Last week, the Centers for Medicare & Medicaid Services (CMS) released its 2017 Advance Rate Notice and draft Call Letter (“2017 Draft Call Letter”) for the Medicare Advantage (“MA”) and Part D programs.  With the final 2017 Call Letter to be released April 4, 2015, CMS is providing interested stakeholders until this Friday, March 4th to provide comments.

The 2017 Call Letter proposes a variety of updates to the program, many that are designed to improve the accuracy of payments to plans serving beneficiaries dually eligible for Medicare and Medicaid (“dual eligibles”).  Of note, CMS proposes updates to the risk adjustment model used to calculate payments to MA plans and to the Star Rating system used to evaluate plan performance.  CMS stated that these proposed changes reflect the public comments received when it shared research findings on the accuracy of the CMS-HCC model for paying dual eligible beneficiaries and the impact of socioeconomic factors on the Star Ratings and solicited input.  A few of the interesting 2017 proposals include: Continue Reading CMS Releases 2017 Advance Notice and Draft Call Letter

As Congress is back to Washington for its next work period, ML Strategies has published an Advisory outlining health care issues on the radar for the upcoming weeks.  Highlights include: legislative initiatives on opioid abuse, mental health access, chronic care and a group of innovation bills; the FDA Commissioner nomination; and Medicare Advantage (MA) lobbying efforts.

ML Strategies reminds us that the current Congressional environment – with a possible diversion of resources to a FY 2017 budget, and the impact of Justice Scalia’s death and election year politics – will impact all legislative considerations, including health care initiatives.

Continue Reading Opioids, FDA and Medicare Advantage Spending on the List for Congress

Earlier today, my colleagues at ML Strategies published the Washington Outlook for 2016, offering their insights about what we might expect from Capitol Hill and the Administration in the coming year. The Outlook covers a wide range of issues and includes a preview of the US legislative agenda as well as a look at the Obama Administration’s regulatory plans.

Also, check out the Outlook’s Appendix for an election season cheat sheet, including the dates of the US state primaries and lists of the important Senate and House races to watch, as well as the 2016 House and Senate calendars.

With regard to health care, it is likely that the Administration’s signature health care law will continue to be at the forefront of its domestic agenda.  ML Strategies says that we should expect additional activity on targeted bipartisan reform efforts to modify the ACA.  Issues include:

  • The “30-hour work week” fix.
  • The Simplifying Technical Aspects Regarding Seasonality Act, or the “STARS Act,” which would exempt seasonal employees from the definition of “full time employee” of the ACA’s employer mandate.
  • The “Small Business Healthcare Relief Act,” which would allow for small businesses with fewer than 50 employees that do not offer health insurance coverage to establish a health reimbursement arrangement.
  • Efforts to address rising insurance prices in the exchanges, which could include efforts to modify insurance “rating,” or pricing rules.

Continue Reading ML Strategies Publishes Washington Outlook for 2016

As we start a new year, let’s take a look back at a few hot topics that emerged in the managed care industry in 2015 and will likely be drivers of developments in 2016.

Industry Consolidation – The Changing Landscape

2015 was a year of significant activity for MCOs large and small. In addition to proposed mergers among some of the largest payors, smaller MCOs are also consolidating with other MCOs, as well as service providers, in an attempt to leverage purchasing power and integrate care models. As we discussed in our Pharmacy Industry year in review, consolidation reshaped the traditional PBM industry paradigms with a move away from stand-alone PBMs to MCO and provider-affiliated PBMs.

Competition Scrutiny

Moving into 2016, we will learn whether the proposed consolidations will be approved and whether the trend will continue. The government will also generally continue to scrutinize health care competition, paying close attention to the proposed mergers among Aetna/Humana and Anthem/Cigna. In early 2015, our colleagues highlighted the FTC-DOJ workshop examining health care competition where the agencies’ worked together to identify and examine the potential competitive implications of strategies currently used by providers and payors seeking to reduce costs and improve quality.

We are also beginning to see competition scrutiny expand beyond the regulatory agencies. For example, the House Judiciary Subcommittee on Regulatory Reform, Commercial and Antitrust Law held hearings examining competition in the PBM industry, while the Central District of Illinois District Court permitted a small regional hospital’s antitrust challenge to its largest competitor’s exclusive dealing contracts with payors to move forward. Continue Reading The Managed Care Industry – 2015 Year in Review

The Centers for Medicare & Medicaid Services (“CMS”) recently announced that, beginning January 1, 2017, Medicare Advantage plans in Arizona, Indiana, Iowa, Massachusetts, Oregon, Pennsylvania and Tennessee will be permitted to offer what are known as “value-based insurance design” (“VBID”) plans. Medicare Advantage plans have been unable to take advantage of VBID designs due to a federal prohibitions against varying benefit designs within a plan based on health status or other enrollee characteristics.  To overcome this obstacle, CMS is pointing to its authority under the Affordable Care Act to test innovative health care payment service delivery models.

