The Centers for Medicare & Medicaid Services (CMS) announced Medicare Advantage (MA) plans will see an even bigger pay bump than what the agency originally proposed in February. CMS also finalized policies for risk adjustment and Star ratings for 2023.

CMS on Monday released its final payment policy changes for MA and Part D drug programs in 2023.

MA plans will see an 8.5 percent average increase in revenue—which is 0.5 percent higher than what CMS originally suggested in the proposed rate announcement. The effective growth rate also increased slightly from 4.75 percent in the proposed advance notice to 4.88 percent.

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The rate announcement also includes final policies on risk adjustment and Star ratings for 2023.

Part C Risk Adjustment: As it proposed, CMS will continue its 2022 policy to calculate 100 percent of the risk score using the 2020 CMS-HCC model. It will also continue to calculate risk scores for MA enrollees using diagnoses exclusively from MA encounter data submissions and fee-for-service (FFS) claims. The agency also will evaluate comments on whether it can improve the CMS-HCC risk adjustment model by addressing the impacts of social determinants of health on beneficiary health status by incorporating additional factors that predict the relative costs of MA enrollees.

Part C End Stage Renal Disease (ESRD) Risk Adjustment: CMS will revise the risk adjustment model for payment to MA organizations and additional demonstrations and programs that use the MA risk adjustment models for enrollees with ESRD. The revised model aims to better predict the cost of these enrollees and is calibrated on more recent data, using CMS’ current approach to identify risk adjustment eligible diagnoses from encounter data records.

Program of All-Inclusive Care for the Elderly (PACE) Risk Adjustment: The agency said it will continue to use the 2017 CMS-HCC model to calculate non-ESRD risk scores as it has done since 2020, the 2019 CMS-HCC ESRD models to calculate ESRD risk scores as it has done since 2019, and the 2020 RxHCC model to calculate Part D risk scores as it has done since 2020.

Medicare Advantage Coding Pattern Adjustment: By law, each year CMS must make an adjustment to plan payments to reflect differences in diagnosis coding between MA organizations and FFS providers. For 2023, CMS said it will finalize a coding pattern adjustment of 5.9 percent, which is the minimum adjustment for coding pattern differences required by statute.

CMS also said it received several recommendations from stakeholders regarding approaches to estimate the MA coding pattern adjustment. Among them: CMS should apply a higher coding pattern adjustment than the statutory minimum and that CMS consider approaches that account for differences in coding patterns across MA plans. CMS said it continually reviews MA coding patterns and assesses how it calculates the MA coding pattern adjustment, how best to apply it, and what the appropriate level of the adjustment should be. CMS said it will consider these recommendations in the development of future coding pattern adjustment proposals.

Medicare Advantage Normalization Factor: Each year, CMS calculates normalization factors to keep the FFS risk score at the same average level over time. For 2023, CMS said it will use the methodology typically used for calculating the normalization factor, which is to project the payment year risk score using a trend that is based on five historical years of FFS risk scores under the payment year model. However, because of the impact of the COVID-19 pandemic, for 2023 CMS will use the same years of FFS risk scores that it used to calculate the 2022 normalization factors, 2016-2020.

Part D Risk Adjustment: As it proposed, CMS will implement an updated version of the RxHCC risk adjustment model for Part D sponsors other than PACE. CMS uses the RxHCC model to adjust direct subsidy payments for Part D benefits offered by stand-alone prescription drug plans (PDPs) and MA prescription drug plans (MA-Ps). The recalibrated RxHCC model includes a clinical update to the RxHCCs based on ICD-10-CM diagnosis codes rather than ICD-9-CM codes used in the prior models. The recalibrated model also includes an update to the data years (2018 diagnoses to predict 2019 costs) using the same approach CMS uses to filter diagnoses from encounter data records for risk score calculation, including the risk adjustment allowable CPT/HCPCS codes.

Part C and D Star Ratings: In the Advance Notice, CMS asked for feedback on several proposals related to social risk factors:

  • Plans to enhance current CMS efforts to report stratified Part C and D Star Ratings measures by social risk factors to help MA and Part D sponsors identify opportunities for improvement. Stakeholders supported stratified reporting, and CMS said it will begin sharing confidential stratified reports with contracts this spring.
  • The development of a Health Equity Index as an enhancement to the Part C and D Star Ratings program to summarize measure-level performance by social risk factors into a single score used in developing the overall or summary Star Rating for a contract.
  • The development of a measure to assess whether plans are screening their enrollees for health-related social needs such as food, housing, and transportation.
  • How MA organizations are transforming care and driving quality through value-based contracts with providers to use in the potential development of a Part C Star Ratings measure.

CMS said it will consider the feedback as it looks for ways to further drive health equity and high-quality care.