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the 2018 advance payment notice: what you need to know

February 14, 2017

Health plan executives across the country have a lot of planning to do now that the 2018 Advance Payment Notice for Medicare Advantage (MA) and Part D plans has been released by the Centers for Medicare & Medicaid Services (CMS). The agency is now accepting public comments on the notice through March 3, 2017, before publishing the final version on April 3. We sat down with Verscend’s Pam Price, director of Risk Adjustment, to get a quick roundup of the key highlights.

What stands out to you the most from the 2018 Advance Payment Notice for health plans?

The biggest highlight for me is that the projected change in revenue is positive at 2.75 percent. Historically, CMS has tended to underestimate what the growth rate will be, having said 2.3 percent back in December, so it’s good news for health plans that this came in higher.


After that, the big news that will undoubtedly have many health plans breathing a sigh of relief is that CMS is pulling back on the transition from RAPS to EDS. Instead of calculating risk adjustment payments using a 50/50 split between RAPS and EDS in 2018, as originally planned, CMS will use the same approach as in 2017, which was 75 percent RAPS and 25 percent EDS.

How significant is it to health plans that CMS is slowing down the transition to EDS?

This is welcome news to many health plans, as shown by the fact that CMS is seeking comment on “applying a uniform industry-wide adjustment” to the EDS portion of the blended risk score in order to respond to industry concerns. What they’re really talking about there is a budget neutrality proposal or some other positive adjustment to account for incomplete EDS data. In one scenario, they would make payments under EDS budget neutral as compared to RAPS. The fact that CMS is asking for comment on this proposal indicates that they’ve already heard a lot of noise, and they’re acknowledging the need for a potential change.


Obviously, some health plans are more prepared for the transition to EDS than others, but many will appreciate having more time to get ready. Going forward, a big question now is how this will effect CMS’ original plan to transition to 100 percent EDS for risk adjustment payments by 2020, which this slowdown clearly puts off track.

How important is the Employer Group Waiver Plan (EGWP) proposal to keep the methodology the same for 2018 as it was in 2017?

This is pretty substantial. Health plans will benefit from retaining the 2017 methodology in calculating MA EGWP payment rates, where individual market plan bids are weighted by 50 percent and EGWP bids are weighted by 50 percent. CMS is now seeking public comment as to whether it should keep this methodology for 2018, or use only individual market plan bids, and it’s very likely that most plans would rather retain the 2017 approach.

The notice proposes a normalization factor of 1.017. What are your observations about this?

What really stands out to me is that there continues to be uncertainty around both the methodology and data points for calculating normalization factors. The industry is interested in seeing more technical detail from CMS in how this is done, as well as the rationale for changing methodologies from year to year, which can be very confusing. For example, given how old the ESRD model is—when it was last calibrated—plans would appreciate more clarity on the denominator and the relationship between the denominator year and the normalization factor. They would like to see more technical documentation to clear up the confusion.


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Pam serves as the Medicare risk adjustment subject-matter expert to all internal Verscend teams, including but not limited to the Product, Data Operations, Client Services, Retrieval, Coding, and Sales teams. Her nine-year tenure with Verscend makes her uniquely qualified to provide advice about growth opportunities and vision for future product offerings. Pam has more than 25 years of experience within the healthcare industry. Before joining Verscend, she was the vice president of finance for a Florida Medicare HMO, where she led the risk adjustment efforts and ran various RADV and medical record review projects. Pam is a CPA and obtained an MBA from New York University’s Stern School of Business.

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