CMS Tries to Flush ‘Sick Creep’ Out of Medicare Advantage Rates

Officials at the Centers for Medicare and Medicaid Services (CMS) are trying to squeeze what they say is unjustified risk score inflation out of the Medicare Advantage program in 2019.

CMS officials have included a 2.26% risk score "normalization" factor in their advance notice for the Medicare Advantage program bidding process for 2019.

CMS officials say they think the "effective growth rate," or increase in the underlying cost of care, will rise to 4.35% for 2019, from the growth rate of 2.8% assumed for the purposes of the bidding process for 2018.

But the addition of the risk score normalization factor could reduce the "expected average change in revenue" to 1.84%, from 2.75% for 2018.

CMS could end up facing pressure from health insurers to reduce or eliminate the normalization factor.

Medicare Advantage Basics

The oldest Medicare program, Medicare Part A, pays enrollees' hospital bills. The next oldest program, Medicare Part B, pays for doctors and outpatient services.

The Medicare Advantage program, which is the biggest Medicare Part C program, gives private insurers a chance to offer Medicare enrollees an alternative to what CMS calls "Original Medicare," or traditional Medicare program coverage.

The typical Medicare Advantage plan uses a managed care network to help hold down the cost of care. In return, the plan may offer lower premiums, lower out-of-pocket costs and more benefits than enrollees get through Original Medicare.

Medicare Advantage Risk Scores

CMS uses a risk-adjustment program to try to even out the overall level of enrollee health risk each Medicare Advantage plan issuer assumes. CMS bases the payment adjustments for the program on risk scores based on various factors that might make an enrollee more or less healthy.

CMS believes that, because the Medicare Advantage plan issuer want to optimize risk-adjustment results, they are working harder to put risk-related information in patients' records.

2019 (Image: Allison Bell/TA)

(Image: Allison Bell/TA)

The extra effort issuers put into documenting Medicare Advantage enrollees' health problems means that Medicare Advantage enrollees' risk scores are creeping up, and are growing less easy to compare with Original Medicare enrollees' risk scores, according to CMS officials.

Health plans argue that they're simply doing a good job of tracking enrollees' risk factors.

Even if the Medicare Advantage plan enrollees' risk scores reflect actual health problems, CMS still wants to adjust the Medicare Advantage plan risk scores, to increase the likelihood that risk scores will mean the same thing for all Medicare enrollees, officials said today, in a program parameters announcement.

The advance notice and the announcement come out early in the bargaining process CMS and the plan issuers use to set plan rates. The parameters included in the advance notice often change as the year goes on.

Comments on this version of the notice are due March 5.

Industry Reaction

Marilyn Tavenner, the president of America's Health Insurance Plans (AHIP), said in a statement that 363 Republicans and Democrats in Congress recently signed a letter expressing strong support for the Medicare Advantage program.

"AHIP will review the advance rate notice carefully to ensure the Medicare Advantage program is protected from policies that could impact the long-term stability of the program and seniors' access to quality, affordable health care that meets their individual needs," Tavenner said.

Resources

A copy of the advance notice announcement is here.

Links to many more documents related to the bidding process are available here.

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