Since the 2010 Affordable Care Act, it seems every year in healthcare has been full of change. With a new administration but a narrowly divided Congress we can expect to see a number of experiments and approaches on the perennial topics of PBMs, prior authorization, 340B, and telehealth payments. But the big dollars and the big growth are centered in Medicare Advantage and its somewhat similarly capitated Managed Medicaid programs.

The heavy action will be in how we incent capitated payers (MA plans) to provide appropriate levels of care given the fundamental incentive to spend less and arguably do less. Today, one pivot point of those incentives is the HCC (Hierarchical Condition Codes), used to prospectively assess how sick insured populations are and therefore how much the plan should get paid. The other pivot point of the MA payment puzzle focuses on retrospectively looking at plan performance on clinical quality and level of service measures - the Star Ratings. Multiple major payers have sued CMS, often successfully, over their Star Ratings. Ultimately payment levels are a data play, and that data will increasingly include rich clinical data. Successful plans will leverage modern big data computing.


What makes these payment tools the point of controversy are varying beliefs on whether MA plans are paid too much or too little. In July, MedPAC, the Congressional CMS oversight agency, stated that MA plans were overpaid by 22%. Recently we’ve seen multiple plans stop paying commissions to brokers who are bringing them high-expense patients in effect saying CMS is not paying enough for these patients. Managed Medicaid, though run by the states, has similar concerns. MA plan payment rules will almost certainly materially change in 2025. Expect to hear a lot about MA plan spend and the underlying performance data in 2025!

- Dr. Don Rucker, Chief Strategy Officer, 1upHealth

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