Report finds flaws in proposals for premium support programs in Medicare

The Urban Institute issued a report titled “Restructuring Medicare: The False Promise of Premium Support,” in which the authors attempt to point out the potential flaws in the proposed premium support program in Medicare. The report states that the proposals attempt to model the program off of the arguably successful Medicare Advantage (MA) program, but fail to account for the features of MA that actually make it work. According to the Urban Institute, the proposals also ultimately shift the burden of the rising cost of the Medicare program to the beneficiaries, who are not in a position to shoulder the increased costs.

The proposal

Current Medicare beneficiaries can choose between traditional Medicare, where they have defined benefits covered by specified providers, or MA, where the beneficiary picks from a selection of private plans that have been approved by Medicare and charge close to traditional Medicare costs. A premium support program would allow beneficiaries a fixed-dollar contribution that they could take and apply to the insurance plan they choose in a health insurance marketplace. Beneficiaries could choose a plan that costs more than their Medicare contribution amount, but they would be responsible for paying the difference out of their own pocket. Supporters of this proposed program argue that setting a fixed cost for each beneficiary would reduce government spending and the marketplace would create competition, which would in turn drive down prices.

Burden shifting

Proponents of the premium support plan argue that without the plan, the Medicare program will run out of money, noting that the “CBO projects that between 2017 and 2047, Medicare spending will grow from 3.1 percent to 6.7 percent of GDP.” However, the report argues that the proponents of are focusing on the wrong problem. The aging-in of the baby boom generation is expected to increase Medicare enrollment by about 50 percent by 2030. By focusing on the cost of premiums and restructuring the program to force more beneficiaries to pay more out of pocket, they are shifting the burden of the increase in incoming enrollees to the beneficiaries. Medicare beneficiaries reported an annual median income of about $25,000 in 2012. “Medicare households spent nearly three times as much of their household budgets on out-of-pocket spending as non-Medicare households did” in 2012. A premium support plan could potentially increase the financial burden on those low-income beneficiaries, and force them into plans that they wouldn’t choose otherwise just to alleviate some of that financial burden.

Competitive markets

Proponents argue that forcing insurance plans to submit bids to participate similar to the way MA does would create competition and lead to lower premiums. The government contribution would then be set based on a weighted average of all of the bids for each region. However, premiums can drastically vary within a region and if premiums are higher in an area than the benchmark government contribution for the region, beneficiaries would be forced to pay the difference. The difference between earlier versions of the premium support plan and the current proposals show that the proponents have noted that there would not be an even playing field in all areas and they have attempted to come up with different ways to set the government contribution amount and increase it annually based on different factors. The MA program has an administratively set benchmark government contribution that is based on traditional Medicare spending in each area, which varies significantly compared to the bids.

Providers who bid to participate in MA are aware that there is a billing limit and they will be paid Medicare rates. The premium support plan does not take into account the impact this has on who submits bids and at what rate. In 2013, “CBO found that commercial insurance rates for inpatient hospital services were 89 percent higher than traditional Medicare rates, but Medicare Advantage plan rates for inpatient services were roughly equal to traditional Medicare’s rates.” Private insurers competing with one another in the bidding process are not likely to drop their prices down to Medicare level rates unless limits are placed on the billing of Medicare beneficiaries, similar to the limits in the MA programs. This leaves Medicare beneficiaries effectively priced out of these competing private insurance plans.

More choices and lower premiums available for MA and PDPs in CY 2018

As calendar year (CY) 2018 approaches, CMS reports that both the Medicare Advantage (MA) and the Part D prescription drug plan (PDP) programs continue to grow, currently providing care and services to more than one-third of Medicare beneficiaries. CMS also reports that the average monthly premium for an MA plan will decrease, enrollment in MA is projected to reach an all-time high, and premiums for a basic PDP will fall for the first time since 2012.

