A new legal analysis prepared for the Better Medicare Alliance by the law firm Foley Hoag LLP finds that the Centers for Medicare & Medicaid Services (CMS) has the statutory authority to modify its risk adjustment calculation permitting the use of 2019 and 2020 data and/or to lower the fee-for-service normalization factor ahead of the June 1, 2020 deadline for bid submissions.

The Better Medicare Alliance, a leading Medicare advantage and research coalition, had previously asked Seema Verma, administrator of the CMS, to issue guidance to help stabilize the market before health plans finalize their bid decisions for 2021 benefits. It suggested the agency exclude COVID-19 vaccinations and treatment costs from the bids and make modifications to data submitted in the risk adjustment payment process and provide an update to the normalization factor.

Because of the shelter-in-place orders throughout the country, Medicare beneficiaries have delayed preventive care, primary care, and elective procedures in 2020. As a result, utilization of health care services in 2020 will not reflect the true health status of Medicare beneficiary and will not provide accurate projections of future health costs, according to the alliance. Furthermore, plans have no way to forecast the cost and utilization of potential future testing, diagnostics, and other treatments associated with COVID-19. These factors could result in higher member costs and reduced benefits in 2021.

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While CMS has provided Medicare Advantage plans with several flexibilities in the wake of COVID-19, it has questioned whether it has the authority to act on its own to make these changes to protect seniors from higher premiums in 2021.

In a follow-up memo to Verma on May 5, the law firm Foley Hoag LLP said the agency does indeed have the authority to modify risk adjustment calculations either through a Section 402 Demonstration Project or a Section 1135 waiver. The law firm said CMS has used its authority in the past to make payment adjustments outside of the typical rate-setting process.

CMS usually provides notice of proposed changes in its annual advance notice, which has already been released. Therefore, the law firm said CMS must use its additional authority to make policy changes in response to the COVID-19 pandemic in time for the 2021 contract year. The agency may make policy adjustments outside of the typical rate-setting timeline either by creating a Section 402 demonstration project to improve the efficiency of treatment for Medicare Advantage beneficiaries during COVID-19 or through a Section 1135 waiver modifying the notice requirements for changes to the risk adjustment.

“With this analysis, we are showing regulators that they have full legal authority to make the sensible reforms we have requested to protect the nation’s 24.4 million Medicare Advantage beneficiaries from higher premiums in 2021,” Allyson Y. Schwartz, president and CEO of the Better Medicare Alliance, said in a statement sent to RISE.

Schwartz said the advocacy group applauds the actions that CMS has already taken to meet the needs of seniors, but because of the uncertainty created by the global pandemic, Medicare Advantage plans need further guidance to develop their bids for the 2021 coverage year.

In recognition of the disruption in care delivery and the impact on data collection essential for accurate financing, we have asked CMS to modify its risk adjustment calculation to allow use of 2019 data or to update the 2021 normalization factor to provide payment accuracy. This analysis affirms that the agency has in its power the tools to do exactly that.”

Medicare Advantage plans, providers, and community partners are doing all they can to protect access to care due to the COVID-19 emergency, including waiving costs for coronavirus treatment, telehealth visits, and meal delivery for millions of seniors, Schwartz noted. “It is our strong hope that the Administration takes further action now to ensure stability going into 2021.”