Today Centers for Medicare & Medicaid Services (CMS) released the Announcement of Calendar Year (CY) 2023 Medicare Advantage (MA) Capitation Rates and Part C and Part D Payment Policies (the Rate Announcement). CMS’s goals for Medicare Advantage and Part D mirror our vision for the agency’s programs as a whole, which is to advance health equity; drive comprehensive, person-centered care; and promote affordability and the sustainability of the Medicare program.

In the CY 2023 MA and Part D Advance Notice, CMS solicited comments on a variety of topics, including seeking input on promoting health equity in Medicare Advantage and Part D plans. CMS appreciates the submitted comments and will consider them in future policymaking.

This fact sheet discusses the provisions of the Rate Announcement, which can be viewed by going to: https://www.cms.gov/Medicare/Health-Plans/MedicareAdvtgSpecRateStats/Announcements-and-Documents.html and selecting “2023 Announcement.”

Net Payment Impact

The chart below indicates the expected impact of the policy changes and updates on MA plan payments relative to 2022.  

Year-to-Year Percentage Change in Payment

Part C Risk Adjustment

CMS will continue the CY 2022 policy to calculate 100% of the risk score using the 2020 CMS-HCC model, which was phased in from CY 2020 to CY 2022, as required by section 1853(a)(1)(I) of the Social Security Act, as amended by the 21st Century Cures Act. We are also continuing our policy of calculating risk scores for MA enrollees using diagnoses exclusively from MA encounter data submissions and fee-for-service (FFS) claims. CMS solicited and received comments on whether enhancements can be made to the CMS-HCC risk adjustment model to address the impacts of social determinants of health on beneficiary health status by incorporating additional factors that predict the relative costs of MA enrollees and will consider all comments received on this topic for future policymaking. 

Part C End Stage Renal Disease (ESRD) Risk Adjustment

For CY 2023, we are finalizing the revised risk adjustment model for payment to MA organizations and additional demonstrations and programs (such as Medicare-Medicaid Plans (MMPs)) where the demonstration also uses the MA risk adjustment models) for enrollees with ESRD in order to improve the prediction of costs for these enrollees. The revised model is calibrated on more recent data, using CMS’s current approach to identify risk adjustment eligible diagnoses from encounter data records. It also incorporates improvements previously made to the Part C CMS-HCC model, specifically the clinical updates and revised segmentation, which accounts for the differential cost patterns of dually eligible beneficiaries.

Program of All-Inclusive Care for the Elderly (PACE) Risk Adjustment

For CY 2023 payment to PACE organizations, we will continue to use the 2017 CMS-HCC model to calculate non-ESRD risk scores as we have done since CY 2020, the 2019 CMS-HCC ESRD models to calculate ESRD risk scores as we have done since CY 2019, and the 2020 RxHCC model to calculate Part D risk scores as we have done since CY 2020.

Medicare Advantage Coding Pattern Adjustment

Each year, as required by law, CMS makes an adjustment to plan payments to reflect differences in diagnosis coding between MA organizations and FFS providers. For CY 2023, CMS is finalizing a coding pattern adjustment of 5.9%, which is the minimum adjustment for coding pattern differences required by statute. CMS received a number of recommendations from stakeholders regarding approaches to estimate the MA coding pattern adjustment. These included recommendations that CMS apply a higher coding pattern adjustment than the statutory minimum and that CMS consider approaches that take into account differences in coding patterns across MA plans. CMS continually reviews MA coding patterns and continues to assess how we calculate the MA coding pattern adjustment, how best to apply it, and what the appropriate level of the adjustment should be. Ensuring that the coding pattern adjustment policy appropriately addresses differential coding in MA is essential and we will consider these recommendations in the development of future coding pattern adjustment proposals.

Medicare Advantage Normalization Factor

CMS calculates normalization factors annually to keep the FFS risk score at the same average level over time. For CY 2023, CMS will use the methodology typically used for calculating the normalization factor, which is to project the payment year risk score using a trend that is based on five historical years of FFS risk scores under the payment year model. However, for CY 2023, we proposed not to update the years of FFS risk scores used in the trend as we typically do – that is to remove the earliest year’s FFS risk score and add the most recent year’s FFS risk score that is available – because of concerns that the changing use of services in 2020 due to the COVID-19 pandemic resulted in an anomalous 2021 risk score, which is based on diagnoses from 2020 dates of service. Including the anomalous 2021 risk score would result in a projection that significantly underestimates what the FFS 2023 risk score is likely to be. CMS is finalizing the proposal to not update the years in the trend and instead use the same years of FFS risk scores that were used to calculate the 2022 normalization factors, 2016 through 2020.

Part D Risk Adjustment

For CY 2023, we are finalizing our proposal to implement an updated version of the RxHCC risk adjustment model for Part D sponsors other than PACE. The RxHCC model is used to adjust direct subsidy payments for Part D benefits offered by stand-alone prescription drug plans (PDPs) and Medicare Advantage prescription drug plans (MA-PDs). The recalibrated RxHCC model includes a clinical update to the RxHCCs based on ICD-10-CM diagnosis codes rather than ICD-9-CM codes used in the prior models. The recalibrated model also includes an update to the data years (2018 diagnoses to predict 2019 costs) using the same approach we use to filter diagnoses from encounter data records for risk score calculation, including the risk adjustment allowable CPT/HCPCS codes.

Puerto Rico

The proportion of Medicare beneficiaries who receive benefits through the MA program (as opposed to FFS Medicare) is far greater in Puerto Rico than in any other state or territory. The policies proposed and finalized for 2023 will continue to provide stability for the MA program in the Commonwealth and to Puerto Ricans enrolled in MA plans. These policies include basing the MA county rates in Puerto Rico on the relatively higher costs of beneficiaries in FFS who have both Medicare Parts A and B, continuing the statutory interpretation that permits certain counties in Puerto Rico to qualify for an increased quality bonus adjusted benchmark, and applying an adjustment to reflect the nationwide propensity of beneficiaries with zero claims.

Part C and D Star Ratings

The Rate Announcement includes information and announces updates in accordance with the Star Ratings regulations at §§ 422.164, 422.166, 423.184, and 423.186.

The Rate Announcement includes information about the date by which plans must submit their requests for review of the appeals and complaints measures data, lists the measures included in the Part C and D Improvement measures and the Categorical Adjustment Index for the 2023 Star Ratings, and lists the states and territories with Individual Assistance designations that began in 2021 from the nationwide FEMA major disaster declarations used in the definition of an affected contract for the extreme and uncontrollable circumstances adjustment for the 2023 Star Ratings.

Additionally, CMS solicited feedback in the CY 2023 Advance Notice on a number of different potential measurement concepts and methodological enhancements, including the following:

• Plans to enhance current CMS efforts to report stratified Part C and D Star Ratings measures by social risk factors to help MA and Part D sponsors identify opportunities for improvement. Nearly all stakeholders supported stratified reporting, and we will begin sharing confidential stratified reports with contracts this spring.
• The development of a Health Equity Index as an enhancement to the Part C and D Star Ratings program to summarize measure-level performance by social risk factors into a single score used in developing the overall or summary Star Rating for a contract.  
• The development of a measure to assess whether plans are screening their enrollees for health-related social needs such as food, housing, and transportation. 
• How MA organizations are transforming care and driving quality through value-based contracts with providers to use in the potential development of a Part C Star Ratings measure.

CMS will take the feedback received into consideration as we continue to explore ways to further drive health equity and high quality care.