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 III. Benefit Parameters for the Defined Standard Benefit and Changes in the Payment Methodology for Medicare Part D for CY 2023

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Comparison of Current (V05) and Proposed (V08) RxHCC Risk Adjustment Models

Part D R05→R08

Section A. RxHCC Risk Adjustment Model

For CY 2023, we are proposing to implement an updated version of the RxHCC risk adjustment model used to adjust direct subsidy payments for Part D benefits offered by stand-alone Prescription Drug Plans (PDPs) and Medicare Advantage-Prescription Drug Plans (MA-PDs). The proposed 2023 model encompasses the following changes:

• Clinical update to the prescription drug hierarchical condition categories (RxHCCs) so that RxHCCs are based on ICD-10-CM diagnosis codes rather than ICD-9 codes used in the prior models; and
• Update to the data years used to calibrate the model to reflect more current trends in utilization and spending.

A1. Clinical update to the prescription drug hierarchical condition categories (RxHCCs)

For CY 2023, CMS is proposing a recalibrated RxHCC model that includes a clinical update to the RxHCCs.

<aside> ⚕️ A clinical update entails reviewing the ICD diagnosis codes based on: current clinical rationality and cohesion within the RxHCC mapping, updated prescription drugs and drug regimens in relation to the disease conditions and severity, and their implications for predicted costs.

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The last clinical revision of the RxHCC model was implemented in CY 2015 and was based on ICD-9-CM diagnosis codes, an older version of the ICD diagnostic classification system. Changes to the model in subsequent years reflected only changes to the Part D benefit structure and the inclusion of more recent utilization data. The proposed 2023 model is recalibrated using a revised clinical classification system based on ICD-10-CM diagnosis codes.

The revised RxHCC risk adjustment model is the result of clinical input from an external panel of physicians regarding the composition of each RxHCC and its contribution to total plan liability for prescription drug costs.