Earlier this year, CMS announced new policies in the 2018 Rate Announcement and Final Call Letter that support flexibility, efficiency, and innovative approaches that are designed to improve quality accessibility and affordability in MA and PDP programs.

MA program data

CMS data provides the following information regarding the MA program for CY 2018:

  • MA enrollment is projected to be an all-time high of 20.4 million beneficiaries, representing a 9-percent (1.7 million) increase from 18.7 million in CY 2017.
  • MA average monthly premiums will decrease by $1.91 to $30.
  • 99 percent of Medicare beneficiaries will have access to at least one MA health plan in their area.
  • More than 85 percent of Medicare beneficiaries will have access to 10 or more MA plans.
  • The average number of MA plan choices per county will increase by two plans—up to approximately 29 plan choices per county.
  • Access to popular supplemental benefits, such as dental, vision, and hearing, continues to grow in MA plans.
  • Approximately 77 percent of MA enrollees in 2017 will have the same or lower premium in 2018 if they continue in the same plan.

PDP program data

CMS projects that the average monthly premium for a basic Medicare PDP in CY 2018 will decrease by $1.20 to an estimated $33.50 per month. CMS also reports that all Medicare beneficiaries will have access to at least one stand-alone Medicare PDP.

Medicare Open Enrollment improvements

CMS is announcing several consumer-friendly improvements so that people with Medicare can make an informed choice between original fee-for-service Medicare and MA plans during open enrollment. These improvements include: (1) updating the “Medicare & You” handbook to better explain coverage options; (2) establishing a help wizard on Medicare.gov that will point to resources to help make informed health care decisions; and (3) establishing a new email communication opportunity to improve the customer service experience through important messages and reminders.

2018 MA and PDP premium, bid amount, related information released

Important 2018 Medicare Part D prescription drug plan (PDP) and Part C Medicare Advantage (MA) information for MA organizations and PDP sponsors has been announced by CMS. The information includes the average basic premium for a PDP, the Part D national average monthly bid amount, the Part D base beneficiary premium, the income-related monthly adjustment amount (IRMAA) for enrollees in PDPs who have incomes above certain threshold amounts, the Part D regional low-income premium subsidy amounts, the MA regional preferred provider organization (PPO) benchmarks, and the MA employer group waiver plan (EGWP) regional payment rates.

Average basic PDP premium

The average premium for 2018 is based on bids submitted by drug plans for basic drug coverage for the 2018 benefit year and calculated by the independent CMS Office of the Actuary. The average basic premium for a PDP in 2018 is projected to decline to an estimated $33.50 per month. This represents a decrease of approximately $1.20 below the actual average premium of $34.70 in 2017. The decline comes despite the fact that spending for the Part D program continues to increase faster than spending for other parts of Medicare, largely driven by spending on high-cost specialty drugs.

Part D national average monthly bid amount

CMS computes the national average monthly bid amount from the applicable Part D plan bid submissions in order to calculate the base beneficiary premium. The national average monthly bid amount is a weighted average of the standardized bid amounts for each stand-alone PDP and MA prescription drug plan (MA-PD). The calculation does not include bids submitted by Medicare medical saving account plans, MA private fee-for-service plans, specialized MA plans for special needs individuals, Program of All-Inclusive Care of the Elderly (PACE) programs, any “fallback” PDPs, and plans established through reasonable cost reimbursement contracts. The reference month for the 2018 calculation was June 2017. The national average monthly bid amount for 2018 is $57.93.

Part D base beneficiary premium

The base beneficiary premium is equal to the product of the beneficiary premium percentage and the national average monthly bid amount. Part D beneficiary premiums are calculated as the base beneficiary premium adjusted by the following factors: (1) the difference between the plan’s standardized bid amount and the national average monthly bid amount; (2) an increase for any supplemental premium; (3) an increase for any late enrollment penalty; (4) a decrease for MA-PDs that apply MA A/B rebates to buy down the Part D premium; and (5) elimination or decrease with the application of the low-income premium subsidy. The Part D base beneficiary premium for 2018 is $35.02. In practice, actual premiums vary significantly from one Part D plan to another and seldom equal the base beneficiary premium.

