Still, the other major element contributing to the expected revenue increase—the projected 4.75% effective growth rate—is the strongest since 2009, according to Premier. The rate could end up being even higher, as CMS has historically bumped up the growth rate in its final MA payment notices.

That’s the number to focus on, said Deana Bell, a principal and consulting actuary at Milliman’s Seattle health practice. The growth rate is similar to the initial projection of 4.55% for 2022, but both years have been much higher than previous years. The final growth rate for 2022 was 5.59%.

“It’s science, but there’s a little bit of art to it where they are accounting for expectations for the future that are not built into the underlying fee for service costs,” Bell said.

The rate increase accounts for additional plan expenses due to COVID-19, like the cost of lab testing and changes in care utilization, the notice said. People may increasingly access care they deferred during earlier parts of the pandemic.

The current high inflation atmosphere also likely contributes to the rate, experts said. Inflation across the US economy is up 7% over the last yearaccording to the Bureau of Labor Statistics.

This growth rate isn’t free money for plans—it’s meant to compensate for the expectation that plans’ costs will be higher next year, according to Alexander Dworkowitz, a partner at Manatt Health. Bell also noted that how much revenue plans take in next year could vary significantly from plan to plan based on risk scores and other factors.

But the projection is still likely to make the MA space even more attractive, said Brad Ellis, a senior director at Fitch Ratings.

MA has grown steadily over the past 20 years. UnitedHealthcare, the largest player in the MA market, grew from 19% of total MA enrollment in 2010 to 27% in 2021, according to the Kaiser Family Foundation. Seven health insurers, including UnitedHealthcare, dominate nearly 70% of the MA market.

The projected revenue increase could encourage plans that are already doing well to expand their offerings, said Adam Block, a New York-based health economist and former health insurance exchanges regulator at CMS.

“When there is more money flowing into the sector, there is opportunity for organizations that are receiving that money to think about the best ways to invest it even when generally the cost of care is increasing at the same time,” he said.

More companies might decide to enter the MA market next year as well, Block said. New firms are increasingly jumping into MA, with 14 firms entering the market for the first time in 2021 and 20 firms joining in 2022, KFF data shows, and Block expects this trend to continue. Advances in telemedicine and digital heath have created new avenues for value, he said.

“As an economist, that is great. We want new entrants to the markets bringing new life to it,” Block added.

Notably, this advance notice seems to signal a stronger commitment from the federal government to growing MA, Ellis said. Support for MA in Congress has become more bipartisan in recent years, with over 340 representatives signing onto a letter to CMS in support of the MA program in late January.

But some are wary of the growth and its associated cost to the Medicare program. Sen. Elizabeth Warren (D-Mass.) called out private insurance companies for gaming the risk adjustment program during a Senate hearing last week. The Medicare Payment Advisory Commission also wrote in its March 2021 report to Congress that MA risk scores were more than 9% higher than scores for similar fee-for-service beneficiaries in 2019 due to more intense diagnosis coding in MA.

“It was disappointing that CMS did not choose to do seemingly anything within their authority to try to reign in Medicare Advantage overpayments” in the advance notice, said David Lipschutz, associate director of beneficiary advocacy group Center for Medicare Advocacy.

Richard Kronick, a professor at the University of California, San Diego, and a former HHS official during the Obama administration, said CMS can and should increase its coding pattern adjustment to level out this difference in coding intensity. The figure has sat at the minimum required rate of 5.9% since 2018. Without any change to that figure, plans will continue to be paid increasingly more than fee-for-service Medicare. The advance notice doesn’t explain why CMS decided not to propose a change.

Despite concerns, Ellis thinks this is the federal government’s way of saying MA is working well.

“I think this is sort of a signal from the government that despite some of the complaints, accusations of upcoding severity and things like that, I think overall, they feel like the program’s working well and providing value,” he said.