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CMS Admits Underpaying Dual-Eligible Health Plans

The agency plans to modify its risk-adjustment model to make up for the underpayment

The Centers for Medicare and Medicaid Services (CMS) has admitted that it underpays health plans that enroll large numbers of people who are dually eligible for Medicare and Medicaid. The agency said it plans to modify its risk-adjustment model to make up for the underpayment.

In response to persistent and vocal complaints from health plans questioning the accuracy of the CMS' model for predicting costs of dual-eligible beneficiaries, the agency conducted a retrospective analysis of its 2014 plan data, according to Modern Healthcare.

The CMS uses a prospective model (called the CMS-HCC) to calculate risk scores, using health status in a base year to predict costs in the following year. Those scores drive adjustments to capitated payments made for elderly and disabled beneficiaries enrolled in Medicare Advantage (MA) plans and certain demonstration programs. 

“Our findings show that the community segment of the 2014 model … somewhat underpredicts for full-benefit, dual-eligible beneficiaries,” the CMS said in a notice sent to plans on October 28. The agency did not reveal a dollar amount for the underpayment.
In the highly technical document, the agency outlined some tweaks to its risk model that officials believe will lead to more accurate payments to plans. The CMS is seeking comments on the proposed alterations by November 25, and will publish final changes in a notice for the following payment year in February 2016.

“We are heartened that CMS has responded to several data analyses that indicate a clear correlation between the socioeconomic status of dual-eligibles and the effect they have on predicting their costs,” said Jeff Myers, CEO of the trade group Medicaid Health Plans of America. “Our hope is that this move will truly level the playing field for Medicaid plans that are serving those with significant health challenges in this vulnerable population.”

Mark Joffe, a Washington, D.C., private practice attorney who is legal and regulatory counsel for the SNP Alliance, which represents health plans serving patients with special needs, said the notice “is very important and underscores that CMS takes the issue seriously.” Molina Healthcare, Centene Corp., and Health Net are likely to benefit most from a more favorable risk-adjustment model because higher percentages of their earnings are tied to dual-eligible members, according to Ana Gupte, a managing director at Leerink Partners.

The notice was posted days after top CMS officials signaled that the agency was considering altering MA quality ratings to adjust for the socioeconomic characteristics of a plan's enrollees. Health plans that primarily serve low-income members and those who are dually eligible for Medicare and Medicaid have complained they unfairly get lower star ratings that make them ineligible for bonuses and put them in danger of losing their Medicare contracts. The CMS has the statutory authority to boot a plan if it has fewer than three stars for three straight years.

During a recent America's Health Insurance Plans (AHIP) Medicare conference, Sean Cavanaugh, deputy administrator and director of the Center for Medicare, noted that both the possible star changes and the risk adjustments were the agency's way of demonstrating they were actually listening to the health care industry. “What I want you to take away from this is that the industry brought an issue to us, and we took it seriously — there is some substance to it,” Cavanaugh said.

The CMS has historically dismissed industry complaints that Medicare's quality ratings and risk adjustments are unfair to plans that enroll low-income Americans with more complex health needs. Earlier this year, the CMS described the effects of socioeconomic status on the quality ratings as “small in most cases, and not consistently negative.” The agency's change of heart is likely the result of robust lobbying efforts by AHIP and the SNP Alliance, according to John Gorman, a former CMS official and Washington-based consultant who works with health insurers.

“Up until a few weeks ago, CMS steadily maintained there wasn't an issue, and on the stars issue, that plans needed to work harder,” Gorman said. “And then at the AHIP conference, there was suddenly a big turnaround.”  Many plans that enroll large numbers of dual-eligible beneficiaries are struggling for survival, and some are at risk of losing their Medicare contracts because of their star ratings, Gorman said. 

Cavanaugh credited the Medicare Payment Advisory Commission for helping the CMS better understand the disparities such plans were facing and the implications if they were not addressed. 

MedPAC Executive Director Mark Miller, testifying at a Senate hearing this year, said the commission found that the CMS overpays for beneficiaries with low medical costs and underpays for those with very high costs. “This inequity could encourage plans to avoid high-cost beneficiaries, who are more likely to be the chronically ill,” Miller said.

Source: Modern Healthcare, November 6, 2015.

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