CMS runs a risk-adjustmentprogram, based on enrollee health risk scores, in an effort to keepthe issuers from taking on more than their fair share of enrolleehealth risk. (Photo: Shutterstock)

America's Health Insurance Plans (AHIP) is blasting efforts bythe Trump administration to recoup what Medicare managers see asexcess risk-adjustment payments to Medicare Advantage planproviders.

The Centers for Medicare and Medicaid Services (CMS), the agencythat oversees Medicare, wants to eliminate an adjustment mechanismthat that's supposed to make spending on traditional Medicarecoverage and Medicare Advantage plan coverage actuariallyequivalent.

Related: Trump admin announces fix for risk-adjustmentpayments

CMS has proposed applying the change to Medicare Advantage planpayments made starting in 2012, when CMS first told health insurersabout the new risk-adjustment methodology.

AHIP President Matthew Eyles writes in a comment letter than theCMS Medicare Advantage risk-adjustment proposal is "fundamentallyunfair and ill-conceived."

The proposed change "would undermine stakeholderconfidence in the agency's willingness to comply with the law andto act as a fair partner with the private sector," Eyles writes."Private-sector partners must be able to rely on the government'sword and know that the government will adhere to its commitments,whether stemming from statute or otherwise."

The Medicare Advantage risk-adjustment program

Congress has built many coverage holes into the traditionalMedicare program, both to discourage unnecessary use of care and tocut down on direct spending.

Private health insurers and other companies run the traditionalfee-for-service Medicare program for CMS, but the traditionalfee-for-service program offers standardized benefits, andthe administrators stay behind the scenes.

The Medicare Advantage program gives private insurers a chanceto offer Medicare plans, under their own brand names, that fill inmost of the gaps in traditional Medicare coverage.

Medicare Advantage plan issuers are supposed to sell coverage toMedicare enrollees who apply during specified enrollment periods ona guaranteed-issue basis, without using information about theenrollees' health to set the premiums.

CMS runs a risk-adjustment program, based on enrollee healthrisk scores, in an effort to keep the issuers from takingon more than their fair share of enrollee health risk.

Critics of the Medicare Advantage program, inside and outsideCMS, have argued for years that the Medicare Advantage plan issuersuse many strategies to push up risk scores and game thesystem.

Program defenders have argued that Medicare Advantage planenrollees tend to have fewer resources and more health problemsthan traditional Medicare fee-for-service program enrollees, andthat plan issuers should have a right to use complete, accurateinformation to score enrollees' health, even if the scores end upbeing higher than when plans are less diligent about riskscoring.

CMS uses a risk-adjustment data validation program to go backand look for what it thinks of as inaccurate, overly precise orotherwise objectionable issuer risk-adjustment data. It has saidthat replacing the fee-for-service actuarial equivalence riskadjuster mechanism with a new approach would be a good wayto  recoup overpayments.

The Medicare risk-adjustment dispute has a direct effect only onthe Medicare Advantage plan market. The Medicare Advantagerisk-adjustment program is separate from the risk-adjustmentprogram that CMS runs for issuers in the ordinary major medicalinsurance market.

What Eyles says

Eyles makes the following arguments:

• Federal law and two federal district court rulings require CMSto use a fee-for-service risk adjuster when it runs therisk-adjustment data validation program.
• CMS has no authority to use the extrapolation method it hasproposed for deciding what a Medicare Advantage plan issuer'srisk-scoring error rate is.
• Federal law prohibits CMS from applying a new data validationmethod retroactively. Even if CMS does change the rules, theearliest the new rules should apply is 2021, after insurers havehad time to build the new rules into their rates.
• CMS has never put the rate-adjustment proposal through properpublic comment periods.
• CMS should withdraw the current proposal. Eyles says the agencyshould work with issuers to come up with a better way to improvethe data validation process, then introduce a revised proposal thatwould apply only to coverage written after the new system takeseffect.