2023 Medicare Advantage Risk Adjustment Final Ruling

Apr 05, 2023

Amanda Diaz
Principal, PwC US
Derek Skoog
Principal, PwC US
Mike Lee
Managing Director,
Thom Bales
Principal, PwC US


The Centers for Medicare & Medicaid Services (CMS) unveiled a final rule that details how it will handle Risk Adjustment Data Validation (RADV) audits to determine whether Medicare overpaid Medicare Advantage (MA) plans. The rule will do away with the Fee-for-Service adjuster and apply the extrapolation to the 2018 plan year, which could result in collecting $479 million in overpayments from plans, according to CMS. The agency estimates that from 2023 through 2032, the plan will recover an extra $4.7 billion from insurers through the new audit methodology. The RADV final rule can be accessed at the Federal Register at Federal Register Documents Currently on Public Inspection.

What this means

Prior to this ruling, CMS included a “fee-for-service adjuster” that set a permissible level of payment errors based on a similar rate in fee-for-service. This adjuster limited the amount that CMS can recoup for overpayments. Payers have argued that without the FFS adjuster, plans will be held to an impossible burden of zero errors in their claims. The Alliance of Community Health Plans said in a statement that the ruling will create a huge burden on smaller regional plans while AHIP said in a statement that the rule is unlawful and will hurt seniors. Conversely, the somewhat limited scope of extrapolation may mitigate the overall impact of the final rule; however, CMS has not formally adopted a specific methodology – opening the door to future adverse changes.

PwC views

MA’s popularity continues to grow, counting more than 30 million beneficiaries. Having the right policies and capabilities that tie to CMS’ regulatory intent is critical to long-term viability. PwC can help payers understand the ramifications of the new RADV methodology, estimate the potential impact of future RADV audits, and improve clinical documentation and risk analytics capabilities. We can also educate providers on accurate coding methodologies and help drive effective strategies that continue to optimize their MA business while preparing for regulatory change.

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