Fact Sheet
Today, the Centers for Medicare & Medicaid Services (CMS) published the Calendar Year (CY) 2021 Rate Announcement, finalizing Medicare Advantage (MA) and Part D payment methodologies for CY 2021. This Rate Announcement addresses comments received on Parts I and II of the CY 2021 Advance Notice, published on January 6 and February 5, 2020, respectively. The final policies in the Rate Announcement will continue to modernize and maximize competition within the MA and Part D programs.
COVID-19 Outbreak
The health and safety of America’s patients and provider workforce in the face of the Coronavirus Disease 2019 (COVID-19) outbreak is the top priority of the Trump Administration and CMS. We are working around the clock to equip the American healthcare system with maximum flexibility to respond to the 2019 Novel Coronavirus (COVID-19) pandemic. The 2021 Rate Announcement is an example of how CMS is focused on implementing the policies that matter most for ensuring continuous and predictable payments across the health care system and ensure care can be provided where it is needed. While the Rate Announcement does not catalog CMS’ actions related to the COVID-19 outbreak, an overview of CMS’ actions related to the outbreak for MA organizations, PACE organizations, and Part D sponsors can be found at: https://www.cms.gov/files/document/covid-ma-and-part-d.pdf. The agency is also communicating with stakeholders, responding to inquiries through the HPMS system, and developing further guidance on issues related to the COVID-19 outbreak.
To keep up with the White House Task Force actions in response to the COVID-19 outbreak, visit Coronavirus.gov. For information specific to CMS, please visit the Current Emergencies Website.
2021 Rate Announcement
After considering all comments received, CMS is finalizing updates and changes to the methodologies used to pay MA organizations, PACE organizations, and Part D sponsors discussed in Parts I and II of the CY 2021 Advance Notice.
Net Payment Impact
The chart below indicates the expected impact of the updated methodologies on plan payments relative to last year.
Year-over-Year Percentage Change in Payment
| Impact | 2021 Advance Notice | 2021 Rate Announcement |
| Effective Growth Rate | 2.99% | 4.07% |
| Rebasing/Re-pricing | N/A1 | -0.35%2 |
| Change in Star Ratings | 0.23% | 0.23% |
| MA Coding Pattern Adjustment | 0% | 0% |
| Risk Model Revision | 0.25% | 0.25% |
| Encounter Data Transition | 0% | 0% |
| Normalization | -2.54% | -2.54% |
| Expected Average Change in Revenue3 | 0.93% | 1.66% |
1Rebasing/re-pricing impact is dependent on finalization of the average geographic adjustment index, which was not available with the publication of the 2021 Advance Notice.
2For 2021, the rebasing/repricing impact reflects the impact of the kidney acquisition cost carve-out.
3The total does not include an adjustment for underlying coding trend. For 2021, CMS expects the underlying coding trend to increase risk scores, on average, by 3.56%.
2021 Part C Risk Adjustment Model
CMS is finalizing as proposed the continued phase-in of the 2020 CMS-Hierarchical Condition Categories (HCC) model. The 21st Century Cures Act requires that CMS phase in changes to risk adjustment payments based on section 1853(a)(1)(I) of the Social Security Act over a three-year period, with full implementation by 2022. In order to continue phasing in the model that meets statutory requirements (i.e., the 2020 CMS-HCC model), CMS is finalizing the proposal to calculate risk scores for CY 2021 payments to MA organizations and certain demonstrations as the sum of:
- 75% of the risk score calculated with the 2020 CMS-HCC model and
- 25% of the risk score calculated with the 2017 CMS-HCC model.
This represents a change from the blend for CY 2020 of 50% of the risk score calculated with the 2020 CMS-HCC model and 50% of the risk score calculated with the 2017 CMS-HCC model.
Using Encounter Data
CMS calculates risk scores using diagnoses submitted by MA organizations and from Medicare fee-for-service (FFS) claims. Historically, CMS has used diagnoses submitted into CMS’ Risk Adjustment Processing System (RAPS) by MA organizations for the purpose of calculating risk scores for payment. In recent years, CMS began collecting encounter data from MA organizations, which also includes diagnostic information. CMS began using diagnoses from encounter data to calculate risk scores for CY 2015, and for CY 2016, CMS blended 10% of the encounter data-based risk score with 90% of the RAPS-based risk score. CMS has since continued to use a blend, calculating risk scores with 25% encounter data and 75% RAPS data for CY 2017, 15% encounter data and 85% RAPS data for CY 2018, 25% encounter data and 75% RAPS data for CY 2019, and 50% encounter data and 50% RAPS data for CY 2020.
For CY 2021, CMS is finalizing the proposal to calculate risk scores for payment to MA organizations and certain demonstrations as the sum of 75% of the encounter data-based risk score and 25% of the RAPS-based risk score. CMS is finalizing the proposal to calculate the encounter data-based risk scores with the 2020 CMS-HCC model and the RAPS-based risk scores with the 2017 CMS-HCC model.
For Programs of All-Inclusive Care for the Elderly (PACE) organizations for CY 2021, CMS is finalizing the proposal to continue to calculate risk scores using the 2017 CMS-HCC model by pooling risk adjustment-eligible diagnoses from encounter data, RAPS data, and FFS claims (with no weighting).
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 2021, CMS is finalizing the proposal to apply a coding pattern adjustment of 5.90%, which is the minimum adjustment for coding intensity required by the statute.
