Net Payment Impact

The chart below indicates the expected impact of the proposed policy changes on MA plan payments relative to last year.  

Year-to-Year Percentage Change in Payment

¹Rebasing/re-pricing impact is dependent on finalization of the average geographic adjustment index and will be available with the publication of the CY 2024 Rate Announcement. 

²The 2023 Star Ratings used for 2024 Quality Bonus Payments (that were made public in October 2022) are, on average lower than the 2022 Star Ratings; while the circumstances for particular contracts differ, an overall decrease in the Star Ratings is to be expected because the adjustments for extreme and uncontrollable circumstances due to the COVID-19 PHE are not included in the 2023 Star Ratings for most measures and there were additional methodological changes from the prior year.

³The underlying risk score trend is the average increase in risk scores, not accounting for normalization and MA coding adjustments, which are shown in separate rows. Individual plans’ experience will vary.

Growth Rates

The effective growth rate reflects the current estimate of the growth in benchmarks used to determine payment for Medicare Advantage plans. This growth rate is largely driven by the growth in Medicare Fee-For-Service (FFS) per capita costs, as estimated by the Office of the Actuary. Included in the 2024 growth rate estimate is a proposed technical correction to the per capita cost calculations related to indirect and direct medical education costs associated with services furnished to MA enrollees; this correction results in a one-time adjustment to the growth rates.

Part C Risk Adjustment Model Revision

CMS is proposing a revised Part C risk adjustment model. The proposed model includes important technical updates, including restructured condition categories using the International Classification of Diseases (ICD)-10 classification system (instead of the ICD-9 classification system), and updated underlying FFS data years (from 2014 diagnoses and 2015 expenditures to 2018 diagnoses and 2019 expenditures), as well as revisions focused on conditions that are subject to more coding variation. The proposed new risk adjustment model reflects more current costs associated with various diseases, conditions, and demographic characteristics, takes into account the ICD-10 diagnostic classification system that has been in use for medical payment since 2015, and includes revisions designed to reduce the sensitivity of the model to coding variation. The Advance Notice contains detailed descriptions of these updates.

Inflation Reduction Act of 2022 (IRA) Updates for 2024

The IRA made several amendments and additions to the standard Part D drug benefit defined in the Social Security Act. The Part D benefit-related IRA updates that will be in place for CY 2024 and that are described in the Advance Notice include:

• Beginning in CY 2024, cost-sharing for Part D drugs will be eliminated for beneficiaries in the catastrophic phase of coverage.
• Beginning in CY 2024, the Low-Income Subsidy program (LIS) under Part D will be expanded so that beneficiaries who earn between 135 and 150 percent of the federal poverty level and meet statutory resource limit requirements will receive the full LIS subsidies that were prior to 2024 only available to beneficiaries earning less than 135 percent of the federal poverty level.
• During CY 2024, Part D plans must not apply the deductible to any Part D covered insulin product and must charge no more than $35 per month’s supply of a covered insulin product in the initial coverage phase and the coverage gap phase.
• During CY 2024, Part D plans must not apply the deductible to an adult vaccine recommended by the Advisory Committee on Immunization Practices and must charge no cost-sharing at any point in the benefit for such vaccines.
• Beginning in CY 2024, the growth in the Base Beneficiary Premium will be capped at 6 percent. The Base Beneficiary Premium for Part D is limited to the lesser of a 6% annual increase, or the amount that would otherwise apply under the prior methodology had the IRA not been enacted.

Please note that IRA provisions that take effect in 2025 and beyond will be addressed in future Advance Notices and Rate Announcements.

Puerto Rico
The proportion of Medicare beneficiaries who receive benefits through MA (as opposed to  Medicare FFS) is far greater in Puerto Rico than in any other state or territory. The policies proposed and under consideration for 2024 would continue to provide stability for the MA program in Puerto Rico and for Puerto Ricans enrolled in MA plans. These policies include basing the MA county rates in Puerto Rico on the relatively higher costs of beneficiaries in FFS who have both Medicare Parts A and B and applying an adjustment to reflect the propensity of beneficiaries with zero claims.

