February 1, 2023
Attachment II. Changes in the Payment Methodology for Medicare Advantage and PACE for CY 2024
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HCC Differences Between the Current and Proposed CMS-HCC Risk Adjustment Models, by Disease Group
For CY 2024, CMS proposes to implement a revised version of the CMS-HCC risk adjustment model. This proposed model has the same structure as the 2020 CMS-HCC risk adjustment model currently used for payment in that it has eight model segments as first implemented for payment for CY 2017 and condition count variables as first implemented for payment for CY 2020.
It incorporates the following technical updates:
(1) updated data years used for model calibration,
(2) updated denominator year used in determining the average per capita predicted expenditures to create relative factors in the model, and
(3) a clinical reclassification of the hierarchical condition categories (HCCs) using the International Classification of Diseases, Tenth Revision, Clinical Modification (ICD-10-CM) codes.
(4) In addition, as part of the clinical reclassification, CMS conducted an assessment on conditions that are coded more frequently in MA relative to FFS. This assessment is consistent with Principle 10 of CMS’s longstanding model principles, described in more detail initially in the December 2000 report titled, “Diagnostic Cost Group Hierarchical Condition Category Models for Medicare Risk Adjustment (Final Report).” As a result of this assessment, in addition to the technical updates, the proposed model includes additional constraints and the removal of several HCCs in order to reduce the impact on risk scores of MA coding variation from FFS.
Refer to Table II-4 below for a list of HCC differences between the current and proposed CMS-HCC risk adjustment models. We propose to use this revised CMS-HCC model in Part C payment for aged/disabled beneficiaries enrolled in MA plans beginning with payment year 2024.
<aside> đź’ˇ CMS regularly updates risk adjustment models to reflect more recent utilization and cost patterns. In addition, CMS periodically conducts clinical revisions of the model to update and revise the composition of the condition categories to reflect more recent changes in disease patterns, treatment methods, and coding practices, as well as compositional changes within the Medicare population.
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As discussed in the 2018 and 2021 Reports to Congress on Risk Adjustment in Medicare Advantage, CMS has been conducting analyses on the CMS-HCC models for reclassification purposes and in preparation for changing to risk adjustment payment models calibrated on ICD-10-CM (also referred to as ICD-10) diagnoses. For CY 2023, CMS finalized an RxHCC model calibrated on ICD-10-CM.
The proposed model, accounting for all the changes to the model described in more detail below in Table II-4, results in more appropriate relative weights for the HCCs in the model because they reflect more recent utilization, coding and expenditure patterns in FFS Medicare, as well as revised HCCs that are constructed to reflect clinical cost patterns associated with ICD-10 codes, the classification system that is currently being used by providers. Beneficiary risk scores or plan average risk scores may change depending on each individual beneficiary’s combination of diagnoses or the clinical profile of a plan’s enrollee population.
<aside> đź’ˇ Risk score differences between the current model and the proposed model will occur for several reasons. Specifically, revisions to the models result in changes in the marginal cost attributable to each HCC, relative to the change in the average cost (i.e., denominator used to set the relatives), and can alter the relative factor associated with each HCC, and with the relative values among HCCs. In addition, changes in the relative factors will result from changing from HCCs that were created using the ICD-9 classification system to HCCs that were created using the ICD-10 classification system, as well as from the addition or deletion of HCCs to or from the model.
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