This amount is based in part on a plan’s bid, which is its projection of the  revenue it requires to provide a beneficiary with services that are covered  under Medicare FFS, and a benchmark, which CMS generally calculates  from average per capita Medicare FFS spending in the plan’s service  area and other factors. Overall Payments to MA Plans Likely Were Lower Due to VA’s Provision of $2.4 Billion in Services to MA-Enrolled Veterans, but Appropriateness of Resulting Payments Still Uncertain

VA provided about $2.4 billion in Medicare-covered inpatient and  outpatient services to the 833,684 MA-enrolled veterans in fiscal year  2010. As  a result, the benchmark would be lower and, in turn, payments to MA  plans would also be lower. Risk scores—VA’s provision of Medicare-covered services may result  in lower risk scores because, like benchmarks, they are calibrated  based on Medicare FFS spending for beneficiaries with specific  diagnoses identified by Medicare. Although VA spending on Medicare-covered services likely results in  lower CMS payments to MA plans, the extent to which these payments  reflect the expected utilization of services by the MA population remains  uncertain. Specifically, payment amounts may still be too high or could  even be too low, depending on the utilization of VA services by veterans  enrolled in MA plans and veterans enrolled in Medicare FFS. For example, payments to MA plans may be too high if veterans  enrolled in MA receive a greater proportion of their services from VA  relative to veterans enrolled in Medicare FFS. In contrast, payments to MA plans may be too low if veterans enrolled  in MA receive a lesser proportion of their services from VA relative to  veterans enrolled in Medicare FFS. Data on veterans’ use  of services through Medicare FFS and VA health care are available from  CMS and VA, respectively. CMS agreed with the  recommendation, but as of August 2015, had not completed all steps  needed to validate the encounter data. CMS Does Not Have the VA Diagnosis and Utilization Data That May Improve Its Methodology for Calculating Adjustments to MA Payments

CMS determined that no adjustment to 2010 through 2016 MA payments  was needed to account for the provision of Medicare-covered services by  VA, but used a methodology that had certain shortcomings that could  have affected MA payments. To determine  whether an adjustment was needed, CMS obtained data from VA  showing veterans who are enrolled in VA health care and Medicare FFS  (that is, enrollment data). When CMS updated its 2009 study to determine whether an MA payment  adjustment was needed for 2017, it used the same methodology, albeit  with more recent data. Specifically, CMS cannot account for services provided by and diagnoses  made by VA. Officials said that they did not intend to incorporate VA  utilization and diagnoses data into their analysis because they did not  currently have such data and that incorporating these data would  introduce additional uncertainty into the analysis. Depending on the mix of veterans and  nonveterans enrolled by individual MA plans, this could result in some  plans being paid too much and others too little. Federal standards for internal control call for management to have the  operational data it needs to meet agency goals to effectively and  efficiently use resources and to help ensure compliance with laws and  regulations. Therefore, if CMS determines that an adjustment to the  benchmark to account for VA spending is needed and the adjustment  results in payments to MA plans that are too high for veterans, additional  adjustments to payments to MA plans could be necessary. While CMS is required to adjust MA  payments to account for VA spending on Medicare-covered services, as  appropriate, the agency determined that no adjustment to the benchmark,  which is based in part on per capita county Medicare FFS spending, was  necessary for years 2010 through 2016. Recommendations for Executive Action

We recommend that the Secretary of Health and Human Services direct  the Administrator of CMS to take the following two actions:
Assess the feasibility of updating the agency’s study on the effect of  VA-provided Medicare-covered services on per capita county  Medicare FFS spending rates by obtaining VA utilization and  diagnosis data for veterans enrolled in Medicare FFS under its  existing data use agreement or by other means as necessary. Appendix I: Scope and Methodology

This appendix describes the scope and methodology used to (1) estimate  the amount that the Department of Veterans Affairs (VA) spends to  provide Medicare-covered services to veterans enrolled in Medicare  Advantage (MA) plans and how VA spending on these services affects  Centers for Medicare & Medicaid Services (CMS) payments to MA plans;  and (2) evaluate the extent to which CMS has the data it needs to  determine an appropriate adjustment, if any, to MA payments to account  for VA’s provision of Medicare-covered services to MA-enrolled veterans. Our evaluation was based on a review of  CMS documentation and an interview with CMS officials.
Why GAO Did This Study

