Medicare Advantage plans expect a booming 2023, thanks in part to high projected revenue growth. But some Medicare watchers say the Centers for Medicare and Medicaid Services missed an opportunity to even out payments to the plans, which they say are overpaid relative to fee-for-service Medicare.
This nearly 8% increase is not a direct comparison to 2022's average revenue increase, since CMS included a 3.5% MA risk score trend in 2023's projections that hasn't been part of recent years' calculations. The agency didn't include the trend in 2022's notice given the uncertainty around COVID-19, a CMS official said on a stakeholder call Friday. The official didn't elaborate on the reasoning for not including it in previous years' average revenue change calculations.
Still, the other major element contributing to the expected revenue increase—the projected 4.75% effective growth rate—is the strongest since 2009, according to Premier. The rate could end up being even higher, as CMS has historically bumped up the growth rate in its final MA payment notices.
That's the number to focus on, said Deana Bell, a principal and consulting actuary at Milliman's Seattle health practice. The growth rate is similar to the initial projection of 4.55% for 2022, but both years have been much higher than previous years. The final growth rate for 2022 was 5.59%.
"It's science, but there's a little bit of art to it where they are accounting for expectations for the future that are not built into the underlying fee for service costs," Bell said.
The rate increase accounts for additional plan expenses due to COVID-19, like the cost of lab testing and changes in care utilization, the notice said. People may increasingly access care they deferred during earlier parts of the pandemic.
The current high inflation atmosphere also likely contributes to the rate, experts said. Inflation across the U.S. economy is up 7% over the last year, according to the Bureau of Labor Statistics.
This growth rate isn't free money for plans—it's meant to compensate for the expectation that plans' costs will be higher next year, according to Alexander Dworkowitz, a partner at Manatt Health. Bell also noted that how much revenue plans take in next year could vary significantly from plan to plan based on risk scores and other factors.
But the projection is still likely to make the MA space even more attractive, said Brad Ellis, a senior director at Fitch Ratings.
MA has grown steadily over the past 20 years. UnitedHealthcare, the largest player in the MA market, grew from 19% of total MA enrollment in 2010 to 27% in 2021, according to the Kaiser Family Foundation. Seven health insurers, including UnitedHealthcare, dominate nearly 70% of the MA market.