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Final Medicare Advantage and Part D Call Letter Brings Few Surprises

Final Medicare Advantage And Part D Call Letter Brings Few Surprises

On April 3, 2017, the Centers for Medicare and Medicaid Services (CMS) released the Announcement of Calendar Year (CY) 2018 Medicare Advantage Capitation Rates and Medicare Advantage and Part D Payment Policies, Final Call Letter and Request for Information. The final 2018 Medicare Advantage and Part D Call Letter brought few surprises. As we noted in our initial blog on the Draft Call Letter, CMS was not making radical changes to the course set in prior years — with a few exceptions.

Below are the few major changes to the February draft.

Final Rate Hike

The final Medicare Advantage rate hike went up slightly from the draft estimate. The base increase went from 0.25 percent to 0.45 percent. After accounting for expected coding trends, plans on average will see an increase of 2.95 percent versus 2.75 percent.

One area begging for attention in the future is the so-called benchmark cap prescribed in the Affordable Care Act (ACA). In its current design, the cap serves as a disincentive to high-performing plans in certain counties and essentially steals benefit dollars from seniors and the disabled. To garner savings to afford the Exchange subsidies in 2010, Congress realigned (aka, cut) Medicare Advantage (MA) rates countrywide to the national average Medicare fee-for-service (FFS) cost. Rates were just below Medicare FFS in many urban counties and above it in some others. At the same time, the ACA also explicitly capped future MA rates at the pre-ACA levels (with growth). Under the law, Star quality bonus dollars are included in the benchmark cap calculation. The result is, with time, plans in certain counties that earn 4 Stars or greater do not receive all or some of the bonus because the payment effectively puts them over the cap calculation. These bonus dollars are passed through to members and in these counties enrollees are not getting any, or at least not the full benefit, of enrolling in a high-performing plan. In fact, because both the benefit rebate and bonus are in the calculation, the better a plan performs in these counties, the more they are discriminated against in Star. The result: plans and members in these counties saw their rates and benefits realigned when the ACA came in and instituted a rate cut. Now, even, if they perform well, plans do not get the revenue (or the benefits passed to the member) they deserve. Millions of seniors and the disabled in more than 1,500 counties are impacted through less access to the highest quality care. Bonuses should be excluded from the caps. The current provision is patently wrong-headed.
caps.

Request for Information on Regulation and Innovation

As part of the final letter, CMS also released a Request for Information (RFI) to welcome feedback on MA and Part D. CMS asks for ideas on program simplification and innovation to further transform the MA and Part D programs. The RFI asks for recommendations for “regulatory, sub-regulatory, policy, practice, and procedural changes to achieve these goals.” This ties to the new Trump administration’s efforts to significantly rollback regulations over time in all walks of life. We predict that plans will see a loosening of some of the mandates that have arisen over the past few years. While some relief is not bad, we hope that CMS does not fundamentally rollback the compliance and quality focus it has positively developed. The compliance and quality dictates have created discipline on the part of plans and led to a meteoric rise in quality ratings since 2010. The final letter does not have major changes for Star in 2018, the significant outyear rigor was set in the 2016 and 2017 letters. We, too, hope that the Medicaid Über rule will be implemented over the next few years in an effort to bring a similar paradigm to Medicaid nationally. For Medicaid, our fear is that efforts to reduce costs and devolve control will mean a significant stalling or watering down of this effort.

Encounter Data Phase-In Rolled Back A Bit

In yet another surprise, CMS tinkered again with the encounter data (EDPS) phase-in the final letter. It states 85 percent of risk rates will be set using the legacy risk adjustment (RAPS) submission and just 15 percent on encounter submissions. We were shocked that in the draft letter CMS proposed freezing 2018 encounter data usage at 75 percent to match 2017. Originally, 50 percent of risk rates were slated to be tied to EDPS in 2018, 75 percent in 2019, and with encounter data to fully govern rate setting for risk in 2020.

We know plans, as well as CMS, have been struggling with the much more complex 837 encounter submission process. Various estimates suggest huge impacts for plans that did not heed CMS’ warning and are still ill-prepared and therefore have significant differences in recognized risk scores between RAPS and EDPS. For CMS to not only propose a freeze and then roll back a bit is a signal that there are bigger problems than expected. In the final letter, CMS did not set a new phase-in schedule. While CMS is known to be very suspect of the RAPS process, which more easily allows plans to remediate for sloppy year-round encounter documentation processes, this may mean a much longer phase in now.

Star Changes From Draft

CMS had proposed to weight certain care coordination and transition measures as a 3 starting in 2019. In the final draft, it pulled its recommendation.

In the draft letter, CMS wanted to revamp the current Beneficiary Access and Performance Problems (BAPP) measure to better reflect severity of audit findings. The final letter dropped these reforms in favor of a display measure in 2019.

Smooth Sailing At Top Speed For Plans

The 2018 increase is very solid. Plans note the ACA insurer fee was not collected over the past few years but will be in 2018, effectively taking away the nice increase. Despite the major negative rate changes in the not-too-distant past, MA enrollment continued to increase steadily. Plans made do, became more efficient, realigned benefits a bit, proved their value against the decrepit and dysfunctional FFS system, and made money. We will likely see the same continued strong growth of Medicare Advantage in coming years. And EDPS rollback means a marked diminution of risk as well and positive revenue that was not anticipated.

In the end, MA plans got the greatest gift for 2018 from CMS that anyone could imagine. Indeed, with Medicaid devolution and overhaul looming and the dismal fate of the Exchanges in many areas of the country, Medicare Advantage seems to be the safe bet for any new plan out there or those looking to expand.

Marc Ryan

Marc S. Ryan serves as MedHOK’s Chief Strategy and Compliance Officer. During his career, Marc has served a number of health plans in executive-level regulatory, compliance, business development, and operations roles. He has launched and operated plans with Medicare, Medicaid, Commercial and Exchange lines of business. Marc was the Secretary of Policy and Management and State Budget Director of Connecticut, where he oversaw all aspects of state budgeting and management. In this role, Marc created the state’s Medicaid and SCHIP managed care programs and oversaw its state employee and retiree health plans. He also created the state’s long-term care continuum program. Marc was nominated by then HHS Secretary Tommy Thompson to serve on a panel of state program experts to advise CMS on aspects of Medicare Part D implementation. He also was nominated by Florida’s Medicaid Secretary to serve on the state’s Medicaid Reform advisory panel.

Marc graduated cum laude from the Edmund A. Walsh School of Foreign Service at Georgetown University with a Bachelor of Science in Foreign Service. He received a Master of Public Administration, specializing in local government management and managed healthcare, from the University of New Haven. He was inducted into Sigma Beta Delta, a national honor society for business, management, and administration.

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