I think this is just a cancel and rebook. I also tried to modify an award reservation as the points rate had dropped. It wouldn't let me do it because I didn't have enough points.
Normally I would make the new reservation first and then cancel the old one just in case the points don't get refunded immediately. But as mentioned didn't have enough points to do it that way, so I had to try modifying it and when that didn't work, I had to risk cancelling it first.
Well, maybe it works differently for people who don't have enough points.
IIRC, I changed the room type and it took the new lower rate. Then later I changed the room type back to the original room type, and it held the new lower rate. But in my case, I have many hundreds of thousands of points, and this was a change from 31000 to 29000 for a one-night stay, where it refunded me 2000 points after I made the change.