The expected Medicare Advantage payment increase of 0.93% released last week is nothing to write home about but that isn’t the story of Medicare Advantage like it once was. What is important is the ongoing drive by the Trump administration to increase penetration of MA enrollment into traditional Medicare while making the program a major tool in effecting reforms to the health care system.
Last week, CMS released Part II of the Medicare Advantage Advanced Notice of the CY 2021 payment rates and a proposed rule titled, "Medicare and Medicaid Programs; Contract Year 2021 and 2022 Policy and Technical Changes to the Medicare Advantage Program, Medicare Prescription Drug Benefit Program, Medicaid Program, Medicare Cost Plan Program, and Programs of All-Inclusive Care for the Elderly.”
End Stage Renal Disease Patient. As everyone who is long DVA knows, Medicare Advantage plans can accept ESRD patients who where previously enrolled in Medicare FFS beginning Jan. 1, 2021. The bull case for DVA is that MA plans will continue to pay rates well in excess of Medicare FFS’s ~$300 per treatment.
Well, maybe.
The insurance industry had been pressuring CMS to somehow limit their reimbursement risk on ESRD patients. They have rightly pointed out that dealing with an oligopoly left them with few options to get the best rate. We had argued that CMS’s aid to MA plans would likely come in the form of changes to the network adequacy rule. Which is what may happen.
CMS is revising network adequacy rules for MA plans in general (more on that in a bit) but also soliciting comments on network adequacy requirements for outpatient dialysis services:
CMS has also received comments concerning patterns of provider consolidation and its impact on higher costs for patients. CMS has heard from stakeholders that providers in concentrated areas may leverage network adequacy requirements in order to negotiate prices well above Medicare FFS rates. We solicit comment on existing problems and behavior in non-rural, consolidated provider markets and recommendations that CMS could take to encourage more competition in these markets.
There are no secrets in Washington.
Specifically, CMS wants input on the following as it relates to network adequacy for outpatient dialysis facilities:
- Remove outpatient dialysis from the list of facility types for which MA plans need to meet time and distance standards;
- Allow plans to attest to providing medically necessary dialysis services in its contract application (as is current practice for DME, home health, and transplant services) instead of requiring each MA plan to meet time and distance standards for providers of these services.
- Allow exceptions to time and distance standards if a plan is instead covering home dialysis for all enrollees who need these services
- Customizing time and distance standards for all dialysis facilities.
So, while it still may be the case that DVA and FMS get to name their price with MA plan sponsors, there is some reason to believe it won’t be the slam dunk DVA bulls have assumed. CMS could opt to adopt one of the four options above or maintain the status quo and wait to see what the impacts are for MA plans. Given CMS’s interest in getting as many people with ESRD enrolled in MA plans to better coordinate their care, we tend to believe the final rule will provide some leverage for MA plans to play FMS and DVA off one another and other emerging options like CVS.
Network Adequacy. One to the major barriers to MA penetration in the eligible population is the difficulty plan sponsors have building a network that meets adequacy standards, particularly in non-urban areas. The current adequacy standards require that 90% of beneficiaries in a given plan be able to access certain specialists and facilities within certain time and distance parameters. For example, in “rural” areas, a primary care physician in an MA network should be no more than 30 miles and 40 minutes from the plan enrollee.
To support network construction, CMS is proposing that 90% of beneficiaries be reduced to 85%. Furthermore, CMS is proposing “credits” of 10% for use of contracted telehealth services for dermatology, psychiatry, neurology, otolaryngology and cardiology.
Additionally, CMS is proposing that another 10% credit be granted for provider types and facilities that are the subject of state Certificate of Need laws or other anti-competitive practices.
These credits can be applied cumulatively.
Medical Loss Ratio. Another important proposal in the rule is changes to the MLR calculation. Under the ACA, the required MLR for Medicare Advantage plans is 85%.
Recall, first, that for the 2020 plan year, MA sponsors could offer supplemental benefits to chronically ill members that were not primarily medical in nature. Recall also, that in December, Congress eliminated the HIF permanently.
The proposed rule includes a provision that allows plan sponsors to treat these supplemental benefits for the chronically ill as incurred claims, thus eliminating any ambiguity around classifying them as quality improvement activities or not offering them at all
Because of the way MLR is calculated, a repeal or deferral in HIF means higher MLR, all other things being equal.
A higher MLR, brought on by the HIF repeal would have the effect of limiting interest in quality improvement expenditures or incurred claims associated with supplemental benefits, all other things being equal.
