CMS is proposing a nearly 8% revenue increase for Medicare Advantage plans next year, according to a proposed payment plan released Wednesday. The overall rate increase for 2023 includes a 4.75% effective growth rate and a 3.5% average increase in risk scores. The risk-adjusted benchmark trend, which analysts peg as the key number, comes out to 4.48% for 2023.
Cowen analysts said in a note Thursday the rate increase "should support another year of benefit enhancements & strong enrollment growth," and noted that in recent years the final rate has been higher than what was first proposed.
Credit Suisse analysts pegged the rate increase as a positive for the industry, particularly Centene and UnitedHealthcare because of year-over-year star ratings fluctuations. "Importantly, the overall rate update eases concerns that the Biden administration might take a hard stance against Medicare Advantage," they wrote.
CMS is also seeking feedback on potential changes to the MA star rating program, which is meant to help beneficiaries compare plans. The agency is considering a method for determining how well plans address social determinants of risk.
Payer lobby AHIP said in a statement it supports the agency soliciting feedback on these measures and believes "MA plans play an essential role in improving health equity and addressing the social determinants of health that impact millions of seniors and people with disabilities."
The Better Medicare Alliance also supported the health equity measures and said the "stable rate" will ensure that work in that area will continue.
CMS is considering a single score to measure performance on social risk factors that would be factored into star ratings as well as a measure to determine how well plans are screening members for factors like food, housing and transportation needs.
It is also considering a further look into value-based arrangements plans have with providers and their role in driving quality improvements.
CMS has pushed for an increased focus on social determinants, especially as the COVID-19 pandemic has highlighted systemic inequality in the U.S healthcare system.
That fast-growing and highly lucrative MA program now covers more than 40% of Medicare beneficiaries and signs point to continued growth. Most major insurers entered new markets this year and have looked at increased benefits.
The fourth-quarter earnings season has seen companies doubling down on expectations and investments in MA.
After UnitedHealth reiterated its growth predictions for MA this year, CEO Andrew Witty told investors in a call that his expectations for the space were "really positive." The payer has seen average increases in MA members of 13% over the past five years.
Anthem noted 30% year-over-year growth in MA enrollment over 2021 and executives told investors they aren't particularly concerned about increased competition. CEO Gail Boudreaux said that it "remains a competitive market" as it has been.
This week, Humana said it will reinvest $1 billion in its Medicare program as it cuts costs in other areas. That followed the payer's prediction last month that enrollment in MA would be much lower than expected, sending shares down nearly 20%.
Humana was predicting more churn in the market. That could be an effect of startups like Clover Health and Devoted Health vying for a bigger slice of the pie.
In early January, the Biden administration signaled it would be taking a closer look at plans' practices. In a proposed rule, it laid out regulations on marketing, provider network adequacy and reporting of medical loss ratios.
Comments on the rate notice are due March 4 and the final notice is expected to be published by April 4.