CMS Proposes Key Reforms to Medicare Advantage

To reform and regulate the increasingly popular Medicare Advantage (MA) program, the Centers for Medicare & Medicaid Services (CMS) proposed new rules that aim to address some of the most pressing issues within the system. These include prior authorization processes, the use of artificial intelligence (AI), and predatory marketing practices. Additionally, the rule proposes enhanced oversight into the handling of supplemental benefits, reporting standards for medical loss ratios (MLRs), and better transparency around provider directories. The changes come at a time when MA plans are covering more than half of Medicare seniors but facing growing scrutiny regarding the quality of care and the barriers posed by various insurance practices, particularly algorithms used for utilization management and claims reviews. 

The Problem with Prior Authorization and AI in MA Plans 

Prior authorization, a process where providers must obtain approval from the insurance company before a service is covered, has been a significant point of contention within the MA program. Many providers and patients have expressed frustration with what they see as unnecessary delays and denials of care. Research has shown that nearly 80% of claim denials are overturned upon appeal, yet fewer than 4% of these denials are ever appealed in the first place, highlighting a systemic issue. According to data from CMS, more patients could access care if inappropriate prior authorization practices were not standing in the way. 

The proposed rule aims to address this problem by placing limitations on overly restrictive utilization management policies. The rule clarifies that MA plans must comply with national and local coverage determinations, similar to those established by traditional Medicare. Additionally, it mandates that when a Medicare coverage determination is unavailable, plans must adhere to “internal coverage criteria,” which should align with clinical guidelines and be reviewed annually by a clinical committee. Furthermore, MA plans will be required to make these internal coverage criteria publicly available on their websites and inform members about their rights to appeal. 

A more troubling aspect of MA’s prior authorization practices is the use of AI and automated systems. CMS is addressing concerns that AI algorithms may be used to unfairly deny or delay care. The proposed rule requires that all services for MA beneficiaries, whether administered by human or AI systems, be provided equitably. In other words, MA plans would be forbidden from using AI that discriminates against patients based on any factors related to health status. This could provide much-needed accountability in a system that has been criticized for algorithms that perpetuate biases or reduce the level of care based on purely cost-related considerations. 

Vertical Integration and Its Impact on Care 

Another concern with MA plans is the increasing trend of vertical integration, where large insurers operate medical groups or physician networks, allowing them to control both the insurance and provider sides of care. This practice has raised red flags for regulators, particularly around potential conflicts of interest and the risk of steering patients to affiliated providers, where insurers may effectively be paying themselves for delivering care. 

UnitedHealth, one of the largest players in the MA market, has come under scrutiny for its vertical integration, with the Department of Justice reportedly investigating the relationship between its health insurance division and physician networks. To address this issue, CMS is seeking information about how vertical integration may be affecting insurers’ medical loss ratios (MLRs), which are a critical metric in determining the proportion of premiums spent on medical care versus administrative costs or profit. If MLRs are being manipulated, it could suggest that insurers are reducing the amount spent on patient care in favor of administrative cost-cutting measures, potentially compromising the quality of services delivered. 

The proposed rule includes several measures aimed at improving the transparency and accountability of MLR reporting. These include requiring insurers to disclose incentive payments and bonuses to providers, as well as stricter audit standards. Additionally, the rule seeks to prevent the manipulation of MLR calculations by excluding administrative costs from the quality improvement numerator and placing new standards on how MLR data is reported. 

Cracking Down on Predatory Marketing Practices 

In addition to concerns about care access and payment practices, predatory marketing has been a significant issue in the Medicare Advantage space. There have been numerous reports of misleading advertisements designed to pressure seniors into signing up for MA plans, sometimes without fully understanding the potential drawbacks or costs associated with them. CMS has already denied more than 1,500 television ads since 2023 for being misleading. 

To strengthen its oversight, the proposed rule would expand the scope of marketing materials that require CMS approval before they can be used. This includes a new focus on ensuring that agents and brokers engage in more thorough conversations with seniors before enrolling them in an MA plan. Agents would be required to discuss topics like eligibility for subsidies under traditional Medicare and provide clearer information about plan benefits. The goal is to ensure that seniors are fully informed and not misled by deceptive marketing practices. 

In addition to marketing, the rule also aims the issue of “ghost networks,” where plans advertise a robust network of healthcare providers that, in reality, may not exist or be accessible to members. CMS is seeking to improve provider directories, making them more transparent and up-to-date. Plans would be required to submit their provider directories to CMS for inclusion in the Medicare Plan Finder tool, giving seniors a clearer view of the healthcare providers available to them under various plans. This effort is crucial to ensuring that seniors can make informed choices about their healthcare options. 

Improving Supplemental Benefits and Cost-Sharing for Behavioral Health 

Medicare Advantage plans offer supplemental benefits, such as vision, dental, and hearing coverage, to attract beneficiaries. However, there has been concern about how these benefits are administered, particularly when it comes to the use of debit cards that members can use for eligible products and services. The rule proposes new guardrails around the use of debit cards, requiring greater transparency about how they can be used and what products are eligible. CMS also aims to improve the process for members to access supplemental benefits if issues arise with the cards. 

In addition to addressing supplemental benefits, the proposed rule includes measures aimed at improving access to behavioral healthcare services in MA plans. Currently, cost-sharing for behavioral health services is higher in many MA plans compared to traditional Medicare. The proposed rule would align these cost-sharing practices to ensure that behavioral health services are more accessible to MA enrollees. 

The Biden Administration’s Push for Medicare Advantage Reform 

The proposed rule represents a significant push by the Biden administration to address the ongoing issues within the Medicare Advantage program. While the proposed changes are designed to provide greater oversight and accountability in key areas like prior authorization, AI usage, marketing, and provider directories, the final decision on these reforms will ultimately lie with the incoming Trump administration. The future of these changes will depend on political dynamics and whether the new administration supports the proposed reforms. 

If the rule is finalized, it could have far-reaching implications for the Medicare Advantage landscape. The changes could help improve the quality of care, reduce barriers to access, and ensure that beneficiaries are better informed when choosing a plan. As Medicare Advantage continues to grow in popularity, these reforms could be crucial in addressing the concerns of patients, providers, and regulators alike, ensuring that the program can continue to serve seniors effectively in the years to come.