Impact of CMS Risk Adjustments on Dual Eligibles

Recent changes to the CMS model for predicting costs of dual-eligible beneficiaries creates turmoil

As PLEXIS monitors important changes in legislation and technology, we continue to inform healthcare payers about significant issues such as the following changes in federal policy and possible impacts. In late October, 2015, the Centers for Medicare and Medicaid Services (CMS) revealed that it had been underpaying health plans that serve dual eligibles, one of the most vulnerable populations that is typically both elderly and impoverished. CMS has proposed risk adjustments to increase payments, but analysts claim that certain regions of the United States may end up receiving significantly reduced payments. Several innovative solutions follow in the wake of CMS’ latest reforms.

Possible unintended consequences from the CMS risk adjustments

The CMS risk adjustments are scheduled to retroactively apply in 2016 for all Medicare Advantage organizations, PACE organizations, Medicare-Medicaid plans, and dual eligible demonstrations. The CEOs of several health plans have expressed optimism about the new risk adjustments, yet others foresee payment inequities. For example, the healthcare consulting firm Avalere Health conducted a recent analysis that predicts large payment discrepancies. These could include payment reductions for some plans with corresponding reduced benefits for beneficiaries. Avalere’s study points out geographical factors that vice president Tom Kornfield says, “could introduce volatility into the Medicare Advantage market with unintended consequences on beneficiaries in some regions.”

The worst case, according to Avalere’s in-depth analysis, could be large payment decreases throughout most of California and a few other states. Before Kornfield joined Avalere he worked for CMS, where he helped develop rates for dual eligible demonstration programs. So Avalere’s predictions may well come true, which could result in significant distress for dual eligible beneficiaries in affected regions.

CMS devotes additional funding and resources to Medicaid IT

Unexpected healthcare cuts and quickly-changing regulations are nothing new to healthcare payers. As payers find innovative technology solutions to improve outcomes at lower costs, CMS recently stepped up with additional funding and resources. First CMS permanently extended the 90% federal matching investment for Medicaid systems, bringing the CMS investment in state Medicaid IT to more than $5 billion/year. CMS’ Acting Administrator, Andy Slavitt said, “Serving the Medicaid consumer better takes meaningful investment in infrastructure to help serve low-income individuals . . . enabling states to modernize their Medicaid IT systems to best meet their program, providers’ and beneficiaries’ needs. CMS and states are prepared to invest in innovative solutions.”

This month CMS launched a new online asset to help states modernize outdated information technology (IT) systems. Slavitt quotes new regulations requiring states to sunset legacy Medicaid IT systems so they can adopt modern platforms that meet industry-proven standards. CMS’ new online resource is intended to help growing healthcare IT organizations identify state procurement opportunities so as to better serve the overall health of Medicaid or dual eligible beneficiaries.

Driving better population health outcomes with care management

Despite the outcome of the CMS risk adjustments, healthcare payers are empowered with various toolsets for success. At the top of the list, care management has proven to work well for dual eligibles to drive improved outcomes at lower costs. Dr. Desphande, chief medical officer of United Healthcare Community Plan of Texas, spoke recently at a Health IT summit about care management for Medicare/Medicaid dual eligibles leading the success of population health and our nation’s healthcare.

Dr. Desphande says,

“As I’ve heard numerous industry leaders attest, . . . it is success with the care management of those very members that could help healthcare executives, managers, and clinicians succeed with other populations, and with population health and accountable care more generally. And that is especially because such success relies on bringing together all the elements of a complex ecosystem of interactions, encompassing health risk assessment-driven analytics and the analysis of both clinical and claims data, the implementation of solid, team-based and IT-facilitated care and case management, authentic patient engagement, and also the engagement of clinicians, especially physicians, and their commitment to complex care management and operational improvement processes over long periods of time, on behalf of defined individuals.”

Mark Hagland, Editor-in-Chief of Healthcare Informatics, says, “healthcare IT leaders will absolutely be front and center in all this, in helping to facilitate the selection and implementation of information systems to support the many complex elements of this kind of work.”


Davis, Jessica. “CMS Launches Medicaid IT Online Resource, Highlights State Opportunities.” Healthcare IT News. Jan. 2016.

Dickson, Virgil. “CMS Speeds Up Move to Raise Rates for Dual-eligible Plans.” Modern Healthcare. Nov. 2015.

Hagland, Mark. “Why Those Interested in Population Health and ACO Development Need to Think About the Dual-Eligible Population” HCI: Healthcare Informatics. Dec. 2015

Kornfield, Tom. “Proposed Changes in Medicare Advantage Could Cause Large Shifts in Payments.” Avalere. Dec. 2015.

Rice, Cheri. “Proposed Changes to the CMS-HCC Risk Adjustment Model for Payment Year 2017.” Department of Health & Human Services, Centers for Medicare & Medicaid Services. Oct. 2015.

Slavitt, Andy. “Encouraging Investment in Medicaid Information Technology.” The CMS Blog. Jan. 2016.


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