CMS Is Making Medicare Advantage Risk Adjustment Changes
Wednesday, September 23rd, 2020

CMS recently proposed changes to Medicare Advantage and Part D payments for 2022, finalizing a multi-year phase-in of a novel, controversial payment method where plan risk scores are based entirely on encounter data.

In the past, to complement encounter information in calculating payment, CMS has relied on reports submitted through its Risk Adjustment Processing System (RAPS) method but stated that policy would cease in 2022.

Risk scores reflect a beneficiary’s estimated medical expenses and are utilized in tailoring Medicare Advantage plan federal payments. In general, the more ill an individual is, the greater the risk score and, therefore, the greater the payment earned by an MA plan. CMS began collecting encounter data, or data based on claims data generated by a provider, supplier, physician in a practice or hospital setting, in 2012. According to insurers, this data can often be incomplete or inconsistent, so depending entirely on that data for risk scores could potentially lower federal plan payments.

As mandated by the 21st Century Cures Act, CMS will completely transition to this risk adjustment calculation model that has been slowly increasing since 2016, when encounter data made up 10% of a risk score. In 2019, 25% of risk adjustment scores were based on encounter data, and that number increased to 75% in 2021. In 2022, encounter data will be the sole determinant for calculating risk adjustment.

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