COVID-19 could depress 2021 Medicare Advantage payments, analysis suggests

Dive Brief:

  • The drop-off in utilization during the COVID-19 pandemic could lead to reduced payments to Medicare Advantage health plans next year, a new analysis of claims data by Avalere Health concludes.
  • Depending on 2021 utilization trends, overall payments could drop between 4% and 6% due to Medicare risk scores that will likely be adjusted downward, the consulting group said.
  • Moreover, Avalere warned that MA plans should brace themselves for dealing with chronically ill enrollees whose overall health has declined due to foregoing care during the pandemic, meaning they could require more services over the longer term.

Dive Insight:

The COVID-19 pandemic has had immediate but disparate impacts on providers and payers. The former was hit hard by a precipitous drop in patient volume, while the latter mostly boasted huge windfall profits due to the drop in utilization along with continued collection of premiums.

However, health plans could see their days of COVID-19-related profit wane next year, as the drop in utilization of healthcare services could impact their rapidly growing books of MA business. About 24 million Medicare recipients are enrolled in MA, up more than 43% since 2015. Several big plans have ambitiously expanded their offerings for 2021.

The storm clouds ahead are based on medical risk adjustments made for each MA enrollee, based on their overall health and claims made to Medicare for healthcare services. Claims data between July 2019 and June 2020 will be used to determine 2021 benchmarks, which includes the months when utilization trends were hit hardest by the pandemic.

Risk adjustment is so critical to the Medicare Advantage business that some health plans, such as Cigna, have been accused by federal authorities of abusing those scores for profit.

“Fewer claims in 2020 could mean lower risk scores, even though the health status of enrollees has not changed,” Avalere said in its analysis. Overall claims dropped 66% last April compared to April 2019 — a trend that continued well into the summer. Although telehealth claims more than quadrupled last April compared to the prior year, the baseline number was so small to begin with that it barely moved the needle in terms of boosting overall claims.

Moreover, Avalere concluded that the number of MA enrollees with at least one medical claim dropped 47% in April compared to April 2019.

As a result, overall risk scores could drop nearly 2.4% in 2021. That translates to payment drops ranging from 4.2% to 6.14%, depending on how utilization rebounds in 2021. The biggest payment drops would take into consideration a wave of COVID-19 so severe that utilization actually declines in June 2021 compared to the prior year.

There is a silver lining to the MA market: CMS has proposed changes that could bump up capitated payments by more than 2% in 2022.

Along with decreased payments, MA plans may have to cope with the double whammy of having to care for sicker enrollees.

“Because many enrollees with chronic illnesses have not seen their providers during the pandemic, their disease states could worsen, increasing the need for more expensive interventions,” ‘Avalere said. “At the same time, plans may be facing lower payments and challenges managing care due the ongoing spread of COVID-19. Plans will need to continue to adjust their strategies to account for the longer-term implications of deferred care and use telehealth and other flexibilities to mitigate the impacts.”

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