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%.
Initially, CMS proposed moving solely to version 28 in 2024, but after receiving many comments with concerns about the effects of the changes to the model, CMS has decided to phase in version 28 over the next few years using a blending methodology. For 2024, risk scores will consist of 67% version 24 risk scores and 33% version 28 risk scores. In 2025, version 28 will account for 67% of the risk score with 33% remaining version 24, and version 28 will be fully implemented for 2026 risk scores.