Under the complex changes, set to roll out over the course of the next three years, CMS will enact what it calls “commonsense updates” to its payment model.
This will include transitioning to using diagnosis codes that align with the rest of the health care system and implementing new data, which the agency says is more accurate at predicting health care costs.
CMS pays private contracted insurers, known as Medicare Advantage Organizations (MAO), to provide Medicare services to their customers. These groups receive a set rate per beneficiary every year based on how likely they are to use health care services.
The more diagnoses a patient has, the higher the risk is assumed and the higher the payments to the organization for that individual.
MAOs have been criticized in the past for “upcoding” their patients, making them seem sicker on paper than they actually are by obtaining more diagnoses of conditions and thus more payments from the federal government.
CMS will be removing 2,000 diagnosis codes, which the agency says are no longer related to conditions for which Medicare costs can be predicted.
The health insurance industry has lobbied against these changes, running ad campaigns claiming the federal government is cutting Medicare funding.
Federal contracts account for large portions of these companies’ revenue and the proposed changes represent billions in reduced payments.
