Risk Adjustment Methodology: Reviewing Proposed and Current Model Improvements
On Thursday, March 24, 2016, the Centers for Medicare & Medicaid Services (CMS) released a white paper regarding the risk adjustment methodology. There has been a lot of criticism and discussion about the U.S. Department of Health & Human Services (HHS) risk adjustment program working appropriately. As indicated in the 2017 Notice of Benefit and Payment Parameters (NBPP), the white paper addresses the comments HHS has received regarding the risk adjustment methodology and serves as the basis for discussion for the Thursday, March 31, 2016, meeting. This document provides the story of the evolution of the HHS risk adjustment program, including a summary of historical information on how the HHS risk adjustment program was developed, changes made to the model thus far, and further discussions and considerations for enhancements in the future.
The risk adjustment model is intended to work with the fair rating rules under the Affordable Care Act (ACA). These rules are in place to reimburse issuers that have riskier, costlier enrollees by issuers that carry lower risk, regardless of any other factors, such as being a new issuer or narrow network plan. To enhance the existing stabilization program, modifications have been applied to recalibrate the model for the 2017 benefit year. The white paper just released highlights the areas needing further refinement, such as methodology for inclusion of prescription drugs, partial year enrollments, and future year recalibrations.
History: When the HHS risk adjustment program was being developed, the primary goal in mind was to "compensate health insurance plans for differences in enrollee health mix." The intent was to allow differences in premium for plan design and benefits but not allow premium differences for any health conditions the prospective member may currently have. When developing how this goal would be accomplished, three specific areas were addressed:
- New Population — During development, data was not available to analyze since this was uncharted territory. The risk adjustment program needed to include members enrolled into a plan that adhered to the ACA regulations, regardless of whether the member purchased the plan through the Marketplace or directly from the issuer. In lieu of not having specific data to utilize, HHS used a commercial dataset consisting of 2010 Truven MarketScan® Commercial Claims and Encounter data.
- Market Factors — This introduced the different plan actuarial values in comparison to a standard benefit level. This is an extremely complex portion of the risk adjustment methodology. HHS encountered challenges defining "how to preserve premium differences that reflect differences in generosity of plan coverage."
- Balanced Transfers — Since issuers were no longer allowed to adjust premiums for enrollees based on health status, the risk adjustment transfer payment is the part of the risk adjustment program that will make the issuer whole from a financial perspective.
There are apparent similarities between the CMS and HHS risk adjustment programs. One of the outstanding questions during development was considering which disease classification grouping would be utilized for the commercial market. It was decided to use the CMS-Hierarchical Condition Category (HCC) grouping utilized for Medicare risk adjustment as the basis to develop a diagnosis clinical classification for commercial. The CMS-HCC grouping consists of 201 HCCs compared to the HHS-HCC grouping that has 264 HCCs. Only a subset of the 264 HCCs is utilized for risk adjustment. These HHCs are classified as "payment HHS-HCCs" since these are the categories that carry a factor weight to be part of the plan liability risk average score (PLRS) calculation. Many HCCs that are part of the Medicare model were split in the commercial model to better predict costs within disease groups, such as those in the metabolic, blood, psychiatric, andDepartment o injury hierarchies.
Model Improvements: There have been improvements to the risk adjustment payment model since the 2014 HHS risk adjustment process was finalized. Each year the commercial risk adjustment program has been enacted has brought enhancements, subtle at most, to improve the accuracy of the program.
- Payment Year 2015 — Primary goal was to maintain stability. Utilized the same factors for cost-sharing reductions (CSR) plan variation in the corresponding Medicaid alternative plan variations.
- Payment Year 2016 — First year the risk adjustment model was recalibrated. In order to maintain stability and avoid using a small sample size, an approach was utilized to average coefficients using separately solved models of 2011, 2012, and 2013 MarketScan® data for 2016 benefit year risk adjustment. This was also the year in which HHS addressed two issues surrounding the classification and reporting for infants. The first issue surrounded infants, classified as age 0 who did not have any birth codes, an issue primarily driven by bundled mother/baby claims. The second issue addressed was for six transplant status HCC coefficients utilized in the child risk adjustment model.
- Payment Year 2017 — Second year the risk adjustment model was recalibrated. A similar blended approach was utilized in the same manor that it was for the 2016 Payment Year. The dataset was updated to include the three most recent years of MarketScan® data; 2012, 2013, and 2014. For this year, preventive services are included in the simulation process of calculating the plan liability. The 2017 NBPP requested comments regarding further discussion topics that will be addressed at the Thursday, March 31, 2016, CMS meeting.
