CMS Provides Risk Adjustment Flexibility Related to COVID-19
This Featured Article is contributed by AHLA's Payers, Plans, and Managed Care Practice Group.
- May 15, 2020
- Jeff Wurzburg , Norton Rose Fulbright US LLP
Risk adjustment is a risk mitigation tool that attempts to offset the cost of covering enrollees with greater health risk, and in turn, medical spending. In short, it is meant to level the playing field so that health plans compete against each other on price and quality while also disincentivizing adverse selection. Risk adjustment also should serve to assist issuers with expenses related to COVID-19 treatment costs. The early months of the COVID-19 pandemic have benefitted insurer cash on hand due to delayed appointments and procedures, but the long-term effect on issuer reserves remains unknown. The Centers for Medicare & Medicaid Services (CMS) has swiftly provided regulatory flexibility and relief to providers and health plans in response to COVID-19, and this has extended to the risk adjustment programs in Medicare Advantage and the individual and small-group commercial markets.
Risk Adjustment Background
In the commercial market, the risk adjustment program transfers funds from health plans in the individual and small group markets with lower than average risk to plans with higher than average risk. The risk adjustment program was created under Section 1343 of the Affordable Care Act and applies to all non-grandfathered individual and small group plans.[1] While Massachusetts initially operated its own risk adjustment program, since the 2017 benefit year the U.S. Department of Health and Human Services (HHS) has operated a risk adjustment program in every state. In the commercial risk adjustment program, age, sex, and diagnosis are used to produce a risk score for each enrollee. Risk scores are concurrent, meaning they are based on enrollee data from the applicable benefit year. The risk adjustment payment transfer formula determines whether the issuer will receive a payment or be subject to a charge for the benefit year.
The Balanced Budget Act of 1997 established risk adjustment for the Medicare Advantage program.[2] In the Medicare Advantage risk adjustment program, beneficiaries are similarly given a risk score using hierarchal condition categories, which is used to adjust capitation amounts to Medicare Advantage Organizations (MAOs) based on the health status of the enrollee.[3] The risk adjustment process uses age, gender, disability status, institutional status, and other factors to ensure actuarial equivalence.[4] CMS uses a beneficiary’s diagnosis from the prior year to create a risk score. The risk score is prospective, rather than the concurrent commercial market risk score.
Medicare Advantage
In the Medicare Advantage program CMS has made two announcements related to COVID-19: (1) permitting the use of telehealth for risk adjustment diagnoses; and (2) suspending risk adjustment data validation (RADV) audits for 2015. CMS has encouraged the expansion of telehealth coverage by exercising enforcement discretion where an MAO wishes to “expand coverage of telehealth services beyond those approved by CMS in the plan’s benefit package.”[5] This aligns with the agency’s position that “[e]nsuring that patients can safely receive the care they need at home minimizes travel to healthcare facilities and supports efforts to limit community spread of the virus.”[6] To have accurate risk adjustment data, providers must be able to sufficiently document enrollee indications so that applicable hierarchal condition categories may be assigned.
On April 10, 2020, CMS released guidance permitting MAOs to submit diagnoses for risk adjustment from telehealth visits when meeting all criteria for risk adjustment eligibility.[7] Telehealth services, however, must be provided using “an interactive audio and video telecommunications system that permits real-time interactive communication.”[8] The exclusion of telephonic appointments with providers has led to concerns that certain vulnerable populations will not be taken into account. On April 25, 2020, 101 medical groups and independent practice associations wrote to HHS Secretary Alex Azar and CMS Administrator Seema Verma requesting that audio-only visits be permitted to gather diagnosis information for the purpose of risk adjustment.” In support, the organizations stated that:
[F]or many patients, accessing care via video is simply not an option. Patients may not have access to the technology or broadband service necessary to receive care through video-based modalities. We also must account for patient preferences, particularly with a senior or frail population that may not be comfortable using video services or may have physical limitations that prevent them from doing so. For these patients, the choice is not between a video visit and a phone visit—it is the choice between an audio visit or no visit. If they are not able to communicate with their physician, the risks are significant.[9]
CMS also has suspended RADV audits related to the 2015 payment year “in order to allow CMS and [Medicare Advantage] organizations to focus on the health and safety threats currently faced by enrollees, participants, and other impacted individuals.”[10] Contract-level audits will not begin prior to the conclusion of the COVID-19 public health emergency. In turn, CMS advised MAOs to “immediately suspend” the collection of any medical records from providers for the purpose of the RADV program.[11] CMS, however, is continuing to review submissions arising from 2014 RADV audits.
