The 2018 Advance Notice and draft Call Letter for Medicare Advantage and Part D plans posted Feb. 1 by CMS contained very few proposals that could be considered major or surprising, industry experts tell AIS Health. Adding to the dullness of the annual notice, which is now required to come out 60 days in advance of the final payment notice instead of 45 days, was a modest pay hike to the tune of 0.25% on average for MA plans.

CMS in last year’s final payment notice forecast an average pay boost of 0.85% for 2017 and predicted that improved diagnosis coding would add another 2.2% to the average revenue change, bringing the total to 3.05%, although some MA plans said the coding rise wouldn’t be anywhere near as large as CMS predicted. This time, CMS is factoring in an estimated 2.5% coding trend for 2018, which it said would bring up plans’ pay by 2.75% on average (MAN 4/7/16, p. 1).

Eric Goetsch, a principal and consulting actuary in the Milwaukee-area office of Milliman, suggests the 2.75% assumed improvement in revenue is “modest yet relatively expected” and could vary widely by plan since it is “completely depending on how each individual health plan improves the diagnosis coding.” Contributing to the modest estimated increase is a fee-for-service normalization factor decrease of 1.9%, which Goetsch points out has in the past changed from the Advance Notice to the final version.

“Many of the provisions are things that the agency had previously signaled that they were going to do, are a continuation of things they were already doing or are a pause on transitions,” observes Ankur Goel, a partner in the Washington, D.C., office of the law firm McDermott Will & Emery. “I think in broad strokes there are things that are of interest and significant but from a policy standpoint the document doesn’t have the same level of major new policy proposals” that CMS has included in past years.

Draft Notice Pursues Status Quo

Perhaps the most meaningful transitional “pause” is CMS’s proposal to decelerate its timeline for phasing in the use of encounter data for calculating risk scores. CMS last year proposed that risk-adjusted pay for MA plans be based 50% on the old risk adjustment payment system (RAPS) and 50% on encounter data, which it began collecting from plans in 2012 (MAN 2/25/16, p. 1). But after hearing the concerns of stakeholders about plan readiness and the quality of the data coming from providers, the agency in the final 2017 notice scaled that back to 25% encounter data and stressed its intent to move to 100% encounter data by 2020.

In the most recent notice, CMS proposed to keep the same 75%/25% blend of RAPS and encounter data. When asked by AIS Health to explain the agency’s rationale for the delay, CMS officials during a Feb. 1 press conference said the proposal stemmed from “plans’ concerns about the impact on payment of transitioning to encounter data” and that this would give plans some “payment stability.” As for the goal of moving to 100% encounter data by 2020, the agency indicated the decision to revise that timeline will be made at a later date. But CMS’s efforts to validate encounter data used to ensure proper payments to MA plans have been questioned, most recently in a Government Accountability Office report suggesting that CMS fully assess data quality before use (MAN 1/26/17, p. 8).

“I think [the latest proposal] all relates to CMS having some technical difficulties implementing the EDS [encounter data system] use,” remarks Kirk Twiss, principal and consulting actuary with Clear View Solutions, LLC. “They’ve been unable to release risk score calculations solely from the EDS information, so I think they’re just pausing the mix in the hopes that they can get their system up to where they want it to be and then start moving it forward again.” In addition, CMS solicited comment on a proposal to apply a “uniform industry-wide adjustment” to the EDS data, “sort of like a budget-neutrality transition to get from RAPS to EDS,” notes Twiss.

That’s important because many MA organizations have seen their risk scores go down as a result of the increased use of encounter data in the risk score calculation, suggests Goetsch. A recent Milliman study involving 15 MA organizations representing 900,000 members in 154 plans found that risk scores based on encounter data for payment year 2016 were on average 4% lower than those based on RAPS, resulting in a reduction of approximately $40 per member per year, assuming approximately $800 in Part C risk-adjusted revenue and a 1.0 RAPS-only risk score. The percentage difference was even larger for Special Needs Plans (SNPs).

