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Medicare Advantage and Part D Draft Call Letter: Good News Mixed with Warnings of Increased Compliance and Complexity

Medicare Advantage And Part D Draft Call Letter: Good News Mixed With Warnings Of Increased Compliance And Complexity

The 2017 Draft Call Letter has relatively good news for Medicare Advantage-Part D (MA-PDs) and standalone Part D plans (PDPs) when it comes to financial sustainability and reversing some long-standing inequities that have been present for Special Needs Plans (SNPs). But at the same time, the Centers for Medicare and Medicaid Services (CMS) is signaling that its increased focus on compliance and quality attainment will only continue to be ratcheted up in the future.

Here are some of the biggest highlights of what is officially known as the Advance Notice of Methodological Changes for Calendar Year (CY) 2017 for Medicare Advantage (MA) Capitation Rates, Part C and Part D Payment Policies and 2017 Call Letter. MedHOK’s Strategic Insights intends to dive deeper into several of these issues in the weeks to come.

Expected Rate Hikes

Plan finance executives and actuaries worry about CMS’ annual announcement as to trends plans can expect in rates. The past few years have been rocky, with initial announcements of low (sometimes negative) anticipated trends for rates as well as the ongoing impacts of various Medicare Advantage reduction measures that were being rolled out due to the passage of the Affordable Care Act (ACA) and other congressional actions. The draft letter must have these finance folks breathing a bit of a sigh of relief.

First, with the exception of some minor ongoing phase-ins of reductions in certain counties, all of the major changes to MA are now in effect, providing some stability moving forward. Thus, generally MA rates in each county are pegged at between 95% of fee-for-service (FFS) costs in large urban counties to 115% in the most rural ones or ones with low MA penetration.

In addition, the Draft Call Letter announced that base rates for Part C likely will be adjusted upward by about 2.92 percent due to current fee-for-service trends and prior year adjustments. Even with some negative adjustments (e.g., coding intensity), this should largely mean the ability for most plans to maintain benefits into 2017. On the Part D side, major inflation is still being seen and a trend adjustment of 11.75% in Part D is anticipated.

On the quality reimbursement side, CMS is sticking with its proven approach to quality incentive. Only plans with ratings of 4 or greater Stars will receive a 5% quality incentive bonus to be passed through to member benefits. Plus, the amount a plan can keep in revenue between the county base bid and the county benchmark (the so-called “quality rebate”), remains as is. Those plans with 4.5 and 5 Stars keep 70% of the difference for member benefits, while 3.5 and 4 Star plans keep 65%, and those at 3 Stars or less keep just 50%. As we have discussed in the past, the combination of these two elements give 4 and 5 Star plans a huge advantage in the marketplace in terms of better benefits to attract members.

Further Phase-In of Encounter Data

For 2016, the long awaited migration from Risk Adjustment Processing System (RAPS) data to Encounter Data Payment System (EDPS) for risk adjustment began. This year, risk score revenue represents a 90% RAPS and 10% EDPS blend. CMS announced that in 2017 it will move the blending to 50%-50%. As we noted throughout last year when the migration plans were announced, plans with little experience with encounter submission and remediation could see major losses in revenue if they did not plan quickly. At a 90-10 blend, losses are a concern but perhaps manageable. While we expected CMS to continue moving the needle on the phase-in, the 50-50 proposal was a dramatic leap we did not expect. It could prove to be extremely challenging for some plans. (For background info, read “Medicare Plans Need to Embrace Conversion to Encounter-Based Risk Adjustment” or view our Webinar on Demand, “Risk Adjustment and Encounter Data Changes).

HCC Model Changes

As we wrote about last November, while the CMS-Hierarchical Condition Category (HCC) risk adjustment system does a good job predicting costs overall in Medicare, it clearly needs some improvement when it comes to risk recognition for dual eligible beneficiaries. In 2017, among other changes, CMS proposes to implement an updated version of the CMS-HCC risk adjustment model to solve this issue. Consistent with its earlier recommendation, the single community segment will be replaced with six separate model segments (non-dual aged, non-dual disabled, full benefit dual aged, full benefit dual disabled, partial benefit dual aged, partial benefit dual disabled). Each segment will have comparative factors reflecting the specific relative costs for the subgroup.

