Medicare – Alex Yarijanian

The 2025 Healthcare Perfect Storm: How Rising Costs and Increased Scrutiny Impact Insurers

The blog post examines the health insurance industry’s challenges in 2025, highlighting rising healthcare costs, increased patient demand, and heightened government scrutiny. Insurers, particularly those focused on Medicare Advantage, must reevaluate strategies to maintain profitability. Despite these hurdles, opportunities for innovation and growth exist through personalized care and strategic partnerships.

This blog post delves into the complex challenges facing the health insurance industry in 2025, a year poised to be a pivotal moment for insurers, particularly those heavily invested in Medicare Advantage plans. Rising healthcare costs, increased patient demand, and heightened government scrutiny are converging to create what we’re calling a “perfect storm.” This confluence of factors threatens profitability and necessitates a critical reevaluation of existing operational strategies. This post expands on the themes discussed in our latest podcast episode, exploring these challenges in greater depth and offering insights into potential solutions for both insurers and healthcare providers.

Rising Healthcare Costs: A Looming Crisis

The escalating cost of healthcare is arguably the most significant challenge facing insurers. Inflation, technological advancements, and the increasing complexity of medical treatments all contribute to this unsustainable upward trend. The post-COVID surge in patient utilization, with many seeking deferred procedures, has exacerbated the problem, placing immense pressure on insurers’ financial reserves. This increased demand is straining existing resources and impacting profitability, pushing medical loss ratios (MLRs) higher than ever before. The implications are profound, forcing insurers to re-evaluate pricing strategies, negotiate more effectively with providers, and explore innovative cost-containment measures.

The Impact on Medicare Advantage

Medicare Advantage (MA) plans, once considered a goldmine for insurers, are particularly vulnerable in this environment. The increased demand for MA plans, coupled with rising healthcare costs, is squeezing profit margins. Major players like Humana and UnitedHealth Group, heavily reliant on MA for revenue, are grappling with these challenges head-on. Their financial performance is becoming increasingly dependent on their ability to manage costs efficiently while maintaining patient satisfaction and adherence to regulatory requirements.

Increased Patient Demand: A Double-Edged Sword

While increased patient demand initially appears beneficial, in the context of rising costs, it becomes a major challenge. Insurers are faced with a difficult balancing act: fulfilling the needs of a growing patient population while simultaneously controlling costs and maintaining profitability. This necessitates a shift towards more proactive and personalized care models that prioritize preventative measures and disease management. Strategic partnerships with providers are crucial for achieving these goals.

The Need for Personalized Care

The sheer volume of patients requires a move beyond traditional, reactive models of care. Personalized care, driven by data analysis and predictive modeling, is becoming essential for identifying high-risk individuals and implementing targeted interventions. This approach not only improves patient outcomes but also helps to manage healthcare costs more effectively, ultimately impacting the MLR and safeguarding insurer profitability.

Increased Government Scrutiny: Navigating Regulatory Hurdles

The health insurance industry is facing unprecedented levels of government scrutiny. Lawmakers are increasingly focused on issues of transparency, affordability, and access to care. This heightened scrutiny translates into stricter regulations, increased audits, and potential penalties for non-compliance. Insurers must navigate this complex regulatory landscape while ensuring they maintain ethical and transparent practices.

Adapting to Regulatory Changes

The regulatory environment is constantly evolving, requiring insurers to be adaptable and proactive. Staying informed about new regulations, investing in compliance programs, and engaging with policymakers are crucial for navigating this challenging landscape. Failure to adapt could lead to significant financial penalties and reputational damage.

Opportunities Amidst the Storm

While the challenges are significant, the current climate also presents opportunities for innovation and growth. Entrepreneurs and healthcare providers can leverage this disruption by focusing on high-cost patient areas and developing innovative solutions that improve efficiency and reduce waste within the healthcare system. New models of care, such as value-based care, offer potential avenues for both improved patient outcomes and reduced costs.

Innovation in Healthcare Delivery

The need for cost-effective and efficient healthcare delivery models has never been greater. Entrepreneurs are stepping up to the plate, developing innovative technologies and solutions to address these challenges. These range from telehealth platforms and remote monitoring devices to AI-powered diagnostic tools and personalized treatment plans. Insurers that embrace these innovations and forge strategic partnerships with these innovators will be better positioned to thrive in the evolving healthcare landscape.

