CMS NEWS: CMS proposes 2016 payment and policy updates for Medicare Health and Drug Plans

Centers for Medicare & Medicaid Services
CMS NEWS & FACT SHEET

FOR IMMEDIATE RELEASE

February 20th, 2015

Contact: CMS Media Relations
(202) 690-6145 | press@cms.hhs.gov

CMS proposes 2016 payment and policy updates for Medicare Health and Drug Plans

Proposed policies continue Secretary’s initiative tying Medicare payments to value and maintain stability of Medicare Advantage program

The Centers for Medicare and Medicaid Services (CMS) today released proposed changes for the coming year for the Medicare Advantage (MA) and Part D Prescription Drug Programs that will advance Health and Human Services Secretary Sylvia M. Burwell’s vision of building a better, smarter health care system and moving the Medicare program, and the health care system at large, toward paying providers based on the quality, rather than the quantity of care they give patients.

“The proposed rates will enhance the stability of Medicare Advantage program and minimize disruption to seniors and care providers,” said Andy Slavitt, CMS Principal Deputy Administrator. “The policies in the Notice and Call Letter will continue the movement to reward providers of high quality, consumer-friendly care for the Medicare Advantage and Part D programs.”

The Medicare Advantage and the Part D Prescription Drug programs’ enrollments and quality continue to grow and improve since the Affordable Care Act. Medicare Advantage has reached record high enrollment each year since 2010, a trend continuing in 2015 with a total increase of more than 40 percent since passage of the Affordable Care Act, and premiums have fallen by nearly 6 percent from 2010 to 2015. And, more than 90 percent of Medicare beneficiaries have access to a $0 premium Medicare Advantage plan.

This continued popularity of the program reflects a clear signal that Medicare Advantage and the Prescription Drug Program are attractive to health plans and beneficiaries alike. Today’s proposal will continue this trend by providing fair payments to plans, rewarding high-quality care, and spending our health care dollars wisely. We believe these policies will minimize disruption and continue our commitment to high-quality plans, and create a stable and consistent policy environment.

The proposed changes reflect the commitment to a Medicare program that delivers better care, spends health care dollars more wisely and results in healthier people. In 2015, CMS estimates that 60 percent of Medicare Advantage enrollees will be in 4 or 5 star plans – an increase of 43 percent since 2009. In the Draft Call Letter, CMS is proposing to continue to refine the star rating system to so as to continue to encourage improved quality, including a proposal to modify the system to ensure plans are not unfairly penalized for enrolling dual eligible or low-income beneficiaries. In addition, the proposal enhances the value of in-home assessments so they are used to support care planning and care coordination and improve enrollee health outcomes.

The Advance Rate Notice proposes changes in payments that will affect plans differently depending on a variety of factors. On average, when combined with expected growth in plan risk scores due to coding, the expected revenue change would be positive growth of 1.05 percent. Plans that have shown quality improvement and have demonstrated a focus on customer satisfaction would see additional growth. Plan payment levels will continue to be somewhat higher than the equivalent payments in fee for service.

Finally, the proposed policies promise to provide enrollees with greater information to make informed decisions about their care and their coverage. The 2016 Draft Call Letter proposes steps to ensure that plans maintain accurate provider directories and make those directories widely available, helping enrollees better understand the providers available to them. In addition, CMS proposes to work with Part D sponsors that offer limited access to preferred cost sharing pharmacies in their networks to ensure all beneficiaries have access to affordable coverage.

The Advance Notice and draft Call Letter may be viewed through: http://www.cms.hhs.gov/MedicareAdvtgSpecRateStats/ and selecting “Announcements and Documents.” Comments on the proposed Advance Notice and Draft Call Letter are invited from the industry and the public and must be submitted by March 6, 2015. The 2016 Final Rate Announcement and Call Letter will be published on Monday, April 6, 2015.

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FACT SHEET

FOR IMMEDIATE RELEASE

February 20th, 2015

Contact: CMS Media Relations
202) 690-6145 | press@cms.hhs.gov

Fact Sheet: Moving Medicare Advantage and Part D Forward

On February 20, CMS released proposed updates to the Medicare Advantage and Part D programs through the 2016 Advance Notice and Draft Call Letter. Through these proposed policies, CMS is continuing the work in moving the Medicare program toward paying providers based on the quality, rather than the quantity of care they give patients while spending taxpayer dollars wisely.

