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This week, our In Focus section reviews the recently announced major policy updates from the Centers for Medicare and Medicaid Services (CMS) that affect the Medicare Advantage (MA) and Part D programs.

First, on January 30, CMS released the final Risk Adjustment Data Validation , a highly anticipated and controversial policy that establishes the agency鈥檚 approach to auditing MA Organizations鈥� (MAOs) risk-adjustment payments and collecting overpayments as needed. Second, CMS released the CY 2024 Advance Notice for MA Capitation Rates (Part C) and Part D Payment Policies on February 1, 2023. Read 红领巾瓜报鈥檚 summary of the advance notice.

Most recently, on March 31, 2023, CMS released the CY 2024 Final  for Medicare Advantage (MA) Capitation Rates and Part C and Part D Payment Policies, which incorporates CMS鈥檚 responses to public comments on the Advance Notice. These changes reflect CMS鈥� continued efforts to strengthen oversight in the MA program, including improving payment accuracy, and implementation of Part D policies from the Inflation Reduction Act (IRA).

Below are highlights of some of the key provisions of the CY 2024 Final Rate Notice and significant changes CMS made from the Advance Notice to the Final Rate Notice.

Risk Adjustment: The Final Rate Notice details the updated risk adjustment model using restructured condition categories based on ICD-10 codes, newer data, and clinical adjustments made to ensure the conditions are stable predictors of costs in the model. Specifically, diagnoses data will come from 2018 rather than 2014 and expenditure data will come from 2019 rather than 2015 to reflect changes in costs. These updates should more accurately reflect the cost of caring for beneficiaries and make payments less susceptible to discretionary coding that can lead to excess payments to MA plans.

Also, CMS changed course from its initial proposal in the Advance Notice to implement the above risk adjustment model changes fully in 2024, and instead decided to phase in these changes over three years. The updated risk adjustment policy will be phased in over three years for organizations other than PACE. As a part of the agency鈥檚 phase-in plan, 67 percent of the CY 2024 risk adjustment will come from the risk scores measured under the 2020 adjustments and 33 percent will come from the 2024 adjustments. In CY 2025, 67 percent of the risk adjustment will come from the 2024 adjustment. In 2026, 100 percent of the risk adjustment will come from the 2024 adjustment. For PACE organizations in CY 2024, CMS will continue to use the 2017 risk adjustment model and associated frailty factors to calculate risk scores.

Effective Growth Rate: The effective growth rate identified within the Final Rate Notice for CY 2024 is 2.28%, up from 2.09% in the Advance Notice. The Effective Growth Rate is largely driven by growth in Medicare Fee-for-Service expenditures. CMS will phase in a technical adjustment to remove MA-related indirect medical education and direct graduate education costs from the historical and projected expenditures.  The technical adjustment to the Effective Growth Rate will be phased in over three years, where 33 percent of the adjustment will apply in CY 2024, 67 percent in CY 2025, and 100 percent in CY 2026.

Payment rate impact in MA: CMS expects that average payments to MAOs will increase by 3.32 percent in CY 2024 because of the finalized rate announcement, which is higher than the 1.03 percent increase outlined in the Advance Notice. This will result in an estimated $13.8 billion increase in MA payments for CY 2024.

Medicare Part D: The changes from the Inflation Reduction Act to the Part D drug benefit will be implemented as described in the Advance Notice. The changes for CY 2024 include:

• Elimination of cost sharing for covered Part D drugs for beneficiaries in the catastrophic phase of coverage.
• Increased income limits from 135 percent of the federal poverty limit (FPL) to 150 percent of the FPL for the low-income subsidy program (LIS) under Part D for the full LIS benefit with a $0 deductible.
• Continuation of the policy to not apply the deductible for any Part D covered insulin product. Also, in the initial coverage phase and the coverage gap phase, cost sharing must not exceed the applicable copayment amount, which for CY 2024 is $35 for a month鈥檚 supply of each covered insulin product.
• Continuation of the policy not to apply the deductible to any adult vaccine recommended by the Advisory Committee on Immunization Practices (ACIP). Also, the statute requires these vaccines to be exempt from any co-insurance or other cost sharing, including cost sharing for vaccine administration and dispensing fees for such products, when administered in accordance with ACIP鈥檚 recommendation, for beneficiaries in the initial coverage and coverage gap phases.
• Base beneficiary premium (BBP) growth will be held to no more than 6 percent by statute. The BBP for Part D in 2024 will be the lesser of the BBP for 2023 increased by 6 percent or the amount that would otherwise apply under the original methodology if the IRA were not enacted.