Generally, VBID plans structure enrollee cost-sharing and other plan characteristics in a way that encourages the enrollees to utilize high-value health care services that are likely to improve their health status. Such plans are structured around certain clinical categories — typically chronic diseases — and have designs that are meant to reward the use of specific therapies or services by individuals falling in those clinical categories.

The VBID plans offered by Medicare Advantage carriers will be targeted at diabetes, congestive heart failure, chronic obstructive pulmonary disease (COPD), past stroke, hypertension, coronary artery disease, mood disorders, and combinations of these categories. CMS has indicated that certain other chronic conditions may be added in the future.

Continue Reading Medicare to Permit Value-Based Insurance Design in Medicare Advantage Plans

On April 16, 2015, President Obama signed into law, the “Medicare Access and CHIP Reauthorization Act of 2015” (MACRA), ending annual temporary patches and massive lobbying efforts since the late 1990s to prevent significant reimbursement cuts for physicians serving Medicare beneficiaries caused by the so-called Sustainable Growth Rate (SGR) formula.  At the end, 392 Members of the U.S. House of Representatives and 92 Members of the U.S. Senate voted in favor of permanently replacing the Sustainable SGR formula in favor of a new system touted as promoting quality over volume.

MACRA also contains several provisions affecting reimbursement to other Medicare providers, program integrity, and fraud and abuse, as well as a mix of other important provisions including extension of the Children’s Health Insurance Program (CHIP).  We will address these provisions in subsequent blog posts.

From the SGR “Patch” to MACRA

Health policy experts have long called for an end to the annual, or even sometime monthly, ritual of “patching” the SGR to avoid reimbursement cuts triggered by unsustainable growth in Medicare spending.  While lawmakers were concerned about the unsustainability of the Medicare program due to costs that outpaced other economic indicators virtually every year, the notion of significantly cutting physician pay put legislators in an untenable situation, especially as the potential “fiscal cliff” increased well into double digit cuts.

The inevitability of Congressional intervention to hold physicians harmless from a SGR cut rose to new heights in 2013 during the annual rate-setting exercise for Medicare Advantage plans.  The Office of the Actuary at the Centers for Medicare and Medicaid Services (CMS) was overruled amidst intense lobbying, including from senior members of the Senate, prior to the publishing the FY 2014 Medicare Advantage rule.  The Actuary’s office had taken the position that the Medicare Advantage rates should be set on the premise that a SGR cut was actually taking place because the law mandated an automatic cut and Congress had not yet stepped in to patch it.  In essence, any decision that relied on the assumption of the SGR cut actually taking place was now a matter of academics and not reality.

Although the SGR is now in the history books, it’s safe to assume that new tensions will arise as the need to control growth in Medicare spending continues amidst a rapidly evolving health care industry.  Akin to how the ACA acted as a catalyst to nationalize certain payment and delivery reform trends, MACRA is likely to accelerate the current movement in health care towards value-based systems.  Thus, stakeholders and policymakers are likely to focus even more on the evolution of payment and delivery reform initiatives due to their increasing relevance and scale.

The New Landscape for Medicare Cost Containment

The SGR tied Medicare physician spending to Gross Domestic Product growth in the overall economy, providing a benchmark that was supported at the time by health care economists.  In reality, however, this measure had little to do with costs and quality in the health care system, and was not sustainable.  MACRA replaces the SGR with a combination of automatic increases for physicians and incentives for them to participate in a variety of pay-for-performance programs and alternative payment models (e.g. medical homes and accountable care organizations).

Between 2015 and 2019, physicians in the Medicare program will receive an annual update of 0.5 percent.  The base reimbursement rate will then hold steady at 2019 levels through 2025, while giving physicians the ability to supplement their reimbursement through payment adjustments in the newly created “Merit-Based Incentive Payment System” (MIPS) and participation in alternative payment models (APMs).  Finally, starting in 2026 and beyond, physicians who receive a significant share of their revenues through an APM are eligible for one percent annual increases as opposed to 0.5 percent updates for those not participating in APMs.

