CMS-HCC V28 Overview: What Medicare Advantage Plans Need to Know
The Centers for Medicare and Medicaid Services (CMS) Hierarchical Condition Categories (HCC) model plays a crucial role in risk adjustment for Medicare Advantage (MA) and other health plans. CMS recently released Version 28 (V28) of the CMS-HCC model, which brings several updates that Medicare Advantage (MA) plans need to understand to stay compliant and ensure accurate payments.
What is CMS-HCC?
The CMS-HCC model is a risk adjustment system that CMS uses to predict healthcare costs for Medicare Advantage beneficiaries. It’s a method for adjusting payments based on the health status of beneficiaries. This system helps CMS ensure that health plans are adequately compensated for covering individuals who are sicker and likely to require more medical care.
Why CMS-HCC Matters:
- It adjusts the financial risk of health plan members and pays the plans according to the those health risks.
- It incentivizes care by encouraging health plans to manage and treat people with chronic and severe conditions.
- It also ensures that those plans that provide health care to high-risk patients are compensated fairly.
Key Points to Note:
- Risk Adjustment Mechanism: The CMS-HCC model calculates a “risk score” for each individual based on their demographic information (age, gender, disability status, Medicaid eligibility) and medical conditions (captured via ICD-10-CM codes).
- Payments Tied to Health Status: Plans that enroll high-risk individuals (e.g., diabetics, and heart failure patients) receive higher payments because these individuals require more care.
Growth in Medicare Advantage Enrollment
Medicare Advantage (MA) enrollment has grown rapidly over the past few years, increasing the relevance and impact of CMS-HCC on the healthcare industry. As of 2024, more than 31 million Americans are enrolled in Medicare Advantage plans, accounting for nearly 50% of the total Medicare population. This highlights the growing importance of risk adjustment models in ensuring health plan payments remain fair and balanced.
| Year | Medicare Advantage Enrollment (millions) | Percentage of Total Medicare Population |
| 2020 | 24.1 | 39% |
| 2021 | 26.7 | 42% |
| 2022 | 28.4 | 46% |
| 2023 | 31.0 | 49% |
With a growing dependence on MA plans, any alterations done to the CMS-HCC model have a profound effect on an even larger healthcare industry.
CMS-HCC V28: Key Changes
CMS-HCC Version 28 brings on numerous changes to condition categories and risk score assessment, along with coding practices adopted by health care plans to ascertain the correct degree of reimbursement. The following list outlines the core changes brought to CMS-HCC V28.
1. New Condition Categories Added
CMS has categorized most of the new conditions based on current health trends. Several other conditions have also been segregated from larger groupings in categories for finer and more detailed analysis of risks. For example, diabetes – previously captured under a single category – is now split into different categories for Type 1 and Type 2.
Old Categories (V24) | New or Revised Categories (V28) |
Diabetes (HCC 19) | Type 1 Diabetes and Type 2 Diabetes (separated) |
Major Organ Transplant | Specific transplant types (e.g., kidney, liver) |
This revision ensures that health plans managing patients with more complex conditions are compensated more accurately for the higher cost of care.
This chart visually illustrates the breakdown of chronic conditions in Medicare Advantage Plans. It illustrates the proportion of common chronic conditions such as diabetes, heart failure, chronic kidney disease, and COPD within the Medicare Advantage population.
2. Removed Condition Categories
Some conditions that previously contributed to risk scores in V24 have been removed or reclassified. CMS made these changes either because treatments for these conditions have improved, making them less costly, or because the conditions were demonstrated not to impact healthcare costs with any significance.
Example:
- Depression and Anxiety Disorders: Certain low-risk mental/behavioral health conditions have been removed or reclassified to reduce the overestimation of costs for mental/behavioral health patients. This helps streamline the model and focus on more resource-intensive conditions.
3. Changes to Risk Weights
CMS-HCC V28 also brings adjustments to the risk weights for several conditions. Some chronic diseases, such as diabetes and heart failure, have had their risk scores values reduced—generally minor adjustments—to reflect improvements in treatment and outcomes for these conditions.
HCC Code | Condition | V27 Risk Score | V28 Risk Score |
HCC 18 | Diabetes with Complications | 0.302 | 0.280 |
HCC 85 | Congestive Heart Failure | 0.368 | 0.355 |
HCC 96 | Acute Myocardial Infarction | 0.444 | 0.429 |
While these adjustments may seem small, they can have a significant financial impact on health plans that enroll large populations of individuals with these conditions.
4. Emphasis on More Accurate Coding
Accurate coding has always been essential to the CMS-HCC model, but V28 places even greater importance on ensuring health plans report diagnoses correctly. Proper documentation and coding ensure that health plans capture all the risk factors for each beneficiary, leading to fair payment.
Impact of CMS-HCC V28 on Health Plans
Health plans must adjust to the changes in CMS-HCC V28 to avoid underreporting or underpayment. Below are the primary ways V28 will affect health plans:
1. Revenue Projections
The CMS-HCC model directly influences the revenue for health plans. The changes within V28 – new categories, and adjustments to the risk weights of the members – may well change the entire payment structure for plans managing those patients with conditions such as diabetes, heart failure, or transplanted organ(s).