Veterans enrolled in Medicare can also enroll in the VA health care system and may receive Medicare-covered services from either their Medicare source of coverage or VA. Payments to MA plans are based in part on Medicare FFS spending and may be lower than they otherwise would be if veterans enrolled in Medicare FFS receive some of their services from VA. Because this could result in payments that are too low for some MA plans, CMS is required to adjust payments to MA plans to account for VA spending, as appropriate. CMS determined an adjustment was needed for 2017, but not for 2010 through 2016.
GAO was asked to examine how VA's provision of Medicare-covered services to Medicare beneficiaries affects payments to MA plans. GAO (1) estimated VA spending on Medicare-covered services and how VA spending affects payments to MA plans and (2) evaluated whether CMS has the data it needs to adjust payments to MA plans, as appropriate. GAO used CMS and VA data to develop an estimate of VA spending on Medicare-covered services. GAO reviewed CMS documentation and interviewed CMS and VA officials.

What GAO Found

In fiscal year 2010, the Department of Veterans Affairs (VA) health care system provided $2.4 billion in inpatient and outpatient services to the 833,684 veterans enrolled in Medicare Advantage (MA), a private plan alternative to Medicare fee-for-service (FFS). While the Centers for Medicare & Medicaid Services (CMS), an agency within the Department of Health and Human Services (HHS), generally pays Medicare FFS providers separately for each service provided, MA plans receive a monthly payment from CMS to provide all services covered under Medicare FFS. These monthly payments are based in part on a bidding target, known as a benchmark, and risk scores, which are used to adjust the payment amount to account for beneficiary demographic characteristics and health conditions. Both the benchmark and risk scores are calibrated based on Medicare FFS spending. Therefore, VA's provision of Medicare-covered services to veterans enrolled in Medicare FFS likely resulted in lower Medicare FFS spending and, in turn, lower overall payments to MA plans. However, the extent to which these payments reflect the expected utilization of services by the MA population remains uncertain. Specifically, payment amounts may still be too high or could even be too low, depending on the utilization of VA services by veterans enrolled in MA plans and veterans enrolled in Medicare FFS. If, for example, veterans enrolled in MA receive a greater proportion of their services from VA relative to veterans enrolled in Medicare FFS, then the benchmark may be too high. Conversely, payments may be too low if MA-enrolled veterans tended to receive fewer Medicare-covered services from VA relative to veterans enrolled in Medicare FFS. Assessing these possible differences would require data on the services veterans receive from MA. CMS began collecting these data in 2012 but, as of August 2015, had yet to take all the steps necessary to validate the accuracy of the data, as GAO has previously recommended.
CMS also lacks data on VA diagnoses and utilization that may improve its methodology for determining if an adjustment to the benchmark is needed to account for VA's provision of Medicare-covered services to veterans enrolled in Medicare FFS. Federal standards for internal control call for management to have the operational data it needs to meet agency goals to effectively and efficiently use resources and to help ensure compliance with laws and regulations. While CMS determined that no adjustment was necessary for 2010 through 2016 based on a 2009 study it performed, CMS's methodology did not account for services provided by and diagnoses made by VA, which can only be identified using VA's data. CMS officials updated the agency's study in 2016 using the same methodology, but with more recent data. CMS officials told GAO that they did not plan to incorporate VA utilization and diagnoses data into their analysis because (1) they do not currently have such data and (2) incorporating these data would introduce additional uncertainty into the analysis. However, if an adjustment is needed but not made or if an adjustment is too low due to limitations with CMS's methodology, it could result in some plans being paid too much and others too little. If CMS does revise its methodology and determines that an adjustment to the benchmark is necessary, it may need to make additional adjustments to MA plan payments, as discussed in this report.

What GAO Recommends

CMS should (1) assess the feasibility of revising its methodology for determining if an adjustment to the benchmark is needed by obtaining diagnoses and utilization data from VA and (2) make any additional adjustments to MA plan payments as appropriate. HHS disagreed with the first recommendation, but agreed with the second. GAO maintains that VA data may improve CMS's analysis.