The amount the insurance company is reimbursed gets higher with every chronic medical condition you have. This is based on a calculated Medicare risk assessment score that estimates how much a patient on Original Medicare would have spent in health costs. This was estimated to be $11,545 per enrollee in 2019. 1
Full Answer
What is risk adjustment in Medicare Advantage?
Better Medicare Alliance presents the paper, “Understanding Risk Adjustment in Medicare Advantage.” Medicare Advantage relies on accurate and stable risk adjustment that ensures plans and practitioners are able to provide high value care to all beneficiaries, including those with complex health needs.
How much more risky are Medicare Advantage beneficiaries?
The Medicare Payment Advisory Commission (MedPAC) estimated that in 2020 the risk scores for beneficiaries in Medicare Advantage were about 9.5 percent higher than what they would have been for a similar beneficiary in traditional Medicare, resulting in about $12 billion in excess payments to plans.
What is the advantage of Medicare Advantage?
Medicare Advantage relies on accurate and stable risk adjustment that ensures plans and practitioners are able to provide high value care to all beneficiaries, including those with complex health needs.
What's new in the 2020 risk adjustment model?
Specifically, per the 21st Century Cures Act, the 2020 model adds variables that count conditions in the risk adjustment model (“payment conditions”) and includes for payment additional conditions for mental health, substance use disorder, and chronic kidney disease.
How does Medicare Advantage risk adjustment work?
Risk adjustment is a statistical method that seeks to predict a person's likely use and costs of health care services. It's used in Medicare Advantage to adjust the capitated payments the federal government makes to cover expected medical costs of enrollees.
How are Medicare Advantage risk scores calculated?
The purpose of the Medicare risk scores is to estimate a relative cost factor. (i.e., it is a payment risk score). CMS calculates individual beneficiary-level risk scores by adding the relative factors associated with each beneficiary's demographic and disease factors. The CMS Payment Risk Score is built up each year.
What is the capitation rate for Medicare Advantage?
As discussed in Attachment I, the final estimate of the National Per Capita MA Growth Percentage for combined aged and disabled beneficiaries is 4.89 percent, and the final estimate of the FFS Growth Percentage is 4.75 percent.
How does CMS calculate risk adjustment?
In order to use the risk adjustment model to calculate risk scores for payment, CMS creates a relative factor for each demographic factor and HCC in the model. CMS does this by dividing all the dollar coefficients by the average per capita predicted expenditure for a specific year (i.e., the “denominator year”).
How does risk adjustment work?
Risk adjustment accomplishes this by transferring funds from plans with lower-risk enrollees to plans with higher-risk enrollees. The goal of the risk adjustment program is to encourage insurers to compete based on the value and efficiency of their plans rather than by attracting healthier enrollees.
What is risk adjustment score?
Risk adjustment is a methodology that equates the health status of a person to a number, called a risk score, to predict healthcare costs. The “risk” to a health plan insuring members with expected high healthcare use is “adjusted” by also insuring members with anticipated lower healthcare costs.
How are Medicare Advantage plans reimbursed?
The money that the government pays to Medicare Advantage providers for capitation comes from two U.S. Treasury funds. The first one is The Hospital Insurance Trust fund, which pays for whatever is covered in Part A of Original Medicare, such as hospital, skilled nursing care, and hospice coverage.
What is a fixed percentage paid by the beneficiary for the services provided?
This option provides certain Medicare beneficiary's with an alternative to resolving Medicare's recovery claim by paying a flat 25% of his/her total liability insurance (including self-insurance) settlement instead of following the traditional recovery process.
Is Medicare Advantage always capitated?
Medicare pays Medicare Advantage plans a capitated (per enrollee) amount to provide all Part A and B benefits. In addition, Medicare makes a separate payment to plans for providing prescription drug benefits under Medicare Part D, just as it does for stand-alone prescription drug plans (PDPs).
How is a RAF score calculated?
The risk adjustment factor (RAF) score is the risk score assigned to each patient in a risk adjustment payment model. Risk Adjustment Models account for multiple factors to calculate a RAF score which is the combination of both the demographic risk score and the disease risk score.
What is a good RAF score?
A score of 1.00 is average, with the decimal places representing percentages above or below average. For example, if a plan's average patient RAF score is 1.10, it will receive 10 percent more from Medicare.
What percentage of the risk score is calculated using the 2020 CMS-HCC model?
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.
Background
Risk adjustment is a statistical method that seeks to predict a person’s likely use and costs of health care services. It’s used in Medicare Advantage to adjust the capitated payments the federal government makes to cover expected medical costs of enrollees.
A Blunt Instrument
While risk-adjustment methodologies may seem arcane, there are big stakes — not just in terms of costs to the federal government, but who benefits and loses. Some research has found that the additional payments driven by risk coding mainly accrue to health plans themselves, in the form of higher profits.
Does Risk Adjustment Worsen Inequities?
Because the current risk-adjustment model relies heavily on past medical spending to determine future payments, a few experts said it could worsen inequities in the system — for example, by underestimating the costs of caring for populations that use fewer services not because they don’t need them, but because they have poor access to medical care.
Better Data Might Help
One way risk adjustment can be improved is by modifying the data on which the model is built.
Moving Forward
All agreed that risk adjustment is worth getting right to ensure plans are paid appropriately based on how well they keep members healthy, not how well they code. Giving plans incentives to find innovative ways to help patients, including those with more complex needs, is key to whether the program fulfills its promise.
What is the CMS HCC model for 2022?
2022 Part C Risk Adjustment Model. For CY 2022, CMS is proposing to fully phase in the CMS-HCC model first implemented for CY 2020 (i.e., the 2020 CMS-HCC model), as required by the 21st Century Cures Act.
How long is the advance notice for 2022?
Other changes to payment methodologies for 2022 that are typically contained in the Advance Notice only require a 30-day comment period ...
What is the coding intensity adjustment for Medicare Advantage?
Since 2010, Congress has required CMS to apply a coding intensity adjustment to Medicare Advantage payments that is an across the board cut to Medicare Advantage risk scores. The purpose of the adjustment is to account for differences in coding patterns between Medicare Advantage and FFS Medicare — differences that are a function of the differences between the structural payment and care models in the Medicare Advantage and FFS Medicare programs. Per statute, the coding intensity adjustment has increased from a 3.41% reduction in 2010 to a 5.91% reduction for payment year 2018. The coding intensity adjustment must remain no less than a 5.91% reduction to risk scores for all subsequent years. CMS has the authority to determine the amount above the statutory minimum. To date, CMS has applied the minimum coding intensity adjustment required by law.
What is Medicare Advantage?
These plans are approved and regulated by the Centers for Medicare & Medicaid Services (CMS) and the program undergoes an annual review process that makes policy changes and sets payment rates for the next year .
What is risk adjustment?
Risk adjustment is an essential mechanism used in health insurance programs to account for the overall health and expected medical costs of each individual enrolled in a health plan. Accurate documentation of diagnoses by clinicians is a critical component of the risk adjustment process.
What is the difference between FFS and Medicare Advantage?
Accurately identifying illness is key to the comprehensive approach to care in Medicare Advantage. FFS Medicare reimburses providers separately for each episode of care. In contrast, Medicare Advantage is structured to encourage early identification of illness, coordinated care, and improved beneficiary health outcomes.