Featured in Health Business Daily, Jan. 30, 2018

CMS Gives MA Plans Modest ’18 Pay Hike, Pushes Need for Better Opioid Monitoring

Reprinted from HEALTH PLAN WEEKLY, strategic business, financial and regulatory analysis of the health insurance industry. Subscribe today!

By Judy Packer Tursman, Senior Reporter
April 10, 2017Volume 27Issue 13

CMS’s 2018 final Call Letter issued April 3 for Medicare Advantage (MA) and Part D plans provides a higher-than-expected, though still modest, pay boost for next year. The document also focuses heavily on better care coordination between payers and prescribers to avoid opioid abuse.

For 2018, CMS will increase payment rates for MA plans by 0.45%, excluding coding benefits, which is slightly above proposed growth of 0.25% in the agency’s draft call letter released Feb. 1. Plans’ expected average year-over-year increase in revenue, with the coding trend, is expected to be 2.95%. CMS responded to plans’ concerns by reducing its phased-in reliance on encounter data, which is being used to help calculate risk scores, to 15% in 2018, down from 25% this year.

“Our view of Medicare Advantage generally is that it is a stable and growing line of business,” Cara Kelly, vice president of Avalere Health, tells AIS Health. “We anticipate that the new [Trump] administration will take a favorable view of Medicare Advantage and will be receptive to plan concerns.” Kelly describes CMS’s 185 pages of final MA/Part D updates for 2018 as being based on a draft that “overall reflected a very conservative approach…except I think the plans got a win” temporarily on encounter data. But MA plans still have concerns about such matters as phasing in encounter data and the impact of Medicare/Medicaid dual eligibles on star ratings, she says.

“There are issues that plans will certainly want to continue discussing with the agency,” Kelly says, “but bottom line, there are no surprises [in CMS’s 2018 final Call Letter], and CMS is showing a willingness to discuss [matters] with the industry.”

In fact, Kelly notes that CMS’s document includes a broad request for ideas on potential regulatory, sub-regulatory, policy, practice and procedural changes to the MA/Part D program. This could include changes to benefit design and the way plans are paid, monitored and measured, CMS said. The agency is accepting feedback through April 24. “It will be very interesting to see whether they make those ideas public,” Kelly says, adding that CMS’s request “seems like a clear signal the administration is saying, ‘Our ears are open.’”

“Obviously, there’s no market that’s risk-free, but our outlook on MA growth is favorable,” Kelly says. CMS’s pullback on encounter data is “the big story on the MA side,” she says, describing MA plans’ 2018 payment increase as slightly smaller, though generally consistent, with previous years’ hikes.

Health Plan Weekly

Yet MA plans are taking “a bigger hit than in previous years” on the normalization factor that CMS applies to keep plans’ risk score at 1.0 for the average beneficiary, she says. The factor will have a negative 1.9% impact for 2018, in keeping with the draft Call Letter.

Nationwide, CMS reported 468 MA and MA-PD (prescription drug) plan contracts with 18.5 million total enrollees, and 64 stand-alone Prescription Drug Plan (PDP) contracts with 25.1 million total enrollees as of March 1. The Congressional Budget Office expects MA to grow to 30 million, or 40.5% of total Medicare enrollment, up from the current 33%, by 2026.

In general, Wall Street analysts seemed to view MA/Part D program developments for next year as positive and found nothing unexpected in CMS’s Call Letter, with Citi Research analysts noting that the MA rate environment appears stable. “We continue to view Medicare Advantage as a major beneficiary of the election, as GOP lawmakers seem likely to favor the program through improved reimbursement,” Oppenheimer analysts said in an April 4 note to investors.

But Citi and other analysts noted that the return of the Affordable Care Act’s health insurer fee for 2018 could reduce net revenue and must be considered in plans’ 2018 bids due June 5.

Stifel analysts said April 3 that CMS’s 2018 pullback on its gradual shift to a 50%-50% blend of encounter data and RAPS (Risk Adjustment Processing System) for risk adjustment should be well received by managed care organizations. “The traditional [RAPS] method…offers the MCOs more influence over risk adjustment conclusions. Encounter data gives CMS more influence in the process,” they said.

Among major MA players, it appears that Centene Corp., Cigna Corp., Molina Healthcare, Inc. and Aetna Inc. will experience the largest increase in payments, Cowen & Co. analyst Christine Arnold said in an April 4 note. She estimated payment hikes of 3.1% and 2.9%, respectively, for UnitedHealthcare and Humana.

On the Part D side, “there really wasn’t much in the Call Letter, which is probably to be expected with a new administration,” says Jeff Baker, senior consultant with BluePeak Advisors LLC. He says there is nothing new in PDP payment methodology for 2018, CMS isn’t narrowing Part D risk-sharing parameters, and “the donut hole’s not going away any time soon.…If they decide to close the coverage gap, it would be 2019 at the earliest.”

CMS’s call letter outlines small increases in Part D benefit parameters and drug subsidies, similar to previous years. For 2018, the standard benefit’s deductible is $405, initial coverage limit is $3,750, and out-of-pocket threshold is $5,000, all up slightly over 2017.

“The most significant change is around opioids and overutilization methodology,” Baker says of CMS’s final MA/Part D updates for 2018.

In its April 3 document, CMS said it expects “all Part D sponsors to focus on improving the coordination of care among these beneficiaries using high dosage[s] of opioids, and MA plans with prescription drug coverage in particular should consider expanding the care management they provide enrollees.”

Specifically, CMS aims to enhance its two-pronged approach in Part D that uses an overutilization monitoring system (OMS), launched in 2013, to retrospectively identify and provide case management to potential opioid overutilizers. The strategy also uses morphine equivalent dose (MED) point-of-sale edits to prospectively identify potential overuse, trying to give real-time safety alerts at the pharmacy.

In the final Call Letter, CMS said it is revising OMS criteria and shortening measurement from a year to six months, to align with the Centers for Disease Control and Prevention’s recently updated opioid prescribing guidelines. CMS said it expects plans to implement soft and/or hard safety edits for opioids for 2018, as was done this year, but won’t require hard edits. Plans using hard edits should rely on the prescriber’s word that the MED is medically necessary, the agency said.

“Opioids are a big topic right now,” Baker tells AIS Health. “We do a lot of the audits for CMS, and ever since they did the MED edits, a lot…has been mitigated, but I still think CMS will continue to focus on opioid overutilization management.” He says his firm anticipates more CMS reviews on MED dosing in their plan audits this year into 2018.

Baker notes that CMS also modified several star rating measures for Part D plans in the 2018 final Call Letter, “but compared to previous years, there was not much out there.” The agency’s draft Call Letter was “pretty soft,” and the final notice is “pretty standard,” he says.

Call Letter Clarifies Formulary Tiering Exceptions

CMS’s April 3 document includes policy clarifications for Part D formulary tiering exceptions. The agency said approval of a tiering exception is to the lowest applicable tier when alternative drugs are in multiple lower tiers, and plans must comply with this approach by the start of the 2018 plan year.

Kelly Brantley, vice president at Avalere Health, says this is the first time CMS laid out tiering exceptions guidance so explicitly, basically spelling out that a beneficiary who can take only a specific non-preferred drug should get it at the cost-sharing amount of the lowest tier.

“From a policy perspective, it’s very significant because CMS is clarifying a patient protection,” Brantley says. “From a practical standpoint, it’s unclear how tiering exceptions will roll out.”

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