Kusserow on Compliance: CMS Proposed Payment and Policy Updates for Managed Care and Drug Plans

CMS has released proposed policy and payment updates to the Medicare Advantage (MA) and Part D Prescription Drug Programs that will further move the Medicare program toward paying providers based on the quality of patient care rather than quantity of care. Significant proposed changes include:

  • Refining the Medicare Advantage star rating system to encourage improved quality by modifying the system to prevent penalization of plans for enrolling dual eligible or low-income beneficiaries; and enhancing the in-home assessment value to support care planning and coordination.
  • Increasing beneficiary access to providers by ensuring MA plans maintain and make available accurate provider directories.
  • Changes in the Advance Rate Notice expected to affect MA plan growth positively by 1.05 percent.

CMS is proposing only minor adjustments to MA and Part D plan payment and policies for 2016. Some individual plans will be more impacted than others by the new payment rates based on their location and enrollee mix. The most significant would likely be felt by Part D beneficiaries, as the Advance Notice highlights increased drug expenses, signaling that Part D premiums will likely be on the rise for the coming plan year. CMS projects a 1.7 percent increase in county benchmarks offset by a 0.9 percent national average reduction due to the continued phase-in of the new methodology for MA benchmarks established in the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148). The effects of the reduction could be much more significant (reductions of up to 4 to 5 percent) for plans in counties subject to the six-year phase-in of the ACA methodology.

Comments on the proposed Advance Notice and draft Call Letter must be submitted by 6:00 PM Eastern Standard Time on March 6, 2015. Comments may be submitted electronically to AdvanceNotice2016@cms.hhs.gov. The 2016 Final Rate Announcement and Call Letter will be published on April 6, 2015.

Richard P. Kusserow served as DHHS Inspector General for 11 years. He currently is CEO of Strategic Management Services, LLC (SM), a firm that has assisted more than 3,000 organizations and entities with compliance related matters. The SM sister company, CRC, provides a wide range of compliance tools including sanction-screening.

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Copyright © 2015 Strategic Management Services, LLC. Published with permission.

“Biggest Loser” and Similar Employer Wellness Programs Harm More Than Help

Employer wellness programs targeting employees’ weight control have resulted in no demonstrated positive effect, according to a paper published in the American Journal of Managed Care. Even with the use of financial incentives and penalties, the paper noted that there is no published evidence of savings resulting from long-term weight loss, nor a reduction in inpatient admissions associated with obesity and suggested that employers should abandon their weight control programs.

The Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) has spurred an influx of wellness programs in larger organizations, as the health reform law gives corporations the opportunity to make up to 30 percent of health insurance premiums dependent on participation in a corporate wellness program and/or on achievement of positive health outcomes. The paper notes that smoking and overweight status are the most common targets of corporate wellness programs.

Lack of results

Despite the expected correlation between obesity reduction savings and wellness savings, corporations have with wellness programs are not reaping any benefits. No studies of such programs have documented savings, according to the paper in one case, even in one particular case that experienced a significant reduction in hospital admissions for reasons such as heart attacks. In addition to a lack of financial results, companies with wellness programs also saw a lack of results in weight loss itself. The paper highlighted that the only major population cohort that showed a reduction in obesity was young children. Comparatively, Medicare and Medicaid populations, who often do not have access to wellness programs, are benefitting from declines in wellness-sensitive medical events requiring hospitalization.

More harmful than helpful results

The paper stresses that corporate wellness programs for weight loss should be discontinued, as these and other programs harm morale and corporate culture through surveys, weigh-ins, and screens, which tend to encourage “employee revolts.” Obesity programs also cause health hazards due to overdiagnosis and overtreatment, and “biggest loser” contests can humiliate employees and spur unhealthy crash dieting. As an alternative to wellness programs such as these, the paper suggests that employers subsidize healthy food options in workplace cafeterias, reimburse fitness memberships, and allow extra breaks for exercise.

Highlight on Virginia: Compromise Might Be the Right Medicine for Health Coverage

Eight months after blocking expansion of Virginia’s Medicaid program, House Republicans are proposing a $124 million health care package which doesn’t propose to expand Medicaid, but it does expand behavioral health care for people with serious mental illness and it provides additional funding for free clinics and community health centers.

The Republican alternative to Democratic Gov. Terry McAuliffe’s “A Healthy Virginia” proposal expands prescription drug coverage to all beneficiaries and provides services to 30,000 mentally ill Virginians, which is 10,000 more than the program McAuliffe established by executive order last year after Republicans blocked his Medicaid expansion plan.

The House plan also would fund two other pieces of the Health Virginia plan that McAuliffe announced in September in response to the General Assembly’s refusal to expand Medicaid. It would provide dental care for pregnant women in the Medicaid and FAMIS programs, as well as allow low-income state employees to secure affordable health care for their children under FAMIS, or Family Access to Medical Insurance Security.

