Nearly a year has passed since Donald Berwick, M.D., and Rick Gilfillan, M.D., opened a full-frontal attack on Medicare Advantage (MA), in their September 30, 2021 blog in Health Affairs online entitled “Medicare Advantage, Direct Contracting, And the Medicare ‘Money Machine.’” That blog, which was actually the second of a two-part blog set, but was the one that captured nearly all the public attention, and indeed, it created a firestorm in federal healthcare policy circles.
As we reported in a news article on that date, Dr. Berwick, who had served as Acting Administrator of the Centers for Medicare and Medicaid Services (CMS) from July 2010 to December 2011, and Gilfillan, who had served a stint as Deputy Administrator of the Centers for Medicare and Medicaid Services and Director of the Center for Medicare and Medicaid Innovation from 2010 to 2013, had “criticized in the very strongest terms the new Direct Contracting program under Medicare, the ongoing evolution of the Medicare Advantage program, and some core aspects of the ways in which accountable care organizations (ACOs) are managed in the Medicare Shared Savings Program (MSSP).” They essentially asserted that any financial incentive was fundamentally wrong and damaging to the ideals of the Medicare program and of true value-based contracting.
A number of industry leaders jumped in to make their points, among them Don Crane, who at that time was president and CEO of APG, America’s Physician Groups, an association that represents many of the most advanced multispecialty physician groups in the country. As we reported last September 30, “APG’s Crane wrote in his letter to HHS Secretary Becerra on Thursday that “In their materials, Drs. Berwick and Gilfillan suggest that CMS replace the HCC RAF [risk adjustment factor] scoring process in two years and begin a process to develop an approach that does not rely on provider reporting. They claim this is necessary because of significant MA “overpayment” they attribute to risk score inflation through risk adjusted coding. Risk adjustment,” Crane emphasized, “was designed to estimate a beneficiary’s future health care costs and align compensation with acuity and severity of disease and the related costs of care as complex patients require the use of more resources. Risk adjustment encourages the enrollment of the sickest patients, and those in a lower socioeconomic status and is widely used in MA and the Medicare Shared Savings Program (MSSP) to appropriately risk adjust quality, expenditure benchmarks, and cost metrics, allowing for a more precise measurement of performance. Alignment of payment and performance goals rewards coordinated care and enhances the achievement of improved health and care among all individuals.”
Fast-forward to summer of this year, and last month, another team of policy leaders has leaped into the discussion. In their July 8 opinion article in Health Affairs online, entitled “Making The Right Diagnosis: A Response To Berwick And Gilfillan,” Jeffrey Kang, M.D., M.P.H., Ian Duncan, Ph.D., and Nhan Huynh, Ph.D., walk their readers through a complex set of propositions, concluding that Berwick and Gilfillan, in their view, miss the point altogether. As they write, “The subsequent debate on the flaws or virtues of MA and capitation shifts the focus from the underlying problem, relatively higher payments in MA versus TM [traditional Medicare] and their cause, and thus fails to provide a meaningful solution. If the relatively higher payments were to go away then MA plans would compete with TM on a level playing field, the original Congressional intent for the two programs. We will therefore respond to the coding and risk adjustment issues raised in the original Berwick and Gilfillan posts, in particular focusing on the root cause of the higher payment, the rationale for disease-based risk adjustment, and a potential solution.”
Indeed, these experts write, “We agree that there is evidence for higher payment to MA plans relative to TM. What is unclear is whether this is due to an overcoding problem in MA or an undercoding problem in TM. The incentive in MA is for physicians to code comprehensively for diagnosis (using International Classification of Diseases (ICD) codes, specifically ICD-10 codes); the incentive in TM is for physicians to code procedures (using Current Procedural Terminology (CPT) codes).”
