CMS releases final MA and Part D rate announcement and call letter

Separate rule making finalizes additional policy, technical changes

On April 1, 2019, the Centers for Medicare and Medicaid Services (CMS) released the 2020 Medicare Advantage (MA) and Part D 2020 Medicare Advantage Capitation Rates and Medicare Advantage and Part D Payment Policies and Final Call Letter.¹ The announcement provides for an average increase in revenue for MA plans of 2.53 percent, up from a proposed increase of 1.59 percent in the draft call letter. The announcement also finalizes the implementation of 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.

April 17, 2019 | Health care

In addition, CMS on April 6, 2019, released a final rule to implement provisions of the 2018 Bipartisan Budget Act (BBA), including a broadening of telemedicine applications, and changes to dual eligible special needs plans (D-SNPs), quality ratings, Medicare Advantage (MA) participation, and risk adjustment. The final rule was published in the Federal Register on April 16, 2019.

Below is a summary of the key proposed changes.

Final notice and call letter
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 the 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 finalized a coding pattern adjustment of +5.9 percent, which is the statutory minimum.

Risk adjustment model

CMS is finalizing implementation of the alternative payment condition count model that includes additional condition categories for pressure ulcers and dementia, as well as additional variables that count the number of conditions a beneficiary may have. These conditions in some cases are among those included in the risk adjustment model, or “payment conditions.”

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 FFS providers to inform risk adjustment calculations. For 2020, CMS finalized its approach 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 finalized the implementation of 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 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 will 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 will allow MA plans to vary these supplemental benefits based on an individual enrollee’s specific medical condition and needs as long there is “a reasonable likelihood of improving or maintaining that specific enrollee’s health or overall function as it relates to the specific chronic condition or illness.”

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:

  1. 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;
  2. Has a high risk of hospitalization or other adverse health outcomes; and
  3. 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.

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 finalized MOOP limits for 2020:

Plan Type Voluntary Mandatory
Health Maintenance Organization (HMO) $0–$3,400 $3,401–$6,700
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) $0–$3,400 $3,401–$6,700

In the announcement’s guidance section, CMS cites potential changes to MOOP and cost-sharing standards for 2021 and beyond. Specifically, CMS states that it may 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
In-network Combined in- and out-of-network
Mandatory 95th $5,001 to $6,700 $7,501 to $10,000
Intermediate Approximate numeric midpoint2 $3,401 to $5,000 $5,101 to $7,500
Lower 85th $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 makes 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 rating measures.

CMS also finalized its proposal to remove three measures for the 2022 Star rating program because of issues with statistical reliability. The measures removed are:

  1. Adult BMI Assessment (Part C)
  2. Appeals Auto-Forward (Part D)
  3. Appeals Upheld (Part D)

CMS will also temporarily remove the Controlling High Blood Pressure measure under Part C for the 2020 and 2021 Star Ratings, pending new treatment guidelines.

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) will continue operating under administratively-set rates, as established in the 2019 Notice.

Puerto Rico

For 2020, CMS will 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 continues a 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 HCC structure that underpins MA risk adjustment. The 2020 Call Letter proposes to make updates to the model implemented in 2018 to reflect the 2020 benefit structure gap parameters.

Encounter data

Similar to the changes to MA risk adjustment, CMS will 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 the 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 for prescription drug costs 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.

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 will be liable for the remaining 5 percent. For 2020, the coinsurance and discount amounts will apply to all drugs in the Part D benefit for most categories of drugs, including generics and biosimilar products.

Policy and technical changes
MA and telehealth

The BBA granted CMS authorities to allow MA plans to provide additional telehealth benefits starting in Plan Year 2020. Notably, the final rule considers telehealth to be a basic benefit for the purposes of bid submission and payment for MA, potentially increasing the likelihood that MA plans will offer such benefits.

To be considered a basic benefit, a telehealth service will need to be classified as clinically appropriate to provide through electronic information and telecommunications technology. Clinical appropriateness remains undefined in the regulation, leaving it to MA plans to interpret.

The rule removes MA telehealth reimbursement restrictions related to geography or care setting. Such restrictions do apply to telehealth services provided under Part B.

