Actuarial Notes

PY2025 ACO REACH RTA tailwind

By Caroline Li, Scott Jones and Chris Smith · Milliman · 2025 · GH301-112-26

Study guide: Exam GH-301

A Milliman paper of January 2025 on the retrospective trend adjustment (RTA), a main source of benchmark uncertainty in the Accountable Care Organization Realizing Equity, Access, and Community Health (ACO REACH) model. It estimates that for performance year 2025 the trend gap between the adjusted USPCC trend and the emerging Reference Population trend creates an RTA tailwind of about 5.2% for the aged and disabled population.

On the syllabus

  • Exam GH-301 — Provider Contracting and Reimbursement, outcome 1d; the whole paper.

What is the RTA?

  • The RTA is a retrospectively calculated factor that corrects for any significant (greater than 1%) differential between the prospective adjusted United States Per Capita Cost (USPCC) trend and the actual REACH National Reference Population trend.
  • Since PY2023 the RTA has been a two-year trend correction.
  • In PY2024 CMS introduced a symmetric risk corridor: 100% of the RTA up to +/-4%, 50% between +/-4% and +/-8%, and 0% in excess of 8%.

CMS interim RTA estimates

  • CMS releases the National Reference Population Data Report monthly, with year-to-date eligibility and claims data and interim forecasts of the RTA.
  • The interim RTA is estimated from ultimate Reference Population expenditures using completion factors for each incurred month and year-to-date-to-year-end seasonality.

Milliman RTA estimates

  • Milliman uses an independent model that differs from the CMS default methodology in the claims data used, its completion factors and its seasonality factors.
  • Its estimates give a higher 2023-2024 Reference Population trend (9.0%) and a higher estimate for the PY2024 RTA (1.017).

PY2025 RTA tailwind

  • Figure 1: Summary of PY2023 (actual), PY2024 (YTD estimate), and PY2025 (tailwind estimate) RTA for AD beneficiaries
  • The PY2025 RTA tailwind is forecast at 1.052; the applied RTA is 1.046 because of the 4%-8% risk corridor.

Conclusion

  • The emerging 2023-2024 Reference Population experience is trending higher than the adjusted USPCC trends in the PY2025 Rate Book, creating a 5.2% RTA tailwind on benchmarks for REACH ACOs going into PY2025, partly shared with CMS through the risk corridor.

Appendix

  • Figure 2: Summary of PY2023 (actual), PY2024 (YTD estimate), and PY2025 (tailwind estimate) RTA for ESRD beneficiaries

Sources