Star Ratings: Medicare Advantage star ratings for CY 2024 will include 30 measures with 12 included in the 2024 categorical adjustment index (CAI) values. By contrast, Part D star ratings for CY 2024 will include 12 measures with 5 of those measures included in the 2024 CAI values. The CAI for the 2024 Star Ratings is expected to be issued later in 2023. The CAI was introduced in 2017 as an interim analytical adjustment to address the average within-contract disparity in performance among beneficiaries who receive a low-income subsidy, are dual eligible, and/or are disabled.

The Final Rate Notice also includes three criteria for determining if Part C and D organizations are eligible for the 鈥渆xtreme and uncontrollable circumstances鈥� adjustment to their Star Ratings. To be eligible, an organization must be in a 1) service area that is within the 鈥渆mergency area鈥� during the 鈥渆mergency period,鈥� 2) service area that is within a geographic area designated in a major disaster declaration under the Stafford Act and the Secretary exercised authority under the Act based on the same triggering events, and 3) a certain minimum percentage (25 or 60 percent) of beneficiaries must reside in the Federal Emergency Management Agency (FEMA) designated Individual Assistance area at the time of the extreme and uncontrollable circumstance. If an organization meets the criteria outlined and meets the 25 percent minimum, then they will receive the higher of their measure-level rating from the current and prior Star Ratings years for purposes of calculating the 2024 Star Ratings. For organizations meeting the 60 percent minimum and the other criteria, they are excluded from the measure-level cut point calculations for non-CAHPS measures, and the performance summary and variance thresholds.

Upcoming LinkedIn Live: Join 红领巾瓜报 for our Future Frame Conversation on Policy Changes in Medicare Advantage and the Implications for Coding, Risk Adjustment, and Reimbursement.聽 Tuesday April 11, 2023, at 12 p.m. E.T.

If you have questions about the contents of CMS鈥檚 MA final notice and how it will affect MA plans, providers, and patients, contact our featured experts below.

This week, our In Focus section highlights a Wakely, an 红领巾瓜报 Company, summary and analysis of the 2024 Medicare Advantage Advance Notice, prepared for America鈥檚 Health Insurance Plans (AHIP). The Centers for Medicare & Medicaid Services (CMS) released the contract year (CY) 2024 Advance Notice with an accompanying fact sheet on February 1, 2023. AHIP has retained Wakely Consulting Group to provide a financial impact summary report of the information presented in the notice. Specifically, Wakely was asked to analyze changes to Medicare Advantage (MA) revenue, risk adjustment models, and fee-for-service (FFS) normalization.

Key highlights of the analysis are:

• The CY 2024 FFS growth rate is lower than projections from the 2023 Final Announcement. A portion of the downward restatement is driven by a technical change. CMS has not commented on the additional drivers.
• Based on a large sample of plans, Wakely estimated that the proposed Part C risk adjustment model is expected to decrease plan risk adjusted payment by 3.7 percent overall, which represents a bigger headwind than the CMS estimated decrease of 3.12 percent. The impacts vary significantly by model segment and geographic region, and for individual plans.
• The proposed FFS normalization factor excludes PY 2021 risk scores in the calculation of the underlying trend. The exclusion of PY 2021 increases the FFS normalization factor which decreases PY 2024 risk scores.

The report, released March 6, 2023, provides additional detail and discussion of these issues. For questions, please contact our experts below.

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This week, our In Focus section reviews recently announced major policy updates from the Centers for Medicare & Medicaid Services (CMS) that affect the Medicare Advantage (MA) and Part D programs. First, on January 30, CMS released the final Risk Adjustment Data Validation , a highly anticipated and controversial policy that establishes the agency鈥檚 approach to auditing MA Organizations鈥� (MAOs) risk-adjustment payments and collecting overpayments as needed.

