The Centers for Medicare and Medicaid Services (CMS) Hierarchical Condition Categories (HCC) model plays a crucial role in risk adjustment for Medicare Advantage (MA) and other health plans. CMS recently released Version 28 (V28) of the CMS-HCC model, which brings several updates that Medicare Advantage (MA) plans need to understand to stay compliant and ensure accurate payments. 

What is CMS-HCC? 

The CMS-HCC model is a risk adjustment system that CMS uses to predict healthcare costs for Medicare Advantage beneficiaries. It’s a method for adjusting payments based on the health status of beneficiaries. This system helps CMS ensure that health plans are adequately compensated for covering individuals who are sicker and likely to require more medical care. 

Why CMS-HCC Matters: 

1. It adjusts the financial risk of health plan members and pays the plans according to the those health risks.
2. It incentivizes care by encouraging health plans to manage and treat people with chronic and severe conditions.
3. It also ensures that those plans that provide health care to high-risk patients are compensated fairly. 

Key Points to Note: 

• Risk Adjustment Mechanism: The CMS-HCC model calculates a “risk score” for each individual based on their demographic information (age, gender, disability status, Medicaid eligibility) and medical conditions (captured via ICD-10-CM codes). 
• Payments Tied to Health Status: Plans that enroll high-risk individuals (e.g., diabetics, and heart failure patients) receive higher payments because these individuals require more care. 

Growth in Medicare Advantage Enrollment 

Medicare Advantage (MA) enrollment has grown rapidly over the past few years, increasing the relevance and impact of CMS-HCC on the healthcare industry. As of 2024, more than 31 million Americans are enrolled in Medicare Advantage plans, accounting for nearly 50% of the total Medicare population. This highlights the growing importance of risk adjustment models in ensuring health plan payments remain fair and balanced. 

Year	Medicare Advantage Enrollment (millions)	Percentage of Total Medicare Population
2020	24.1	39%
2021	26.7	42%
2022	28.4	46%
2023	31.0	49%