February 2, 2022

NOTE TO: Medicare Advantage Organizations, Prescription Drug Plan Sponsors, and Other Interested Parties

SUBJECT: Advance Notice of Methodological Changes for Calendar Year (CY) 2023 for Medicare Advantage (MA) Capitation Rates and Part C and Part D Payment Policies

Attachment II. Changes in the Payment Methodology for Medicare Advantage and PACE for CY 2023

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Table II-4. Key Differences Between the V21 and V24 ESRD Risk Adjustment Models:

ESRD E21→E24

Section H. End Stage Renal Disease (ESRD) Risk Adjustment Models for CY 2023

Background on the ESRD model

CMS uses a separate model to calculate the risk scores applied in payment for the Part A and Part B benefits provided to beneficiaries in ESRD status when enrolled in MA plans, PACE organizations, and certain demonstrations, including Medicare-Medicaid Plans (MMPs).

For CY 2019, CMS recalibrated the ESRD risk adjustment model with more recent data and updated the Medicaid factors to be concurrent with the payment year (refer to the 2019 Advance Notice and Rate Announcement for more information regarding these updates).

For CY 2020, CMS continued improving the ESRD model by implementing a revised model that included adjustments for the functioning graft new enrollee, functioning graft long term institutional (LTI), and dialysis new enrollee populations to address the over-prediction or under-prediction for these unique subpopulations.

For CY 2023, we are proposing to implement a revised model with updates that more closely align the ESRD risk adjustment model with the Part C risk adjustment model, and will result in overall risk adjustment payment that is more accurate for MA organizations that enroll ESRD beneficiaries.

Starting with CY 2017, CMS updated the Part C CMS-HCC model by creating model segments based on dual eligibility and aged/disabled status to improve the model prediction for these subpopulations. For CY 2019 and CY 2020, CMS updated the clinical version of the Part C CMS-HCC model to include additional conditions.