Medicare Advantage plans could see nearly 8% increase in revenue

The Centers for Medicare and Medicaid Services on Wednesday proposed increasing Medicare Advantage payment by 7.98% in 2023 as they eye future changes to its risk adjustment model.

In a proposed payment policy for 2023, the agency asked for feedback on whether MA's risk adjustment model and star ratings could address the impacts of social determinants of health and health equity.

Medicare Advantage organizations could see an almost 8% increase in revenue next year compared to 2022, according to the proposed changes. The proposed increase is almost double the 4.08% pay increase plans saw for 2022.

This projection includes a 3.5% increase in the MA risk score trend, which represents the average increase in risk scores. Risk scores account for the expected costs of an enrollee, and are generally higher when enrollees are sicker. The projection also factors in a 4.75% effective growth rate.

"The proposed effective growth rate is higher than the prognostications I had seen. Absent a sharp reversal in the final note, this ensures another year of benefit and enrollment growth for MA plans," Michael Adelberg, head of Faegre Drinker Consulting's healthcare strategy practice, said in an email.

Download Modern Healthcare’s app to stay informed when industry news breaks.

CMS also used the advance notice to ask for feedback on how it could enhance efforts to report star ratings measures by social risk factors. Plans receive star ratings based on their performance across different measures. The ratings are meant to encourage quality and help prospective enrollees choose between different plans.

"Our goals for Medicare Advantage mirror our vision for CMS' programs as a whole, which is to advance health equity; drive comprehensive, person-centered care; and promote affordability and the sustainability of the Medicare program," said CMS Administrator Chiquita Brooks-LaSure in a news release.

The agency asks for thoughts on developing a health equity index for MA and Medicare Part D plans in the future. The index would summarize measure-level performance by social risk factors into one score. CMS also asked for thoughts on developing a measure to assess whether plans are screening enrollees for social needs like food, housing and transportation.

Medicare Advantage organizations could be judged on a measure reflecting their value-based care arrangements with providers in coming years as well. CMS requested feedback on how that could be structured.

The agency wants to explore whether risk adjustment could better address the impact of social determinants of health by incorporating factors that predict their relative costs.

CMS said it will continue calculating the risk score using the new model that was fully phased in this year, as well as the policy of calculating risk scores using only diagnoses from MA encounter data. Insurers railed against this policy when it was initially proposed.

For Part D plans, CMS wants to implement an updated version of the risk adjustment model, which includes a clinical update to the prescription drug hierarchical condition categories and an update to the data years.

CMS proposed continuing to apply a coding pattern adjustment of 5.9%, the lowest adjustment required by law. This adjustment reflects differences in coding between MA organizations and fee-for-service providers.

Comments on the notice are due March 4. A final rate announcement will be published by April 4.