Commercial Market
CMS extended the deadline for submission of 2019 benefit year data to the issuer’s EDGE server to May 14, 2020, a two-week extension.[12] Ordinarily, issuers must submit risk adjustment data by April 30 of the year following the applicable benefit year.[13] In turn, the release of the 2019 Benefit Year Risk Adjustment Summary report will be released no later than July 17, 2020.[14] Historically, this report has been released no later than June 30 of the calendar year following the applicable benefit year. Similar to Medicare Advantage, CMS has promoted the use of telehealth in the commercial context. In a March 24 Frequently Asked Questions document, CMS stated that “[t]he widespread availability and usage of telehealth services is vital to combat COVID-19” and expressed support for the promotion of telehealth by issuers:
We strongly encourage all issuers to promote the use of telehealth services, including by notifying policyholders and beneficiaries of their availability, by ensuring access to a robust suite of telehealth services, including mental health and substance use disorder services, and by covering telehealth services without cost sharing or other medical management requirements.[15]
In the individual and small group markets, CMS will permit “any service provided through telehealth that is reimbursable under applicable state law and otherwise meets applicable risk adjustment data submission standards” to be used for purposes of the risk adjustment program.”[16] CMS provided technical guidance including the telehealth codes eligible for inclusion in risk adjustment, such as:
- HCPCS codes G0425, G0426, G0427, G0406, G0407, G0408, G0459, G0508, and G0509;
- Other services may be eligible for inclusion by using modifier codes such as 95, GQ, or GT, or with a place or service code “02”; and
- Six e-visit codes will be designated to expand the use of telehealth and virtual care and valid for risk adjustment purposes—CPT Codes 99421-00423 and HCPCS codes G2061–G2063.
As a result of the COVID-19 public health emergency, CMS postponed 2019 benefit year RADV on April 13, 2020. CMS will “provide future guidance” by August of 2020 and intends to begin 2019 benefit year RADV activities in 2021.[17] In their announcement, CMS acknowledged that proceeding with 2019 benefit year RADV would “divert providers from caring for patients.”
Conclusion
Moving forward, it is unclear the impact COVID-19 will have on risk adjustment transfers and adjustments. For instance, in early May, CVS (owner of Aetna) indicated that patients are receiving fewer new prescriptions and seeing doctors less frequently.[18] Yet, there remains significant uncertainty about whether cost reductions will continue as a result of consumers postponing care unrelated to COVID-19 or whether utilization will rebound including pandemic-related treatments if there is resurgence of COVID-19 cases later this year or in 2021.[19] At the same time, purchases of coverage in the individual market may increase due to the anticipated losses of employment sponsored coverage. At the time of this writing, 36.5 million Americans had filed for unemployment since the COVID-19 public health emergency began.[20] A new analysis from the Kaiser Family Foundation (KFF) estimates 26.8 million individuals may lose their employer-sponsored coverage as a result of COVID-19 related job losses.[21] Of this population, KFF estimates 8.5 million people will be eligible for exchange subsidies.[22] While estimates have varied, KFF found that the cost of treating a patient with COVID-19 may be greater than $20,000, and exceed $88,000 where a patient is placed on a respirator.[23] While the ultimate cost of the COVID-19 pandemic on issuers is unknown, it is clear that risk adjustment will remain a critical mechanism to disincentivize adverse selection and promote stability in the commercial and Medicare Advantage markets in 2020 and beyond.