Viewpoint: Part 1 of the 2019 CMS Advance Notice

By: Rich Gamret, FSA, MAAA, Director, Actuarial Consulting, Optum

CMS recently released Part 1 of the 2019 Advance Notice of Methodological changes for Medicare Advantage. This was a first for the industry — this information has historically been released in February.

As required by the 21st Century Cures Act, CMS is focused on improving the predictability of the risk adjustment (RA) model’s claim cost. The question for many health plans now is: How much will the proposed 2019 RA model changes actually change Medicare Advantage payments in 2019?

The precise impact of these changes will vary by plan and population. Our thoughts on the proposed changes include:

  1. New counting component. CMS is proposing to implement coefficients to reflect the comorbidity of members who are diagnosed with multiple payment Hierarchical Condition Categories (HCCs). Under the proposed model, additional risk factors will be added to reflect the count of payment HCCs with which a member has been diagnosed. The proposed coefficient is zero for members with a payment HCC condition count of fewer than 3–5 conditions (depending on community segment). This means that in 2019 for most health plans, only a small group of existing members would have a condition count that is large enough to actually receive a new positive risk factor. Based on 2015 CMS Limited Data Set for fee-for-service enrollees, fewer than 10 percent of members will actually have a payment HCC condition count large enough to receive a non-zero risk factor.


  1. Revised HCC definitions. CMS has proposed new HCC categories to be introduced in the categories of Mental Health Conditions, Substance Use Disorders, and Chronic Kidney Disease. They also propose the revision of diagnosis mappings to HCCs and renumbering specific HCCs within these categories. CMS has not yet released specific changes to the diagnosis mappings. For now, clinical judgement is required to create expected diagnosis mappings that can be used to determine the financial impact of these changes.


  1. Coefficient re-calibration. We expect to see additional variability when comparing the 2017 CMS-HCC risk scores to the 2019 Payment Count model. The demographic factors and disease coefficients have been updated in the proposed model. However, the model is still required to normalize to 1.0 for all fee-for-service enrollees. Given the variation present in the demographic and disease coefficients, it is impossible to evaluate change without analyzing actual member populations.


  1. Model blending. Starting in 2019, CMS is proposing to blend the results of the proposed 2019 payment count model with the 2017 model. The model will continue to phase until 2022; see the table below. While the new model may produce different risk projection results, in 2019, only a small proportion of the effect will be felt, with the impact becoming more noticeable through 2022.


Proposed Model Blending Schedule
Year Proposed CMS-HCC Payment Condition Count Model 2017 CMS-HSS Risk Adjustment Model
2019 25% 75%
2020 50% 50%
2021 75% 25%
2022 100% 0%


Next steps:

  • Given the variety of the proposed changes, health plans should evaluate the possible impact based on their specific population. Comments and proposals are due to CMS by March 2.
  • Learn more at Viewpoints on the 2019 CMS Advance Notice.


About the Author:

Rich Gamret, FSA, MAAA

Director, Actuarial Consulting


Rich Gamret directs Medicare Advantage plan pricing and analysis, evaluation of new regulations and ad hoc analyses depending on specific client needs. Rich has previously assisted clients by completing: individual and small-group rate filings for federal and state exchanges; actuarial opinions; custom pricing model development; and benefit relativity analysis. He has extensive experience in the Florida marketplace. Rich has a BS in Actuarial Science from Florida State University, is a fellow of the Society of Actuaries and is a member of the American Academy of Actuaries. In addition, he serves in various roles on the group health examination committee of the Society of Actuaries.

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