On February 1, the Biden administration proposed to increase Medicare Advantage (MA) and Part D plan payments by 1.03% for 2024 amid other changes to the programs’ risk adjustment model. The Centers for Medicare & Medicaid Services (CMS) released the advance notice of methodological changes for MA capitation rates and payment policies for MA and Part D. The proposed rule implements several changes to the risk adjustment model. “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 healthcare needs of all beneficiaries,” said CMS Deputy Administrator and Director of Medicare Meena Seshamani, M.D., Ph.D., in a statement. Comments on the Advance Notice are due March 3, 2023. The final Rate Announcement will be published no later than April 3, 2023.
Proposals from Advance Notice
The effective growth rate for 2024 MA non-End-Stage Renal Disease (ESRD) rates is estimated to be 2.09%. Accounting for the impact of the benchmark rate cap, MA rebate and other policies, the net impact on the Medicare Trust Funds for CY 2024 is expected to be $7.3 billion. CMS estimates the expected average change in revenue for MA organizations to increase by 1.03% in CY 2024, down from an 8.50% increase in CY 2023. Normalization and changes to the Part C risk adjustment model resulting in a -3.12% decrease, plus a -1.24% decline due to changes in Star Ratings, are driving the lower increase in revenue.
CMS further proposes several changes to the Hierarchical Condition Category (HCC) risk adjustment model. The impact of the proposals on MA risk scores is projected to be -3.12%, which represents $11.0 billion in estimated net savings to the Medicare Trust Fund in 2024. CMS intends to restructure the condition categories using the ICD-10 code classification system instead of ICD-9; update the FFS data years underlying the model from 2014 for diagnoses and 2015 for expenditures to 2018 for diagnosis and 2019 for expenditures; revise the denominator year that is used in determining the average per-capita predicted expenditures to create relative factors in the model from 2015 to 2020; and clinica revisions to the model adding constraints and removing several HCCs to reduce the effect of MA coding variation from FS on risk scores.
The Advance Notice also discusses several updates made by the Inflation Reduction Act (IRA) for 2024, including the elimination of cost sharing for covered Part D drugs for beneficiaries in the catastrophic phase. Part D sponsors will be on the hook for 20% of the costs incurred after a Part D beneficiary’s costs exceed the annual out-of-pocket threshold, compared to roughly 15% of costs in prior years. Additionally, the income limit for the full low-income subsidy benefit will increase from 135% to 150% of the federal poverty level. Individuals who earn between 135% and 150% of the federal poverty level and who meet certain resource requirements will now be eligible for the full low-income premium and cost-sharing subsidies, as well as a $0 deductible.
Finally, for Part C and Part D star ratings, CMS included a list of the measures that will be used to calculate the 2024 Star Ratings, as well as a list of the emergency areas that were affected by emergency declarations in 2022 for purposes of making adjustments under the extreme and uncontrollable circumstances policy. Furthermore, for the 2023 measurement year and beyond, CMS is considering a core set of measures that are aligned across quality rating and value-based care programs, in what CMS is calling a “Universal Foundation” of quality measures. Each program would add aligned or program-specific measures to this measurement base. The Advance Notice outlines a preliminary set of measures that would be included in the Adult Universal Foundation, including Adult Immunization Status, Screening for Depression and Follow-Up Plan, and Screening for Social Drivers of Health/Social Need Screening and Intervention, among others.