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CMS payment notice signals shift in COVID-19 policies for Medicare Advantage, Part D

This week our In Focus section reviews the Advance Notice of Methodological Changes for Calendar Year (CY) 2023 for Medicare Advantage (MA) Capitation Rates and Part C and Part D Payment Policies issued by the Centers for Medicare & Medicaid Services (CMS) on February 1, 2022. The Advance Notice includes proposed updates to MA payment rates and guidance to plan sponsors as they prepare their bids for CY 2023. It also shows CMS’ updates to Part D benefit parameters. Comments are due by 6:00 PM EST on March 4, 2022. The final Rate Announcement will be published by April 4, 2022.

Overall, the proposed 2023 payment updates and policy provisions are aligned with the administration’s stated commitment to address equity in health and health care. Notably, CMS states MA organizations and Part D sponsors have “a key role to play in advancing health equity.”

The Advance Notice identifies specific proposals that could address health equity among MA enrollees and promote person-centered care linked to reimbursement. CMS solicits information on several concepts as it lays the groundwork for future potential policy changes to better align the Star Rating program with its goals. However, the agency would still need to refine and advance many of these proposals through separate rulemaking in future years. 

Highlights from the Advance Notice are noted below. The analysis and insight reflect the combined expertise of HMA and its companies including the Wakely Consulting Group and The Moran Company.

MA Plan Payment Changes. Based on the Advance Notice, MA plan revenues are expected to increase by 7.98 percent in 2023. CMS included in this year’s projection the anticipation that risk scores will increase by 3.50 percent. Absent that impact, MA revenues will increase an estimated 4.48 percent compared to an estimated 4.08 percent increase in 2022.

CMS is also proposing to modify the methodology used to calculate the normalization factor for 2023. This factor accounts for the estimated change in fee-for-service (FFS) risk scores that are the basis for MA payments. CMS found that the most recent year (2021) of FFS risk scores was lower than prior years, which under the normal methodology would have resulted in an additional payment increase for MA plans. CMS is proposing to not use the most recent year, and instead rely on older FFS data to determine the normalization factor.

CMS also intends to rebase the county-level FFS rates for 2023.  Rebasing rates will adjust the county-specific estimated FFS payment and could move some counties to higher or lower benchmark quartiles.

  • Takeaway:  Plan-specific changes in payments will reflect both the change in the county-level rates from rebasing rates as well as the individual plan’s change in risk scores. The payment increase of nearly 8 percent will likely garner the attention of Congress and Administration officials, particularly amidst ongoing conversations about Medicare Trust Fund insolvency. Payment and risk adjustment policies could be subject to structural changes in the future, though there is currently no consensus in Congress on specific policy solutions.

Risk Adjustment Models. For CY 2023, CMS plans to continue to calculate 100 percent of the risk score using the 2020 CMS- hierarchical condition categories (HCC) model. For CY 2023 payment to PACE organizations, CMS will continue to use the 2017 CMS-HCC model to calculate risk scores. In addition, CMS asks for comments on whether additional predictive factors regarding costs of MA enrollees could be incorporated in the risk adjustment model to address the impact of social determinants of health on beneficiary health status. The agency also makes updates to the ESRD model used in CY 2020 to account for differences in cost patterns of dual eligible individuals.

  • Takeaway: CMS continues to face pressure from Congress, MedPAC and some stakeholders to ensure the risk adjustment models result in appropriate levels of payment for MA enrollees. The examples CMS provides and forthcoming stakeholder input signal potential future adjustments that will continue to leverage and refine the use of encounter data.

Star Rating Program. The biggest change in the Star Rating Program from 2022 to 2023 is not what is in the Advance Notice but what is missing: there is no mention of a continuation of the Public Health Emergency Disaster Adjustment.

  • Takeaway: Without the COVID-19 guardrails, applied to all plans in 2022, many plans could lose their current Star Rating as the advantages afforded of the “hold harmless” provisions will no longer be available. In addition,       the change in the weights of most of the Consumer Assessment of Healthcare Providers and Systems (CAHPS) measures will have a significant impact on overall Star Ratings.

