qotd: CMS will likely continue to overpay Medicare Advantage plans

Center on Budget and Policy Priorities
February 16, 2016
Making Medicare Advantage Payments More Accurate
By Edwin Park

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.

http://www.cbpp.org/blog/making-medicare-advantage-payments-more-accurate

***

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

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.

https://www.cms.gov/Newsroom/MediaReleaseDatabase/Fact-sheets/2016-Fact-sheets-items/2016-02-19.html

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):

https://www.cms.gov/Medicare/Health-Plans/MedicareAdvtgSpecRateStats/Downloads/Advance2017.pdf

***

AHIP
January 28, 2016
AHIP, Coalition for Medicare Choices Launch Nationwide Ad and Grassroots
Campaign to Protect Medicare Advantage

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."

https://www.ahip.org/News/Press-Room/2016/AHIP,-Coalition-for-Medicare-Choices-Launch-Nationwide-Ad-and-Grassroots-Campaign-to-Protect-Medicare-Advantage.aspx

***


Comment by Don McCanne

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.