The Loop

Medicare Advantage Update

Filed under: Benefits

Medicare Part A covers hospital care, post-discharge skilled nursing facility care and some home healthcare and hospice. It is free to those who paid Medicare taxes for at least 10 years. Medicare Part B covers physician and specialist care, some preventative services, outpatient care and medical equipment. It is optional and can be purchased for a fee.

Alternatively, people age 65 and up can choose to assign their benefits under Medicare Parts A and B and purchase a private Medicare Advantage (MA) plan – also known as Part C. This type of Medicare plan is administered through a private insurer and may have a limited network of providers.

Since 2004, the number of beneficiaries enrolled in private Medicare plans has more than tripled. Last year, among 61 million Medicare enrollees, 20 million opted for Medicare Advantage. Of Medicare Advantage members, about 18% (three million retirees) receive their plan through an employer or union.

Medicare Advantage Employer Group Waiver Plans
A new federal proposal would cut government overpayments made to Medicare Advantage Employer Group Waiver Plans (MA-EGWPs) sponsored by employers and unions. In lieu of the current bidding process, the Centers for Medicare & Medicaid Services (CMS) would require those plans to receive predetermined payments. This would subsequently reduce insurers' plan revenues.

According to the Medicare Payment Advisory Commission (MPAC), the proposal could save between $1 billion and $5 billion over five years. However, the plan might increase Medicare Part C costs and could discourage employers and unions to stop offering Medicare Advantage coverage to retirees. This would require beneficiaries to purchase an individual plan or opt for traditional Medicare.

2019 Medicare Advantage and Part D Rate Announcement and Call Letter
On April 2, 2018, CMS issued a final rule with updates for Medicare Advantage (MA) in an effort to offer a wider array of choices and improve quality of care. Combined with new changes for Medicare Part D prescription drug plans, CMS projects the new rules will save $295 million a year between 2019 through 2023, leading to reduced premiums or additional benefits.

New Supplemental Benefits
CMS will expand how it defines the "primarily health-related" benefits for next year to cover items and services that may not be directly considered medical treatment. Examples may include air conditioners for people with asthma, healthy groceries, rides to medical appointments and home-delivered meals. Simple modifications in beneficiary homes to help with mobility and balance may qualify (e.g., installing a wheelchair ramp and grab bars in the bathroom), as well as home aides to help with dressing, eating and other personal care needs related to daily living activities.

The new rule indicate that benefits must be "medically appropriate" and recommended by a licensed health care provider. Note, too, that this expansion of benefits applies only to Medicare Advantage plan participants, not original Medicare.

Removing Meaningful Difference Requirements
Beginning in 2019, CMS is eliminating the requirement that multiple MA plans from an issuer within the same county be significantly differentiated. This will enable issuers to create benefit packages that vary based on enrollee health conditions. In other words, some enrollees will pay higher or lower cost sharing and deductible amounts for certain covered benefits based on health status or progression of disease state, with the main criteria that similarly situated individuals are treated uniformly. By eliminating the meaningful difference requirement, CMS projects issuers will develop a larger range of plan options for beneficiaries. However, it also means that payment models will be subject to underwriting and pre-existing conditions.

Payment Update
In April, CMS also released a 3.40% payment increase for Medicare Advantage (MA) plans in 2019, which is well above the initial 1.84% proposal and higher than the 2.95% increase for 2018. The average increase in payments to insurers is estimated to be about 6.5 percent when factoring in changes based on how sick or healthy people are.

The accompanying table shows the impact of the policy changes on plan payments relative to last year. Medicare Advantage growth rates are linked to the overall Medicare Fee-For-Service per capita growth rate, which have grown over the past year.


2019 Advacne Notice

2019 Rate Announcement
Effective Growth Rate 4.35% 5.28%
Rebasing/Re-pricing N/A 0.49%
Change in Start Ratings -0.2% -0.26%
Medicare Advantage coding intensity adjustment 0.01% 0.01%
Risk Model Revision 0.28% 0.28%
Encounter Data Transition -0.04% -0.04%
Employer Group WAiver Plan Payment Policy -0.3% -0.1%
Normalization -2.26% -2.26%
Expected Average Change in Revenue 1.84% 3.40%

Risk Adjustment Model
For 2019, CMS has finalized a Risk Adjustment model used to pay for beneficiaries enrolled in Medicare Advantage plans. The model adds mental health, substance use disorders, and chronic kidney disease conditions as well as a variety of additional technical updates. The finalized rule will base 75% of Medicare Advantage risk scores on traditional fee-for-service data and 25% based on encounter data – up from 85% fee-for-service data and 15% encounter data in 2018.

The agency plans to update this model further for 2020 by incorporating the number of conditions an individual beneficiary may have, referred to as the "Payment Condition Count Model".

Medical Loss Ratio
CMS is significantly reducing the amount of Medical Loss Ratio (MLR) data that MA plan sponsors must submit to CMS each year. The MLR calculation also has been revised to include expenses related to fraud reduction activities (including fraud prevention, fraud detection, and fraud recovery) and Medication Therapy Management (MTM) programs.

Medicare Advantage Open Enrollment Period
Starting in 2019, the existing MA disenrollment period (January 1st - February 14) will be replaced with a new Medicare Advantage open enrollment period (OEP) from from January 1st through March 31st each year. The new OEP permits MA plan beneficiaries to make a one-time election into another MA plan or Original Medicare. They also will be able to make a coordinating change to add or drop Part D coverage during the same OEP.

Star Ratings
One of the ways participants can compare different Medicare Advantage plans is through a Star Ratings system. CMS posts Star Ratings for each Part C plan each year, which it also uses to calculate Quality Bonus Payments for the plans.

In its most recent rule change, CMS has applied:

  • New rules for assigning Star Ratings to contracts that consolidate to reflect the performance of all related contracts, even ones that no longer exist independently.
  • New methods for when the agency has reduced data due to incomplete appeals. These methods are designed to improve Star Ratings predictability by enabling plans to invest in improvements for quality of care.
  • Codified principles for adding, updating, and removing measures to the Star Ratings methodology for calculating and weighting measures.

Drug Coverage
Beginning in 2019, CMS will allow Medicare Part D plans to limit coverage for frequently abused drugs, including opioids and benzodiazepines. Furthermore, plan sponsors will be expected to limit initial opioid prescriptions to treat acute pain to no more than a seven-day supply. CMS did not issue a decision on whether discounts that pharmacy benefit managers negotiate for drugs should be passed on to patients.

New Budget Deal
As part of the federal budget agreement that Congress approved in March, the Medicare patient doughnut hole share cost will be reduced in 2019. The doughnut hole is a reference to when a beneficiary's total annual drug expenses reach $3,750 (2018); at that point he must pay a higher percentage of the cost. The share cost will be reduced from 35% to 25% – one year ahead of schedule.

The budget deal also calls for the previous annual caps on how much Medicare pays for physical, occupational or speech therapy to be eliminated. Medicare and Medicare Advantage enrollees remain eligible for therapy indefinitely as long as their medical provider confirms their need for therapy and they continue to meet other requirements.

Note that issuers of new 2019 Medicare Advantage plans must submit benefit packages for CMS approval before the fall annual open enrollment begins.

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