February 27, 2023
Honorable Xavier Becerra
Secretary of Health and Human Services Washington, DC
Honorable Chiquita Brooks-LaSure
Administrator, Centers for Medicare and Medicaid Services Washington, DC
Dear Secretary Becerra and Administrator Brooks-LaSure:
The policy changes for Medicare Advantage payment proposed by CMS in the “Calendar Year 2024 Advance Notice with Proposed Payment Updates for the Medicare Advantage and Part D Prescription Drug Program” constitute important advances. These improvements are long overdue and badly needed to assure appropriate financial payments and stewardship for MA funds, fair payments to enable excellent care for sicker patients, sustainability of the overall Medicare program, and security for all beneficiaries. We support CMS’s finalizing these proposed MA payment changes.
MedPAC has estimated that in 2023 there will be $27 billion in excessive and unwarranted payments to MA Plans. Others have projected these overpayments will cost taxpayers $600 billion over the next 8 years. Beneficiaries will ultimately directly shoulder approximately 14% of this, almost $90 billion in increased Part B premiums.
The primary mechanism by which MA plans harvest these profits is by increasing the number of diagnoses recorded for their beneficiaries. Problems with the current CMS Hierarchical Conditions Category (HCC) system have been well documented for years. Under the coding rules, CMS pays plans more for beneficiaries with many diagnostic codes that have little or no real connection to patients’ health conditions and needs, costs of their proper care, or true illness severity. Some of the codes overused by MA plans identify asymptomatic disease that may represent future risk but are not contributors to current year expenses. Because the financial value of each HCC is based on Traditional Fee-for-Service Medicare, in which fewer codes are submitted, every additional code drives excess payments.
The hunt for more codes is distorting the actual delivery of care. It is not primarily a case of bad actors or fraud. It is a broken system that rewards questionable behavior like house calls to do lots of screening exams looking for asymptomatic diseases. While it is possible that these exams may occasionally pick up an unknown problem that needs treatment, the motivating factor is disease coding not preventive care. Furthermore, if an MA Plan does not participate in the game of adding more codes, they suffer in the marketplace as their products become uncompetitive because they have less revenue to support more generous benefits.
CMS now proposes to decrease the coding revenue opportunities by eliminating some HCC’s that have been abused and standardizing the prices associated with categories of codes to avoid upcoding for some conditions. The net result is projected to be a 1% increase in payments in 2024. In practice, the changes will be concentrated among MA plans and providers that are using the eliminated codes or adding more codes per patient. The proposed changes will leave the MA Plans, in aggregate, in a strong financial position while penalizing those who game the risk adjustment system. Efficient, ethical, and cost-effective providers will continue to be adequately reimbursed to deliver high quality care.
Continued overpayment to MA Plans represents a fiscally unsustainable long-term policy. Stakeholders should support CMS in these proposed reforms. The best answer is for MA plans, themselves, to become constructive partners in major coding and payment reforms.
Sincerely,
Scott Armstrong
Former President & CEO
Group Health Cooperative
Former Commissioner, Medicare Payment Advisory Commission (MedPAC)
Richard J. Baron, MD
CEO and President, American Board of Internal Medicine Former Director, Seamless Care Division
Center for Medicare and Medicaid Innovation, CMS
Elaine Batchlor, MD
CEO MLK Community Healthcare
Robert Berenson, MD
Institute Fellow, Urban Institute
Former Acting Deputy Administrator, CMS
Former Vice-chair, Medicare Payment Advisory Commission (MedPAC)
Donald Berwick, MD
President Emeritus and Senior Fellow, Institute for Healthcare Improvement Former Administrator,
Center for Medicare and Medicaid Services
Lawrence Casalino, M.D., Ph.D.
Professor Emeritus of Population Health
Livingston Farrand Professor of Public Health (2008-2022) Chief, Division of Health Policy and Economics (2008-2021) Weill Cornell Medical College
Tina Castanares, MD
Principal, Castanares Consulting
Rima Cohen
Founder & Principal, Rima Cohen Strategies Former Counselor for Health Policy, HHS Secretary
Zack Cooper
Associate Professor of Public Health and Economics, Yale University
Joseph Damore, LFACHE President and CEO Damore Health Advisors
Michael Eliastam, MD, MPP, FACP
Ezekiel J. Emanuel, M.D., Ph.D.
