Risk adjustment reform in Medicare Advantage could be put on the budget reconciliation table
As I told you recently, the budget reconciliation process is mired down. There are a number of contentious points, including state and local taxation deductions and Medicaid spending cuts. At least on the Medicaid issues, moderates are lining up against conservatives and the prospects of a quick and successful bill passage are becoming more and more remote.
Conservatives in each chamber, but more so in the House, want two core things on the spending front. They want enough spending reductions to pay for the extension of the 2017 Trump tax cuts. In addition, they think Medicaid is growing far too much and want to rein it in with deep structural reforms.
Conservatives may lose on their Medicaid reform point if a bill is to pass, but the GOP may be looking for more spending reductions outside of Medicaid to meet conservatives’ overall spending reduction demand. The House Energy & Commerce Committee just unveiled healthcare cuts worth over $700 billion over 10 years, most of them impacting Medicaid. The most controversial Medicaid reductions are not included, but betting odds are that moderates will move to further reduce the cutbacks. Budgeteers would likely need to find offsetting reductions to keep conservatives happy. And one area that may get attention is Medicare Advantage (MA) overpayments. Indeed, Democrats are challenging the GOP to hit MA overpayments before they cut Medicaid. And GOP lawmakers sensitive to corporate welfare are sympathetic to resolving alleged overpayments.
I have written often on this topic. In general, I have attacked MA opponents’ mammoth figures on overpayments. MedPAC, the congressional Medicare policy arm, constantly tags overpayments as in excess of $80 billion annually. Other academic outfits opposed to MA put these numbers even higher – some over $100 billion annually.
Much of the big overpayment number is unverified and speculative. I don’t believe the beneficial selection argument that academics use to generate their huge sums. As well, at least some of the alleged risk adjustment overscoring is related to the fact that the traditional system has little to no incentive to document all of the disease states and conditions that enrollees have. Still other academic outfits classify deliberate congressional policy decisions as overpayments. Additive dollars for the Star program and benchmark rates that are higher in certain rural and suburban counties than traditional Medicare fee-for-service (FFS) program costs are good examples.
But in the end, even I am willing to admit that MA plans are overpaid to some degree. If you really look at the data, at least part of the risk adjustment difference between MA and FFS can be attributed to certain plans – oftentimes large ones – aggressively or perhaps fraudulently scoring enrollees. What’s more, these plans leverage a disproportionate share of the higher risk-scoring revenue. In essence, they give the whole industry a bad name.
What might the overpayment number really be from intensive risk-adjustment overcoding? Richard Kronick and his colleagues at the University of San Diego looked at data from 2015 to 2021 and examined the differential persistence and new incidence of risk scoring in the MA world compared with traditional fee-for-service (FFS). They say the average MA risk scores were 18.5% higher than the average in FFS in 2021. This led to an estimated $33 billion in overpayments to MA plans that year. I do not think all of these payments are suspect because the FFS world tends to “under capture” risks. But it is far lower than the $80 to $100 billon or more estimates we often hear. Indeed, the researchers admitted that undercoding in FFS could be a phenomenon.
The researchers, who published their work in the Annals of Internal Medicine, did find that the suspect coding revenue varied widely by MA plan. It found that UnitedHealth Group’s MA market share was 27% in 2021, but United received 42% ($13.9 billion) of that $33 billion sum. United’s estimated per-member revenue increase of $1,863 was the biggest, with the MA industry average at $1,220 per member. See an article at the end for a link to the study. They also found that chart reviews and home-based health risk assessments (HRAs) accounted for about half of the difference in MA risk scores.
Other studies back this up (see details in my “Will CMS Rein In Risk Adjustment Submissions” blog link below):
- A study published in Health Affairs found that MA plans that conduct in-home and other HRAs (but not necessarily the ones for the Special Needs Plans) are adding considerably to revenue through coding diagnoses from these encounters. The study, based on 2019 data, found that when an HRA is present, risk scores increase by about 12.8 percent on average. Restricting their use for such purposes could save between $4.5 billion to $12.3 billion.
- The Department of Health and Human Services Office of Inspector General (HHS OIG), which studied HRAs for the 2017 calendar year, determined that diagnoses reported only on HRAs (and on no other service records) that year led to an estimated $2.6 billion in additional risk-adjusted payments.
