 With Medicare insolvency expected in just a few years, lawmakers are zeroing in on ways to save the program money, including curbing prescription drug costs and increased oversight of privately run Medicare Advantage plans — though many of these measures face fierce industry opposition or are a nonstarter in Congress.

The trust fund backing Medicare's hospital benefit is forecasted to run dry in 2026 without government intervention. To date, Congress has not allowed the fund to become depleted, though deficit hawks and watchdogs warn the situation is becoming increasingly precarious. Lawmakers often leave action right up until the last minute, threatening financial stability for the vast majority of U.S. providers that accept Medicare.

Under current law, if the trust fund runs out, Medicare payments would be immediately slashed to levels that would be covered by incoming tax and premium revenues. Those lower payments would likely reduce care availability and quality for tens of millions of Americans, experts warn.

"Yes, it's years, but it's not that many years," Sen. Bill Cassidy, R-La., said Wednesday at a Senate finance subcommittee meeting on Medicare. "We should be addressing this in a more serious fashion than we are."

It would take an immediate reduction of $70 billion in Part A spending to put the program's financing on stable footing, testified Michael Chernew, chair of the Medicare Payment Advisory Commission. But the looming Hospital Insurance Trust Fund insolvency is only one part of Medicare's fiscal problem, Chernew said.

Witnesses said the program's flagging finances are just one symptom of overarching headwinds in the sector, including skyrocketing drug prices and rampant fraud and abuse.

For example, the program needs to identify and reduce payments to providers that are historically overpaid in fee-for-service Medicare, while curbing aspects of Medicare Advantage that insurers are taking advantage of to inflate their profits, Chernew said.

Medicare Advantage, Medicare plans administered by private insurance companies that can include extra benefits like dental or hearing, in its current form was created in 2003 with the hope the plans would expand coverage while lowering costs.

Instead, the program has cost Medicare billions of extra dollars, said Sen. Elizabeth Warren, D-Mass. Warren cited insurers "gaming the program's rules," including its risk adjustment process, how benchmarks are calculated and its quality bonus program, to obtain higher payments from the government.

"The Medicare system is hemorrhaging money on scams and frauds. It is critical that we stop the flow," Warren said.

Higher Medicare spending per MA enrollee contributed an estimated $7 billion in additional spending in 2019 alone, according to the Kaiser Family Foundation.

One problem is that the program incentivizes health insurers to code additional diagnoses for their members, categorizing them as sicker, in order to increase reimbursement.

In MA, Medicare pays insurers a fixed monthly amount per enrollee, but that sum is adjusted based on the characteristics of that enrollee, including their health diagnoses — basically, plans are paid more if their members are sicker. That gives payers a strong financial incentive to identify as many diagnoses as possible, Chernew said.

The problem compounds as the program grows, witnesses said. MA has snowballed over the past decade. In 2021, more than 26 million Medicare beneficiaries enrolled in the plans, making up 42% of the total Medicare population — and $343 billion (or 46%) of total Medicare spending.

The federal government has cracked down on such fraud in recent months. Of all fraud and false claims settlements the Department of Justice received in the 2021 fiscal year, about 90% involved healthcare companies.

A "growing number" of those matters involved MA, DOJ said in a Tuesday release. In 2021, for example, California giant Sutter Health paid $90 million to resolve allegations it was upcoding patients, resulting in inflated MA payments — the largest False Claims Act settlement against a health system for alleged MA fraud.

MA also pays more for plans that achieve higher ratings in its quality bonus program, but there's little evidence that results in better outcomes, Chernew testified.

One study published in December found the program led to no observable difference in plan quality, boosting calls from groups such as MedPAC to revise or eliminate it altogether.

"Medicare should pay them in a way that allows it to share in those efficiencies," Chernew said. The MedPAC head suggested lawmakers consider reforms to how regulators calculate benchmarks, adjusting payments to reflect diagnostic coding and restructuring the quality bonus program.

But insurers are unlikely to quietly accept any large-scale MA reforms, as many have been investing heavily in their MA plans in a bid to grow market share in the lucrative program. Humana, Cigna and CVS Health-owned Aetna all entered into new markets for 2022, facing off against program giant UnitedHealthcare along with new upstarts like Clover Health and Oscar Health to capture new members.

https://www.healthcaredive.com/news/senate-congress-medicare-advantage-drug-costs-insolvency/618213/