Susan Marie Diamond
Chief Financial Officer at Humana
Thank you, Bruce, and good morning, everyone. Today, we reported adjusted EPS of $6.88 for the third quarter, representing 42% growth over third quarter 2021. Results in the quarter came in above initial expectations driven primarily by lower-than-anticipated medical cost trends in our individual Medicare Advantage and Medicaid businesses. Recall that we raised our full year adjusted EPS guidance by $0.25 to $25 at our Investor Day in September, which we affirmed today. Our revised full year guidance anticipated the strength of the quarter and reflects a compelling 21% growth in adjusted earnings for 2022, while funding incremental marketing to support the 2023 AEP selling season and the dilution related to the hospice divestiture.
I will now provide additional details on our third quarter performance by segment, beginning with Retail. Medicare Advantage membership growth and revenue remained in line with expectations. Total medical costs in our individual Medicare Advantage business were lower than initial expectations for the quarter with the favorable inpatient trends seen throughout the year continuing with some moderation. With respect to group MA, we shared last quarter that we were seeing higher-than-expected non-inpatient utilization. As I mentioned in September, we have been pleased to see positive current year restatements and moderating trends during the third quarter, suggesting that some of the higher trend we described previously was likely due to pent-up demand. Finally, I would note that while it is early in the season, flu levels are running as anticipated.
All in, our Medicare Advantage business is strong and tracking consistent with the updated expectations shared at Investor Day. Our Medicaid business also performed well in the quarter, experiencing lower-than-anticipated medical costs. We updated our full year Medicaid membership guidance from a range of up $75,000 to $100,000 to our current guide of up approximately $175,000 to reflect the extension of the public health emergency to January 2023. We are prepared for the Ohio contract to go live on December 1, adding approximately 60,000 members at implementation, which is included in our guidance. Group and Specialty segment results were in line with expectations for the quarter with our specialty business continuing to benefit from lower-than-expected dental utilization. We continue to anticipate a reduction of approximately 200,000 employer group medical members in 2022 driven by our disciplined pricing and focus on margin stability.
I will now discuss our Healthcare Services businesses. Pharmacy results for the quarter were in line with the increased expectations we communicated in April as a result of the outperformance seen earlier in the year. Primary care organization continues to perform well with results in line with expectations for the quarter. The team is focused on executing on the expansion strategy we shared at Investor Day, and we continue to expect to add approximately 30 to 35 centers to our portfolio through the first quarter of 2023, bringing our total center count to greater than 250. Patients served also continues to grow as expected, and we anticipate serving nearly 250,000 value-based payments by the end of 2022. Turning to the Home. In our core fee-for-service business, home health episodic admissions for the third quarter are up 5.1% year-over-year, while total admissions are up 6.4% year-over-year. Year-to-date, episodic admissions were up 3.9%, while total admissions are up 5.4%, tracking in line with our full year expectations of a mid-single-digit year-over-year increase.
In addition, we plan to expand our value-based home health model to cover an additional 450,000 Medicare Advantage members in the fourth quarter, bringing our total covered lives to approximately 15% as of the end of the year. From a capital deployment perspective, our debt-to-capitalization ratio decreased by 590 basis points in the third quarter to 39.4% as we retired $2 billion of debt following the divestiture of our majority interest in Kindred Hospice, which closed in August. We continue to anticipate a customary level of share repurchase in 2022, and as a result, expect our debt-to-capitalization ratio to be in the low 40s at the end of the year. I will now take a few moments to provide additional color on our early outlook for 2023, starting with membership. As Bruce shared, while it's still early in AEP, we remain confident that the investments we made to support 2023 growth has positioned us well, and we are pleased to share our individual MA membership growth expectations today of 325,000 to 400,000 members, which is in line with our expectation of high single-digit market growth.
As we always caution this time of the year, it is early in the AEP selling season to the outlook we provided today could change depending on how sales and voluntary disenrollment ultimately come in. Initial sales volumes are strong and favorable to our expectations. Recall that we have limited visibility into member disenrollment data this early in the AEP season as those results take longer to complete. But we do expect modestly low attrition in 2023 as a result of our improved benefit offerings, enhanced onboarding support for all new members and increased focus on sales quality and retention by our call center partners. We also advanced our analytic models, incorporating additional granular inputs and machine learning techniques, improving our sales and retention forecasting ability. Taken all together, these improvements and early results support our confidence in the guidance shared today. With respect to group Medicare Advantage, as we previously stated, growth can vary year-to-year based on the pipeline of opportunities, particularly large accounts going out to bid.
We expect a net reduction in group MA membership of approximately $60,000 in 2023. This reduction is primarily driven by the loss of a large account, partially offset by expected growth in small group account membership. We remain committed to disciplined pricing in a competitive group Medicare Advantage market. With respect to stand-alone PDP, the overall PDP market is declining as more beneficiaries choose Medicare Advantage. In addition, we remain disciplined in our pricing. And as a result, our Walmart Value plan will not be as competitively positioned, and our basic plan will exceed the low-income benchmark in three regions in 2023, driving an expected net decline of approximately one million PDP members. As we look beyond 2023, we will evaluate the impact of the various regulatory changes proposed which are likely to result in higher PDP plan premiums broadly and could lead to further industry-wide movement from PDP to MAPD plans given the strong MAPD value proposition.
Our focus remains on creating enterprise value from our PDP plans by driving increased mail order penetration and convergence to Medicare Advantage. Finally, in our Medicaid business, we expect 2023 membership to be flat to slightly up as the new state awards in Louisiana and Ohio will largely offset the impact of redeterminations, which will begin following the end of the public health emergency. Louisiana has indicated that we will begin the program with 150,000 members, while Ohio will ramp to 200,000 members over the course of 18 months. Turning now to our expected 2023 financial performance. I would reiterate our commitment to grow 2023 adjusted EPS within our targeted long-term range of 11% to 15%, off of our expected 2022 adjusted EPS of $25. We will continue with our practice of conservative planning and at this time, expect the current consensus estimate of approximately $27.90 to be in line with our initial adjusted EPS guidance.
The earnings growth anticipated for 2023 will put us on a solid path to achieve our $37 adjusted EPS target in 2025. We look forward to providing more specific 2023 guidance on our fourth quarter earnings call in early February. Before closing, I would echo Bruce's appreciation to our employees for their contribution to our success and to our shareholders for their continued support. We are pleased to report another strong quarter and are excited about our outlook for 2023 and beyond. We look forward to delivering against the commitments we shared with you at Investor Day providing better experiences and outcomes for our members and patients and creating significant value for our shareholders. With that, we will open the line for your questions. In fairness to those waiting in the queue, we ask that you limit yourself to one question.
Operator, please introduce the first caller.