MA Industry Braces for Part C Rate Cut, Part D Benefit Shakeup

As CMS proceeds with its planned phase-in of changes to the CMS-Hierarchical Condition Categories (HCC) risk adjustment model starting this year, the agency on Jan. 31 projected that Medicare Advantage plans next year can expect to receive an average increase of 3.70% in risk adjusted revenue. After picking apart the various factors that go into that assumption, however, the industry is bracing for an effective rate reduction, along with significant changes to the Part D benefit that incited proposed updates to the RxHCC risk adjustment model used to calculate direct subsidy payments to Part D plans.

CMS this time last year projected an all-in rate increase of 1.03%, which included an effective growth rate of 2.09% and expected revenue declines of -3.12% — stemming from changes to the CMS-HCC risk model and fee-for-service (FFS) normalization — and -1.24% due to changes in Star Ratings from the prior year. The agency also estimated an underlying MA risk score trend of 3.30%. Subsequent studies suggested that the removal of thousands of diagnosis codes, renumbering of several HCCs, and other technical changes would reduce plans’ risk scores by anywhere from 2% to 14%. In the final rate notice, CMS revised its all-in rate increase projection to 3.32% after deciding to phase in the risk model changes over a three-year period.

© 2024 MMIT
Lauren Flynn Kelly

Lauren Flynn Kelly Managing Editor, Radar on Medicare Advantage

Lauren has been covering health business issues, including drug benefits and specialty pharmacy, for more than a decade. She served as editor of Drug Benefit News (the predecessor to Radar on Drug Benefits) from 2004 to 2005 and again from 2011 to 2016, and now manages Radar on Medicare Advantage. Lauren graduated from Vassar College with a B.A. in English.

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