CMS proposes major changes to Medicare Advantage payment models

CMS’ latest report proposed major changes to Medicare Advantage reimbursement structure and the clinical documentation used to capture HCCs.
clinical documentation

The Centers for Medicare & Medicaid Services (CMS) proposed major changes that would financially impact providers contracted to Medicare Advantage (MA) plans in its most recent Advance Notice, released on February 1, 2023.

The Advance Notice – formally known as the 2024 Advance Notice of Methodological Changes for Medicare Advantage (MA) Capitation Rates and Part C and Part D Payment Policies – details modifications including a rate increase, cost-sharing changes, quality measures reporting updates, and risk-adjustment model revisions impacting Hierarchical Condition Categories (HCCs).

Rate changes

CMS is proposing a 2.09% increase in the Effective Growth Rate for Medicare Advantage in 2024. However, after decreases due to poor performance in Star Ratings in 2022, along with proposed revisions to the risk model, plans could see an expected average increase in revenue of only 1.03%.

Cost sharing

Part D beneficiaries could benefit from proposals to support the 2022 Inflation Reduction Act. These proposals would eliminate cost sharing when a “catastrophic” threshold of $7,400 is met for drugs; increase the qualification threshold for the low-income subsidy program to 150% of the federal poverty level; and eliminate the deductible for covered insulin products and adult vaccinations.

Quality reporting

Proposed changes for quality reporting by MA plans include alignment with a core set of quality measures reported across CMS programs and new quality measures for 2024. New measures include Adult Immunization Status, Screening for Depression and Follow-Up, and Screening for Social Drivers of Health/Social Need Screening and Intervention.

HCC recalibration

Revisions for 2024 proposed for the Part C risk adjustment model incorporate recalibration and clinical reclassification of hierarchical condition categories (HCCs). Recalibration will update the data year to 2018 diagnoses and 2019 expenditures from 2014 diagnoses and 2015 expenditures. The denominator year used to calculate risk scores will update to 2020 from the current 2015.

Reclassification updates to ICD-10-CM from ICD-9-CM will improve the alignment between diagnosis and HCC mappings; increase the number of HCCs in the model; and eliminate diagnoses determined to be subject to coding variation or inappropriate coding.

Furthermore, ICD-10-CM updates will improve the alignment between ICD-driven diagnostic groups and HCCs to ensure that risk score calculation is weighted by only the most severe manifestation among related diseases.

In the proposed 2024 CMS-HCC model, 115 HCCs will qualify for payment, up from the current 86. This change is due to improvements in clinical specificity of codes within ICD-10-CM; updates in clinical concepts for some conditions; newly created HCCs; and the splitting of several existing HCCs. 

To address coding variation or inappropriate coding, CMS incorporated clinical input and analysis of MA coding compared to fee for service coding for certain conditions. This resulted in the proposed removal of several condition categories that do not accurately predict the projected cost of a beneficiary, and the constraining of certain HCCs to carry the same weight in the risk score.

CMS is accepting comments on the Advance Notice through March 3, 2023, and plans to publish the final rate announcement by April 3, 2023. IMO is reviewing proposed 2024 CMS-HCC Version 28 model changes and will supply comments to CMS as needed.

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