Income-related monthly adjustment amount (IRMAA)

If a beneficiary’s “modified adjusted gross income” is greater than the specified threshold amounts ($85,000 in 2018 for a beneficiary filing an individual income tax return or married and filing a separate return, and $170,000 for a beneficiary filing a joint tax return), then the beneficiary is responsible for a larger portion of the total cost of Part D benefit coverage. Therefore, in addition to the normal Part D premium paid to a plan, such beneficiaries must pay an IRMAA to the standard base beneficiary premium of $35.02 for 2018. Beneficiaries do not pay the IRMAA to the Part D plan; instead, IRMAAs are collected by the federal government.

Part D regional low-income premium subsidy amounts

Full low-income subsidy (LIS) individuals are entitled to a premium subsidy equal to 100 percent of the premium subsidy amount. A Part D plan’s premium subsidy amount is the lesser of the plan’s premium for basic coverage or the regional low-income premium subsidy amount (LIPSA). The 2018 regional LIPSAs are available through the CMS website.

MA regional PPO benchmarks

The standardized PPO benchmark for each MA region is a blend of: (1) a statutory component consisting of the weighted average of the county capitation rates across the region for each appropriate level of star rating; and (2) a competitive, or plan-bid, component consisting of the weighted average of all of the standardized A/B bids for regional MA PPO plans in the region. For 2018, the national weights applied to the statutory and plan-bid components are 66.5 percent and 33.5 percent, respectively.

Beginning in 2017, these benchmarks reflect the average bid component of the regional benchmark excluding EGWPs. The statutory and plan-bid components of the MA regional standardized benchmarks for 19 of the 26 MA regions are available from CMS. In the remaining seven MA regions, there are no regional MA plans.

MA regional EGWP payment rates

For detailed descriptions of the payment policy finalized for 2018 MA regional EGWP payment rates see the 2018 Advance Notice and Rate Announcement. The payment rates for Regional EGWPs are in the file Regional Rates and Benchmarks 2018 which can be accessed on the CMS website.

Kusserow on Compliance: HHS Office of Inspector General adopts new Anti-kickback safe harbors

In a Final rule effective January 6, 2017, the HHS Office of Inspector General OIG amended the rules to the Anti-Kickback Statute (AKS) by adding new safe harbors that protect certain payment practices and business arrangements from sanctions under the AKS. The law provides criminal penalties for individuals or entities that knowingly and willfully offer, pay, solicit, or receive remuneration in order to induce or reward the referral of business reimbursable under federal health care programs. This law was so broad that, as Inspector General, I requested Congress to create an administrative alternative. Upon enactment, I was permitted to identify and create safe harbors that would identify practices that would not result in enforcement actions.  The changes created additional safe harbors that enhance flexibility for providers and others to engage in health care business arrangements to improve efficiency and access to quality care while protecting programs and patients from fraud and abuse. They include:

Changes to existing safe harbors for cost-sharing waivers. Changes were made to the definition of the term “remuneration,” allowing the waiver or reduction of certain patient cost-sharing obligations. Previously, there were cost-sharing waiver exceptions that included waivers for some amounts owed for inpatient hospital services, and amounts owed by individuals who qualified for subsidized services or amounts paid to federally qualified health care centers or certain other qualified health care facilities. The new rule expands these existing safe harbors to cover cost-sharing waivers issued to beneficiaries in all federal health care programs, which includs Medicare, Medicaid, the State Children’s Health Insurance Program (SCHIP), TRICARE, the Veterans Health Administration (VHA) program, and the Indian Health Service (IHS) program.

