- CMS is proposing calculating risk scores in Medicare Advantage plans using diagnoses solely from encounter data for 2022. Monday's announcement marks the end of a multiyear transition plan that should skew positive for MA companies.
- Since 2015, the agency has calculated risk scores using a blend of provider-generated encounter data on patients's conditions and treatment needs and diagnoses from inpatient records submitted by MA plans.
- The agency expects the proposed changes will result in a 0.25% rise in MA risk scores in 2022 compared to 2021, or a net cost to the Medicare program of almost $634 million.
Insurers have generally pushed back against using encounter information to adjust payments, arguing it's often incomplete and could lead to lower payments. But the move to a new risk model relying on 100% encounter data should be a net positive to MA organizations given the expected rate increase, SVB Leerink analyst Stephen Tanal wrote in a Tuesday morning note on the proposal.
Risk scores, representing the expected medical cost of a patient, are used to tweak federal payments to MA plans. Sicker beneficiaries tend to have higher risk scores and lead to higher payments for their insurer.
The 21st Century Cures Act passed four years ago directed CMS to change the methodology for calculating risk scores in MA for 2022 and subsequent years, following a three-year phase-in period.
Monday's proposal would end the agency's old policy of supplementing encounter data with diagnoses from inpatient records submitted by MA plans to the Risk Adjustment Processing System for calculating beneficiary risk scores. That was allowed during the three phase-in years: 2019, 2020 and 2021.
CMS first began using diagnoses from encounter data to calculate risk scores in 2015, and has used a blend of RAPS data-based scores and encounter data since then. In 2021, the new model, called CMS-Hierarchical Condition Categories will make up three-fourths of the agency's risk-scoring methodology, with the remaining quarter derived from an older CMS-HCC model from 2017.
CMS will then transition to 100% of the new model for 2022, which adds a number of variables that count conditions and adds payments for more conditions than before, including mental health, substance abuse disorder and chronic kidney disease.
It's projected to result in higher payments to MA companies relative to 2021. However, the agency thinks transitioning to a heavier weighting of encounter data itself won't have an effect on payments, and doesn't expect an impact from axing inpatient data supplementation as the contribution in RAPS from inpatient data has been shrinking over time. That dampened the projected net effect of the policies on MA plan risk scores to a 0.25% increase compared to 2021.
CMS released the notice about three months earlier than usual. The agency said that was to accommodate the fact that it might publish the final rate announcement for 2022 in January next year, instead of the usual time in April, given the challenges the coronavirus pandemic has created for MA plans.
CMS expects to publish the second half of the advance notice in the fall, as opposed to February next year, but said it could still follow the normal timeframe for Part II and the 2022 final rate announcement.