Updates to Star Ratings Measures. Among the potential updates to the clinical specifications for the Star Ratings measures in future years, CMS is considering adding the Complaints Tracking Module category 1.30 (CMS Lead Marketing Misrepresentation: Allegation of inappropriate marketing by plan, plan representative, or agent/broker). According to CMS’ analysis of the 2019 CTM data, adding category 1.30 complaints would have produced an 11 percent increase in the complaint volumes for calculating the performance measures overall, leading to a decrease in the star assignments for almost one-quarter of MA-prescription drug (MA-PD) contracts and no change for Prescription Drug Plan (PDP) contracts. In addition, CMS makes technical changes to existing Star Rating Measures, for example, for Statin Use for Persons with Diabetes and the three Medication Adherence measures among others.

  • Takeaways: Like the CY 2023 Part C and D policy proposed rule, CMS has again raised concerns with plan marketing activities. This is a clear signal that the Agency is paying much closer attention to how beneficiaries are choosing MA plans. Adding additional pressure via the Star Ratings process could encourage plans to understand the potential impact and identify areas where additional education and training strategies may be needed. Without significant improvement, some plans may experience lower scores.

Expanded Focus on Health Equity: In the Advance Notice CMS discusses plans to develop and incorporate a Health Equity Index in the Star Ratings programs. CMS envisions that the index would consolidate existing health equity measures to provide a more holistic view of the plan’s performance for enrollees with social risk factors (SRFs). Using the Star Ratings program, CMS is exploring how it can incentivize plan sponsors to better identify and then address disparities in care provided to members with a particular SRF. CMS is considering replacing the current reward factor based upon overall Star Ratings with the health equity index. The agency would need to establish the health equity index through separate rulemaking.

Related to the Health Equity Index, CMS is also considering a potential measure concept for screening enrollees for social needs such as food, housing and transportation.

  • Takeaway: Incorporating a Health Equity Index would be a significant change. The agency will be evaluating specific measures and approaches that could be most impactful to achieve health equity. In the future, a Health Equity Index could provide a competitive advantage for plans with benefit designs, including supplemental benefits and relationships with community-based organizations, that address social risk factors and begin to reduce disparities among members.

Risk Stratification. CMS is also considering stratification of additional process and outcomes measures as well as additional variables for stratification. The agency’s goal is to incentivize plans to deliver better care and services to beneficiaries with similar needs and risk factors. This is expected to lead to within-contract improvement. The agency suggests it could display stratified reporting on its website, the Plan Finder tool or both.

  • Takeaway: Making these data accessible to beneficiaries increases the information individuals possesses as they review and select plans. This will assist beneficiaries if these data are relevant and understandable to the individual. While CMS is clearly interested in shifting competition to focus more on plan performance, the agency recognizes the nuances and complexities in selecting the measures that would underly this transformation.

Transparency in Part C Value-Based Care Arrangements. CMS is exploring approaches to improve the agency’s understanding of value-based care arrangements between MA organizations and providers as well as how these relationships impact health outcomes and quality of services provided to enrollees. For example, CMS asks for feedback on how to potentially structure a measure pertaining to value-based contracts.

  • Takeaway: CMS has a goal of ensuring all Medicare beneficiaries are in accountable relationships by 2030. This measure will help inform the agency’s understanding of the breadth and level of accountability that exists among MA organizations and providers, and whether the agency is on track to meet its goal. As value-based models are often complex and individualized, providing input to CMS on the measure will likely help it to encompass many options. 

HMA’s Medicare practice has deep experience with the development and implementation of best practices to improve compliance with Medicare Advantage and Part D regulations. Specifically, we have been working with clients to understand the potential impact of these policy changes to improve Star Rating performance and helping plans achieve economies of scale around maximizing their year-round Medicare stars strategy. For information on our Medicare practice, please contact HMA colleagues Julie Faulhaber, Amy Bassano, Eric Hammelman, Aimee Lashbrook, Andrea Maresca, Tim Courtney, Kevin Kirby, or Sarah Owens.

Meet the HMA blog contributors

Julie Faulhaber

Julie Faulhaber, MBA

Managing Director, Medicare and Dual Eligibles
Chicago, IL
Amy Bassano

Amy Bassano

Managing Director, Medicare
Washington, DC
Aimee Lashbrook

Aimee Lashbrook, JD, MHSA

Associate Principal
Lansing, MI
Andrea Maresca

Andrea Maresca, MPH

Managing Director, Information Services
Washington, DC
Kevin Kirby

Kevin Kirby

Managing Director
Washington, DC
Sarah Owens

Sarah M. Owens

Philadelphia, PA
Tim Courtney

Tim Courtney, FSA, MAAA

Principal, Wakely Consulting Group, an HMA Company
Atlanta, GA