UnitedHealth Group CEO Andrew Witty stated that CMS’ risk adjustment changes will not hinder the company’s long-term growth in the Medicare Advantage program. CFO John Rex told investors that the company expects to add upward of 900,000 new Medicare Advantage members in 2023. The changes to the risk adjustment model will be phased in over three years, giving Medicare Advantage plans more time to prepare and adapt to the changes in reimbursement rates. The final rate announcement by CMS stated that Medicare Advantage plans will see an average pay increase of 3.32 percent between 2023 and 2024.
On April 14, 2023, UnitedHealth Group CEO Andrew Witty told investors that changes to the Centers for Medicare & Medicaid Services (CMS) risk adjustment model would not slow down the company’s long-term growth in the Medicare Advantage program. During the investor call, CFO John Rex also shared that the company is expecting to add upward of 900,000 new Medicare Advantage members in 2023. Payers opposed CMS’ initial proposed coding adjustments, which industry groups said would amount to a cut in funding for the program. However, the final rate announcement published by CMS on March 30, 2023, stated that Medicare Advantage plans would see an average pay increase of 3.32 percent between 2023 and 2024, up from 1.03 percent in the advance notice, because of the three-year phase-in of the changes. This article will explore the implications of CMS’ risk adjustment changes for UnitedHealth Group’s Medicare Advantage program.
CMS Risk Adjustment Changes CMS uses a risk adjustment model to calculate payments to Medicare Advantage plans, accounting for over one-third of all Medicare beneficiaries. The model uses diagnoses from medical claims to predict beneficiaries’ healthcare costs. The more severe and numerous the diagnoses, the higher the expected costs, and thus, the higher the payment. The risk adjustment model has come under scrutiny for overpaying Medicare Advantage plans for beneficiaries who have the same diagnoses as traditional Medicare beneficiaries.
In January 2023, CMS proposed changes to the risk adjustment model that would have reduced payments to Medicare Advantage plans for certain medical conditions. However, the proposal faced opposition from payers, who argued that it would reduce funding for the program. CMS revised the changes in response and published a final rate announcement on March 30, 2023. The announcement stated that Medicare Advantage plans would see an average pay increase of 3.32 percent between 2023 and 2024, up from 1.03 percent in the advance notice, because of the three-year phase-in of the changes. The phase-in will allow Medicare Advantage plans more time to prepare and adapt to the changes in reimbursement rates.
Impact on UnitedHealth Group UnitedHealth Group is the largest Medicare Advantage insurer in the United States, with 7.5 million members at the end of March 2023, up from 6.9 million in March 2022. The company’s Medicare Advantage business generated $78.3 billion in revenue in 2022, representing 27 percent of UnitedHealth’s total revenue.
During the investor call, Andrew Witty stated that the three-year phase-in would allow the company more time to prepare and adapt to the changes in reimbursement rates. He also expressed concerns about potential unintended consequences of the changes, particularly around adequate diagnosis and support for people with diabetes, complex behavioral needs, and more. However, he appreciated CMS’ decision to phase in the changes.
CFO John Rex told investors that the company expects to add upward of 900,000 new Medicare Advantage members in 2023. Brian Thompson, CEO of UnitedHealthcare, said the three-year phase-in would allow the company to minimize any impacts to beneficiaries. He also stated that the company remains optimistic about Medicare Advantage and its value proposition, and intends to grow again in 2024.
UnitedHealth Group’s Q1 2023 earnings report showed revenues of $91.9 billion, up 15 percent from $80.1 billion over the same period last year. The company’s Optum segment, which includes pharmacy benefits manager OptumRx and health services provider OptumHealth, contributed $43.7 billion to the company’s revenue, up 17 percent from the first quarter of 2022. The company’s health insurance segment, UnitedHealthcare, contributed $48.
