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Predicting How Plans Should Prepare After CMS Final Rate Announcement

Analysis  |  By Laura Beerman  
   April 11, 2022

CMS' final 2023 Rate Announcement included risk adjustment and health equity surprises.

Medicare Advantage (MA) plan rates for 2023 are final, with the impact and predictions for health plans now emerging. Avalere highlighted its takeaways in its 2022 Expert Webinar Series: "CMS Final Rate Announcement: How Should Plans Prepare?"

The Announcement—otherwise known as the Medicare Advantage (MA) Capitation Rates and Part C and Part D Payment Policies­—also included plan risk adjustment and coding intensity; health equity; Star Ratings and overall quality; and end stage renal disease (ESRD) guidance. For each issue, HealthLeaders has analyzed Avalere's key quotes, surprises, and predictions to help payers prepare for another wait-and-see pandemic year.

The big picture

"This year's rule reads more like a first-year announcement," noted Avalere Managing Director Revenue Sean Creighton. This refers to the relative lack of risk and other adjustments that plans were expecting.

"The major lever that everyone expected to be pulled was taken off the table, so I can't describe the Final Announcement as anything but positive, but it depends on what happens with legislation," Creighton added.

Federal legislation could impact plans beyond the rate notice, along with the decisions CMS has left to health plans and the additional technical levers it can pull via other regulations. About these levers Creighton noted that while CMS has many, they must apply them while assessing beneficiary impact—a kind of Hippocratic Oath for payment policy.

Three top-line payer recommendations for next year were:

  1. Keep COVID-19 central to strategy (even after the public health emergency ends) as it pertains to care access, delivery, and quality measurement.
  2. Look for legislation that addresses what the Rate Announcement didn't.
  3. Expect more specificity related to equity, including closer collaboration between CMS and the Center for Medicare & Medicaid Innovation (CMMI).

Coding intensity and plan risk adjustment

"There was a possibility of significant downward rate adjustments, and they weren't there," noted Creighton.

While CMS did not change how it calculates risk scores, the Rate Announcement and other CMS rules signal the agency is assessing its risk methodology across plan types. It must also consider the role of social determinants of health (SDOH) in risk adjustment as well as long-standing concerns over MA plan upcoding practices that increase reimbursement by teasing out patient risk.

In addition to the lack of any real rate adjustment, CMS also did not tinker with its normalization factors and coding intensity adjuster. As a result, Creighton adds: "There is a huge risk of CMS doing something on coding intensity adjuster next year; they haven't done anything for years, even though MedPAC has been beating the drum."

Creighton said CMS may be leaving coding intensity as a legislative activity as it tries to leverage other changes related to benefits and drug costs.

Star Ratings and quality

Some 90% of MA plans had a 4+ Star Rating in 2021. These gains rode the back of pandemic losses and anomalies. Continued COVID-19 impacts are an area of concern, including the CAHPS response rates and results that will factor heavily in CMS' new patient-experienced-focused Stars program.

Related to CMS' broader quality approach, Avalere Associate Principal Taylor Musser noted the intent to not only stratify but evaluate measures based on social risk, in part to create a Health Equity Index that would impact a plan's overall Star Rating. The Rate Announcement also addressed SDOH screenings, manual versus electronic measure reporting, and CMS' intent to "begin sharing confidential stratified reports with contracts this spring."

Health equity

Quality and equity were intertwined in the Rate Announcement takeaways, with Avalere analysts surprised at the level of health equity program detail but advising that CMS will introduce health equity measures "in a fairly careful way."

Creighton said that current risk models "already take into account" some aspects of health equity and SDOH. He added that MLR may be a better place to look for payment-equity gains (e.g., shifting equity outreach costs to clinical). 


One plan year into MA ESRD eligibility, CMS finalized two expected changes—risk modeling and network adequacy­—but left a widely desired rate change off the table. "Leaving it to the plans for now" was the ESRD theme, at least for now.

Creighton noted: "If I had to look at the tea leaves, there is probably a belief at CMS … that plans can bring down costs without doing damage." Explaining CMS' rationale, he cited the looser network adequacy rules and plans' power to negotiate with providers, including large dialysis providers.

Case management was the other ESRD hot topic, yielding some of the strongest warnings and predictions for plans.

“The normalization factor aspect was huge and could move the dime next year, also the intensity adjuster.”

Laura Beerman is a contributing writer for HealthLeaders.


While meeting many expectations, CMS' 2023 Rate Announcement offered surprises on rate adjustment and health equity.

Other key areas included Star Ratings and end stage renal disease.

A recent Avalere webinar highlighted what was left on the table and how much health plans must figure out on their own.

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