Tag Archives: Medicare Advantage

CMS proposed changes to the Medicare Advantage risk adjustment model

Late last month, the Centers for Medicare and Medicaid Services (CMS) released a 60-day “Advance Notice of Methodological Changes for Calendar Year (CY) 2019 for the Medicare Advantage (MA) CMS-HCC Risk Adjustment Model,” which describes proposed changes to the 2019 Part C risk adjustment model. CMS is seeking comments on the proposed changes, which are due by March 2, 2018.

The 21st Century Cures Act (Cures Act) requires CMS to make improvements to the CMS-HCC risk adjustment model for 2019 and subsequent years. The Cures Act directs CMS to:

• Evaluate the impact of including additional diagnoses for mental health and substance abuse disorders, as well as chronic kidney disease
• Make adjustments to the risk payments to account for the number of diseases or conditions of a beneficiary
• Phase-in the above changes to the risk adjustment payment over a three-year period, beginning with 2019 and fully implemented for 2022 and subsequent years

Based on the evaluation of the additional diagnosis codes, CMS is proposing to add to the model three new Hierarchical Condition Categories (HCCs) related to mental health and substance abuse, and one new HCC related to chronic kidney disease. In addition, CMS is proposing to include additional diagnosis codes for an existing substance abuse HCC.

In order to account for the number of conditions for each beneficiary, CMS has proposed to include new HCC count variables in the proposed risk adjustment model. As part of the development of the new count variables, CMS compared the predictive power of a model that counts only the conditions that result in a payment to MA plans in the CMS-HCC model (“Payment Condition Count” model) to a model that counts all conditions, regardless of whether they are used for risk payment (“All Condition Count” model). CMS concluded that the “Payment Condition Count” model increased the predictive accuracy of the risk adjustment model, while the “All Condition Count” model decreased the predictive accuracy. Both models are included in the Advance Notice for comment. CMS also noted that, in order for the overall fee-for-service (FFS) risk score to remain revenue-neutral, adding the new count variables would result in a decrease to the coefficients for many HCCs.

For 2019, CMS is proposing a model phase-in schedule that blends 25% of the risk score calculated using the proposed “Payment Condition Count” model and 75% of the risk score calculated using the existing 2017 CMS-HCC model. The weights of the “Payment Condition Count” model are proposed to increase to 50% in 2020, 75% in 2021 and 100% in 2022. However, CMS comments that because the three-year phase-in is required over a four-year period (2019 to 2022), it may be possible to use 2019 for comments and implement model changes in 2020.

In addition to the requirements directed by the Cures Act, CMS is proposing to recalibrate the 2019 CMS-HCC model using more recent data. The Advance Notice also proposes an increase to the weight given to the Encounter Data System (EDS) risk scores, from 15% in 2018 to 25% in 2019; these weights are used to blend the EDS and Risk Adjustment Processing System (RAPS) risk scores during the transition to 100% EDS. For 2019, CMS is proposing to combine the two phase-ins (increasing the weight for EDS and adding the proposed new model) by using the “Payment Condition Count” model exclusively for EDS risk scores and the existing 2017 CMS-HCC model exclusively for RAPS risk scores. Hence, CMS will only calculate two risk scores, one using the proposed model and EDS data at a 25% weight, and the second using the existing model and RAPS data at a 75% weight. CMS also plans to include RAPS inpatient submissions as an additional data source for the EDS risk scores, noting that inpatient submissions for EDS are low compared to RAPS. No explanation is offered for why inpatient submissions are low under the EDS methodology.

In the CMS fact sheet, it is stated that the new model will lead to an estimated 1.1% risk score increase across all MA plans, which equates to a 0.3% risk score increase after recognizing the 25% phase-in. However, results will vary for each plan. We expect to be able to evaluate the impact using actual data for individual plans once CMS releases the updated mapping of diagnoses to HCCs later this month.

The full text of the Advance Notice can be found here. The CMS Advance Notice Fact Sheet can be found here.

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 in 2018 will be $3.35 for generics and $8.35 for brands, 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.

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.

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)?

Webinar: Medicare Advantage risk scores

Payment year 2017 is a key year for Medicare Advantage (MA) plans, as encounter data is weighted 25% and has been shown to result in lower risk scores and revenue. An upcoming Milliman webinar hosted by Charlie Mills and Deana Bell will explore how MA plans have prepared for the transition to encounter data, and highlight best practices for monitoring financial results and encounter data submissions. The webinar entitled “Medicare Advantage risk scores: Best practices in financial monitoring and encounter data submissions” is scheduled for October 19 from 11 a.m. – 12 p.m. PT (2 p.m. – 3 p.m. ET).

For more information or to register, click here.