The Advance Notice and draft Call Letter may be viewed through: http://www.cms.hhs.gov/MedicareAdvtgSpecRateStats/ and selecting “Announcements and Documents.” Comments on the proposed Advance Notice and Draft Call Letter are invited from the industry and the public and must be submitted by March 6, 2015. The final 2016 Rate Announcement and Call Letter, including the final Medicare Advantage and FFS growth percentage and final benchmarks will be published on Monday, April 6, 2015.

CMS will accept comments on all proposals before publishing final versions on April 6, 2015. Comments can be emailed to: AdvanceNotice2016@cms.hhs.gov.

Recent Trends in Medicare Advantage and Part D
In recent years, both the Medicare Advantage (MA) and Part D programs have continued to grow, quality of participating plans has continued to increase, and premiums have remained stable. In the MA program:

Enrollment continues to grow – MA enrollment has increased by 42 percent since passage of the Affordable Care Act to an all-time high of more than 16 million beneficiaries, with nearly 30 percent of Medicare beneficiaries enrolled in an MA plan.
Plan quality continues to improve – in 2015, CMS estimates that 60 percent of MA enrollees will be enrolled in a 4 or 5 star plan, compared to an estimated 17 percent back in 2009.
Premiums remain affordable – average premiums today are lower than before the Affordable Care Act went into effect, dropping 6 percent between 2010 and 2015.

Moving the Medicare Program Forward – Greater Value for the Programs
The 2016 Advance Notice and Draft Call letter supports broader efforts at the Department of Health and Human Services and CMS to move the Medicare Advantage and Part D programs toward value and quality. On January 26, Secretary Burwell announced a new initiative to move the Medicare program, and the health care system at large, toward paying providers based on the quality, rather than the quantity of care they give patients. Through the proposed policies in the Advance Notice and Draft Call Letter, CMS is proposing to further align the Medicare Advantage and Part D programs with those goals.

Higher Quality of Care­ – The 2016 Draft Call Letter includes a number of updates to the star rating system used to assess the performance of plans in providing enrollees with high quality care. The proposed updates would strengthen the accuracy of the evaluation system, as well as to improve incentives for plans to provide care for dual eligible or low-income beneficiaries.
More Information for Enrollees – The 2016 Draft Call Letter proposes to improve the information available to beneficiaries regarding plan networks, including an emphasis on requirements for plans to maintain accurate provider directories for beneficiaries.
Payment reform – The 2016 Draft Call Letter announces CMS’s intention to work with plans to collect information on the adoption of valued-based payment models among health plans.

2016 Advance Notice

Through the 2016 Advance Notice, CMS is proposing updates to the methodologies used to pay MA plans and Part D sponsors. The proposed changes are intended to improve payment accuracy and incent quality, while continuing to protect beneficiaries from significant increases in premiums and out of pocket costs.

As in previous years, CMS continues to move payments towards aligning MA program payments with payments made for beneficiaries in Fee for Service Medicare, helping to ensure fairness in the program.

Net Payment Impact

The chart below shows the expected impact of the proposed policy changes on plan payments relative to last year.

Year-to-Year Percentage Change in Payment

Impact

2016

Advance Notice

MA Growth Rate

1.7%
Transition to ACA rules

-0.8%
Rebasing/Re-pricing

TBD1
Improved star ratings

0.5%
Risk model revision

– 1.7%
MA coding intensity adjustment

– 0.25%
Normalization

– 0.4%
Expected Average Change in Revenue from Advance Notice Policies

-0.95%
Coding trend

2.0%
Expected Average Change in Revenue

1.05%

1 Rebasing/re-pricing impact is dependent on finalization of average geographic adjustment index and will be available with the publication of the Rate Announcement

Coding Pattern Adjustment

Each year, as required by law, CMS makes an adjustment to plan payments to reflect differences in diagnosis coding between Medicare Advantage organizations and FFS providers. In CY 2016, CMS proposes to make an adjustment reflective of the statutory minimum.

Risk Adjustment Model

For CY 2015, CMS used the 2013 CMS-HCC and 2014 CMS-HCC models, blending the resulting risk scores from each model at 67 percent and 33 percent, respectively. In 2016, CMS proposes to end the blend and calculate risk scores based entirely on the 2014 CMS-HCC model.

The 2014 model differs from the 2013 model in that it excludes a few diagnoses, such as stage 1-3 chronic kidney disease, that have been coded very frequently by the MA plans that have been most aggressive in coding. For example, in 2012, 9.9 percent of FFS beneficiaries were coded as having ‘Renal Failure’ (HCC 131), 14.6 percent of all MA enrollees were coded with renal failure, and 38.8 percent of beneficiaries in the plans that were most aggressive in coding were coded with renal failure. Similarly, 6.5 percent of FFS beneficiaries were coded with Polyneuropathy (HCC 71), 10.1 percent of all MA beneficiaries, and 20.1 percent of beneficiaries in the MA plans that were most aggressive in coding. By excluding some diagnoses from the model, the 2014 CMS-HCC model makes the payment system fairer.

