Insurers insist RADV rule, MA payment changes would result in cuts

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Insurers have been pushing back against a Medicare Advance Notice on payment rates and a Risk Adjustment Data Validation (RADV) final rule they say will affect consumers and taxpayers.

With an eye toward improving program integrity, the Risk Adjustment Data Validation (RADV) rule modifies how CMS calculates what a plan has to pay back to the federal government when risk adjustment diagnosis codes aren't supported by the medical records. Risk adjustment, based on an enrollees' health status, determines plan payments.

CMS' rule will extrapolate error rates in the audit sample to the full contract. This practice is common to other audits, but it's new to RADV. And CMS is estimating about $4.5 billion in collections over the next 10 years by applying these changes to audits, starting with plan year 2018, though no new collections will come in until 2025.

On top of the RADV rule is a proposal to modify Medicare Advantage payments for the upcoming plan year, which happens annually when CMS publishes its notice of proposed MA payment changes. The changes are technical adjustments that allow for the payment formula to reflect economic changes and Medicare spending trends.

Current estimates from CMS are that plan payments per enrollee for MA will be a little over 1% higher in 2024 than they are this year. The Congressional Budget Office estimates that the total proposed payment changes for 2024 are unlikely to affect the trajectory of Medicare Advantage spending.

Insurers take issue with the RADV rule and payment adjustments, saying that rather than resulting in an increase in collections, they will ultimately harm insurers financially.

Meleah Bridgeford, director of risk adjustment analytics at Episource, said there are two payment systems in Medicare: Fee-for-service, in which CMS pays directly, and Medicare Advantage Organizations (MAOs), in which the member can enroll and CMS pays a capitated rate. The capitated rate is based on how sick a member is, and that's where the risk score comes in. 

From the start, CMS has understood the difference between fee-for-service and MA when it comes to the claims they receive, she said, and CMS applies a modifier to MA. Fee-for-service and MA have the same model as far as what conditions are looked at, with risk scores linked to those conditions. What's different, she said, is that with CMS paying at a capitated rate, they're going to do more to make sure they're capturing various conditions. The modifier lowers the risk score.

"When RADV was coming out and CMS was looking at the accuracy of these samples they were pulling, CMS turned around and said they'd have a fee-for-service adjuster," said Bridgeford. "What it acted like is kind of like a benchmark in some regards. An MA organization will do a chart review to look for those conditions they're missing; they don't go after every single chart. So there is some of that, where they're not going after everything. From an MAO perspective, they're not going to be 100% accurate."

With fee-for-service, she said, there's no checking of the diagnosis code. The provider is just paid based on the claims they're submitting.

"CMS was looking at error rate in its FFS claims, and applying that as an adjuster when it comes to RADV audits for MAOs," said Bridgeford. "MA wasn't being kept to a 100% accuracy standard. Now, with getting rid of the fee-for-service adjuster, this says to MAOs, 'You're going to be kept to this 100% adjuster.'"

What remains a sticking point for insurers is the discrepancy between their projections and those of CMS. While CMS said the 2024 Advance Notice for the Medicare Advantage and Part D Prescription Drug Programs rule would result in a little over 1% increase for Medicare Advantage plans, payers are saying this would result in a more than 2% decrease.

Bridgeford has an idea why.

"CMS looks at fee-for-service data," she said. "They're not looking at Medicare Advantage data. They're taking that percentage they're getting and applying it to MAOs. Whereas MAOs, they're going to be looking at their data specifically, and oftentimes it's their own data in-house. I think that's where a lot of the differences are. Avalere did a study on applying CMS' logic specifically to MAOs and they showed some of the flaws – trying to apply the same rules from fee-for-service to MAOS. There are missing data points.

"Both sides are going to be a little bit self-serving," she said. "They'll play it to their best advantage."

Bridgeford said the writing is on the wall in terms of what will be needed for compliance.

"They're placing more of an emphasis on compliance and doing compliance reviews," she said. "It's important that when these MAOs do their chart reviews, they're not just looking one way. They're putting themselves at risk when they're not validating their claims. There's more of an emphasis on linking chart review to a claim."

Mark Hamelburg, senior vice president, federal programs at AHIP, also questioned CMS' figures as they pertain to the Medicare Advantage payment changes. In his view, the changes are unquestionably a cut to insurers.

"CMS estimates that the average rate reduction would be 2.27% based on the policies in the proposed rule," said Hamelburg. "The issue of confusion is this 3.3% risk score trend that is being used to offset the other reductions. This isn't the first time that administrations have incorporated a risk score calculation when they release a Medicare Advantage rate notice. But in each case where they've done that, they calculate that risk score trend, but only after they separately calculate the combined impacts of the proposals in the rate notice. They'll either put it in a footnote or add a line. I think it's quite clear – we have to do the math."

According to Hamelburg, the proposed changes from the rate notice were -2.27% on average. Under the Obama administration, he said, a distinction was made between what the rate notice is doing and what the administration believes would occur, separate from the actual policies. The trend is only in the official FAQ sheet because it's not a part of the rate-setting policies in the advance notice, he said. 

"In our view it's quite clear the policies within the four corners of the Advance Notice don't include this estimated risk score trend," said Hamelburg. "If it did, it would be included in the notice. CMS would be transparent about how they made that calculation and stakeholders would be able to weigh in and comment. In fact, there's no transparency as to how they calculated it."

AHIP has serious questions about the number. One of the proposed changes in the rate notice pertains to the risk adjustment model, having to do with removing HCCs, or Hierarchical Condition Categories codes that CMS believes are contributing to the risk score trend. Hamelburg said it seemed odd that, at the same time they're proposing changes to reduce the risk score trend, they're estimating the trend will continue.

"The focus should be on the rates, as they would be modified based on the rate notice," he said.

As for how the rate notice will affect insurers, Hamelburg said it's going to vary between different plans and geographies. There's concern about individuals who are dually eligible for Medicare and Medicaid, as well as those with a large number of conditions who are affected by the changes, and particularly for plans that serve a high percentage of those enrollees.

In Hamelburg's view, this could have a significant effect on premiums, and could possibly reduce benefits to enrollees.

The Department of Health and Human Services disputes AHiP's claim of rate cuts, stating in February, "Despite industry-funded reporting indicating otherwise, the Biden-Harris Administration is not proposing cuts to Medicare Advantage. In fact, the administration is proposing to increase Medicare Advantage payments this year by 1%, on top of an 8.5% increase in Medicare Advantage payments last year."

Bridgeford said she sees an opportunity.

"Ultimately, there's this move toward value-based care," she said. "With the move, it really is this opportunity for providers and insurers to develop that relationship with one another. The stronger that relationship is, the more accurate your data can become.

"When we talk about risk adjustments, you focus so much on the financials, but what it all goes down to is whether you're getting these clearer pictures," said Bridgeford. "The result is better care and better care management for the member."
 

Twitter: @JELagasse
Email the writer: Jeff.Lagasse@himssmedia.com