Continuing our series analyzing the recently proposed Contract Year 2023 Policy and Technical Changes to the Medicare Advantage and Medicare Prescription Drug Benefit Programs rules (Proposed Rule), this post focuses on a few items that are specific to Medicare Advantage (MA) Plans. Here, we discuss CMS’ proposals to (1) require initial and expanded services area applicants to submit their proposed contracted networks during the application process, (2) clarify that beneficiary access requirements during disasters and emergencies apply when there is a “disruption in access to health care,” (3) return to medical loss ratio (MLR) reporting requirements from 2014 – 2017, and (4) adjust how the maximum out-of-pocket (MOOP) limit is calculated for dually-eligible beneficiaries.

Network Adequacy Standards

MA regulations require that MA Organizations (MAOs) maintain a network of appropriate providers sufficient to provide adequate access to covered services for enrollees. The standards outline specific time and distance thresholds for each combination of provider or facility specialty type and each county – MAOs must ensure that at least 85% of beneficiaries in micro, rural, or counties with extreme access conditions have access to at least one provider/facility of each specialty type within the published time and distance standards (the requirement is 90% for beneficiaries residing in large metro and metro counties). Further, MAOs must attest to compliance with these network adequacy standards during the application process for a new or expanded service area.       

Beyond this attestation, there currently is no requirement for an MAO to demonstrate compliance during the application process and CMS primarily relies on its triennial network review process to ensure compliance with these standards. While CMS may consider information related to an MAO’s previous failure to comply with an MA contract due to network access and adequacy issues resulting in sanctions or civil monetary penalties, CMS will not deny an application based on the evaluation of the MAO’s network for a new or expanding service area, and has not performed network adequacy reviews during the application process since 2018 (for contract year 2019).

As CMS states in the Proposed Rule, since removing the network adequacy reviews from the application process in 2018, it has observed a pattern of deficiencies in its network reviews once the MA plans were operational. In response, the Proposed Rule would require initial and expanded service area applicants to submit their proposed contracted networks during the application process beginning with the 2024 application cycle. CMS is also proposing to provide MAO applicants with a 10%-point credit towards the time-distance percentage requirements for a new service area or a service area expansion.

Beneficiary Access to Care During Disasters and Emergencies

Current regulations require MAOs to cover services provided by non-contracted providers and to waive gatekeeper referral requirements when health plan services are impacted by disasters or emergencies, including public health emergencies (PHEs). The purpose of these regulations is to (1) ensure MA beneficiaries have access to health care services, and (2) inform out-of-network (OON) providers of the terms of payment for furnishing services to affected enrollees during disasters or emergencies. In response to questions received about the applicability of certain requirements during the COVID-19 PHE, CMS proposes to clarify that MAOs are required to comply with these standards when there is both a declaration of disaster or emergency and a disruption of access to health care. A “disruption of access to health care” is defined as “an interruption or interference throughout the service area such that enrollees do not have ability to access contracted providers or contractors providers do not have the ability to provide needed services, resulting in MAOs failing to meet the normal prevailing patterns of community health care deliver in the service area.” CMS also proposes technical changes to clarify the period of time during which MAOs must comply with these obligations.  

Medical Loss Ratio Reporting

MLR is a measurement of the revenue used for patient care relative to other items, such as administrative expenses or profits. The Affordable Care Act instituted MLR standards for a wide variety of payors, including those operating under MA and Part D plans, the commercial market, and Medicaid. For MA plans, the MLR reflects the percentage of revenue received under the contract spent on incurred claims for all enrollees (including prescription drug cost for Medicare Advantage Prescription Drug (MAPD) plans), quality initiatives, and amounts used to reduce Part  B premiums. For Part D plans, the MLR reflects the percentage of revenue received under the contract spent on incurred claims (reduced by direct & indirection remuneration) for all enrollees for Part D prescription drugs and on quality initiatives.

The MLR requirements for MA and Part D plans, which went into effect beginning in 2014, require MA and Part D plans to achieve a minimum MLR of 85% or face sanctions and financial penalties. Between 2014 and 2017, CMS required MA and Part D plans to report MLR data on forms that were modeled after the commercial MLR reporting requirements, with the purported aim that requiring payors to use different MLR reporting forms for their commercial versus Medicare products increased the administrative burden on such organizations. The reports used for 2014-2017 required the underlying data used to calculate and verify the MLR and any remittance amount, such as incurred claims, total revenue, expenditures on quality improving activities, non-claims costs, taxes, and regulatory fees. In response to then-President Trump’s Executive Order on Reducing Regulation and Controlling Regulatory Costs (2017), however, CMS significantly streamlined the Medicare reporting requirements for MLR in 2018, requiring that MA and Part D plans only report on the following seven elements: Contract Year, Contract Number, Organization Name, Date MLR Form Finalized, Contact Information, Adjusted MLR, and MLR Rebate Amount owed.

CMS proposes to reinstate the detailed MLR reporting requirements that were in effect for contract years 2014 through 2017. CMS is also proposing to collect additional details on plan expenditures to allow them to better assess the accuracy of MLR submissions, the value of services being provided to enrollees and the impacts of recent rule changes.  

Maximum Out-of-Pocket Policy for Dually Eligible Beneficiaries

Current regulations require MA plans to establish a limit on beneficiary cost-sharing for Medicare Part A and B services, after which the plan pays 100% of the service costs. MA plans for dually eligible beneficiaries have the option to count only those amounts the individual enrollee is responsible for paying, net of any state responsibility or exemption from cost-sharing toward the MOOP limit, rather than the cost-sharing amounts for services the plan has established in its plan benefit package. CMS found that this results in virtually no cap on the amount a state could pay for a dually eligible beneficiary’s MA cost-sharing. Essentially, state Medicaid programs end up paying more in Medicare cost-sharing for dually eligible enrollees than if the plan calculated attainment of the MOOP limit based on cost-sharing amounts for services in its plan benefit package.

As a result, CMS proposes to require the MOOP limit for an MA plan be calculated based on the accrual of all Medicare cost-sharing in the plan benefit, whether that Medicare cost-sharing is paid by the beneficiary, Medicaid, other secondary insurance, or remains unpaid because of state limits on the amounts paid for Medicare cost-sharing and dually eligible individuals’ exemption from Medicare cost-sharing. CMS expects this change to create significant cost savings for state Medicaid Agencies and increase payments to providers serving dually eligible beneficiaries.