Conclusion

The healthcare industry in 2025 faces a perfect storm of rising costs, increasing patient demand, and intensified regulatory scrutiny. Insurers, especially those heavily reliant on Medicare Advantage, are experiencing significant financial pressure. This necessitates a complete re-evaluation of operational strategies, focusing on cost containment, personalized care, and proactive compliance. However, amidst these challenges lie significant opportunities for innovation and growth. By embracing new technologies, fostering strategic partnerships, and prioritizing patient-centric care models, both insurers and healthcare providers can navigate this turbulent environment and emerge stronger. To delve deeper into this topic and explore potential opportunities, please listen to our podcast episode, “2025 Opportunities in Healthcare: Navigating the Perfect Storm.” This episode provides further insights into the challenges and opportunities discussed in this blog post and offers actionable strategies for navigating the complexities of the 2025 healthcare landscape.

Companies mentioned in this episode:

Research Links:

The Definitive Playbook for Choosing Behavioral Health Markets – Value Based Care Advisory (VBCA) Podcast

Rate sheets don't tell the whole story.In this episode, Alex Yarijanian breaks down the 8-indicator playbook he uses to evaluate any tele-behavioral health market before committing capital — and names the specific states he'd enter today and why.Most operators default to the biggest states: California, Texas, Florida, New York. But population size alone is one of the weakest predictors of a winning market. The real levers live in parity law enforcement, workforce economics, MCO concentration, and infrastructure readiness.WHAT YOU'LL LEARNWhy the biggest states are rarely the best markets for tele-behavioral healthThe 8 indicators that separate win-win markets from cheap-rate miragesHow to build a weighted scoring model before entering a new marketWhat associate-level billing eligibility does to your workforce marginsHow MCO concentration affects contracting speed and rate-cut riskWhich states Alex rates as best all-around, high-risk, and growth-stage betsTHE 8 MARKET INDICATORSMedicaid market size: Total addressable population and realistic capture potentialPayment parity: State-level mental health parity laws and strength of enforcementCost of living index: The single best proxy for labor margin on clinical staffAssociate-level billing: Whether licensed associates can bill independentlyHRSA HPSA demand mapping: Documented unmet need in mental health shortage areasBroadband & 5G coverage: Infrastructure required for reliable telehealth deliveryMCO landscape: Plan count, behavioral carve-outs, any-willing-provider law exposureTax & corporate climate: State-level business environment and regulatory postureMARKET ARCHETYPESBest all-around: Arizona, Nebraska, Delaware, OregonVolume, thin margins: Arkansas, North DakotaHigh rate, high cost niche: AlaskaGrowth stage bets: New Mexico, Montana4 ACTION STEPSBuild a scroll scoring model — layer all 8 indicators into a weighted scorecardValidate demand on the ground — overlay HRSA HPSA maps + FCC broadband gap dataCheck your plan mix — count Medicaid MCOs and behavioral carve-outsRun a payroll stress test — model cost of living vs. your target clinician pay bandRESOURCES MENTIONED HRSA Mental Health HPSA maps: data.hrsa.govFCC broadband coverage maps: broadbandmap.fcc.govNCSL mental health parity law trackerLicensure compact maps: PSYPACT, ASWB Compact, Nurse Licensure Compact State Medicaid rate databases

Cognitive Assessment & Care Plan Services

If your patient shows signs of cognitive impairment during a routine visit, Medicare covers a separate visit to more thoroughly assess your patient’s cognitive function and develop a care plan – use CPT code 99483 to bill for this service.

Effective January 1, 2021, Medicare increased payment for these services to $282 (may be geographically adjusted) when provided in an office setting, added these services to the definition of primary care services in the Medicare Shared Savings Program, and permanently covered these services via telehealth. Use CPT code 99483 to bill for both in-person and telehealth services.

How Do I Get Started?

Detecting cognitive impairment is a required element of Medicare’s Annual Wellness Visit (AWV). You can also detect cognitive impairment as part of a routine visit through direct observation or by considering information from the patient, family, friends, caregivers, and others. You may also use a brief cognitive test and evaluate health disparities, chronic conditions, and other factors that contribute to increased risk of cognitive impairment.

If you detect cognitive impairment at an AWV or other routine visit, you may perform a more detailed cognitive assessment and develop a care plan during a separate visit. This additional evaluation may be helpful to diagnose a person with dementia, such as Alzheimer’s disease, and to identify treatable causes or co-occurring conditions such as depression or anxiety.

Who Can Offer a Cognitive Assessment?

Any clinician eligible to report evaluation and management (E/M) services can offer this service. Eligible providers include:

Physicians (MD and DO)
Nurse practitioners
Clinical nurse specialists
Physician assistants

Where Can I Perform the Cognitive Assessment?

You can perform the assessment at any of these locations:

Office or outpatient setting
Private residence
Care facility
Rest home
Via telehealth

What’s Included in a Cognitive Assessment?

The cognitive assessment includes a detailed history and patient exam. There must be an independent historian for assessments and corresponding care plans provided under CPT code 99483. An independent historian can be a parent, spouse, guardian, or another individual who provides patient history when a patient isn’t able to provide complete or reliable medical history.

