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Medicare Advantage 2016 rate season begins

By Healthcare Finance Staff

Medicare Advantage reimbursement and regulatory changes are coming, along with new probes into risk adjustment practices that could lead to settlements and clawbacks.

Late winter and early spring is Medicare Advantage regulatory proposal season, as the Centers for Medicare & Medicaid Services outlines reimbursement and benefit rules for 2016.

In the 2016 Advance Notice and Draft Call Letter, CMS is a proposing both continuity and changes that principal deputy administrator Andy Slavitt said will "enhance the stability of Medicare Advantage program and minimize disruption to seniors and care providers."

The Affordable Care Act mandated rate changes to Medicare Advantage payments, to bring them in parity with fee-for-service. On average, the proposal for 2016 will "modestly" decrease payments by 0.9 percent per beneficiary, although factoring in the expected continuation of risk scoring growth, the average effect in 2016 will be a modest increase of 1.05 percent.

Now, "there will be significant variation around these numbers," said deputy administrator Sean Cavanaugh. Medicare Advantage plans with good quality ratings and beneficiary satisfaction will see additional growth, and payment levels will continue to be "somewhat higher than the equivalent payments in fee for service," the agency said.

Among managed care analysts, J.P. Morgan Securities predicted a more modest 0.6 percent rate increase that would be more than the 0.4 percent increase Medicare Advantage plans received for 2015. Sterne Agee analyst Brian Wright estimates that the average effect will be an increase of 0.2 percent.

The proposal is on top what America's Health Insurance Plans estimates to be a nearly 10 percent reimbursement reduction over the last two years.  

"There's wide recognition that providing stability to the Medicare Advantage program is critically important for the more than 16 million seniors enrolled," said AHIP president and CEO Karen Ignagni. "Protecting the millions who rely on this program should mean no further cuts."

In any case, Medicare Advantage insurers have proven they can adapt because the program's growth has a lot of potential. Investors have become "desensitized to rate cuts in recent years, as Medicare enrollment growth has held up quite strong," Agee said, and at least a few dozen health systems are expanding or launching their own Medicare Advantage plans.

This year, CMS estimates that 60 percent of the 16 million Medicare Advantage members will be in plans rated with 4 or 5 stars. For 2016, the agency is going to continue to "refine" the star system to make sure that plans "are not unfairly penalized for enrolling dual eligible or low-income beneficiaries." The agency is going to downweight by 50 percent seven star measures that are not adjusted for socioeconomic status.

A new era of risk adjustment?

The most sweeping changes may come from CMS's plan to transition to new risk score methodologies. The agency is not going to stop permitting the use of in-home visits for risk assessments, which was under consideration amid concerns about inflated risk scores. But the proposal to update the risk adjustment model and the expansion of risk adjustment audits "will get at many of the same issues," Cavanaugh said.

"For payment year 2016, we propose to transition entirely to using risk scores calculated from the community, institutional, new enrollee, and C-SNP new enrollee segments of the clinically-revised CMS-HCC model in Part C payment for aged/disabled beneficiaries," CMS wrote in the notice.

CMS is also planning to expand its risk adjustment data validation oversight. "Results from the pilot and targeted RADV activities indicate that some diagnoses submitted by MA organizations are not supported by medical record documentation," regulators wrote. "Thus, CMS is conducting RADV contract-level audits to recover overpayments in Medicare Advantage. RADV audits verify, through medical record review, the accuracy of enrollee diagnoses submitted by MA organizations for risk adjusted payment. RADV audits are CMS's primary corrective action to recoup Part C improper payments. CMS expects that payment recovery will have a sentinel effect on the quality of risk adjustment data submitted by plans for payment."

As John Gorman, head of the Gorman Health Group consultancy, put it: risk adjustment data validation "just got real."

Humana, the second-largest Medicare Advantage insurer with 3 million senior members, now finds itself in the Medicare risk adjustment spotlight. The insurer recently told investors that the Justice Department is looking into allegations of improper risk adjustment, amid whistleblower complaints.

"We continue to cooperate with and voluntarily respond to the information requests from the Department of Justice and the U.S. Attorney's Office," Humana wrote in its latest Securities and Exchange Commission filing.

In one case, Olivia Graves, MD, alleges that her medical clinic was consciously adding diagnostic codes to Humana Medicare Advantage members' medical records, indicating the patients had diseases like diabetes or kidney diseases despite a lack of diagnosis.

"The Justice Department's involvement in the Humana audit would appear to indicate the review is in the advanced stages and has been underway for some time," wrote Gorman. "The methodology assures an extrapolated repayment to the Federal government for unsubstantiated codes submitted for risk adjustment. That this action also comes in connection with the False Claims Act and a qui tam whistleblower action could signal serious trouble for the insurance giant."

Read the full Medicare Advantage 2016 notice.

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