New Reimbursement Pathways
 2015 – 2019  0.5% annual update
   2019 – 2025 0% annual update (MIPS)Negative payment adjustment capped at 4% – 9% (depending on year) for lowest performers.  Positive payment adjustment capped at 3x the respective cut amount for that year for highest performers. (APMs)Automatic 5% annual bonus for participation in qualifying APMs (exempt from MIPS and some EHR “meaningful use” requirements).
 2026 – 0.5% annual update (APMs)1% annual update (in lieu of 0.5% update)

One way to view the new future for Medicare physician cost containment efforts is that it better aligns with existing initiatives to control costs within the context of improving quality.  For example, from 2019 until 2025, reimbursement rates are held constant with no automatic increases or decreases.  This leaves most physicians with two choices: 1) be subject to payment adjustments through MIPS, or 2) participate in qualifying APMs.

MIPS aims to streamline three incentive programs: 1) the Physician Quality Reporting System (PQRS); 2) the Value-Based Modifier (VBM); and 3) Meaningful Use for electronic health records.  Assessments that eventually make up a physician’s composite score will be based on four categories: 1) quality; 2) resource use; 3) meaningful use of electronic health records; and 4) clinical practice improvement activities.

Those physicians with a composite score in the bottom quartile, as compared with a predetermined performance threshold (based on average of last year’s MIPS scores), will receive reimbursement cuts up to the cap set for each year (4% in 2019, 5% in 2020, 7% in 2021, and 9% in 2022).  Negative and positive payment adjustments will be ratcheted up or down in a proportional manner for those scores closer to the threshold.

For physicians with a composite score above the threshold, they will receive a positive payment adjustment up to a maximum of three times the annual cap for the negative adjustments.  Additionally, physicians receiving the top 75% of all scores above the threshold will receive an additional positive payment adjustment, allocated using a linear distribution formula.  In essence, this allows for a greater number of physicians to be eligible for incentive payments, even if the vast majority of them are above the threshold score. Continue Reading With SGR Repealed, Replacement Policy Creates New Priorities

In a highly anticipated announcement on Tuesday, March 10, the Centers for Medicare and Medicaid Services (CMS) released details for a new Accountable Care Organization (ACO) program called the Next Generation ACO (NGACO).  The newest model comes amidst intense discussion from health policy experts and industry leaders on the future of the ACO program at CMS and expected changes to the Medicare Shared Savings Program (MSSP).

The NGACO model differs from the existing portfolio of ACOs in several important ways.  For one, the NGACO offers financial arrangements with higher levels of risk and reward.  In year 2, NGACOs would be able to select a full capitation payment mechanism that would prospectively pay for each attributed beneficiary on a monthly basis.  This is a significant development for some integrated health care systems that have largely stood on the sidelines of the CMS ACO programs due to the lack of incentives and ability to manage from a set amount of funding.

Other distinctions include refined benchmarking methods that ultimately transition away from comparisons to an ACO’s historical expenditures.  By making this change, high performing health systems will have a greater incentive to join/continue in the ACO program and avoid being penalized for past quality and cost containment successes.

Finally, what may be the most interesting additions to the ACO arsenal of tools, are several “benefit enhancements” that will give ACOs the ability to circumvent a series of Medicare rules that go beyond benefits that Medicare Advantage (MA) plans are able to offer.  For example, flexibility around Medicare telehealth rules would allow ACOs to utilize the technology regardless of a patient’s geographic location.  This would allow patients who are homebound or who require care from remote locations (outside of a physician’s office) to be able to receive care using a low-cost and efficient mechanism.

The new benefits include:

  1. Greater access to home visits, telehealth services, and skilled nursing facilities;
  2. Opportunities to receive a reward payment for receiving care from the ACO;
  3. A process that allows beneficiaries to confirm their care relationship with ACO providers; and,
  4. Greater collaboration between CMS and ACOs to improve communication with beneficiaries about the characteristics and potential benefits of ACOs in relation to their care.

One important difference to note between MA plans and the NGACOs is that beneficiaries in the NGACO retain their choice of providers, as opposed to being confined within a network.  Additionally, beneficiaries are not required to pay any additional out of pocket costs to NGACOs, as they do for premium payments in MA.

Continue Reading Obama Administration Announces “Next Generation ACOs”

As a final addition to our series on the 2016 Draft Call Letter, we highlight some of the MA contracting issues raised by the Centers for Medicaid and Medicare Services (“CMS”). Specifically, CMS (1) recommends Medicare Advantage Organization (“MAO”) contract consolidation, (2) MA application changes related to MAOs operating contracts that may not meet minimum enrollment standards, and (3) a two-year prohibition for terminated or non-renewed contracts.

