Alliance of Community Health Plans Calls Risk Adjustment ‘Out of Control’

In September, the Alliance of Community Health Plans (ACHP) released an analysis that highlighted what it called “gaming” in risk adjustment payments within the Medicare Advantage (MA) program by large national carriers. The ACHP study found that the largest national MA insurer collected up to $785 more per beneficiary than local, nonprofit plans in 2023. That difference cost Medicare more than $6 billion.

ACHP President and CEO Ceci Connolly recently spoke with Healthcare Innovation about the analysis and her organization’s call for reforms to simplify the risk adjustment program. 

Healthcare Innovation: Before we get into this analysis that the Alliance did about risk scoring in Medicare Advantage, could you give us a little bit of background about the Alliance members and how their perspective might be different from the larger national plans?

Connolly: We are a national trade group based in Washington, D.C., and all of our members are nonprofit, provider-aligned local health plans. And that is not only our membership criteria, but it is very much our North Star when it comes to setting our policy priorities. We believe strongly in a model in which the payers and the providers are working together in collaboration on behalf of patients and communities. When you have that true partnership happening, what we see over and over again are better health outcomes and much greater value for your health care dollar. 

This is a model that we believe in, but it is one that is very, very challenged in the current environment for a few reasons. One is just simply that you have some of the large national, publicly traded payers that are answering to their shareholders, as one would expect, and as they've seen some pressure on some of the lines of business, government programs in particular, they need to keep those profits up, so they've become really quite fierce in their competitive posturing, even in smaller communities. 

We've also, unfortunately, over a period of several years, seen national policy-making that — whether it's intentional or an unintended consequence — is done with a one-size-fits-all approach based on some national averages. But when you're talking about healthcare and you go into different communities, whether it's a rural community or a minority community, the national averages really don't apply, and it's not an effective way to think about keeping a vibrant, competitive industry going.

HCI: Would you say your members probably have less of an adversarial relationship with providers than we hear about in a lot of the high-profile disputes where provider groups go out of network? 

Connolly: Yes, we certainly feel that way, and I think that we have a number of good, strong examples over the years in which our members, with their provider partners, are able to get upstream and agree on care pathways and set in place clinical protocols that they all believe are based on the evidence. When you do that, it goes much more smoothly the whole way through.

HCI: ACHP did an analysis of federal data about risk scores for patients in the largest Medicare Advantage insurers vs. the community health plans. Can you summarize what it found from comparing those?

Connolly: Just to take one step back for context, when Medicare Advantage was first created, it was a brand new market. No one was certain if seniors were going to be interested. Nobody was certain if health plans were going to participate in this new public/private partnership. A lot of thought went into things like how do we make certain that the most vulnerable or the sickest in a population are going to be cared for at high quality. So risk adjustment is one of those elements within Medicare Advantage that's intended to account for and make certain that a health plan treating a high number of especially sick seniors is going to get the dollars that it needs to cover those care needs. 

Risk adjustment has grown and expanded, and we would now submit that it has grown out of control. By that, I specifically mean that we are up to 115 of these categories of illness. And under the 115 — they’re known as HCCs [Hierarchical Condition Categories] — there are more than 7,000 diagnoses. We wanted to see the data for the two biggest payers in Medicare Advantage and all of those ACHP nonprofit member plans. When we looked at all of that risk adjustment data, what we found was that the largest national insurer in the program was collecting more than 32% more than all of those ACHP nonprofit local plans. The second had an almost 20% difference. There's just a little bit of common sense that comes into this. There is no way on planet earth that they have patients who are one-third sicker than our members. What's going on is very excessive coding over and over again, and it is unfortunately gaming the current system. So loopholes need to be tightened. In our view, the easiest way to do this is to go to a much simpler, much more streamlined approach, to get to a very fair and accurate risk adjustment.

HCI: Would those big plans say that they are following the rules and this accurately reflects how sick these patients are, so that they can identify the services they need and get them more care?

