- Medicare Advantage organizations may see capitation rates rise as much as 2.8% for 2022, according to a CMS proposal released Friday.
- SVB Leerink analysts said Monday the hike was positive and a “strong starting point” for the year. They noted it was higher than the 1.7% increase last year.
- CMS is also proposing to rely entirely on encounter data to calculate patient risk scores in 2022 instead of using a blend of encounter data and diagnoses submitted to the Risk Adjustment Processing System. The move has been opposed by commercial insurers.
The rate hike comes as insurers are reporting sizable profits amid the COVID-19 pandemic, which is uncontrolled in the U.S. as case counts break new records.
As patients delay care, either out of fear of the virus or due to a pause on electives, it means insurers pay less on claims. Recently, some insurers have said care did bounce back in the third quarter, though it retreated as cases again started to surge in various regions.
The increase to capitated rates is especially positive for payers with significant exposure in the Medicare Advantage space, including Humana, UnitedHealthcare, CVS’ Aetna and Anthem.
It’s most positive for Humana and UnitedHealthcare, which both have considerable Medicare enrollment. In 2019, Humana covered nearly 8.5 million Medicare enrollees, including those with Part D plans, according to data in its annual filing with the Securities and Exchange Commission. UnitedHealthcare covered about 5.3 million MA members in 2019 and an additional 4.5 million in supplemental plans.
It’s likely that the final rate, which CMS will release by April 5, will be even better for payers, analysts with SVB Leerink said.
“We think this is a strong starting point, and note that in each of the past three years, the rate increase improved in the Final Rate notice relative to the preliminary rate,” Monday’s note said.
Medicare Advantage is viewed as a growth driver for many commercial insurers. As seniors age into Medicare, more are choosing MA plans. In 2020, more than one-third of the Medicaid beneficiaries were covered by an MA plan, according to the Kaiser Family Foundation.
But some have been critical about how insurers use risk scores to inflate their payments from the federal government. A recent report from the HHS Office of Inspector General found that plans inappropriately increased risk scores at a cost to taxpayers of $264 billion.
CMS’ proposal to rely exclusively on encounter data is a move to combat the improper inflating of risk scores. The agency has been using a mix of encounter data and the RAPS data since 2015. This year, the mix included 75% encounter data, but the plan has been to move to 100%.
CMS will gather comments on the the latest rate proposal through Nov. 30.