Risk Adjustment in Times of Uncertainty

The healthcare landscape is currently rife with uncertainty. Impending financial cuts to Medicaid and ACA plans, increased scrutiny on Medicare Advantage programs, and rising medical costs are creating financial headwinds for payers. These challenges affect all sectors—providers, payers, and most importantly, patients.

Policy and Funding Uncertainty

A major concern is the absence of a fiscal year 2026 (FY26) federal budget and the looming possibility of a government shutdown. Healthcare programs face substantial funding reductions due to the proposed One Big Beautiful Bill Act. Estimates suggest that up to 15 million individuals may lose coverage, and Medicaid could see budget cuts of up to $863 billion over the next decade. With or without insurance, healthcare services will always be in demand, which will likely lead to increased uncompensated care and financial strain on providers, especially in rural and/or underserved areas.

Major payer organizations like UnitedHealthcare, CVS Aetna, and Elevance Health have announced reductions in Medicare Advantage and Prescription Drug Programs (PDPs) or are exiting certain regional markets entirely. This creates barriers for patients relying on these programs. With the Annual Enrollment Period (AEP) approaching, patients may face unexpected challenges accessing coverage and provider networks. Although CMS’ fast-tracking of MA risk adjustment data validation (RADV) audits appears temporarily stalled, audits are expected to resume soon given the focus on curbing inappropriate spending.

Positive Developments

Despite these challenges, there are encouraging signs within the industry. The 2024 CMS MSSP financial performance results highlight the program’s viability:

• Total Medicare Savings: MSSP Accountable Care Organizations (ACOs) generated $2.4 billion in net savings to Medicare in 2024
• Shared Savings Earned: 75% of ACOs earned shared savings totaling $4.1 billion—the highest since the program’s inception
• Losses: Only 16 out of 476 ACOs incurred losses totaling $20.3 million

Legislative Proposals

The ongoing congressional negotiations on the federal budget include proposals to restore safety net healthcare funding. Key proposals include expanded support for struggling rural facilities through rural hospital flexibility grants, an additional $1.85 billion in funding for community health centers, and $1.36 billion in spending to strengthen the healthcare workforce.

Strategic Focus Areas in Risk Adjustment

In the face of all this uncertainty, it is essential for healthcare organizations to strengthen their operations wherever possible—and risk adjustment is a great place to start.

Adapting to CMS-HCC Model V28

• Coding Optimization: Ensure accurate documentation of diagnoses that map to the new HCCs, especially with ~2,100 fewer ICD-10 codes now eligible
• RAF Score Management: Monitor the impact of constrained coefficients and recalibrate forecasting models to reflect lower risk scores
• Provider Education: Continue focused education and feedback to clinicians on V28 nuances, including precise documentation of chronic conditions

Improving Data Quality and Interoperability

• Real-Time Data Exchange: Invest in platforms that support timely sharing of clinical data across providers and payers
• AI-Powered Audits: Use machine learning to detect coding gaps, upcoding risks, and missed opportunities for risk capture
• Social Determinants of Health (SDOH): Integrate SDOH data to improve risk stratification and equity-based adjustments

Enhancing Member Engagement and Retention

• Annual Wellness Visits: Promote preventive care visits to capture chronic conditions early and maintain continuity of care
• Targeted Outreach: Use predictive analytics to identify high-risk members and engage them with personalized care plans

Preparing for 2026 and Beyond

With 2026 just months away, organizations must proactively prepare for the new calendar year, especially those participating in value-based or accountable care models. Engage provider networks and emphasize comprehensive patient assessments and precise clinical documentation and coding. If AI technology is being used to supplement or even replace human coding, implement robust validation and auditing protocols to mitigate risks associated with coding intensity.

Staying focused, prioritizing operational agility, and adopting a strategic approach can help organizations navigate an uncertain landscape—and emerge stronger on the other side.