Typically, you would spend 50 minutes face-to-face with the patient and independent historian to perform the following elements during the cognitive assessment:

Examine the patient with a focus on observing cognition
Record and review the patient’s history, reports, and records
Conduct a functional assessment of Basic and Instrumental Activities of Daily Living, including decision-making capacity
Use standardized instruments for staging of dementia like the Functional Assessment Staging Test (FAST) and Clinical Dementia Rating (CDR)
Reconcile and review for high-risk medications, if applicable
Use standardized screening instruments to evaluate for neuropsychiatric and behavioral symptoms, including depression and anxiety
Conduct a safety evaluation for home and motor vehicle operation
Identify social supports including how much caregivers know and are willing to provide care
Address Advance Care Planning and any palliative care needs

NOTES

Notes

Data reflect NCQA’s 2019 ratings of Medicaid managed care plans. The plans included in the NCQA data do not always match the MCOs in other tables in the Medicaid Managed Care Market Tracker, or they may appear under different names. Discrepancies may be due to differences across reports and sources, timeframes, and other factors. MCOs not accredited or rated by NCQA may be accredited or rated by other organizations.

The NCQA plan overall rating scale is 0-5 (0 is lower performance, 5 is higher performance). NCQA accreditation is as of June 30, 2018. For more information about how NCQA rates plans, please see NCQA’s methodology.

Sources

NCQA Health Insurance Plan Ratings 2018-2019 – Summary Report (Medicaid). Special Data Request, October 2019.

Definitions

Partial Data Reported: Plans with partial data do not receive a rating, but NCQA lists them in the ratings and shows their scores on the measures they report. A plan is considered to have partial data if it submits HEDIS and CAHPS measure data for public reporting, but has insufficient data for one or more measures, submits HEDIS data for public reporting but does not submit CAHPS data, or vice versa, or earned NCQA Accreditation without HEDIS data (health plan accreditation standards only) and did not submit HEDIS or CAHPS data for public reporting.

No Data Reported: Plans that submit results but do not report data publicly, or plans that report no HEDIS, CAHPS or accreditation information to NCQA, are given a rating status of “No Data Reported”.

Insufficient Data: Plan has “missing values” (i.e., NA or NB) in more than 50 percent of the weight of the measures used in the methodology.

Statutory and Plan-Bid Components of the Regional MA Benchmarks

Carriers set their actual prices by bidding against the capitation payment amounts. Carriers with plans that do well on Medicare Advantage program quality measures get a higher monthly capitation payment.

Statutory and Plan-Bid Components of the Regional MA Benchmarks

The annual election period for 2020 coverage is set to start Oct. 15 and run until Dec. 7. The capitation payment spreadsheet below shows about how much Medicare Advantage program managers think they should be paying each month for each Medicare Advantage plan enrollee’s care.

The 2020 county-level averages range from $755 per month, in Presidio, Texas, up to $1,609, in Nome, Alaska.
To simplify things, we calculated state-level averages. The 2020 state-level averages ranged from $883 per month, in Hawaii, up to $1,168, in Alaska.
We also calculated how fast each state’s average capitation level changed between 2019 and 2020. The year-over-year change ranged from 4%, in Delaware, up to 8.2%, in one state.

ACCESS THE 2021 MEDICARE RATEBOOK: 2021 Medicare Ratebook (National, County Level Capitation Rates)

Determining Medicare payment for regional MA plans

Aside from a few special payment incentives, payment for regional MA plans is determined like payment for local plans, except that the benchmarks are calculated differently. CMS determines the benchmarks for the MA regional plans by using a more complicated formula that incorporates the plan bids. A region’s benchmark is a weighted average of the average county rate and the average plan bid.

As directed by law, CMS computes the average county rate as the individual county rates weighted by the number of Medicare beneficiaries who live in each county. The average plan bid is each plan’s bid weighted by each plan’s projected number of enrollees. CMS then combines the average county rate and the average bid into an overall average. In calculating the overall average, the average bid is weighted by the number of enrollees in all private plans across the country, and the average county rate is weighted by the number of all Medicare beneficiaries who remain in FFS Medicare.

#CMS #FFS Medicare #Medicare #2021RateBook

Title 42. Public Health Chapter IV. CENTERS FOR MEDICARE & MEDICAID SERVICES, DEPARTMENT OF HEALTH AND HUMAN SERVICES Subchapter B. MEDICARE PROGRAM Part 422. MEDICARE ADVANTAGE PROGRAM Subpart F. Submission of Bids, Premiums, and Related Information and Plan Approval Section 422.258. Calculation of benchmarks.