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HCC Risk Adjustment Refinement Coming for 2017

HCC Risk Adjustment Refinement Coming For 2017

As we have written about several times over the past year, Special Needs Plans (SNPs) and other plans with heavy concentration on dual eligible members have long complained that both the Hierarchical Condition Category (HCC) risk adjustment system and Medicare Advantage Star rating system implicitly discriminates against them. In its 2017 Call Letter released on April 4, 2016, the Centers for Medicare and Medicaid Services (CMS) announced changes meant to address these concerns.

In the Star program, an interim adjustment to some measures will be introduced to compensate for the socio-economic, health literacy, and higher clinical co-morbidities that are common within the dual-eligible and related populations.

In the case of HCC, the single community segment will be overhauled. Currently the community segment is calculated as one segment, with Medicaid status factored in. Since that is not adequately predictive, CMS is proposing to include separate community segments for the following six population groups:

  1. Full benefit dual aged
  2. Full benefit dual disabled
  3. Partial benefit dual aged
  4. Partial benefit dual disabled
  5. Non-dual aged
  6. Non-dual disabled

The significant change caps a multi-year effort to assess the actual predictive ratios for various groups covered in the community segment. In the fall of last year, CMS released an actuarial assessment. CMS actuaries studied the 2014 HCC model and calculated predictive ratios to ascertain whether scores for full and partial dual eligible beneficiaries are reasonably predictive. Premiums, cost sharing, and certain supplemental benefits for full dual eligible beneficiaries are paid by their state Medicaid agency; partial dual eligibles usually benefit only from premium or cost-sharing support from the Medicaid program. CMS included the Qualified Medicare Beneficiary (QMB) Plus and Specified Low-Income Medicare Beneficiary (SLMB) Plus sub-categories as full duals.

A predictive ratio close to 1.0 indicates that the model is accurately predicting that dual group’s average cost. A ratio greater than 1.0 indicates over-prediction, while a ratio less than 1.0 indicates under-prediction. As part of the study, CMS also looked at how predictive HCC is based on disability and institutional status. Disability and institutional status is factored into the HCC risk adjustment system in addition to dual status.

Over 80% of those who are institutional (in a facility 90 days or more) are also dual eligible beneficiaries. CMS found that the predictive cost for institutional dual eligible beneficiaries is very close to 1. Therefore, there is no issue and no changes are proposed.

While HCC does a good job of predicting costs for those with a community status who are non-dual eligible beneficiaries (1.015), it actually over-predicts for partial benefit dual beneficiaries (1.092) and under-predicts for full benefit dual beneficiaries (0.914). Even when the dual groupings are taken as a whole, there is a substantial under-reimbursement against actual cost (.957).

With the adoption of the community segment “split out,” each segment will have comparative factors reflecting the specific relative costs for the subgroup. In this way, the model can be targeted to actual costs for full, partial, and non-dual beneficiaries to better predict costs. Disability substantially impacted costs within the three groups as well, necessitating six groupings. In the final model, the predictive cost is 1.0 for all groupings.

In a June 10, 2016, HPMS memo, CMS outlined its proposed approach for implementing the community segments. The Long Term Institutional and New Enrollee categories are unaffected, with payment and reconciliation methodology remaining unchanged.

  • If a beneficiary has a community status for a payment month, CMS will apply one of six community scores, depending on the beneficiary’s aged versus disabled status for the year and their dual status for the month.
  • A prior month’s dual status will be used to determine the payment for the succeeding month.
    • For months prior to the mid-year risk score update (Jan to July), the previous October status will be used.
    • For August through the end of the year, the May status will be used.
  • When payments are reconciled, the beneficiary’s actual status will be used for each month.
  • CMS believes this methodology works because most full dual beneficiaries remain in this status for all or most of a year.
  • The approach will reduce monthly adjustments as well.
  • CMS will be using three sources of Medicaid status for risk adjustment: the MMA State files, the Point of Sale data, and the monthly Medicaid file that the Commonwealth of Puerto Rico submits to CMS.

Marc Ryan

Marc S. Ryan serves as MedHOK’s Chief Strategy and Compliance Officer. During his career, Marc has served a number of health plans in executive-level regulatory, compliance, business development, and operations roles. He has launched and operated plans with Medicare, Medicaid, Commercial and Exchange lines of business. Marc was the Secretary of Policy and Management and State Budget Director of Connecticut, where he oversaw all aspects of state budgeting and management. In this role, Marc created the state’s Medicaid and SCHIP managed care programs and oversaw its state employee and retiree health plans. He also created the state’s long-term care continuum program. Marc was nominated by then HHS Secretary Tommy Thompson to serve on a panel of state program experts to advise CMS on aspects of Medicare Part D implementation. He also was nominated by Florida’s Medicaid Secretary to serve on the state’s Medicaid Reform advisory panel.

Marc graduated cum laude from the Edmund A. Walsh School of Foreign Service at Georgetown University with a Bachelor of Science in Foreign Service. He received a Master of Public Administration, specializing in local government management and managed healthcare, from the University of New Haven. He was inducted into Sigma Beta Delta, a national honor society for business, management, and administration.

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