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The American people deserve to know that the insurance companies receiving more than $700B annually in taxpayer funds are working to ensure you receive effective, high-quality care. Remember, you have rights and options to ensure you receive the care you deserve.”

On March 21, 2024, the Department of Health and Human Services (“HHS”) Office of the Inspector General (“OIG”) posted an informational video directed to beneficiaries regarding the potential risks and concerns of managed care plans. It includes infographics and quotes like the one above to capture the attention of the approximately 100 million Americans who currently receive managed healthcare benefits paid for by a federal health care program, and to explain the complex alternative healthcare delivery model in digestible terms. The video, as summarized below, was accompanied by statistics relating to the use of government-funded managed care, a blurb about the OIG’s 2023 Strategic Plan for Oversight of Managed Care for Medicare and Medicaid (“Strategic Plan”), and an inclusive list of other resources. 

Overview of Managed Care and Key Payment Terms 

The government delivers federal health care program managed care benefits via its Medicare Advantage (“MA”) and Medicaid Managed Care (“MMC”) programs. In the case of MMC, state Medicaid agencies – not the federal government – contract with health plans operating in their state. According to the OIG, more than half (54%) of Medicare beneficiaries received care via MA in 2023, and a significant majority (81%) of current Medicaid enrollees receive at least one component of care via MMC. To summarize the flow of taxpayer funds within the managed care model generally: the federal government in the case of MA pays private health plans to provide care to Medicare beneficiaries, and those plans pay providers to give care to beneficiaries enrolled in the MA plan (as reflected in the OIG’s infographic, below).

This differs from the traditional payment/delivery model (referred to as fee-for-service), in which the federal (or state) government pays providers directly for episodes of care provided to their Medicare (or Medicaid) patients. There are potential risks and rewards assumed by plans that participate in managed care: the plan gets to keep the full fixed per member per month (“PMPM payment”) payment from the government regardless of the amount of care each member receives in the month. However, the plan is also responsible for footing the bill if a member receives care in a month the cost of which exceeds the PMPM payment it receives from the government.

Of course, the model is not entirely that simple. For example, the government can also increase the fixed PMPM payment under a risk adjustment payment methodology for enrollees whose health status indicates that they will have higher utilization of healthcare services than the average enrollee.

Concerns Associated with Managed Care 

The OIG warned viewers that managed care, which can benefit millions of Americans by delivering high quality care more efficiently, also poses risks of abuse or misuse. Specifically, OIG raised the following potential concerns in its video: 

  • After plans agree to cover the cost of care, some plans might improperly limit enrollees’ access to care so that they can retain a larger share of the fixed payment; 
  • To “game” the risk adjustment payment program, the OIG warned that some plans may inappropriately seek more money than they should by overstating how sick their enrollees are. 

The OIG issued a report in 2022 that found some MA plans improperly deny authorization or payment for services, which it calls “stinting on care.” For more information regarding that report as well as industry’s response to it, please refer to our prior blog post. The OIG emphasizes that beneficiaries should stay informed, ask questions, and report suspicious activity to Medicare or their state’s Medicaid agency. 

The 2023 Strategic Plan 

In response to the risks summarized above, in 2023, the OIG published a strategic plan designed to counteract utilization risks and protect beneficiaries. This includes the following objectives: 

  1. Promoting patients’ access to healthcare services, including mental health services 
  2. Establishing quality standards in delivering patient care (including standards relating to reducing health disparities) 
  3. Ensure payments to managed care plans are accurate and reduce fraud 
  4. Oversee data collection and reporting. 

What’s Next? 

Plans should expect significantly more guidance and enforcement in the managed care area, particularly with respect to access to care initiatives, financial oversight, and data-driven decision-making. Our team will continue to monitor developments in the managed care area. If you have any questions about these laws or their impact on you or your business, please contact a member of the Sheppard Mullin Healthcare Team