Proposed Model Improvements: CMS is hearing the concerns coming from the health plans and is actively engaging them for comments in regards to issues. This interaction allows for an avenue of different perspectives to enhance the risk adjustment program with solutions that will further advance the model. There is no specific avenue HHS is taking in regards to the below improvements at this time. Rather, they are gathering all of the feedback they have received thus far and opening it up for discussion to determine the next best step to take.
- Partial Year Enrollment — Health plans are concerned about the adverse effect partial year enrollments is having on their risk adjustment payment transfer outcome. The industry is seeing enrollees with 6 months or less enrollment with high Medical Loss Ratio (MLR). This type of membership "flip flop" has been a concern of health plans since the onset of the ACA. This is where an individual elects an ACA plan on a temporary basis to only handle a current condition and not to maintain health insurance coverage long-term. In turn, health plans experience high claims cost, minimal revenue, and subpar balance to the risk they are carrying for these individuals. With the commercial demographic, the majority of conditions are considered acute as opposed to chronic conditions. This statement is the exact opposite of what you would see in the Medicare space.
- Proposed Drug Modeling — The use of pharmacy claims is an important analytical element used to validate a member's diagnosis and to proactively research for potential undocumented chronic conditions. HHS is talking about introducing a hybrid risk adjustment model that would use prescription drug utilization as risk indicators for the HHS-HCC model. The framework and operational impact to maintain a model like this is up for discussion but certainly is a step in the right direction.
- Use of a Concurrent Model — There is discussion around if utilizing a prospective model, rather than a concurrent model, will be more beneficial for the HHS risk adjustment program. A concurrent model predicts costs within the current year. This type of model tends to address more acute costs, whereas a prospective model allows greater time to review prior encounters to better predict the future costs. This allows a greater time lag for encounters to be analyzed and submitted, allowing time to capture more advanced acute and chronic conditions.
CMS clarifies the program is functioning as it was intended to, with which I would agree. The operational complexities, concurrent model, and mediocre data management practices established by health plans is leading to incomplete data submissions and, therefore, inaccurately reflecting the risk of the organization. The established model and demographic understanding will evolve over time by utilizing more accurate data to stabilize the factors used in the calculation when it becomes available. Until then, it is important for health plans to work on what they can directly impact by refining the risk adjustment processes they have in place, establish analytics and reporting practices, and ensure a thorough extraction process is conducted for the EDGE server submission inclusive of controls, pre-validation checks, and error resolution processes.
Resources
GHG can help you streamline the execution of your risk adjustment approach, and build a roadmap to ensure you're keeping pace with CMS and/or HHS expectations in both compliance and health care outcomes. Contact us today to learn more >>
For actionable advice and best practices, join us at our annual Gorman Health Group 2016 Forum, April 19-20, at the Worthington Renaissance Fort Worth Hotel in Fort Worth, Texas. During this year's information-packed two days, our elite team of experts, operators, clients, and partners will help you figure out what matters and what doesn't. We will share proven tactics to cut costs, increase member satisfaction, and manage and drive sustainable growth. The hotel room block expires on April 4 so register now to reserve your seat!
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MA Plans' Must-Fix: the Member Experience
Now more than ever, it's clear to us health plans and their stakeholders will thrive or die based on the member experience they provide. The member experience, especially with drug benefits, now represents more than half of a health plan's Star Rating in Medicare Advantage (MA), with millions in bonuses and bid rebates hanging in the balance. It also drives member retention and thereby acquisition expense (now averaging $1,200 per/member, or more than an average month's premium), so how members are treated now determines both health plan revenues and costs.
Overall, the member experience in a Medicare plan is defined by an enrollee's ability to get timely appointments, care, and information, how well providers communicate, and whether member-facing health plan and provider staff are helpful, courteous, and respectful. It's driven by the company culture, its commitment to communication, and the empowerment of staff to solve problems. And despite two-thirds of plans saying the member experience is their top investment priority, we are losing ground.
In a few short years, the Star Ratings system has evolved from a crappy consumer information tool to a multi-billion dollar pay-for-performance (P4P) initiative investing in improved processes and outcomes of care in MA. In 2016, the scoring methodology for Star Ratings ensures the member experience measures, especially in Part D, count for more than half of a plan's rating. It also narrows the margin for error, so only a 10% deviation in performance on the critical Consumer Assessment of Healthcare Providers and Systems (CAHPS®) is the difference between a 2-Star Rating and a 4-Star Rating.
