CMS Proposes Changes to Medicare Advantage and Part D Programs

Health Highlights

The Big Picture

On January 12, the Centers for Medicare & Medicaid Services (CMS) released the Contract Year 2023 Policy and Technical Changes to the Medicare Advantage and Medicare Prescription Drug Benefit Programs proposed rule, representing CMS’ first major policy proposals for these programs in the Biden Administration.

The changes proposed are, overall, modest in scope. In the main, CMS is reversing some policies adopted in the prior Administration, for example by reinstating reporting requirements related to plans’ Medical Loss Ratios (MLRs) and increasing scrutiny of new Medicare Advantage (MA) plans’ networks of contracted providers.

One new proposal, a form of which was considered and rejected under the prior Administration, is to require Part D plans (PDPs) to reflect potential pharmacy price concessions in the negotiated prices of drugs and thereby theoretically lower beneficiary out-of-pocket costs. The proposed rule also puts forth stricter marketing requirements for independent brokers and agents, reflecting CMS’ concern over the growth of print and television advertising of MA and Part D. There are also several changes proposed for the design and operation of special needs plans (SNPs).

Comments on the proposed rule are due by March 7. In addition to general comments, the proposed rule contains multiple CMS requests for information (RFIs) on specific topics the agency is considering, including prior authorization requirements for patient transfers from facility to facility, challenges MA plans face in building adequate networks of behavioral health providers, and data notifications for SNPs.

Part D Pricing and Pharmacy Price Concessions

CMS is proposing a change to how price concessions given by pharmacies to PDP sponsors are reflected in the “negotiated price” of the drug that determines beneficiary out-of-pocket costs. The agency proposes to amend the definition of Part D-negotiated prices to effectively require that the negotiated price reflect all potential pharmacy price concessions provided to a PDP sponsor.

Plan Quality and Reporting

Medical Loss Ratios. MA and PDPs are subject to an MLR requirement, generally obliging them to spend 85% of revenue on patient care rather than administrative expenses or profit. From 2014 to 2017, CMS required plans to submit detailed reports of expenditures to validate compliance. Yet beginning in 2018, the agency significantly reduced the amount of MLR data that plans are required to submit on an annual basis, as part of an initiative to reduce regulatory burdens.

Noting that the lack of data collection makes compliance monitoring difficult at a time when more plans are reporting failures to meet MLR targets, CMS now proposes to reinstate the 2014–17 reporting obligations with some modifications and add new data fields to improve accuracy. A technical clarification would also permit CMS to reopen and require resubmission of MLR reports when data is found to be materially incorrect or fraudulent.

Star Ratings for 2023. CMS is proposing a technical change to enable CMS to calculate 2023 Part C Star Ratings for the three Healthcare Effectiveness Data and Information Set (HEDIS) measures collected through the Health Outcomes Survey (HOS): Monitoring Physical Activity, Reducing the Risk of Falling and Improving Bladder Control. Without this technical change, CMS would be unable to calculate 2023 Star Ratings for these measures for any MA contract since all contracts qualify for the extreme and uncontrollable circumstances adjustment for COVID-19.

Medicare Advantage

Network Adequacy. A proposed change to MA network adequacy reviews would require new plans to submit networks for review earlier in their application process. CMS is proposing to require (for 2024 and beyond) demonstration of an adequate network as part of the February application process, moving up the dates by which a plan must have its network in place. As a modest concession, CMS will allow a 10% credit toward meeting time and distance standards for new applicants, holding them to a slightly laxer standard.

Special Needs Plans

CMS is proposing a number of changes for SNPs that serve Medicare-Medicaid dual eligibles and beneficiaries with chronic conditions:

  • SNPs for dual eligibles (D-SNPs) would be required to form an enrollee advisory committee.
  • As part of Health Risk Assessments conducted by SNPs, the SNP would be required to include one or more standardized questions on the topics of housing stability, food security and access to transportation.
  • Beginning in 2025, a SNP that is a fully integrated dual-eligible special needs plan (FIDE SNP) would need to have exclusively aligned enrollment for Medicaid purposes and cover Medicaid home health, durable medical equipment and behavioral health services through a capitated contract with the state Medicaid agency. A highly integrated dual-eligible special needs plan (HIDE SNP) must have a capitated contract with the state for Medicaid benefits that applies to its entire service area.
  • CMS would codify new pathways for states to use their contracts with D-SNPs to better integrate care for dually eligible individuals.
  • Plans would have to calculate a beneficiary’s maximum out-of-pocket spending based on the accrual of all cost-sharing in the plan benefit, regardless of whether that cost-sharing is paid by the beneficiary, Medicaid or other secondary insurance. Cost-sharing that remains unpaid because of state limits on the amounts paid for Medicare cost-sharing would also count toward the maximum out-of-pocket spending.

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Comments on the proposed rule are due by March 7, 2022.

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