SummaryAvalere analyzed data from eight Medicare Advantage Organizations (MAOs) representing 1.1 million beneficiaries in more than 30 unique plans operating across the country to understand the impact of shifting the determination of plan risk scores from the traditional Risk Adjustment Processing System (RAPS) to the new Encounter Data System (EDS).
The Centers for Medicare & Medicaid Services (CMS) originally expressed the intention to transition gradually to EDS-based payments, starting with 10 percent of the payment based on EDS scoring in 2016, increasing to 25 percent in 2017 and 50 percent in 2018. In spite of recent actions taken by CMS to improve the EDS submission process, a new Government Accountability Office (GAO) report documents numerous problems MA plans have had in submitting data and receiving reliable edits from the agency. In recognition of the ongoing operational challenges and other concerns about the accuracy of EDS, CMS recently proposed to maintain the 2017 blend in 2018.
CMS has said EDS should capture the same diagnoses 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 percent lower in the 2015 payment year (based on 2014 claims data) and 16 percent lower in the 2016 payment year (based on 2015 claims data) compared to RAPS. The risk score differences ranged from 14 to 30 percent lower across all age groups, but the adverse impact on the high cost, high need younger disabled population was significantly greater, ranging from 25 to 30 percent. Average risk scores of dual eligible members were also significantly lower compared to non-duals. The lower risk scores were the result of up to 40 percent fewer Hierarchical Condition Category (HCC) diagnoses identified in EDS compared to RAPS.
These risk score differences will put significant downward pressure on MAOs and may adversely impact 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 per-member-per-month payment rates, representing a decrease of $260.4 million per year for the average plan in our study. As an example, a plan of the average size in our study that bid $800 in 2016 would have seen a decrease of $260.4 million in risk-adjusted funds per year. A 75/25 blend would have reduced payments by $63.8 million and the 90/10 blend would have reduced payments by $25.2 million per year for the same average plan in our study.
An executive summary of the findings was released on January 23, 2017. This full report includes additional analyses and supplemental information.
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