Contract Consolidation

CMS used the Call Letter to encourage MAOs operating more than one contract of the same product type under the same legal entity to consolidate the contracts under a single contract for CY 2016.  Note though, that MAOs are not permitted to consolidate contracts of different product types.

MAOs seeking to consolidate multiple contracts under the same legal entity should submit a formal request that follows the specific guidance provided via an HPMS memorandum dated February 6, 2015 and includes the following:

  1. How the MAO came to operate more than one contract of the same plan type;
  2. The contract(s) to be consolidated and the contract ID into which the MAO wishes to consolidate the contract(s);
  3. The service area covered by the contracts;
  4. The plan types under the contracts; and
  5. Any pending applications under the contracts.

Requests to consolidate contracts for CY 2016 must be received by April 15, 2015 and MAOs can expect to be notified regarding the approval or denial of consolidation requests by May 2015. Continue Reading CMS Call Letter: Medicare Advantage Contracting Considerations

For the last of our series on the 2016 Draft Call Letter, we focus on the provisions impacting plans serving Medicare-Medicaid, or dual eligible, enrollees. As we have previously posted, the Centers for Medicare & Medicaid Services (CMS) has struggled with how to provide high quality, seamless care to dual eligible individuals. Through the 2016 Draft Call Letter, CMS further attempts to ease administrative burdens and provide incentives for plans to better integrate Medicare and Medicaid services. Specifically, the 2016 Draft Call Letter i) proposes changes to the Star Ratings program to reduce the weight of certain measures whose outcome may be impacted by dual status; ii) introduces a potential integrated Star Ratings system for Medicare-Medicaid Plans (MMPs); and iii) requests comments on providing certain administrative flexibilities to allow Dual Eligible Special Needs Plans (D-SNPs) to better integrate services. The Draft Call Letter also provides the annual updates to Low Income Subsidy (LIS) costsharing amounts and the Fully Integrated Dual Eligible (FIDE) Special Needs Plans (SNP) frailty adjustments.

Star Ratings Weights

The most notable provisions of the 2016 Call Letter impacting plans providing care to dual eligible individuals are those related to the Star Ratings program, which we covered in-depth in Monday’s post. As we discussed, this fall CMS released a Request for Information soliciting research showing that plans with a high proportion of dual eligible or LIS enrollees are disadvantaged under the Star Ratings program. CMS released many of the submissions last week, as well as its internal research and analyses. From this research, CMS found that, although there is no evidence to “definitely” identify low-income status as driving the differences in Star Ratings, there may be a correlation between dual/LIS status and the outcomes of a subset of measures. Specifically, after examining 19 of the 46 Parts C and D Star Rating measures, CMS found that LIS/dual status had an impact on the outcome of nine of those measures. For seven of the nine, CMS is proposing to reduce the weight of the measure by half. The measures include: breast cancer screening, colorectal cancer screening, diabetes care – blood sugar controlled, osteoporosis management in women who had a fracture, rheumatoid arthritis management, reducing the risk of falling, and medication adherence for hypertension (for Part D Plans (PDPs) only). This adjustment is proposed for all plans, regardless of a contract’s percentage of dual and/or LIS enrollees.

Please refer to Monday’s post for additional information on these and other proposed changes to the Star Ratings program. Continue Reading CMS Call Letter: Provisions Related to Dual Eligible and Low Income Subsidy Individuals

In past Call Letters, CMS has proposed and finalized significant changes to the Medicare Advantage risk adjustment system including, recalibrations, deletions and additions of diagnoses codes, and questioning of the value of in-house health risk assessments. This year’s Call Letter did not include any major changes to risk adjustment, but nevertheless the Call Letter  includes important risk adjustment information for MA plans.

First, for 2016, CMS has proposed to fully transition to use of the clinically revised CMS-HCC model introduced in 2014. This could have a significant impact on some plans’ overall risk scores, but many plans have likely been tracking their data in the clinically revised model in anticipation of this change. Alongside this change, CMS proposes to calculate each risk score using two scores, one from RAPS accounting for 90% of the score and one from EDS accounting for 10% of the score.

Second, CMS is asking for comments on proposed methods for calculating the MA coding pattern adjustment. CMS believes that MA enrollees are on average no different than Medicare fee-for-services (“FFS”) beneficiaries and therefore, beginning in 2017, is considering establishing a method to ensure that aggregate payments to MA plans are no greater than those that would have been made under the adjusted average per capita costs payment system used prior to 2000, which was prior to risk adjustment. Plans should carefully consider how this proposed methodology would affect their aggregate reimbursement and consider submitting comments to CMS. Continue Reading MA Risk Adjustment in the 2016 Call Letter and … in Health Care Fraud Charges