Then, on February 1, CMS published the for the MA (Part C) and Part D Prescription Drug Programs. Between these two directives and the CMS announced in December 2022, the Administration continues its efforts to actively manage Medicare Advantage and strengthen quality and oversight of the program. Read 红领巾瓜报鈥檚 summary of the December 2022 proposed rule.

Below are some highlights of the 2024 Advance Notice. By law, CMS must notify the public of planned changes in the MA capitation rate methodology and risk adjustment methodology annually. The deadline for submitting comments to CMS is Friday, March 3, 2023.

Payment Impact in MA: CMS is projecting an average increase in revenue of 1.09 percent in plan payments from last year. This percentage increase is based on a net number that reflects multiple factors including growth rates, change in STAR ratings, and risk score trends.

Risk Adjustment: CMS is seeking to make some refinements to the Part C risk-adjustment model. For example, CMS will begin using the International Classification of Diseases (ICD)-10 classification system (instead of the ICD-9 classification system) and updated underlying fee for service data years. More specifically, diagnoses data years are being updated from 2014 to 2018, and expenditure years are being updated from 2015 to 2019 to reflect changes in costs.

Star Ratings: CMS is proposing updates and refinements to the Star Ratings program, including:

• Retiring the diabetes care-kidney disease monitoring and Medication Reconciliation Post-Discharge
• Expanding the age range for colorectal cancer screening measure to 45鈭�75 years old to align with the preventive task force
• Adding the Care for Older Adults (COA)鈥擣unctional Status Assessment measure back to the Star Ratings, and introducing Kidney Health Evaluation for Patients with Diabetes (KED), Concurrent Use of Opioids and Benzodiazepines (COB), Polypharmacy Use of Multiple Anticholinergic Medications in Older Adults (Poly-ACH), and polypharmacy Use of Multiple Central Nervous System Active Medications in Older Adults (Poly-CNS)
• Introducing a case-mix adjustment to Part D medication adherence measures for diabetes, hypertension, and cholesterol.

CMS also is seeking to potentially align measures with other CMS programs. Specifically, the agency is introducing a 鈥淯niversal Foundation鈥� of quality measures, which is a core set of metrics aligned across programs. Additional information can be found in this 鈥淧别谤蝉辫别肠迟颈惫别鈥�.

Part D Impact

The Advance Notice also notifies plans on the changes to the Part D benefit occurring in 2024 as a result of the Inflation Reduction Act (IRA), including:

• Beginning in CY 2024, CMS will eliminate cost-sharing for Part D drugs prescribed to beneficiaries in the catastrophic phase of coverage.
• Beginning in CY 2024, the Low-Income Subsidy program (LIS) under Part D will be expanded so that beneficiaries who earn 135鈭�150 percent of the federal poverty level and meet statutory resource limit requirements will receive the full LIS subsidies that were available only to beneficiaries earning less than 135 percent of the federal poverty level prior to 2024.
• During CY 2024, CMS will prohibit Part D plans from applying the deductible to any Part D covered insulin product and from charging more than $35 for each month鈥檚 supply of a covered insulin product in the initial coverage phase and the coverage gap phase.
• During CY 2024, CMS will prohibit Part D plans from applying the deductible to an adult vaccine recommended by the Advisory Committee on Immunization Practices and from charging any cost-sharing payments at any point in the benefit for these vaccinations.
• Beginning in CY 2024, CMS will cap the growth in the Base Beneficiary Premium at 6 percent. The Base Beneficiary Premium for Part D is limited to the lesser of a 6 percent annual increase or the amount that would otherwise apply under the prior methodology had the IRA not been enacted.

The 红领巾瓜报 Medicare team will continue to analyze these proposed changes. We have the depth and breadth of expertise to assist with tailored analysis, to model policy impacts across the multiple rules, and to support the drafting of comment letters on this notice.

If you have questions about the contents of CMS鈥檚 MA advance notice and how it will affect MA plans, providers, and patients, contact our experts below.