2020 Part D advance notice and draft call letter released

MA updates rates, CMS risk adjustment methods, other changes

On January 30, 2019, the Centers for Medicare and Medicaid Services (CMS) released the 2020 Medicare Advantage (MA) and Part D Advance Notice Part II and Draft Call Letter. The notice proposes an average increase in revenue for MA plans of 1.59 percent, not including an expected increase of 3.3 percent resulting from coding trend increasing MA risk scores. The notice also proposes to implement provisions of the Bipartisan Budget Act of 2018 that waive MA benefit uniformity requirements in some circumstances to permit plans to provide supplemental benefits targeted at certain chronically ill patients.

January 31, 2019 | Health care

The 2020 Advance Notice and Draft Call Letter is part of an ongoing CMS initiative to bring new competition to MA and Part D and to modernize plan offerings to better respond to the beneficiary need.

CMS released Part I of the Advance Notice on December 20, 2018. CMS will accept comments on both Part I and Part II through Friday, March 1, 2019. The final rate announcement and call letter will be published by April 1, 2019.

Below is a summary of the key proposed changes.

Medicare advantage

While MA plans receive a flat, capitated rate for each enrollee, rates are risk-adjusted based on enrollee characteristics to ensure that payments take the enrollees’ individual claims experiences into account. Risk scores are intended to reflect the total expected cost for MA plans relative to the average expected cost of a beneficiary enrolled in Part A and B.

MA capitation rates are also subject to a coding pattern adjustment to reflect differences between Fee-for-Service Medicare and MA coding practices. For 2020, CMS proposes a coding pattern adjustment of +5.9 percent, which is the statutory minimum.

MA encounter data

Since 2016, CMS has been collecting encounter data directly from MA organizations (MAOs) in a multi-year process of merging MA encounter data with the older risk adjustment processing system (RAPS), which uses diagnosis codes submitted by Medicare fee for service (FFS) providers to inform risk adjustment calculations. For 2020, CMS proposes to calculate MA risk scores using 50 percent MA encounter data and 50 percent RAPS, up from 25 percent MA encounter data and 75 percent RAPS for 2019.

CMS also is proposing to implement the phase-in of the new risk adjustment model by calculating the encounter data-based risk adjustment scores exclusively with the new risk adjustment model, while continuing to use the risk adjustment model first implemented in 2017 for calculating risk scores for RAPS data.

Special supplemental benefits

As required by the Bipartisan Budget Act (BBA) of 2018, CMS will allow MA plans to offer non-primarily health-related supplemental benefits to certain members with chronic illnesses. In addition, CMS proposes to exercise its authority to waive benefit uniformity requirements for supplemental benefits provided under the new provision of the BBA to chronically ill members. The policy would allow MA plans to vary these supplemental benefits on an individual enrollee’s specific medical condition and needs.

CMS emphasizes that special supplemental benefits for the chronically ill do not have to be uniform across the entire population of the chronically ill. Examples of such benefits include transportation for non-medical needs, home-delivered meals (beyond the current allowable limited basis), food, and produce.

Chronically ill enrollees are now defined in statute as an individual who:

  • Has one or more comorbid and medically complex chronic conditions that are life-threatening or significantly limits the overall health or function of the enrollee;
  • Has a high risk of hospitalization or other adverse health outcomes; and
  • Requires intensive care coordination.

While MA plans are not expected to describe the means by which they intend to identify chronically ill enrollees, CMS does expect plans to develop and document any methods used to identify this class of enrollee.

CMS requests comment on proposed guidance related to the new supplemental benefits for the chronically ill and on the process for submitting these benefits in the MA bid.

Maximum out-of-pocket limits

All MA plans are subject to voluntary and mandatory limits to their maximum out-of-pocket (MOOP) thresholds. MOOP limits are based on Medicare Parts A and B claims experiences, and reflect percentiles of expenditures in that pool. Plans adopting the voluntary MOOP limits are granted additional flexibility in other areas of plan design. The table below presents the proposed MOOP limits for 2020:

Plan type



Health Maintenance Organization (HMO)



HMO-Point of Service (HMO-POS)

$0–$3,400 in-network

$3,401–$6,700 in-network

Local Preferred Provider Organization (PPO)

$0–$3,400 In-network and $0–$5,100 combined

$3,401–$6,700 In-network and $3,401–$10,000 combined

Regional PPO

$0–$3,400 In-network and $0–$5,100 combined

$3,401–$6,700 In-network and $3,401–$10,000 combined

Private Fee for Service (PFFS) (full network)

$0–$3,400 combined

$3,401–$6,700 combined

PFFS (partial network)

$0–$3,400 combined

$3,401–$6,700 combined

PFFS (non-network)




CMS requests comment on MOOP and cost-sharing standards for 2021 and beyond. Specifically, CMS seeks comment on how it can better use its authorities to:

  • Increase the voluntary MOOP limit to another percentile level of Medicare FFS
  • Increase the number of service categories that have higher cost sharing in return for offering a lower MOOP amount,
  • Implement more than two levels of MOOP and cost-sharing limits to encourage plan offerings with lower MOOP limits.

In response to data showing that fewer plans are operating under the voluntary MOOP limits, for 2021, CMS is considering the establishment of a third (intermediate) MOOP limit halfway between the voluntary and mandatory limits for a particular plan year. Below is a table with an initial proposal for three-tiered MOOP limits:

MOOP limit

Original Medicare percentile

Examples based on current MOOP limits


Combined in-and out-of-network



$5,001 to $6,700

$7,501 to $10,000


Approximate numeric midpoint1

$3,401 to $5,000

$5,101 to $7,500



$0 to $3,400

$0 to $5,100


CMS further proposes added flexibility for service category cost-sharing standards when plans elect the intermediate or lower MOOP limits.

