Summary

The Centers for Medicare & Medicaid Services (CMS) has released its annual payment and policy guidance for Medicare Advantage and Part D plans. CMS is continuing to find ways to inject more flexibility into these programs, spur innovation and diversification among plans, fine-tune payment models, and involve Part D plans in efforts to curb the opioid epidemic.  CMS is accepting comments on its proposals through March 5, 2018.

In Depth

On December 27, 2017, and February 1, 2018, the Centers for Medicare & Medicaid Services (CMS) released Parts I and II, respectively, of its annual payment and policy guidance for Medicare Advantage (MA) and Part D plans (the Advance Notice). Our key takeaways include the following:

• Consistent with the proposed regulation issued on November 28, 2017, CMS is continuing to find ways to inject more flexibility into the MA and Part D programs. The expansion of supplemental benefits is a good example of this flexibility, and will likely spur innovation and diversification within the MA industry.

• The national focus on the opioid epidemic is apparent in this Advance Notice and the recent proposed regulations, with CMS asking Part D Sponsors to step up to the plate in combatting opioid overutilization.

• CMS also continues to fine-tune the payment model for Medicare Advantage Organizations (MAO), with proposals to increase payments for members that have multiple chronic conditions and increase the weight of encounter data for risk adjustment purposes.

We address each of these topics in more detail below. Plans and other interested parties can comment on these proposals through March 5, 2018.

Proposed Expansion of Permissible Supplemental Benefits

One of the key features of the MA program that differentiates it from Fee-for-Service Medicare is the ability of MAOs to offer supplemental benefits to their members that are not covered by Fee-for-Service Medicare. These benefits can help MAOs attract members and keep them healthy. Today, some of the most common supplemental benefits include preventative dental care, vision benefits, hearing aids, podiatry services, nurse hotlines, transportation services and gym memberships.

CMS has historically defined the scope of what MAOs may offer as supplemental benefits more narrowly than what is required by statute. Currently, the primary purpose of a supplemental benefit must be “to prevent, cure or diminish an illness or injury” and daily maintenance services are specifically excluded from this category. CMS now proposes to expand the scope of permissible supplemental benefits to include items and services with the primary purpose of:

• Compensating for physical impairments,

• Ameliorating the functional/psychological impact of injuries or health conditions, or

• Reducing avoidable emergency and health care utilization.

In practice, this means that MAOs will have significantly more discretion in identifying and offering supplemental benefits that they think will be attractive to prospective enrollees and/or improve overall health outcomes, and may result in greater differentiation among MA plans beginning as early as 2019. For example, CMS has indicated that MAOs would be permitted to offer daily maintenance services, such as non-skilled in-home support services, to members. While some of these services are covered under Medicaid, seniors that are not eligible for Medicaid typically pay out of pocket or through long-term care insurance for these in-home support services. Depending on the types of benefits implemented by MAOs, this could represent a valuable benefit to many Medicare beneficiaries and a potential new payment source for home care providers. Currently, supplemental benefits do not need to be provided through Medicare providers, nor at Medicare certified facilities (although they cannot be provided by providers that have been excluded or opted out from Medicare).

CMS reminds MAOs that these additional items and services must still be focused directly on an enrollee’s health care needs, medically appropriate and ordered by a licensed provider as part of a care plan. As has historically been the case, all supplemental benefits will need to be approved by CMS as part of the bid submission process. Other limitations on supplemental benefits will likely continue to exist. For example, an MAO cannot condition eligibility for a supplemental benefit on utilization (e.g., offering a gym membership only if a member attends classes biweekly). MAOs also may not design plans with supplemental benefits that only appeal to healthier beneficiaries. CMS stated that it will issue more detailed guidance for MAOs regarding the expanded supplemental benefit rules in advance of the June 2018 bid submission deadline.

Use of Drug Utilization Review Controls to Combat Opioid Overutilization

Recognizing the gravity of the national opioid epidemic, CMS proposes to enhance the role Part D Sponsors will play in addressing opioid overutilization. Building on its proposals in the proposed rule released on November 28, 2017, CMS specifically proposes both retrospective drug utilization review (DUR) efforts as well as prospective edits at the point of sale (POS) to combat opioid overuse.

The retrospective DUR activities are meant to identify potential overutilizers of opioids and enable Sponsors to provide appropriate case management. CMS launched the Overutilization Management System (OMS) in July 2013, which identifies beneficiaries at significant risk due to a combination of high levels of opioids as well as multiple prescribers and/or use of multiple pharmacies. CMS proposes enhancement of OMS by flagging beneficiaries who concurrently use both opioids and “potentiator” drugs, such as gabapentin and pregabalin, as such combined drug use is associated with opioid-related deaths and is susceptible to misuse at high doses. CMS also proposes a new Pharmacy Quality Alliance (PQA) star ratings measure, which would reflect the concurrent use of opioids and benzodiazepines. CMS notes that it expects Sponsors to report on the results of implementing these efforts and requests feedback on Sponsors’ experience with potential overuse of potentiator drugs with opioids, whether flagging such use would be helpful, and how a case management approach could help combat such overuse.

