Executive Summary
On September 14, 2020 and October 30, 2020, the Centers for Medicare & Medicaid Services (CMS) released the contract year (CY) 2022 Advance Notice Part I and Advance Notice Part II with the accompanying fact sheet (Notice), respectively. America’s Health Insurance Plans (AHIP) has retained Wakely Consulting Group LLC. (Wakely) to provide a financial impact summary report of the information presented in the Notice as well as changes to the risk adjustment models and the impact of COVID on CMS projections.
Key highlights of our analysis are:
- The CY2022 fee-for-service (FFS) growth rate is in line with CMS projections released prior to COVID, indicating that CMS believes most of the impact of deferred care, forgone services, and pent-up demand will not affect 2022 costs.
- The encounter data submission (EDS) risk models are proposed to be fully phased in for CY2022, and diagnoses from inpatient RAPS submissions would be removed as a
supplemental source of diagnoses. Wakely estimates that the removal of inpatient RAPS submissions would result in a 0.23% drop in Part C risk scores, and 0.12% decrease for Part D. - CMS acknowledged that the allowance of 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 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.
- 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.