Centers for Medicare and Medicaid Services (CMS) intends to transition gradually to EDS-based payments, starting with 10% of the payment based on EDS in 2016, increasing to 25% in 2017 and 50% in 2018.

CMS has said the diagnoses captured in EDS should not be different from those identified in RAPS. However, we found that this transition will significantly reduce the identification of diagnoses used to calculate the risk scores that reflect the disease burden of the plans membership. Average risk scores resulting from the EDS process were 26% lower in the 2015 payment year (based on 2014 claims data) and 16% lower in the 2016 payment year (based on 2015 claims data) compared to RAPS. The lower risk scores were primarily the result of 35–40% fewer Hierarchical Condition Category (HCC) diagnoses identified in EDS compared to RAPS.

The risk-score differences will have significant negative implications for MAOs and the 18 million beneficiaries they serve. As an example, using an $800 bid rate, if there had been a full transition from RAPS to EDS in 2016, this would equate to an average reduction of 16.1% in PMPM rates, representing a decrease of $260.4 million per year for the average plan in our study. The 90/10 phase-in in 2016 would result in a 1.6% reduction in PMPM rates which would translate to $25.2 million per plan in lower payments on average.

In spite of recent actions taken by CMS to improve EDS, a new Government Accountability Office report documents numerous problems MA plans have had in submitting data and receiving reliable edits from the agency.

A full report including extensive detailed information from the study will be released in February 2017.