Part C and D Star Ratings

In the Advance Notice, CMS provides information and updates in accordance with the Star Ratings regulations at §§ 422.164, 422.166, 423.184, and 423.186 of title 42 of the Code of Federal Regulations. In addition, CMS solicits input on future measures and concepts as CMS continues to enhance the Star Ratings over time.

Star Ratings updates for CY 2024 include providing the list of eligible disasters for adjustment, non-substantive updates to several measure specifications, and the list of measures included in the Part C and D Improvement measures and Categorical Adjustment Index for the 2024 Star Ratings to be issued later this year. CMS is also soliciting initial feedback on potential substantive measure specification updates, new measure concepts, and the addition of measures to align with other CMS programs. Specifically, across our CMS quality rating and value-based care programs, where applicable, we are considering including what CMS is calling a “Universal Foundation” of quality measures, which is a core set of measures that are aligned across programs.

Process

Comments on the proposals set forth in the Advance Notice must be submitted by Friday, March 3, 2023. The final 2024 Rate Announcement will be published no later than Monday, April 3, 2023.

To submit comments or questions electronically, go to www.regulations.gov, enter the docket number “CMS- 2023-0010” in the “search” field, and follow the instructions for ‘‘submitting a comment.’’

The 2024 Advance Notice may be viewed by going to: https://www.cms.gov/files/document/2024-advance-notice.pdf and selecting “2024 Advance Notice.”

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• Improper payments represent payments that do not meet program requirements.
• The vast majority of improper payments occur in regards to people who may be eligible for care, but for whom there was an unintentional payment error or a reviewer cannot determine if a payment was proper due to insufficient payment documentation from a state or a provider.
• Improper payments do not necessarily represent expenditures that should not have occurred and can include both overpayments and underpayments situations where there is insufficient documentation to determine if a payment is proper in accordance with program payment requirements.
• While fraud and abuse are improper payments, they are not synonymous; it is important to note that most improper payments are not attributable to fraud, and improper payment estimates are not fraud rate estimates.

Improper Payment Measurements:

Medicare

• CMS developed the Comprehensive Error Rate Testing (CERT) program to estimate the Medicare Fee-For-Service (FFS) program’s improper payment rate.
  • The CERT program cites improper payments in accordance with payment policies on any claim: 1) that was paid when it should have been denied or paid at another amount (including both overpayments and underpayments); and/or 2) for which documentation was insufficient to be an improper payment.
  • The CERT program reviews a statistically valid stratified random sample of Medicare FFS claims to determine if they were paid properly under Medicare coverage, coding, and billing rules. If these criteria are not met, the claim is counted as either a total or partial improper payment.
• The majority of Medicare FFS improper payments fall into two categories:
  • (1) insufficient documentation; and
  • (2) the documentation provided for the items or services billed did not sufficiently demonstrate medical necessity.

Medicaid

• CMS estimates Medicaid and CHIP improper payments using the Payment Error Rate Measurement (PERM) program.
  • The PERM program uses a 3-year, 17 state rotation, meaning each state is reviewed once every three years and each cycle measurement includes one-third of all states. The most recent three cycles (2021, 2020, and 2019) combined to form each year’s overall national rate.
  • PERM ensures a statistically valid random sample representative of all Medicaid and CHIP payments matched with federal funds meets a national precision requirement where CMS is 95% confident that the Medicaid and CHIP improper payment rates are within +/- 3 percentage points.
  • The Medicaid and CHIP improper payment national rates are based on reviews of the FFS, managed care, and eligibility components of a State’s Medicaid and CHIP program in the year under review.
  • In addition, the PERM program combines individual state component estimates to calculate the national component estimates. National component rates and the Medicaid and CHIP rates are weighted by state size, such that a state with a $10 billion program is weighted more in the national rate than a state with a $1 billion program. A correction factor in the methodology ensures that each Medicaid improper payment is counted only once in the combined national rate.
• Medicaid and CHIP improper payment data released by CMS are based on reviews of whether states are implementing their Medicaid and CHIP programs in accordance with federal and state payment and eligibility policies.

