CMS will likely continue to overpay Medicare Advantage plans

Making Medicare Advantage Payments More Accurate

By Edwin Park
Center on Budget and Policy Priorities, February 16, 2016

Anticipating the Centers for Medicare and Medicaid Services’ (CMS) expected announcement Friday of preliminary payment rates and policies for Medicare Advantage insurers in 2017, insurers have pushed for changes to the “risk adjustment” system — which raises or lowers payments to plans based on their enrollees’ health.  Insurers claim the system undercompensates them for high-cost enrollees with chronic conditions.  We favor making the system as accurate as possible, but that should include reducing overpayments to insurers as well.

To be sure, risk adjustment tends to underpredict health spending for high-cost individuals in poorer health.  The Medicare Payment Advisory Commission (MedPAC) suggests that CMS make several changes to better account for higher spending by people with multiple chronic conditions and low-income beneficiaries eligible for both Medicare and Medicaid.

But Medicare Advantage risk adjustment also overcompensates insurers for healthier, low-cost enrollees.  For example, Avalere Health research, which insurers have cited favorably, shows risk adjustment overpredicting spending among people with no chronic conditions by 26.9 percent and among people with one or two chronic conditions by 5.1 percent.  That’s critical because Medicare Advantage enrollees are healthier than those in traditional Medicare, on average.

CMS could reduce Medicare Advantage overpayments by doing more to address “upcoding,” which the Congressional Budget Office, the Government Accountability Office (GAO), and academic research cite as a long-standing problem.  The risk adjustment system measures enrollees’ health using a “risk score” based on patient diagnoses; upcoding occurs when the risk scores that plans submit for their enrollees rise over time — making enrollees appear increasingly unhealthy — without actual changes in their health.

Risk scores have risen 9 percent faster in Medicare Advantage, on average, than in traditional Medicare for comparable beneficiaries, MedPAC estimates.  This leads to excessive payments to Medicare Advantage plans.

To compensate for upcoding, health reform requires CMS to adjust Medicare Advantage’s risk adjustment system by at least a minimum amount each year.  CMS has only applied the minimum required adjustment in recent years.  A larger adjustment, which MedPAC believes is warranted, would reduce overpayments to Medicare Advantage plans.

CMS could also reduce upcoding by excluding health assessments from risk score calculations unless they’re later confirmed in treatment settings, as MedPAC will likely recommend in its March report to Congress.  Medicare Advantage plans increasingly provide health assessments of their enrollees; for example, a nurse may come to a patient’s home to do a physical exam.  CMS has found that some insurers mainly use these assessments to “collect” diagnoses in order to raise enrollees’ risk scores for purposes of risk adjustment, rather than to improve follow-up care or identify illnesses requiring treatment.  In fact, CMS had proposed excluding these kinds of assessments but dropped this change in the face of industry opposition.


2017 Medicare Advantage and Part D Advance Notice and Draft Call Letter, February 19, 2016

Today, CMS released proposed updates to the Medicare Advantage (MA) and Part D programs through the 2017 Advance Notice and Draft Call Letter. Through these policies, CMS is proposing updates to the program designed to improve the accuracy of payments to plans serving beneficiaries who are dually eligible for Medicare and Medicaid.  

CMS is proposing updates to the Risk Adjustment Model used to calculate payments to Medicare Advantage plans and to the Star Rating system used to evaluate plan performance. In both cases, the updates reflect a public process through which CMS shared research findings and solicited public comment.

Expected Average Change in Revenue:  3.55%

Risk Adjustment Model

CMS is proposing to implement a new Risk Adjustment Model for 2017. The proposed new model has separate coefficients for partial benefit dually eligible beneficiaries, full benefit dually eligible beneficiaries, and non-dually eligible beneficiaries.  These proposed changes will improve the precision of the payments made to plans, including increases in payments for plans serving full benefit dually eligible beneficiaries.

Coding Pattern Adjustment

Each year, as required by law, CMS makes an adjustment to plan payments to reflect differences in diagnosis coding between Medicare Advantage organizations and fee-for-service (FFS) providers. In CY 2017, CMS proposes to make an adjustment reflective of the statutory minimum.

Using Encounter Data

CMS calculates risk scores using diagnoses submitted by FFS providers and by Medicare Advantage organizations. Historically, CMS has used Medicare Advantage diagnoses submitted into CMS’ Risk Adjustment Processing System (RAPS). In recent years, CMS began collecting encounter data from MA organizations to develop more accurate payment models. In 2016, CMS began using diagnoses from encounter data to calculate risk scores, by blending encounter data-based risk scores with RAPS-based risk scores. In 2017, CMS is proposing to continue using a blend, using a higher percentage of encounter data-based risk scores.

