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.

HHS Praises ACA, Donut Hole Shrinks, and Preventive Care Use Rises

Over 9 million Medicare beneficiaries have saved over $15 billion on prescription drugs since the passage of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148). According to an HHS press release, beneficiaries have saved an average of $1,598 since the passage of the health care law. In the announcement, HHS Secretary Sylvia M. Burwell said that “by providing access to affordable prescription drugs and preventive services with no cost sharing, the Affordable Care Act is working for seniors to help keep them healthier.”

Prescription Drugs

According to HHS, in 2014 alone, 5.1 million seniors and people with disabilities saved a total of $4.8 billion on prescription drugs. The savings to the average beneficiary in 2014 amounted to $941. The figures are higher than they were in 2013, when 4.3 million beneficiaries saved a total of $3.9 billion at an average savings of $911 per beneficiary. The savings are a result of the ACA’s gradual closing of the coverage gap—known as the donut hole—where beneficiaries are forced to pay the full cost of prescriptions out of pocket before catastrophic coverage takes effect. HHS indicates that the donut hole is projected to be closed in 2020, marking 2015 as the halfway point. Under the ACA, in 2015, people with Medicare Part D who are in the donut hole will “receive discounts and savings of 55 percent on the cost of brand name drugs and 35 percent on the cost of generic drugs.”

Preventive Care

The HHS release also celebrated the success of preventive services under the ACA, with 39 million Medicare beneficiaries taking advantage of at least one preventative service with no cost sharing in 2014. Additionally in 2014, almost 4.8 million Medicare beneficiaries took advantage of the Annual Wellness Exam. These numbers represent considerable increases from 2013, when 37.2 million Medicare beneficiaries took advantage of at least one preventative service with no cost sharing and just over 4 million took the Annual Wellness Exam.

Highlight on Utah: Healthy Utah, Happy Utah?

Utah Governor Gary Herbert’s Medicaid expansion plan, nicknamed “Healthy Utah,” was amended and passed by the full Senate on February 25, 2015. The amendments reduced the term of the expansion from five years to two. S.B. 164 is sponsored by Republican Senator Brian Shiozawa. After the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) made Medicaid expansion available and mandatory for all states and a subsequent Supreme Court finding in National Federation of Independent Business v Sebelius made expansion optional, about half of the states decided to expand. Others, like Utah, are still trying to pass an expansion bill. Several states began using Section 1115 waivers, previously used for testing new policies under Medicaid, to expand Medicaid in ways not specifically outlined in the ACA.

Why now?

In general, more conservative states have been resistant to Medicaid expansion due to financial concerns. The national average of those considering themselves religious sits at 49 percent, while 79 percent of Utah citizens consider themselves religious. The majority of those considering themselves religious in Utah, both citizens and state legislators, are part of the Church of Jesus Christ of Latter-day Saints (LDS). Some religious clergy previously united to urge the governor to expand Medicaid coverage, but the absence of LDS leaders illuminated the lack of consensus within the state on the topic. In 2013, Governor Herbert requested information from the state health department regarding expansion options and took his time deciding before moving forward with the Healthy Utah plan.


The state first commissioned a report analyzing five different options of Medicaid expansion. These options ranged from no expansion to full expansion under the ACA to those with incomes up to 138 percent of the federal poverty level (FPL). These five were narrowed down to three: no expansion, expansion to those 100 percent of FPL, and expansion of traditional Medicaid for those at 100 percent of FPL and then using federal funds to provide assistance to those between 100 percent and 138 percent of FPL. This was expanded to include a recommendation for supporting private insurance purchases for the expansion population with incomes up to the FPL (see Utah governor announces Medicaid expansion, January 29, 2014).

So, what’s the plan?

Governor Herbert decided on a Section 1115 waiver proposal that involves a three year block grant. Those eligible will be adults without children with incomes ranging up to 138 percent of the FPL, and those aged 19 to 64, with children and with incomes from 50 to 128 percent of the FPL. The assistance provided to each individual will be based on the following criteria: individual health care needs, household income, ability to work, and access to employer based or family health insurance. Those who receive assistance will be required to pay co-payments, while private insurance options are available for parents with children on Medicaid.

Why this particular plan?

The governor stated that he considers the ACA a policy failure and supports the efforts to repeal it. However, he decided that his state “must deal with the realities of the law” and sought to provide health care for the needy, pointing out that the ACA policies left a gap of about 62,000 Utah citizens making less than $12,000 and no assistance to purchase health care. The governor described four criteria that he sought to meet while providing this much-needed assistance, balancing the interests of those in need of health care coverage and the taxpayers to “work toward the best deal possible.” These criteria involve respecting taxpayers by directing tax money back to the state, supporting private markets by providing financial assistance to allow citizens to purchase of private health insurance as opposed to using the money for federal Medicaid funds, promoting responsibility by including premiums and copays as well as introducing aid recipients to work programs, and maximizing flexibility by limiting it to a three-year program. This three year time span allows the state to evaluate its effectiveness. Provisions are also made for program termination if the federal government restricts promised funding.

Proposed MA, Part D Policy and Payment Updates Focus on Quality, Access

Newly released proposed changes to the Medicare Advantage (MA) and Part D Prescription Drug programs reflect a commitment to better care and smarter spending. The proposed payment and policy changes, which would take effect in 2016, would provide fair payments to plans, reward high-quality care, and encourage wiser spending of health care dollars to minimize disruption and “create a stable and consistent policy environment,” according to an announcement by CMS.

Health Reform Spurs Improvements

Since the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148), MA and Part D have experienced growth and improvement, with MA seeing record high enrollment every year since 2010—a more than 40 percent increase since the ACA was passed—and premiums have fallen by almost 6 percent. Almost all Medicare beneficiaries (90 percent) now have access to a $0 premium MA plan. The announcement notes that the increased enrollment shows that the improvements spurred by the ACA have made the programs more attractive to health plans and beneficiaries. Thus, the proposed changes “will continue this trend.”

Proposed Changes

In its proposed changes, CMS detailed its plan to continue refining the star rating system used by enrollees to select MA plans, with the goal of encouraging improved quality. The proposal also seeks to enhance the value of in-home assessments to support care planning and coordination and improve outcomes. Changes to payment rates vary among plans depending on certain factors. However, the announcement estimates that the expected revenue change would be positive growth of 1.05 percent, with additional growth for plans showing improvement and a focus on customer satisfaction. CMS also proposed working with part D sponsors to ensure access to affordable drug coverage.

Additionally, the proposal seeks to provide enrollees with more information to aid in decision making about care and coverage. Specifically, steps are proposed for ensuring the maintenance of accurate provider directories such that enrollees can better understand what providers are available to them.