Medicare Advantage: How Changes To Risk Adjustment Impact Payments, Beneficiaries

posted by Alicia Caramenico

on April 2, 2015

For the third year in a row, the Centers for Medicare & Medicaid Services (CMS) proposed new cuts to Medicare Advantage. According to a recent report, more cuts to this program will lead to reduced benefits, fewer choices, and increased costs.

Those consequences will be very real for patients, especially for people with chronic kidney disease, according to a new analysis from Oliver Wyman. More than 15 percent of all Medicare beneficiaries have been diagnosed with chronic kidney disease. For these beneficiaries, early intervention and treatment is critical to managing their health. Medicare Advantage plans work to identify their enrollees’ health conditions early on so they get the treatment they need and to mitigate serious, complicated health issues that may arise in the future.

Yet, CMS’ proposed changes to the current risk adjustment model would undermine health plans’ early intervention efforts. In fact, the Oliver Wyman analysis estimates the majority of those beneficiaries would not be identified as having the disease under CMS’s proposal, meaning they would risk losing access to the programs and disease management services that make a tremendous difference in their health.

This change could directly impact seniors, like Paula Ercolini of Georgia. Paula has kidney disease, but Medicare Advantage coordinates her care so that she can stay healthy. In her own words: “With Medicare Advantage, I feel like I have retained some control and a significant quality of life.”

The unfortunate and serious trade-off is that the cost of early disease identification and activities to slow the progress of chronic kidney disease is far less than treating it at its later stages. CMS estimates that the impact of fully implementing the risk adjustment changes would translate into a 1.7 percent cut to the program, or approximately $3.5 billion. In contrast, Medicare spent about $29 billion in 2012 (excluding prescription drugs) on treating patients with kidney failure. That’s why it’s critical for CMS to keep funding stable so health plans can maintain population-based programs that prevent, monitor and treat chronic kidney disease before it becomes a more life-threatening and costly condition.

When it releases final payment rates on April 6, 2015, CMS has an opportunity to help protect beneficiaries like Paula in Medicare Advantage. This Oliver Wyman analysis amplifies the voices of bipartisan majorities in Congress, providers, stakeholders, and beneficiaries who are warning of the harmful impacts proposed cuts would have on beneficiaries – and we hope CMS is listening.