2017 Advance notice and draft call letter:
Implications for MA and PDP plans
CMS has just released the 2017 advance notice of important information for
Medicare Advantage and Part D plan sponsors (“Plans”). As always, the notice
contains both a mix of opportunities and challenges that plans will need to assess
and develop strategies to address. Most importantly, commentary about general
impact can vary greatly based on specific plan circumstances.
Overview of key proposed changes for 2017
• Estimated MA and FFS growth rate of about 3.0%, which results in a net 1.35% national
average plan payments change in plan payments after considering all proposed changes, which
can vary significantly by county and plan
- Estimated ESRD growth percentage of -2.39%
• One-year holiday from Health Insurance Tax in addition to the MA increase
• ACA FFS-based rates are now 100% phased in for all counties in 2017 (rate caps still apply)
• Proposed changes below will impact plans differently:
- H
CC risk score model includes significant changes in relative risk factors for full dual eligible,
partial dual eligible and institutional members, and statutory minimum +0.25% change in
coding pattern adjustment factor (to 5.66%)
- S tars adjustments for impact of socioeconomic status (SES) on outcomes
- E mployer Group Waiver Plan (EGWP) Part C bids no longer required and payment tied to
non-EGWP bids intended to reduce CMS costs, plus a prospective reinsurance payment
• Annual Part D policy and larger-than-typical benefit parameter changes; and continued increase
in standard coverage in the gap
• Part C meaningful difference test limits unchanged, with some proposed equivalence and TBC
test adjustments
• 2017 risk scores will be based on 50% EDS/FFS and 50% RAPS/FFS
• PBP tool changes to streamline and clarify copay input and display
• No mention of any policy as proposed in recent years for in-home assessments for risk
adjustment
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2017 Advance notice fact sheet
Advance notice
Changes and implications
County benchmark
changes
• 1.35% plan payment increase is a national average and does not
account for all variables that affect plan payments; reflects statutory
minimum coding pattern adjustment update of +0.25% to 2017 value
of 5.66%
• Plans should consider how the following may vary from the national
averages:
- Lower increase for most ACA 6-year transition counties (slightly
higher elsewhere)
- Impact of FFS rate rebasing, which will also be impacted by HCC
model changes
- Variances from -0.6% average risk model change impact
- Variances from average +0.1% average Star change impact
- Contract-specific HCC coding trend, not reflected in 1.35% revenue
change (CMS estimate = +2.2%)
• MA risk scores based on 50% EDS data for 2017 payment instead of 10%
- Impact could be material for some plans depending on EDS
operational status and the quality of ICD-10-based diagnosis
reporting for 2017 payment year risk scores
• One-year holiday from Health Insurance Tax
• 2017 applicable (“quartile”) percentages have been updated based on
2016 FFS rates proposed adjustments reflecting MSSP and Pioneer ACO
performance, SSA ZIP code and VA duals
HCC model changes
• CMS is proposing six new community population risk segments to
replace the current one
- For each of aged and disabled: full duals, partial duals and non-duals
(eliminates the need for a Medicaid status demographic adjustment)
- Reduces risk scores for partial duals and non-duals; raises full dual
scores
- CMS estimated average impact: -0.6%
- Will have an impact on standardized (and rebased) FFS rate
calculations
• Dual status to be based on payment month instead of prior year
• Institutional HCC model: Updated for 2014 FFS data, but segments
unchanged from 2016
- Long-term institutional DE status will be based on payment year
instead of prior year
• New enrollee scores: Updated to 2014 FFS data
• CMS developing technical specs for reporting implications of dual
status changes
• 2017 risk scores based on 50% EDS/FFS and 50% RAPS/FFS
- Two primary issues:
• Increased complexity of the submissions and required data elements
• Changes in the process for submitting supplemental (Chart Review)
data
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2017 Advance notice fact sheet
Advance notice
Changes and implications
Quality Star rating
changes
• No new measures for 2017
• Proposal to use categorical adjustment index (CAI) to reflect impact of
SES on Star ratings (not measure scores) for a subset of measures with
demonstrated statistical correlation to SES
- Additive Star adjustment based on contract level 2015 Dual/LIS and
disabled penetration
- Applied to 2017 Overall, Part C Summary, and Part D Summary Stars
- Negative adjustments could be expected for certain combinations of
lower deciles of dual/LIS/disabled penetration
- Most contracts not expected to change Star level; most changes
expected to be upward
- Simulated 2016 CAI-adjusted scores made available February 22, 2016
• Proposal for contracts that are solely serving the population of