CMS also proposes that Sponsors should implement certain safety alert edits at the point of sale. These include both “hard” edits, which can only be overridden by the Sponsor, and “soft” edits, which can be overridden by the pharmacist. CMS sets forth proposals for a number of specific edits, which include a hard edit when a beneficiary’s opioid prescription exceeds certain thresholds, including dosage thresholds and maximum days’ supply, and a soft edit for duplicative therapy of multiple long-acting opioids. Sponsors will be required to submit information about their safety edits through HPMS; the first data collection will be in February 2018 for 2017 data.

CMS acknowledges some of the difficulties that may result from implementation of these proposals, and seeks feedback not only on the proposals themselves, but also how best to manage multiple edits and reduce confusion. Sponsors will be responsible for providing adequate training for network pharmacies and customer service representatives with respect to these edits. Despite these proposals, however, CMS also emphasizes that Sponsors must nonetheless provide appropriate access to medication-assisted therapy to beneficiaries who need it, and CMS will not approve formularies that discourage enrollment of members that use these drugs.

Increasing Risk Adjustment Payments for Members with Multiple Chronic Conditions

CMS adjusts payments to MAOs based on the health status of their enrollees using the CMS-Hierarchical Condition Category (HCC) risk adjustment model. CMS proposes a number of changes to the CMS-HCC risk adjustment model for 2019 and future years, and the Agency estimates that the changes will result in a 0.28 percent increase in payments to MAOs in 2019. The most significant change would be the addition of a new coefficient to represent the number of conditions a beneficiary has, under the “Payment Condition Count” model. Although the risk adjustment model is already additive and “effectively provid[es] an adjustment as the number of conditions increases,” CMS interprets the 21st Century Cures Act mandate to “take into account the total number of diseases or conditions of an individual enrolled in an MA plan” as requiring this additional coefficient. The goal of this change is to compensate MAOs for the financial impact associated with the presence of multiple chronic conditions, which tends to increase the cost and complexity of care.

CMS proposes to limit the condition count to only those health conditions that are already included in the CMS-HCC risk adjustment model for payment, but invites comment on the possibility of counting all conditions in the condition count. Because only certain health conditions “risk adjust” and therefore result in additional payment to an MAO, counting all conditions in the “Payment Condition Count” would result in MAOs receiving some financial benefit for members who have multiple health conditions (e.g., several non-severe conditions that require additional management), but no conditions with a current risk adjustment impact.

CMS proposes to phase in these changes. For Payment Year 2019, risk scores would be a weighted blend of those calculated with the proposed “Payment Condition Count” model (weighted at 25 percent) and those calculated with the 2017 CMS-HCC model (weighted at 75 percent). The weight given to the risk scores calculated with the new model would increase to 50 percent in 2020, 75 percent in 2021 and 100 percent in 2022. Although some phase-in is required by statute, CMS acknowledges that it may be possible to delay the changes until 2020 and seeks comment on that approach.

Continued Phase-In of Encounter Data

CMS also proposes to continue phasing in the use of encounter data as a source of information for calculating risk scores. For many years, CMS has been working to increase the role of encounter data in calculating risk adjusted payments to MAOs, but the effort has been plagued by data reliability issues, as cited by the Government Accountability Office and industry analysts. CMS currently uses a blended approach, calculating risk scores with a weighted blend of: (1) encounter data and FFS diagnoses, and (2) RAPS data and FFS diagnoses. Last year, CMS announced that it would take a step back from the phase-in of encounter data for 2018, reducing the weight of encounter data in the risk score calculation from 25 percent in 2017 to 15 percent in 2018. For 2019, CMS now proposes to increase the weight of encounter data back up to 25 percent, but has not indicated its plans for continued phase in of this data over future years.

In order to address some of the key concerns about the completeness of encounter data, CMS also proposes to supplement encounter data with RAPS inpatient submissions in 2019. CMS stated that “[e]ncounter [d]ata inpatient submissions are low compared to corresponding RAPS inpatient submissions,” meaning that allowing the supplementation “will improve the completeness of the data for payment in 2019.” CMS projects the continued transition to encounter data will have a -0.4 percent impact on payment to MAOs for 2019.

Star Ratings of Consolidated Contracts

In the Advance Notice, CMS referenced the proposal in the November 28, 2017 proposed rule that would change the Star Rating assignment methodology for consolidated contracts. CMS did not indicate whether this proposal would be finalized and, if so, when it would become effective, noting that “the application of this policy for CY 2019 and future periods will be addressed in the pending rulemaking.”

The comment period for these and other proposals remains open until March 5, 2018 and CMS plans to issue final guidance on April 2, 2018.