Category Archives: Medicare

CMS proposed rules would impact Part D drug costs and plan designs

On November 16, 2017, the Centers for Medicare and Medicaid Services (CMS) released 713 pages of proposed changes to Medicare Advantage (MA) and the Medicare Part D prescription drug benefit. The proposed changes (file code CMS-4182-P) would take effect for contract year 2019 and are intended to manage utilization of opioids, reduce costs, and provide more plan choices. The updates present major changes to the way the programs operate. According to CMS, “the proposed changes would result in an estimated $195 million in savings a year for the Medicare program over 5 years (2019 through 2023).”

Some significant impacts on Part D that plans need to be aware of would include:

Midyear formulary changes: Plans would have more flexibility to immediately incorporate generic drugs as soon as they are available.

• Plans could assess the cost impact of each new generic drug based on member utilization to weigh against administration and disruption issues.
• This proposed rule could be significant, especially if the increases in generic approvals continue. According to Milliman’s internal research, there were about 14 and 31 significant first generic launches in 2015 and 2016, respectively. And this year the U.S. Food and Drug Administration (FDA) has continued to speed up the generic approval process.

Opioid treatment: Plans would be able to restrict access and manage opioid utilization. The proposed rules codify and expand upon the current Part D Opioid Drug Utilization Review Policy and Overutilizing Monitoring System.

Biosimilars: Plans would be able to categorize certain low-cost biosimilars as generics for low-income subsidy (LIS) cost sharing and non-LIS catastrophic cost sharing. Because the LIS copays will be $3.35 for generics and $8.35 for brands in 2018, this is likely not to have a large impact on 1) lowering member costs or 2) increasing biosimilar utilization.

Point-of-sale costs: The proposal includes a request for information (RFI) regarding applying price concessions and rebates at the point of sale, which could lower member cost sharing when taking brand medications that offer rebates, but may increase premiums and government cost.

Meaningful differences testing: With the elimination or modification of this testing, plans may be able to add more enhanced alternative Part D plans to their product portfolios in the same region.

A link to the Fact Sheet issued by CMS can be found here. CMS is accepting comments until January 16, 2018.

Financial implications for Next Generation ACO Program

The Centers for Medicare and Medicaid Services has released the 2016 financial results for each of the Next Generation Accountable Care Organizations (NGACOs). The financial results may influence key decisions that each NGACO needs to make very soon regarding the magnitude of their risk parameters for 2018.  In this article, Milliman consultants explains those results and offer considerations for NGACOs to think about.

Medicare Advantage proposed rule could have a profound impact on product development for 2019 and beyond

The Medicare Advantage (MA) and Prescription Drug (PD) Benefit Program proposed rule for 2019 discusses important policy updates that may have a significant impact on the product development process for 2019. The proposed changes provide new opportunities for plans to innovate benefit designs and tailor packages for selected enrollees. The Centers for Medicare and Medicaid Services (CMS) is also requesting feedback on Part D rebates and price concessions that could have a profound impact on the way formularies and pharmacy benefits are managed. Finally, we also highlight additional proposed changes in enrollment policies that may result in strategic implications.

The key advantage for product development is CMS’s proposal to discontinue the use of “meaningful differences” requirements. By removing the restriction that limits the number of plans a Medicare Advantage Organization (MAO) could offer, MAOs would be in a position to develop a more diverse portfolio of products. In addition, plans can focus on creating product designs that are meaningful to beneficiaries instead of making benefit decisions based on the results of the CMS out-of-pocket cost (OOPC) calculator prescribed methodology. CMS did not propose waiving the Total Beneficiary Cost (TBC) requirements, meaning that plans would still need to rely on the OOPC methodology to determine year-over-year plan changes.

CMS is proposing additional flexibility in the benefit design process. One proposal would allow plans to offer different cost sharing and/or additional supplemental benefits for specific subsets of enrollees based on defined health conditions (e.g., zero cost share for diabetic supplies for patients diagnosed with diabetes). In addition, CMS also proposes to allow additional flexibility with plan designs for segments within plans by being able to offer different supplemental benefit packages by segment. Finally, CMS also discusses the possibility of additional maximum out-of-pocket (MOOP) levels and associated cost-sharing limits to allow plans a greater range of options versus the currently prescribed mandatory levels and to encourage plan offerings with lower MOOP limits.

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Exploring Medicare Advantage star ratings

The Centers for Medicare and Medicaid Services (CMS) publish star ratings to measure the quality of Medicare Advantage and Medicare Part D plans. They are also published to help beneficiaries select the best plans for them and to financially reward high-quality plans.

In this article, Milliman’s Dustin Grzeskowiak and Pat Zenner provide an overview of CMS’s methodology for calculating star ratings. Additionally, the authors discuss the financial and marketing implications of star ratings for Medicare plans and summarize best practices common to high-rated plans.

Important considerations for Medicare premium support program

Policymakers sometimes point to Medicare premium support programs as a possible cost-reduction solution for the federal health insurance program. In this article, Milliman’s Catherine Murphy-Barron and Pamela Pelizzari discuss some of the key financial and insurance issues involved in premium support proposals for Medicare Part A and Part B. The authors also explore the potential advantages and disadvantages of such an approach.

Here is an excerpt from the article:

A premium support model has the potential to fundamentally change the way Medicare benefits are provided to eligible individuals. Such a model would substantially influence both beneficiary and federal spending far into the future.

Financially, the possible implications of some premium support models have been scored by the Congressional Budget Office (CBO) to demonstrate the level of savings or costs to the federal government and affected beneficiaries. Under the options examined, the CBO found that net federal spending for Medicare would decrease in 2024 relative to current law by $84 billion (a 9% decrease) in the second-lowest-bid option (where the federal contribution is set at the second-lowest bid), and by $41 billion (a 4% decrease) in the average-bid option (where the federal contribution is set at the average bid). However, it is worth noting that the CBO projected an increase in spending by beneficiaries on their own premiums and care in the second-lowest-bid option.8

From a beneficiary perspective, the design of any premium support model would be under pressure to demonstrate that beneficiaries would have access to comprehensive coverage for an affordable price. Without sufficient information on the similarities and differences among various plans, beneficiaries may be at a disadvantage in terms of their ability to identify plans that best meet their needs. Financially, beneficiaries are at risk of incurring an increasing percentage of the cost of these plans if the federal contribution is less than the cost of the plans. In the second-lowest bid option that was scored by the CBO, beneficiaries’ spending was projected to increase by 18% (including both premiums and other out-of-pocket costs) in 2024 relative to the amount projected under current law, which represents a substantial increase in out-of-pocket costs for the same level of care.9

Medicare Advantage risk score considerations

Risk scores are a crucial area of focus for successful Medicare Advantage (MA) plans because changes in risk scores directly affect plan revenue. However, risk scores are complex and are influenced by many factors, which can confuse those who are new to MA risk score development. This article by Milliman’s Hillary Millican and Brad Piper offers perspective on the following questions related to MA risk scores.

• What time period of diagnoses supports risk scores?
• When are revenue payments made?
• Who submits diagnoses used to create risk scores?
• Why is member retention critical for the success of a Medicare Advantage organization (MAO)?