As rural Medicare Advantage (MA) expansion grows, more insurers are terminating local providers from their networks and requiring rural seniors to travel much longer distances for care. Critics say these changes provide a hidden windfall for MA plans while weakening rural access in ways Congress never intended.
National policy experts warn that MA plans have a financial incentive to enter rural areas and eliminate seniors’ convenient, local access to care. As this article will explore, rural low-volume providers receive enhanced payments under traditional Medicare to help cover their fixed staffing costs. Complex rules for paying MA plans allow the insurers to keep these enhanced payment rates after severing local patient-provider relationships. Federal officials exacerbated this problem by removing safeguards that protected rural MA patients’ access to local in-network providers.
In Louisiana, Humana and People’s Health MA plans have fully or partially terminated contracted services with five Critical Access Hospitals (CAHs). “The majority of the primary care physicians in this parish are no longer in network” beginning Jan. 1, 2025, said St. James Parish Hospital (SJPH) CEO MaryEllen Pratt, explaining that Human’s unilateral patient-steering decision impacts more than 20% of STPH’s revenue and could trigger a significant net loss in 2025.
Pratt’s award-winning CAH serves as the only hospital in the parish, which includes approximately 1,200 Humana MA enrollees. SJPH also serves patients who lack any hospital in nearby St. John the Baptist Parish, where MA plans include more than 74% of Medicare patients. During Medicare’s Open Enrollment Period, Pratt partnered with the Louisiana Department of Insurance to help inform local seniors of their options. She said people are frustrated by Humana’s changes and their potential out-of-network costs. Humana’s MA plans had covered local providers since 2010.
Severing Doctor-Patient Relationships
Recently, 79-year-old former Humana MA enrollee Susie Jacob said she and her 85-year-old husband like and want to keep their family practice physician of more than 20 years. “When we have testing done, he always calls us with our results. That gives us a chance to ask questions,” she said, adding that her doctor’s rural health clinic and SJPH are only two blocks from her home. With experience in national Medicare shared savings activities, SJPH providers improve local patient outcomes every day by recommending smoking cessation, mammograms, and colonoscopies, and helping patients control their diabetes and hypertension.
Jacob recalled feeling upset when Humana told her it had assigned her a new physician without fully explaining why. After switching MA plans, she still worried about learning where to refill medications under her new insurance company. “I can’t wait until the last minute,” she said.
“The loophole here is ‘we are not dropping you, but we’re leaving your local provider,’” said former Humana MA patient Maitland “Spuddy” Faucheaux, who expressed concerns that other MA insurer networks might also drop SJPH and that some local seniors might forgo needed care due to new transportation challenges. “Many of us feel we were misled,” he said, discussing how Humana’s webpage for 2025 MA enrollees still falsely listed SJPH as in-network during the open enrollment period.
Dr. Will Freeman, who works in several Louisiana CAHs, agreed that Humana’s provider lockout exacerbates existing rural provider shortages and undermines investments in physician recruitment. “Sending patients far away to get labs, X-rays, and MRIs makes it less convenient for doctors to practice in those communities,” he said.
Weakening Rural Access Protections
Before 2020, MA plans were required to ensure that 90% of their total enrollees could reach an in-network acute care hospital within 75 minutes and reach a primary care provider within 40 minutes. After reporting “existing failures in MA plans meeting the time and distance standards,” the Centers for Medicare & Medicaid Services (CMS) reduced these rural patient protections by cutting the threshold to 85%, and allowing MA plans to lower it to 65% by using waivers. During rulemaking, CMS said it did “not believe that this reduction will result in leaving some rural communities without appropriate access to essential services.”
Kaiser Family Foundation (KFF) researchers recently found that rural MA enrollment has nearly quadrupled since 2010, with an average of 27 MA plans in each rural community. MA rules also explicitly permit companies to enroll rural beneficiaries without offering access to any providers in the same parish (county) or state.
Since 2020, policy leaders have raised concerns about access barriers that prompt rural MA enrollees to switch back to traditional Medicare. A Health Affairs study found that “rural MA enrollees switched to traditional Medicare at substantially higher rates than nonrural MA enrollees. This phenomenon was more pronounced among those who required the use of costly services, such as facility stays or hospitalizations, those with poor self-reported health, and those who reported lower satisfaction with their access to care. If the quality of MA networks in rural areas is a concern, CMS can consider implementing more stringent network adequacy standards for rural counties in a plan’s service area.”
“Eliminating people from access by cutting out whole markets is not the solution,” said Pratt, noting that rural Medicare enrollees “are just as important as every other Medicare recipient across the country.”
