Tag Archives: Regs and guidance

Guidance for Medicaid managed care MLR calculations

In May 2019, the Centers for Medicare and Medicaid Services (CMS) released an Informational Bulletin clarifying how payments to subcontracted vendors should be accounted for in the medical loss ratio (MLR) calculation required by 42 CFR §438.8 as established by the Medicaid and Children’s Health Insurance Program (CHIP) managed care final rule published in May 2016. In the May 2019 bulletin, CMS focuses on the responsibilities of a subcontractor in providing data and the proper accounting of subcontractor payments for purposes of MLR reporting. The provisions outlined in the May 2019 bulletin apply to all subcontractor relationships, but CMS specifically highlights pharmacy benefit manager (PBM) arrangements that may include “spread pricing” and rebate retention.

The final rule requires states to complete MLR reporting for the first contract period beginning on or after July 1, 2017. It is anticipated that many state Medicaid programs will be providing MLR data for CMS for the first reporting period during calendar year 2019, so states should clearly articulate this guidance to contracted managed care plans and modify data collection processes and vehicles to collect the necessary detail to meet CMS requirements.

The final rule also stipulates that a managed care plan must ensure that its subcontractors fully comply with all terms and conditions of its contract with a state and must comply with all applicable Medicaid law and regulations. One area in which managed care plans commonly use subcontractors is in the delivery of pharmacy benefits. PBMs maintain and develop pharmacy networks, negotiate rebates with drug manufacturers, and perform other activities that support managed care plans’ obligations under contracts with states. In this paper, Milliman’s Paul Houchens, Ian McCulla, and Amber Kerstiens discuss reporting requirements for PBMs and other third-party vendors under this new CMS guidance.

Challenges for providers taking on Medicare Part D risk

In January 2019, the Centers for Medicare and Medicaid Services (CMS) released Part II of the 2020 Advance Notice and Draft Call Letter, which contains the proposed methodological changes for the 2020 Medicare Advantage (MA) capitation rates along with Part C and Part D payment policies.

In the letter, CMS issued a request for comments on the potential use of risk-based arrangements for pharmacy benefits in contracts between MA plans and contracted providers. CMS noted that risk-based arrangements in contracting for pharmacy benefits may be another tool to drive down the cost of Part B drugs in MA and Part D drugs for MA and Part D plans. CMS requested information on the barriers, feasibility, benefits, and drawbacks for these types of arrangements between MA plans and contracted providers.

As part of its August 2018 proposed rule, CMS asked how accountable care organizations and Part D sponsors in the Medicare Shared Savings Program “could structure the financial terms of these arrangements to reward Part D sponsors’ contributions towards achieving program goals.” There was also a request for information in that rule regarding “barriers to developing these relationships.”

In this article, Milliman’s Matt Kramer, Simon Moody, and Michael Hunter provide a summary of the key issues providers need to consider before taking on Part D risk, an increasingly common ask from MA organizations, and highlight some of the complexities and common barriers observed when advising provider clients on their strategies for Part D risk.

Analyzing midyear drug list price reductions

In February, the U.S. Department of Health and Human Services issued a proposed rule that would eliminate the current safe harbor to the Anti-Kickback Statute, which allows manufacturers to provide rebates to plans and pharmacy benefit managers, and creates a new safe harbor that would force the rebates to be passed through to the point of sale.

Some manufacturers have preemptively decreased list prices on popular brand drugs. List price reductions can be effectuated in several ways, including the launch of an authorized generic, the release of a new package for an existing identical product, or a complete reduction in list price on an existing product. The structure of the Medicare Part D program produces interesting, and sometimes counterintuitive, financial outcomes when list prices are decreased and rebates are eliminated. Plan sponsors will want to consider these outcomes during bid preparation and when estimating Part D payment settlements.

In this paper, Milliman’s David Mike, Matthew Hayes, and Stephen Amend analyze the impact of midyear drug list price reductions coupled with a reduction in rebates resulting in identical net price. Their analysis addresses the impact to Part D plans, Part D beneficiaries, the federal government, and pharmaceutical manufacturer payments to plans through rebates and the coverage gap discount program.

