More Good News for Medicare Advantage in 2013 Rate Announcement
CMS released the 45-Day Notice of CY 2013 Medicare Advantage (MA) rates after the market close on Friday, and while it's the usual hot mess of green-eyeshade factors that comprise payment, it brought unexpectedly positive news for the industry. If it holds up in the final rate announcement on April 2, it will represent the largest increase in payments to plans in 4 years. Here's a brief rundown of what's hot, what's not, and what to watch in the runup to the final rates.
HOT
- The weighted average rate increase for 2013 is 2.47%, net likely flat. Most Wall Street analysts expected a cut of 2-4% in 2013. Again, this represents the largest increase in payments to MA plans in 4 years.
- CMS maintained the risk adjustment coding intensity adjustment at 3.41%, for the third consecutive year. 2013 will be the last year CMS can offer this concession -- the ACA mandates that coding intensity increase to 4.71% in 2014, and then by at least 25 basis points/year 2015-2018, bringing it to at least 5.7% by 2019. There is no incremental impact on 2013 rates, and plans get an extra year to get their risk adjustment houses in order before the pain starts.
- CMS made no mention of Risk Adjustment Data Validation (RADV) audits, which have been looming large over the plans for the past 3 years and remain a prominent source of revenue recoveries in the President's last two budget proposals.
- The fee-for-service normalization factor, which adjusts for upward trend in risk scores in MA vs. FFS, was a big positive for 2013. It usually rises or falls by 1-2% a year, and in most years it increases. For 2013, CMS is dropping the FFS normalization factor by almost 5 points, boosting 2013 rates by around 150 basis points.
- CMS's general tone toward the industry was decidedly more positive, as it was last year. CMS noted that the proposed annual growth rate "will sustain a strong Medicare Advantage landscape for 2013," and highlighted that enrollment increased roughly 10% in the last year. I guess once you top 25% enrollment in Medicare the agency has to show you some love.
- Star Ratings quality bonuses and rebates remain a key source of revenue boosts for high performing plans, which helps to offset the cuts to MA in health reform. Bonuses will increase in 2014 for plans with ratings of 3.5-4.5 Stars. We estimate that Star bonuses will increase payment by more than 4% in 2012 and around 25 basis points in 2013, as MA plans' overall Star rating increased to 3.56 stars, up 0.11 Stars year-over-year.
- CMS is also rebasing MA county rates for 2013. Historically this is usually a good thing for the plans (though CMS notes it could hurt a little next year). CMS is required to undertake this exercise every 3 years, and the consensus among many Wall Street analysts is that rebasing will add approximately 60 basis points to the 2013 rates.
- The "Doc Fix": In the past, CMS has insisted on basing its trends on the law in force at the time they made the projection. The doc fix on the books for 2/17/2012, the date of this advance notice, only extends through 2/29. The new doc fix, through 12/31, hasn't been signed into law yet. So our guess is that the advance notice doesn't include a catch up correction for a doc fix for the remainder of 2012. The fact that CMS didn't hold a conference call makes us think they didn't want to discuss the matter until the bill is signed. If we're right, we'll see a higher trend and higher rates in the final notice on April 2, when an additional 10 months of higher doctors' fees is factored in.
- Sequestration: the 2% cut to Medicare from the failure of the not-so-Super-Committee is the law of the land as of today, so CMS should have included that in their trending -- and we still came out ahead.
NOT
- CMS is updating and recalibrating the HCC (risk adjustmetnt) system for Medicare Advantage for the first time since 2009. The current HCC model for Medicare Advantage has 70 HCCs, a decrease of 7 from 2011. Our best guess of the impact of the HCC changes will cut 2013 rates by 125 basis points on average. Some
diseases will pay better and some will pay worse after recalibration, which could have a significant impact on some plans. CMS is looking for a better way to calculate the coefficients, one that is not so sensitive to
plans' activities to improve coding accuracy and completeness. One thing they are looking at is the impact when plans target a specific subset of members for prospective evaluations.
WHAT TO WATCH
- Repeal of sequestration before April would, presumably, result in a higher 2013 trend -- but that ain't gonna happen in an election year. Wait for something in the lame duck session after the election, when Congress has to deal with sequestration, the expiration of the Bush tax cuts, the expiration of the payroll tax holiday and the 2012 doc fix. Should look like a cross between cage fighting and smash-mouth hockey. If sequestration is repealed, it will show up as a correction to the 2014 rates.