In addition, the document proposed certain monitoring and compliance actions and said it will now use performance measures related to encounter data submission to “guide oversight and enforcement in this area, with the goal of further ensuring complete and accurate submissions.” Goel points out that the mention of tying compliance actions to a failure to comply with encounter data submission standards is new. “I think there will be some comments around that issue because it’s part of the broader issue with encounter data…[and] that the encounter data is really not a reliable process at this point for calculating risk scores. And I think that whole area of encounter data and compliance issues is going to continue to increase in importance so long as CMS is going to use that data as part of the blend for risk scores.”

CMS Considers Same EGWP Pay Methodology

CMS in last year’s final 2017 payment notice and Call Letter opted to phase in over two years a new policy moving MA Employer Group Waiver Plans (EGWPs) from a separate bidding process to one based on individual MA market data that will ultimately result in a 2.5% payment reduction. The methodology for 2017 involved bid-to-benchmark ratios reflecting a blend of individual market plan bids and EGWP bids from the prior payment year.

CMS for 2018 had intended to switch to full use of individual market data for 2018, but in the latest notice said it is seeking comment on whether it should fully implement the individual market methodology or continue using the blend for 2018, effectively alleviating some payment uncertainty for EGWP sponsors. What kind of impact the initial change had on the group marketplace may not be fully known until the full 2017 Annual Election Period enrollment results are posted later this month, but preliminary results released last month showed an increase in group coverage (MAN 1/26/17, p. 3).

The call letter portion of the document also included some expected changes to the star ratings, such as a proposal to revise the Beneficiary Access and Performance Problems measure (MAN 11/17/16, p. 1) and the continuation of the Categorical Adjustment Index to address disparities among low-income subsidy/dual eligible plans and non-LIS/duals plans. But one proposal that could impact high performers is the suggested modification to the methodology to determine “double-bonus” counties, whereby MA plans with a rating of 4 or more stars can get an additional 5% bonus on top of their payment rate in certain counties, points out Goetsch. Moreover, with no mention of keeping the moratorium on the health insurer fee, “we have to assume that plans are going to have to pay that fee again and include it in their administrative cost bids,” adds Goetsch.

The call letter also proposed establishing separate adequacy evaluations of provider networks specific to MA SNPs, with the goal of ensuring “adequate access” for particularly vulnerable MA enrollees who require enhanced care coordination. Noting that the key differences between non-SNP MA plans and SNPs, which have always had to follow the same rules, is that SNPs provide focused care to special target populations (e.g., institutionalized, dual eligible, disabled) based on their unique health care needs. CMS asked SNP stakeholders to weigh in on how SNP-specific networks currently differ from other MA networks, what would be desirable in SNP-specific network adequacy evaluation, and how it would improve patient health or quality of care.

Twiss and fellow Clear View principal Stephen Wood tell AIS Health this would be a great benefit to the SNPs they work with because many of them are long-term care providers and argue that the network they need to contract with is very different than that of a regular MA plan. “For instance, in almost every organization we’ve been working [with] lately, one approach is to have a podiatrist that makes rounds in the nursing home, but he doesn’t have an office, so CMS can basically say, ‘You don’t exist’ and force the plan to contract with a podiatrist who has an office. So we think more customization over these networks will make a lot of sense,” says Wood.

Meanwhile, the document contained very little change for Part D plans. One area where CMS chose to maintain the status quo was preferred cost-sharing pharmacies (PCSPs). Whereas beneficiary access to and confusion around PCSPs (formerly known as preferred pharmacy networks) was a focus of previous call letters, CMS proposed to keep the policies it established for calendar year 2016 regarding access to these types of pharmacies (MAN 3/12/15, p. 4). These include posting information about the current year’s PCSP access levels on the CMS website, requiring outlier plans to disclose that their plan’s PCSP network offers lower access than other plans’, and working with “extreme outliers” to address concerns about beneficiary access and marketing representations relative to preferred cost sharing. Additionally, CMS will hold plans to the same access standards it did in 2016, considering plans such as those with network PCSPs that are within 15 miles of less than 70% of beneficiaries in rural areas as outliers. Those that fail to use the required marketing disclosure language and/or do not meet the terms of bid negotiation agreements will be subject to compliance and/or enforcement actions, CMS reminded plan sponsors.