Claw Backs and Beneficiary Protections in the Form of CMS Regulatory Changes – Massive Financial Implications
CMS has been busy over the past few weeks churning out numerous regulatory updates and leveraging every tool in their purview to bring the most significant changes to Medicare Advantage in recent history. With Health Plan Management System (HPMS) memos flying rapidly, it can be a bit overwhelming to sift through everything that has been proposed, codified, and hinted at for the near future. With that in mind, the experts at ZeOmega have combed through all the documentation to bring you a regulatory roundup and share our tips for ensuring you are poised for continued success. As we walk through this regulatory roundup, keep in mind that with the volume of changes we’re seeing, we can’t cover everything, so we are highlighting the most impactful changes.
First, it is important to note these rapid and substantive changes for Medicare Advantage Organization (MAOs) are related to three key focus areas for CMS. The first area we’ve been following for the past few years—and have all no doubt been aware of by now—is CMS’ commitment to advancing health equity. CMS has hinted at a regulatory change on the horizon to codify healthy equity policy since the beginning of the Biden-Harris administration takeover. The next area driving these updates is normalizing post COVID-19 as the public health emergency (PHE) comes to an end in May. During the pandemic, we saw several adjustments and flexibilities introduced to accommodate historically low utilization and mitigate impact to operations. As the president has indicated plans to end the PHE, and with it, a number of temporary provisions, plans will need to find their way back to “normal.” Lastly, with concern for the Medicare Trust Fund in mind, CMS has been aggressively investigating and studying the payment systems to plans to understand current state and evaluate impact of change. CMS is in part using regulatory changes to claw back and control overpayments with the implication that plans will need to work harder than ever to justify their payday.
The comment period for the 2024 Advance Notice expires March 3 and MAOs should expect the final rule in April.
Regulatory Changes in Medicare Advantage Risk Adjustment
CMS released the 2024 Advance Notice just days after announcing the Risk Adjustment Data Validation (RADV) final rule on January 30th. The RADV proposed rule has been impending since 2012 when it was first introduced to the Federal Register. Lawmakers and stakeholders have voiced their concerns and have conducted studies to finalize the details now codified for 2023 and forward.
RADV Final Rule
The RADV final rule seeks to increase oversight and penalties leading to overpayment in risk adjustment. Historically, RADV audits were limited in both their lookback periods and ability to extrapolate fines based on a limited sample of member records. The new policy increases CMS’ ability to look at data submitted as far back as 2018 and allows them to evaluate more accurate data sample sets to assess application of fines. The new finalized rule is expected to result in $4.7 billion dollars in claw backs over the next 10 years.(https://avalere.com/insights/ma-radv-policy-changes-raise-questions-for-plans)
CMS will begin assessing and extrapolating fines for payment year (PY) 2012 and forward.
Audit sampling and extrapolation of fines will be based on “any statistically valid” methodology.
These updates also apply to audits conducted by the Office of the Inspector General (OIG).
What’s the Impact:
With new oversight to apply fines based on extrapolation methodology, plans could be looking at huge financial impact for submitted codes dating back to PY 2012.
Plans will need to be more mindful than ever of any “upcoding” type of procedures, intentional or not.
ZeOmega’s Expert Advice:
Take a close look at your risk adjustment coding and chart review procedures to ensure that submissions meet RADV compliance.
If not already part of protocol, consider introducing internal RADV mock audits to simulate and catch any potential coding errors.
Tread lightly with suspecting and be sure DX codes presented are clinically relevant and substantiated.
Act quickly to delete any unsubstantiated codes submitted to CMS. Remember, an accepted code is not a guarantee of RADV compliance.
Jiva, ZeOmega’s industry-leading healthcare enterprise management platform, has a Risk Adjustment Navigator solution that takes a different approach to HCC recapture by utilizing only CMS files to reconcile historical conditions and present recapture opportunities. This approach avoids any potential for unsubstantiated suspected conditions without limiting the client’s ability to conduct chart review to validate conditions and identify missing codes during sweeps.
