CMS Issues the 2022 Medicare Advantage Advance Notice Part I – Risk Adjustment

Sheppard Mullin Richter & Hampton LLP

Sheppard Mullin Richter & Hampton LLP

On September 14, 2020, the Centers for Medicare & Medicaid Services (“CMS”) issued the Advance Notice of Methodological Changes for Calendar Year (CY) 2022 for Medicare Advantage (MA) Capitation Rates and Part C and Part D Payment Policies – Part I, CMS-HCC Risk Adjustment Model (the “Advance Notice”).  CMS is issuing the Advance Notice in two parts: Part I includes key information about the Medicare Advantage CMS-Hierarchical Condition Categories (“HCC”) risk adjustment model and the use of encounter data for CY2022.  Part II, which will include other changes to the CY2022 payment methodologies, will be issued later this Fall.   CMS will announce the CY2022 MA capitation rates and final payment policies no later than Monday, April 5, 2021.

CMS proposes to fully phase in the CMS-HCC model first implemented for CY2020 (i.e., the 2020 CMS-HCC model), as required by the 21st Century Cures Act. The 2020 CMS-HCC model adds variables that count conditions, e.g., total number of diseases or conditions of an individual, in the risk adjustment model and includes payment for additional codes related to mental health, substance use disorder, and chronic kidney disease. This represents a change from the blend for CY2021 of 75% of the risk score calculated using the 2020 CMS-HCC model and 25% of the risk score calculated using the older 2017 CMS-HCC model.

The 2020 CMS-HCC model is significant because it is designed to calculate the risk scores for Medicare Advantage organizations using diagnoses submitted from encounter data submissions via the Encounter Data Processing System (“EDPS”) as opposed to diagnoses submitted via CMS’ risk adjustment processing system (“RAPS”).  CMS’ proposed full-phase in of the 2020 CMS-HCC model means that Medicare Advantage organizations’ risk scores will be based entirely on encounter data submissions.  CMS also proposes to discontinue the policy (used for CY2019, CY2020, and CY2021) of supplementing diagnoses from encounter data with diagnoses from inpatient records submitted to RAPS for calculating beneficiary risk scores.

While no longer having to maintain two separate systems for the submission of risk adjustment data, it is unlikely that Medicare Advantage organizations will welcome CMS’ proposed changes given ongoing concerns regarding CMS’ systems for receiving and processing encounter data.  CMS has previously acknowledged plans’ concerns regarding the reliability of the encounter data systems, but dismisses those concerns as older and not reflective of more recent improvements.

Comments are due no later than November 13, 2020.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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