These authors have significant credentials to bring to the discussion. The article points out that “Jeffrey Kang, M.D., M.P.H., was Chief Medical Officer at the Centers for Medicare and Medicaid Services (then the Health Care Financing Administration) when the original disease-based risk adjustment model, Hierarchical Condition Categories (HCC), was developed. He is currently the CEO of WellBe Senior Medical, a home-based geriatric medical group caring for frail, disadvantaged, complex Medicare Advantage beneficiaries. Ian Duncan, Ph.D., FSA FIA FCIA FCA CSPA MAAA, is Adjunct Professor of Actuarial Statistics at the University of California Santa Barbara and president of Santa Barbara Actuaries Inc., a provider of healthcare predictive modeling and actuarial services. Dr. Duncan holds a graduate degree in economics from Balliol College, Oxford and a Ph.D. in Statistics from Heriot-Watt University, Edinburgh, Scotland. He is a fellow of a number of actuarial societies. He is active in public policy and healthcare reform and served on the board of directors of the Commonwealth of Massachusetts Health Insurance Connector Authority from 2007-2014. He was also a member of the board of the Society of Actuaries (2012-5) and currently chairs the SOA’s Research Executive. And Nhan Huynh, Ph.D., is a Consultant at Santa Barbara Actuaries Inc.”
Kang, Duncan, and Huynh write that “The important purpose of disease-based risk-adjustment is to appropriately pay MA plans for members’ “burden of disease.” Instead of abandoning disease-based risk adjustment, policy makers should deal with the underlying incentives related to coding. The correct short-term solution is to adjust for relatively higher coding intensity in MA. In the medium term, instead of abandoning disease-based risk-adjustment in MA, CMS should introduce disease-based risk adjustment in TM. This would (a) not only address the coding intensity differences between MA and TM but (b) also more appropriately direct resources to providers who are caring for sicker patients within TM. Then, in the long run,” they write, “once the two programs are on even footing (i.e., with similar incentives for capturing diagnosis codes), it would be appropriate to look at improving risk adjustment in both programs to account for patient differences, for example in both functional status and social determinants of health (SDOH).”
The authors look directly at the contention of Berwick and Gilfillan that Medicare Advantage inevitably encourages diagnostic code creep, with the implication that correct diagnostic coding occurs in traditional Medicare. But, as Kang, Duncan, and Huynh note, traditional Medicare explicitly reimburses based on work units rather than on patient complexity, asserting that that reality inherently promotes distortions. They write that, “For example, let’s take a patient who has three chronic diseases: CHF [congestive heart failure], diabetes with nephropathy, and peripheral vascular disease. Let’s say the patient is seen three times in a year. In MA, this patient would have all three diagnoses coded over three visits, but the same CPT code for two intermediate and one brief visit could be used for the three visits. Conversely, in TM the same patient would have one comprehensive and two intermediate visits coded but only the diagnosis of diabetes submitted. In MA the physician has an incentive to capture all three diagnoses including complications (diabetes with nephropathy attracts a higher HCC score than diabetes by itself) accurately. In TM the physician is paid based on CPT codes regardless of what diagnosis is recorded. Thus, it is more likely that the same patient’s diagnosis codes are under-coded in TM versus over-coded in MA.”
After walking readers in great detail through the intense complexity involved in comparing incentives in Medicare Advantage and traditional Medicare, the authors write that, “In the short run, rather than abandoning disease-based risk adjustment in MA, which would return us to a world where MA plans are incentivized to “skim the healthy” and plans that experience adverse selection would be underpaid, we believe that CMS could use the tools it has in place to deal with coding intensity issues and continue to move to physician-reported encounter data.” And, they write, “In the medium term, rather than throwing out the MA disease-based risk adjustment approach, CMS should continue down the path marked by the CMS Innovation Center of using disease-based risk adjustment approaches in Medicare FFS. We can imagine a world where it will not matter whether physicians are practicing in FFS or managed care or both; all physicians will have incentives to code diagnoses accurately and completely, and then care for all the conditions of the complex patient, with reimbursement appropriate to the patient’s disease burden.”
