January 19, 2018

CMS Proposes New Risk Adjustment Methodology for Medicare Advantage

On Dec. 27, the Centers for Medicare & Medicaid Services (CMS) released Part I of the 2019 Advance Notice of Methodological Changes for Medicare Advantage Capitation Rates and Part D Payment Policies, which contains key information about proposed updates to the Part C Risk Adjustment Model and the use of encounter data. In response to the requirements of the 21st Century Cures Act which mandated certain changes to the Part C risk adjustment model and a 60-day comment period for these changes, CMS has proposed changes to the CMS-HCC Risk Adjustment model that is used to pay for aged and disabled beneficiaries enrolled in Medicare Advantage plans. For 2019, CMS is proposing a model that includes additional mental health, substance use disorder, and chronic kidney disease conditions in the risk adjustment model. CMS is  proposing to begin the phase in of this new model in 2019, starting with a blend of 75 percent of the risk adjustment model used for payment in 2017 and 2018 and 25 percent of the new risk adjustment model proposed. 

Another provision of the Cures Act would require CMS to take into account the number of conditions an individual beneficiary has. In Part 1 of the Advance Notice, CMS describes a proposed new risk adjustment model and discusses an alternative model. The first - the "Payment Condition Count model" - takes into account the number of conditions that a beneficiary has, only among the conditions that are included in the payment model. The model discussed as an alternative - the "All Condition Count model" - takes into account all conditions that a beneficiary has, including both those in the payment model and those not in the model. Overall, while the experience of individual plans would vary, the Payment Condition Count model is projected to increase MA risk scores by 1.1 percent, while the All Condition Count model would decrease MA risk scores by -0.28 percent.

For additional information, contact Kathy Reep, vice president of financial services, at (407) 841-6230.