Implications of the 2019 Medicare Advantage Part 1 Advance Notice

Jan. 10, 2018 / By Gretchen Mills

On December 27, 2017, CMS published Part 1 of this year’s Medicare Advantage (MA) Advance Notice highlighting proposed changes in MA payments for 2019. CMS requires comments on this Part 1 announcement by March 2, 2018. Highlighted below are two key changes:

1. HCC Risk Adjustment to be updated to include adjustments for the number of conditions.

“The 21st Century Cures Act amended the Social Security Act by, in part, requiring CMS to make improvements to risk adjustment for 2019 and subsequent years. In response to these requirements, we are proposing changes to the CMS-HCC Risk Adjustment model that is used to pay for aged and disabled beneficiaries enrolled in Medicare Advantage plans. These proposals reflect changes to risk adjustment required by the 21st Century Cures Act, including an evaluation of adding mental health, substance use disorder, and chronic kidney disease conditions to the risk adjustment model and making adjustments to take into account the number of conditions an individual beneficiary may have, as well as a variety of additional technical updates. Further, the 21st Century Cures Act requires that CMS fully phase in the required changes to the risk adjustment model by 2022. We are therefore 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.”

“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. Under the Payment Condition Count model, the change in MA contracts’ risk scores is generally positive and less varied than the All Condition Count model. The change in MA contracts’ risk scores under the All Condition Count model is more varied, with both negative and positive changes.”

2. CMS proposes to slow down implementation of use of encounter data versus RAPS data compared to a more aggressive transition previously proposed

“In 2016, CMS began using diagnoses from encounter data to calculate risk scores, by blending 10 percent of the encounter data-based risk scores with 90 percent of the RAPS-based risk scores. For 2017 and 2018, CMS continued to use a blend to calculate risk scores, by calculating risk scores with 25 percent encounter data and 75 percent RAPS in 2017, and 15 percent encounter data and 85 percent RAPS in 2018. For 2019, CMS proposes to calculate risk scores by adding 25 percent of the risk score calculated using diagnoses from encounter data and FFS diagnoses with 75 percent of the risk score calculated with diagnoses from RAPS and FFS diagnoses. CMS is also proposing to implement the phase-in of the new risk adjustment model by calculating the encounter data-based risk scores exclusively with the new risk adjustment model, while maintaining use of the current 2018 risk adjustment model for calculating risk scores with RAPS data.”

Summary

These payment policy adjustment proposals will result in favorable changes for MA insurers. This is a continuation of CMS’ and Congress’ generally positive support for the MA program. And, if deficit hawks have their way, Congress may consider using a premium subsidy approach to attempt to contain costs in original Medicare, making MA even more attractive to cash strapped beneficiaries. See my previous post for an explanation of the Medicare premium subsidy approach. However, any Medicare change that impacts beneficiaries is always a highly volatile issue for Congress to tackle!

Gretchen Mills is manager of market strategy for populations and payment solutions at 3M Health Information Systems.