The COVID-19
pandemic has had a significant impact on how Americans seek medical care. It
has also impacted the delivery of care and operations of health care providers.
During the ongoing pandemic, the Centers for Medicare & Medicaid Services
(CMS) released several waivers and flexibilities. This is to support health
care providers and health plans as they continue to deliver care.
Most recently, CMS
released two very important documents for Medicare Advantage plans.
2022 CMS Advance Notice Part I
On September 14, 2020, CMS released the Advance Notice Part I. Typically, this
document is not released until December. The early timing allows CMS to release
the Advance Notice Part II in fall 2020 and the Final Announcement in January
2021. This is to provide health plans more time to prepare 2022 bids.
Note: CMS reserves
the right to publish the Advance Notice Part II and the Final Announcement in
February and April, respectively. The release time will depend on the progress
CMS makes on internal rate development efforts and stakeholder feedback.
Below are
highlights of the Advance Notice Part I, from our perspective:
1. CMS is proposing to
move to 100% weight on encounter data system (EDS) risk scores using the 2020
CMS-Hierarchical Condition Categories (HCC) model for 2022. In 2021, EDS risk
scores were weighted 75% and 25% on risk adjustment payment system (RAPS) risk
scores using the 2017 CMS-HCC model.
2. In 2021 and prior,
CMS supplemented EDS risk scores with Fee-for-Service (FFS) and inpatient (IP)
RAPS data. Starting in 2022, EDS risk scores will no longer be supplemented
with IP RAPS data.
3. CMS is estimating
that moving 100% to the 2020 CMS-HCC model (from 75% in 2021) can increase
revenue by 0.25% (actual value will vary by plan).
4. CMS is estimating
there will be no impact due to transitioning to 100% EDS data and removing IP
RAPS supplement data.
Risk adjustment model
considerations not addressed in Part I
For health plans and stakeholders that follow proposed changes in Medicare Advantage
risk adjustment, these proposed changes are not a surprise. From our
perspective, what wasn’t addressed in Part I of the Advance Notice is more
interesting.
First, CMS is not
proposing to recalibrate the coefficients of the 2020 CMS-HCC model using
ICD-10 diagnosis codes. Currently, the 2020 CMS-HCC model is calibrated using
2014 FFS diagnosis data to predict 2015 FFS expenditures. When ICD-10 was
implemented on October 1, 2015, the CMS-HCC model was developed by creating a
crosswalk mapping of ICD-9 diagnosis codes into ICD-10 diagnosis codes. There
were roughly 14,000 ICD-9 diagnosis codes and there are more than 69,000 ICD-10
diagnosis codes. One may suspect that recalibrating using only ICD-10 data
could have an impact on the model coefficient calibration.
Second, the CMS-HCC
model is using FFS data from 2014 and 2015 and normalized to estimate expected
costs for Medicare Advantage plans in 2022. It may be prudent for CMS to
consider recalibrating the model for recent FFS data. They may also consider
shifting the calibration to incorporate Medicare Advantage encounter data
similar to how RxHCC coefficients are calibrated.
Recalibrating the
2020 CMS-HCC model for updated claims information and ICD-10 diagnosis codes
would be more reflective of today’s market. It also may alleviate the need for
an MA Coding Pattern Adjustment and lower the overall normalization factor
required.
CMS memo: Deadline for
Submitting Risk Adjustment Data
In addition to the Advance Notice Part I, CMS released a memo on September 18,
2020, with updated deadlines to submit risk adjustment data for use in risk
score calculations for payment years (PY) 2020, 2021 and 2022.
Most notable in
this memo is CMS adding one final payment for PY 2020. This additional final
payment gives health plans another six months to submit diagnosis data from
calendar year 2019 for PY 2020.
CMS has extended
the window to submit diagnosis data for 2019 dates of service. Yet this
presents challenges to MA plans and actuaries during the bid submission process.
The bid submission timeline for 2022 will occur well before this final
submission window. At the end of March or April, plans likely will need to
build risk score forecasts and base period values using the best data available
at that time. For this reason, we encourage plans to identify any programmatic
delays in submitting diagnosis data to monitor and estimate the financial
impact on the final risk score estimates for PY 2020.
The following table
shows updated deadlines from the memo:
For more
information, on the 2022 CMS Advance Notice Part I, visit CMS. For information on the CMS memo on the Deadline for
Submitting Risk Adjustment Data, visit CMS Health Plan System
(HPS) weekly memos page.
About the Author Randall Fitzpatrick, FSA, MAAA Vice President, Optum Actuarial
Services
Randall Fitzpatrick
provides consulting services to health insurers, Medicare Advantage
organizations, MCOs and health care providers. His expertise includes pricing
and filing of Medicare Advantage Part C and Part D bids, reserving, provider
contract analytics and strategic market analyses for MA. He also provided
actuarial services to CMS for the review and audit of its bid pricing tools.
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