This April 4, 2022, Biden’s administration announced an 8.5% revenue rate increase for Medicare Part D and Medicare Advantage plans. This rate is slightly higher than the 7.98% proposed earlier this year. Afterward, the Centers for Medicare and Medicaid Services (CMS) released the final 2023 Medicare Advantage and Part D rate announcement. The effective growth rate is at 4.88%, 0.05% higher than the rate (4.75%) released earlier this year.
Why will the price increase matter?
According to America’s Health Insurance Plans (AHIP), their primary concern is that the price increase of Medicare Advantage Plans will lead to a rise in premiums and a reduction in benefits. As a probable result, consumer affordability, choice, and stability will be limited if that happens.
For instance, CMS proposed excluding 2020 data from the calculation of “fee-for-service normalization.” CMS usually adds a new year of data as part of the annual FFS risk scores.
However, they assume that FFS risk scores will return to pre-pandemic levels by 2023 and therefore propose not updating data years to include 2020. The reasoning is that 2020 is a year when risk scores were reduced. Including it would lead to a lower normalization factor and a lower projected risk score growth in 2023 for the FFS program.
AHIP is asking CMS to explain why CMS excluded the 2020 data and how they will address this in future calculations.
AHIP, however, praises the decision of CMS to keep the coding intensity at the statutory premium of 5.9%. The agency noted that this approach would help MA plans keep rates low while offering seniors essential supplemental benefits.
Moreover, the Better Medicare Alliance also released a statement saying that the Medicare Advantage Rate Announcement puts beneficiaries first and ensures stability and continuity of care for the more than 28 million seniors and disabled individuals nationwide enrolled in Medicare Advantage plans.
According to the Congressional Budget Office, 42% of Medicare beneficiaries are enrolled in MA plans, and by 2030 this number will reach 51%. In light of this fact, the 2023 Raten Announcement sets forth an increase in revenue to reflect the increasing importance of MA plans in providing care to Medicare beneficiaries.
The table below shows the expected impact of the policy changes and updates on MA plan payments relative to 2022.
Year-to-Year Percentage Change in Payment
Overall, the 2023 Rate Announcement is welcome news for the 29 million seniors cared for by the policy throughout the nation. With this increased revenue, plans will improve risk score accuracy and premium accuracy while creating an ecosystem where members can interact meaningfully with their providers to close care gaps for better health in today’s hypercompetitive MA marketplace.
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