All in all, a very positive development for our favorite program, considering the Age of Austerity we live in.
MA Enrollment - Good News
Today Secretary Sebelius announced the results of the annual election period showing that Medicare Advantage (MA) enrollment increased by 10 percent compared to this time last year. She declared that Medicare Advantage is "stronger than ever". This is consistent with my prediction in a December 2, 2011 blog based on reports we were seeing on the ground and hearing from the industry. The best news is that more beneficiaries are enrolling in 4 and 5 star plans, suggesting that the star bonuses and better information to beneficiaries may be influencing the choices. It is interesting that enrollment in stand-alone Prescription Drug Plans increased while enrollment in Medicare Advantage plans with drug coverage (MA-PDs) declined compared to last year. Enrollment in Special Needs Plans also increased about 10 percent. I look forward to seeing research on the effects of the new quality incentives on beneficiary choices and future changes in star ratings and beneficiary satisfaction surveys.
Forbes Gets it Wrong on Medicare Advantage
Forbes recently published a blog post ("Seniors: No, You Cannot Keep Your Plan Even if You Like It") that was wildly off the mark on the future of Medicare Advantage. I commented directly there (my handle on the Forbes blog is MedicareNinja), but had to call it out here.
I agree, the President overpromised to seniors when he famously said during the health reform debate "If you like your health care plan, you can keep your health care plan." You can't cut $135 Billion from plan payments and expect to have no impact on beneficiaries. But Forbes got it wrong: we are NOT about to see another exodus from the program as we did in the late 1990s.
As we've said here before, the exhortations of the death of MA are premature. We got confirmation from CMS last month: MA premiums will fall another 4% in 2012, and enrollment will grow by a brisk 10%. This after a robust 2011 where we think AEP will close with MA enrollment up over 8% vs. 2010.
The plans aren't going anywhere for several reasons -- none of which you see if all you're reading is wonky CBO and MedPAC reports.
First, government programs (Medicare and Medicaid in particular) are the only segments of the insured that are growing. As noted earlier, MA enrollment will grow over 8% this year, topping 12.5 million beneficiaries. Part D is approaching 20 million enrollees. Just this week Cigna announced it's spending over $3 Billion to acquire HealthSpring, a pure-play MA plan. Why? Because they see tremendous continued growth in the program, not because of its imminent demise.
Second, publicly-traded companies like MA leaders Humana and United are now dependent on Medicare, deriving twice their earnings from the program than they did a decade ago (average publicly-traded health plan earnings from Medicare in 1999: 13%; today, 26%, with some like HealthSpring and Universal American over 70%.) Bottom line: the big boys ain't going anywhere.
Third, over 40% of beneficiaries aging into Medicare have enrolled in MA plans the last two years, indicating the Boomers are a much more plan-friendly population than the World War II generation given managed care trends in the commercial market (HMOs, PPOs and POS plans represent more than 90% of all insured Americans).
Fourth, and most importantly, market-leading plans are adapting to the health reform cuts by focusing on Star Ratings quality bonuses and mastering the new state of the art in risk adjustment: the prospective home advanced evaluation. It's working, enabling plans to hold the line on benefits and premiums, and maintaining the attractiveness of these products vs. Medigap or traditional Medicare.
As long as the Congressional deficit Super-Committee doesn't fire another broadside at MA plan payment rates this fall, 2012 is shaping up to be a VERY good year, and I'd venture an estimate of over 15 million beneficiaries in these MA plans by the end of 2015.
The Forbes piece struck me as a wonky political hatchet job, trying to score cheap political points against Obama without any real basis in reality. They're usually above that sort of thing.
Creativity Shapes the Complexity of Part D Benefit Design
The question was recently posed on a social website as to "why some PDPs have no incentives for mail order and why some PDPs have bizarre generic tiers?" Although the question was specific to Oregon Medicare Prescription Drug Plans (PDP), it can be extrapolated nationwide. There are a variety of dynamics in play in the benefit design for PDPs, as well as MA-PDs, that have a significant impact on the complexity of the Part D Benefit offering. In considering the question, I have listed several possible reasons for the lack of mail-order incentives and the "bizarre generic tiers."
