Report: CMS underpays Medicare Advantage plans for treating chronic conditions

Avalere analysis shows that CMS' model under-predicts costs by $2.6 billion
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The Centers for Medicare & Medicaid Services (CMS) underpaid Medicare Advantage health plans for the costs of treating individuals with multiple chronic conditions, according to a new analysis from Avalere Health.

Avalere says CMS' risk adjustment model under-predicts costs for individuals with multiple chronic conditions by $2.6 billion on an annual basis, and that CMS last updated the model in 2014.

The analysis also found that the model specifically under-predicts certain chronic conditions such as rheumatoid arthritis (RA) and osteoarthritis, which have the largest percentage difference between predicted and actual expenditures--15 percent, or $2.3 billion, for RA and 12 percent, or $4.4 billion, for osteoarthritis.

Because the model was last updated in 2014, CMS had indicated it will make changes to the model to improve its accuracy for certain Medicare-Medicaid "dual-eligibles" in 2017, notes the report, which was funded by America's Health Insurance Plans.

The changes will account for both dual-eligible status and disabled status, but the analysis says these adjustments still do not address underpayments for low-income beneficiaries with multiple chronic conditions.

"Payment accuracy in Medicare Advantage is critical so that the appropriate incentives exist for plans to treat the chronically ill. Ensuring adequate payment levels encourages broader program participation and robust coverage options for seniors," Caroline Pearson, senior vice president at Avalere, since in the report announcement.

Past research has indicated that focusing on preventing chronic disease and coordinating care could save Medicare 5 percent to 10 percent of its total spending, FierceHealthcare has reported.

To learn more:
- read the full Avalere report
- here is the Avalere announcement

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