Industry Stocks Tumble on Flat Payment Outlook (Image Credits: Unsplash)
Federal health officials proposed sweeping changes to Medicare Advantage payments this week, aiming to eliminate long-standing practices that have funneled excessive funds to private insurers.
Industry Stocks Tumble on Flat Payment Outlook
Centers for Medicare & Medicaid Services announced on January 26 a minimal rate increase of less than 0.1 percent for 2027, far below expectations.[1]
Shares of major players like UnitedHealth Group and Humana plunged immediately after the news. Industry leaders warned of potential benefit reductions and higher premiums for enrollees. These plans serve roughly 34 million Medicare beneficiaries, more than half of those eligible.[1]
Chris Bond, a spokesperson for AHIP, stated the changes could harm 35 million seniors and disabled individuals renewing coverage in October 2026.
Chart Reviews Under Fire for Fueling Overpayments
A key target emerged in the proposal: restrictions on “chart reviews,” where insurers scour patient records to add diagnoses that boost reimbursements, often without corresponding treatment.[1]
Government auditors criticized this for years. A 2019 Department of Health and Human Services inspector general report revealed over 99 percent of such reviews added diagnoses, leading to $6.7 billion in 2017 payments unsupported by service records.[1] Recently, Kaiser Permanente settled with the Justice Department for $556 million over allegations of generating $1 billion in improper payments through half a million added diagnoses from 2009 to 2018, though the organization admitted no fault.
- Plans hire coding consultants to identify billable conditions.
- Audits frequently find diagnoses lacking treatment documentation.
- Practice contributes to higher payments for supposedly sicker enrollees.
- Taxpayers bear the cost of these inflated risk scores.
Experts Weigh In on CMS’s Aggressive Move
Health policy analysts praised the initiative as a potential turning point. Spencer Perlman, a Bethesda-based expert, noted the Trump administration’s support for Medicare Advantage but expressed concern over profit-driven billing without care.[1]
CMS Administrator Dr. Mehmet Oz emphasized accuracy: “These proposed payment policies are about making sure Medicare Advantage works better for the people it serves.”NPR David Meyers of Brown University called it “a step in the right direction,” adding that plans remain highly profitable despite complaints.
Richard Kronick of UC-San Diego viewed it as “at least a mildly encouraging sign,” while cautioning insurers might adapt. David Lipschutz of the Center for Medicare Advocacy deemed it a “meaningful step” against overpayments.
Past Efforts Stalled by Lobbying Pressure
Regulators attempted similar curbs in 2014 but retreated amid industry backlash described as an “uproar.”[1]
Lobbyists and public campaigns thwarted prior reforms. CMS now seeks public comments, with a final rule expected by early April. Observers watch whether the Trump team holds firm this time.
This proposal tests the administration’s resolve to prioritize taxpayer dollars and patient care over insurer gains. Medicare Advantage has expanded rapidly, but at what true cost? What do you think about these changes? Tell us in the comments.
Key Takeaways:
- Flat 2027 rates could save billions by curbing upcoding.
- Chart review bans target unsupported diagnoses.
- Experts optimistic, but history suggests industry pushback.
