By Elizabeth B. Lippincott

The pendulum of the Medicare plan regulatory environment—which grew increasingly stringent under the Biden administration—probably reached its amplitude in the last few weeks and began to swing in the opposite direction. Having seen several oscillations of this political pendulum, I wanted to share some insights about what these changes mean for Medicare plans, as well as what lawyers and business teams can count on to stay constant.

Setting personal politics aside, it would not surprise me to see a second Trump Administration beginning in January, with more limited regulatory action and different enforcement priorities. Even if Democrats keep control of the White House for another four years, the judicial branch has taken steps to limit federal agency power that will impact CMS under any administration. The Supreme Court clipped the wings of the federal bureaucracy with its overturn of Chevron, which is likely to encourage more frequent court challenges to CMS rules as well as hesitancy at CMS to stretch the bounds of its statutory authority, as it can no longer rely on judicial deference to its statutory interpretations. Additionally, SCAN’s favorable summary judgment ruling on STARS ratings methodology was a blow from the judiciary, causing CMS to recalculate 2024 ratings for all plans. More recently, a Texas district court stayed the implementation of CMS’ new agent compensation restrictions that were to go into effect for sales of 2025 plans.

To understand how the political tides impact the Medicare plan industry, it’s worth reflecting on how it started, where we are now, and how much this program has changed over the years. I remember the day in 2004 when I received two thick binders filled with the Medicare Modernization Act of 2003 and CMS’ Proposed Rules to update Medicare Advantage and launch Part D. George W. Bush occupied the White House, and Medicare Part D was a proud legislative achievement for his administration. The longstanding absence of prescription drug coverage for people on Medicare would be addressed with a quirky Part D benefit, with its difficult to explain “donut hole.” Medicare Advantage plans, which covered about 13 percent of beneficiaries, were positioned by legislative and regulatory changes to grow in popularity, not that many of us imagined how many people would enroll in Medicare Advantage in the coming years.

In the first few years of Part D and the rapid expansion of Medicare Advantage fueled by the new Medicare law, the regulatory oversight environment was serious, but also sympathetic to industry challenges, and motivated by a desire to see a successful program launch. A friend who worked in a CMS regional office at that time shared about being asked by a political appointee not to pursue Part D fraud suspicions too aggressively in the early months of the program, to avoid bad press. Everyone was on a steep learning curve, including health plans, regulators, vendors and providers. We saw substantive regulatory updates at least yearly, and statutory updates introducing agent compensation limits in 2008, but nothing earth shattering.

The pendulum started to swing in the other direction in 2009 with the Obama administration, which had little to lose politically by clamping down on the private insurers administering Medicare benefits. Medicare plans saw significant new regulatory implementations each year, together with an intense series of program audits with increased penalties. CMS began to rely heavily on data-driven oversight of Medicare plans nationwide, using plan-reported and other collected data, with targeted audits and enforcement in addition to traditional routine reviews. The industry successfully pushed back on CMS’ approach following the 2010 audit cycle, when auditors got fairly aggressive, and in some cases downright rude, in their treatment of plan staff and executives in on-site audits, which tempered the tone of the enforcement environment somewhat, but substantive scrutiny of plan operations remained tough through 2016.

Although CMS monitoring and auditing continued steadily with the onboarding of the Trump administration in 2017, the regulatory environment changed again, with routine rule updates that tended to increase flexibility for plans in designing benefits. As healthcare lawyers, we learned that de-regulation feels a lot like regulation when you are in the middle of it because change still generates new work. Medicare Advantage plans saw a softening of some requirements, such as a relaxing of the meaningful difference requirements for plans post-acquisition and expansion of supplemental benefits flexibility. We also saw a rush of new entrants into the Medicare plan business, with tech-focused and private-equity backed companies angling for a slice of the market.

More surprising was the relative quiet in the Medicare plan regulatory scene in the first two years of Biden’s leadership. Most likely, this was a result of the Administration’s focus on COVID-19 in the early years of the public health emergency as well as an emphasis on passing the Inflation Reduction Act. However, the 2024 Final Rule for MA and Part D plans showed the kind of intensification of requirements we had been expecting under a Biden Administration, and the 2025 Final Rule published this past April was even more expansive. Then, in the last few weeks, the pendulum began to swing back once again.

In this dynamic regulatory environment, what can Medicare plan lawyers, compliance teams, and business leaders count on in the coming years?

1. Medicare Advantage is here to stay. It’s popular with beneficiaries, with 51 percent of Medicare beneficiaries enrolled, in part because of the relatively low premiums compared with purchasing Medicare Supplement and standalone Part D plans. The program has bipartisan political support.
2. To succeed in the Medicare health plan business, where CMS is your large group customer, you have to be able to thrive and grow under both Democratic and Republican administrations. Try to think of these transitions as your biggest employer group getting a new CEO. Normalize change. Businesses and individuals who can adapt quickly, and even thrive on change, will have a natural advantage.
3. Every political environment has its own set of challenges. In years with less intensive regulatory climates, expect new entrants to Medicare Advantage, who are willing to operate at a loss for a few years to build membership, and who may make bold mistakes that lead to broad regulatory responses that complicate your operations. In tougher regulatory times, anticipate that some organizations will exit the market due in part to a heavier burden.
4. Whistleblower lawsuits under the False Claims Act fall outside of the shifting regulatory climate. Plaintiffs’ lawyers will continue to pursue these cases aggressively no matter who is in the White House. False Claims Act whistleblower litigation is a Medicare Advantage plan’s largest legal risk.
5. Make legal risk decisions with a long-time horizon in mind. Statutes of limitations and lookback periods under the False Claims Act and Anti-Kickback statute are longer than 4-year presidential terms. In assessing legal risk, remember how quickly the pendulum can swing from a more to less industry-sympathetic climate – and back again. Make sure people on your team understand this reality.

© 2024 Strategic Health Law