Waivers or reductions by pharmacies. Pharmacies will now be allowed to reduce or waive cost-sharing amounts imposed under a federal health care program if the waivers or reductions are not offered as part of an advertisement or solicitation which could result in abusive steering of patients. Waivers or reductions offered to certain individuals eligible for Medicare Part D subsidies need only meet the no-advertising, no-solicitation requirement to fall within this safe harbor. For waivers or reductions offered to individuals not eligible for subsidies, the pharmacy must meet several additional requirements. It must not routinely waive or reduce cost-sharing amounts, and must only waive the cost-sharing amounts “after determining in good faith that the individual is in financial need or after failing to collect the cost-sharing amounts after making reasonable collection efforts.”  Providers should note that this rule only applies to pharmacies, and thus would not allow a physician to waive cost-sharing for Part B drugs.

Waivers or reductions for emergency ambulance services. Cost-sharing reductions or waivers for emergency ambulance services will now be allowed, but extend only to emergency ambulance services furnished by a state, municipality, or federally recognized Indian tribe. However, they must not take into account insurance or financial status of the beneficiary, nor can the ambulance provider shift costs to a federal health care program.

Free or discounted shuttle service and local transportation. A new safe harbor will allow eligible entities to provide free or discounted local transportation or shuttle services, as long as they meet defined requirements. An eligible entity is any individual or entity, except for individuals or entities (or family members or others acting on their behalf) that primarily supply health care items, such as durable medical equipment suppliers, pharmaceutical companies, and pharmacies. Transportation is divided into two categories: (1) a “shuttle service” provided by an eligible entity and (2)other transportation offered to federal health care program beneficiaries. Eligible entities must meet five standards: (1) have the availability of the free or discounted local transportation services set forth in a policy, applied uniformly and consistently and not determined in a manner related to volume or value of federal health care business; (2) not be air, luxury, or ambulance-level transportation; (3) not market or advertise the services, nor market health care items and services during the course of transportation, or pay drivers on a per-beneficiary-transported basis; (4) only make the transportation available to established patients; and (5) bear the cost of the transportation services and not shift the burden onto federal health care programs, other payers, or individuals. Simply put, hospitals and other eligible entities will be able to provide some forms of transport services for their patients without fear of violating the AKS, so long as they meet the applicable safe harbor requirements laid out above.

Protected remuneration between FQHCs and Medicare Advantage. Another safe harbor was created that will protect any remuneration between a federally qualified health center (FQHC) (or an entity controlled by such a health center) and a Medicare Advantage (MA) organization pursuant to a written agreement required by regulations. The payment to the FQHC must not be less than the level and amount of payment that the MA organization would make to a non-FQHC entity. Provision of free space by the FQHC to the MA organization would not be covered by the safe harbor, because arrangements must be related to MA plan enrollees being treated at the FQHC. Similarly, financial support from the MA to the FQHC for outreach services or infrastructure costs, for example, would not be covered.

Medicare Coverage Gap Discount Program. A new safe harbor was created that supplements the already-existing statutorily-based Medicare Coverage Gap Discount Program, which allows prescription drug manufacturers to enter into an agreement with HHS to provide access to discounts on drugs at the point of sale. “Applicable drugs” furnished to “applicable beneficiaries” under the Medicare Coverage Gap Discount Program will not be considered remuneration. The rule requires manufacturers to be “in compliance with the requirements of the Medicare Coverage Gap Discount Program,” rather than “in full compliance with all requirements” of the program. “A manufacturer that knowingly and willfully provided discounts without complying with the requirements of the Medicare Coverage Gap Discount Program could be subject to sanctions.”

Technical revision of the AKS. There is in the Final rule a technical correction pertaining to referral services, whereby the language was changed inadvertently in 2002 to say “. . . business otherwise generated by either party for the referral service . . .” and is now changed back to the 1999 language, “. . . business otherwise generated by either party for the other party”.

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 © 2016 Strategic Management Services, LLC. Published with permission.