Risk Adjustment

After its last two reports suggested comprehensive reforms to Medicare Advantage plan reimbursement, the Medicare Payment Advisory Commission (MedPAC) in its June report to Congress shifted its MA focus to one area in particular: the potential for high-cost patient outlier data to skew the calculation of risk scores that determine MA plans’ risk-adjusted pay.

Although the Hierarchical Condition Category (HCC) risk adjustment model is intended to produce scores that reflect the relative health status of a plan’s enrollees, fee-for-service (FFS) Medicare spending data that is used to calculate risk scores can include a small group of outliers whose annual costs are much higher than the average costs of patients with a given condition, explained MedPAC Executive Director Jim Mathews during a June 15 web briefing with members of the press.

HHS and the Treasury Department on May 19 approved Virginia’s waiver for a state reinsurance program starting on Jan. 1, 2023. Although states have been less aggressive when it comes to applying for reinsurance programs recently, the looming expiration of enhanced premium tax credits in the individual marketplace could create renewed interest in reinsurance, policy experts tell AIS Health, a division of MMIT. That would be welcome news for insurers who are in favor of such programs because they incentivize more individuals to enroll in plans, create a more balanced risk pool and help insurers deal with large claims.

Reinsurance programs are primarily focused on lowering premiums for individuals who did not previously qualify for subsidies on the Affordable Care Act exchanges. In early 2021, the American Rescue Plan Act (ARPA) made enhanced subsidies available to people whose incomes are above 400% of the federal poverty level, the previous threshold, leading to a smaller number of people who benefited from reinsurance.

Perhaps the biggest headline from the largely uneventful 2023 final rate notice for Medicare Advantage and Part D plans is that they will, on average, receive a slightly higher-than-anticipated pay bump next year. Also, risk scores will not be reduced by any more than the statutory minimum adjustment of 5.9%. However, MAOs are still waiting on the final version of an MA and Part D rule containing some provisions that could impact 2023 bids, and sources at press time suggested its release was imminent.

With the April 4 release of the 2023 Rate Announcement, CMS finalized most aspects of its rate proposal for next year but increased the effective growth rate from 4.75% to 4.88%, bringing the expected average change in revenue to 8.50% — one of the highest updates in recent history. CMS maintained an estimated risk score coding trend of 3.5% and a fee-for-service normalization factor — which is used to offset the trend in risk scores and keep the FFS risk score at the same average level over time — of -0.81%. CMS also said it would continue to apply an across-the-board adjustment of 5.9% to offset the effects of higher levels of coding intensity in MA relative to FFS Medicare. That coding intensity adjustment generated much discussion in comment letters on the Advance Notice.

Although Medicare Advantage is outpacing other payer types in the move from volume to value, there are still ways the program could hasten the shift to value-based care, experts agreed during a recent panel of the AHIP 2022 National Conference on Health Policy and Government Programs. These range from the increased use of Z-codes to document social determinants of health to the adoption of a Star Ratings measure that would influence more risk sharing between MA organizations and their providers.

According to the Health Care Payment & Learning Action Network survey, which is conducted in partnership with AHIP and the Blue Cross Blue Shield Association, 58% of MA payments to providers in 2020 were through an Alternative Payment Model (APM) such as the Shared Savings Program or an episodic/bundled care payment model, and 29.3% of such payments were for a risk-bearing arrangement. That’s compared with nearly 43% of payments through APMs in Traditional Medicare and roughly 35% in both commercial and Medicaid plans.

From payment related to the growing number of Medicare Advantage enrollees with end-stage renal disease (ESRD) to the proposed exclusion of 2020 data from risk score assumptions, several commenters responding to the 2023 preliminary rate notice questioned various factors that will be used to determine MA plan reimbursement next year. And while AHIP and other MA stakeholders voiced strong support for CMS keeping the coding intensity adjustment at the statutory minimum for 2023, the Medicare Payment Advisory Commission (MedPAC) took the opportunity to reiterate its contention that MA organizations are overpaid and that the adjustment does not adequately account for the differences in coding between MAOs and fee-for-service (FFS) Medicare.

In the 2023 Advance Notice for MA and Part D plans, CMS said it intended to continue to apply an across-the-board adjustment of 5.9% — the statutory minimum — to offset the effects on MA risk scores of higher levels of coding intensity in MA relative to FFS. AHIP, in its March 4 letter to CMS, said it strongly supports retaining that overall risk score reduction but asked for more detail around CMS’s proposal to exclude 2020 data in its annual “FFS normalization” adjustment, its assumption that 2023 FFS risk scores would return to pre-pandemic trends, how it will incorporate 2021 utilization data into the normalization factor for 2024, and how CMS arrived at the MA risk score trend of 3.5% for 2023.