First, the national benchmark for the Part D benefit premium has decreased for the third consecutive year as the market has become more competitive, while the pharmaceutical inflation rate continues to raise approximately twice the national rate at 9.2% in 2011 and predicted to be 8.3% in 2012. Plans compensate for the increase by shifting to higher member cost-share using more tiering options, a broader range of copays, and more preferred tiers. CMS is allowing six tiers in 2012, allowing for both preferred brand and generic tiers. Utilization costs can be managed effectively by applying lower cost-sharing to more cost-effective therapies.
Next, Generic approvals are changing the landscape as many blockbuster drugs are moving off patent and becoming available in generic versions. Lipitor, Lexapro, and Zyprexa as well as other drugs representing over $1 Billion in sales either have or will become available over the next year. In many cases, however, the generic pricing is not much different than the brand name versions. As generics, they move to generic cost-sharing tiers, often actually increasing the cost to the plan. As a result the non-preferred generic tier is born with increased member cost sharing.
Next, the Specialty Drug Industry is a $40 billion industry involving more than 600 specialty pharmaceuticals currently under development in a market that is expected to top $160 billion by 2013. Management of this drug class is a challenge faced by every health plan. One of the tools applied to the management of specialty drugs is using cost-share tiers. Percentage based tiers are often applied to shield the risk.
Finally, Medicare Plan Rating incentives for MA-PDs achieving a five star rating are significant. Nine Five-Star Plans earned in excess of $4 billion in bonus payments for 2012 Plan Ratings. Starting in January, plans with three stars or better will get bonuses of 3 to 5 percent of their total Medicare payments. Five-star plans also can market to and enroll members year-round, while all other plans enrollment is limited to Medicare's annual open period. Member satisfaction plays a substantial role in those ratings. Part D Plan ratings look at factors such as access to prescriptions. Excessive step therapy and prior authorization requirements are member dissatifiers. By reducing restriction but increasing cost-sharing, members encounter less delay at point of purchase. Savings available by switching to a less costly therapy is also a satisfier.
Mail-Order service is on the decline as more and more plans are offering "mail-order at retail." When given the choice, the vast majority of Medicare Beneficiaries prefer to use their local retail pharmacies according to numerous studies. Although Medicare requires that an extended day's supply is available at retail, there was a cost saving advantage for using mail-order. As plans level the playing field, members seeking extended prescription supplies opt to use retail pharmacies. Again, increased member satisfaction results in better plan ratings and member retention.
Although there may be many other explanations, I believe these are some key reasons explaining the variation in plan design. Creativity and informatics continue to play a huge role in the delivery of high quality, cost-effective healthcare to Medicare Beneficiaries.
PBM Compliance-Oversight: What you Don't Know Can Cost You
Whether plans stick their heads in the sand or not, it doesn't change the fact that delegating services to a contracted entity is emerging as one of the fastest growing areas of audit risk.
CMS defines Compliance-Oversight Activities to include developing effective metrics and controls, monitoring and reporting, and risk assessment with corrective action for any delegated entities or contractors. Compliance refers to all contract compliance requirements and includes FWA compliance elements and requirements of the plan sponsor.
A Compliance-Oversight Plan should be structured in a way that is data driven — quantifiable performance metrics and monitoring with measurable outcomes. The goals of a Compliance Oversight plan should be proactive — to prevent, detect and respond ("find and fix") and focused — targeted on risk areas.
CMS has made it clear that the stakes have never been higher for the cost of non-compliance. In the area of oversight of contracted entities the warnings are beginning to play out in a variety of ways. At best, a plan sponsor can expect a corrective action plan that comes with intense scrutiny. Recently, CMS announced a series of actions against non-compliant activities that included fines and penalties. At worst, a plan risks non-renewal of its contract with CMS.
There are more subtle costs to the lack of compliance oversight that may not bring down the wrath of a CMS audit. Plans that fail to monitor the activities of their PBM effectively may have a deleterious impact on customer satisfaction. Poor satisfaction will result in lower CAHPS scores and reduced Plan Ratings.
Kaiser Health announced this week that the 9 Five-Star Plans earned in excess of $4 billion in bonus payments for 2012 Plan Ratings. Starting in January, plans with three stars or better will get bonuses of 3 to 5 percent of their total Medicare payments. Five-star plans also can market to and enroll members year-round, while all other plans enrollment is limited to Medicare's annual open period. What's more, CMS will aggressively encourage consumers to move their Medicare policies to the higher-ranked plans, giving them a big boost.
Failure to adequately provide compliance oversight to PBMs or other contracted entities is not only risky; it is also a costly failure by a plan sponsor at a time when resources are diminishing. Don't be caught unprepared.
