Medicare is deferring the full crackdown on private health plans

The Biden administration on Friday finalized new rules aimed at curtailing widespread overbilling by private Medicare Advantage insurance plans, but softened the approach after intense lobbying by the industry.

Regulators are still pushing ahead with rules that will cut payments to insurance companies by billions of dollars annually. But it will introduce changes gradually over three years, not all at once, and this will reduce the direct effects.

In the short term, private health plans will still be able to take payments that Medicare officials don’t consider appropriate. The system will eventually eliminate the extra money insurers receive to cover patients with fewer than 2,000 diagnoses, including 75 cases that appear to be the subject of widespread fraud.

But the extended schedule could also mitigate concerns raised by health plans, doctors and others that a broad policy change could lead to unintended consequences, such as premium increases or reductions in benefits for Medicare Advantage recipients.

In the two months since the proposal became public, insurers and their allies have waged an expensive and noisy lobbying campaign, using television ads, pressuring lawmakers on Capitol Hill and recruiting thousands to offer comments in opposition.

The nation’s top Medicare official acknowledged on Friday that industry protests had affected the shape of the new rules.

“We’ve been really comfortable with our policies, but we always want to hear what our stakeholders have to say,” said Chiquita Brooks Lashore, who is responsible for the Centers for Medicare and Medicaid Services. The desire for a slower policy shift, she said, was “something we really heard coming from our comments, and we wanted to be responsive.”

The new payment formula is a response to mounting evidence over more than a decade that private insurers have been exploiting a formula to extract overpayments from the federal government. Plans are eligible for additional payments for patients whose disease coverage may be more expensive, which has encouraged many to go to great lengths to diagnose their clients with as many health conditions as possible. Insurance companies collect tens of billions of dollars in additional payments annually, according to various estimates.

Almost every major insurer in the program has settled for, or is facing a federal fraud lawsuit for, such behavior. Evidence of overpayments has been documented before academic studiesAnd Government guard reports f Plan audits.

Despite abuses and concerns that Medicare Advantage too often denies needed care, about half of all Medicare beneficiaries are now enrolled in private plans, which receive more than $400 billion in government expenditures annually. It’s still popular with consumers, who often enjoy lower premiums and benefits — such as vision and dental services — that the basic state healthcare plan doesn’t offer.

The program has also become profitable for the largest insurance companies. Recently research From the Kaiser Family Foundation I found that insurance companies make twice as much gross margins with Medicare plans as they do with their other lines of business. Humana recently announced that it will stop offering commercial insurance to focus on Medicare, which serves seniors and disabled Americans, and Medicaid, which serves mostly low-income residents.

The new rule will eventually eliminate extra payments for many diagnoses that Medicare Advantage plans were commonly reporting but Medicare data that didn’t show to be related to more Medicare. These diagnostic codes included a few special plans that targeted them specifically, such as “complications” diabetes and a form of severe malnutrition commonly seen in famine-stricken countries.

With the three-year rollout, insurers will receive payments based on one-third of the new formula in the first year, and two-thirds on the old year. In all, Medicare estimates that Medicare Advantage plans will pay 3.32 percent more next year than this year. Under the original limits proposed by the administration, this increase would have been about 1 percent. Previous changes to the payment model also took three years to complete.

Opponents of the policy have argued that the change could dilute benefits for clients of the plans, and may have a disproportionate impact on poor and minority populations. The offering wasn’t the slowest to calm her down.

“While we appreciate the CMS transition to an incremental approach, the underlying policy has not fundamentally changed,” he said Mary Beth Donahue, president of the Better Medicare Alliance, an industry group that has spent eight figures on television advertising to fight the policy. “We remain concerned about the unintended consequences for seniors of this risk adjustment policy.”

But the Alliance for Community Health Plans, a group representing nonprofit insurers, said in a statement that it agreed with the new approach: “We support changes to the risk adjustment model to focus on achieving outcomes for consumers and to aggressively address the underlying incentives for documentation.”

Insurance companies have long challenged the agency’s Medicare actions in court, but it’s not clear if any insurance company would dispute the policy.

Some advocates and experts said they found the new formula too timid. The Medicare Payments Advisory Committee (MedPAC), which recommends policies to Congress, wrote in a Comment message The proposed changes, while “straightforwardly correct, are insufficient to address the scale of excess Medicare spending.”

Mark Miller, a former executive director at MedPAC, urged Medicare to go further than its initial proposal. He is now the Executive Vice President at Arnold Ventures, a political and advocacy organization closely associated with a group it funds. TV ads Defend change. He described the final approach as a disappointment. “They’re basically going through the plans,” he said in an email.

In February, just weeks after releasing their proposal, top health officials in the Biden administration vigorously advocated for the change. in a series of TweetsHealth and Human Services Secretary Xavier Becerra described the criticism of the policy as “disinformation being pushed away by the industry’s highly paid hackers and their allies.” In an interview with The New York Times, Medicare’s chief medical officer, Dr. Meena Sechamani, said she was committed to “holding the industry accountable for the manipulation of the system.”

Ms. Brooks-Lashore’s comments on Friday were more measured, emphasizing the views of “stakeholders” in Medicare. She said she didn’t feel Medicare was adjusting to industry pressures.

The payment change is one of a series of strict rules for the program that has been proposed or recently completed by management. Another proposal would put tighter controls on industrial marketing and make it harder for plans to deny patients care. A rule finalized in January requires plans to make payments to the government for a larger share of the overpayments detected through audits.

Although Medicare Advantage has long enjoyed strong bipartisan support on Capitol Hill, in this round a handful of high-profile lawmakers have come forward to defend the plans, despite all the pressure. Republicans on the committees that oversee the programs wrote letters to Medicare officials asking technical questions about the change, but avoided harsh criticism of the policy. On Tuesday, 17 House Democrats sent a letter to Medicare officials asking them to delay implementation, but not rescind it.

Bill Cassidy of Louisiana, a Republican senior physician on the Senate Health, Education, Labor and Pensions Committee, and Senator Jeff Merkley, a Democrat from Oregon, presented legislation On Tuesday it would take more steps to prevent “unreasonable payments, coding or diagnostics.”