On an enrollment-weighted basis, MA averages a 4.03 rating, with 49% of contracts (179) and 71% of members in plans over 4 Stars. But on CAHPS®, the program dropped from 3.45 Stars in 2015 to 3.4 Stars this year. That's a big problem threatening to drag the program back below the all-important 4th Star and, taken in context of other recent data, gets downright scary.
Last week our friends at Deft Research released their latest Seniors Shopping survey on the 2016 open enrollment period. They found that for the first time in recent memory, far more seniors are leaving Medicare Advantage for Medigap than vice-versa.
On virtually every measure, they found declining loyalty to and retention with their health plan. That says a lot about the state of the member experience in MA despite the priority and focus. It says we're missing the point.
Meanwhile, Alegeus Technologies had some incredible findings in their annual health plan consumer survey presented at the recent AHIP conference. First, they found half of members (50%) do not want to "play an active role" in their healthcare. This argues plans' investments in "member engagement" may be backfiring with half their enrollees. And there was widespread confusion in what they're paying for, possibly delineating why appeals and grievances processing remains the top compliance challenge for plans:
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66% of members think they're not paying the right amount
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56% complain they don't know how much they are spending until after they receive services
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45% of members say they simply do not know much they spend even after getting a bill
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45% say they never know what is covered
All of this says the way we think of and invest in the "member experience" needs rethinking.
It reminds me of the seminal 2014 behavioral economics study that found that happiness is defined by expectations being exceeded a little bit on a regular basis. Because expectations are variable, everyone can be made happy. That begins during the marketing and sales process and continues throughout the member lifecycle.
Moving to proactive service models is only the beginning. Only half our members want to be involved — the rest are disappointed and confused enough to be leaving in growing numbers to join inferior and more expensive products. They need help navigating provider networks, better understanding of how to use their benefits, and what to expect in out-of-pocket spending in real time. They need in-plan service ninjas empowered to solve their problem on the first call. They need Pharmacy Benefit Managers to get it together and health plans to advocate and agitate for members with their vendors. They need constant improvement in the member experience to be the new normal in government programs.
Resources
For actionable advice and best practices, join us at our annual Gorman Health Group 2016 Forum, April 19-20, at the Worthington Renaissance Fort Worth Hotel in Fort Worth, Texas. During this year's information-packed two days, our elite team of experts, operators, clients, and partners will help you figure out what matters and what doesn't. We will share proven tactics to cut costs, increase member satisfaction, and manage and drive sustainable growth. Register now >>
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Star Ratings: Moving the Needle
Now more than ever before, plans must streamline their Star Ratings programs to meet member expectations while encompassing all aspects of care delivery and breaking down internal silos. This requires innovation amidst a backdrop of the ever-changing Centers for Medicare & Medicaid Services (CMS) landscape. CMS continues to treat Star Ratings as an ever-evolving, dynamic measurement program that is consistently expanding to include challenging new clinical areas, the impact of socio-economic status on Star Ratings, and operational evolution within the risk assessment processes.
As CMS continues to introduce more medication-related measures into Star Ratings, as both Part C and Part D ratings, and evolves Medication Therapy Management from its current status as a process measure to a more impactful outcomes measure, highly-rated plans will continue to set a high bar for seamless, integrated, and holistic care management and coordination. Earning 4 stars will become more difficult without fully breaking down organizational and data-related silos and effectively communicating and engaging with providers.
Join my colleague, Lisa Erwin, and me at our annual Gorman Health Group Forum next month as we share best practices around optimizing the relationship of medication management (either in-house or via Pharmacy Benefit Manager delegation) with the "medical side of the house" for a more holistic approach to achieving Star Ratings success.
Resources
For actionable advice and best practices, join us at our annual Gorman Health Group 2016 Forum, April 19-20, at the Worthington Renaissance Fort Worth Hotel in Fort Worth, Texas. During this year's information-packed two days, our elite team of experts, operators, clients, and partners will help you figure out what matters and what doesn't. We will share proven tactics to cut costs, increase member satisfaction, and manage and drive sustainable growth. Register now >>
Stay connected to industry news and gain perspective on how to navigate the latest issues through GHG's weekly newsletter. Subscribe >>
Compliance Highlights of the CY 2017 Draft Call Letter
According to the Centers for Medicare & Medicaid Services (CMS), the Call Letter activities follow four major themes: improving bid review, decreasing costs, promoting creative benefit designs, and improving beneficiary protections. This means implementing creativity and doing more with less while enhancing the beneficiary experience. To borrow from one of the earliest reality shows, this is the time when CMS stops being nice and starts getting real. There are some of the key items of which your Compliance Department needs to be aware outlined below; however, it is not all inclusive and a thorough read of the document is required.
