Stop the gaming. MA risk adjustment shouldn't be a 'a source of competitive advantage,' says a top Trump CMS official

On a day when health insurers were reeling from the Trump administration proposing minimal increases to Medicare Advantage (MA) rates next year and a tightening of risk adjustment rules, a top CMS official defended the risk adjustment changes while also saying the administration was fully supportive of Medicare Advantage.

“We do not want risk adjustment to be a source of competitive advantage,” said Chris Klomp, MBA, director of Medicare and deputy administrator of CMS, during a Paragon Health Institute webinar this afternoon. “If you’re better at it than me because you have more resources or are cleverer than me or you decided to focus all of your attention on doing that really well, perhaps in place of rendering the best possible care to the beneficiary, whom you are charged sacredly with stewarding and helping and serving, that is not the point of adjustment.”

Klomp added that if a beneficiary is coded as being sicker, “we want to see follow-on care that you helped get that beneficiary healthier.”

Later in the webinar, he said he wanted the Medicare program to “reward the people who provide the best care, most efficiently. Stop rewarding people who have a Ph.D. in policy who are better at navigating the complexity of Byzantine rules and regulations.”

CMS issued its “advance notice” of the proposed 2027 Medicare Advantage payment rate and the risk adjustment rules late yesterday. After a higher-than-expected hike of 5.06% in Medicare Advantage payment rates this year from last year and a narrative that the administration looked favorably upon Medicare Advantage, CMS is proposing a near-flat increase of 0.09% in 2027 from this year’s rates. Wall Street analysts who follow the publicly traded healthcare companies such as UnitedHealth Group and CVS Health that have large health insurance divisions were expecting the administration to propose an increase of between 4% and 6% in 2027. News of the much lower proposed increase sent the stock prices of the healthcare companies. UnitedHealth Group’s stock price fell by 19.61% today, a plunge that dragged down the Dow Jones Industrial Average with it.

Klomp forcefully rejected the notions that the administration had pivoted to being hostile to the Medicare Advantage plans, which have grown in popularity and now cover more than half of all Medicare beneficiaries. “In no uncertain terms, let me make clear that we continue to believe Medicare Advantage will and must play an important role in the future of Medicare,” Klomp said during the webinar, which was conducted as an interview of Klomp by Demetrios Kouzoukas, J.D., a Paragon Medicare expert who held the job that Klomp now holds during the first Trump administration.

Klomp said the administration wants to make sure that Medicare beneficiaries get the care they need and that care is provided in a cost-effective manner. He said that many Medicare Advantage plans strive to make beneficiaries healthier, but that “over the last several years, there has been a breach of trust. The American people have maybe had a little bit of lack of confidence that Medicare Advantage and that the government, who is overseeing, regulating and stewarding that program, are being the wisest stewards possible of that program and of our otherwise scarce taxpayer resources.

The gaming of risk adjustment has been the subject of numerous government and media investigations and reports and congressional hearings. Earlier this month, Sen. Charles Grassley, an Iowa Republican and chair of the Senate Judiciary Committee, issued a report based on documents submitted by UnitedHealth Group that charges the company uses “aggressive strategies to maximize these risk adjustment scores” and its “size, degree of vertical integration, and data analytic capabilities to stay ahead of CMS’s efforts to counteract unnecessary spending related to coding intensity.”

In 2024, The Wall Street Journal published an investigative article that reported that UnitedHealth Group used in-home health assessments to change diagnostic codes to increase Medicare Advantage payment.

A CMS summary of the advance notice says the agency is proposing to exclude diagnoses from its risk adjustment calculations based on “audio-only encounters” and “unlinked chart review records,” which the summary says is “diagnosis information not associated with a specific beneficiary encounter.” The summary says, “organizations may continue to submit diagnoses using unlinked CRRs [chart review records], however, those diagnoses will no longer be used for calculating risk scores.”

During the webinar, Klomp said modifications to the rules for unlinked chart reviews were designed to ensure that Medicare Advantage incentivizes behavior that improves beneficiary care and makes it more cost-effective. “It is not just about data fields. It’s not just about the linking,” he said.

Before inveighing against risk adjustment being turned into a source of competitive advantage, Klomp spoke about what he said was its original purpose, to prevent adverse selection against beneficiaries who might be sicker.

The rate increase and the risk adjustment changes are part of a proposed rule that is scheduled to be finalized no later than April 6. CMS is accepting comments on them through Feb. 25.