NOTE TO:   Medicare+Choice Organizations and Other Interested Parties

SUBJECT:   Announcement of Calendar Year (CY) 2000 Medicare+Choice Payment Rates

In accordance with section 1853(b)(2) of the Social Security Act (the Act), we are required to notify you of the annual Medicare+Choice capitation rate for each Medicare+Choice payment area for 2000, and the risk and other factors to be used in adjusting such rates. Attached is a spreadsheet containing the capitation rate tables for CY 2000, which include the rescaling factors that will be used with the risk-adjusted portion of payment in 2000. Payment rates reflect a 5.0 percent increase in the National Per Capita Medicare+Choice Growth Percentage. The increase in rates may vary per individual plan. For 2000, 63.1 percent (or nearly 2,000) of the county rates reflect the blended capitation rate under § 422.252(b) of the regulations. Other county rates reflect either the minimum percentage increase of 2 percent under § 422.252(c), or the "floor" amount of $401.61 for aged beneficiaries (or, if lower, the 1999 floor increased by the National Per Capita Medicare+Choice Growth Percentage for areas outside of the 50 States and the District of Columbia). County worksheet data are posted on the HCFA Web site (http://www.hcfa.gov/stats/hmorates/aapccpg.htm). County demographic tables will be sent under separate cover.

This announcement also provides a set of tables which summarizes many of the key Medicare assumptions used in the calculation of the national per capita Medicare+Choice growth percentage. The instructions you need to complete the Adjusted Community Rate Proposals (ACR) for contract periods beginning January 1, 2000, will be forthcoming, within the next week to 10 days.

Our January 15, 1999, the Advance Notice of Methodological Changes for the CY 2000 Medicare+Choice Payment Rates included a detailed description of the new risk adjustment methodology which will be in effect for 2000, and information on how risk adjustment will be implemented, including an explanation of the transition method that will be employed. Briefly, the approach the Health Care Financing Administration (HCFA) will use to meet the year 2000 mandate for risk adjusted payments will:

1. Be based on inpatient data;
2. Apply individual enrollee risk scores in determining fully capitated payments;
3. Utilize a prospective PIP-DCG risk adjuster to estimate relative beneficiary risk scores;
4. Apply separate demographic-only factors to new Medicare enrollees for whom no diagnostic history is available;
5. Apply a rescaling factor to address differences between demographic factors in the rate book and the new risk adjusters;
6. Use 6-month old diagnostic data to assign PIP-DCG categories (the "time shift" model, as opposed to using the most recent data and making retroactive adjustments of payment rates part way through the year);
7. Allow for a reconciliation after the payment year in order to account for late submissions of encounter data;
8. Phase-in the effects of risk adjustment, beginning with a blend of 90 percent of the demographically adjusted payment rate, and 10 percent of the risk-adjusted payment rate in the first year (CY 2000); and
9. Implement processes to collect encounter data on additional services, and move to a full risk adjustment model as soon as is feasible.

We received several comments on the risk adjustment methodology and the transition. This announcement includes responses to these comments. The announcement also includes the final factors to be used in the risk adjustment methodology.

Section 1853(a)(1)(B) of the Act requires that Medicare+Choice monthly payments for ESRD enrollees be reduced by an amount equivalent to $.50 pre dialysis. Effective with January 1999 payments, a withhold of $5.25 per month for each ESRD enrollee (which is equivalent to $.50 per service) has been applied to the Part B ESRD rates. This withhold of $5.25 per month for each ESRD enrollee will continue to be applied in 2000.

Questions on the capitation rate tables and the National Per Capita Medicare+Choice Growth Percentage can be directed to Sol Mussey at (410) 786-6386. Questions on the submission of ACR proposals can be directed to Phil Doerr at (410) 786-1059. Questions on the risk adjustment methodology can be directed to Jim Hart at (410) 786-4474.

Enclosures