Example:
A plan with high numbers of patients with Type 2 diabetes is likely to be impacted by revenue per patient based on the V28 risk weights for diabetes being reduced. Analysis of these impacts should be evaluated by health plans to project future revenue.
2. Coding and Documentation
V28 will require health plans to code and document even more accurately because new categories, as well as changes in risk scores, will make codAing errors result in underpayment. Investments in coder training and provider training (Clinical Documentation Improvement initiatives) will be essential to ensure accurate reporting.
3. Member Care Management
Under V28, MA plans should focus on management of chronic conditions with high implications for healthcare spending. Health plans must apply additional effort and resources to manage high-risk populations, ensuring these members receive necessary care. In turn, this effort will lead to both positive health outcomes and appropraite reimbursement.
Chart: Risk Score Distribution in Medicare Advantage
Figure: Distribution of risk scores in Medicare Advantage, showcasing how the CMS-HCC model impacts different populations.
Case Study: Effect of CMS-HCC V28 on Chronic Disease Management
Consider an example patient with Congestive Heart Failure (CHF), a disease that affects literally millions of Medicare beneficiaries. CMS-HCC V28 assigns a modestly less risk score for CHF, revealing that care delivery and management of the disease have enhanced.
Case Scenario:
- Health Plan A has 2,000 enrollees diagnosed with CHF.
- Under V24, the risk score of a CHF patient is 0.368, which results in higher payments to the plan.
- Under V28, the risk score of a CHF patient is reduced to 0.355, and the health plan will receive slightly lower payments for these individuals.
Financial Impact:
With a baseline reimbursement rate set at $10,000 annually (approximately $833 per member per month) for each beneficiary, the variation between the risk scores (0.368 – 0.355 = 0.013) will translate into a loss in revenue of $130 per patient per year by CHF patients. For the 2,000 enrollees, this is a net loss of revenue of $260,000 from the change in V28.
Reversal Approach to Revenue Deterioration:
In response to this loss in revenue, Health Plan A can invest in chronic disease management programs with a focus on bettering outcomes for CHF patients. It can reduce hospitalizations and promote better health, thereby reducing costs while maintaining quality care.
Transitioning to CMS-HCC V28
A smooth transition to CMS-HCC V28 can be ensured by health plans following these steps:
1. Training and Education
Health plans should train their teams, including coders, providers, and management, on the changes in V28. The training should be focused on understanding the new condition categories, accurate coding practices, and how to capture all relevant diagnoses.
Key Training Topics:
- Differences between V24 and V28
- New condition categories and removed codes
- Best practices for clear, complete medical record documentation, to avoid coding errors and omissions
2. Internal Auditing
Health plans should conduct regular internal audits to identify any gaps in coding or documentation. This will help ensure that the plan is not missing out on capturing key conditions that could impact risk scores and reimbursement.
3. Population Health Analytics
Health plans should use data analytics tools, which can help in the identification of at-risk populations and assessment of the impact of V28 on the plan’s membership. Such tools will further enable health plans to gain better insight into which conditions dominate their population and tailor care management tactics appropriately.
Chart: Distribution of Risk Scores in Medicare Advantage Plans Under CMS-HCC V28
Figure: Distribution of risk scores in Medicare Advantage plans under CMS-HCC V28, showcasing the impact on different patient populations.
4. Optimize Care Management Programs
Care management programs for chronic conditions will be very important under V28. Plans should focus on managing high-risk populations such as diabetes, heart failure, and kidney disease, which will significantly reduce overall costs and improve outcomes.
Example Programs:
- Diabetes remote monitoring for prevention of complications
- CHF management programs to prevent unnecessary admissions and readmissions to hospitals
- Coordination of complete care for transplant patients
Key Data to Consider: Growth in Medicare Advantage Enrollment
Now that more than 31 million Americans are covered under Medicare Advantage plans, it is more imperative than ever for risk adjustment models like CMS-HCC to be fully understood by all Medicare Advantage Organizations. If health plans fail to adjust to these changes, there is always a risk of financial shortfall; therefore, knowing and implementing new guidelines is critical.
Table: Medicare Advantage Enrollment Over Time
Year | Enrollment (millions) |
2020 | 24.1 |
2021 | 26.7 |
2022 | 28.4 |
2023 | 31.0 |
The graph below shows the Medicare Advantage enrollment growth trends for 2018 through 2024. This graph highlights the steady increase in enrollment over the years, emphasizing the growing significance of the CMS-HCC risk adjustment model, which helps manage the costs of covering this expanding population.
Conclusion
Several critical changes that CMS introduces in V28 require a knowledge base to implement them and enable accurate payments on behalf of correct care provision among the members. The condition categories, risk scores, and refining of the score calculation process involve a comprehensive study and education effort. If accuracy in coding leads to audit precision and better handling of member populations, the easy transition into the new V28 would allow a health plan the proper fair pay for high-risk patients.
Understanding and adapting to CMS-HCC V28 may seem challenging, but with the right approach and attention to detail, health plans can thrive under these new guidelines. Stay proactive, stay compliant, and ensure your team is prepared for success.
