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the 2018 final payment notice: the top four takeaways

April 07, 2017

After listening to public comments, the Centers for Medicare & Medicaid Services (CMS) has released its Final Notice for the 2018 Payment Year for Medicare Advantage (MA) and Part D plans—and there are significant changes from the Advance Notice released back in February. Verscend’s Sean Creighton, senior vice president of Risk Adjustment, breaks down what it means for payers.

more revenue for MA plans

In the Final Notice, CMS estimates a 0.45 percent increase in revenue for MA plans. After the coding trend adjustment of 2.5 percent, this brings up the total expected average change in revenue to 2.95 percent. This increase is very positive, as it represents a 7 percent hike over the 2.75 percent that CMS estimated in the Advance Notice and includes a 0.3 percent rebasing/repricing adjustment that was not available at the time of the Advance Notice.

scaled-back encounter data expectations 

The next biggest news by far is that CMS not only won’t increase the percentage of its payment calculation that will be sourced from Encounter Data System (EDS) data but is actually reducing it from the 2017 payment year. In the Advance Notice, CMS proposed maintaining the current RAPS/EDS blend of 75/25 percent instead of applying its original phase-in schedule of a 50/50 blend in 2018. Now, the agency is backing off even further, deciding that 85 percent of payments will be sourced from RAPS in the 2018 payment year, while only 15 percent will be sourced from EDS. 


This news comes as a relief to many MA plans, which have experienced significant challenges in submitting clean data to CMS. Furthermore, with the Phase III MAO-004 files being released just this past weekend, telling plans which EDS diagnosis codes CMS will use in its payment calculations, plans are only now able to assess the payment impact of EDS at its current 25 percent level.


The beneficiary file, which is used to assist in the 2018 payment year bidding process and due early next week, will contain separate risk scores for EDS and RAPS. The EDS risk score will include EDS records submitted through January 31, 2017, and will be based upon Phase II MAO-004 filtering logic.


CMS has not yet updated its phase-in timeline for using EDS to calculate 100 percent of payments to MA plans, but that goal is unlikely to be met by 2020 as previously proposed under the Obama Administration. While CMS isn’t authorized to change the RAPS/EDS blend for the 2017 payment year due to the requirement that all payment changes be announced in advance, the agency may revisit the payment year deadline of January 31, 2018 if it appears that the industry needs more time to submit its EDS data.

Puerto Rico updates 

CMS continues to make payment adjustments that will have a positive impact on plans serving Medicare beneficiaries in Puerto Rico, which has the highest percentage of MA beneficiaries in the country. Like the 2017 payment year, CMS will adjust for zero claims and base rates on the estimated fee-for-service costs of beneficiaries with both Medicare Parts A and B. Additionally, CMS has identified certain counties in Puerto Rico that will be eligible to receive an increased quality bonus using the quality bonus adjusted benchmark.

request for information

In releasing the Final Notice, CMS included a request for “proposals that include data and specific examples that could be implemented to increase benefit flexibility, innovation and more affordable plan choices for beneficiaries.” The agency says its goal is to use “transparency, flexibility, program simplification and innovation to transform MA and Part D so Medicare enrollees have options that fit their individual health needs.” CMS is seeking feedback via email through April 24, 2017.


Learn more about Verscend’s Medicare Risk Adjustment solution, an integrated set of tools to perform all stages of an MRA program.

As Verscend’s senior vice president of risk adjustment, Sean Creighton works with our product development and delivery teams to set priorities and develop world-class products that align with both our business and our clients’ needs. Prior to joining Verscend, Sean worked for CMS for 15 years, most recently as the deputy group director of the Payment Policy and Financial Management Group in the Center for Consumer Information and Insurance Oversight. While at CMS, he was responsible for payment policy and operations for both private Marketplace (ACA) and Medicare plans. Sean holds a BA in European Studies from the University of Limerick and an MSc in Sociology from the London School of Economics.

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