Something that is highly detrimental to an organization is CMS' reduction of a Star measure to 1 Star if any compliance-related issues are identified with a measure's data. We have seen that applied repeatedly this year to a variety of measures. This Data Integrity initiative is not new; unfortunately, CMS notes in the Call Letter that the agency continues to identify new vulnerabilities where inaccurate or biased data could exist. You will hear more from my colleague, Melissa Smith, on the proposed Star Ratings changes here in this blog.
Program Audit Protocols and Enforcement Actions
In an effort to allow sponsors more time to implement new protocols, CMS is proposing to release the following year's protocols by the end of July, starting this year. How does this change impact an organization?
- An earlier release means industry feedback received at certain times this year will most likely inform the 2018 protocol updates. Since the Medication Therapy Management and Provider Network Adequacy (PNA) pilots are scheduled to be released "a few months into" the pilot audit period, comments won't be received in time to inform 2017 protocol. Therefore, CMS proposes to extend the pilot into 2017.
- CMS notes the PNA protocol will not be administered during the same time as the program audits. This is not surprising for two reasons. First, the current program audit schedule is jam-packed. It's tough to envision adding another layer of operational audits to an already taxing schedule. Second, CMS reminds sponsors that this is only one piece of their larger scale efforts at reviewing adequacy. Consider the provider directory requirements memo released on November 13, 2015. CMS will actually be using the PNA pilot to validate corrections required as part of monitoring completed by the Medicare Drug and Health Plan Contract Administration Group (MCAG).
Some of these changes may mean more impact to your Compliance staff day to day. Gorman Health Group (GHG) notes our sponsor partners are quick to dive into published protocols to update tools and programming. Oftentimes they identify unclear items and immediately contact CMS for clarification, so this change should not create a significant impact to those who follow suit.
Since CMS is focusing on network, this should drive renewed focus and monitoring as part of a risk assessment and current oversight activities. GHG is aware of at least one consistently rated five star plan that has conducted full network assessments on a quarterly basis for quite some time now. In addition, CMS, in working with a contractor, has developed what they believe is a comprehensive process for monitoring provider directory accuracy. Interpret as such: your focus on this area pays off. Our Network team will dive deeper into this area here in the GHG blog.
CMS plans to release a memo describing their interpretation of applicable rules in the methodology for civil money penalties and will provide a comment period to the industry. Compliance should distribute this memo and collect comments as the calculation is often questioned on user calls and during enforcement discussions.
The agency is also seeing no significant reduction in the volume of Part D auto-forwarded coverage determinations and redeterminations. For this reason, they plan to increase the level of severity of compliance and enforcement actions. This is an area of the program with direct impact on a beneficiary's ability to access his or her Part D benefit. It is hoped that turning up the heat in this area may encourage plans to implement changes to reduce that volume and start meeting time frames more regularly.
CMS also proposes to consider the findings of noncompliance from the one-third financial audits for potential enforcement actions. In the past, sponsors were required to implement a corrective action plan, but they have had this authority under 422.752 and 423.752.
Sensing a theme here? CMS has reached a tipping point, and as our Founder and Executive Chairman, John Gorman, has recently noted, it appears 2016 is the year they drop the gloves. If you've ever played hockey, that's when it starts getting good. We hope to see you at our webinar on March 1!
Resources
Join John Gorman, GHG Executive Chairman, and colleagues, Olga Walther, Senior Legislative & Policy Advisor, and Leslie Mullins, GHG's Senior Consultant, as they provide a hard-hitting analysis of critical areas addressed in the document. Learn what the proposed "methodology changes" could mean for your organization and its partners, and the steps you can take to soften the impact on Tuesday, March 1 from 2:30-3:30 pm ET. Register now >>
Register your team for the 2016 GHG Forum! For more details around the event and agenda, download the full conference brochure or visit our website. Register now >>
Stay connected to industry news and gain perspective on how to navigate the latest issues through GHG's weekly newsletter. Subscribe >>
There's a Lot to Like and to Fear in the 2017 Medicare Advantage Call Letter
On Friday after the close, the Centers for Medicare & Medicaid Services (CMS) released the 2017 Medicare Advantage (MA) Call Letter with proposed policy and payment changes. There's a lot to like — and much to fear. On payments, CMS came in with higher-than-expected rates that make clear the long walk in the desert from cuts in the Affordable Care Act (ACA) is over. But on compliance, they are rolling out the firing squad with a broad mandate, and the Administration will leave its mark long after Obama has left office.
