CMS admits bad dual-eligible math

Health plans have complained for years that the CMS doesn't treat them fairly if they enroll large numbers of low-income people with complex medical needs. It looks as if they have been heard and may see the changes they want.

One persistent gripe has been that Medicare underpays plans for patients who, because they are both poor and either elderly or disabled, are dually eligible for Medicaid and Medicare.

That is true, the CMS indicated last month in a little-noticed document. The agency plans to modify its risk-adjustment model to make up for the underpayment. The document came soon after top CMS officials said during a conference of health plans that they would consider tweaking the Medicare Advantage program's five-star quality ratings to reflect socio-economic factors.

The agency's change of heart is likely the fruit of robust lobbying by America's Health Insurance Plans and the SNP Alliance, a coalition of plans and providers, said John Gorman, a consultant and former CMS official.

“Up until a few weeks ago, CMS steadily maintained there wasn't an issue, and on the stars issue, that plans needed to work harder,” Gorman said.

In response to industry complaints about the risk-adjustment model, the CMS conducted a retrospective analysis of its 2014 plan data.

The CMS calculates risk scores using health status in a base year to predict costs for the next year. Those scores drive adjustments to capitated payments made for elderly and disabled beneficiaries enrolled in Advantage plans and certain demonstration programs.

Part of that model, the CMS said in an Oct. 28 notice to plans, “somewhat underpredicts” payment for dual-eligible beneficiaries. The agency is seeking feedback on proposed changes to the model by Nov. 25 and plans to publish final changes in February 2016.

“We are heartened that CMS has responded to several data analyses that indicate a clear correlation between the socio-economic status of dual-eligibles and the effect they have on predicting their costs,” said Jeff Myers, CEO of Medicaid Health Plans of America.

Molina Healthcare, Centene Corp. and Health Net may benefit most from a more favorable risk-adjustment model because significant percentages of their earnings are tied to duals-eligible members, said Ana Gupte, a managing director at Leerink Partners.

Days before the notice was posted, a top CMS official said during an AHIP conference that the agency was considering changes to its five-star quality ratings. Plans have complained that they get lower star ratings if they serve the dual-eligible population, and consistently low ratings can get a plan kicked out of the program.

“What I want you to take away from this is that the industry brought an issue to us and we took it seriously,” Sean Cavanaugh, deputy administrator and director of the CMS' Center for Medicare, said at the conference. “There is some substance to it.”

Cavanaugh credited the Medicare Payment Advisory Commission for helping the CMS better understand the disparities plans face and the implications of not addressing them.

During a Senate hearing this year, MedPAC Executive Director Mark Miller said the commission concluded that the CMS overpays for beneficiaries with low medical costs and underpays for those with very high costs. “This inequity could encourage plans to avoid high-cost beneficiaries, who are more likely to be the chronically ill,” Miller said.