More on Reimbursement

Spring song for Medicare Advantage

For the third year, regulators have revamped reimbursement reductions into an average increase for Medicare plans serving America's growing senior populations, though not without requiring more work and oversight.

In the final version of 2016 Medicare Advantage and Part D rates and rules, the Centers for Medicare & Medicaid Services' reimbursement methodology will lead to an average bump of 1.25 percent for MA plans, not the 0.95 percent decline pre-acuity adjustment proposed in February.

Accounting for the growth in risk scores, the 0.95 percent proposed decline was estimated to come with an average increase of 1.05 percent, and the final regulation's 1.25 percent average increase (3.25 percent post-adjustment) will vary greatly across plans and regions. Nonetheless, the policy represents a smoother, more drawn-out landing for the Affordable Care Act's mandated MA reductions to create parity with Medicare FFS, bringing a number of gradual changes and a likelihood of more changes in the years to come--in tandem with more enrollment.  

"As the Medicare Advantage marketplace continues to grow, consumers are getting access to better care through more choice and competition," said Andy Slavitt, acting CMS Administrator and former UnitedHealth Group executive. "Seniors and people with disabilities, including the dual-eligible population, will continue to have an extensive choice of plans, affordable premiums, and better and more transparent information about provider networks and pharmacies."

CMS said the final revenue increase is more than proposed largely because Medicare actuaries updated Medicare FFS per capita spending estimates by 1.9 percentage points to a growth rate of 4.2 percent, although the trends remain "below historical standards." But, despite the average increases for MA plans, the regulations are coming with a number of changes that bring challenges for insurers, as the agency demands more on behalf of Medicare beneficiaries.  

New risk adjustment model

Among the most significant policy, CMS is going ahead with an entirely modernized model for risk adjustment scores, after using a blend of old and new hierarchical condition category calculations in the 2015 plan year.

The "industry should be ready for a full transition to the 2014-CMS-HCC model," regulators wrote. "This revised model comprises both an update to the data years used to recalibrate the model, and a clinical update to the disease categories to reflect more recent clinical experience. The advantages of using this model include reflecting more recent utilization and costs, being more clinically accurate, and including updates to accommodate ICD-10 codes."

CMS acknowledged that the model "underpredicts" the cost of the lowest-risk decile of beneficiaries, with 1.0 predictive ratio for the highest-risk decile, and thus created concerns about overpaying for the highest cost patients while also overcompensating for healthier seniors.

"We take very seriously the concerns raised by commenters that the model may disproportionately affect specific populations, particularly dual eligibles," the regulators wrote. "We will evaluate the impact of the model on these populations (including exploring ideas raised by MedPAC and others such as whether partial duals and full duals should be treated differently ) in the coming months, we will share our analysis with stakeholders, and, if appropriate, propose modifications to the model to improve predictive accuracy in a future year's process."

And in drug plans, as part of an effort to "improve predictive accuracy," CMS is also making changes in the Rx risk adjustment models. The include a clinical update to the diagnosis for certain condition categories--among them secondary cancers of the bone, lung and brain, and hepatitis C--and adding Part D data to the model calibration for MA-Part D plan sponsors.

Network accuracy

In another area of accuracy, CMS is taking steps to bolster management of provider and pharmacy directories, if not making major changes to requirements, after a spate of narrow network controversies.

Currently, Medicare Advantage plans must maintain accurate provider network directories for enrollees, though under flexible circumstance. Under the 2016 regulations, CMS emphasized that plans are expected to "update directories in real time, and have regular, ongoing communications with providers to ascertain their availability and, specifically, whether they are accepting new patients."

The agency said it will use "a three-pronged approach to monitor compliance," with direct verification through a contractor, a new audit protocol and enforcement actions. MA plans "that fail to maintain complete and accurate directories may be subject to compliance and/or enforcement actions, including civil money penalties or enrollment sanctions," and those "whose network adequacy is not met because of failure to have a sufficient number of providers open and accepting new patients may also be subject to such actions."

CMS also said it "will ensure that Part D sponsors provide clear and accurate access to information on preferred cost sharing pharmacies in their networks so that all beneficiaries have access to affordable coverage." (That was mentioned in the regulations just after CMS fined Aetna $1 million for directories that erroneously listed 7,000 pharmacies as being in-network in MA and Part D plans. Indeed, last year CMS took 35 enforcement actions against MA and Part D sponsors, including six figure fines.)

Over time in the realm of network adequacy, CMS said will "harmonize these policies" with the requirements for health insurance exchange plans, to create "consistent rules across programs."

Star ratings

For 2016 Star ratings rules, CMS said its priorities are "enhancing the measures and methodology to reflect the true performance of organizations and sponsors, maintaining stability because of the link to payment, and providing advance notice of future changes." However, "we do not anticipate methodology changing from the 2015 Star Ratings."

In 2016, plans that earn at least four stars will earn a 5 percent bonus, and a few new measures are being added, including medication therapy management and call center foreign language accessibility.

But CMS is not going to reduce seven star rating measure weights to help plans serving Medicare-Medicaid dual eligible beneficiaries, as was proposed. "Based on stakeholder concerns, CMS decided not to finalize the proposed policy and will make no changes to the 2016 Star Ratings for dual-eligible or (low income subsidy) effects." The agency, though, is exploring the possibility of using an integrated star rating system for Medicare-Medicaid Plans participating in the capitated financial alignment program for dual eligibles.

Looking for more value in a growing program

Medicare Advantage has seen record enrollment each year since the ACA, growing by 42 percent to more than 16 million seniors, or 30 percent of Medicare beneficiaries, according to the CMS. By the estimates of consultant Mark Farrah, enrollment stood at 17.3 million in March 2015.

In the same five years, premiums have also fallen by around six percent and 90 percent of Medicare beneficiaries can choose a plan with no premium, according to CMS. In 2015, 60 percent of MA enrollees will be covered in a 4 or 5 star plan, compared to an estimated 17 percent back in 2009.

All of which, according to CMS, is evidence of the program improving for seniors thanks to robust regulation and competition among insurers--from provider-owned plans and nonprofits to the Blues and UnitedHealthcare and Humana, which each cover 20 percent and 18 percent of the MA market.

Still, CMS is looking ahead and very much seeing Medicare Advantage as a key part of the exodus away from Medicare fee-for-service. In the 2016 notice, CMS said it wants to have a conversation with MA plans about the current and future of valued-based payment.

"CMS will be reaching out to and having conversations with MA organizations regarding how they are using physician incentive payments (e.g. payments based on quality of care, patient satisfaction) and value-based contracting of provider services to achieve these goals," regulators wrote. "Based on this input, we will also, this year, ask MAOs to share data regarding their adoption of alternative payment models. In the context of value-based contracting we are also interested in comments from MAOs regarding issues or concerns they may have regarding compliance with the physician incentive regulations."

Calculating Medicare Advantage changes

The full regulatory document: The 2016 Medicare Advantage Capitation Rates and Medicare Advantage and Part D Payment Policies and Final Call Letter.

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