The U.S population is older today than it has ever been. By 2030, all Baby Boomers will be 65 or older and the oldest close to 85. Most will be using some form of Medicare for their health insurance.1
In early April 2024, the U.S. federal government announced the finalized 2025 cuts to Medicare Advantage base rates. We sat down with League’s Chief Growth Officer, Andrew Dubowec, to discuss the implications of these cuts for insurers.
Q: Another consecutive year of cuts to Medicare Advantage rates has sparked debate and concern in the industry, causing sharp drops in stock prices for insurers like Humana, CVS Health and Elevance. What is the biggest challenge facing payers, and how do you see these cuts impacting the future of Medicare?
A: The cuts are certainly a significant hurdle and there’s a lot of uncertainty around the long-term financial impact. Payers are grappling with reduced reimbursem*nts, which inevitably puts a strain on their bottom line. The stock market’s reaction underscores the investor concern that these cuts aren’t just a one-time event, but rather a trend towards increased regulatory and earnings pressure for the Medicare Advantage program. This, coupled with the existing challenges of a rapidly aging population and the increasing prevalence of chronic conditions, will force payers to walk a tightrope between maintaining financial sustainability and delivering the value Medicare Advantage members have come to expect.
Q: In light of these challenges, how can payers ensure they are still delivering value to their members while navigating this heightened financial pressure?
A: In the short term, we’ll likely see payers making necessary adjustments to premiums, benefits, provider networks, and other factors to maintain profitability. That said, more innovative payers are already looking beyond these immediate measures to find sustainable solutions to deliver care more efficiently and effectively. This could involve investing more in preventive care and chronic disease management, or leveraging technology to optimize inefficiencies and enable better self-service. I think we’re also going to see renewed focus on effective member communication and benefits literacy. It will be crucial for payers to clearly explain any changes in benefits or costs.
Q: As insurers inevitably look for ways to reduce costs, where should they start? What role can technology play in streamlining operations?
One of the biggest—and increasingly unnecessary—financial burdens insurers face is administration. Digital member portals have attempted to address this issue but, the reality is, they are often outdated and transactional in nature. Sure, they have things like coverage and claims, and maybe you can chat via text with an agent or chat bot. But they are impersonalized and static—there isn’t anything that keeps the member coming back again and again.
Modern member portals, like the ones powered by League, are designed to augment these basic self-service functions with behavior change science to drive health engagement and, ultimately, actions that matter. Members can share, track and manage priorities and goals; find trusted, evidence-based content; and even participate in gamified, dynamic activities personalized at the individual level. The goal is to help our customers reduce administrative and medical costs, improve program utilization, and increase quality scores like Star Ratings and HEDIS measures.
Q: While base rates are being cut, does the risk adjustment model create any opportunities for payers to increase revenue?
It does. The continued phase-in of the risk adjustment model means that payments will be more aligned to the health status of members. So it’s crucial for payers to accurately assess and code the health conditions of their enrollees to ensure accuracy in the risk adjustment process to ultimately maximize revenue. It also encourages insurers to focus on preventive care and invest in programs to improve member health.
Comprehensive member health data is one of the most valuable resources they have to do that—as long as there’s a strategy in place and the right technology is being used to harness it. Most healthcare organizations are sitting on a mountain of data. The real challenge lies in getting it into an actionable state to effectively harness it for N-of-1 personalization at scale. Payers that can successfully organize and navigate this data will be well positioned to deliver truly personalized experiences and anticipatory care recommendations that drive better health outcomes for members. The ability to do this is going to have a big impact on member satisfaction and retention as well.
A platform like League makes it easy to collect and use member data to understand the needs, goals, risk factors, and other SDoH of members. When payers can action this data, they can deliver timely, targeted interventions—that can help avoid many of the high cost claims associated with unmanaged conditions—and drive a more preventative approach to health.
The Medicare Advantage market is growing ($1.8T by 2031)2. The ability to provide seamless and engaging digital experiences is already a huge differentiator for payer organizations amid the rising market competition and the demand for those experiences from members is only going to increase.
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Sources
1 https://www.emarketer.com/insights/aging-population-healthcare/
2 https://www.kff.org/medicare/issue-brief/what-to-know-about-medicare-spending-and-financing/
