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CMS provides greater payment rate increase for Medicare Advantage, Part D plans for 2019

The Centers for Medicare and Medicaid Services (CMS) on April 2, 2018, released the final version of the 2019 Medicare Advantage (MA) Capitation Rates, combined with the MA and Part D Payment Policies and the Part D Call Letter.

April 16, 2018 | Health care

CMS followed up with the release of the final rule, Contract Year 2019 Policy and Technical Changes to the Medicare Advantage, Medicare Cost Plan, Medicare Fee-for-Service, the Medicare Prescription Drug Benefit Programs, and the Program for All-inclusive Care for the Elderly (PACE) on Friday, April 6, 2018.

The final rule is scheduled for publication in the Federal Register on April 16, 2018.

Of note, average increases to MA payment rates for 2019 will be 3.4 percent, up from a proposed average increase of 1.84 percent. In addition, MA plans have a potential further increase of 3.1 percent as a result of expected changes to risk scores for MA Plans.

As a demonstration of the administration’s strong support of MA and Part D plans, in the accompanying press release, CMS states that it is “committed to unleashing and strengthening the Medicare Advantage and Part D programs by giving Medicare beneficiaries flexibility so they can make informed health choices,” including new benefits. In addition, the Administration describes certain changes to the Part D program as part of a larger effort to reduce out-of-pocket prescription drug costs for individuals.

The policies outlined in the proposed rule would apply to contract year 2019, for which bids are due to CMS by June 4, 2018.

Select key provisions of the call letter and final rule are highlighted below.

Medicare Advantage

MA plan uniformity

CMS finalized proposals for greater flexibility on cost-sharing and supplemental benefits based on specific medical needs of enrollees, subject to non-discrimination rules. In addition, CMS will permit plans to vary supplemental benefits, as well as premium and cost sharing, by each segment of an MA plan. Under this change, an MA plan can identify enrollees diagnosed with specific diseases, such as diabetes, chronic heart failure, and COPD, as medically vulnerable and in need of additional services.

MA supplemental benefits

MA plans are permitted to use rebates they receive for submitting bids under the risk-adjusted benchmark amount either to lower enrollee premiums or to offer supplemental benefits. Although supplemental benefits must be directly related to health care, current guidance does not allow an item to be eligible if it is for daily maintenance.

In the final rule, CMS finalized a reinterpretation of statutory language to allow supplemental benefits that compensate for physical impairments, reduce the impact of injuries or health conditions, and/or reduce avoidable emergency room utilization. In the call letter, CMS cites fall prevention devices as an example of a newly eligible supplemental item under this new policy. Further detail on allowable items will be released in supplemental guidance.

In recognition of provisions of the Bipartisan Budget Act of 2018 (BBA), CMS also notes changes that expand supplemental benefit offerings for beneficiaries with chronic illnesses starting in the 2020 plan year. CMS states that future rulemaking may allow for greater benefit flexibility in response to these changes.

Meaningful difference

CMS will eliminate the requirement that permits MAOs to submit multiple bids for the same area only if the plans substantially different from one another based on key plan characteristics such as premiums, cost sharing, or benefits offered. The proposed rule stated that the policy is intended to foster greater “competition, innovation, available benefit offerings, and provide beneficiaries with affordable plans that are tailored for their unique health care needs and financial situation.”

CMS plans to issue guidance through the annual call letter process to and Health Plan Management System (HPMS) memoranda “to help organizations design plan options that avoid potential beneficiary confusion prior to bid submission.”

MA Value-based Insurance Design

The MA Value-based Insurance Design Model (V-BID) offers supplemental benefits or reduced cost sharing to enrollees with certain chronic conditions. CMS will expand the model in 2019 to begin allowing plans to submit V-BID proposals for the following states:

California Colorado Florida
Georgia Hawaii Maine
Minnesota Montana New Jersey
New Mexico North Carolina North Dakota
South Dakota Virginia West Virginia

In 2018, CMS tested the model in Alabama, Arizona, Indiana, Iowa, Massachusetts, Michigan, Oregon, Pennsylvania, Tennessee, and Texas. CMS had previously approved MA VBID plans in Indiana, Massachusetts, Michigan, and Pennsylvania.

Under the BBA, VBID will be available in all 50 states beginning in 2020.

