The Centers for Medicare and Medicaid Services (CMS) has released Part I of 2022 methodological changes for Medicare Advantage capitation Rates and Part C and Part D payment policies. This notice contains key information about the Part C CMS-Hierarchical Condition Categories (HCC) risk adjustment model and the use of encounter data for 2022.

The 2022 Advance Notice is being published in two parts due to requirements in the 21st Century Cures Act. The payment policies for 2022, discussed in both Part I and Part II of the Advance Notice, will be finalized in the 2022 rate announcement, which the statute requires be published no later than April 5, 2021.

CMS issuing earlier notification of proposed payment changes for 2022 is in response to uncertainty created by the coronavirus disease 2019 (COVID-19) pandemic, giving Medicare Advantage organizations and Part D sponsors more time to take this information into consideration as they prepare their bids for 2022.

2022 Part C Risk Adjustment Model

For 2022, CMS is proposing to fully phase in the CMS-HCC model first implemented for 2020, as required by the 21st Century Cures Act. Specifically, per the 21st Century Cures Act, the 2020 model adds variables that count conditions in the risk adjustment model (“payment conditions”) and includes for payment additional conditions for mental health, substance use disorder, and chronic kidney disease. This represents a change from the blend for 2021 of 75 percent of the risk score calculated using the 2020 CMS-HCC model and 25 percent of the risk score calculated using the older 2017 CMS-HCC model.

Using Encounter Data

CMS calculates risk scores using diagnoses submitted by MA organizations and from Medicare fee-for-service (FFS) claims. Historically, CMS has used diagnoses submitted into CMS’ Risk Adjustment Processing System (RAPS) by MA organizations for the purpose of calculating risk scores for payment. In recent years, CMS began collecting encounter data from MA organizations, which also includes diagnostic information. CMS began using diagnoses from encounter data to calculate risk scores for 2015, and has since continued to use a blend of encounter and RAPS data-based scores through 2021, when risk scores will be calculated with 75 percent encounter data and 25 percent RAPS data.

With the proposed full phase-in of the 2020 CMS-HCC model, which is designed to calculate risk scores using diagnoses from encounter data submissions, the Part C risk score used for payment in 2022 would rely entirely on encounter data as the source of MA diagnoses.

Also, for 2022, CMS is proposing to discontinue the policy (used for 2019, 2020, and 2021) of supplementing diagnoses from encounter data with diagnoses from inpatient records submitted to RAPS for calculating beneficiary risk scores. 

Part I of the Advance Notice may be viewed through: https://www.cms.gov/Medicare/Health-Plans/MedicareAdvtgSpecRateStats/Announcements-and-Documents.html and selecting “2022.” To submit comments or questions electronically, go to www.regulations.gov, enter the docket number “CMS-2020-0093” in the “search” field , and follow the instructions for ‘‘submitting a comment.’’ To be assured consideration, comments on the proposals announced today should be submitted by November 13, 2020.