CMS Pub. 100-16, ch. 8, § 60.3

Payment Rates for CCPs and PFFS Plans

(Rev. 89; Issued: 11-02-07; Effective/Implementation: 11-02-07)

Under §1853(a)(1)(F) of the Social Security Act, implemented at 42 CFR 422.308(d),

payments to organizations for enrollees in CCPs and PFFS plans must be adjusted to take

into account variations in MA capitation rates among counties in a plan’s service area or

segment of a service area.

The MA organizations must submit a single bid for each MA local plan and each MA

regional plan. In preparing their bids, MA organizations make assumptions about the likely

differences in costs between low-cost and high-cost areas in the service area, and

assumptions about the relative distribution of enrollment from these different areas. If their

enrollment estimates prove incorrect, their costs could be significantly higher (or lower)

than originally anticipated.

The purpose of the ISAR adjustment is to adjust payments to compensate for any variation

between the expected enrollment mix (by county) that formed the basis of a plan’s bid and

the actual enrollment mix by county. The geographic ISAR adjustment converts a plan’s

single bid for the service area into county payment rates that are unique to the plan. The

plan-specific county rates reflect the plan’s projections of average required revenue. The

idea is that these plan-specific county payment rates will better reflect the relative cost of

doing business in the respective counties than a single, average rate across the service area

(the bid).