CMS proposes new rules for risk adjustment validation programs: 3 things to know

CMS released a proposed rule May 29 to change the methodology of HHS' risk adjustment data validation, or RADV, program.

HHS' risk adjustment program provides payments to health insurers who have higher-risk enrollees who are often more expensive to cover. The payments are funded through a collection of charges from health insurers with lower-risk enrollees. The RADV program aims to validate the accuracy of insurer-submitted data that is used to calculate the amount of funds transferred among health insurers based on the risks of their members. 

Here are three things to know: 

1. CMS wants to refine the RADV program's error rate calculation. The error rate calculation is the methodology CMS uses to decide adjustments to health insurer's previously calculated risk adjustment scores and transfers based on RADV results. 

2. There are three changes CMS is proposing for the error rate calculation: 

  • The agency wants to modify the way it groups medical conditions in RADV within the same hierarchical condition category coefficient estimate groups in risk adjustment. 
  • CMS is proposing changes to reduce the magnitude of risk score adjustments for health insurers that are close to the threshold used to determine whether a health insurer is an outlier.
  • The agency also wants to modify the error rate calculation in cases where an outlying health insurer with a negative error rate also has a negative failure rate. 

3. CMS also is proposing to apply RADV results to adjust the risk scores and transfer amounts for the benefit year that's being audited, not the subsequent year as is now the case.

Find the full list of proposals here

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