2024 Advance Notice
On February 3rd, CMS released the 2024 Advance Notice, which is anticipated annually by MAOs to begin reviewing operations and strategies to ensure readiness. It’s important to note the Advance Notice is not finalized, and MAOs have until March to submit feedback, which CMS will consider before releasing the final rule. This year’s Advance Notice presented major changes to the current risk adjustment model including full transition to ICD-10-based diagnosis codes, HCC renumbering, and recategorization of disease groupings. These updates are expected to result in a 3.12% reduction in average risk scores resulting in $11 billion in savings for the Medicare Trust Fund.
The new Version 28 risk model is based entirely on ICD-10 codes and includes 115 HCCs. This increase in HCCs reflects the new disease group categorization, which is meant to provide more specificity and align with FFS coding intensity.
New constraints have been added for Diabetes, Congestive Heart Failure, which results in all related diagnosis codes mapping to the same HCC with the same risk score coefficient.
HCCs have been dropped for Protein-Calorie Malnutrition, Angina Pectoris, and Atherosclerosis of Arteries of the Extremities with Intermittent Claudication.
What’s the Impact:
A new risk model requires MAOs and vendors to update mapping files and realign coding practices.
Greater granularity resulting from clinical recalibration of diagnosis and disease groups is intended to more closely align with cost data, which will likely reduce risk scores.
Many plans monitoring decreases in risk scores or average risk scores will need to account for this impact in their targeting logic and payment projections.
Work quickly to delete any unsubstantiated codes. Any code deleted will result in a payment adjustment in the next model run.
Begin working on updates to mapping tables now to analyze the difference in risk scores and payment projections for your population.
Educate your coding staff and providers on new ICD-10 coding requirements.
With Jiva’s risk adjustment analytics, monitor changes in your population and identify commonly missed HCCs to refine your risk adjustment education programs. Configurable performance metrics allow you to manage network performance and compare year-over-year outcomes.
Regulatory Changes in CMS 5-Star Program
The Notice also included more changes to the 5-Star program than any other notice in recent years. MAOs closely study the proposed changes to calculate down to a single member what is needed to obtain the rating and bonus they seek. With the pure number of changes introduced for measure year 2024 and beyond, plans and Quality teams are going to have to sharpen their pencils to stay ahead of what is on the horizon for Stars. Aside from all the measure-level changes, which we’ve rounded up in a handy at-a-glance guide below, there are a few other program updates that will greatly impact overall Star Rating calculations and reduce provider burden.
Tukey Outlier Deletion Methodology
CMS began discussing the Tukey Outlier Deletion Methodology in the 2022 Advance Notice but quietly removed it from the final rule with much speculation. CMS commented that this update was removed due to a codification error, and they would include it in the next regulatory update. Fast forward to 2024, as new ratings will be announced based on measure year 2022 performance, the effect of Tukey will be front and center. So, why is this important? Because this methodology is applied to scoring calculations to remove outliers which could skew measure scores prior to the clustering process for rating. Application of this methodology will make earning and maintaining Star Ratings more difficult than ever. CMS’ modeling indicates up to 16% of plans could lose at least half a star. Plans who barely make the cut-point threshold should brace themselves. Not only will a loss of Star Ratings result in potential loss of bonus and lower rebates—but as of last year’s final rule—MAOs who fail to achieve at least a 3-Star rating for two consecutive years are also at risk of their contract or expansion applications being denied.
Universal Foundation Measures
Tucked into the over 100-page Advance Notice document is the introduction of what CMS is calling the “Universal Foundation,” which is a core set of measures for which all federal and value-based programs will share. CMS has proposed 10 measures covering several meaningful measure domains. Of the 10- measure set outlined on pages 103 and 104 of the notice, eight are already included in the 5-Star measure set, and CMS is seeking feedback on the other two measures proposed. The primary intention behind the Universal Foundation is to reduce provider burden, allowing them to focus on care while additional benefits include universal stratification and acceleration of interoperability standards for measure data.
CMS has been focused on reducing health disparities and promoting health equity over the past few years and has announced their intention to introduce a new measure to measure plan performance on screening and referring members to social care services. Beginning in 2022, CMS is sending MAO’s stratified reports focused on members meeting criteria for Low Income Subsidies (LIS), Dual Eligibility (DE), and disability status to allow plans to identify how well they are providing equitable care. Additionally, CMS has proposed a replacement of the 5-Star reward incentive with the Health Equity Index (HEI), which will provide additional financial rewards for plans who reduce disparities and perform best in providing equitable care. This new incentive is slated to take effect for 2027 Star Ratings and will be based on 2024 and 2025 data. For plans to reach success with HEI, they need to focus on identifying social risk factors among the population, seek a closed loop referral tool like ZeOmega’s Social Care solution to ensure members have access to services, and monitor Quality outcomes for at-risk cohorts.
