How changes to Medicare financial reconciliation will impact payers

Medicare financial reconciliation is becoming more complex, driven by CMS processes and reporting requirements. Combined with the shifts in the Medicare population, these factors have heightened the risk of substantial revenue loss for Medicare Advantage (MA) plans. Legacy reconciliation systems often struggle to adapt to these changes, leading to financial leakage and inefficiencies.

This has become a business-critical issue—and adapting quickly with modern, automated solutions is essential to avoid financial leakage and protect profitability. The question is no longer whether these changes will impact payers, but how soon they can respond to stay competitive.

Key challenges impacting Medicare Advantage plans

1. Enhanced data matching and reporting

• Increased MSP identification: CMS has strengthened its Coordination of Benefits & Recovery (COB&R) program to better detect enrollees with other primary insurance coverage. CMS’s increased cross-referencing frequency have flagged more beneficiaries for Medicare Secondary Payer (MSP). This results in more negative MSP adjustments, reducing MA plan payments.
• Expanded Section 111 reporting: New reporting mandates for private insurers (such as Employer Group Health Plans, liability insurers, and workers’ compensation providers) coupled with stricter non-compliance penalties has increased the frequency of MSP adjustments and increased adjustments in the Monthly Membership Report (MMR) overall.

2. Retroactive revenue reduction adjustments

• Negative MSP adjustments: One of the main reasons for seeing an increase in both the length and frequency of negative MSP adjustments is retroactive updates to a beneficiary's coverage status. These retroactive updates often trigger MSP adjustments spanning multiple months, extending the period of revenue reduction.
• Conditional payment recovery: Medicare Advantage plans issue conditional payments when the primary payer is delayed. CMS subsequently recoups these payments through negative MSP adjustments, especially in cases involving liability insurance, workers' compensation, or auto insurance claims where delayed settlements result in larger retroactive adjustments.

3. Rise in beneficiary complexity

• Increase in working-aged seniors: As more individuals aged 65-74 remain employed, primary coverage through EGHPs adds complexities to benefits coordination. Approximately 20% of MA beneficiaries currently have employer-sponsored insurance as their primary coverage. That figure is anticipated to rise 32% by 2030, leading to even more MSP adjustments. With more MA enrollees working past age 65, EGHPs frequently become the primary payer, creating complexities in coordinating benefits and impacting revenue tied to MSP rules.
• D-SNP and I-SNP enrollment growth: Payers are set to face additional revenue challenges. These populations often have Medicaid or other secondary coverage, reducing MA payments via MSP rules.

Questions for payers to consider tackling financial leakage

In the complex landscape of Medicare reconciliation, multiple sources of potential financial leakage can significantly impact revenue. Understanding and addressing these challenges is crucial for optimizing financial performance. Organizations should consider the following to ensure accuracy and completeness in financial processes:

1. CMS policy funding reconciliation

• Are CMS enrollment and payment files being reconciled accurately?
• Is there a comparison between CMS and state enrollment files?
• Are updates to MMR adjustment reason codes being reviewed?
• Are CMS credits tracked across multiple months to reconcile and close enrollment corrections?

2. Enrollment & COB accuracy

• Are we able to process 100% of MSP & COB adjustments in a timely and accurate manner?
• Can we identify automation opportunities to reduce manual touchpoints & interventions?
• Can we reconcile these adjustments with policy funding adjustments?

3. Claims accuracy

• Can we identify and reprocess 100% of claims impacted by retro changes?
• Are we re-examining processes for out-of-area snowbird claims?
• Are we applying known COB information during claims pre-payment to reduce overpayment chasing?

Conclusion

Medicare Advantage plans face increasingly complex challenges in financial reconciliation due to evolving CMS processes, heightened reporting requirements, and shifting beneficiary demographics.

As MSP adjustments and retroactive revenue reductions continue to rise, plans must proactively address potential sources of financial leakage. By focusing on enhanced data matching, automated reconciliation processes, and improved accuracy in claims processing, MA plans can mitigate revenue loss and ensure financial stability.

With the right strategies in place—like the comprehensive, proven methodology West Monroe deploys—organizations can navigate the intricate landscape of Medicare financial reconciliation and safeguard their bottom line in the face of ongoing regulatory and demographic changes.