Cut through the noise, find the signal: Intelligence for serious healthcare leaders
How Medicare Advantage, ACOs and ACA plans get paid for how sick their members are — and where the scrutiny is heading.
1. Diagnosis Capture Jan 1 – Dec 31 (Service Year)
Providers document diagnoses during patient encounters. Every face-to-face visit generates ICD-10 codes that will map to HCCs.
Who cares: Providers, MA plans, coding teams
2. Data Submission Ongoing + Jan deadline
MA organizations submit encounter data to CMS via the Encounter Data System (EDS). Diagnoses must meet MEAT criteria (Monitored, Evaluated, Assessed, Treated).
Who cares: Health plan RA teams, compliance
3. Risk Score Calculation Mid-year (initial) + following year (final)
CMS maps ICD-10 codes to HCCs, applies hierarchies, calculates demographic + disease factors, produces Raw Risk Score per beneficiary.
Who cares: Actuaries, finance teams
4. Normalization Applied to payment year scores
Raw scores divided by FFS normalization factor to keep average risk score near 1.0, accounting for year-over-year growth in FFS risk scores.
Who cares: Plan actuaries, CFOs
5. Coding Pattern Adjustment Applied to payment year scores
5.9% mandatory reduction applied to all MA risk scores per ACA statutory requirement. Adjusts for MA plans coding more intensely than FFS providers.
Who cares: Plan finance, government affairs
6. Blending (during transitions) As applicable
During model version transitions (e.g., V24 to V28), CMS blends risk scores from old and new models at specified percentages. Fully phased in for 2026.
Who cares: Actuarial modeling teams
7. Payment Monthly throughout payment year
CMS pays MA plans monthly capitation = county benchmark × plan bid ratio × enrollee risk score (adjusted). Higher RAF = higher payment.
Who cares: CFOs, plan executives
8. RADV Audit 2–5 years after payment year
CMS selects contracts for audit, requests medical records for sampled beneficiaries, validates that submitted diagnoses are supported. Unsupported codes trigger repayment.
Who cares: Compliance, legal, coding directors
9. Recalibration Every several years
CMS updates model with more recent data, reclassifies HCCs, adjusts condition weights. Major recalibrations include V22→V24→V28 transitions.
Who cares: Strategy, all stakeholders
| Phase | Timing | Key difference |
|---|---|---|
| Diagnosis Capture | Concurrent year | Same-year diagnoses used (not prior year) |
| Data Submission | Via EDGE servers | Issuers submit to EDGE, not EDS/RAPS |
| Risk Score Calculation | Annual | Applies plan metal-level actuarial value factors |
| Risk Transfer | Annual settlement | Budget-neutral: money flows between issuers within same state market; does NOT come from CMS |
| Audit | HHS-RADV | Separate from MA RADV; different methodology |
CMS-HCC Risk Score Calculation
Raw Risk Score = Demographic Factor + Σ(HCC Factors) + Σ(Disease Interaction Factors) Adjusted Risk Score = (Raw Risk Score / Normalization Factor) × (1 – Coding Pattern Adjustment)
V24/V28 Blending (Historical Reference)
2024: Blended Score = (0.67 × V24 Score) + (0.33 × V28 Score) 2025: Blended Score = (0.33 × V24 Score) + (0.67 × V28 Score) 2026: Score = 100% V28 Score (no blending)
MA Plan Payment (Simplified)
Monthly Capitation = County Benchmark × Plan Bid Ratio × Enrollee Risk Score
MSSP Benchmark Risk Adjustment
Risk-Adjusted Benchmark = Historical Benchmark Expenditures / Average Risk Score
ACA Risk Transfer Formula (HHS-HCC)
Risk Transfer = Plan Average Risk Score – Market Average Risk Score (adjusted for allowable rating factors, plan metal level, geographic cost factors, induced demand)