Medicare Advantage

Humana Anticipates Strong EPS Growth in 2023, Cites Individual MA Enrollment Increase

During its fourth-quarter and full-year 2022 earnings call on Feb. 1, Humana Inc. said that it will have strong adjusted earnings per share (EPS) growth and see a significant increase in its individual Medicare Advantage (MA) enrollment this year.

Humana projects its adjusted EPS in 2023 will be at least $28, which “is slightly favorable to prior statements” and is 10.9% higher than its $25.24 adjusted EPS for 2022, Jefferies analyst David Windley wrote in a note to clients on Feb. 1.

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As CMS Finalizes RADV Rule, Prior Audits Shed Light on Payment Errors, High-Risk Codes

In a highly anticipated final rule on the Medicare Advantage Risk Adjustment Data Validation program, CMS on Jan. 30 said it would extrapolate RADV audit findings starting with the 2018 payment year. Notably, CMS will not extrapolate RADV audit findings for payment years 2011 through 2017 as it had previously proposed. Currently, CMS reviews a small sample of patient medical records to compare them with billing codes sent to the federal government. Under the final rule, CMS will extrapolate the error rate found in the sample to the entire plan. Additionally, the rule finalized a plan to not apply a “fee-for-service adjuster” to its audit methodology. Using the new methodology, CMS officials said the agency expected to recover $479 million in overpayments from 2018 alone, and an extra $4.7 billion from 2023 through 2032.

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Insurer Groups Object, but Analysts View RADV Rule Headwinds as ‘Manageable’

Although health insurance trade groups slammed a final rule that will cause the government to claw back billions of dollars’ worth of overpayments to Medicare Advantage organizations (MAOs), some equities analysts pointed out that the regulation was not as bad as it could have been. What remains unclear, however, is whether the industry will challenge the rule in court.

“Our high-level takeaway is that, while some components of the rule run counter to the industry’s requirements, the absolute impact that CMS is forecasting is manageable within the context of a program that will soon approach $400 [billion],” Credit Suisse’s A.J. Rice advised investors. In fact, CMS estimates that payment clawbacks under the rule will amount to $4.7 billion through 2032, or $470 million annually over 10 years, he noted. “This would represent roughly 0.1% of annual program spend.”

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Medicare Enrollees May Still Face Affordability Issues After Part D Benefit Redesign

About 800,000 Medicare beneficiaries in 2024 and 200,000 in 2025 could see their out-of-pocket (OOP) medication costs exceed 10% of their annual income, even with the Part D drug benefit reforms passed via the Inflation Reduction Act (IRA), according to an Avalere analysis.

The IRA will establish a beneficiary OOP cap at the catastrophic threshold, which is estimated to be $3,233 in 2024. Avalere estimated that 1.5 million Part D enrollees without low-income subsidies (LIS) are projected to reach OOP drug spending levels above the catastrophic threshold in 2024. Among them, about 18% of beneficiaries will reach the catastrophic phase in the first three months. Greater shares of beneficiaries who are younger than 65 years old or who are Hispanic will face affordability challenges compared to the average non-LIS enrollees. The analysis also suggested that non-LIS enrollees taking asthma drugs, blood thinners, immunology therapies, cancer treatments and HIV drugs are more likely to reach the OOP cap in 2024.

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With Final RADV Rule Out, MAOs Are Advised to Clean Up Risk Adjustment Practices

Medicare Advantage organizations may not have gotten the outcome they were hoping for in CMS’s recently finalized Risk Adjustment Data Validation rule, but industry experts say they weren’t surprised by the position CMS ultimately took after years of pressure to close out RADV audits and recover identified overpayments. And while one aspect of the rule could expose it to litigation and further delay CMS’s attempts to collect overpayments from MAOs, experts say plans still would be wise to sharpen their risk adjustment practices in order to limit their audit exposure.

Issued on Jan. 30, the final rule (88 Fed. Reg. 6643, Feb. 1, 2023) pertains to contract-level audits that CMS began conducting more than a decade ago to verify the accuracy of payments made to MA organizations and recover improper payments. The agency in 2012 said it planned to adopt a “fee-for-service adjuster” to account for any impact from unaudited diagnosis codes in FFS data that are used to calibrate the MA risk adjustment model. But in a November 2018 proposed rule (83 Fed. Reg. 54982, Nov. 1, 2018), CMS said its plans to recoup improper payments would not involve an FFS adjuster and that it may apply an extrapolation methodology when finalizing audits dating back to payment year 2011. The RADV provisions of the 2018 proposed rule received pushback from insurers and were never finalized by the Trump administration.