Levy University Professor
Vice Provost for Global Initiatives Co-Director, Healthcare Transformation Institute
Perelman School of Medicine and The Wharton School
University of Pennsylvania
Alain Enthoven
Marriner S. Eccles Professor of Public and Private Management (Emeritus) Graduate School of Business
Stanford University
Elliott Fisher, MD, MPH
Professor of Medicine and Health Policy The Dartmouth Institute
Senior Fellow
Institute for Healthcare Improvement
Lisa K. Fitzpatrick, M.D., MPR, MPA CEO, Grapevine Health
Former Chief Medical Officer,
DC Medicaid
Victor Fuchs, PhD
Henry J. Kaiser, Jr. Professor Emeritus Stanford University
Richard J. Gilfillan, MD
Independent Consultant
Former Deputy Administrator,
Center for Medicare and Medicaid Services Former CEO, Trinity Health
Paul Ginsburg, PhD
Senior Fellow, USC Schaeffer Center Professor, Practice of Health Policy and Management
USC Price School of Public Policy Nonresident Senior Fellow, Brookings Institution
Former Vice-Chair, Medicare Payment Advisory Commission
Sherry Glied, PhD
Dean and Professor
Robert F. Wagner Graduate School of Public Service, New York University
Former Assistant Secretary for Planning and Evaluation, U.S. Department of Health and Human Services
Merrill Goozner
Editor & Publisher of GoozNews.substack.com
Former Editor, Modern Healthcare
Glenn M. Hackbarth, JD, MA
Former Chair, Medicare Payment Advisory Commission (MedPAC)
George Isham, MD, MS
Frederick Isasi JD, MPH Executive Director Families USA
Gary S. Kaplan MD, FACP, FACPE CEO Emeritus
Virginia Mason Health System Virginia Mason Franciscan Health
Rick Kronick, PhD
Herbert Wertheim School of Public Health Former Deputy Assistant Secretary for Health Policy
& Director, Agency for Healthcare Research and Policy, U.S. Department of Health and Human Services
Timothy Layton, PhD
30th Anniversary
Associate Professor of Health Policy, Department of Health Policy, Harvard Medical School
Peter Lee
Senior Scholar, Stanford University, CERC Former Executive Director
Covered California
Former Deputy Director,
Center for Medicare and Medicaid Innovation, CMS
John C. (Jack) Lewin, MD
Principal and Founder
Lewin and Associates LLC
Health Science Innovation and Policy
Michael R. McGarvey, MD
Chair, Board of Directors
New York County Health Services Review Organization.
Michael McWilliams, MD PhD
Warren Alpert Foundation Professor of Health Care Policy
Department of Health Care Policy Harvard Medical School,
Professor of Medicine and Practicing General Internist
Brigham and Women’s Hospital
*All affiliations are for identification purposes only and do not reflect the views of the affiliated institutions
Mark E. Miller, PhD
Executive Vice President of Health Care Arnold Ventures
Former Executive Director, Medicare Payment Advisory Commission
Arnie Milstein, MD
Medical Director,
Purchasers Business Group on Health Clinical Excellence Research Center Director Stanford University
Former Commissioner, MedPAC
Tia Goss Sawhney, DrPH, FSA, MAAA
Adjunct Clinical Associate Professor, New York University School of Global Public Health Owner and Managing Director, Teus Health, LLC
Roy Schutzengel, MD, MBA
Former Medical Director
California Department of Health Care Services
Integrated Systems of Care Division
Cary Sennett, MD, PhD
Principal
The Sennett Consulting Group
Former Executive Vice President, National Committee on Quality Assurance
Robert Reischauer
President Emeritus and Distinguished Institute Fellow, Urban Institute
Bruce Vladeck, PhD
Former Administrator,
Healthcare Financing Administration U.S. Department of Health and Human Services
Judy Zerzan-Thul, MD, MPH
Chief Medical Officer
Washington State Health Care Authority Former Chief Medical Officer
Colorado Dept of Health Care Policy and Financing
