For payment year 2026, the Centers for Medicare and Medicaid Services (CMS) began transitioning Program of All Inclusive Care for the Elderly (PACE) organizations from the 2017 CMS-HCC risk adjustment model (“V22”), which incorporates diagnoses from RAPS, EDS, and FFS claims, to the 2024 CMS-HCC model (“V28”), which relies on diagnoses from EDS and FFS claims only. This article provides a high-level overview of the differences between the two models.
Overview of the CMS V28 risk adjustment model for PACE organizations
As with most new versions of a risk adjustment model, the Centers for Medicare and Medicaid Services (CMS) developed the 2024 CMS-HCC model (V28) using more recent data. Specifically, the model uses 2018 diagnoses and 2019 expenditures, so the coefficients reflect closer-to-current cost patterns rather than the decade-old data underlying the 2017 CMS-HCC model (V22). Beyond that expected refresh, CMS made two structural changes that materially alter how the model behaves relative to its predecessor:
- The condition categories are now directly built on ICD-10 diagnosis codes.
- There is now a more disciplined application of Principle 10, as described below.
How does rebuilding on ICD-10 diagnosis codes affect V28?
Earlier versions of the CMS-HCC model were built on the ICD-9 classification system for identifying condition categories. In practice, earlier models treated many diagnoses as an all-or-nothing trigger for a payment HCC and left much of the additional specificity available through ICD-10 codes unused.1 V28 rebuilt the condition categories directly on ICD-10 and uses that specificity to determine when a condition maps to a payment HCC. According to CMS, the V28 model includes approximately 21% fewer ICD-10-CM diagnosis codes mapped to payment HCCs than the outgoing 2020 CMS-HCC model (V24), decreasing from 9,797 to 7,770 FY22/23 ICD-10 codes.2 MedPAC has also noted that a greater share of diagnosis codes is excluded from payment under V28 relative to the 2017 CMS-HCC model (V22).3
A more disciplined application of Principle 10
Principle 10 is one of CMS's ten longstanding risk adjustment principles.
| Principle 10: Discretionary diagnostic categories should be excluded from payment models. Diagnoses that are particularly subject to intentional or unintentional discretionary coding variation or inappropriate coding by health plans/providers, or that are not clinically or empirically credible as cost predictors, should not increase cost predictions. Excluding these diagnoses reduces the sensitivity of the model to coding variation and coding proliferation.4 |
In developing the V28 model, CMS compared condition prevalence in Medicare Advantage (MA) against traditional Medicare fee-for-service (FFS), identified HCCs where MA coding sat materially above FFS, and had clinicians weigh in on whether the gap reflected a genuine population difference or simply a difference in diagnosis coding practices. The review resulted in removing some HCCs, adding others, and constraining some hierarchies so that every HCC in the hierarchy carries the same coefficient. Diabetes and congestive heart failure are the two diagnoses with the most impactful changes.
What are the V28 model implications for PACE programs?
V28 is a more clinically deliberate model than a simple data refresh would produce. For PACE organizations entering the phase-in, the priority is less about equating HCCs and their relative value across V22 and V28 and more about making sure each participant’s clinical picture is represented accurately under the new model. Critical elements for focus include clinician documentation that uses the specificity ICD-10 allows, understanding the revised mappings and hierarchies under V28, and ensuring that complete diagnosis information is captured through the encounter data used to calculate risk scores.
For additional information on PACE risk adjustment, including analysis of your organization’s risk scores, please contact your Milliman PACE consultant.
1 A Hierarchical Condition Category (HCC) assignment contributes to a risk score increase in the CMS-HCC model.
2 Centers for Medicare and Medicaid Services. (2023, February 1). 2024 Medicare Advantage and Part D Advance Notice Fact Sheet. Retrieved October 26, 2026, from https://www.cms.gov/newsroom/fact-sheets/2024-medicare-advantage-part-d-advance-notice-fact-sheet.
3 Medicare Payment Advisory Commission. (March 2025). Report to Congress: Medicare payment policy. Retrieved October 26, 2026, from https://www.medpac.gov/wp-content/uploads/2025/03/Mar25_MedPAC_Report_To_Congress_SEC.pdf.
4 Page 48 of https://www.cms.gov/files/document/2024-advance-notice-pdf.pdf.