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The recent spending deal, combined with administrative policies, are designed to grow enrollment and penetration of Medicare eligible beneficiaries. The elimination of the annual threat from IPAB, expanded core and supplemental benefits and design flexibility point to growth rates that should exceed historical patterns. Be mindful, however, that the end game is to slow the spending growth of the Medicare entitilement which is expected to grow at 6 to 8 percent a year, 2017 to 2024. Until then, plan sponsors should enjoy their day in the sun. |
We have always been amused when Sen. Bernie Sanders and other members of the Democratic party invoke the threat of privatizing Medicare to discredit Republican health care policy. Privatization of Medicare is already well under way through the Medicare Advantage program. Since Republicans took control of the government in 2016, they have done nothing but implemented policies to grow the program. The most recent spending bill is no exception.
The relevant provisions are:
IPAB Repeal. The Independent Payment Advisory Board was created by the ACA to control costs in the Medicare program by targeting two areas long disliked by Democrats: Medicare Advantage and pharma. Unfortunately for IPAB and its advocates, Medicare Advantage reached an inflection point in its popularity shortly after passage of the ACA. The cuts envisioned in 2009 quickly became politically untenable. American’s new found love for Medicare Advantage plans, in turn, made repeal of IPAB a bipartisan issue.
Expanded benefits. As we noted last week, the spending deal moves telehealth services to a core benefit in MA plans. This provision of the spending plan allows MA plans to offer telehealth services beyond what is currently permitted in Medicare FFS. In other words, the geographical and originating site and services restrictions imposed by Medicare law will not apply to the telehealth services offered by Medicare Advantage.
The change is effective for plan year 2020. By Nov. 30, 2018, CMS must promulgate rules that define the telehealth services Medicare Advantage plans can provide. Plans will need to have their telehealth solution in place by June 2019 (and ideally earlier) if they plan to offer it as a core benefit as part of their PY 2020 bids.
Integrating telehealth services into Medicare Advantage is not just a priority of Congress, it is a significant part of the administration’s strategy to expand enrollment in Medicare Advantage plans. For that reason, Congress labeled the relevant section of the spending bill, “Increasing convenience for Medicare Advantage enrollees through telehealth.” In effect, Congress is making MA plans more convenient and thus more desirable for Medicare eligible persons relative to traditional Medicare.
The spending deal also includes a provision that redefines supplemental benefits from “primarily health-related” to “have a reasonable expectation of improving or maintaining the health or overall function of a chronically ill enrollee.” To this point, Medicare Advantage plans were prohibited from providing car rides to doctor appointments or food delivery because CMS did not consider these items and services to be “primarily health related.” Supplemental benefits offered are primarily vision and dental services.
Like the expansion of Medicare Advantage’s core benefits to include telehealth services, the redefinition of supplemental benefits makes these plans more attractive relative to Medicare Fee-For-Service – albeit to a subset of eligible beneficiaries. Nonetheless, Medicare Advantage plans should be able to use the provision to take share from FFS.
Expansion of Medicare Advantage Value-based Insurance Design. CMS has considered value-based insurance design in Medicare Advantage plans for years. In PY 2017, they formally expanded this notion and implemented a voluntary VBID program through the Innovation Center. Initially Medicare Advantage VBID plans were available in only seven states: Arizona, Indiana, Iowa, Massachusetts, Oregon, Pennsylvania and Tennessee. For Plan Year 2018, the list of states was expanded to include Alabama, Michigan and Texas. The spending bill requires that the VBID model be expanded to all 50 states for Plan Year 2020.
Generally, Medicare Advantage VBID plans do not adhere to uniformity rules that are meant to prevent discrimination against high cost enrollees. These plans can be designed to cover people with specific conditions. For the Plan Year 2018 the following conditions can be addressed through Medicare Advantage VBID plans in the states listed above:
- Diabetes
- Congestive heart failure
- COPD
- Past stroke
- Hypertension
- Coronary Artery Disease
- Mood disorders
- Rheumatoid Arthritis
- Dementia
Generally, Value-based Insurance Design has been considered a great vehicle for managing drug prices. Two of the top 25 drugs by Medicare Part B spending in 2015 are for one of the above listed conditions, Rheumatoid Arthritis; JNJ’s Remicade and BMY’s Orencia.
Medicare Advantage plan sponsors have the flexibility under VBID to establish payment rates based on outcomes or available alternatives of Part B drugs. Since the spending bill reduced plan liability for Part D drugs in the coverage gap, shifting more of it to drug manufacturers, there is little incentive for combined MA-PDP plans to control prices there, however.
The only bit of bad news is how star ratings will be handled for plans that combine:
Preventing inflation of star ratings after consolidation of plans. Medicare Advantage plans have made a habit, with the full support of CMS, of consolidating plans. However, when plans consolidate, the star rating of the higher ranked plan applies to both plans, potentially making the sponsor eligible for bonus payments they otherwise would not receive. The spending bill puts an end to the practice by requiring CMS to weight star ratings by enrollment in the pre-consolidated plans.
These spending provisions, combined with new industry friendly policies in the 2019 Call Letter, creates a very bright future for Medicare Advantage plans for the next few years. For the first time ever, Medicare Advantage enrollment reached 20 million people in January and now accounts for 34 percent of all eligible Medicare beneficiaries.
When Medicare Advantage enrollment surpasses 50 percent of eligible people - sometime around 2024 - a few problems are likely to arrive. The bidding system is based on expected Medicare Fee-for-Service per beneficiary expenditures. If the FFS population in each service area is diminished to such an extent and/or skews much older or sicker, the predicitve value of the FFS benchmark in the bidding process will be diminished.
In becoming the default coverage vehicle for Medicare eligible populations, plan sponsors risk becoming vassals of the Federal government and the tool by which the Medicare entitilement can be controlled. The HHS Office of the Actuary released its 2017-2028 National Health Expenditure projections last week and the picture is not a pretty one.
With Congress at an impasse on major reforms to entitilements, Medicare Advantage offers the best hope for slowing the growth in spending. Don't expect CMS to be dictate significant reductions in provider payments just yet. The more immediate goals is penetration into the eligible population. Once maximum penetration is reached - and what that is will depend on policies yet to be formed - MA plan sponsors will turn to utilization management and provider payments for their EBITDA growth. Until then, expect MA plans to enjoy their day in the sun.
Call with questions.
Emily Evans
Managing Director
Health Policy
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