beneficiaries in Puerto Rico
- Use an income-based LIS proxy, where LIS does not exist, to
determine DE/LIS penetration for CAI methodology
- Implement a differentiated weighting scheme for the Part D
medication adherence measures in the calculation of the Overall
and Summary Star Ratings
• Proposal to waive EGWP requirement to submit Part C bids and tie
EGWP plan payments to 2017 non-EGWP bid/savings to benchmark
ratios for each unique county-quartile combination
EGWP changes
- Adjusted to EGWP-specific quality bonus and rebate levels, and
enrolled member risk scores to produce an overall bid + rebate
equivalent EGWP payment, but without an explicit EGWP bid to
determine the amounts
• Uncertainty exists with the exact mechanics of the calculation CMS
intends
• EGWPs may no longer buy-down Part B premium
• EGWPs must still submit PBP for each benefit plan
• Proposed a prospective reinsurance payment to calendar year EGWPs
of $26.50 PMPM
• PPO EGWP bids would no longer be included in the MA regional
benchmark calculation
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2017 Advance notice fact sheet
Advance notice
Changes and implications
Benefits
• Meaningful difference
- Threshold remains at $20 PMPM
- Consideration of applying test at legal entity level instead of
contract level
- CMS considering future guidance for applying test at parent
organization level
- HMO-POS geographic or provider limitations will not be considered
meaningfully different
- D -SNPs and VBIDs (benefit enhancements) excluded from test
- Other SNPs categorized by population served
- MA separate from MA-PD for SNPs and non-SNPs
• Total benefit cost (TBC)
- Threshold remains at $32 PMPM
- TBC Test will not recognize changes to HCC
- TBC for consolidating plans based on each feeder plan, not on
weighted average
- D -SNPs and VBIDs (benefit enhancements) excluded from test
• Maximum OOP (MOOP)
- Cost limits unchanged from 2016
- Accumulated contributions move with member to any plan
type CMS intends to remove service-specific flexibility for plans meeting
voluntary MOOP thresholds over the next few years, but is seeking
input on how to encourage plans to offer voluntary MOOP levels
- Discriminatory cost share assessments updated for changes in
original Medicare costs
- Note that the way plans use the HIP fee holiday could create
problems for TBC in 2018
• L arge Part D benefit parameter increases and further statutory closing
of the coverage gap
Part D key changes
- 11.75% API increase for 2017 (including 6.99% for 2016 and 4.45%
for prior periods)
- 51% generic and 40% brand coinsurance (after manufacturer
discounts) in the coverage gap
• Increasing meaningful difference:
- Between basic and EA PDP plans from $18 to $23 PMPM
- Between EA PDP plans from $30 to $34 PMPM
• CMS has provided formulary tier models with a non-preferred drug
tier option, which can be either a tier with brand and generic drugs, or
a tier with brand only, but not both
• The 2017 cost threshold for specialty tier drugs will be increased to
$670 from $600
• CMS has made several changes intended to improve policies and
outcomes for opioid overutilization
• The 2017 COB user fee is $1.05 PMPY and will be collected for the first
9 months of the coverage year at $0.116 PMPM
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2017 Advance notice fact sheet
Advance notice
Changes and implications
PBP requirement
changes
• The following new requirements will be necessary for PBP approval by
CMS:
Other
announcements
of note
- All Medicare-covered zero dollar cost sharing preventive services
must be included in PBP service category 14a and must not be
included in any other category
- CMS has identified additional PBP service lines in 2017 for services
that can be provided in different health care settings, in which
copays must now be entered and must not be entered elsewhere
- Tiered cost sharing must be applied so that all plan enrollees are
charged the same copay for any specific provider and all providers
are available to all enrollees in the plan
- Copays that differ by place of service may not be unbundled and
must be clearly reflected as a total copay in materials distributed to
members
• Enforcement actions:
- CMS will release for comment draft guidance for determining civil
monetary penalties
- Findings from one third financial audits will be considered for
enforcement actions in 2017
• CMS intends to increase expectations and scrutiny on provider
network information with emphasis on:
- More accurate and efficient provider directories
- The use of new technology to simplify the provider directory
update process
- The ultimate establishment of a single provider network
requirement across all CMS programs (MA, QHP, Medicaid)
Needed reaction for plan sponsors for 2017
Despite the Health Insurance Tax holiday in 2017, the combination of benchmark, risk
adjustment, quality Star and EGWP changes, coupled with the uncertainty of several 2017
payment variables, will mean a different mixed bag of good and bad news for each MA
plan sponsor.
