The Centers for Medicare & Medicaid Services (CMS) proposes updates to Medicare Advantage (MA) payment growth rates, changes to the MA and Part D Prescription Drug Programs, and technical updates to the MA risk adjustment model.

Just days after CMS issued a final rule to revamp its Risk Adjustment Validation Audits of MA plans, the agency on Wednesday released the Calendar Year (CY) 2024 Advance Notice for the MA and Part D Prescription Drug Programs, proposing updates to payment policies for the programs and seeking feedback on MA quality measures under Star ratings.

In addition to the payment changes, the Advance Notice outlines several updates and improvements made by the Inflation Reduction Act (IRA) to the Part D program that will go into effect or be in effect on January 1, 2024. These include the continuation of reduced cost-sharing for insulin and eliminated cost-sharing for recommended, preventive vaccines, as well as the elimination of cost-sharing for Part D prescription drugs in the catastrophic phase and expansion of eligibility for full cost-sharing and premium subsidies under the Low-Income Subsidy program.

“The commonsense proposals in the Advance Notice, coupled with the proposals in the MA and Part D rule released in December, ensure these important programs continue to meet the health care needs of all beneficiaries while improving the quality and long-term stability of the Medicare program,” said CMS Deputy Administrator and Director of the Center for Medicare Meena Seshamani, M.D., Ph.D., in an announcement.

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Comments on the Advance Notice will be accepted through March 3, and CMS will finalize the payment policies in the CY 2024 Rate Announcement, which will be published no later than April 3.

Here is a summary of four changes outlined in the 139-page Advance Notice:

Net payment impact

In a fact sheet, CMS said it expects:

  • Medicare costs to grow by 2.09 percent in 2024 compared to 2022
  • MA plans will see a 1.03 percent change in revenue
  • The average increase in risk scores will be 3.30 percent (the figure doesn't account for normalization and MA coding adjustments) 

A revised CMS-HCC risk adjustment model

CMS plans to revise the Part C risk adjustment model to incorporate a clinical revision of HCCs using ICD-10 codes for the first time. It also intends to update underlying Fee-For-Service data years (from 2014 diagnoses and 2015 expenditures to 2018 diagnoses and 2019 expenditures).

While the model will structurally stay the same, CMS said the proposed model reflects more current costs associated with various diseases, conditions, and demographic characters. It also takes into account the ICD-10 diagnostic classification system that has been used for medical payment since 2015. CMS states in the Advance Notice that the changes to the model will result in more appropriate relative weights for HCCs because they reflect more recent utilization, coding, and expenditure patterns in FFS Medicare, and revised HCCs that reflect clinical cost patterns associated with ICD-10 codes currently being used by providers. Preliminary ICD-10 to HCC mappings can be found here.

Changes to Part C and D Star ratings

The Star ratings update include a list of eligible disasters for adjustment, non-substantive updates to several measure specifications, and the list of measures included in the Part C and D improvement measures and the Categorical Adjustment Index for the 2024 Star Ratings, which will be issued later this year.

CMS also is seeking feedback on new measures across its quality rating and value-based programs that it calls a “Universal Foundation” of a core set of quality measures that are aligned across programs. The agency said in the Advance Notice that the Universal Foundation will focus provider attention; reduce provider burden; allow for consistent stratification of measures to identify disparities in care; accelerate the transition to interoperable, digital quality measures; and allow for cross comparisons across quality and value-based care programs, to better understand what drives quality and equity improvement and what does not. The preliminary set of measures is listed in Table IV-4 (p. 103 of the Advance Notice) and includes whether the measures are currently in the Star ratings program.

Updates based on the Inflation Reduction Act (IRA) of 2022

The Advance Notice includes provisions from the IRA that will be in place beginning Jan. 1, 2024 and that impact Part D plans:

  • 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.