Part D Payment Modernization Model Request for Application considerations

In February, the Center for Medicare and Medicaid Innovation released a Request for Applications (RFA) for the Medicare Part D Payment Modernization Model (PMM). The PMM is a voluntary program whose goal is to reduce Part D federal reinsurance costs by adding new program flexibilities and introducing a two-sided risk-sharing arrangement around federal reinsurance costs. Interested Part D plan sponsors were required to submit an application to the Centers for Medicare and Medicaid Services (CMS) by March 15 in order to participate in the 2020 plan year.

There are many unknowns and questions regarding the PMM RFA. Some of these questions are:

• Who is eligible to participate (and who would want to)?
• What types of formulary or other program flexibility might be offered?
• What costs are associated with participating?
• Will this really result in Part D savings?
• How should plans determine information required for the application without insight on key program aspects?
• How would the benchmark be calculated?
• How could this be affected by the U.S. Department of Health and Human Services (HHS) proposal to move drug rebates to point of sale?
• What are the financial implications to the bid?
• What are the potential risks with participating?

In this article, Milliman’s actuaries discuss the answers to these questions.

Regulatory roundup

More healthcare-related regulatory news for plan sponsors, including links to detailed information.

Q&A issued following final rule on association health plans case
The U.S. Department of Labor (DOL) released questions and answers (Q&As) regarding the federal district court case ruling in State of New York v. United States Department of Labor concerning the department’s final rule on association health plans (AHPs).

The DOL published the Q&A to address questions that may arise in relation to the District Court’s decision. The Q&A will be updated as this matter evolves. The questions are:

• I get my benefits through an AHP. Does the court decision mean that my healthcare claims will not be paid?
• Will the Department appeal the decision?
• Do state insurance departments still have regulatory oversight of AHPs?
• May I contact the Department of Labor if I have more questions or concerns about the impact of the court ruling on my AHP?

To read the entire Q&A, click here.

New resource to help employers understand mental health issues
The DOL, in coordination with the Office of Disability Employment Policy (ODEP) and its Employer Assistance and Resource Network on Disability Inclusion (EARN), has launched a new resource to help employers better understand mental health issues and to provide guidance on how to cultivate a supportive workplace.

The Mental Health Toolkit is an online resource providing background, tools, and resources for employers seeking to offer a mental health-friendly workplace. It presents a framework for fostering a supportive workplace built around awareness, accommodations, assistance, and access.

To read the toolkit, click here.

New report focuses on healthcare costs of untreated behavioral health conditions
The Government Accountability Office (GAO) released “Behavioral Health: Research on Health Care Costs of Untreated Conditions is Limited.” GAO was asked to describe what is known about adults with untreated behavioral health conditions. This report examines (1) reasons why some adults with behavioral health conditions do not receive treatment for their condition, and (2) what is known about the healthcare costs associated with untreated behavioral health conditions in adults.

To download the report, click here.

Implications of proposed modifications related to pharmacy rebate safe harbors

In February, the Office of the Inspector General of the U.S. Department of Health and Human Services (HHS) released proposed modifications to safe harbor regulations in 42 CFR 100.952 (h) that protect pharmacy rebates from the federal anti-kickback statute.

The proposed update eliminates safe harbor protection for rebates provided by pharmaceutical manufacturers to Medicare Part D plan sponsors, Medicaid managed care organizations (MCOs), and pharmacy benefit managers (PBMs) acting under contract with either.

The proposed regulations do not explicitly affect the commercial market. The regulations also do not change the safe harbor with respect to drugs purchased through Medicare Part B fee-for-service plans, federal rebates collected for Medicaid MCO claims, or federal or supplemental rebates received directly by Medicaid state agencies.

As a potential replacement for removing the safe harbors, the regulation proposed new safe harbors for reductions in price reflected at the point of sale to the beneficiary. The proposed rule also outlines a protected structure for fixed service fees paid by manufacturers to PBMs.

In this paper, Milliman’s Christine Mytelka focuses on the potential implications of the proposal for state Medicaid agencies and the Children’s Health Insurance Program.