What We Like:
- The draft offers all-in rates of +1.35% and a trend of +3.05%, better than last year and better than expected.
- CMS is leaving home visits for MA risk adjustment untouched. If ever CMS was going to clamp down on this after years of threats, this was the time — in the last year of the Administration. By not doing so, we think they're closing the book, acknowledging much good also comes from these house calls, and the home is the most underutilized source of care in the delivery system for seniors. Despite MedPAC recommendations and a drumbeat of op-eds, CMS didn't want to throw the baby out with the bathwater.
- There are big proposed changes to risk adjustment and Star Ratingsfor MA plans serving dual eligibles.
- CMS would launch a new payment system with six subcategories: full duals, partial duals, and non-duals, for both aged and disabled beneficiaries. The net effect is like a crude, mega-risk adjuster, paying plans with more duals bigger, more accurate payments, while paying slightly less to plans with fewer duals.
- On Star Ratings, CMS is proposing an adjustment on three key measures — the overall plan rating, and Part C and D summary ratings — which will increase ratings for plans with higher proportions of duals and could increase bonus payments if the plan is 4+ stars. This is a big win for the industry.
- The health insurer issuer tax has been suspended for a year (and will return in 2018).
What We're Worried About:
- The rapid acceleration from 10% to 50% encounter data driving risk adjustment could depress risk scores. It's clear CMS is moving to 100% encounter data as quickly as possible and likely presages the use of encounters and not Fee-for-Service (FFS) claims to calculate risk factors as well as the phase-out of the coding intensity adjustment.
- CMS is proposing changes for Employer Group Waiver Plans (EGWPs) that amount to a "tax" on sponsors designed to reduce Medicare's spend on these 3 million of the 18 million beneficiaries in MA. EGWPs typically bid much higher than individual MA plans, and the proposal will likely result in a cost-shift to group members or a reduction in supplemental benefits. There was no estimated impact given, so watch this closely.
- CMS made it clear Star Ratings low performers will be executed by firing squad as early as next week. The Call Letter states plans rated below 3 stars for 3 consecutive years will be terminated in February 2016 for a December 31 effective date. Three to six plans qualify for termination. This will be the timeline for future years, and CMS states these decisions are non-negotiable.
- Huge news here on the compliance front:
- CMS notified Part D sponsors it's stepping up enforcement actions on coverage disputes and complaints, the leading noncompliance issue for plans.
- Plans failing the financial audits conducted on one-third of plans each year will no longer be subject to corrective action plans but rather sanctions and civil monetary penalties.
- CMS is ramping up audits and enforcement actions in network adequacy, provider directory accuracy, and medication therapy management programs.
As always, we now enter the frenzied public comment/lobbying phase where the industry tries to get an even better deal, with the final policies announced April 4. As these things go, MA plans should be generally happy about the financial picture while getting down to the busy work of getting the compliance house in order. Most of what's proposed here, we think, becomes the "new normal" long after Obama has left office.
Resources
Join John Gorman, GHG Executive Chairman, and colleagues, Olga Walther, Senior Legislative & Policy Advisor, and Leslie Mullins, GHG's Senior Consultant, as they provide a hard-hitting analysis of critical areas addressed in the document. Learn what the proposed "methodology changes" could mean for your organization and its partners, and the steps you can take to soften the impact on Tuesday, March 1 from 2:30-3:30 pm ET. Register now >>
Register your team for the 2016 GHG Forum. For more details around the event and agenda, download the full conference brochure or visit our website. Register now >>
Stay connected to industry news and gain perspective on how to navigate the latest issues through GHG's weekly newsletter. Subscribe >>
What to Watch: The Fiscal Year 2017 budget
President Obama released the Fiscal Year 2017 budget last Tuesday, which contains many significant proposals to government healthcare programs. Although both the Senate and House's budget committees already rejected hearings from the President's budget chief and unsurprisingly declared the bill "dead on arrival," the proposals do contain many bipartisan provisions with significant cost savings. One such proposal organizations should watch carefully, for example, is using competitive bidding in Medicare Advantage plans.
