Today, the Centers for Medicare & Medicaid Services (CMS) released the Calendar Year (CY) 2023 Advance Notice of Methodological Changes for Medicare Advantage (MA) Capitation Rates and Part C and Part D Payment Policies (the Advance Notice). CMS will accept comments on the CY 2023 Advance Notice through Friday, March 4, 2022, before publishing the final Rate Announcement by April 4, 2022.
Net Payment Impact
The chart below indicates the expected impact of the proposed policy changes on MA plan payments relative to last year.
Year-to-Year Percentage Change in Payment
| Impact | 2023 Advance Notice |
|---|---|
| Effective Growth Rate | 4.75% |
| Rebasing/Re-pricing | TBD |
| Change in Star Ratings | 0.54% |
| Medicare Advantage Coding Pattern Adjustment | 0% |
| Risk Model Revision | 0% |
| Normalization | -0.81% |
| MA risk score trend | 3.50% |
| Expected Average Change in Revenue | 7.98 % |
2023 Part C Risk Adjustment
CMS will continue the CY 2022 policy to calculate 100 percent of the risk score using the 2020 CMS-HCC model, which was phased in from CY 2020 to CY 2022, as required by section 1853(a)(1)(I) of the Act, as amended by the 21st Century Cures Act. We are also continuing our policy of calculating risk scores using diagnoses exclusively from MA encounter data submissions and fee-for-service (FFS) claims. CMS is soliciting comment on whether enhancements can be made to the CMS-HCC risk adjustment model to address the impacts of social determinants of health on beneficiary health status by incorporating additional factors that predict the relative costs of MA enrollees.
2023 End Stage Renal Disease (ESRD) Risk Adjustment
CMS uses a separate model to calculate the risk scores applied in payment for the Part A and Part B benefits provided to beneficiaries in ESRD status when enrolled in MA plans, Program of All-Inclusive Care for the Elderly (PACE) organizations, and certain demonstrations, including Medicare-Medicaid Plans (MMPs). In the CY 2023 Advance Notice, we are proposing to implement a revised model for payment to MA organizations for enrollees in ESRD status and intend to use the revised model for additional organizations other than PACE; this revised model is calibrated on more recent data, using CMS’ current approach to identify risk adjustment eligible diagnoses from encounter data records. It also incorporates improvements previously made to the Part C CMS-HCC model, specifically the clinical updates and revised segmentation, which accounts for the differential cost patterns of dual eligible beneficiaries.
Program of All-Inclusive Care for the Elderly (PACE) Risk Adjustment
For CY 2023 payment to PACE organizations, we will continue to use the 2017 CMS-HCC model to calculate non-ESRD risk scores as we have done since CY 2020 and the 2019 ESRD models to calculate ESRD risk scores as we have done since CY 2019.
Medicare Advantage Coding Pattern Adjustment
Each year, as required by law, CMS makes an adjustment to plan payments to reflect differences in diagnosis coding between MA organizations and FFS providers. For CY 2023, CMS proposes to apply a coding pattern adjustment of 5.9 percent, which is the minimum adjustment for coding pattern differences required by statute. CMS continually reviews MA coding patterns and continues to assess how we calculate the MA coding pattern adjustment, how best to apply it, and what the appropriate level of the adjustment should be.
Medicare Advantage Normalization Factor
CMS calculates normalization factors annually to keep the FFS risk score at the same average level over time. CMS is proposing to use the methodology typically used for calculating the normalization factor, which is to project the payment year risk score using five historical years of FFS risk scores under the payment year model. CMS typically uses the most recent years of available FFS risk scores to calculate the trend. However, for CY 2023, we are proposing not to update the years in the trend because of concerns that the changing use of services in 2020 because of the COVID-19 pandemic resulted in an anomalous 2021 risk score, which will result in a projection that significantly underestimates what the 2023 risk score is likely to be. Instead, CMS is proposing to use the same years of FFS risk scores that were used to calculate the slope for the 2022 normalization factors, 2016 through 2020.
2023 Part D Risk Adjustment
For CY 2023, we propose to implement an updated version of the RxHCC risk adjustment model used to adjust direct subsidy payments for Part D benefits offered by stand-alone prescription drug plans (PDPs) and Medicare Advantage prescription drug plans (MA-PDs). 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 we use 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 provides information and updates in accordance with the Star Ratings regulations at §§ 422.164, 422.166, 423.184, and 423.186. In addition, CMS solicits input on future measures and concepts as we continue to advance health equity and enhance the Star Ratings over time.
The Advance Notice includes information about the date by which plans must submit their requests for review of the appeals and complaints measures data, lists the measures included in the Part C and D Improvement measures and the Categorical Adjustment Index for the 2023 Star Ratings, and lists the states and territories with Individual Assistance designations that began in 2021 from the nationwide FEMA major disaster declarations used in the definition of an affected contract for the extreme and uncontrollable circumstances adjustment for the 2023 Star Ratings.
Additionally, CMS is soliciting feedback on a number of different potential measurement concepts and methodological enhancements, including the following:
- 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.
- 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 models with providers to use in the potential development of a Part C Star Ratings measure.