Earlier this week, CMS announced in its Final Call Letter that Medicare Advantage rates would rise an average of 0.4 percent in 2015, instead of falling 1.9 percent as proposed in February.  CMS’s shift in course may stem from the 1300 comments the agency received in response to February’s advance notice, which announced Medicare Advantage rate cuts along with a range of other controversial policies.  This is the second straight year in which CMS proposed significant rate reductions, but then backtracked following a review of stakeholder comments.

The Final Call Letter contains many significant departures from February’s draft, again most likely in response to stakeholder comments.  CMS opted not to finalize several proposals:

• Diagnoses from Enrollee Risk Assessments Resulting from Home Visits.  CMS expressed concern that provider visits to beneficiaries’ homes were used to gather diagnoses for payment rather than to provide treatment to beneficiaries and proposed to exclude diagnoses obtained from home visits for purposes of 2015 risk adjustment payments.  CMS did not move forward with this proposal, but noted that it will study data submitted by Medicare Advantage Organizations to determine whether further policy changes are required.

• Enhanced Alternative Plans.  CMS proposed that all Part D enhanced alternative plans would be required to provide additional cost-sharing reductions in the coverage gap for formulary generic and brand drugs.  Many commenters opined that CMS’s proposal could cause disruption to beneficiaries with respect to their existing plans.  As a result, CMS opted to abandon this proposal.

• Star Ratings.  CMS did not move forward with several changes to Star Ratings, the plan rating scoring system used to measure Part C and D plan quality.  Most notably, CMS opted to neither: (1) pursue independent plan audits to dispute CMS’s reductions in Star Ratings; nor (2) apply incremental reductions to measures based on the number of errors CMS finds.  These proposals were aimed at ensuring the integrity of data supplied by plans to calculate Star Ratings, an issue CMS will continue to study. CMS remains committed to Star Ratings and moved forward with other updates.  The Final Call Letter contains an Appendix that summarizes stakeholder comments to CMS’s proposals impacting Star Ratings.

Some other significant policies announced in the Final Call Letter include:

• Part C CMS-HCC Risk Adjustment Model.  CMS will continue to blend risk scores in 2015 utilizing the 2013 CMS-HCC and 2014 CMS-HCC models, but will use a 67 percent and 33 percent blend, respectively.

• Part D Risk Adjustment Model.  Instead of using an updated RxHCC model for prescription drug risk scores in 2015, CMS will delay implementation of the updated model and continue to use the RxHCC model used in 2014.  CMS delayed implementation of the updated model in response to many commenters who requested that CMS seek additional input from the industry and offer plans more time to assess the impact of the change before implementation.

• Changes to Provider Networks.  Beginning in 2015, Medicare Advantage Organizations must notify CMS when they plan network changes that the Medicare Advantage Organization considers “significant.”  CMS will then consult with the Medicare Advantage Organization to assess whether further actions are required to ensure that Medicare standards will continue to be met.

CMS appears to be listening to concerns of plan sponsors, other stakeholders, and Congress, as the Final Call Letter comes several weeks after CMS’s Administrator wrote a letter stating that a number of the most significant provisions of the January 2014 proposed regulation would not be finalized.

CMS highlights that the Medicare Parts C and D programs have expanded in size and improved in quality over the past several years.  Thirty percent of Medicare beneficiaries are enrolled in a Medicare Advantage plan, and Medicare Advantage enrollment has increased by 38 percent since enactment of the Affordable Care Act.  CMS also asserts that Medicare Advantage enrollees are receiving better healthcare quality, as over half of Medicare Advantage enrollees are in plans rated with 4 or more stars compared with 37 percent of Medicare Advantage enrollees who were enrolled in plans with 4 or more stars in 2013.