CMS Finalizes 2021 Rate Increases for Medicare Advantage

Ken Terry

April 07, 2020

The Centers for Medicare and Medicaid Services (CMS) announced Tuesday that it will raise per-capita payments to Medicare Advantage (MA) plans by 1.66% in 2021. That's a slight bump up from the 0.93% that CMS proposed in February, but a decline from the 2.53% increase that MA plans received this year.

The 2021 payments to the private plans, which cover about a third of Medicare beneficiaries, do not reflect the government's efforts to combat the COVID-19 pandemic, a CMS fact sheet said.

CMS is transitioning its Medicare Advantage payments to a new risk-adjustment model required by the 21st Century Cures Act. According to the fact sheet, 75% of the risk score in 2021 will be based on the 2020 CMS-Hierarchical Condition Categories (HCC) model, and 25% of the score will be calculated using the 2017 CMS-HCC model. In 2020, the risk-adjustment methodology was evenly divided between the two methods.

To determine payments to each MA plan, CMS calculates risk scores using diagnoses submitted by MA organizations and from Medicare Fee-for-Service claims. Historically, CMS used diagnoses that MA plans submitted to its Risk Adjustment Processing System to risk-adjust each plan's patient population. Five years ago, CMS began to factor in encounter-based risk scores so that Medicare payments would more accurately reflect case-mix severity.

Studies have shown that MA plans tend to upcode diagnoses to make it appear that their members are sicker than they really are. As a result, Medicare has overpaid these plans. The new risk-adjustment model aims to correct that by relying on encounter data in addition to plan reports.

CMS is giving MA plans one break, however. In 2021, it will adjust the MA coding pattern by only 5.9%, which is the minimum the law requires. The adjustment reflects the difference in diagnosis coding between MA organizations and fee-for-service providers.

Because of the COVID-19 crisis, the fact sheet said, CMS has adopted several changes to the 2021 Star Ratings for Part C (Medicare Advantage) and Part D (prescription drug) plans that will suspend quality-reporting requirements and reuse earlier data from the 2020 Star Ratings.

The COVID-19 Public Health Emergency Interim Final Rule "establishes how we will assign Star Ratings for 2021 in the event that the virus prevents CMS from having validated data or results in systemic data integrity issues, or if CMS's functions become focused on only continued performance of essential Agency functions due to the Pandemic."

CMS also established separate rates of payment for MA plan members with end-stage renal disease (ESRD). The final increase in the ESRD payment rate will be 4.04%, a raise from the proposed rate hike of 2.8%.

Under the 21st Century Cures Act, all Medicare-eligible patients with ESRD will be able to enroll in MA plans beginning January 1, 2021. Organ acquisition costs for kidney transplants for MA beneficiaries will be covered under the Medicare Fee-for-Service program, CMS said.

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