Health care fraud was the largest driver of False Claims Act recoveries last year, the Dept. of Justice (DOJ) recently reported. Of the more than $5.6 billion in settlements and judgments from civil cases involving fraud and false claims against the government for the fiscal year ending Sept. 30, 2021, more than $5 billion related to matters involving the health care industry, including drug and medical device manufacturers, managed care providers and hospitals, the DOJ estimated. Medicare Advantage-related recoveries included a $90 million settlement with Sutter Health to resolve allegations that it submitted unsupported diagnosis codes that led to inflated payments to MA plans and the health system and a $6.3 million settlement with Kaiser Foundation Health Plan of Washington (formerly Group Health Cooperative) over similar allegations.

Serving as a timely companion to its comment letter on the 2023 Advance Notice for Medicare Advantage and Part D plans, the Medicare Payment Advisory Commission (MedPAC) on March 15 released its 2022 March Report to the Congress: Medicare Payment Policy. The first of two annual reports containing policy recommendations, it echoed many of MedPAC’s prior points regarding MA plan reimbursement, namely that plans are overpaid for delivering services at below the cost of fee-for-service (FFS) Medicare.

MedPAC observed that MA plan bids continue to trail FFS, with the average plan bid coming in at 15% below FFS Medicare costs for 2022. When accounting for coding intensity, Medicare payments to MA plans this year will average 104% of FFS spending, like 2021, MedPAC estimated. In other words, “Medicare currently pays 4% more to MA plans for the average enrollee than it would have had that enrollee remained in traditional fee for service,” explained MedPAC Executive Director Jim Mathews, Ph.D., during a March 15 press briefing on the new report.

CMS’s coding intensity adjustment, which is used to account for the estimated difference between risk scores that hypothetical beneficiaries would receive if enrolled in Medicare Advantage vs. fee-for-service (FFS) Medicare, has led to more than $91 billion in payments to MA plans between 2007 and 2022, asserted a March 3 letter from the Medicare Payment Advisory Commission (MedPAC) to CMS Administrator Chiquita Brooks-LaSure. The agency in its 2023 Advance Notice proposed to use the statutory minimum adjustment of 5.9%, which MedPAC estimated will lead to an inflated $16.2 billion in payments — and that’s on the conservative end, the commission noted. MedPAC first raised this issue in 2016, when it urged CMS to consider a new model that would use two years of FFS and MA diagnostic data, exclude diagnoses documented only on health risk assessments from either MA or FFS, and then apply an adjustment that fully accounts for the remaining coding differences. The commission in its March letter reiterated its support for this approach.

After progressive Democratic lawmakers urged CMS to shut down a fee-for-service Medicare model aimed at fostering more value-based care arrangements, the agency’s Center for Medicare and Medicaid Innovation (CMMI) on Feb. 24 unveiled a revamped version that it said more closely aligns with its “vision of creating a health system that achieves equitable outcomes through high quality, affordable, person-centered care.” While the three types of Accountable Care Organizations (ACOs) that may participate starting next year appear to largely mirror the Direct Contracting Entities (DCEs) of the current Global and Professional Direct Contracting (GPDC) Model, CMS aims to ensure that participants in the new model operate as provider-led organizations, have a proven track record of providing care in underserved communities and will not be shifting any enrollees into Medicare Advantage — a key concern expressed by lawmakers and advocates.

CMS on March 1 issued a request for applications (RFA) for the 2023 Medicare Advantage Value-Based Insurance Design Model, which will include new elements such as a Health Equity Incubation Program that will encourage testing of interventions in “the most promising focus areas” (e.g., food insecurity) and designing best practices for such interventions. Thirty-four MA organizations are currently offering benefit packages that feature tailored VBID model benefits and rewards and incentives to more than 3.7 million enrollees, according to the model’s website. CMS on Feb. 28 also released an RFA from Medicare Part D sponsors and pharmaceutical manufacturers interested in participating in the 2023 Part D Senior Savings Model. Now in its third year, the insulin-focused model is intended to lower out-of-pocket costs for seniors by featuring “predictable” copayments of no more than $35 for a broad set of insulins. The voluntary model has 106 participants, including five manufacturers. CMS is accepting applications for the VBID model through April 15 and for the SSM through April 8.