
Is Medicare Advantage Risk-Based?
Medicare Advantage is a type of Medicare health plan offered by private insurance companies that provides all Original Medicare Part A and Part B benefits. Medicare Advantage Plans may charge different premiums, copays, deductibles, and have different provider networks. But are they considered "risk-based" plans?
What is Risk-Based Health Insurance?
Risk-based health plans are plans where the insurer assumes more financial risk for the total costs of care for covered members. Traditional fee-for-service Medicare is not risk-based.
Features of risk-based health insurance include:
· Fixed payments per member to provider organizations (capitation)
· Providers responsible for costs exceeding payments (downside risk)
· Bonuses possible if costs are less than payments (upside risk)
· Focus on care coordination to improve health and lower costs
Examples of risk-based plans include Medicare Advantage, Medicaid managed care, and accountable care organizations (ACOs).
Is Medicare Advantage Health Plan Risk-Based?
Yes, Medicare Advantage is considered a risk-based alternative to Original Medicare. Here's why:
· Medicare pays a fixed monthly amount per member to Medicare Advantage Plans
· Plans are at high-risk of costs exceeding their payments
· Plans can earn bonuses by meeting quality and savings benchmarks
The as of 2022 claim data monthly payment Medicare provides to Medicare Advantage Plans is determined by a process called risk adjustment.
How Risk Adjustment Coding Works with Medicare Advantage
Risk adjustment helps account for the health status and predicted costs of each Medicare Advantage Plan member when calculating the monthly payments from Medicare.
· Plans collect diagnosis codes from providers to capture member risk profiles
· Medicare calculates a risk score for each member based on diagnoses
· Higher risk scores mean higher monthly payments to the plan
· Accurate coding is key - plans invest in data analysis and coding initiatives
Proper risk adjustment ensures primary care health plans have adequate funding to care for sicker populations. It removes incentives for plans to avoid higher-risk members.
Why Risk Adjustment Matters for Medicare Advantage Plans
Accurate risk adjustment is critical for both Medicare Advantage Plans and the Medicare program:
· Ensures appropriate payments for plans based on members' health conditions
· Allows plans to serve higher risk members without financial penalty
· Reduces incentives for Medicare Advantage Plans to "cherry pick" only healthy members
· Stabilizes payments as member health status changes
Without risk adjustment, Medicare Advantage would be financially unstable for plans and less beneficial for sicker, higher cost members.
Risk Adjustment in Medicare Advantage Risk Adjustment: The Controversies
While critical for payment accuracy, Medicare Advantage risk adjustment has also faced controversies:
· Plans accused of exaggerating member diagnoses to increase risk scores and payments ("upcoding")
· Federal audits and lawsuits filed over alleged upcoding schemes
· Plans investing heavily in data analytics and specialist risk coding firms
· Ethics concerns over disease screening programs used to boost risk scores
Finding the right balance of risk adjustment, auditing, and incentives remains an ongoing challenge in Medicare Advantage.
Do Providers Share Financial Risk in Medicare Advantage?
Medicare Advantage Plans take on risk for total costs of care. But providers in Medicare Advantage networks don't necessarily take on financial risk:
· Many plans pay providers through discounted fee-for-service arrangements
· Providers share risk only in capitated Medicare Advantage Plans and special needs plans
· More plans are introducing bonuses and shared savings for efficient providers
· Upside risk for providers expected to increase as value-based care expands
The level of provider risk depends on the specific plan and contract terms. But Medicare Advantage Plans themselves bear the primary risk under CMS contracts.
Conclusion: Medicare Advantage Shifts Insurance Risk to Private Plans
While doctors treating patients make day-to-day medical decisions, Medicare Advantage Plans take on population health and financial risk under capitated CMS contracts. This transfers insurance risk from traditional fee-for-service Medicare to private insurers.
Risk adjustment provides the foundation for this model, allowing plans to compete based on care management and coordination instead of just avoiding the sickest members.
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FAQS
What is Medicare Advantage and how does it differ from traditional Medicare?
Medicare Advantage is a type of health insurance plan that offers the same benefits as traditional Medicare, but also includes additional services such as vision, dental, and prescription drug coverage. Medicare Advantage Plans are offered by private companies that contract with the Centers for Medicare and Medicaid Services (CMS) as payer to provide health care to Medicare beneficiaries.
What is risk adjustment and why is it important for Medicare Advantage Plans?
Risk adjustment is a statistical method that adjusts the payments to Medicare Advantage Plans based on the health status and expected costs of care of their enrollees. Risk adjustment encourages plans to enroll and provide quality care to beneficiaries with different health conditions, and ensures that plans are paid appropriately for the risk they assume.
How is risk adjustment data validation (RADV) performed and what are its implications for Medicare Advantage Plans?
RADV is a process that verifies the accuracy and completeness of the diagnosis codes submitted by Medicare Advantage Plans to CMS for risk adjustment purposes. CMS conducts RADV audits to ensure that the payments to Medicare Advantage Plans are based on valid diagnoses from medical records. If RADV audits find discrepancies between the submitted diagnosis codes and the medical records, CMS may recover overpayments or make additional payments to the plans.
What are risk-based Medicare Advantage models and how do they differ from fee-for-service models?
Risk-based Medicare Advantage models are alternative payment models that reward or penalize Medicare Advantage Plans based on their performance on quality, cost, and patient satisfaction measures. Risk-based Medicare Advantage models aim to improve health outcomes and reduce costs of care by shifting from fee-for-service payments, which pay providers for each service they deliver, to value-based payments, which pay providers for the value they create.
What are some examples of risk-based Medicare Advantage models and how can health systems participate in them?
Some examples of risk-based Medicare Advantage models are:
· The Next Generation Accountable Care Organization (ACO) Model, which allows ACOs to take on higher levels of financial risk and reward than other ACO models.
· The Direct Contracting Model, which allows entities that are not traditional Medicare providers, such as provider-sponsored health plans, to contract directly with CMS and take on financial risk for a population of Medicare beneficiaries.
· The Global and Professional Direct Contracting Model, which allows entities that have experience in risk-sharing arrangements, such as vertically integrated health plans, to take on global or professional risk for a population of Medicare beneficiaries.