Medicare Advantage: What Happened In The Final Rate Notice?

Risk Adjustment Model and Fee-for-Service Normalization

What Did CMS Propose in the 45-Day Notice?

CMS proposed a major change to the risk adjustment model that would separately calculate beneficiary risk scores for “full dual eligibles,” “partial dual eligibles,” and “non-dual eligibles,” with each of those categories further divided based on disabled or non-disabled status. In addition, CMS proposed to determine and adjust dual eligible status on a monthly basis during the payment year (i.e. concurrently), rather than prospectively based on such status in the year preceding the payment year, as is currently done.

What Did CMS Do in the Final Notice?

CMS finalized changes to the risk adjustment model for 2017 as proposed. However, CMS acknowledged there was a “technical error” in the original calculation of the model coefficients, and released revised coefficients that are 1.8 percent higher than originally proposed.

How Did the Fee-for-Service Normalization (FFSN) Factor Change?

Due to changes in the calculation of the risk adjustment model coefficients, CMS revised the FFSN factor to 0.998, compared to the preliminary estimate of 0.993 proposed in the 45-Day Notice. The updated FFSN factor will reduce plan risk scores by 0.6 percent on average in comparison to 2016 (FFSN factor of 0.992).

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