Proposed Risk Model Revision Could Hurt Risk Scores by as Much as 14%, Pareto Finds

Since CMS posted its 2024 Advance Notice for Medicare Advantage and Part D plans a month ago, the MA industry has been in a frenzied state trying to understand the impact of proposed risk model changes on revenue while vocalizing its displeasure prior to the March 3 end date of the comment period. While CMS projected that MA plans may see an average 3.3% increase in risk scores, a new analysis from Pareto Intelligence based on client data suggests that the impact to risk scores could vary widely, increasing at best by 2% and dropping by up to 14% — for an average decline of 4%. 

CMS, in its annual Advance Notice of updates to Medicare Part C and Part D payment policies for the coming plan year, included significant changes to the risk model that is used to adjust MA plan reimbursement. In addition to removing thousands of diagnosis codes and renumbering several Hierarchical Condition Categories (HCCs) used to determine MA plans’ risk scores, the agency proposed moving from using ICD-9 codes to the “more commonly used” ICD-10. And in doing so, CMS explained that it removed certain diagnostic categories that are coded more frequently in MA relative to fee-for-service (FFS) Medicare. Specifically, the proposed 2024 CMS-HCC model (version 28) would contain 115 diagnostic HCCs, up from the 86 used in the current model (version 24), but use just 7,770 ICD-10 codes, down from 9,797 ICDs under the current model.