Most of the Medicare and Medicaid proposals are estimated to provide savings. The Congressional Budget Office's (CBO's) review of the budget in March will further shine light on which proposals will make it through the budget process. In a new memo, The GHG Policy team provides an overview of proposals to watch in a new memo, including:
ACA Updates
- Medicaid Expansion Incentive
- Uniform billing and out of network charges
- Marketplace eligibility determinations
- Cadillac Tax updates
Medicaid Budget Updates:
- Medical Loss Ratio (MLR)
- CHIP Funding
- Health Coverage Expansion Proposals
- Long-Term Services and Supports (LTSS)
Medicare Advantage (MA):
- Competitive Bidding Proposal
- Higher payments to high-quality MA plans
- Telehealth expansion
Part D:
- State-federal Medicaid negotiating tool
- Part D plan sponsor incentives to better manage high prescription drug costs.
- Increase of manufacturer rebates
- Mandate to provide rebates consistent with Medicaid rebate levels for drugs provided to low-income Part D beneficiaries.
Alternative Payment Models (APMs):
- Bundled Medicare payments for post-acute providers such as nursing homes and home health agencies.
- New bonus payment for hospitals that collaborate with certain APMs.
- Quality bonus program for the highest rated Part D plans
Resources
Register your team now through February 14 for the 2016 GHG Forum, and take advantage of our standard registration rate of $1,095 before the price goes up to $1,295 on February 15. Register now >> For more details around the event and agenda, download the full conference brochure or visit our website.
Stay connected to industry news and gain perspective on how to navigate the latest issues through GHG's weekly newsletter. Subscribe >>
Is Value-Based Insurance Design All It's Cracked Up To Be?
There continues to be a lot of buzz about value-based insurance design (VBID). VBID is the idea that consumers' out-of-pocket medical costs should be based on the value of a service to their health and not the price. Health Affairs defined VBID as "an approach that attempts to improve the quality of care by selectively encouraging or discouraging the use of specific healthcare services, based on their potential benefit to patients' health, relative to their cost."
Treatments, medications, and procedures evidence has shown to be effective and recommended for a condition are provided at no or low cost to the patient. Care that is ineffective or unnecessary is priced higher to discourage utilization. Corporations like Pitney Bowes, Caterpillar, and Marriott, and organizations like Oregon Educators Benefit Board and the Colorado Springs School District 11 have implemented several models of VBID. Reported outcomes include savings from reduced adverse events like hospitalizations and emergency department visits.
Some Medicare Advantage Special Needs Plans have designed their benefit structure along the lines of the value-based model. For example, members who have diabetes have $0 copays for necessary medications and may have additional benefits like gym classes, cooking classes, and Certified Diabetes Educator access.
Designing a value-based benefit for Medicare patients with chronic conditions begins with a review of the peer-reviewed treatment guidelines. These treatment guidelines can be accessed at https://www.guideline.gov/. Medications designated as first-line therapy should be provided at very low or $0 copays. Medications lower on the list, such as third- or fourth-line therapy, can be placed on a different/higher tier. Lab tests, provider visits, and other recommended therapies (physical therapy, exercise, dietary requirements, etc.) can also be provided at low cost to the member. Most chronic conditions lend themselves to a value-based design. Barriers like the cost of a custom formulary will hopefully be resolved by more industry uptake of VBID.
Resources
Gorman Health Group can map the right strategy for realizing value-based care by aligning clinical and revenue cycle workflows for faster and more accurate payment, redesigning care delivery models to benefit from outcomes-based reimbursement, transforming the quality and effectiveness of care, as well as designing a value-based benefit for your members with chronic conditions. Visit our website to learn more >>
Register your team now through February 14 for the 2016 GHG Forum, and take advantage of our standard registration rate of $1,095 before the price goes up to $1,295 on February 15. Register now >> For more details around the event and agenda, download the full conference brochure or visit our website.
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Issues That Will Define Government Health Programs in 2016
The new year brings a slew of issues that will define government-sponsored health programs. Here's what we're watching closely, not necessarily in this order. Opportunities have never been greater in Medicare, Medicaid, and ObamaCare, but execution risk is rising fast. If this was an easy business, we'd be out of business.
Drug Pricing: Prospects for a legal fix in Congress is questionable, and this will be a leading issue in the Presidential campaign. Expect administrative action, demonstration project solicitations from the Centers for Medicare & Medicaid Services (CMS), "comparative effectiveness research" by federal agencies on specialty drugs, and "collaborative pricing" initiatives between pharma manufacturers and payers on high-profile therapeutic classes. Health plan CEOs expect higher specialty drug cost trends to be the biggest driver of medical cost trend in 2016.
Medication Therapy Management (MTM): 2016 is the year MTM gets real. CMS will begin conducting widespread audits of Medicare Advantage (MA) and Part D plan medication reviews, and there is tremendous emphasis on MTM in the Star Ratings system. Making MTM real for your members will require extensive vendor contracting and Pharmacy Benefit Manager (PBM) coordination, so turn your plan's attention to this fast.