West Feliciana Parish Hospital CEO Lee Chastant said his CAH serves as the only behavioral health provider that accepts Medicare patients in its parish, and People’s Health terminated its MA contract for all non-emergency services without negotiation. He said local leaders were already focusing on transportation challenges within the parish for these patients. “If they can’t get to us in the same community, how are they going to get to Baton Rouge or beyond?” he asked.
Reducing rural patient access might seem counterproductive considering that most federally-designated primary care shortage areas are rural or partially rural, and that rural communities experience “extreme levels of poverty and low life expectancies” with “higher rates of certain chronic conditions and health risk factors.” “Distance and time are two variables that lead to lower health status of populations,” said National Rural Health Association Chief Operating Officer Brock Slabach.
Enhancing Payments for Rural Access
To protect local rural access, Congress established enhanced reimbursements under the CAH payment system for low-volume rural hospitals that have high fixed-staffing costs. According to the Medicare Payment Advisory Commission (MedPAC), after Medicare sequestration payment reductions, CAHs can recover 99% of their costs for services for “outpatient, inpatient, laboratory and therapy services, as well as post-acute care in the hospital’s swing beds.”
MedPAC recently found that even with these payment enhancements, “the smallest hospitals lack economies of scale, and if their patient volumes fall far enough, they may close.” While Louisiana has largely been spared from rural hospital closures, researchers have tracked 109 complete closures in the U.S. since 2005.
Gaming the MA Benchmarks
Critics have called for significant reforms in how CMS pays MA plans for rural care. To update payments for MA plans, the agency calculates a county-level benchmark or maximum it will pay based on average spending for that county’s traditional Medicare enrollees. These calculations include the enhanced reimbursements for local care provided by CAHs and other small rural hospitals.
“The higher costs of rural care are in the benchmark,” said MedPAC member Lynn Barr, who clarified that her private comments were not the official opinion of the commission. “If traditional Medicare pays $500 for a CT scan due to the cost at low volumes, that is in the benchmark. If MA sends the patient to a [non-CAH] provider instead for $100, it keeps $400. Suddenly rural patients became the most profitable target you could have because of the high cost of providing care in rural communities.”
“This is just pure arbitrage for the MA plans,” said Stroudwater Chair Eric Shell. “That is just dropping to the bottom line of these MA plans and putting dollars over care. If this happens on a nationwide basis, now that Medicare Advantage plans are 54% of total beneficiaries, this bodes very poorly for rural America and access.”
Payments to MA plans increase under the benchmarks if these plans create sufficient friction to prompt sicker enrollees to switch back to traditional Medicare. KFF recently identified challenges for low-income dual-eligible beneficiaries, minorities, people ages 85 and older, and patients with diabetes and cancer. The researchers called this “adverse selection into traditional Medicare, which leads to higher Medicare Advantage benchmarks and higher payments to Medicare Advantage plans.”
Addressing MA Program Integrity
Congress established the MA program in 2003 with the aspirational goal of improving value through choice and competition. Today, the program continues to grow in popularity by offering zero premiums (beyond Medicare Part B), unique out-of-pocket limits, affordable medications and free vision or dental benefits. In comparison, traditional Medicare offers none of these up-front perks and no protection for catastrophic medical expenses without purchase of supplemental coverage, which can become expensive for many beneficiaries.
As MA expands and CMS works to nudge all beneficiaries into value-based care arrangements by 2030, even supporters of MA “default enrollment” policies argue that lawmakers need to improve the program’s integrity. MedPAC also found that “Medicare spends approximately 22% more for MA enrollees than it would spend if those beneficiaries were enrolled in [fee-for-service] Medicare, a difference that translates into a projected $83 billion in 2024.” MedPAC expressed concerns that these higher payments increase Part B premiums for traditional Medicare enrollees, while distorting choice and competition in the MA program.
Seeking Solutions
Without federal action, experts warn MA plans could trigger the closure of CAHs and other rural hospitals that might otherwise thrive, causing these communities to lose access to inpatient beds, local doctor-patient relationships, and highly skilled rural jobs that support their local economies.
Proposed rural access solutions include revisiting MA rural network adequacy standards, requiring MA plans to make timely payments to CAHs at traditional Medicare rates, and keeping enhanced CAH payments out of the hands of MA companies under a voluntary new payment model. Providers said they are also still waiting for CMS to aggressively enforce new rules on improper MA care denials.
Revisiting MA Network Adequacy
After hearing about care disruptions in rural Louisiana, U.S. Sen. Bill Cassidy circulated a discussion draft of legislation that would require MA plans to offer contracts to certain defined essential community providers that are integral to providing care to underserved communities and low-income populations.
“I’m glad Dr. Cassidy recognizes the issue,” said Dr. Freeman. “This is going to be a long haul. It’s never an easy fight, no matter how straightforward a solution seems.”