Improper Payments Do Not Necessarily Indicate Fraud:

• Improper payment rates are not measures of fraud in CMS programs. Most improper payments are caused by improper or inadequate documentation. 
• Improper payments do not necessarily represent expenditures that should not have occurred.
  • For example, a majority of improper payments are due to instances where information required for payment was missing, documentation that an eligibility determination was made correctly was missing from the state system, states did not follow the appropriate process for enrolling providers, and/or states did not follow the appropriate process for determining beneficiary eligibility. However, these improper payments do not necessarily represent payments to illegitimate providers or on behalf of ineligible beneficiaries. Had the missing information been on the claim and/or had the state complied with the enrollment or redetermination requirements, then the claims may have been payable. A smaller proportion of improper payments are instances where the State Agency had sufficient documentation to determine that payments should not have been made or should have been made in different amounts, which are considered monetary losses to the Federal Government (e.g., medical necessity, incorrect coding, and other errors).
• Improper payments can result from a variety of circumstances, including:
  • 1) services with no documentation,
  • 2) services with insufficient documentation, or
  • 3) no record of the required verification of an individual’s eligibility, such as income, specifically for Medicaid and CHIP.
• Proper payments occur when there is sufficient documentation to support payment in accordance with the program payment requirements. Two examples of proper payments include:
  • Payments where the state appropriately maintained documentation of an eligibility verification requirement and appropriately determined eligibility based on program eligibility and payment requirements.
  • Payments where sufficient documentation was provided to support medical necessity in accordance with program payment requirements.

Improper Payment Reporting Criteria

• The Payment Integrity Information Act of 2019 defines significant improper payments are defined as either:
  •  (i) improper payments greater than $10 million and over 1.5 percent of all payments made under that program, or
  • (ii) improper payments greater than $100 million.
• The Office of Management and Budget (OMB) has identified Medicare Fee-For-Service (FFS), Medicare Part C, Medicare Part D, Medicaid, and the Children’s Health Insurance Program as susceptible to significant improper payments. The Advanced Premium Tax Credit program has also been identified as susceptible to significant improper payments. In FY 2021, CMS completed the development of the Federally-facilitated Exchange improper payment measurement and commenced measurement activities for future reporting.

CMS/State Collaboration on Improper Payments

• CMS collaborates with states in many ways to share information and help to ensure they maintain the proper documentation to demonstrate that payments are being made correctly. Examples include:
  • Medicaid Eligibility Quality Control (MEQC) Program: Under MEQC, states design and conduct pilots to evaluate the processes that determine an individual’s eligibility for Medicaid and CHIP benefits. States have flexibility in designing pilots to focus on vulnerable or error-prone areas as identified by the PERM program and state. The MEQC program also reviews eligibility determinations that are not reviewed under the PERM program, such as denials and terminations.
  • Enhanced State PERM Corrective Action Plan Process: CMS works with states to coordinate state development of corrective action plans to address each error and deficiency identified during the PERM cycle. After each state submits the corrective action plan, CMS monitors each state’s progress in implementing effective corrective actions. Throughout the process, CMS also provides training opportunities to ensure compliance with federal policies.
  • State Medicaid Provider Screening and Enrollment Data and Tools: CMS shares Medicare data to assist states with meeting Medicaid screening and enrollment requirements.
  • Enhanced Assistance on State Medicaid Provider Screening and Enrollment: CMS provides ongoing guidance, education, and outreach to states on federal requirements for Medicaid provider screening and enrollment. CMS also assesses provider screening and enrollment compliance, provides technical assistance, and offers states the opportunity to leverage Medicare screening and enrollment activities.
  • Medicaid Integrity Institute (MII): CMS offers training, technical assistance, and support to state Medicaid program integrity officials through the MII. More information is located at the Medicaid Integrity Institute website.

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