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January 4, 2018

How CMS wants to change MA risk adjustment payments next year

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    CMS last week released an advance notice of proposed changes to Medicare Advantage's (MA) risk adjustment payment model for aged and disabled beneficiaries.

    About the risk adjustment model

    CMS uses MA's risk adjustment model, known as the CMS-HCC Risk Adjustment model, to determine payments for MA plans. Under the model, MA plans assign each beneficiary a risk score based on medical coding that reflects the beneficiary's medical condition. Beneficiaries with poorer health will have higher risk scores, while healthier beneficiaries will have lower risk scores. MA plans are given higher payments for beneficiaries with higher risk scores than they are for beneficiaries with lower risk scores.

    Proposed changes

    CMS beginning in 2019 proposed adding conditions related to chronic kidney disease, mental health, and substance use disorders to the risk adjustment model.

    CMS also proposed changing the risk adjustment model to account for various technical updates, such as further incorporating encounter and inpatient data into a beneficiary's risk score. For 2019, CMS proposed basing:

    • 75% of the risk score on fee-for-service data, down from 85% in 2018; and
    • 25% of the risk score on encounter data, up from 15% in 2018.

    In addition, CMS proposed changing the risk adjustment model so it accounts for beneficiaries' total number of medical conditions that qualify for the risk adjustment model, as required under the 21st Century Cures Act.

    To meet that requirement, CMS proposed two new models:

    • The Payment Condition Count (PCC) model, which would account for the total number of medical conditions a beneficiary has that are included in the payment model; and
    • The All Condition Count (ACC) model, which would account for the total number of medical conditions a beneficiary has that are included in the payment model, as well as conditions that are not included in the payment model.

    CMS projected that the PCC model would increase MA risk scores by an average of 1.1% and would decrease payment variance among MA contracts. In comparison, the agency projected that the ACC model would decrease MA risk scores by an average of 0.28% and would lead to greater payment variance across MA contracts.

    Proposed timeline

    CMS said the 21st Century Cures Act requires the agency to phase in the proposed changes by 2022. To begin implementing those changes, CMS proposed calculating 2019 risk adjustment payments using:

    • 75% of the risk adjustment model criteria the agency used to determine 2017 and 2018 risk adjustment payments; and
    • 25% of the newly proposed payment model.

    CMS will accept public comments on the advance notice through March 2. The agency said it will propose changes to other MA payment methodologies for 2019 in a separate notice. CMS said it will finalize all changes to MA payments for 2019 in an annual rate announcement that the agency will release by April 2, 2019 (AHA News, 1/2; CMS fact sheet, 12/27/17; Livingston, Modern Healthcare, 1/2; Morse, Healthcare Finance News, 12/27/17).

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