Medicare Advantage Rate Announcement: What Stayed, What Changed, and How Will It Impact Payers and Plans?

On March 31, 2023, Centers for Medicare and Medicaid Services (CMS) released the annual 2024 Medicare Advantage and Part D Rate Announcement (Rate Notice), which is the final guidance on rates for Medicare Advantage in 2024. As we explained in our prior blog posts (here and here), one of the more substantial changes proposed for Medicare Advantage in 2024 is in the way risk scores are calculated.

As a very brief primer, risk scores are one of the key elements for determining how much money a Medicare Advantage payer will receive for a beneficiary. Risk scores reflect both the demographics of the beneficiary in the demographic relative factors and the illness burden of the beneficiary in the disease relative factors. A beneficiary has a higher risk score if they have a higher illness burden. Risk scores are intended to project how much a beneficiary will cost in a performance year.

In 2023, CMS is using version 24 of its CMS-Hierarchical Condition Categories (CMS-HCC) Risk Adjustment Model. The new model is named version 28 and contains changes both to the diagnosis codes that feed into HCC categories that add to the risk score as well as changes to the values of HCCs. In our prior analysis, we found that overall risk scores would decrease by 0.41%, but that risk scores for minorities decreased by 1.62% and risk scores for beneficiaries dually eligible for Medicare and Medicaid decreased by 1.81%.