Star Announcements

Given the robust activity over the past few years, CMS is taking a bit of a breather when it comes to radical changes for 2017; but no one should confuse this short respite as a lack of commitment. Here are a few of the changes noted in the Call Letter in this area:

  • CMS announced that it intends to continue using its authority to terminate poor performing plans. The first plans will be terminated at the end of this year, and each year thereafter.
  • CMS will remove two measures in 2017 — Improving Bladder Control (Part C) and High Risk Medication (HRM) (Part D) — and amending a number of others. The HRM measure will become a display measure and HRM measure reports will continue to be supplied on a monthly basis through the Patient Safety Analysis website. CMS will continue to identify outliers.
  • CMS re-asserts its desire to further refine and strengthen the Star Program and, as with the 2016 announcement, it recommits to introducing a series of new, highly complex measures:
    • Medication Reconciliation Post Discharge Expansion
    • Care coordination measures
    • Asthma Measures Suite
    • Depression
    • Hospitalization of Potentially Preventable Complications
    • Several Statin Therapy measures
    • Antipsychotics in those with Dementia
    • Opioid Misuse
    • Pain Management

Medication Therapy Management (MTMP) Spotlight

Concerned about poor overall MTMP performance and bad results on the Comprehensive Medication Reconciliation (CMR) measure, CMS is proposing to better track MTMP results. All Part D sponsors will continue to submit an MTM program description through HPMS each year. A new attestation is now being added. Plans will need to attest to meeting the MTM program requirements during the annual submission. Further, CMS will comprehensively review a subset of MTM program submissions, including submissions of new plans, those of plans that have failed reviews in the past, and those of plans that score less than 3 Stars on the CMR measure.

SNPs Win Again

The other burning issue for SNPs beyond appropriate risk recognition outlined above has been the discrimination it faced in achieving high Star scores due to the socio-economic, health literacy, and multiple co-morbidities typical of such enrollees. As with the risk recognition issue, CMS published some empirical data outlining the problem and now has proposed at least an interim step to address it.

In the Call Letter, CMS said it looked at two possible interim adjustment factors to compensate for the barriers to high performance faced by SNPs. It settled on applying a Categorical Adjustment Index (CAI) to a contract’s Overall and/or Summary Star Ratings. MA contracts could get up to three adjustments — Part C Summary Rating, Part D Summary Rating and Overall Star Rating. PDPs would be adjusted just for the Part D Summary Rating. Penetration of Dual Eligible (DE)/Low Income Subsidy (LIS) and disabled members will vary by plan. The CAI seeks to take into consideration the effect on Star performance that DE/LIS/disability status and penetration have on a number of C and D measures known to have significant variability in outcome. Applying the CAI should positively impact the Star results of a number of plans dominated by dual or LIS enrollment.

The HCC risk score and Star changes favoring SNPs and plans with high dual eligible enrollment show how focused CMS is on the future of SNPs. It sees SNPs as the critical instrument to rein in costs and promote quality in the Medicare and Medicaid worlds.

Compliance and Audit Changes

CMS is looking at stopping the clock and extending the required compliance timeframe to process Coverage Determinations and Redeterminations when clinical documentation is not present. Stopping the clock for lack of clinical documentation occurs only for exceptions processing currently. CMS believes that adding additional cases and circumstances is in the best interest of beneficiaries because it might actually shorten the timeframe to obtain needed medications. For example, a plan receiving a request over the weekend may have a difficult time obtaining clinical information and then deny the initial request. This would lead to an appeal and an entirely new review period. A short extension in these types of circumstances could aid plans in receiving required information and acting based on sound clinical evidence. CMS is proposing to allow an expansion of the extension policy in limited circumstances and when cases meet multiple conditions only (including decisioning over a weekend or holiday).

On a similar topic, CMS also expressed its dismay at the large number of auto-forwards to external review made by plans. In the Call Letter, CMS lays out that it will watch closely outliers in terms of auto-forwards of cases to the independent review entity and take vigorous enforcement actions against plans.

Looking forward

To build on what it has done in the Medicaid arena with promotion of interoperability between plans and providers, CMS will explore how best to encourage the adoption of such technology and standards in MA. As well, in its endeavor to emphasize quality outcomes, CMS will also ask plans to report on how much of its payments to providers are performance based. Plans will report on one of the following payment types for each provider: fee-for-service with no link to quality; fee-for-service with a link to quality; alternative payment models built on fee-for-service architecture; and population-based payment.

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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