Fact Sheets

2021 Medicare Advantage and Part D Advance Notice Part II Fact Sheet

2021 Medicare Advantage and Part D Advance Notice Part II

Today, the Centers for Medicare & Medicaid Services (CMS) released Part II of the Calendar Year (CY) 2021 Advance Notice of Methodological Changes for Medicare Advantage (MA) Capitation Rates and Part C and Part D Payment Policies (the Advance Notice). CMS released Part I of the Advance Notice on January 6, 2020. CMS will accept comments on all proposals in the Advance Notice through Friday, March 6, 2020, before publishing the final Rate Announcement by April 6, 2020. The proposed updates will continue to modernize and maximize competition among MA and Part D plans.  

2021 Advance Notice

Through the CY 2021 Advance Notice, CMS is proposing updates and changes to the methodologies used to pay Medicare Advantage plans, PACE organizations, and Part D sponsors.

Net Payment Impact

The chart below indicates the expected impact of the proposed policy changes on plan payments relative to last year.   

¹Rebasing/re-pricing impact is dependent on finalization of the average geographic adjustment index and will be available with the publication of the CY 2021 Rate Announcement.
²The total does not include an adjustment for underlying coding trend. For 2021, CMS expects the underlying coding trend to increase risk scores, on average, by 3.56 percent.

2021 Part C Risk Adjustment Model Proposals

As previously discussed in Part I of the Advance Notice, we are proposing to continue the phase-in of the 2020 CMS-Hierarchical Condition Categories (HCC) model. The 21st Century Cures Act requires that CMS phase-in changes to risk adjustment payments based on section 1853(a)(1)(I) of the Social Security Act over a three-year period, beginning with 2019, with such changes being fully implemented for 2022 and subsequent years. In order to continue phasing in the model that meets the statutory requirements (the 2020 CMS-HCC model), CMS is proposing to calculate risk scores for CY 2021 payment to MA organizations and certain demonstrations as the sum of:

• 75% of the risk score calculated with the 2020 CMS-HCC model and
• 25% of the risk score calculated with the 2017 CMS-HCC model.

This proposal represents a change from the blend for CY 2020 of 50% of the risk score calculated with the 2020 CMS-HCC model and 50% of the risk score calculated with the 2017 CMS-HCC model.

Using Encounter Data

Also as previously discussed in Part I, CMS calculates risk scores using diagnoses submitted by MA organizations and from original 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 CY 2015 and, for CY 2016, CMS blended 10% of the encounter data-based risk score with 90% of the RAPS-based risk score. CMS has continued to use a blend to calculate risk scores by calculating risk scores with 25% encounter data and 75% RAPS data for CY 2017, 15% encounter data and 85% RAPS data for CY 2018, and 25% encounter data and 75% RAPS data for CY 2019. For CY 2020, CMS is continuing to use a blend to calculate risk scores, by calculating risk scores with 50% encounter data and 50% RAPS data.

For CY 2021, CMS proposes to calculate risk scores for payment to MA organizations and certain demonstrations by summing 75% of the encounter data-based risk score with 25% of the RAPS-based risk score. CMS proposes to calculate the encounter data-based risk scores with the 2020 CMS-HCC model and the RAPS-based risk scores with the 2017 CMS-HCC model.

For Programs of All-Inclusive Care for the Elderly (PACE) organizations for CY 2021, CMS proposes to continue calculating risk scores by pooling risk adjustment-eligible diagnoses from encounter data, RAPS data, and FFS claims to calculate a single risk score (with no weighting) using the 2017 CMS-HCC model.

Medicare Advantage Coding Pattern Adjustment

Each year, as required by law, CMS makes an adjustment to plan payments to reflect differences in diagnosis coding between MA organizations and FFS providers. For CY 2021, CMS proposes to apply a coding pattern adjustment of 5.90 percent, which is also the minimum adjustment for coding intensity required by the statute.