Using Encounter Data

Historically, CMS calculated risk scores using diagnoses submitted from FFS providers and diagnoses submitted by MA plans into CMS’ Risk Adjustment Processing System (RAPS). In recent years, CMS began collecting encounter data from MA plans to develop more accurate payment models. In 2015, CMS added Encounter Data as an additional source of diagnostic data used to calculate risk scores. For 2016, CMS proposes to use encounter data to calculate risk scores, by blending encounter data-based risk scores with RAPS-based risk scores.

Part D Risk Adjustment Model

For 2016, CMS is proposing an updated Part D risk adjustment model encompassing the following changes:

Update to reflect the 2016 benefit structure;
Updates to the data years used to calibrate the model;
Clinical update to the diagnoses included in some prescription drug hierarchical condition categories (RxHCCs);
Inclusion of Part D data for Medicare Advantage- Part D sponsors in the model calibration; and
An actuarial adjustment to the Chronic Viral Hepatitis C RxHCC.
This proposed Part D model is designed to improve predictive accuracy.

2016 Draft Call Letter

As with previous years, CMS is continuing to propose improvements to the Medicare Advantage and Part D programs through the Draft Call Letter. These updates are intended to drive quality improvement in the care enrollees receive, as well as to strengthen beneficiary protections within the program.

Value-Based Contracting

Last month, the Secretary announced her vision for moving the health care system toward paying providers based on quality rather than the quantity of care they provide. In the Draft Call Letter, CMS announces an intention to begin working with plans participating in Medicare Advantage to better understand, through a voluntary effort, the extent to which they use value-based payment models to compensate providers offering services to their enrollees.

Changes to Star Ratings

Last fall, CMS released a Request for Information (RFI) seeking research or analyses that could demonstrate a causal relationship between dual or Low-Income Subsidy (LIS) status of a plan’s enrollees and a plan’s ability to achieve high star ratings. After reviewing the results of this RFI, CMS is proposing to reduce by 50 percent the weight of seven targeted measures for 2016. By reducing the weight of these measures, CMS seeks to provide relief to plans serving a large number of duals or LIS beneficiaries while CMS conducts additional research on what is driving the association. Long-term adjustments would be based on further in-depth examination of the issue by CMS and its HHS partners in quality measurement, as well as external measure developers, to determine the driving factors for the difference that has been observed in the preliminary research and the RFI submissions.

In-Home Enrollee Risk Assessments

In recent years, CMS has observed an increase in home visits for enrollees. CMS encourages Medicare Advantage Organizations to adopt best practices for in-home assessments to enhance care planning and care coordination and signals its intention to track and analyze care provided to enrollees following in-home visits.

Accuracy of Provider Directories

Under current program rules, Medicare Advantage Organizations are required to maintain accurate provider network directories for the benefit of enrollees. CMS proposes to reiterate existing rules regarding the accuracy of these directories to make certain plans are aware of their responsibility to maintain accurate directories.

Preferred Cost Sharing Pharmacies (PCSP)

Part D plans have the ability to form networks of pharmacies that offer “preferred cost sharing;” or lower cost sharing arrangements for beneficiaries than those offered by other network pharmacies. Part D plans must maintain network adequacy standards for all network pharmacies, though there are no comparable standards for access to preferred cost sharing pharmacies. CMS is not seeking to establish such standards; however, based on recent research, CMS is concerned about beneficiary access to preferred cost sharing pharmacies and about the transparency of preferred cost sharing pharmacy network access. CMS therefore proposes to publish information on PCSP access levels for each plan offering a preferred cost sharing benefit structure. CMS also proposes to work with plans who are outliers with respect to access to preferred cost sharing networks to either improve access or prevent plans from marketing themselves as offering preferred cost sharing in areas where the benefit is not meaningfully available.

Total Beneficiary Cost

Through the bid process, CMS tracks Total Beneficiary Cost, which assesses the collective impact on plan enrollees of changes in premiums, benefits, and other factors on plan enrollees. By statute, CMS has authority to deny bids that propose too significant an increase in costs or decrease in benefits. As with last year, CMS intends to keep the level of acceptable increase to $32 per member per month. To support continued quality improvement, this year, CMS will modify the TBC evaluation methodology for plans experiencing large overall adjustments resulting from quality increases and decreases.

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