RISE summarizes the findings of a recent Wakely report commissioned by the America’s Health Insurance Plans (AHIP) that analyzes the information contained in the 2022 Medicare Advantage Advance Notice, including changes to the risk adjustment models, and the impact of COVID-19 on the Centers for Medicare & Medicaid Services (CMS) projections.

Among the key findings of the report:

  • The CY2022 fee-for-service (FFS) growth rate is in line with CMS projections released prior to COVID, which indicates that CMS believes most of the impact of deferred care, forgone services, and pent-up demand will not affect 2022 costs.

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Although CMS has projected cost impact due to COVID based on the United States Per Capita Costs amounts, Wakely notes that the 2020 data year does not reflect other adjustment factors, such as Average Geographic Adjustment (AGA), Veterans Affairs (VA), Department of Defense (DoD) dual-eligibles, and Kidney Acquisition Costs (KAC).

For 2022 rates, these adjustment factors are based on a rolling average from 2015-2019. For 2023 rates, the rolling average will shift forward to include 2020 data, which Wakely notes could have a significant impact to these adjustments. CMS has not yet stated if and how it will adjust the development of these factors to account for the anomaly year.

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  • CMS proposes to fully phase in the encounter data submission (EDS) risk models for CY2022 and will remove diagnoses from inpatient Risk Adjustment Processing System (RAPS) submissions as a supplemental source of diagnoses. Wakely estimates that the removal of inpatient RAPS submissions would result in a 0.23 percent drop in Part C risk scores and 0.12 percent decrease for Part D.


  • CMS acknowledged that allowing end-stage renal disease (ESRD) beneficiaries to proactively enroll in Medicare Advantage Organizations (MAOs) will negatively impact plans financially by estimating a -$0.78 PMPM impact to gain/loss margin for 2021 due to ESRD beneficiaries joining via open enrollment. This is consistent with a previous Wakely analysis that ESRD benchmark rates currently do not cover the costs of Medicare beneficiaries with ESRD on average. In addition, CMS updated its estimate of the number of new ESRD entrants joining via open enrollment for 2021 and found a much higher number of enrollees than its previous estimates published in the June 2,2020 CY2021 Policy and Technical Rule.


  • The Part C FFS normalization factor continues to trend upward, which reduces payment to plans. The calculation CMS uses to derive the normalization factors was updated to include 2016 through 2020 scores, but these scores are unaffected by potential impact of COVID on 2022 scores, and CMS made no adjustment for such a potential impact.


Wakely notes that if CMS knows that risk scores in CY 2021 will likely be decreased due to COVID, the agency should adjust the seven-year trend to account for the anomaly year. Wakely suggests CMS consider using emerging 2020 diagnosis data relative to prior years to estimate a 2020 risk score impact and adjust the expected trend and normalization factors accordingly.


  • The proposed RxHCC FFS normalization factor that is tied to the proposed 2022 RxHCC risk adjustment model reflects a significantly higher observed growth trend as compared with recent years. This factor could serve to decrease Part D scores for 2022, depending on the impact of the new model on each plan’s score.