Perils and promise of Medicare Advantage highlighted at congressional hearing

Testimony during a congressional hearing this week highlighted the strain hospitals are experiencing from the administrative roadblocks posed by Medicare Advantage (MA).

For all the potential seen in the program to improve health and care delivery, MA is not working the way it should, several industry experts acknowledged during the July 22 joint hearing of two House Ways and Means Committee subcommittees.

“Our volume of care denials has more than doubled since 2022,” said David Basel, MD, vice president of clinical quality and population health officer with Sioux Falls, S.D.-based Avera Health. “Even though we overturn more than 70% of these denials, the administrative burden continues to climb.”

He said a particular problem is the tendency of MA plans to seek to downgrade inpatient stays to outpatient observation status without following Medicare’s standard definitions for qualifying admissions (e.g., the two-midnight rule).

“These discrepancies compromise timely access to care, increase physician burnout, increase member costs and penalize hospitals unfairly,” Basel said.

Seeing the benefits

MA also has selling points that advocates hope can be accentuated while the drawbacks are addressed.

More than 54% of Medicare beneficiaries are enrolled in MA, many drawn by the promise of lower out-of-pocket costs and supplementary benefits such as dental, vision and hearing coverage and access to fitness, nutrition and social programs. Rep. Vern Buchanan (R-Fla.), chair of the Health Subcommittee, said data shows 95% of MA beneficiaries are satisfied with their plan.

“MA beneficiaries spend less on care and have better health outcomes than those that [are in] traditional Medicare, leading to lower and more efficient costs across the system,” Buchanan said.

Expert witnesses at the hearing described MA as filling gaps left by traditional Medicare, including the lack of supplementary benefits and the limited emphasis on prevention and care coordination. Robust coverage through traditional Medicare may require seniors to purchase Medigap plans, a financially untenable proposition for many.

“[MA] brings care coordination, supplemental benefits and financial protections that traditional Medicare simply doesn’t offer, dramatically reduces cost sharing with beneficiaries to the tune of thousands of dollars annually, and it aligns incentives to keep people well,” said Sachin Jain, MD, MBA, the CEO of SCAN Health Plans. “Are there problems with the program and [a] need for reform? Absolutely, but let’s not miss the forest for the trees.”

Traversing an obstacle course

MA’s advantages may not provide much comfort to hospitals and other providers struggling to navigate the program.

At Avera Health, said Basel, one impediment is the increasing difficulty in getting patients approved for discharge to a skilled nursing facility. MA plans then may withhold payment on the basis that a patient’s stay exceeded the expected length, “even when that longer length of stay is directly related to post-acute authorization delays.”

As a result of those delays, “We’ve got beds that we can’t put another patient in. Especially if it’s in our tertiary care center, they’re usually running at capacity.”

Plans also may go further than traditional Medicare in penalizing hospital readmissions, “refusing to pay for any readmissions within 30 days, even if totally unrelated to the initial episode.”

Taken together, he said, the actions of MA plans tend to “drive the cost of caring for MA patients up while reducing the actual payment for MA patients.”

Rural hospitals may especially struggle to counter such issues because, in many cases, “staff fill multiple roles and don’t have the capacity to specialize in utilization review or clinical documentation roles,” Basel said.

Making it work better

Much of the hearing focused on ways to improve prior authorization in MA.

“It should be one-click submission of data in the electronic health record,” said Brian Miller, MD, MBA, MPH, associate professor of medicine at Johns Hopkins University and a practicing hospitalist. “The patient’s seeing you, you shouldn’t get a request weeks or months later. It should be real-time. You submit your data automatically — ports, labs, notes, imaging studies. You should be able to access what the medical criteria are for prescription outpatient drugs. Pushing that information to the point of care is something that CMS and plans can do together.”

But he also said providers can do a better job helping themselves.

“We need to improve our documentation enormously,” Miller said. “A lot of denials are because you don’t have the right information, you don’t have the member number, you don’t have the date of birth. The note is copy-forwarded for every single day of the 24-day hospitalization and says the exact same thing, with no additions. There are a lot of tools that we can [use] to support doctors and hospitals with documentation.”

Exceedingly expensive

Concerns about MA extend beyond the payer-provider relationship. Policymakers on both sides of the aisle view the program as fiscally unsustainable if it stays on its current trajectory.

Rep. Lloyd Doggett (D-Texas), ranking member of the Health Subcommittee, cited a report from the Medicare Payment Advisory Commission, which found that taxpayers will spend $84 billion more on MA in 2025 than if the same beneficiaries were in traditional Medicare. He said the resulting additional cost of premiums for a Part B enrollee — including those who do not have MA — is $198.

The program’s risk adjustment system presents a roadblock to fiscal soundness, said Matthew Fiedler, senior fellow with the Center on Health Policy at Brookings Institution. CMS under the Trump administration is ramping up its auditing of MA plans and their risk adjustment processes.

“The current system overstates the needs of many enrollees because plans report more health conditions for their enrollees than would be reported for the same enrollees if they were enrolled in traditional Medicare, where the same [payment] incentive to record every possible diagnosis does not exist,” Fiedler said.

He added that a fix “would require multiple reforms, but one worthwhile step would be for lawmakers to more clearly specify how CMS should calculate the coding intensity adjustment it uses to offset MA plans’ more intensive diagnosis coding. This adjustment is currently much too small.”

Tweaking the methodology could be made via insurer-specific adjustments or at the market level, Fiedler noted. The former approach would be more targeted but also might encourage favorable selection by health plans.

The policy outlook

Members of both parties described wanting to see improvements in MA, setting up the potential for compromise in areas such as prior authorization, data transparency and payment consistency.

While it remains to be seen whether any MA-related legislation gains traction in the current Congress, various bills have been proposed.

Doggett this week introduced bipartisan legislation to ensure MA plans reimburse for all covered healthcare items and services at the same or higher rate as traditional Medicare. The bill also establishes prompt payment rules for clean in-network claims, similar to requirements in Medicare Part D. Another of his bills would set guardrails for MA coverage of veterans’ healthcare.

Versions of another bill, the Improving Seniors’ Timely Access to Care Act, have been in the pipeline for three years. Among other provisions, the bill would establish an electronic prior authorization process for MA plans, including standardization of transactions and clinical attachments.

A final rule written by the Biden administration similarly requires electronic prior authorization for MA and Medicaid managed care plans starting in 2027. The regulations also set deadlines for resolution of prior authorization requests beginning in 2026.

Rep. David Schweikert (R-Ariz.) drafted a 2025 bill to require most MA plans to incorporate capitated payments beginning in 2028. Controversially, it also would make MA the default option for traditional-Medicare beneficiaries who seek Part B coverage and would require most enrollees to stay in their plan for three years.

Rep. Judy Chu (D-Calif.) said she’s preparing legislation to require transparency in how MA plans use AI, ensure any AI system complies with traditional-Medicare coverage standards, and mandate physician review before any adverse determination is issued.