MA and the Quality Payment Program

The Medicare Access and CHIP Reauthorization Act (MACRA) instituted a Quality Payment Program (QPP), under which clinicians participating in Medicare generally will be paid under the Merit-based Incentive System (MIPS) or as a qualifying participant (QP) in Advanced Alternative Payment Models (AAPMs).

Beginning in the 2019 QPP performance year, the All-Payer Combination Option will provide opportunities for clinicians to achieve QP status by participating in payment arrangements through Medicare Advantage, Medicaid and other commercial payers that meet the criteria under MACRA to be considered Other Payer APMs: Required use of certified electronic health record technology, payment linked to MIPS-like quality measures, and more than nominal financial risk.

In the MACRA QPP final rule for 2018, CMS stated that MA plans will be able to submit payment arrangements for consideration as Other Payer APMs for 2019 as part of the MA bid process for 2019. The final rule states that guidance and submission forms will be a part of the QPP module of the bid submission package to be released sometime in April 2018, with a bid submission deadline in June 2018.

Participation in MA and Part D

The final rule eliminates the requirement that providers and prescribers participate in Medicare Part B as a condition of participating in MA, Part D or PACE. As an alternative, CMS will adopt a “preclusion list” of individuals and entities that fall within either of two categories:

  • Are currently revoked from Medicare, are under a re-enrollment bar, and CMS determines that the underlying conduct that led to the revocation is detrimental to the Medicare program
  • Have engaged in behavior for which CMS could have revoked the individual or entity to the extent applicable if they had been enrolled in Medicare, and CMS determines that the underlying conduct that would have led to the revocation would have been detrimental to the Medicare program

Under this policy, CMS will provide the Preclusion List to MA and Part D plans, which will be required to deny claims from or written by providers or prescribers on the list. However, before Part D plan sponsors can reject a claim or deny a beneficiary request for reimbursement for a drug because a prescriber is included on the preclusion list, the plan sponsor will have to provide a 90-day provisional supply of the drug and provide individualized written notice to the beneficiary that the drug is being covered on a provisional basis.

2019 MA risk adjustment

Reflecting changes required by the 21st Century Cures Act, CMS has incorporated mental health, substance use disorder, and chronic kidney conditions, as well as other technical changes into the risk adjustment model for 2019. The new risk adjustment model protocol for 2019 would account for 25 percent of the overall risk adjustment model, and the risk adjustment model used for 2017 and 2018 would account for 75 percent of the risk adjustment model.

In addition, CMS will continue to use a blend of encounter and inpatient data submitted to the Risk-Adjustment Processing System (RAPS). For 2019, CMS will add 25 percent of the risk score calculated using diagnoses from encounter data and fee-for-service (FFS) diagnoses to 75 percent of the risk score calculated with RAPS and FFS diagnoses.

Quality Bonus Payment percentages

CMS finalized Quality Bonus Payments (QBPs) of five percent for plans with four or more stars, while plans with fewer than four stars will not receive a QBP percentage increase to county rates. A QBP percentage increase of 3.5 percent will apply to county rates for new MA plans.

Expanding Use of Electronic Health Data for MA Enrollees

Consistent with the MyHealthEData initiative announced by CMS Administrator Seem Verma in March, the MA call letter “recommends and encourages” plans to incorporate data release platforms that will allow enrollees to connect health data to applications, services and research programs of their choice. The policy is intended to complement CMS’s launch of Blue Button 2.0, which provides secure beneficiary-directed data transport in a structured Fast Healthcare Interoperability Resources (FHIR) format.

The call letter states that CMS may require the adoption of such platforms by Medicare Advantage plans beginning in calendar year 2020.

MA Employer Group Waiver Plans

Employer Group Waiver Plans (EGWPs) are MA plans sponsored by employers that wish to offer an enhanced benefits package to retirees. Currently, EGWPs make a bid independent of other MA bids in a particular county, and often receive higher payments in comparison to other MA plans. After prior delays in implementing changes to how EGWPs are paid, for 2019 CMS will calculate the bid-to-benchmark ratios that set EGWP payments to use the overall county-level individual bids, instead of the EGWP’s, but with an adjustment for the proportion of enrollees in PPO versus HMO plans. This change would result in an estimated -0.1 percent payment adjustment to these plans, down from a -0.3 percent adjustment in the proposed rule.