Lastly, CMS and NCQA are reviewing existing measures like Breast Cancer screening to remove gendered language and promote gender-affirming care.
Regulatory Changes from the Inflation Reduction Act (IRA)
Finalized in 2022, the Inflation Reduction Act seeks to limit Part D out-of-pocket costs for beneficiaries. New regulations will affect the 2024 bid season, and CMS has highlighted important areas for Medicare Advantage–Part D (MAPD) plans to remember as bid season approaches in the Advance Notice. This strategy is expected to keep plan revenue at a 1.32 increase overall for 2024.
HHS will implement price caps on qualifying high-cost drugs that are among the top 50 in total Part D and B drug spend beginning in 2026.
Already in effect, HHS can implement “soft caps” on a much wider set of qualifying drugs based on historic wholesale cost and current urban consumer price index, which will be recalculated quarterly for Part B and annually for Part D.
Benefit changes taking effect as of 2023 and continuing into 2024 include $35 monthly insulin copay cap. Plans are required to reimburse members within 30 days of exceeding the cap. The act lays out additional copay cap criteria for 2025 and beyond.
There is expanded eligibility for Low Income Subsidy (LIS) beneficiaries through new Federal Poverty Level (FPL) qualification criteria for 2024.
As of 2023, recommended immunizations will be provided with no copays.
Part D benefits have been restructured to eliminate the coverage gap or “donut hole” and base the initial coverage phase on the true out-of-pocket cost. Catastrophic coverage costs are shifting to plan in a phased approach beginning in 2023 and will reach the final stage of transition in 2025.
New provisions allow beneficiaries to opt into a self-defined monthly price cap at any time and makes spreading out-of-pocket costs across the remaining months an option.
A 6% annual premium cap for beneficiaries begins in 2024.
What’s the Impact
Plan premiums are expected to increase to account for benefit restructuring.
Plans should expect revenue to be limited or reduced as each phase of the IRA plays out.
Pharmacy Benefits Managers, Pharmacies, and Plans will require greater interoperability and infrastructure to share member benefit data and properly adjudicate claims at the point of sale.
Start reviewing benefit packages and premiums now to understand what and when changes will need to be rolled out.
Work with actuarial staff to model revenue and premium impacts.
Evaluate your population for LIS criteria change impact to prepare for meeting the needs of this at-risk cohort.
Educate staff and care teams on new regulations and new operational procedures to ensure continuity of care and reduce member abrasion.
State of the Union Address
And lastly for our regulatory roundup, we can’t forget to mention that Medicare benefits were in the spotlight during the State of the Union Address on February 7th. The President spoke about his vision for the second half of his term and highlighted some of the administration’s accomplishments in healthcare including passing the IRA, the 16 million Americans who signed up for healthcare coverage via the marketplace, and the impending end of the public health emergency. On the topic of a potential phase out of Medicare benefits, Biden reiterated his commitment to seniors and his intent to veto any related bills passed. Through live and unprecedented negotiations in a packed House, President Biden gained unanimous agreement to take any reduction in Medicare benefits off the table.
Director of Population Health Informatics
As Director of Population Health Informatics for ZeOmega, Cindy Henry is responsible for product innovation and market expertise in population health management and value-based care.
Cindy is a member of the Product Planning team contributing subject-matter expertise to shape the product roadmap and provide thought leadership. She collaborates with other experts, clinicians and development teams to survey regulations, monitor policy changes, and research market trends to ensure ZeOmega’s products continue to meet the evolving and emerging needs of our clients.
Cindy began her career in population health in 2015 as a Business Intelligence Project Manager at North Texas Specialty Physicians (NTSP), an independent physician association and parent company of Care N’ Care, a Medicare Advantage plan in Texas. While at NTSP, she held several titles including business analyst, project manager, and interim manager for the Business Intelligence and Application Development teams. Before coming to ZeOmega, Cindy was the Medicare Advantage Product Manager for a PHM startup company.