However, once premiums are revised under permanent repeal of the HIF in the 2021 plan year, plan sponsors will have another tool to both manage MLR and retain membership. UNH has perfected control of MLR with its ownership of a number of provider types to which it can send a bunch of money when necessary to control falling MLR and avoid rebating it to plan members
UNH’s approach, however, does not do much for retaining membership. One young company we have worked with through our relationship with VC seed firm Jumpstart Foundry is Belle, which provides in-home pedicures to Medicare Advantage plan members. This start-up has found their value proposition is not limited solely to foot inspections but is a service valued by plan members and keeps them enrolled in their plan.
With the HIF out of the way, and a more lenient approach to non-medical services, we anticipate a proliferation of solutions like Belle to develop, especially in collaboration with more innovative health plans.
Telehealth. The administration’s enthusiasm for the Medicare Advantage program is matched only by its support for the proliferation of telehealth services.
In this rule, CMS is proposing to change current policy that only telehealth services provided on a contracted basis (i.e. “in-network”) could be treated as a core benefit by Medicare Advantage plans. Telehealth service providers to MA plans that were not contracted would be considered a supplemental benefit and therefore available only in those plans whose markets and bids made that possible.
Given the dearth of telehealth providers in what is still a young industry, what CMS is proposing is to give both providers and plans a little more room to negotiate. The network adequacy credits mentioned above will also help with the uptake.
However, we still believe that until star ratings require it, telehealth services will have a slow ramp in MA plans. The change nonetheless represents forward motion for the development of the telehealth industry.
Second Specialty Tier in Part D Formularies. In this rule, CMS is proposing a second specialty drug tier which even they admit, may not be heavily used. Currently, Part D plans can offer a specialty tier for certain high cost drugs (defined as being in top 1% on a negotiated price basis) and drugs in the tier would not be subject to an exceptions process. The exceptions is an appeal-like process where plan members can take advantage of a cost-sharing structure on a formulary tier other than the one to which the drug is assigned.
CMS is proposing that Part D plans offer a second specialty tier with an exceptions process that, like the primary specialty tier, does not permit an exceptions process that would allow a plan enrollee to avail themselves of non-specialty tier cost-sharing.
The cost sharing for the new specialty tier would be the same as the existing one – 25% for plans with a deductible and 33% for plans without a deductible.
A bigger deal than the creation of a new specialty tier is the change in the methodology for establishing “high cost” drugs eligible for a specialty tier. Current policy defines a “high cost” drug as one with a negotiated price in the top 1% of Part D drugs. CMS proposes to change that definition to a drug with ingredient cost in the top 1%.
The reason for the change from negotiated price to ingredient cost is that negotiated price includes rebates, administrative fees and other costs that can be highly variable. CMS anticipates that about 20 drugs will be ineligible for the specialty tier as a result of the change.
Pharmacy Performance Reporting. One contentious issue among pharmacies, especially independent ones, is the claw back of reimbursement due to performance. The pharmacies claim the performance standards are unclear and arbitrary, leading many pharmacies to conclude the claw backs are designed to force them out of business.
CMS is proposing that the pharmacy industry develop performance standards, an effort already under way, and report on adherence to those standards, which CMS will make public available. CVS has earned a reputation for aggressive use of these claw backs so any transparency in that regard may be a headwind in the years to come.
Real Time Benefit Tool. Effective for plan year 2021, Part D plans must support a Real Time Benefit Tool for providers that is integrated into at least one EHR and that provides the clinician with real time information about cost, formulary alternatives and utilization management requirements.
Effective in 2022, CMS is extending this requirement to make the same information available to beneficiaries though a computer or smart phone, and for plan members in the technology gap, via the plan’s customer service call center.
CMS is also politely suggesting that it would consider it a best practice for beneficiary RTBT to include cost-sharing amounts for medications if purchased at a in-network pharmacy.
Star Rating Measures. CMS is adding to the star rating system a couple of measures that support and encourage patient engagement strategies. Specifically:
- Transitions of Care - the percent of discharges for members 18 years or older who have each of the four indicators during the measurement year: 1) notification of inpatient admission and discharge; 2) receipt of discharge information; 3) patient engagement after inpatient discharge; and 4) medication reconciliation post discharge.
- Follow-up After Emergency Room Visit for Patients with Multiple Chronic Conditions – the percentage of ED visits for members 18 years and older who have high-risk multiple chronic conditions who had a follow-up service within 7 days of the ED visit between January 1 and December 24 of the measurement year.
CMS fiddles around with star rating measures each year but these are interesting in the context of a new emphasis on digital strategies to encourage patient and family engagement being promoted around HHS.
CMS is also changing the way it eliminates outliers in its star ratings methodology. Currently, CMS trims 1% and 99% of measure data. The rule proposes that CMS use the Tukey Outer Fence Outlier Deletion method instead.
The result of this change is about $900 million in savings when it would become effective in 2024, mostly as a result of downgrades in star ratings and the commensurate loss of bonuses.
Those are the highlights from an 895 page proposed rule. I am sure you have questions. Ring Tom or I and we will try to answer.
