CMS proposes small hike to Medicare Advantage, Part D plan payments in 2024 amid risk adjustment changes

The Biden administration is proposing to increase Medicare Advantage (MA) and Part D plan payments by 1.03% for 2024 amid other changes to the programs’ risk adjustment model.

The Centers for Medicare & Medicaid Services (CMS) released the advance notice of methodological changes for MA capitation rates and payment policies for MA and Part D. The proposed rule implements several changes to the risk adjustment model. 

“The commonsense proposals in the Advance Notice, coupled with the proposals in the MA and Part D rule released in December, ensure these important programs continue to meet the healthcare needs of all beneficiaries,” said CMS Deputy Administrator and Director of Medicare Meena Seshamani, M.D., Ph.D., in a statement. 

CMS is expecting an effective growth rate of 2.09% and a 3.3% increase based on the MA risk score trend, which is the average increase in plan risk scores. 

However, CMS has estimated a 3.12% decline in payments after taking in changes to the risk adjustment model.

“We’re really looking to make some technical updates to make sure that our payments are up to date and accurate,” said Seshmani during a call with reporters Wednesday.

One of the key changes in the proposed rule is to change the diagnosis classification system from ICD-9 to ICD-10, which is used by more physicians. 

“The proposed new risk adjustment model reflects more current costs associated with various diseases, conditions, and demographic characteristics,” according to CMS’ fact sheet on the advance notice. 

CMS is trying to update the fee-for-service data used in the risk adjustment model, moving from 2014-15 to 2018-19. 

The agency is also looking at where there may be discretionary coding and variation in the coding patterns to make risk adjustment more predictive. 

The proposed changes come amid increased criticism of how risk adjustment is applied to the MA program. Several reports have outlined increases in federal spending on MA compared to traditional fee-for-service Medicare and reports of plans using chart reviews as well as health risk assessments to inflate the risk scores of patients to get greater quality bonus payments. 

The proposed rate notice comes a few days after CMS released a proposal to overhaul how it conducts risk adjustment audits of MA plans. 

Despite the changes, CMS has proposed to keep the risk adjustment coding intensity adjustment at 5.9% as it was for 2023 and the minimum identified under a federal statute. The adjustment lowers MA risk scores to reflect a difference in coding between MA and fee-for-service. 

The Medicare Payment Advisory Commission has identified coding intensity adjustments as a key source of overpayments to MA plans. It said in a March 2022 letter to CMS that the (PDF) coding intensity adjustment doesn't fully account for differences in coding between MA and fee-for-service, as MA plans have a financial incentive to code more diagnoses compared with traditional Medicare. 

Changes to star ratings

CMS has also proposed a 1.24% decline in payments based on the plan performance in 2023 Star Ratings, which influences how much plans will get in quality bonus payments for 2024.

The star ratings from 2023 are on average lower than the 2022 star ratings. CMS has expected the 2023 star ratings to be lower after removing a disaster provision put in place to help plans weather the financial impact of the COVID-19 pandemic. 

This rate notice builds on another proposal released back in December that includes a bid to update MA and Part D star ratings to account for health equity. CMS wants comments on potential new quality measures that assess how plans screen for social needs like transportation or food insecurity.

The agency will publish the final rate notice by April 3 and will accept comments on the latest proposal until March 3.