Antitrust/Mergers: Sometime in Q3 or Q4 of 2016, the Federal Trade Commission and the Department of Justice Antitrust Division will rule on proposed mergers for Aetna/Humana, Anthem/CIGNA, Walgreens/Rite-Aid, and Pfizer/Allergan. We expect all four deals to be approved but with strings attached; e.g., we expect Aetna/Humana will have to divest 250,000-450,000 lives to get a green light.
Star Ratings: Must be a central focus of all payers and providers in government programs. Star Ratings has transcended MA and Part D. Star Ratings data is already being collected by ObamaCare plans, and over a dozen state Medicaid programs are using CAHPS® and Star Ratings data in contracting with plans for dual-eligible and managed long-term care (LTC) initiatives. And while there aren't major changes to Star Ratings measures in 2016, scoring is the game-changer: 50% more plans will be scored for the first time this year, guaranteeing a shift right in the ratings bell curve and that many of 2015's 4-Star plans will go off the cliff. To maintain progress, plans must run Star Ratings as a program with dedicated leadership and execution spelled out at the workflow level.
Risk Adjustment: 2016 will usher in increased efforts to ensure payment accuracy through more stringent and expansive Risk Adjustment Data Validation (RADV) reviews, and so providers delegated for risk and sharing in a percent of premium will be in the spotlight. CMS is seeking to contract with third-party auditors on RADV, and risk adjustment is a top concern in the Department of Health and Human Services (HHS) Office of Inspector General (OIG) work plan.
Providers and Care Delivery: 2016 will be a transformative year with contracted providers in government programs. Narrow/preferred networks and value-based risk contracting will go mainstream this year, whether providers are ready or not. Huge penalties start this month on network adequacy and accuracy of provider directories, and NAIC's model guidance on provider networks will be a central document governing the issue. Star Ratings measures on access to care and the member experience put new heft and revenue behind network requirements. Provider-sponsored entities will provide a mini-surge of dozens of new plans into MA and Medicaid in 2016 and 2017, especially among Medicare Accountable Care Organizations (ACOs), so keep your friends close and your enemies closer. Home- and community-based services and alternatives to nursing homes will go mainstream in 2016. Retail pharmacies will become the second-most-important provider type for health plans. With crushing burdens of ICD-10 and meaningful use, small and mid-size practices will become overwhelmed and will underperform. Plans will need aggressive oversight, quality improvement, and directory management activities to stay ahead.
Exchange Payment: For the first time in two years, CMS is going to begin paying plans HIX 820s at the member level, which will shine a spotlight on enrollment reconciliation issues that have been lingering. The plans' readiness transition period is from January to March, then it gets real in April.
Medicaid and Dual Eligibles: Unexpected states like LA, SD, and IA are now considering Medicaid expansion. CMS is focusing on new Medicaid quality measures and will be depending heavily on NCQA quality measures to gauge health plans. This will impact payment and future membership for some lower-rated plans. Beneficiary opt-outs in excess of 75% are plaguing early dual-eligible demos, but many states remain in fiscal crisis and need to move ahead to balance budgets.
Compliance: 2015 was a near-record year in CMS enforcement actions, and scores always get settled with insurers in the second term of a Democratic administration. There will be a slew of rules coming from CMS this year as well as expanded audits from OIG. Both agencies' approaches indicate how critical documentation remains: CMS added a number of items to documentation requests for Compliance Program Effectiveness; Medicaid, dual-eligible, and LTC demos are still very documentation-heavy, and CMS found that approximately two-thirds of CMS-reviewed FFM issuer plan policies and procedures (P&Ps) were incomplete or had operational findings with their vendor contracts. So even though there is focus on data monitoring and passed/failed samples, P&Ps and documents are still the cornerstone.
There is no question that 2016 will be a banner year in government programs enrollment, and the long walk in the desert on payment rates in MA and Medicaid appears to be over. But execution risk and the enforcement environment have never been tougher. This year will be a "Darwinian moment:" it's not about being the biggest or even the smartest but being the most adaptable.
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Resources
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Because They Can
The United States Senate conducted the first day of hearings Wednesday, December 9, on the high price of pharmaceuticals. The Special Committee on Aging is investigating the soaring prices of old drugs, including the overnight price hike of Turing's Daraprim from $18 to $750. Every day there is another press release about the egregious increase in pricing of a generic drug or a newly-released-to-market medication. U.S. drug prices are the highest of any in the industrialized world.
