How New Medicare Benefits Would Impact Medicare Advantage Rebates

Updated 8/30/2021: The original AHIP analysis was corrected to convey that seniors could lose at least $696 in Medicare Advantage benefits. This article has been altered to include that correction. A previous version of this article conveyed that seniors could lose a minimum of $970 in benefits, as was reported in the original AHIP analysis.

Adding benefits to traditional Medicare without changing Medicare Advantage benchmarks could have a significant impact on Medicare Advantage rebates, according to an analysis from Wakely Consulting Group that was funded by AHIP.

“MA is popular because it delivers better health and great value for seniors and people with disabilities,” Matt Eyles, president and chief executive officer of AHIP, said in the AHIP press release. “Tens of millions of MA seniors should not pay the price for improving traditional Medicare.”

Depending on Congress’s strategy in tacking on more benefits to original Medicare, such as the strategy that HR-3 has proposed, Medicare Advantage plans would experience a drop in rebates, receiving 48 percent to 73 percent less from CMS.

The researchers differentiated between average rebates and “flexible” rebates.

“By ‘flexible’ rebate, we mean CMS rebate payments that plans can choose to spend on reducing beneficiary cost sharing, adding coverage for non Medicare-covered services (e.g. OTC drugs or non-Medicare covered transportation), or reducing Part D premiums,” the analysis explained. 

The changes imposed by the different approaches to altering traditional Medicare benefits could reduce Medicare Advantage benefit richness by $970 to $1,056 per beneficiary per year for Medicare Advantage seniors. The actual amount would depend upon the type of proposal that Congress passed.

Congress may decide to fully phase-in dental, hearing, and vision benefits in the original Medicare program.

On a monthly basis, fully phased-in additional benefits for original Medicare beneficiaries would mean approximately $58 less per Medicare Advantage member in flexible rebate spending. Payers would normally spend that rebate on social determinants of health and other nonclinical benefits.

Alternatively, Congress might pass a proposal that would require dental, vision, and hearing benefits for original Medicare to be non-Medicare covered services. Such a proposal would have a mixed impact on Medicare Advantage plans’ rebates.

The average Medicare Advantage rebate would remain the same. The flexible rebate, however, would drop considerably in comparison, the researchers warned. It would drop to 73 percent of its original size.

As a result, payers would have to work with $88 per member per month less in flexible rebates.

The report acknowledged that plan star rating, geographic area, and other factors would also influence how much the rebate size dropped.

“Americans should be able to rely on a high-quality Medicare program. Medicare Advantage delivers for a growing number of seniors and people with disabilities,” said Eyles. “Asking 27 million Americans to pay for new dental, vision, and hearing benefits in lieu of services they affirmatively chose and have come to rely on is unnecessary and unfair.”

To prove the value of Medicare Advantage benefits, AHIP pointed to Medicare Advantage members’ strong satisfaction with their benefits (93 percent) and drug coverage (92 percent) as well as their openness to promoting Medicare Advantage to others (95 percent).

Traditional Medicare beneficiaries can access any provider in the US under Medicare’s hospital healthcare coverage and medical healthcare coverage—Medicare Parts A and B. However, Beneficiaries have to access prescription drug through a separate Medicare Part D plan. Supplemental coverage is another way to enrich benefits in traditional Medicare.

In contrast, Medicare Advantage plans include hospital and medical healthcare coverage and often a prescription drug plan (which is very popular). Although the provider network is limited, Medicare Advantage plans’ strength lies in the additional benefits they have the flexibility to offer. 

For example, over a third of payers offered coronavirus-specific benefits through their Medicare Advantage plans for plan year 2021. Vision, hearing, and dental benefits were three of the most common benefits that Medicare Advantage plans offered, with over nine in ten plans featuring each of these.

Wakely’s research will prove critical as Medicare Advantage enrollment continues to grow stronger. In 2021, payers saw high enrollment in this market, continuing the trend of a 60 percent increase in enrollment from 2013 to 2020.