Comments on the 2022 Notice of Benefit and Payment Parameters

Editor's note:

This analysis is part of the USC-Brookings Schaeffer Initiative for Health Policy, which is a partnership between Economic Studies at Brookings and the University of Southern California Schaeffer Center for Health Policy & Economics. The Initiative aims to inform the national health care debate with rigorous, evidence-based analysis leading to practical recommendations using the collaborative strengths of USC and Brookings.

Matthew Fiedler and Timothy Layton provided comments to the Centers for Medicare and Medicaid Services on the 2022 Notice of Benefit and Payment Parameters. Their letter comments on aspects of the proposed rule related to risk adjustment.

Fiedler and Layton recommend that CMS finalize its proposal to introduce severity-HCC-count variables into the risk adjustment model but not finalize its proposal to adopt a two-stage procedure for estimating the risk adjustment model coefficients. Furthermore, they recommend that CMS reconsider its goal of reducing underprediction for enrollees with low predicted spending. They argue that changes along those lines would actually worsen market outcomes by reducing the quality of the coverage available to consumers and by threatening the market’s ability to support robust insurer competition. The experts recommend that if CMS nevertheless does seek to reduce underprediction for enrollees with low predicted spending, it should do so in a way that does not worsen overall model fit, which CMS’ proposed two-stage procedure is guaranteed to do.

Fiedler and Layton also recommend that CMS eliminate the state option to reduce risk adjustment transfers by up to 50% and, failing that, reject Alabama’s request to implement a 50% reduction in risk adjustment transfers. They argue that current risk adjustment transfers are most likely already too small and, thus, that scaling down transfers would worsen market outcomes. Read the experts’ full letter here.

The authors did not receive financial support from any firm or person for this article or from any firm or person with a financial or political interest in this article. They are currently not an officer, director, or board member of any organization with an interest in this article.