Although the final rule grants MA plans new flexibility to offer telehealth services, plans also must cover the service on an in-person basis and inform current and potential enrollees of this option in plans’ Explanations of Coverage. The final rule requires telehealth providers to be fully contracted with the MA plan in order to be considered an additional benefit, although non-contracted providers may be covered as an MA telehealth supplemental benefit.

The rule finalized a proposal to permit cost sharing to vary between a service delivered in person or via a telehealth arrangement. CMS explained that such flexibility is warranted based on the different means by which the service is delivered.

In addition, the final rule maintains regulatory authorities to offer supplemental benefits such as remote monitoring in instances where a service does not meet the additional benefits requirements.

Dual Eligible Special Needs Plans (D-SNPs)

The BBA requires that D-SNPs more fully integrate across Medicare and Medicaid by developing a unified grievance and appeals process, and setting new standards for integrating benefits across the two programs. HHS is required to establish new unified grievance and appeals procedures by April 1, 2020, with the new procedures used by D-SNP contracts and state Medicaid agencies starting in 2021. Benefits integration requirements also will take effect starting in 2021.

Beginning in 2021, D-SNPs will be required to meet the following standards for integration of benefits:

  • Coordinate long-term services and supports (LTSS), behavioral health services, or both, by meeting an additional minimum set of requirements for integration
  • Either meet the requirements of a fully integrated dual eligible special needs plan described in section 1853(a)(1)(B)(iv)(II) of the Social Security Act, or enter into a capitated contract with the state Medicaid agency to provide LTSS, behavioral health services, or both
  • The parent organization of a D-SNP that is also the parent organization of a Medicaid managed care organization providing LTSS or behavioral services must assume “clinical and financial responsibility” for benefits provided to beneficiaries enrolled in both the D-SNP and Medicaid managed care organization

MA and Part D Quality Rating System

The rule finalizes methodological changes as proposed for the non-Consumer Assessment of Healthcare Providers and Systems (CAHPS) measures effective for the 2020 plan year. Several updates are also made to measures that will be used to establish the 2022 and 2023 Star Ratings, which correspond to the 2020 and 2021 measurement periods.

The final rule moves forward by modifying the following existing measures:

  • Controlling High Blood Pressure (Part C) to align with new clinical guidelines related to hypertension
  • Medicare Plan Finder Price Accuracy (Part D) to better measure the reliability of a contract’s advertised prices
  • Plan All-Cause Readmissions (Part C) to include observation stays and remove individuals with high-frequency hospitalizations
  • Improvement measures (Part C and D) to exclude from the improvement calculation any measure that receives a measure-level Star Rating reduction for data integrity concerns for either the current or prior year

Preclusion List requirements

The MA and Part D final rule for 2019 first established a policy to prevent MA and Part D payments to individuals and entities found to be “demonstrably problematic” to the programs. Under the final rule, these entities would be placed on a “preclusion list,” and payment for MA services and items would be rejected or denied.

The Preclusion List approach creates a blanket list of ineligible individuals and entities identified at the point of payment, instead of relying on MA and Part D enrollment requirements. The final rule for 2020 makes several revisions and additions to the preclusion list provisions with the purpose of clarifying CMS’ expectations on the preclusion list, including the timing for inclusion on the list, and the appeals process.

MA Risk Adjustment Data Validation (RADV)

Pursuant to three statutes3 passed between 2002 and 2012, the RADV system is the primary means for CMS to implement corrective action reducing improper payments under MA. The proposed rule would have established a new procedure to use sampling and other extrapolation methodologies as part of MA contract-level RADV audits. Because CMS extended the initial comment period to April 30, 2019, the final rule does not address the RADV proposals. CMS plans to address the RADV provisions in rulemaking at a later time.

1 Announcement of Calendar Year (CY) 2020 Medicare Advantage Capitation Rates and Medicare Advantage and Part D Payment Policies and Final Call Letter, April 19, 2019.

2 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.

3 Improper Payments Information Act (IPIA) of 2002, as amended by the Improper Payments Elimination and Recovery Act (IPERA) of 2010 and updated by the Improper Payments Elimination and Recovery Improvement Act (IPERIA) of 2012.

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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