Star ratings and other measurement approaches

CMS proposes adjustments to 2020 star ratings for MA and Part D plans to account for controllable circumstances, as well as numerous methodological adjustments to existing star ratings measures.

CMS also proposes to remove three measures for the 2022 star ratings program because of issues with statistical reliability. The measures proposed to be removed are:

  • Adult BMI assessment (Part C)
  • Appeals auto-forward (Part D)
  • Appeals upheld (Part D)

CMS also proposes to temporarily remove the controlling high blood pressure measure under Part C for the 2020 and 2021 star ratings, pending new treatment guidelines.

CMS seeks public comment on new star ratings concepts for Part D appeals.

Opioid treatment services and benefits

As part of the 2018 Substance Use-Disorder Prevention that Promotes Opioid Recovery and Treatment for Patients and Communities (SUPPORT) Act, opioid treatment programs (OTPs) are identified as a Part B benefit starting in 2020. Such services include FDA-approved opioid agonist and antagonist treatment medications, substance use counseling, individual and group therapy, toxicology testing, and other items and services that CMS determines appropriate (excluding meals and transportation). MA plans will be expected to include the coverage of OTP services as part of the standard Medicare benefit.

CMS further encourages MAOs to consider supplemental benefits that cover non-opioid pain management, including complementary and integrative pain treatments. To qualify as a supplemental benefit, the item or service must treat or ameliorate the impact of an injury or illness (e.g., pain, stiffness, loss of range of motion).

Employer Group Waiver Plans

Medicare Employer Group Waiver Plans (EGWPs) are proposed to continue operating under administratively-set rates, as established in the 2019 notice.

Puerto Rico

For 2020, CMS proposes to continue basing MA county rates in Puerto Rico on the relatively higher costs of beneficiaries in FFS Medicare who are enrolled in both Medicare Part A and Part B. This policy would continue the statutory interpretation that permits certain counties in Puerto Rico to qualify for an increased quality bonus adjusted benchmark and applies an adjustment to reflect the nationwide propensity of beneficiaries with zero claims.

Payment changes to Part D for 2020

Medicare Part D and Medicare Advantage Prescription Drug Plans (MA-PDs) use an RxHCC risk adjustment model that is similar in some respects to the hierarchical condition categories (HCC) structure that underpins MA risk adjustment. The 2020 Advance Notice proposes to make updates to the model implemented in 2018 to reflect the 2020 benefit structure gap parameters.

Encounter data

Similar to the proposed changes to MA risk adjustment, CMS proposes to calculate Part D risk scores for 2020 using 50 percent encounter data (supplemented with RAPS inpatient data) and FFS, and 50 percent RAPS and FFS diagnoses. For 2019, CMS used 25 percent encounter data (supplemented with RAPS inpatient data) and FFS, and 75 percent RAPS and FFS diagnoses.

Risk corridors

Part D risk corridors are a risk-sharing feature defined in statute. Noting ongoing plan difficulty in assessing the risk profiles of enrolled beneficiaries prospectively, CMS leaves risk corridors for 2020 unchanged. This means that plans will be fully exposed to adjusted allowable risk up to 5 percent above or below the target amount. At +/-10 percent of the target amount, the plan must either pay 20 percent of the costs or keep 20 percent of the savings. The table below describes the risk corridors in greater detail.

Difference from the target amount

Government and plan share

+10 percent

Government pays 80 percent

Plan pays 20 percent

+5 percent

Government pays 50 percent

Plan pays 50 percent

0 to 5 percent

Plan pays 100 percent

0 to -5 percent

Plan keeps 100 percent

-5 percent

Government recoups 50 percent

Plan keeps 50 percent

-10 percent

Government recoups 80 percent

Plan keeps 20 percent


Out-of-pocket threshold and coinsurance requirements

By statute, the increase in out-of-pocket payments for Part D beneficiaries is calculated off a number of parameters and uses a combination of average expenditures for Part D drugs and the consumer price index.

For 2020, the out-of-pocket cost threshold increases by 5.21 percent. This corresponds to a 2020 deductible of $435, with an initial coverage limit of $4,020, an out-of-pocket threshold of $6,350, and a total spending threshold of $9,038.75.

The coinsurance for standard Part D beneficiaries under basic prescription drug coverage is reduced to 25 percent for Part D drugs purchased during the coverage gap phase of the Part D benefit, after applying the 70 percent manufacturer discount. Plans would be liable for the remaining 5 percent. For 2020, the coinsurance and discount amounts would apply to all drugs in the Part D benefit for most categories of drugs, including generics and biosimilar products.

Interoperability and prior authorization coordination

CMS’s in 2018 began participating in the Da Vinci project, which developed the Fast Healthcare Interoperability Resources (FHIR) Standard. The standards development organization Health Level 7 (HL7) leads the Da Vinci project.

Citing its own participation the initiative, CMS encourages all payers—not just MAOs and Part D plan sponsors—to align with the Da Vinci Project’s Coverage Requirements and Documentation Rules Discovery Work by:

  • Developing a similar lookup service
  • Populating it with their list of items/services for which prior authorization is required
  • Populating it with documentation rules for, at least, oxygen and CPAP

Request for information—risk-based arrangements for pharmacy benefits

CMS solicits comment on using risk-based arrangements for Part B and Part D pharmacy benefits in contracts between MA plans and contracted providers as a means of driving down costs.

The intermediate MOOP limit would be based on the mandatory MOOP limit, less approximately 50 percent of the numeric difference between the mandatory and voluntary MOOP amounts.

This publication contains general information only and Deloitte is not, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This publication 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 publication.

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