Drug prices and the strategies used to determine them are shrouded in secrecy. A recent Wall Street Journal article compared U.S. prices to Norway and several other countries. Pharma and biotech companies in the S&P 1500 average a net profit margin of 16% compared with an average of about 7% for all the other companies. Their rationale is usually they need that profit margin to support Research & Development (R&D) costs. That argument obviously doesn't apply for generic drugs. Pricing has nothing to do with recouping costs—it is a decision based on market research, competitor products, and shareholder value.
What's the answer? Doctors, insurance companies, hospitals, and Pharmacy Benefit Managers (PBMs) are all struggling to figure it out. Many healthcare policy experts are advocating for Congress to pass legislation which would allow the government to negotiate pricing especially for Medicare. Since there are more pharmaceutical company lobbyists in Washington, DC, than there are members of Congress, this could be an epic struggle.
These breakthrough treatments are invaluable to patients, but the costs for the patient and insurers can be exorbitant. What programs have you put in place to help your members adhere to treatments, minimize side effects, and empower them to understand their disease, and the drugs to help treat it?
Doctors are publishing and participating in dialogues about what the true value of a cancer drug is based on effectiveness and increased patient longevity. What is the true cost of a medication? If patients actually knew, could they make informed decisions about their options?
The Turing CEO may have just opened the can of worms that Pharma did not want to ever be seen. Greed and arrogance may be the catalyst Congress needs to implement meaningful changes. One thing we all know now―pharmaceutical and biotech manufacturers charge what they do…because they can.
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Evolution of Validation: Selecting an Independent Auditor
The Centers for Medicare & Medicaid Services (CMS) audit validation process has evolved over the past few years. Here is what you should know about the changes and how to best prepare to contract with an Independent Auditor, or IA.
Let's go back to 2012. CMS was conducting the validation of audited Sponsors' corrective action plans (CAPs) by retesting areas found to be problematic. While the terminology has changed, the charge was led at that time by the Regional Office. In 2013, validation became an activity conducted by the Medicare Parts C & D Oversight and Enforcement Group (MOEG) at Central Office and Regional Office staff. Any items that resulted in a Corrective Action Required (CAR) or an Immediate Corrective Action Required (ICAR) were subject to validation.
As part of the 2013 validation timeline, the Sponsor had seven days from the issuance of the final audit report to submit a CAP for each condition. If we reference the 2014 Part C and Part D Program Audit and Enforcement Report, CMS outlined the average number of days which elapsed after an audit notice was issued.
If we take a look at the average days elapsed from the Exit Conference to the Final Report Issued date, the number of days elapsed has decreased, from 241 days in 2011 to 99 days in 2014. Based on the last year of reported data, plans still had a healthy three months from the verbal acknowledgement of CARs and ICARs (that is, the Exit Conference) to the issuance of the final report in order to implement corrections. In theory, by the time the final report was issued, some issues could have been corrected and, therefore, could have been ready for validation. However, time had to elapse for CMS to approve the CAPs, and after that point, CMS allowed Sponsors another 90 calendar days from that approval to implement and test the results of those CAPs. That's a lot of time when you look at it from the beneficiary perspective.
Fast forward to today — CMS is exercising their authority to require a Sponsor to hire an IA in order to validate if deficiencies found during a CMS program audit have been corrected. In a memo released on November 12, 2015, CMS confirms they will not provide recommendations on IA firms. Instead, they require the Sponsor to attest to both the independence of the IA as well as an absence of conflicts of interest. They point to the 2010 guidance for the selection of a Data Validation auditor for examples of relationships not meeting the standard for organization independence.
We are united with CMS' recommendation that Sponsors solicit proposals to select an IA early in the post-audit phase. Speaking from the auditor standpoint, it is much better for all parties involved to plan early, so exceed CMS' expectations and seek proposals as soon as possible. It's better to have that agreement in place ahead of time, rather than waiting until CMS sends you their instruction to hire an IA. This will give you the time to evaluate your options, so you can best determine their experience and subject matter expertise. When you are accountable to CMS to validate corrections, it is particularly important to partner with someone you can trust to apply a skilled eye to the validation activities. Otherwise, you may be subject to further scrutiny by CMS, which is the last thing any Sponsor needs when coming to the close of their audit process.
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Determining conflict of interest is the responsibility of the Plan Sponsor and can be subject to interpretation. Not every auditor that a Plan Sponsor has used in the past is necessarily a conflict of interest. Contact us for further questions >>
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