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Medicare Advance Notice

2023 Medicare Advantage Advance Notice: 5 Key Takeaways

It came as no surprise when Medicare Advantage (MA) continued its trend of rapid and steady growth in 2021, with enrollment accounting for 42 percent of the total Medicare population – equating to more than 26 million people. The Congressional Budget Office now forecasts that MA enrollment will exceed more than half of all Medicare enrollment by 2030. For the growing number of health plans operating in the MA market, this means heightened competition to attract and maintain members and an even greater focus on regulatory compliance and preparedness.

Regulatory preparedness is a year-round sport in healthcare. For MA plans, release of the CMS Advance Notice – an annual regulatory policy document detailing proposed payment and coverage policies for MA and Part D plans for the upcoming plan year – represents an important milestone each year, helping frame plans’ regulatory preparedness efforts in the months that follow and often beyond. This year, the 2023 Advance Notice, which serves as the first rate notice for the Biden Administration, may be most notable for what it does not include – no changes to the risk adjustment model used for MA plan payment, no changes to the coding intensity factor, no major quality or risk-related policy changes, etc.

While largely status quo, the 2023 Advance Notice does include several important proposals that MA plans need to be aware of and prepared for. From changes to the End Stage Renal Disease (ESRD) and Prescription Drug Hierarchical Condition Category (RxHCC) risk adjustment models, to new initiatives focused on incorporating social risk factors and health equity into the Star Ratings and risk adjustment programs – here’s the top five things you need to know:

1. Payment for MA plans includes few substantive changes

CMS is not proposing significant changes in MA or Part D payment policies for 2023 and will continue. leveraging encounter data and fee-for-service (FFS) data to calculate risk scores.

Key Medicare Advantage Program Updates

2023 MA Updates

*Rebasing/re-pricing impact is dependent on the final average geographic adjustment index and will be available with the publication of the CY 2023 Rate Announcement.
** This does not include the MA risk score trend. In 2023, CMS estimates a risk score growth of 3.50%, not accounting for normalization and MA coding adjustments. In previous rate notices, CMS estimated average risk score increases of 3.45% for 2022 and 3.56% for 2021.

2. Star ratings and risk adjustment focus on health equity and social risk factors

Amid growing recognition that social and economic factors contribute significantly to one’s overall health, CMS put a spotlight on health equity and social risk factors in the 2023 Advance Notice, including a range of proposals focused on incorporating these factors into the Star Ratings and risk adjustment programs.

For Star Ratings, CMS is considering the development of new measures focused on social risk factors and health equity, including:

    • Driving Health Equity: Focused on identifying within-contract differences in performance to remove potential selection bias in the treatment of certain disparities.
    • Stratified Reporting: Expanded reporting on contract performance for additional Star Ratings measures for subgroups of beneficiaries with social risk factors.
    • Health Equity Index: Create a plan performance index to include a subset of Star Ratings measures and develop the Health Equity Summary Score, a quality improvement tool.
    • Measure of Contracts’ Assessment of Beneficiary Needs (MA only): Measure development to determine assessment rates for health-related social needs using a standardized screening tool.
    • Screening and Referral to Services for Social Needs (MA only): Develop a MY 2023 measure to assess screening for unmet health-related social needs, including referral to intervention.

Related to health equity, CMS is also soliciting comments on how the risk adjustment model might be adjusted to account for the impact of social determinants of health (SDOH) in the future. CMS is seeking comments on how to improve data collection and what additional data could be collected and incorporated into the HCC model to advance equity (e.g., geographic data).

 Increasing Weight of Patient Experience Measures in Star Ratings

Finally, CMS continues its march toward more heavily weighting patient experience (e.g., CAHPS and HOS survey measures) in its calculation of MA plan Star Ratings. Based on the changes implemented for 2023 Star Ratings, as much as 44% of an MA plan’s quality score will be based on Patient Experience measures.

3. Lower plan payments may result from normalization factor calculation changes

Due to lower-than-predicted 2020 utilization, CMS is proposing to exclude 2021 risk scores from the calculation of CY 2023 normalization factors. Instead, CMS will use the same 5 years of historical risk scores used to calculate the CY 2022 normalization factor and estimates this will lower MA plan payments by 0.81%.

4. Potential of lower risk scores for ESRD enrollees amid proposed model revisions

CMS proposes several updates to the ESRD risk adjustment model, including updating the clinical version of the model to align with the 2020 CMS-HCC model and updating the data years used for model calibration from 2014 to 2018. In addition, CMS has proposed to account for cost pattern differences for dual-eligible enrollees by breaking the single functioning graft community model into 4 separate model segments to reflect the specific relative costs for an HCC within that subgroup.

While CMS estimates these changes could result in $470 million in savings to the Medicare Trust Funds in 2023, its proposed updates to the ESRD payment model could result in lower risk scores for ESRD enrollees, which could reduce plan payment.

Additionally, while CMS has expressed concerns over deviating from its current statewide payment calculation for ESRD enrollees, the agency suggests it may consider additional modifications to payment policy in the future and interested stakeholders should consider submitting comments. A 2019 Avalere Health analysis found MA payment for ESRD enrollees in highly populated regions may be substantially below actual patient costs, reporting that 10 out of 15 of the top metropolitan statistical areas (MSAs) by ESRD FFS-enrolled had costs that exceeded the MA payment rate.

5. RxHCC model updates reflect transition to ICD-10

CMS proposes modest adjustments to the Part D benefit parameters and a recalibration of the 2023 Part D RxHCC risk adjustment model, which reflects the transition from ICD-9 to ICD-10 diagnosis codes.

2023 CMS Parameters

CMS 2023 Advance Notice: next steps

Keep an eye out for when CMS announces the 2023 MA capitation rates and final payment policies, no later than Monday, April 4.

For a comprehensive, data-driven analysis of the proposals outlined in the CMS 2023 Advance Notice, check out this on-demand webinar, 2023 Advance Notice: What Medicare Advantage Plans Need to Know.

If you have questions about CMS’ proposals or are looking for expert analysis to better understand the potential impact of proposed changes on your organization, please contact us to set up time to speak with one of our subject matter experts.

By Tom Kornfield, Senior Consultant, Avalere and Matthew Caminiti, Senior Principal Sales Engineer, Inovalon