Pratt said the bill sends a strong message that lawmakers want to protect rural beneficiaries from harmful local access disruptions. Barr said CMS could also avoid burdensome MA travel requirements by reverting to the MA network adequacy standards in effect before 2020.
Bunkie General Hospital CEO Linda Deville said, “If you’re taking Medicare money from patients, then you’ve got to provide care where they reside,” reflecting on Humana MA’s abrupt contract termination with her CAH.
Requiring MA Payment Parity for CAHs
Provider groups have warned that “MA plans are not required to pay rural providers, such as CAHs, at the same cost basis as fee-for-service Medicare; and they are increasingly paying below costs, straining the financial viability of many rural providers.”
The Center for Healthcare Quality & Payment Reform (CHQPR) asked Congress to require MA plans to make timely payments to CAHs and other small rural hospitals at Medicare rates. “This is a problem Congress can solve without spending a dime of additional money,” wrote CHQPR President Harold D. Miller. “MA plans should spend existing money in the best interest of rural patients.”
Creating a New Voluntary CAH Payment System
Shell argued that Congress should modernize CAH payments “to reflect the new era of MA plans and alternative payment models. Until we move in this direction, the friction between CAHs and payers will continue to grow.”
Barr, Shell, and other members of the Coalition for Rural Medicare Equality circulated a proposal for a “New Voluntary Payment Option for CAHs and RHCs.” Under the proposals, MA plans would reimburse CAHs at similar rates that they pay non-rural providers. CAHs would separately file cost reports with Medicare Administrative Contractors (MACs) to recover unreimbursed costs. In exchange for this added stability, CAHs would report quality metrics to CMS. Enhanced CAH payments would not impact MA payment benchmarks or a beneficiary’s coinsurance payments, which, according to MedPAC, equal 20% of charges for CAH outpatient services.
“It will cost the MA plan the exact same amount to get that procedure in the rural community as it will in the urban community. So, the MA plans have no reason to steer [patients] and cut them out of the community,” said Barr, indicating that Federally Qualified Health Centers now receive separate supplemental funding to help cover their costs and that a similar mechanism should help CAHs survive.
Barr also argued for policies that prohibit the use of MA prior authorization in rural areas, explaining that these administrative burdens distract from patient care improvements.
Gathering Data
During a March 2024 meeting, MedPAC officials announced plans to study MA rural access challenges. The group discussed the extent to which MA plans hasten rural hospital closures and concerns with MA network adequacy.
“We want to know if rural MA [beneficiaries] tend to travel longer for care or if MA plans actually encourage the use of local care,” said MedPAC Principal Policy Analyst Jeffrey Stensland.
MedPAC also discussed MA enrollees who switch back to traditional Medicare. “People get into these [MA] plans, and then realize they don’t have the access,” Barr said during a recent interview. “I sign up. I’m 65 in good health. Ten, 20 years later, I’m driving 70 miles to get care. I’m exhausted. Then, they want to go back to the rural hospital to get their care there. At that point, their cost of Medigap is high. It’s going to cost you even more than it did before you went into Medicare Advantage, and maybe a lot more. If you’ve got cancer or something, they can charge you for your preexisting condition.”
MedPAC also said it plans to continue exploring rural providers’ frustration with prior authorization burdens and “the extra effort and time it takes to be paid from MA compared to fee-for-service.” Barr recently said she would like to compare how MA plans and MACs process the same rural provider requests.
KFF found that MA plans overturn 8 out of 10 appealed denials. Providers have argued these results show MA plans misuse prior authorization as a cost-containment tactic that lacks medical justification and jeopardizes patient outcomes.
Despite a 2024 CMS final rule designed to “ensure people with MA receive access to the same medically necessary care they would receive in traditional Medicare,” Louisiana providers have continued reporting harmful care delays.
“I can tell you that in five years of having inpatient rehab, Humana denied over 90% of the requests for prior authorization,” said Franklin Medical Center CEO Blake Kramer. After pledging aggressive auditing, CMS has not announced any enforcement actions against noncompliant MA plans. Making matters worse, KFF researchers found that CMS lacks sufficient data to “determine whether plans are complying” with the 2024 MA rule. “Until there’s an enforcement mechanism that really punishes the plans, nothing’s going to happen,” said Kramer. “They’ll keep doing it until they’re fined or have their contract with CMS revoked.”
Improving Rural Outcomes
As leaders explore growing access barriers for rural MA patients, both Pratt and Barr expressed optimism that rural providers can be key partners in improving future patient outcomes. Barr said she previously led a national rural ACO in 44 states and Guam with hundreds of rural hospitals, including SJPH, and more than 10,000 rural doctors. Barr said the group helped traditional Medicare save $500 million by rallying around “providing better quality, better access and being proactive in their care. This is why they were in medicine.”