MA special needs plans (SNPs)

In light of the BBA’s permanent reauthorization of SNPs, CMS will continue to accept applications for special needs plans (SNPs), models of care (MOCs), and other SNP-related material for new and renewing SNPs as planned, with some explanation of frailty adjustment factors MA capitation rates for certain statutorily-defined categories of SNPs, based on restrictions to beneficiaries’ Activities of Daily Living scores, such as Fully Integrated Dual Eligible (FIDE) and Programs of All-Inclusive Care for the Elderly (PACE) SNPs. CMS states that it will issue further guidance on SNPs in line with changes from the BBA.

Default enrollment

The final rule codifies requirements for default enrollments of individuals upon Medicare eligibility. In general, individuals dually eligible for Medicaid and Medicare (dual eligibles, or duals) could be default enrolled in dual eligible special needs plans (D-SNPs) in states that have agreed to the default enrollment and in cases in which D-SNPs have been previously approved by CMS for default enrollment. Additional conditions would apply.

Open enrollment

The final rule implements a provision of the 21st Century Cures Act of 2016 that eliminate the current MA disenrollment period and establish a new MA open enrollment period from January 1 to March 31, beginning in CY 2019. During this time, beneficiaries may make a one-time election to change MA plans or to disenroll from an MA plan and enroll in traditional Medicare. Beneficiaries making a change in the open enrollment period will be permitted to make a corresponding change in Part D coverage.

Medical loss ratio (MLR)

CMS will allow MAOs to include spending on fraud reduction activities and medical therapy management (MTM) programs in the numerator of the medical loss ratio (MLR) formula (i.e., treat spending on fraud reduction and MTM as medical costs rather than administrative costs). In addition, the rule reduces the amount of data that MAOs and Part D plan sponsors would have to provide to CMS annually under the MLR requirement.

Star measures

The final rule includes provisions of the methodology for Star ratings, including how measures are added, updated and retired, and the methodology for calculating and weighting measures. The final rule also provides for a process that allows for scaled reductions to Star ratings in cases in which independent review entity (IRE) data for appeals measures is incomplete.

CMS also made changes to Star measures that will be used to assess performance improvement and to the 2019 CMS display measures, which are not factored into Star ratings but are nonetheless publicly available.

Regarding changes to the measures themselves, CMS finalized the removal of Beneficiary Access and Performance Problems (BAPP) from the Star measures for MA and Part D. CMS earlier proposed temporarily removing the Reducing the Risk of Falling from the MA measures, but opted to include the measure in the improvement measure calculations for the 2019 Star ratings.

For 2019, CMS finalized the proposal to add statin therapy for patients with cardiovascular disease to the Star measures for MA and adding statin use in people with diabetes to the Star measures for Part D.

The final rule also included new directives focused on contract consolidations in an effort to improve the accuracy of the Star rating for the surviving and consumed contracts in an effort to prevent lower-rated plans that do not receive a quality bonus payment (QBP) being subsumed into higher-rated plans that do receive a QBP, thereby increasing the size of QBPs paid to Medicare Advantage organizations (MAOs). Star measures will now use an enrollment-weighted mean of the surviving and consumed contracts so that the ratings reflect the performance of all contracts involved in the consolidation.

Timing and method of disclosure documents

The final rule permits plans to deliver in electronic format, rather than hard copies, of certain documents, such as the Evidence of Coverage (EOC). In addition, CMS has proposed changing the timeframe for delivery of the EOC to the first day of the annual election period rather than 15 days prior to that date. CMS estimates that plans would save $51 million for not producing and mailing hard-copy EOCs to members.

Part D

CMS finalized a general recalibration of Part D risk adjustment models to account for updates to plan benefit structures, as well as adding encounter data as a diagnosis source for 2019 Part D plan risk scoring. In accordance with changes to the Part D coverage gap discount program (the “donut hole”) from the BBA, estimates for total covered Part D spending at the out-of-pocket threshold were updated, as well as applicable coinsurance amounts.

Part D plans must submit formularies for approval between May 14 and June 4, 2018.