• It is important for plan sponsors to perform their due diligence on those variables that
can be estimated, to minimize the uncertainty of 2017 and thereby minimize their risk
as they consider their benefit and pricing options for 2017.
• Limitations on year-over-year changes (TBC and OOPC) will continue to challenge plans
in terms of response to revenue and operational changes being imposed by CMS.
• Large Part D cost increases will accelerate pressure on MA-PD and PDP plan liabilities
and competitive premium and benefit options
Meanwhile, the previously existing operational and financial pressures still exist, such as the
need for plan sponsors to maintain consistency between risk scores and rising claim costs,
continue improvements on ICD-10 coding and EDS submissions, and increase demand and
tighter monitoring from CMS on quality, care coordination, member communication, and
benefit options and reporting.
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2017 Advance notice fact sheet
How can Optum assist plan sponsors?
It is more imperative than ever that plans continue to execute effectively on the remaining
levers available to them in the areas of quality, risk adjustment and cost of care if they
are to produce achievable, competitive bids and products to reach the goals for benefits,
member premiums and margins.
The Optum approach to health plan revenue management is one that focuses the
alignment of plan sponsor operations and execution with the extremely important strategic
decisions based on financial projections for 2017 and beyond. Our focus is to call out the
impacts of the various management levers available, understand emerging experience on a
real-time basis and maximize realistic, achievable design and operations alternatives in an
increasingly constrained pricing environment.
Actuarial services and performance reporting: The bid process is becoming even more
complex as CMS instructions/rules become more restrictive. Optum has the experience
and tools to assist in the development of strategic bid pricing to help align with a plan’s
operational and strategic goals. We also offer both Parts C and D reporting tools to assist
plans in monitoring their performance during the plan year and the ability to drill down to
understand the source of issues when actual results vary from expected.
Risk score improvement: We offer both the clinical and operational insight and delivery
to improve risk score documentation — combined with the analytics to illustrate the
revenue impacts and critical path for such initiatives.
Stars improvement: We offer projections, assessments, processes, dashboards and other
critical components to improve plan quality outcomes and resulting revenue impacts.
Data management and analytics: Changes called out in connection with the EDS and
ICD-10 transition will require a response that addresses not only the data, but also the
ability to work with your providers of care. Plans will need a strategy to understand the
impacts and forge an appropriate response in providing CMS with data that reflects your
plan risk and performance.
Cost of care management: We offer deep experience in care management, network
management and hands-on experience in creating transformational provider risk-sharing
arrangements.
Optum is unique in its alignment and delivery of the critical combination of actuarial, care
management and operational consulting expertise. In an environment where there are
often more and more issues to address, we have helped achieve the balanced approach our
clients need to deal with the challenges of the Medicare Advantage market.
Contact Optum to discuss how
we can help you assess and
address 2017 rule changes.
Call: empower@optum.com
Email: 1-800-765-6807
Visit: optum.com
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