The Medicare Advantage Program in 2014. IV. Looking Forward to 2015

04/07/2014

Our goal is to continue improving the MA program while keeping costs down, reducing fraud and abuse, and fostering competition. As discussed earlier, the changes that are underway under the Affordable Care Act reduce higher payments to MA plans, by transitioning to FFS-based payment rates; and provide incentives for quality improvements by basing part of the MA payment on plan quality performance. In 2015, we will continue implementing the provisions of the Affordable Care Act, and pursuing policies that seek to improve MA payment accuracy and quality, while providing greater protections for beneficiaries and value for taxpayers.

Two important factors are expected to affect MA payments in 2015:

  • Slower Growth In FFS Spending – The Medicare program has been experiencing historically low growth in underlying Medicare per-capita spending, which is tied, in part, to successful initiatives undertaken to promote value over volume and help curb fraud, waste, and abuse in the Medicare fee-for-service program in recent years. As the rate of growth in underlying FFS Medicare spending decreases, MA plans are likely to be experiencing similar trends, which should be helpful as more and more counties transition to FFS-based MA payment rates.38
  • Increases in Coding Intensity and Policy Responses – Since 2004, when CMS began adjusting payments to MA plans based on the relative health of their enrollees, the average MA risk score (which measures beneficiaries’ estimated relative costs based on demographics and health characteristics) has increased faster than the average FFS risk score. However, most of this growth appears to result from MA plans identifying more diagnoses to code in a population that is no sicker, and therefore no more costly to treat, than before the coding change.39 The change in “coding intensity” has resulted in MA payments increasing to a greater degree than would be consistent with actual changes in the health risk of enrollees. The policy responses have included both across-the-board adjustments and changes to CMS’s risk adjustment model.40

38 For 2015, most counties will be fully transitioned to the new rate methodology, while others will continue to be based on a blended rate.

39 For example, the Government Accountability Office has found that “differences in diagnostic coding caused risk scores for MA beneficiaries to be higher than those for comparable beneficiaries in Medicare FFS in 2010, 2011, and 2012.” Government Accountability Office, “Medicare Advantage: Substantial Excess Payments Underscore Need for CMS to Improve Accuracy of Risk Score Adjustments,” GAO-13-206, January 2013, accessed at http://www.gao.gov/assets/660/651712.pdf.

40 The CMS-HCC risk adjustment model was modified for 2013 and again for 2014 in ways that disproportionately affect plans with large increases in average risk scores. However, even if the 2014 model (which was 75 percent phased in for 2014) had been used starting in 2004, MA risk scores would still have increased every year since then. The FY 2015 President’s Budget proposes increasing the MA coding pattern adjustment to account for ongoing growth in coding intensity.

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