Risk corridors

CMS made no changes to the risk corridor thresholds for 2019, citing a continued high variation in part D risk sharing amounts. Part D plans’ standard deductibles are projected to increase from $405 to $415 for 2019, and the maximum out of pocket limit is projected to increase from $7,508.75 to $7,653.75 for 2019.

Part D and opioids

The Comprehensive Addiction and Recovery Act of 2016 requires CMS to promulgate new rules around drug monitoring and dispensing of opioids and other substances with abuse potential. Accordingly, CMS establishes a new framework for Part D plans to identify and manage beneficiaries deemed “at-risk” for abuse or misuse of drugs determined by CMS to be “frequently abused.” Of note, frequently abused drugs are not defined by whether they are classified as controlled substances, but by a more open process of assessing clinical experience.

Plans will be able to limit at-risk beneficiaries to certain providers or pharmacies. CMS will be able to continue to enforce existing rules around opioid Drug Utilization Review, and the Overutilization Monitoring System, as well as enact a more stringent standard for drug management programs’ structural and reporting requirements.

The Call Letter cites its Overutilization Monitoring System (OMS) as having resulted in a reduction of very high risk overutilization of certain opioids, and CMS proposed further steps intended to curb opioid abuse for Part D beneficiaries. For example, OMS will add “potentiator” drugs such as gabapentinoids and benzodiazepines that are sometimes used in combination with opioids, and consider adding new measures to the Pharmacy Quality Alliance evaluation strategy.

Notably, under the policy all Part D plans will be required implement a “hard safety edit,” or an automatic claim rejection unless authorized by a plan representative for coverage of opioids over a seven-day supply of opioid drugs for initial opioid prescription fills, though with no rule on a morphine milligram equivalent (MME) limits. Nevertheless, all plan sponsors will be required to implement an opioid care coordination edit at 90 MME per day, and have the flexibility for hard safety edits at 200 MMEs or greater.

Tiered formularies

The final rule eliminates a provision of existing regulations that permits plans to exclude a dedicated generic tier from the tiering exceptions process, which is intended to lower the cost-sharing requirements of a specific drug when a specific patient demonstrates medical necessity. As an alternative, the final rule provides for plans to establish a framework based on the type of drug (brand, generic, biologic product) requested and the cost sharing of the applicable alternative drugs.

Expedited substitution of certain generics and mid-year formulary changes

Under the final rule, Part D plans would be permitted to immediately substitute a new equivalent generic drug for a brand-name drug at the same or lower cost-sharing level without seeking approval from CMS, provided that beneficiaries are adequately informed of the formulary change.

Payment redeterminations and IRE reconsiderations

The final rule lengthens the adjudication timeframe for Part D payment redeterminations and IRE reconsiderations from a maximum of seven days to a maximum of 14 days.

Any willing pharmacy

Current regulation enforces the principle that Part D plans must offer a standard contract to pharmacies that is accessible to any pharmacy willing to dispense drugs under that plan. Responding to anecdotal evidence that these standard contracts effectively preclude certain classes of pharmacy from plan participation, the final rule requires that such contracts must have more readily achievable terms and conditions. This change is intended to ensure beneficiary access to a range of mail-order, retail, compounding, and other pharmacy types.

Maximum Out-of-Pocket (MOOP) amounts

In the final rule, CMS makes changes to the formula used to determine MOOP amounts in an effort to encourage Part D sponsors to voluntarily offer plans with lower MOOP limits, based on local market conditions, rather than actuarial standards set by national Medicare Part A and B cost sharing benchmarks. The final rule sets voluntary and mandatory range amounts by plan type.

Manufacturer rebates and pharmacy price concessions of point of sale

In the proposed rule, CMS issued a Request for Information on potential policy approaches to apply some manufacturer rebates and all pharmacy price concessions to the price of a drug paid by a consumer at the point of sale. In the final rule, CMS states that any requirements regarding the application of rebates at the point of sale would be proposed through notice and comment rulemaking in the future.

This article contains general information only and Deloitte is not, by means of this article, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This article is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor.

Deloitte shall not be responsible for any loss sustained by any person who relies on this article.

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Anne Phelps
Principal | Deloitte Risk and Financial Advisory

US Health Care Regulatory Leader
Deloitte & Touche LLP

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Deloitte & Touche LLP

Ethan Joselow
Manager | Deloitte Risk and Financial Advisory

Deloitte & Touche LLP

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