CMS proposes Medicare Advantage risk adjustment increase
Payers in Medicare Advantage (MA) may soon see a change to its risk adjustment model that will take into account mental health, substance use disorder and chronic kidney disease and makes adjustments “to take into account the number of conditions an individual beneficiary may have.”
In the CMS’ “2019 Medicare Advantage Part I Advance Notice – Risk Adjustment,” the agency offered changes to MA capitation rates and Part D payment policies. The CMS proposed a Payment Condition Count model, which is expected to increase MA risk scores by 1.1%.
While increasing risk scores through the Payment Condition Count, the CMS would also decrease MA risk scores by 0.28% in the alternative All Condition Count model.
Health insurance companies involved in MA get risk-adjusted payments that provide additional funding depending on the members’ characteristics and health conditions. Providing those payments is a way to prevent payers from cherry-picking healthier members.
CMS’ move comes on the heels of the 21st Century Cures Act, which required that the agency fully phase-in changes to the risk adjustment model by 2022. The proposal would phase-in the model in 2019 "starting with a blend of 75% of the risk adjustment model used for payment in 2017 and 2018 and 25% of the new risk adjustment model proposed."
Ana Gupte of Leerink Partners suggests the CMS' proposal is positive for payers, including UnitedHealth Group and Humana, which are the two largest MA payers. “The notice offers a change in the risk adjustment methodology that is more industry-friendly than the status quo and this combined with a 4+% underlying cost trend expectation should offer a positive advance rate announcement in February and final in April,” wrote Gupte.
Payers are already pleased with MA. This latest risk adjustment proposal may tempt more insurance companies to expand in the market. Both UnitedHealth and Humana, for example, plan on growing their MA offerings this year.
MA has seen a stable market in recent years. For that, payers plan a 6% premium decrease in 2018. Reasons for the stability include a daily stream of new eligibles for Medicare; the ease with which payers can convert traditional Medicare members to MA; MA members are usually people who had employer-based plans, so they don’t have pent up healthcare needs; and CMS pays insurers upfront to cover people with high healthcare costs.
The CMS expects MA enrollment will grow to 20.4 million members this year.
Steve Wiggins, founder and chairman of Remedy Partners, recently told Healthcare Dive that Republicans controlling both the White House and Congress will only increase MA’s growth. “With Republican control of the federal government, it is conceivable that Medicare Advantage will become a centerpiece of CMS’ strategy to control spending growth,” said Wiggins.
The CMS is taking comments on the proposal until March 2. The final 2019 Rate Announcement is planned for April 2.