Medicare Advantage plans are getting a pay raise and more flexibility to tailor benefits for chronically ill patients next year, the CMS said Monday. But Advantage plans' payments will also be based on a higher percentage of patient "encounter data," a change that health insurers have fought hard to avoid.
The CMS on Monday finalized a rule giving Medicare Advantage plans a 2.53% pay raise in 2020. The agency had initially floated giving plans a 1.59% pay bump for next year. The final rate is less than the 3.4% raise Advantage plans received for 2019, which was one of the biggest pay raises plans have received in years.
"These changes to the model better reflect costs and improve the financing for the care of beneficiaries with multiple conditions," CMS Administrator Seema Verma said in a press call with reporters late Monday.
The final rule also allows Medicare Advantage plans more flexibility to offer supplemental benefits to patients with chronic illnesses that aren't necessarily going to cure their conditions but will address the social and environmental factors that can harm health. Plans will also be able to tailor benefits or reduce cost-sharing to meet certain members' needs.
For instance, Verma said a Medicare Advantage plan could pay for home air filters or carpet shampooing for a patient with asthma, or pay for heart-healthy meals for a beneficiary with heart disease. She noted that in the original Medicare program, 27 million people have chronic conditions. The agency also said it is encouraging plans to take advantage of the flexibilities to offer targeted benefits to patients with chronic pain or those undergoing addiction treatment.
With this new flexibility, "Coverage is determined by what a person needs, not just what's on a list of allowable items or services," Verma explained.
The change, which was called for by the Bipartisan Budget Act of 2018, is a significant departure from previous policy, which allowed coverage only for services that prevented, improved or cured a patient's conditions. Previously, plans were also barred from offering different benefits to different sets of patients. The CMS began introducing flexibility starting in 2019 by allowing plans to pay for in-home supports, such as grab bars and wheelchair ramps, for their members.
In comments to the CMS due in March, health insurers largely supported the increased leeway in what supplemental benefits they could offer patients. But most of them railed against the agency's proposal to increase the amount of encounter data it uses in calculating patient risk scores to 50% from 25%, saying that data is often inaccurate and will lead to lower funding for the plans.
The CMS didn't back down. Verma said the agency has been monitoring encounter data and feels comfortable moving ahead with plans to increase its use in the risk-adjustment model "because of the work we've done with the plans around improving the accuracy."
Federal payments to Medicare Advantage plans are adjusted based on patient risk scores. Generally, the sicker the person, the higher the risk score and, consequently, the higher the payment an Advantage plan receives. Plans have been accused of manipulating risk scores to nab higher payments, however.
The CMS has been using encounter data to calculate risk scores since 2016, but insurers have never embraced it. In a letter to the CMS in March, Cigna Corp. even said it was concerned the agency "may be using the EDS transition to reduce MA payments without providing full information about the impact to stakeholders and others."
Beyond encounter data, the CMS also said it is moving ahead with plans to adjust payments to reflect patients' total number of medical conditions, in addition to viewing each condition individually. This change is required by the 21st Century Cures Act. The CMS said it will implement what it called the "alternative payment condition count model," which accounts for some additional diagnoses, including dementia and ulcers. Insurers had supported the alternative model in their comments to the CMS.