More on risk adjustment

This is a follow-up from my Saturday post on the risk adjustment freeze. There have been two major updates from the Center for Medicare and Medicaid Services (CMS).

1) CMS press release

On February 28, 2018, the United States District Court for the District of New Mexico issued a decision invalidating use of the statewide average premium by the Center for Medicare & Medicaid Services (CMS) in the risk adjustment transfer formula established under section 1343 of the Patient Protection and Affordable Care Act for the 2014 – 2018 benefit years, pending further explanation of CMS’s reasons for operating the program in a budget neutral manner in those years. The ruling prevents CMS from making further collections or payments under the risk adjustment program, including amounts for the 2017 benefit year, until the litigation is resolved.

It is a sign that the Trump Administration is not interested in making things work well or easily on the Exchanges but if it is few weeks this is not a major meteor of death but it is bad faith as Nick Bagley at the Incidental Economist outlines:

the court’s order remains in place. And so CMS says that the ruling “prevents [the agency] from making further collections or payments under the risk adjustment program, including amounts for the 2017 benefit year, until the litigation is resolved.”

That’s wrong. The truth is that the Trump administration has lots of options. It’s just choosing not to exercise them.

First and foremost, CMS could have moved quickly to adopt a rule to address the judge’s concerns. Indeed, it’s already done that for the 2019 risk adjustment year, where it proffered precisely the sort of explanation that the judge says he’s looking for. For prior years, CMS could have issued an interim final rule (i.e., one that took immediate effect) offering the same explanation for prior plan years, after which it could have solicited notice and taken comments. With that interim final rule in hand, it could have sought to vacate the district court’s decision.

Second, the Justice Department could have filed a notice of appeal (even while the motion for reconsideration is pending) and sought a stay pending appeal, first from the district court and, failing that, from the Tenth Circuit or even the Supreme Court. That’s what I expected the Justice Department to do: it’s a completely natural move for a litigator. And this is precisely the sort of case in which a stay would be appropriate. The district court’s decision is weak, the rule’s deficiencies can be easily addressed, and allowing the decision to take immediate effect would be immensely disruptive.

2) CMS released the 2017 Risk Adjustment payment flow report this morning

The critical question that I’ve been making when I’ve been talking with press over the weekend and this morning is how long is the suspension. If this is a couple of weeks or even a few months, I am not too worried.

This is a normal operational report. Insurers can use these numbers to book their liabilities and assets. Actuaries and insurers will use these numbers to modify their 2019 rate requests because those requests are partially informed by 2017 risk adjustment because that informs the morbidity of the covered population.

Right now, this is more of a possible problem than an actual problem. It is worth monitoring.