This post is parenthetical to the series entitled, A Moment of Silence for the Sunsetting MRA Program.
Although Medicare Advantage (MA) and the traditional Medicare program cover the same patients (called members in the former and beneficiaries in the latter), the operation of both payment systems is as different as night and day. The idea behind Medicare Advantage, or Medicare Part C, is that it’s an alternative to traditional Medicare and shifts the financial risk of medical care for those beneficiaries to a third party (the Humanas, AvMeds, etc.) and away from the federal government.
We’re going to limit our discussion to physician care for this explanation.
The Medicare program pays physicians via fee-for-service, which is literally a fee for every service performed. The payment for each service is determined by the CPT (Current Procedural Terminology) code® as listed on the Medicare Physician Fee Schedule based on the county where the services are rendered. Take, for example, CPT code 99213, a low-level evaluation and management visit; payments range by region from $66.49 (FL-99) and $68.82 (FL-03) to $71.85 (FL-04).
The Medicare program bases payment on medical necessity, so providers link diagnosis codes [from the International Classification of Diseases, 10th Edition (ICD-10)] to the CPT code(s) when they submit a claim. Each CPT codes needs only one ICD-10 code to be processed for payment, although more than one may be reported by the biller.
The Medicare Advantage world is very different. MA plans are paid a flat payment by CMS that covers all of the costs of care the member incurs. The formula to calculate this flat payment includes factors for demographics, such as age, sex and location, but the predominant driver of the payment is the member’s medical profile as expressed in diagnoses, or ICD-10 codes. MA payments are highly impacted by the number of medical conditions in the member’s profile, which are assigned to hierarchical condition categories (HCCs), from the CMS-HCC model.
Conditions are mapped to an HCC when they have sufficient predictive value for future medical costs. Although MA physicians also report a CPT code for each service, when providers are paid via capitation, the CPT code doesn’t impact the payment amount. The medical conditions do. In summary, physician payment in the traditional Medicare program is based on CPT codes with ICD-10 codes used only to prove coverage and medical necessity. Physician payment in MA is capitated and based on ICD-10 codes, and CPT codes are largely irrelevant. Yet CMS is bent on squeezing the MA risk adjustment paradigm into the FFS framework, despite the disparate incentives and rules.