Operating Medicare Part C and Part D plans has become increasingly complicated. The Affordable Care Act 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.
The Bipartisan Budget Act of 2018 enacted key changes to Medicare Part D that will affect the program’s coverage gap—the “donut hole”—starting in 2019. The changes to the coverage gap have several financial implications for Part D stakeholders. In this article, Milliman consultants Adam Barnhart, Gabriela Dieguez, and David Mike explain the financial impact the bill will have on beneficiaries, employers, pharmaceutical manufacturers, the federal government, and plan sponsors.
Direct and indirect remuneration (DIR) has grown to be an important provision that Medicare Part D plan sponsors use to reduce their claim liabilities and thus member premiums. As DIR continues to increase, it is important for Part D sponsors to consider the effect of potential regulatory changes on plans’ bottom lines and operations. Milliman actuaries Deana Bell and Tracy Margiott provides some perspective in this article.
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.
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.
Prescription drug plan sponsors must consistently evaluate and update their pharmacy benefit manager (PBM) contracts to control costs. In their article “Medicare Part D PBM contracting strategy,” Milliman actuaries Michael Polakowski, Nicholas Johnson, and Todd Wanta highlight numerous contract provisions that plan sponsors should examine and renegotiate to reduce pharmacy expenses.
Here’s an excerpt:
As contracting has become more complex, the following contract provisions are becoming more common as plan sponsors look to reduce their pharmacy expenses.
• Price protection. In the current environment of high-cost trends for brand-name drugs, price protection can offer more inflation protection than discount guarantees. Any price increases above a predefined threshold are paid back to the PBM by the manufacturer and considered rebates by the Centers for Medicare and Medicaid Services (CMS). Plan sponsors should carefully consider how price protection can affect Medicare bids and end-of-year settlements.
• Membership. More favorable dispensing fees, discounts, and/or rebates may be achieved for plan sponsors with higher membership counts. Improved contracting levels are specified directly in the PBM contract.
• Discount/rebate guarantees. Discount and rebate guarantees may be presented in many different forms, e.g., rebates per brand-name script or on a per member per month (PMPM) basis, or discounts off AWP or the maximum allowable cost (MAC) list. Rebate guarantees may exclude certain drugs. At a minimum, plan sponsors should ensure the targets are clearly understood and auditable. Plan sponsors should be wary of proprietary definitions when industry definitions are available for reference. Plan sponsors should also ensure that reimbursement mechanisms are in place if targets are not achieved.
• Rebate maximization. Because of the structure of the Part D benefit, rebates can be a more effective way to reduce Medicare bids than discounts. Over the last few years (and with the increasing cost of specialty drugs), plan sponsors have increasingly negotiated with PBMs to maximize rebates rather than discounts. The financial incentives for this approach are discussed by Milliman consultants Adam Barnhart and Jason Gomberg in a recent article for the AIDS Institute, “Financial Incentives in Medicare Part D.”1
• Multi-year agreements. Some PBMs have been willing to provide discount or rebate improvements over time if plan sponsors commit to multi-year contracts. Plan sponsors should be sure to verify that the improvements are contractually guaranteed and meet or beat market-wide improvements. Even multi-year discounts should have market check provisions to allow plan sponsors the ability to receive better terms when the market changes.