Exclusion of Kidney Organ Acquisition Costs from MA Benchmarks

The 21st Century Cures Act amended the Social Security Act to allow all Medicare-eligible individuals with ESRD to enroll in MA plans beginning January 1, 2021. With this new enrollment option, the Cures Act also made related payment changes in the MA and FFS programs. Effective January 1, 2021, MA organizations will no longer be responsible for organ acquisition costs for kidney transplants for MA beneficiaries, and such costs will be excluded from MA benchmarks and covered under the FFS program instead. CMS is implementing these payment provisions through the Advance Notice. PACE organizations will continue to cover organ acquisition costs for kidney transplants, and CMS will continue to include the costs for kidney acquisitions in PACE payment rates.

Puerto Rico

A far greater proportion of Medicare beneficiaries receive benefits through MA in Puerto Rico than in any other state or territory. The policies proposed and under consideration for 2021 would continue to provide stability for the MA program in the Commonwealth and to Puerto Ricans enrolled in MA plans. These policies include basing the MA county rates in Puerto Rico on the relatively higher costs of beneficiaries in FFS who have both Medicare Parts A and B, continuing the statutory interpretation that permits certain counties in Puerto Rico to qualify for an increased quality bonus adjusted benchmark, and applying an adjustment to reflect the nationwide propensity of beneficiaries with zero claims.

Part C and D Star Ratings

As part of the Administration’s effort to increase transparency and seek public comment on the Part C and D Star Ratings program, CMS codified the methodology for the Part C and D Star Ratings program in the CY 2019 Medicare Part C and D Final Rule, published in April 2018 for the 2021 Star Ratings. The Advance Notice provides updates that those regulations require us to make through the process described for changes in, and adoption of, payment and risk adjustment policies in section 1853(b) of the Act. In addition, we are soliciting input on future measures and concepts as we continue to enhance the Star Ratings over time.

The Advance Notice includes information about the date by which plans must submit their requests for review of the appeals and complaints measures data, and lists the measures included in the Part C and D Improvement measures and the values for the Categorical Adjustment Index for the 2021 Star Ratings. The policy for adjustments to Star Ratings in the event of extreme and uncontrollable circumstances, such as major hurricanes, is the same as the one implemented for the 2020 Star Ratings and codified in regulation for the 2022 Star Ratings and beyond.

Additionally, as part of our efforts to lower prescription drug costs for Medicare beneficiaries and strengthen competition for generic products, CMS is soliciting feedback on a generic utilization Part D measurement concept through the 2021 Advance Notice. CMS encourages Part D sponsors to leverage favorable tier placement and effective formulary management tools to incentivize beneficiaries to fill generic alternatives over branded products. Our goal is to ultimately propose to adopt measures that reward sponsors for high rates of generic utilization.
Other measurement concepts that CMS is soliciting feedback on include:

• End-Stage Renal Disease (ESRD) measures (Part C)
• Prior Authorizations (Part C)
• Physical Functioning Activities of Daily Living Patient-reported measure (Part C)
• Initial Opioid Prescribing (Part D)

2021 Call Letter

CMS will not be publishing a Call Letter for 2021. CMS is proposing to codify much of the guidance typically included in the annual Call Letter through the CY 2021 and 2022 MA and Part D Proposed Rule. CMS will also separately issue Part C and Part D bidding instructions and information previously provided through the Call Letter.

Process

Comments on the proposals set forth in Part I and Part II of the Advance Notice must be submitted by Friday, March 6, 2020. The final 2021 Rate Announcement will be published by Monday, April 6, 2020.

To submit comments or questions electronically, go to www.regulations.gov, enter the docket number “CMS-2020-0003” in the “search” field, and follow the instructions for ‘‘submitting a comment.’’

The 2021 Advance Notices (Part I and Part II) may viewed by going to: https://www.cms.gov/Medicare/Health-Plans/MedicareAdvtgSpecRateStats/Announcements-and-Documents and selecting “2021 Advance Notices.”

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