CMS wants to use more patient-specific data for Medicare Advantage payments

The CMS said Thursday it wants to move ahead with a proposal to adjust payments to Medicare Advantage plans in 2020 to reflect the total number of conditions each patient has, in addition to viewing each condition individually in the risk adjustment model—a change that was proposed but not finalized in the 2019 rate announcement.

The CMS also proposed increasing the amount of encounter data, or information about the care of an Advantage beneficiary received from a clinician, to determine risk scores for health plans. The agency also wants to use a risk-score blend of 50% diagnoses from encounter data, inpatient records and fee-for-service claims; and 50% fee-for-service claims and inpatient records.

In 2019, risk scores are being calculated using a mix of 75% fee-for-service data and 25% encounter data. Health insurers have lobbied heavily against the use of encounter data, claiming it's often inaccurate.

For 2020, beneficiaries' risk scores would also take into account additional conditions for mental health, substance abuse disorder, and chronic kidney disease in the payment model. The new model would be phased in until 2022.

The 21st Century Cures Act required the CMS to improve the Medicare Advantage risk-adjustment methodology, which is used to pay for seniors and disabled people enrolled in private Advantage plans. This is the first part of the 2019 Medicare Advantage Advance Notice. Comments are due to the agency by Feb. 19, 2019. Medicare Advantage capitation rates and final payment policies are expected no later than April 1, 2019.

Federal payments to Medicare Advantage plans are adjusted to reflect the beneficiary's level of sickness. Insurers evaluate the health of their members and build "risk scores" based on medical coding. The sicker the person, the higher the risk score and, consequently, the higher the payment an Advantage plan receives from the federal government.

The risk-adjustment model is designed to reduce the incentive for insurers to cherry-pick the healthiest members. Government audits have found evidence that some plans inflate the severity of their members' diagnoses and their risk scores to obtain higher payments.

In the 2019 rate notice, the CMS estimated that accounting for the number of conditions a beneficiary has among the conditions that are included in the Advantage payment model would increase plans' risk scores by 1.1%.

Some groups expressed concern about that change. America's Health Insurance Plans, relying on an analysis from consultancy Oliver Wyman, said changing risk scores to reflect the total number of conditions a patient has could lower risk scores for large numbers of dual-eligible patients, while also raising payments for people with no reported health conditions.