The Medicare Advantage Landscape: Plan Consolidation and Proposed Rate Cuts Impact Care Providers

In 2023, Medicare Advantage (MA) enrollment surpassed traditional fee-for-service Medicare enrollment for the first time in the program’s history, with more than 30 million seniors—51% of the Medicare population—now enrolled in a private plan. While MA plans can boast lower 30-day hospital readmission rates and fewer avoidable hospitalizations for their members, the increasing penetration of MA plans is a trend that senior housing and care providers should monitor closely.

Medicare Advantage plans routinely contract with health care providers—including assisted living and nursing care operators—for services. These plans control which care providers are in their networks as well as the characteristics of their contracts.

MA Plan Consolidation and Rate Cut Implications for Care Providers

When a single MA plan has considerable penetration in a given market, their contractual offerings to a post-acute care provider may not cover the costs of basic custodial care, let alone the more intense care provided within a skilled nursing setting. For post-acute care providers, this can present a lose-lose situation. While their costs may not be covered due to contractual payment limitations, not accepting a contract offer could result in inadequate service volume, leading to lower occupancy and further financial strain.

Simultaneous to MA enrollment reaching its highest level, the number of MA plans available to eligible seniors fell for the first time ever, with fewer plans available to choose from in 2024 than in 2023. With smaller plans exiting the market, larger MA organizations further consolidate, resulting in more limited competition and diminished negotiating power for providers.

An additional challenge facing the marketplace is a proposed 2025 rate reduction in the Medicare Advantage base payment rate which, if finalized, would mark the second consecutive year with a lower benchmark rate. The response from MA insurers will likely be increased premiums and a reduction to enrollee benefits and provider reimbursement.

One-fifth of Medicare beneficiaries discharged from a hospital receive post-acute skilled nursing care. In the Medicare Advantage plans, skilled nursing providers are much more likely to encounter prior authorization requirements for necessary drugs and treatments. These authorizations often lead to delays in care and in some cases are denied for reimbursement. Post-acute providers have long decried the burdensome prior authorization process and high denial rates experienced with Medicare Advantage plans.

Navigating the MA Landscape by Care Providers 

There are moves that providers can make to better navigate this MA landscape. First, ongoing advocacy related to prior authorization and the high rate of denials is needed. A number of groups continue to push federal officials to further scrutinize these denial patterns. Second, there are a number of providers who have entered value-based care arrangements themselves. Some have formed their own Medicare Advantage plans as owners while others have joined a network with others to share in risk. This puts the provider in a greater position of upside risk for delivering positive outcomes for their residents. Last, it is imperative that provider organizations are sophisticated in demonstrating their value through prevention and wellness efforts that result in cost savings and better outcomes for their residents.

With the CMS goal to have all Medicare-eligible individuals enrolled in a value-based care relationship by 2030, it is anticipated that these MA trends will only increase in the next several years. Providers need to stay on top of these trends, understand their local markets, and explore where they can participate in value-based care arrangements to better position for success and viability long-term.

If you're attending the 2024 NIC Spring Conference in Dallas, mark your calendar for two informative main stage sessions you don't want to miss: "Orchestrating the Future of Medicare and Medicaid" for Senior Living Operators, on March 5 at 4:00pm, and "Medicare Priorities and Programs" with Dr. Meena Seshamani, Director of the Center for Medicare and Deputy Administrator of CMS, on March 6 at 9:30am.