Timing is everything: CMS 2022 Advance Notice Part I and other guidance

The COVID-19 pandemic has had a significant impact on how Americans seek medical care. It has also impacted the delivery of care and operations of health care providers. During the ongoing pandemic, the Centers for Medicare & Medicaid Services (CMS) released several waivers and flexibilities. This is to support health care providers and health plans as they continue to deliver care.

Most recently, CMS released two very important documents for Medicare Advantage plans.

2022 CMS Advance Notice Part I
On September 14, 2020, CMS released the Advance Notice Part I. Typically, this document is not released until December. The early timing allows CMS to release the Advance Notice Part II in fall 2020 and the Final Announcement in January 2021. This is to provide health plans more time to prepare 2022 bids.

Note: CMS reserves the right to publish the Advance Notice Part II and the Final Announcement in February and April, respectively. The release time will depend on the progress CMS makes on internal rate development efforts and stakeholder feedback.

Below are highlights of the Advance Notice Part I, from our perspective:

  1. CMS is proposing to move to 100% weight on encounter data system (EDS) risk scores using the 2020 CMS-Hierarchical Condition Categories (HCC) model for 2022. In 2021, EDS risk scores were weighted 75% and 25% on risk adjustment payment system (RAPS) risk scores using the 2017 CMS-HCC model.
  2. In 2021 and prior, CMS supplemented EDS risk scores with Fee-for-Service (FFS) and inpatient (IP) RAPS data. Starting in 2022, EDS risk scores will no longer be supplemented with IP RAPS data.
  3. CMS is estimating that moving 100% to the 2020 CMS-HCC model (from 75% in 2021) can increase revenue by 0.25% (actual value will vary by plan).
  4. CMS is estimating there will be no impact due to transitioning to 100% EDS data and removing IP RAPS supplement data.

Risk adjustment model considerations not addressed in Part I
For health plans and stakeholders that follow proposed changes in Medicare Advantage risk adjustment, these proposed changes are not a surprise. From our perspective, what wasn’t addressed in Part I of the Advance Notice is more interesting.

First, CMS is not proposing to recalibrate the coefficients of the 2020 CMS-HCC model using ICD-10 diagnosis codes. Currently, the 2020 CMS-HCC model is calibrated using 2014 FFS diagnosis data to predict 2015 FFS expenditures. When ICD-10 was implemented on October 1, 2015, the CMS-HCC model was developed by creating a crosswalk mapping of ICD-9 diagnosis codes into ICD-10 diagnosis codes. There were roughly 14,000 ICD-9 diagnosis codes and there are more than 69,000 ICD-10 diagnosis codes. One may suspect that recalibrating using only ICD-10 data could have an impact on the model coefficient calibration.

Second, the CMS-HCC model is using FFS data from 2014 and 2015 and normalized to estimate expected costs for Medicare Advantage plans in 2022. It may be prudent for CMS to consider recalibrating the model for recent FFS data. They may also consider shifting the calibration to incorporate Medicare Advantage encounter data similar to how RxHCC coefficients are calibrated.

Recalibrating the 2020 CMS-HCC model for updated claims information and ICD-10 diagnosis codes would be more reflective of today’s market. It also may alleviate the need for an MA Coding Pattern Adjustment and lower the overall normalization factor required.

CMS memo: Deadline for Submitting Risk Adjustment Data
In addition to the Advance Notice Part I, CMS released a memo on September 18, 2020, with updated deadlines to submit risk adjustment data for use in risk score calculations for payment years (PY) 2020, 2021 and 2022.

Most notable in this memo is CMS adding one final payment for PY 2020. This additional final payment gives health plans another six months to submit diagnosis data from calendar year 2019 for PY 2020.

CMS has extended the window to submit diagnosis data for 2019 dates of service. Yet this presents challenges to MA plans and actuaries during the bid submission process. The bid submission timeline for 2022 will occur well before this final submission window. At the end of March or April, plans likely will need to build risk score forecasts and base period values using the best data available at that time. For this reason, we encourage plans to identify any programmatic delays in submitting diagnosis data to monitor and estimate the financial impact on the final risk score estimates for PY 2020.

The following table shows updated deadlines from the memo:

For more information, on the 2022 CMS Advance Notice Part I, visit CMS.  For information on the CMS memo on the Deadline for Submitting Risk Adjustment Data, visit CMS Health Plan System (HPS) weekly memos page.


About the Author

Randall Fitzpatrick, FSA, MAAA
Vice President, Optum Actuarial Services

Randall Fitzpatrick provides consulting services to health insurers, Medicare Advantage organizations, MCOs and health care providers. His expertise includes pricing and filing of Medicare Advantage Part C and Part D bids, reserving, provider contract analytics and strategic market analyses for MA. He also provided actuarial services to CMS for the review and audit of its bid pricing tools.

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