Connolly: Well, frankly, this is where we're so grateful to a lot of journalists who have been digging in and looking at that very question. And the sad reality is that very often, the coding is not tied to care delivery. Over and over again, there were some horrible stories about HIV diagnoses and no care being delivered. You often see some of the extra complexity around diabetes cases. So you have the ability within the diabetes category to say, with extra complications, with additional acuity, etc., etc., but still, that diabetic is not getting anything additional. Journalists and other investigators have found, for instance, you go into the home and you ask Mrs. Smith if she ever likes to have a glass of wine with dinner. She says, yes, I do. And the next thing you know, she is either recorded as depressed or having possible addiction issues.

You want people to have the most accurate diagnosis, so that they get the proper care. But it has to go together. That’s another reason why we like the payer-provider partnership model, because you're already connected in with the care delivery system, and it's much more seamless. Often they're using the same sort of data and technology systems, sharing information, all of that is just going to go toward really giving folks that appropriate care that they need and deserve.

HCI: If the regulations around this aren't changed by CMS, is there a possibility that the burgeoning use of AI could exacerbate this situation?

Connolly: Yes, absolutely, and that has already begun. And the sad truth is that the local nonprofit community health plan does not have the sort of capital sitting around to invest in as much technology or the newest AI, so they're being outgunned in that respect as well. It's troubling, because in some parts of the country, seniors are going to see less choice. There's going to be less competition, and you may start to see local players not be able to continue. That would be really unfortunate and we’re starting to see little inklings of that already in some parts of the country.

HCI: Have the folks at CMS signaled that they're aware of this and that they're planning to do something about it? Or with a new administration, are you in wait-and-see mode about what they might do about it?

Connolly: We have been constantly talking to them, and it has been a very good, constructive dialog. Thanks to some news coverage, thanks to MedPAC and GAO, there was this general sense in Washington, D.C., that Medicare Advantage seems to be overspending in the category of risk adjustment. There have been these big ballpark figures out there for the nation. But we were not aware of anyone that had done this kind of drill-down so that you can see the actual comparisons. 

When you see that difference, you may see it is not as easy as saying let's just cut all of MA across the board, because the problem is a little bit more complex than that. So with this analysis, we have been able to demonstrate to CMS and up on Capitol Hill more precisely what the exact problem is. I would say we are getting great interest in our proposals. 

I think there's a lot of appeal to streamlining and simplifying. I don't know that anyone is willing to go as far as we are, but we are confident that if you were to go this far or maybe even part way, you would reduce waste to the tune of billions of dollars, and you would simplify administrative burden for plans and also for clinicians who have to do all of the recording and all of the sign-offs on all of this, and you will keep a more competitive, fair market. So we are very optimistic that CMS is going to head in this direction.

HCI: I read that ACHP has an “MA for Tomorrow” initiative that has a range of proposals. Are there some other concepts that you could mention?

Connolly: MA for Tomorrow was first rolled out about 18 months or so ago, and it's built on several policy pillars within Medicare Advantage: quality, benchmarking, network adequacy, etc. A couple of the ideas have already been adopted, which is really unheard of in Washington, and terrific. Some of our reforms are around marketing to seniors — you know, those television commercials with famous football players. We also have had some success on broker compensation, and there have been some real loopholes that are getting tightened up. We then moved on to this particular analysis on risk adjustment within the last couple of months. We also have ideas on how to simplify Stars and make those less about process and more about health outcomes. Almost all of our proposals in MA for Tomorrow are structured in such a way that you don't need legislation passed. We know that that's extremely hard. Most of what we're putting forward, CMS or the administration can do through executive branch and and regulatory reform. 

HCI: What are some next steps in trying to convince CMS or Congress to address this? 

Connolly: Well, there are certainly members of Congress who are interested in this topic, so we spend a lot of time briefing them on our analysis and where we see opportunities to improve. I think we're one of the rare groups that says, yes, there are opportunities to improve. Most of them are in the defensive crouch and just say, ‘Don't touch my Medicare Advantage. Leave it alone.’ We try to be very honest with everyone and say, ‘No, actually it can be better. It can be higher quality. It can certainly be more affordable.’ 

We can start by taking these extra billions of dollars out of risk adjustment. That's either going to be a huge savings to the taxpayer or it's going to be reinvested into the program in the form of higher quality care. So that's a huge win for American taxpayers, in our view, and we should get on with it. CMS will have a couple of Medicare regulations that will come out in the next several months, and we're very optimistic that they will start adopting some of these ideas.