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Biden Administration Faces Off With Health Insurers Over Medicare Payments

Key Highlights

  • Health insurers are engaged in a dispute with the Biden administration over a proposed pay cut for private Medicare plans that could impact the industry’s growth.
  • Known as Medicare Advantage, these health plans have become popular among consumers, and health insurers and their supporters are concerned that the administration is planning to reduce medicare payments for them next year.

The Better Medicare Alliance, an industry-backed group, has launched a campaign urging the White House not to cut Medicare Advantage plans. The campaign includes a Super Bowl ad, a website called dontcutmedicareadvantage.com, and rallies to encourage enrollees to call Congress members.

Federal health officials have responded by defending their proposed payment changes. Secretary of Health and Human Services Xavier Becerra has criticized the “disinformation being pushed out by high-paid industry hacks and their allies.” While Chiquita Brooks-LaSure, the head of the Medicare agency, has argued that the changes proposed by the Centers for Medicare and Medicaid Services would improve payment accuracy and result in a net increase in payments to Medicare Advantage plans.

Insurers and Allies Argue Payment Changes Could Hurt Rapidly Growing Medicare Business

The proposed changes to payment methods would alter the “risk adjustment” system currently used by the Medicare agency to pay health insurers. Under this setup, insurers receive more money for enrollees with more health conditions, as these patients will likely require more care and generate higher expenses. However, critics have long maintained that insurers’ efforts to document health conditions have resulted in overpayments.

The new proposal would eliminate or reduce medicare payments for certain conditions, such as plaque buildup in arteries and a specific type of malnutrition. Health insurers argue that these changes and other aspects of the proposal would effectively reduce their payments.

The proposed changes would affect payments in 2024 and are expected to be finalized in early April. The dispute over payments comes amidst a broader political messaging fight over Medicare, with President Biden positioning himself as defending the federal health program for the elderly and disabled against Republican cuts. However, Republican leaders have denied plans to cut Medicare, and the National Republican Senatorial Committee has criticized the proposed Medicare Advantage payment changes.

The proposed changes threaten insurers and some doctor groups because of the growing importance of the Medicare business. More than 30 million people now receive Medicare coverage through private insurers, and in 2022, the federal Medicare program spent about $427 billion on Medicare Advantage.

The Biden administration argues that its payment proposal is not cut. It cites a projection from the Medicare agency suggesting that Medicare Advantage insurers’ revenue would still increase by about 1% on average next year.

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