Medicare Advantage insurers to CMS: Rethink expanding use of encounter data in risk adjustment

Calculator that says "Medicare" on it on top of money, next to bottle of pills
Insurers responded to CMS' request for comment on its 2020 advance notice and draft call letter. (Getty Images/liveslow)

Medicare Advantage insurers are warning the Centers for Medicare & Medicaid Services that it should pump the brakes on its plan to expand the use of encounter data to calculate risk scores, saying such data often has gaps or errors. 

CMS has used encounter data—or information about patients’ medical conditions that comes from physicians and hospitals—since 2016 to calculate risk scores in MA. But it made up just a quarter of data used in the 2019 plan year.  

However, in its Advance Notice and Draft Call Letter for 2020, CMS has proposed increasing that to 50%. In their comments to the agency, insurers said that CMS needs to address concerns about the reliability of the data before scaling up its use to that degree. 

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CMS has been gathering such data since 2012, and payers have long argued there are significant gaps and inaccuracies. The data could lower patient risk scores and therefore unfairly bring down federal MA payouts, insurers warned in their comments. 

RELATED: Sporting new CMS-approved plan designs, Medicare Advantage insurers target enrollee expectations 

America’s Health Insurance Plans said in a letter (PDF) that “operational problems and uncertainties” with the data persist, though the Government Accountability Office recommended in both 2014 and 2017 that CMS demonstrate that it is accurate before relying heavily on such data. 

“Ongoing operational deficiencies and lack of certainty undermine the stable funding environment that is critical to the growth and enhancement of the MA program and limit the ability of plans to achieve other Administration goals such as implementing more flexible benefit designs and expanding the offering of more patient-centered supplemental benefits,” AHIP said. 

AHIP and many of the insurers that responded to the call letter said they support the concept of using encounter data, should it be proven accurate.  

The Blue Cross Blue Shield Association said in its letter (PDF) that CMS should consider reducing the amount of encounter data it uses for 2020 and should instead make such data about 33% of the information used to devise risk scores. 

RELATED: How policymakers can help Medicare Advantage plans maximize their potential 

In addition, CMS should continue to be open and transparent with MA plans about how it intends to use encounter data, BCBSA said. 

“Whatever the [Encounter Data System] level is in 2020, it is still crucial that improvements be made to EDS and that operational issues be resolved,” the association said in its letter. 

Responding insurers also noted that the change could reflect a desire on the part of the Trump administration to cut back payouts in Medicare Advantage. In its letter, AHIP noted that President Donald Trump’s budget for fiscal year 2019 called for a full phase-in of encounter data, which would cut MA spending by $11.1 billion over the course of a decade. 

Cigna raised a similar concern in its letter (PDF), saying the budget “considers the transition to encounter data a source of savings to the federal government.” Humana said in its letter (PDF) that the original purpose of calculating risk scores using encounter data was not to just slash payments. 

“We strongly oppose the transition to encounter data as a means of reducing payments by purposefully calculating risk scores materially lower than those calculated under” the current risk adjustment system,” Cigna said. 

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