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Newsletter Article


MedPAC Backs MA Cuts Relating to Coding Behavior

By John Reichard, CQ HealthBeat Editor

March 6, 2009 -- The Medicare Payment Advisory Commission is backing a proposal by Medicare officials to trim payments to private health plans to adjust for the way they assign "risk scores" used to vary reimbursement based on how sick an enrollee is.
The lobby that represents the plans says that the proposal goes too far, and would have the effect of lowering rates 3.74 percent below what they otherwise would be.

Medicare carries out a process known as "risk adjustment," which is meant to avoid overpaying plans that have unusually large numbers of healthy enrollees and to avoid underpaying those with a disproportionate number of sick enrollees. The process involves assigning risk scores to enrollees.

The Centers for Medicare and Medicaid Services (CMS) wants to adjust the risk scores to reflect the difference between coding practices in the private health plan side of Medicare, known as Medicare Advantage (MA), and the traditional fee-for-service (FFS) side. The Medicare Payment Advisory Commission (MedPAC) says that what CMS is proposing is consistent with the law.

"When payment systems change and the amount providers or plans will be paid is affected by changes in their behavior to emphasize more coding and documentation, adjustments to the payment system are necessary to maintain the integrity and accuracy of the payment system," MedPAC said in a March 5 letter commenting on the CMS proposal.

MedPAC estimates that MA plans receive payments on average that are 14 percent higher than payments to providers in traditional Medicare. The commission says that the coding changes would not lower that 14 percent differential. "The differences in coding practices between MA and FFS that CMS has identified result in payments beyond the 14 percent by which MA payments currently exceed FFS," the MedPAC letter says.

Robert Zirkelbach, a spokesman for America's Health Insurance Plans, said MA plans do a better job than traditional Medicare of identifying patients with chronic illnesses and should not be penalized as a result. AHIP also is concerned about how quickly CMS would phase in cuts from the adjustment for coding behavior, he said.

According to the MedPAC letter, "CMS found that even after controlling for patient characteristics, risk scores were persistently higher for beneficiaries in MA."

Medicare Advantage plans are bracing for lower-than-expected payments next year.

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