Star Ratings – Adjusting for Socioeconomic Status

CMS is proposing to implement a new analytical adjustment for a subset of Star Rating measures that is meant to adjust for plans serving dually eligible enrollees and/or enrollees receiving the low income subsidy, as well as enrollees with disabilities. Through this interim adjustment, CMS seeks to more accurately capture true plan performance, while work continues by the HHS Assistant Secretary for Planning and Evaluation (ASPE) and measure stewards in this important area.

CMS Advance Notice of Methodological Changes for Calendar Year (CY) 2017 for Medicare Advantage (MA) Capitation Rates, Part C and Part D Payment Policies and 2017 Call Letter (over 220 pages):


AHIP, Coalition for Medicare Choices Launch Nationwide Ad and Grassroots Campaign to Protect Medicare Advantage

AHIP, January 28, 2016

As CMS prepares to release proposed Medicare Advantage payment policies, AHIP's Coalition for Medicare Choices (CMC) is launching a coast-to-coast mobilization of its 2 million Medicare Advantage beneficiaries who are calling on Washington to protect their coverage from further cuts.

"Medicare Advantage is the game-changer. It's the foundation for innovative, high-quality care delivery that seniors and the country demand," AHIP President and CEO Marilyn Tavenner said. "CMS should protect millions of beneficiaries who depend on Medicare Advantage and strengthen -- not undermine -- the program moving forward.",-Coalition-for-Medicare-Choices-Launch-Nationwide-Ad-and-Grassroots-Campaign-to-Protect-Medicare-Advantage.aspx



By Don McCanne, M.D.

Today CMS released proposed updates for the 2017 Medicare Advantage (MA) plans. It appears that, once again, CMS will be co-conspirators with the insurance industry in increasing net MA payment rates when the Affordable Care Act requires reduction of the MA overpayments.

The Medicare Payment Advisory Commission (MedPAC) has recommended that CMS apply a larger adjustment to the MA risk adjustment system to reduce overpayments to the MA plans. Yet, once again, as with prior years, CMS is making “an adjustment reflective of the statutory minimum.”

Another example is that the MA plans have been using “encounter data” to upcode the diagnoses of the MA patients. Home visits are made, not by the health care providers but by representatives of the MA insurance plans, in order to find other disorders that can be used to pad the diagnostic list, making these patients appear sicker than they really are, thus qualifying the MA plans for higher payments than warranted. MedPAC is expected to recommend excluding encounter data from risk score calculations unless they are later confirmed in treatment settings. Yet, CMS is instead proposing to use a higher percentage of encounter data-based risk scores.

Instead of a reduction in payments, CMS is proposing a 3.55% increase.

CMS invites comments through March 4, 2016 before the final publication on April 4, 2016. During that time, AHIP, the insurance lobby organization, will be negotiating with CMS for further adjustments that will favor the MA plans. Each year that has resulted in additional innovative chicanery that further thwarts the intent of ACA to reduce MA overpayments. Since the new President and CEO of AHIP is Marilyn Tavenner, the former Administrator of CMS, it is anticipated that the negotiations on behalf of the MA plans will be quite successful.

Ensuring success of the MA plans is part of the plot to eventually privatize Medicare - converting it into a premium support system (vouchers) for a market of private plans that will displace the traditional Medicare program. The value of the voucher equivalents will erode with time, shifting ever more of the costs to the Medicare beneficiaries. It will be disastrous.

By this time it was expected that MA plan enrollment would begin to decline since the private insurance industry is incapable of providing comparable benefits at the same or lower costs than traditional Medicare, because their administrative costs are significantly higher than those of the traditional program, plus they need to return a profit to their investors. They have been profitable only because they have continued to be successful in enrolling healthier, less costly patients while at the same time receiving overpayments from the government.

Thus this conspiracy reenacted each year to use innovative payment schemes (chicanery) is vital to this industry. Members of AHIP's Coalition for Medicare Choices will, once again, pressure members of Congress to cajole CMS into “saving” the Medicare Advantage plans through whatever accounting tools they can find (all with a wink and a nod). What is surprising is that this has not provoked the outrage of taxpayers. But maybe this is not so surprising after all since hardly anyone recognizes the terrible crime that is taking place before our very eyes.