MMA and Risk Adjustment Change the Strategic Rules

The implementation of MMA and the transition to 100% Risk Adjusted (RA) payment are the most significant changes to the Medicare Managed Care program in the last 20 years. Operating a successful product under these systems will require a fundamental shift in a Health Plan’s strategy. Consider the following:

  • Medicare Fee-For-Service rates, which form the basis for Medicare Advantage (MA) rates include administrative cost levels of less than 1%. MA plans typically have administrative costs of between 8% and 12%
  • MA members with no RA factors will have RA payment levels approximating 25% of the RA capitation levels for most chronically ill members. Assuming that administrative costs are the same for all members, the portion of the RA capitation that is available for medical expenses will be approximately five times higher for chronically ill members
  • Most MA plans have experienced success managing costs for chronically ill members. Most plans have not had as much success managing episodic costs for “healthy” members
  • Plans have had different results managing costs for chronically ill members by disease groups

As a result, it is necessary for MA contractors to evaluate every aspect of their business and develop a strategy that will allow them to be successful in the future.

MMC 20/20, as the largest advisor to MA contractors, has substantial experience assisting Health Plans to develop and implement successful strategies. If you would like to learn more about these issues and how MMC 20/20 can assist your health plan, please contact one of our principals at (678) 775-1070 or