Let the Medicare Advantage lobbying begin

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Taking stock of the 2025 MA proposals

If there’s one thing to take away from CMS’ newest proposals for Medicare Advantage plans, it’s that the Biden administration didn’t really want to rock the boat in an election year.

CMS expects the average benchmark payment for MA plans to decrease by 0.2% in 2025, the agency said Wednesday. But that doesn’t mean MA plans will be paid less next year (keep this in mind if insurers and Republicans falsely claim, again, that this is a “cut” to Medicare benefits). After accounting for the industry’s intensive coding practices, which are lumped on top of that benchmark payment and vary from insurer to insurer, Medicare still expects to pay MA plans an extra $16 billion compared with this year.

For the wonks: The Biden administration didn’t trot out many surprises within the proposal. Next year will be the second year of phasing in the new risk adjustment coding system — the main reason why there would be a decrease in the MA benchmark payment. In addition, the “effective growth rate” — which is the main component of MA payments and is an estimate of how much spending in the traditional Medicare program is increasing — came in lower than expected. But CMS based that growth rate on data through Sept. 30, 2023, and the final rate will incorporate more recent spending and utilization data, Richard Coyle, an actuary who works at CMS, said last week on a conference call for industry stakeholders. Read our story to understand the big picture.

The next two months will involve a lot of industry squawking for CMS to raise rates. Insurers have chased growth in Medicare Advantage over the past several years, and regardless of what happens in the final notice, “an industry-wide repricing effort seems likely at this point in ’25,” Jefferies analyst David Windley wrote last week. In other words, expect insurers to focus heavily on growing their profits over growing their membership. The final MA rates for 2025 will come out no later than April 1. Here’s a new, handy schedule of all the big MA-related dates for the rest of this year, too.

The clock strikes two midnights

Last year, tucked inside one of Medicare’s rules, there was a provision that said Medicare Advantage plans had to start covering their members’ hospitalizations at the higher inpatient rate if doctors believe the members will have to stay beyond two midnights — just like traditional Medicare does. This is known as the “two-midnight rule.”

Hospitals are already saying the policy switch is boosting their revenue, while insurers are hinting this change may be contributing to their higher claims costs, my colleague Tara Bannow reports.

The two-midnight rule has a long, contentious history. Medicare instituted it a decade ago as a way to define a medically necessary hospital stay, and hospitals hated it because it potentially meant lower payments for shorter patient stays. But now, in a full-circle kind of way, hospitals are embracing it as a way to force Medicare Advantage insurers to pay higher rates for any stay lasting longer than two midnights. Read Tara’s story for more details, including the concerns about how companies like UnitedHealth Group are using their own criteria to determine medically necessary hospitalizations, and a doctor who has a nuanced view of the situation.

How health care continues to gobble up your salary

This story by Amanda Fries of the Delaware News Journal is a perfect example of how runaway health care prices directly lead to wage cuts for America’s workers.

Delaware is raising the health insurance premiums of state employees by 27% next year, and state leaders are hoping that workers don’t mind that this hike will eat away at seven years of salary increases. Yes, the raw dollar amount in wages exceeds that of insurance premiums, but pay raises are supposed to go toward everything in life, not just health care.

From the story: “Delaware leaders acknowledged that a 27% premium hike is significant, but noted that since 2017, state employee pay has increased 31%, which hopefully will help lighten the financial burden for state workers.” The state’s budget director said, “Our hope is once you factor in the increased salaries, that this increase — though for some definitely may be significant — will be overcome by the amount of pay that has gone to each individual.”

Health insurance premiums are based on the prices that hospitals, doctors, drug companies, medical device makers, and others charge for their services and products. Those prices are the highest in the world, and insurers aren’t particularly good at negotiating. That leads to these types of moments in Delaware, where employers have been absorbing most of those high prices for years, but then employers shift more of the tab quickly, and painfully, to workers — and that essentially functions as a massive wage cut.

A peek inside Devoted Health

Devoted Health has been one of the most prominent health insurance and provider startups of the past decade — founded and overseen by several alumni of former President Barack Obama’s administration.

But it has not turned a profit after five years of selling Medicare Advantage plans to older adults, according to a STAT analysis of Devoted’s financial filings. And Devoted isn’t sharing many details about its progress, either.

There’s a bit of a disconnect between Devoted’s $13 billion valuation, which is much higher than its peers’, and the company’s persistent string of losses that very possibly could increase in 2024, as more seniors in Medicare Advantage broadly get more care and as Devoted’s enrollment soars. Read the story for more.

Aduhelm’s adieu

Biogen is officially pulling the plug on the Alzheimer’s drug Aduhelm, my colleague Damian Garde reports.

Not only is Biogen relinquishing the rights of the drug, but it’s also terminating the ongoing clinical trial meant to prove the treatment’s benefits for patients in the early stages of Alzheimer’s.

It’s difficult to think of a more controversial drug in recent memory than Aduhelm. Biogen worked with the FDA to get it approved despite a lack of evidence that it worked, and then priced it at $56,000 per year — an amount that would have nuked Medicare and its beneficiaries. And now, it’s getting thrown in the trash, as if it were a crumpled-up heist plan that no longer seemed feasible. “The Readout LOUD” podcast also held an Aduhelm memorial, for those interested in listening to more.

Industry odds and ends

• Cigna officially is unloading its Medicare Advantage plans to Health Care Service Corp., the big Blue Cross Blue Shield affiliate. Does this open the door for Cigna to rekindle merger talks with Humana, especially now that it can buy Humana for a lot cheaper? And as one person opined to me last week: Cigna may wait until after the election to do anything, because if Trump wins, the current antitrust regime that has prioritized cracking down on consolidation would disappear.
• Last week, my colleague John Wilkerson was at the Delaware courtroom where AstraZeneca argued to a judge that Medicare’s new authority to negotiate drug prices is unconstitutional. The judge was not impressed.
• Biosimilar versions of Humira, the blockbuster anti-inflammatory drug, finally came out last year. And yet, AbbVie, which makes Humira, still registered $12.2 billion of U.S. Humira revenue in 2023.
• Lurie Children’s Hospital in Chicago had to shut down its network last week in response to a “cybersecurity matter.” It led to canceled procedures and prescription refills, leaving families in the dark about their kids’ care. Regulators continue to sound the alarm on these types of cyber threats facing hospitals, my colleague Mohana Ravindranath reports.
• Tenet Healthcare completed the sale of its three South Carolina hospitals to the nonprofit Novant Health for $2.4 billion, and announced it is selling another four hospitals to University of California, Irvine Health for almost $1 billion. Whit Mayo of Leerink Partners wrote last week that “UCI operates both [inpatient] and [outpatient] facilities in similar markets, which may potentially elevate some FTC risk by investors.”
• At some point, it feels like the proton beam bubble is going to burst. The Georgia Protoncare Center, which is affiliated with Emory University, lost more than $38 million in 2023, on a little less than $39 million of revenue. That’s right — its losses matched its entire revenue base. Aside from high day-to-day expenses, the proton beam center is getting hit by extremely high interest rates on the company’s debt and depreciation of the equipment.

The Meme Ward