Status quo. Up until this point, Virginia hasn’t experienced much progress with expanding health coverage. In the spring of 2014, the majority of Virginians favored the Medicaid expansion, however, the 2014 legislative session ended without any decision on Medicaid expansion. The indecision led to a budget stand-off and required a special session of the General Assembly. As the special session began, Governor McAuliffe announced a revised proposal for a two-year “pilot program,” which would end with the 100 percent federal funding. McAuliffe presented written assurances from CMS that Virginia could end its Medicaid expansion after two years with “no financial penalty and no reduction” in the percentage of federal matching funds the state would receive. McAuliffe said he would take the responsibility if Medicaid expansion does not continue after the two-year pilot.

Last fall, Governor McAuliffe via executive authority launched “A Healthy Virginia” to provide additional health coverage to some Virginians. A Healthy Virginia is a 10-step plan that includes the authorization of four emergency regulations and one executive order to expand coverage. Part of the plan requires a CMS waiver, and the plan will lose funding at the end of July 2015 unless the General Assembly approves its continuation.

In a December update to the state Joint Money Committees, McAuliffe stated that he “remain[s] committed to providing health care coverage to up to 400,000 uninsured Virginians who are still waiting for their leaders to expand Medicaid eligibility.”

With this new piece of legislation being introduced by the Republicans, maybe there is room for some cooperation and expansion of coverage.

Who Will Pay the Bill After the Medical Device Tax Repeal?

The Patient Protection and Affordable Care Act (ACA) (P.L.  111-148) Medical Device Excise Tax has returned to headlines in light of renewed efforts to repeal the tax. The controversial ACA provision— a fundamental financial support of health reform—is projected to bring in $29 billion over the next 10 years. According to a New York Times article, the apparent legitimacy of the tax repeal effort is being given unusual bi-partisan support due to “liberal Democrats in states with large concentrations of device manufacturers.”  Amidst the reintroduction of legislation to repeal the tax—H.R. 160, the “Protect American Innovation Act”—opinions are divided as to who ultimately bears the cost of the 2.3 percent tax and whether the tax produces harm or supports positive industry reform.


The ACA provision imposes a 2.3 percent tax on the sale of medical devices. The tax is paid by manufacturers and importers. According to the New York Times, trade groups have brought strong opposition to the tax, indicating that it has already led to reduced spending and will lead to a loss of “195,000 jobs among manufacturers and suppliers and in the general economy over the next five years.” The Congressional Research Service (CRS) plainly disagrees with the industry’s analysis. The CRS estimated in a January 2015 report that the tax will have “fairly minor effects, with output and employment in the industry falling by no more than two-tenths of 1 percent.” Additionally, the CRS analysis concluded that most of the cost of the tax would fall on consumers, and not on the profits of medical device companies. The CRS also indicated that the subsequent effect on the price of healthcare would be negligible.


Steven Ubl, chief executive of the Advanced Medical Technology Association (AdvaMed), and Gail Rodriguez, executive director of the Medical Imaging and Technology Alliance, responded critically towards the tax and the ACA in the form of a letter to the editor in the New York Times.  Primarily, Ubl and Rodriguez took issue with the assertion that, in the aggregate, pharmaceutical and medical device companies benefit from expanded insurance coverage under the ACA, regardless of the excise tax. The letter critiqued the argument in light of what the letter referred to as an “essentially nonexistent” growth in the demand for medical devices.  To support their position that the ACA tax is damaging the industry, UBL and Rodriguez pointed to a study conducted by AdvaMed—a medical device trade association. According to the study, which contradicted sharply with the CRS findings, the tax was responsible for 8,500 job losses and will lead to 20,500 less new jobs in the next five years. The study also indicated that 53 percent of companies participating in the survey indicated that research and development spending was cut as a result of the tax.

Future of the Tax

What the future holds for the ACA and its device tax remains unclear. Although opinions could hardly differ more significantly with respect to the tax’s actual effect, there are some facts that are less contested. For example, it is seldom disputed that the purpose of the tax was to generate revenue to support the expansive reforms of the ACA. The CRS indicates that although the tax is small, if it were repealed, “no revenue replacement has been proposed and it may be difficult to find.” Additionally, repeal efforts are raising other concerns. For example, both the CRS report and a New York Times opinion page have expressed concerns that success with medical device repeal may lead to industry challenges of other health care revenue provisions.   The worry is that without adequate revenue, already significant budget deficits will increase and struggling health care programs will be forced to face damaging cuts. The President and Congress will be asked to decide, in the near future, what should become of this particular tax. However, this issue once again poses the outstanding question about how we, as a country, should go about paying our health care bills.