CMS floats Medicare Advantage payment tweaks that would boost insurers' risk scores

Over the holidays, Medicare Advantage insurers got a gift from the federal government.

That gift arrived on Dec. 27, when the Centers for Medicare & Medicaid Services released part one (PDF) of its 2019 advance notice of changes to MA capitation rates and Part D payment policies. The advance notice is split into two parts this year because of requirements related to the 21st Century Cures Act, per a CMS fact sheet.

To comply with the Cures Act, CMS is proposing an MA risk adjustment model that includes additional mental health, substance use disorder and chronic kidney disease conditions. The agency uses risk adjustment models to adjust payments based on the characteristics and health conditions of each plan’s enrollees, with the goal of preventing insurers from enrolling only the healthiest patients.

The agency is also proposing a “Payment Condition Count model" for risk adjustment, which takes into account the number of conditions that a beneficiary has—but only among the conditions that are included in the payment model. This model is projected to increase MA risk scores by 1.1%, meaning more government reimbursement would be flowing toward health plans.

By comparison, the alternative “All Condition Count model”—which takes into account all conditions that a beneficiary has—would have decreased MA risk scores by 0.28%, CMS said.

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The proposed methodological change to risk adjustment is “more industry friendly than the status quo,” Leerink Partners analysis Ana Gupte wrote in a research note (PDF). It’s the most positive for Humana, UnitedHealth and WellCare, she said, but also a good sign for the sector as a whole.

In addition to this proposed change, CMS appears to be heeding insurers’ concerns about using encounter data to calculate MA risk scores. For 2019, the agency proposes blending 25% of encounter data-based risk scores with 75% of the Risk Adjustment Processing System-based risk scores. That’s a bump up from the 15/85 mix in 2018, but still a slowdown from the more rapid phase-in that the Obama administration had planned.

Such changes are consistent with the MA-friendly stance of the Trump administration. Late last year, the industry cheered CMS’ proposed rule for Medicare Advantage and Part D, which offers more flexibility and a lighter regulatory burden for health plans. CMS also announced a broad expansion of a Medicare Advantage value-based insurance design model started by the Obama administration.