Almost every reporting services company noted that 2021 was a year of suppressed government business. Partly responsible for that mix shift was the increased availability of ACA exchange plans for people making over 400% of the federal poverty threshold. Another part was due to the elderly delaying care through pandemic.
As part of the annual Medicare Advantage rate setting the Office of the Actuary estimates the per capita fee-for-service spending for Medicare beneficiaries. Needless to say, their thinking has had to evolve in recent years. Early in the pandemic, the Actuary had estimated things would return mostly to normal levels of per capital spending in 2021-22. At the time they were not factoring in the wage and supply pressures that are making their way into payment updates or the waves of variants that have proven difficult to evade.
The 2023 MA rate announcement demonstrates it will be a longer climb out even with ~0.50 increase in reimbursement attributable to increased compensation expenses. The actuary estimates an improvement in inpatient hospital spending in 2022 but a further erosion in SNF per capita amounts. Their model also assumes the home health benefit will pick up some of that slack as it has been doing for years. Not sure we get there given labor constraints.
A key assumption underlying the Actuary's has been the effects of mortality on spending. From the MA rate update:
Health care costs associated with Medicare beneficiaries who died with a COVID-19 diagnosis tended to be much more expensive than the average Medicare beneficiary. As a result, the surviving population on average has lower projected per capita spending. We have built this reduction in the average morbidity of the Medicare population into the estimates using the number of deaths from the projections of the path of the pandemic. We currently project that health care spending patterns will return to pre-pandemic levels in CY 2024, but that the lingering morbidity effects will continue through CY 2028.
Mortality has been a theme for us with respect to services and the actuary adds another twist. If FFS spending in Medicare is depressed due to mortality, the MA benchmark rates are going to be implicated, the PY 2023 rate announcement notwithstanding.
Let me know what you think.
Emily Evans
Managing Director – Health Policy
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