- The HHS OIG came back in late 2021 with an additional study using the same data from 2016 and combining the HRA issue with manual chart reviews. It found that 20 of the 162 MA plans drove a disproportionate share of payments related to diagnoses that were reported only on chart reviews and HRAs and no other service events. HHS OIG pegged the overall universe of potential overpayments across all the plans at $9.2 billion. HHS OIG said that the higher share of payments to the 20 plans could not be explained by their enrollment size. The companies generated payments that were more than 25 percent higher than their share of enrolled MA beneficiaries. The 20 companies drove 54% of the $9.2 billion. One company drove 40% of the total amount. That was United.
Sensible reforms
There are a series of sensible reforms that could be phased in over time to protect MA plans from huge change in the short term but take away the abusive risk scoring. This is where budgeteers could go to gain MA savings and better insulate Medicaid from drastic coverage impacts.
First, it is important to note that the Centers for Medicare and Medicaid Services (CMS) is already going down the road of reform. While MA plans objected and have seen hard financial times because of it, CMS’ new v28 risk model moves from v24 and is aimed at pulling back on some of the abusive scoring practices. It is being phased in from 2024 through 2026 and removes over 7% from rates. In the end, the new risk model is a good thing for the industry. It will reduce opponents’ overpayment number in the future and at base is a fair and accurate reform.
Second, I have made the case that eliminating (again over time to protect the industry) risk adjustment diagnoses that are tied exclusively to manual chart reviews or health risk assessments is a fair reform as well. The savings could be big and bigger plans tend to have the resources and know-how to invest here. A small number of plans disproportionately benefit from these activities. Plans argue these activities are good and identify risks that otherwise would not be reported. Fair enough. Plans would be free to continue them if they are beneficial. But surely if the risks are valid, they should be reported by physicians and other providers who are rendering care to the enrollees.
Third, tackling the inequities between larger and smaller plans in terms of risk adjustment scoring is important. And I am most concerned about the risk-adjustment activities of the very biggest plans. Two ways of doing this would be to have CMS get the resources and become very aggressive on risk adjustment data validation (RADV). It, too, would need to amend the current RADV rule so it is legally defensible. Aspects of the current rule go too far. Overall, this would recoup unreasonable risk-adjustment scoring revenue and change behavior over time. Another idea recently highlighted would be to change the current coding intensity factor from a flat negative 5.91 percent to one that floats by plan based on the difference between that plan’s risk-adjustment scoring and the average. Of course, protections would need to be put in place for those plans that truly enroll beneficiaries with major risks.
Now, lawmakers might choose to go the simple route in budget reconciliation. If so, they could do the following:
- Reduce MA benchmarks (e.g., by 10%)
- Do global change to the coding intensity factor and take out more than 5.91%
Other changes can be seen in my earlier blog “Medicare Advantage In The Gunsight” below.
Conclusion
My health plan friends will accuse me of being some sort of turncoat, but here is my defense.
- Notwithstanding recent news that the Medicare Part A trust fund will last longer than we thought, Medicare is in a crisis and needs critical reform to ensure its longevity.
- A bipartisan group in and out of government is increasingly accusing MA of being unaccountable. That will undermine everyone’s faith in MA.
- The national debt and deficits are out of control. MA, too, has to contribute something to get the nation’s budget back on solid footing.
- As noted, there is good reason to believe that the vast majority of overpayments go to a small number of bigger MA plans. Reforming risk adjustment will ultimately benefit the other MA plans. Right now, big national MA players control in excess of 75% of the market. Some part of that is driven by the advantages it seems to have in risk adjustment, which boosts the amount of revenue Big MA gets vs. other players. This is then used to out compete other plans in terms of added benefits.
Resources:
San Diego study: https://www.medpagetoday.com/publichealthpolicy/medicare/115000
Earlier blogs: https://www.healthcarelabyrinth.com/will-cms-rein-in-risk-adjustment-submissions/ and https://www.healthcarelabyrinth.com/medicare-advantage-in-the-gunsight/
#medicareadvantage #riskadjustment #overpayments #cms #congress #budgetreconciliation #trump
— Marc S. Ryan