Medicare Advantage End-Stage Renal Disease (ESRD) Payment
Pursuant to section 1853(a)(1)(H) of the Act, CMS establishes “separate rates of payment” for ESRD beneficiaries enrolled in MA plans. Outside of the exclusion of organ acquisition costs for kidney transplants from MA ESRD rates (mandated by the 21st Century Cures Act; discussed below), the methodology proposed in the Advance Notice and finalized in the Rate Announcement for the CY 2021 ESRD rates remains unchanged from the methodology used continuously for the past several years. The final trend factor that will apply to the MA ESRD state-level rates for 2021 is 4.04%, which is higher than the Advance Notice estimate of 2.8%.
Exclusion of Kidney Organ Acquisition Costs from MA Benchmarks
The 21st Century Cures Act amended the Social Security Act to allow all Medicare-eligible individuals with ESRD to enroll in MA plans beginning January 1, 2021. With this enrollment policy change, the Cures Act also made related payment changes in the MA and FFS programs. Effective January 1, 2021, MA organizations will no longer be responsible for organ acquisition costs for kidney transplants for MA beneficiaries, and such costs will be excluded from MA benchmarks and covered under the FFS program instead. The CY 2021 Advance Notice provided a step-by-step description of the methodology by which CMS will estimate the kidney organ acquisition costs to carve out from MA ESRD and non-ESRD benchmarks, which we are finalizing through the Rate Announcement. PACE organizations will continue to cover organ acquisition costs for kidney transplants and CMS will continue to include the costs for kidney acquisitions in the development of PACE payment rates.
Puerto Rico A far greater proportion of Medicare beneficiaries receive benefits through MA in Puerto Rico than in any other state or territory. The policies finalized for 2021 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
As part of the Administration’s effort to increase transparency and seek public comment on the Part C and D Star Ratings program, CMS codified the methodology for the Part C and D Star Ratings program in the CY 2019 Medicare Part C and D Final Rule, published in April 2018 for the 2021 Star Ratings. The Advance Notice provided information and updates that those regulations require us to announce through the process described in section 1853(b) of the Social Security Act for changes in, and adoption of, payment and risk adjustment policies. In addition, we solicited input on future measures and concepts as we continue to enhance the Star Ratings over time.
Please note that in the Medicare and Medicaid Programs: Policy and Regulatory Revisions in Response to the COVID-19 Public Health Emergency Interim Final Rule (CMS-1744-IFC); https://www.federalregister.gov/documents/2020/04/06/2020-06990/medicare-and-medicaid-programs-policy-and-regulatory-revisions-in-response-to-the-covid-19-public) put on display at the Office of the Federal Register website on March 31, 2020 and scheduled to be published in the Federal Register on April 6, 2020, CMS adopted several changes to the 2021 Star Ratings to address the disruption to data collection and plan performance in 2020 posed by the COVID-19 pandemic. Specifically, this rule eliminates the 2020 collections of Healthcare Effectiveness Data and Information Set (HEDIS) and Medicare Consumer Assessment of Healthcare Providers and Systems (CAHPS) data and replaces the measures calculated based on those HEDIS and CAHPS data collections with earlier values from the 2020 Star Ratings that would not have been affected by the public health threats posed by COVID-19. It establishes how we will assign Star Ratings for 2021 in the event that the virus prevents CMS from having validated data or results in systemic data integrity issues, or if CMS’s functions become focused on only continued performance of essential Agency functions due to the pandemic. It also modifies the current rules for the 2021 Star Ratings to replace any measure that has a systemic data quality issue due to the COVID-19 outbreak with the measure-level Star Rating and score from the 2020 Star Ratings.
The IFC also makes changes for the 2022 Star Ratings to remove guardrails and expand the hold harmless provision for the Part C and D improvement measures to include all contracts. For just the 2022 Quality Bonus Payment (QBP) ratings that are based on 2021 Star Ratings, we are modifying the definition of new MA plan: we will treat an MA plan as a new MA plan if it is offered by a parent organization that has not had another MA contract for the previous 4 years.
In Attachment VI of the the CY 2021 Rate Announcement, CMS is finalizing June 30, 2020 as the date by which plans must submit their requests for review of the appeals and complaints measures data. The Rate Announcement also lists the measures included in the Part C and D Improvement measures and the values for the Categorical Adjustment Index for the 2021 Star Ratings. The policy for adjustments to Star Ratings in the event of extreme and uncontrollable circumstances, such as major hurricanes, is the same as the one implemented for the 2020 Star Ratings and codified in regulation for the 2022 Star Ratings. This policy will only impact measures that do not already revert back to the 2020 measure-level Star Rating and associated measure score, as a result of the adjustments to the 2021 Star Ratings codified in the Interim Final Rule.
Additionally, as part of our efforts to lower prescription drug costs for Medicare beneficiaries and strengthen competition for generic products, CMS solicited feedback on a generic utilization Part D measurement concept through the CY 2021 Advance Notice. CMS encourages Part D sponsors to leverage favorable tier placement and effective formulary management tools to incentivize beneficiaries to fill generic alternatives over branded products. We reviewed the feedback received and will consider it for any potential future development of generic utilization measures for the Part D Star Ratings program.
Other measurement concepts that CMS solicited feedback on include:
- End-Stage Renal Disease (ESRD) measures (Part C)
- Prior Authorizations (Part C)
- Physical Functioning Activities of Daily Living Patient-reported measure (Part C)
- Initial Opioid Prescribing (Part D)
CMS will take feedback received into consideration and where appropriate share with the measure stewards.
Process
The CY 2021 Rate Announcement may be viewed by going to: https://www.cms.gov/Medicare/Health-Plans/MedicareAdvtgSpecRateStats/Announcements-and-Documents.html and selecting “2021 Announcement.”
CMS will offer stakeholders an opportunity to discuss the 2021 Rate Announcement, as well as guidance related to the COVID-19 outbreak for MA organizations, PACE organizations, and Part D sponsors, with CMS staff during a call that will be scheduled in the near future. We will provide further details on this stakeholder call soon.