Tag Archives: Medicare Advantage

Medicare Advantage and Part D actuarial compliance considerations

Operating Medicare Part C and Part D plans has become increasingly complicated. The Patient Protection and Affordable Care Act (ACA) and a growing number of rules and regulations added each year have heightened the complexity and associated compliance burden for the health insurance companies that sell and administer these plans.

Actuaries are instrumental in developing the bids that plan sponsors submit annually to the Centers for Medicare and Medicaid Services (CMS). Those bids include a plan benefit package and Part C and Part D bid pricing tools. The bid submission also includes a set of supporting documentation describing how the financial projections were developed and demonstrating compliance with the many bidding rules.

During desk review, CMS independently confirms that the bids pass compliance tests. It is critical that plan sponsors understand the tests and confirm compliance before bids are submitted.

In this paper, Chris Girod and Shyam Kolli discuss a relatively narrow area of rules that is sometimes loosely referred to as actuarial compliance. This information can be useful for actuaries and other professionals who are tasked with understanding and following the many rules and regulations as they relate to Parts C and D.

State of the 2018 Medicare Advantage industry: Stable and growing

Each Medicare Advantage (MA) plan has an associated “value added,” defined as the value of benefits provided to a specific plan’s beneficiaries above traditional Medicare that are not funded through member premiums. This report by Milliman actuaries Julia Friedman and Brett Swanson highlights key changes in beneficiary premiums and benefits for the 2018 MA market. The report also examines the reasons for, and the magnitude of, the decrease in value added within the MA market between 2014 and 2016 as well as the increases in value added in 2017 and 2018. The report aims to assist Medicare Advantage organizations in making strategic decisions during 2019 bid preparations.

Medicare Advantage star ratings: Expectations for new organizations

Successful Medicare Advantage organizations maximize federal revenue to provide enhanced benefits and/or reduced premiums to their members, which ultimately improves marketability with the aim of increasing membership. Organizations entering the Medicare Advantage market should be aware of the current star rating climate as well as short- and long-term star rating and revenue considerations. This report by Milliman consultants provides perspective.

Medicare Advantage’s transition from RAPS to EDS risk scores

In 2017, there were many changes to Medicare Advantage (MA) risk adjustment as the transition continued from Risk Adjustment Processing System (RAPS) data to Encounter Data System (EDS) data. MA organizations will also experience complexity and challenges in payment year (PY) 2019.

This article by Milliman’s Deana Bell, David Koenig, and Charlie Mills compares EDS and RAPS risk scores and details some of the program highlights from the past 12 months:

• A 25% EDS weight for PY 2017
• EDS file layout updates
• PY 2016 EDS deadline extension and change to payment timing
• PY 2017 RAPS and EDS deadline extensions
• Including inpatient RAPS diagnoses in EDS risk scores for PY 2019

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.