CMS Releases Advance Notice For Medicare Advantage And Part D Plans
Last week, the Centers for Medicare & Medicaid Services (CMS) released Part II of its Advance Notice of Methodological Changes for Medicare Advantage (MA) Capitation Rates and Part D Payment Policies for Calendar Year (CY) 2021 (fact sheet). The agency also released its proposed rule on policy and technical changes to MA and Part D for CYs 2021 and 2022 (fact sheet).
A press release for both developments is available here. This post focuses on summarizing the Advance Notice component of this package of policies.
The topline takeaway for you from this raft of rulemaking is that the Medicare Advantage program is stronger than ever. Since I wrote a post on these pages in 2014 about its inexorable rise, over six million more seniors enrolled in the program, now accounting for 34 percent of all Medicare beneficiaries. Growth has remained strong despite reimbursement cuts to MA plans under the Affordable Care Act that brought their payment into parity with traditional Medicare.
Overall, the changes in the Advance Notice will likely continue to fuel this trend. Payments are expected to rise modestly, a newly refined risk adjustment methodology continues to be phased in, and an array of next-generation quality measures are presented for potential adoption. The trend and positive implications for the Part D prescription drug benefit track a similar path
CMS already released Part I of the Advance Notice on January 6, 2020 (fact sheet). Today’s Part II addresses a wider array of MA and Part D-related policies and includes the estimated net rate update for MA plans. The Agency includes additional updates for both the MA and Part D programs, including the continued phase-in of using encounter-based risk scores for determining MA payment adjustments.
An important change from the proposed rule on policy changes that we want to briefly note is the inclusion of beneficiaries with end-stage renal disease (ESRD) in the program for the first time, per the requirements of the 21st Century Cures Act.
Payment Update For MA Plans
CMS estimates that, based on the proposed policies in the Advance Notice, net year-over-year revenue to MA plans will increase by 0.93 percent in CY 2021 compared with CY 2020, reflecting an almost three percent growth in underlying costs of care, modest adjustments due to the quality Star ratings program and revisions to the risk model, and an approximate 2.5 percent decrease to account for the relative risk of MA enrollees compared to other Medicare beneficiaries. This projection does not include an adjustment for current coding behavior of MA plans, which CMS says would yield an additional 3.5 percent increase for 2021.
Risk Adjustment And Other MA Changes
CMS is continuing implementation of a new approach to its MA risk adjustment methodology. In 2021, 75 percent of this factor will be based on the new model, up from 50 percent in 2020, while 25 percent will be based on the old model. The primary difference is that the new methodology relies on real patient counter data to calculate risk.
The Advance Notice makes other changes to MA policy, including exclusion of organ procurement costs from plan payments, establishing the basis for payment for beneficiaries with ESRD, imposition of a statutorily mandated 5.9 percent reimbursement cut to counterbalance historical increases in coding intensity, and maintenance of a cap on MA benchmarks that, despite some stakeholder objections, also applies to quality bonus payments. An open question for comment is whether to extend a 4.7 percent increase to plans in Puerto Rico to reflect the fact that over three times the proportion of Puerto Ricans do not use any Medicare services at all as compared to the national average.
Prescription Drug Benefit Changes
As it does annually, CMS proposes updates to the benefit parameters for Part D prescription drug plans indexed to an annual increase of 2.85 percent. For example, standardized Part D plan deductibles would increase from $435 to $445 and the coverage limit is set to increase from $4020 to $4130.
CMS proposes to continue the phase-in of a new risk adjustment model for Part D as well, advancing usage of the new, encounter-based methodology to 75 percent of the factor for 2021. The Agency also floats the concept of shifting more risk to Part D plans, while stopping short of a formal proposal, while noting that plans will pay 75 percent of dispensing and vaccine administration fees in the coverage gap, while beneficiaries pick up the balance. This discussion may be related to the fact that Congress is contemplating reforms to the Part D benefit as well.
CMS proposes several new measure concepts for potential incorporation into the Star ratings quality measurement program. For MA plans, they explore including new measures relating to ESRD, prior authorization, health outcomes, osteoporosis screening, cardiac rehabilitation, diabetes overtreatment, and home health. For Part D, new measures are proposed for generic drug utilization, initial opioid prescribing, and net promotor score (a measure of customer satisfaction).
Comments on Advance Notice are due by Friday, March 6 at 6pm ET. CMS will publish the Final Call Letter no later than April 6, 2020. CMS also states it will no longer be publishing a Call Letter for 2021, stating that it plans to codify much of what it has traditionally included in the Call Letter instead in the CY 2021 and 2022 MA and Part D proposed rule, a change consistent with the Administration’s goal of reducing the overall number of regulations issued. CMS will issue MA and Part D bidding instructions separately.
All-told, as noted above, these policy changes are a net improvement for the Medicare Advantage and Part D programs, which are likely to continue their stability and consistent growth in the years to come.