Despite concerns from the industry about proposed changes to the risk adjustment program, the Centers for Medicare & Medicaid Services (CMS) finalized its plans to revamp the model. However, the modifications to the risk adjustment program will be phased in over three years, which means Medicare Advantage (MA) plans will see a 3.32 percent net increase in revenue in 2024 instead of the one percent the agency projected in February.
CMS late Friday released the Calendar Year (CY) 2024 Medicare Advantage and Part D Rate Announcement, projecting a payment increase for MA plans of 3.3 percent from 2023 to 2024, which is approximately a $13.8 billion increase in MA payments for next year. In addition to updates to MA payment growth rates and methodologies, the rate announcement also includes technical and clinical changes to the MA risk adjustment model.
Among the changes included in the 200-page announcement:
Revisions to the risk adjustment model
CMS will move forward with the changes it proposed for the model in the Advance Notice, including restructured condition categories using the ICD-10 classification instead of ICD-9 and updated underlying Fee-for-Service data years from 2014 diagnoses and 2015 expenditures to 2018 diagnoses and 2019 expenditures. As a result, the 2024 CMS-HCC payment model will have 2,236 fewer diagnosis codes that map to Hierarchical Condition Categories (HCCs), which CMS said will improve predictive ability and better account for current disease patterns, treatment methods and costs, and diagnosis and coding practices.
The model will be phased in over three years:
- For CY 2024, risk scores will be calculated as a blend of 67 percent of the risk scores calculated with the current model (the 2020 model) and 33 percent of the risk scores calculated with the updated model (the 2024 model).
- For CY 2025, CMS expects risk scores to be calculated as a blend of 33 percent of the risk scores calculated with the 2020 model and 67 percent of the risk scores calculated with the 2024 model.
- For CY 2026, CMS expects 100 percent of the risk scores to be calculated with the 2024 model.
RELATED: The fight for Medicare Advantage: CMS, payers clash over proposed 2024 changes
CMS said the changes in risk adjustment payment policies were developed in collaboration with expert clinicians to account how well different conditions predict costs and will help make payments more accurate. “This reduces incentives to cherry-pick healthy beneficiaries and discriminate against sicker patients. In addition, CMS will continue to pay more for someone who is dually eligible for Medicare and Medicaid than someone who is not when they have the same diagnoses,” CMS said in the announcement.
Part C and D Star ratings changes
As indicated in the Advance Notice, CMS finalized updates for Star ratings, including providing the list of eligible disasters for the extreme and uncontrollable circumstances adjustment, non-substantive updates to several measure specifications, and the list of measures included in Part C and D Improvement Measures and Categorical Adjustment Index for the 2024 Star Ratings, which will be issued later this year.
Inflation Reduction Act of 2022 (IRA) updates for 2024
As indicated in the Advance Notice, the following provisions from the IRA impact Part D plans and will take place beginning Jan. 1, 2024:
- Eliminate cost-sharing for Part D drugs for beneficiaries in the catastrophic phase of coverage.
- Expand the Low-Income Subsidy Program (LIS) under Part B) so that beneficiaries who earn between 135 and 150 percent of the federal poverty level and meet statutory resource limit requirements will receive the full LIS subsidies that were prior to 2024 only available to beneficiaries earning less than 135 percent of the federal poverty level.
- Eliminate the deductible to any Part D covered insulin product. Part D plans must charge no more than $35 per month’s supply of a covered insulin product in the initial coverage phase and the coverage gap phase.
- Eliminate the deductible to an adult vaccine recommended by the Advisory Committee on Immunization Practices. Part D plans must charge no cost-sharing at any point in the benefits for the vaccines.
- Provide a cap of six percent for the growth in the Base Beneficiary Premium. The premium will be limited to the lesser of a six percent annual increase or the amount that would otherwise apply under the prior methodology had the IRA not been enacted.