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News Briefs: CMS Projects Average Rate Increase of 1.03% for MA Plans in 2024

CMS in its 2024 Advance Notice projected that Medicare Advantage organizations can expect an average estimated change in revenue of 1.03%, when taking into account an average increase in risk scores of 3.3%. Even though analysts expected that rate to fall well below the robust 8% CMS predicted in its preliminary rate notice for 2023, they characterized it as low when excluding the risk scoring trend. The 2024 projection is also based on an effective growth rate of 2.09%, which CMS this time last year estimated would be 4.75%. Additionally, CMS will continue to apply the statutory minimum coding intensity adjustment of 5.9% to offset the effects of higher levels of coding intensity in MA relative to fee-for-service (FFS) Medicare. That coding intensity adjustment generated much discussion in comment letters on the Advance Notice last year. When asked during a Feb. 1 call with reporters why CMS again opted for the minimum adjustment, CMS Deputy Administrator and Center for Medicare Director Meena Seshamani, M.D., Ph.D., told AIS Health: “We continue to analyze and evaluate MA coding patterns, and 5.9% we feel is adequate at this time, and we continue to look at coding pattern differences, how we set that pattern adjustment [and] how that’s applied…in future years as well.” The preliminary rate notice also included technical updates to the risk adjustment model, including a reliance on condition categories from the ICD-10 classification system (instead of the ICD-9 system) and a shift to more recent underlying FFS data years to reflect 2018 diagnoses and 2019 expenditures.

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Diabetes Patients Fare Better With Medicare Advantage, Study Suggests

New research conducted by Avalere on behalf of the Better Medicare Alliance (BMA) suggests Medicare Advantage plans aid in earlier detection of type 2 diabetes and that seniors diagnosed with type 2 diabetes generally fare better than similar patients in fee-for-service (FFS) Medicare. Specifically, lower medical spending and rates of inpatient hospitalizations/emergency department visits observed by researchers may be particularly compelling for policymakers as they consider the overall value of the MA program.

With MA serving more seniors than ever before — having just reached a milestone of enrolling more than 30 million Medicare-eligible beneficiaries — and one-third of seniors estimated to have a diagnosis of type 2 diabetes, it is important to look at how these patients’ care differs in MA vs. traditional Medicare, asserted Matt Kazan, managing director with Avalere, during a Jan. 12 webinar hosted by BMA. In many cases, there are “major differences,” he noted.

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Medicare Enrollees May Still Face Affordability Issues After Part D Benefit Redesign

About 800,000 Medicare beneficiaries in 2024 and 200,000 in 2025 could see their out-of-pocket (OOP) medication costs exceed 10% of their annual income, even with the Part D drug benefit reforms passed via the Inflation Reduction Act (IRA), according to an Avalere analysis.

The IRA will establish a beneficiary OOP cap at the catastrophic threshold, which is estimated to be $3,233 in 2024. Avalere estimated that 1.5 million Part D enrollees without low-income subsidies (LIS) are projected to reach OOP drug spending levels above the catastrophic threshold in 2024. Among them, about 18% of beneficiaries will reach the catastrophic phase in the first three months. Greater shares of beneficiaries who are younger than 65 years old or who are Hispanic will face affordability challenges compared to the average non-LIS enrollees. The analysis also suggested that non-LIS enrollees taking asthma drugs, blood thinners, immunology therapies, cancer treatments and HIV drugs are more likely to reach the OOP cap in 2024.

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MA, Part D Plans Face New Premium Calculus With Drug Price Negotiation

The coming year is unlikely to see any major new policy developments come out of the split Congress, but health insurers and other stakeholders will have their hands full figuring out the implications of the Inflation Reduction Act’s (IRA) Medicare drug price negotiation policy, according to a Jan. 18 panel of Avalere Health experts.

Last November’s election led to divided control of Congress, with Republicans in control of the House of Representatives and Democrats in control of the Senate. Given that, “the activity this year, over the next two years, is going to look quite a bit different than we saw in Congress from the previous two years,” said Matt Kazan, managing director at Avalere.

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News Briefs: Medicare Advantage Enrollment Hits 30M, but Isn’t Done Rising

Medicare Advantage now enrolls more than 30.6 million individuals, including more than 25 million in individual MA plans, according to the latest monthly enrollment data from CMS. Industry trade group AHIP called the information “cause to celebrate,” noting that “just 10 years ago, the program had 13 million enrollees.” Enrollment in the private Medicare plans is likely to rise more in the short term, however, as the 30.6 million figure reflects only those signups accepted through Dec. 2, 2022, and thus does not capture the full outcome of the Annual Election Period that ran from Oct. 15 through Dec. 7, Citi analyst Jason Cassorla pointed out in a Jan. 17 research note.

The percentage of Americans who said they or a family member put off medical treatment due to cost rose to 38% in 2022, representing a 12-percentage-point increase compared to 2021. That’s according to a new Gallup poll, which noted that the percentage of Americans reporting deferring care due to cost was at its highest level since Gallup began its survey in 2001. That finding comes after inflation reached the highest point in 40 years in 2022, and in the wake of “two consecutive 26% readings during the COVID-19 pandemic that were the lowest since 2004.” Gallup also added that “lower-income adults, younger adults and women in the U.S. have consistently been more likely than their counterparts to say they or a family member have delayed care for a serious medical condition.”

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