GHG is hosting Medicare Advantage and Part D Compliance Leaders at our Compliance Forum 2011. We'll be addressing CMS' highly energetic regulatory activities and other key issues November 2-4 in Las Vegas. View the preliminary agenda here.
In addition, we're now offering a delayed payment pricing option, just in case your travel budgets have run out before your questions have. If you register now, the registration fee payment will be delayed until January 2012.
Click here to pre-register.
Regulations, Duals and Stars
GHG recently posted our summary of the October 3 proposed rule on changes to the MA and Part D programs for FY 2013. Most of the provisions in this rule are codifying current policies or implementing ACA provisions without interpretation. However there are two provisions of special interest. The first is a proposal to allow fully integrated dual eligible SNPs (FIDE) to offer supplemental benefits that are targeted to the needs of their enrollees such as personal care services, custodial care or in-home meal delivery. This is an exciting opportunity for dual SNPs to provide even more meaningful integration of Medicare and Medicaid services and is consistent with the movement in CMS, Congress and the health policy community to find better solutions to providing more coordinated care for dual eligibles. AHIP has joined the bandwagon and recently released its proposal to "Achieve Medicare/Medicaid Integration for Dually Eligible Beneficiaries" through managed care solutions.
The other regulatory provision of interest is proposed authority for CMS to terminate or non-renew MA and Part D plans that do not achieve at least an overall 3 star rating for 3 consecutive years, beginning with contract year 2013 ratings. This would be a discretionary authority and low performing plans would not automatically be terminated from the program. CMS just released the 2012 plan ratings. The good news is that 9 MA plans received 5 star ratings for 2012 and overall plan ratings increased to 3.44 from 3.18. However there are almost 70 MA plans and almost 150 Part D plans that had overall scores under 3 stars for 2012.
Stars don't matter to real people
Kaiser Permanente published a study on Monday that found only about 6% of Medicare beneficiaries used the CMS star quality ratings to select a Medicare Advantage plan. And only 2% know what their plan's currnet rating is.
What is important to customers regarding their insurance companies? Pay my claims. Fix problems quickly. Don't let problems happen. Don't raise my premiums too much. Otherwise, I don't want to know you are there.
What does CMS measure? Two years ago 90% of a plan's members got their flu shots. What does that mean to me? I get flu shots from my doctor, not from the health plan. And, if I like my doctor, I assume I'm getting good care. One thing I'm sure of: I don't want my health insurance company in the exam room with me.
The star rating system is based on what CMS thinks should be important for Medicare beneficiaries. I haven't found any evidence that CMS surveyed beneficiareis to discover what is actually important to them.
Kaiser Permanente concludes that plans need to do more to inform beneficiareis about the star ratings, so they can make informed choices. I think CMS should scrap the whole thing and start over with the four or five things that really matter to health insurance consumers.
OnStar for Risk Adjustment: Are you Okay?
Did you just hit something — a bump in the road or another car? Is there a calm voice coming from your car, asking if you are okay?
If only there were OnStar for risk adjustment. It is almost year end and if there were an OnStar for risk adjustment this is what she would be asking you today:
• Do you have at least 75% of your chart review done?
• Is your coding accuracy over 85%?
• Do you have at least 70% of your member evaluations completed?
• Have you scrubbed your claims based HCCs for validity or code confidence?
• Have you checked the health plan RAPs filtering process, not just for duplicate, but for complete compilation? Put another way - have you reconciled all the codes from your claims, chart review, and evaluations in the RAPS submission?
• Do you have a strong reconciliation process to ensure accurate payment when you get your RAPS return?
• Do you have an EDPS plan in place?
• Are you moving from retrospective chart review to current year chart review for 2012?
• Are you reducing your chart review strategy for 2012 and replacing it with member evaluations?
• Have you combined your member evaluations with your wellness exam criteria?
• Are you improving member outcomes and your HEDIS & STARS score with your integration of risk adjustment findings?
• Are you tracking the closing of your members' gaps in care?
If you need some roadside risk adjustment assistance, now is the time to ask.
"Lean and Clean" is Key to Survival for Medicare Plans -- Join the exclusive GHG Compliance Forum November 2-4 in Las Vegas
New regs every other week. 500 HPMS notices a year. RADV audits and Star Ratings surveys. Intermediate sanctions and the threat of termination for poor Stars performance. And now a new, uncoordinated CMS Central Office/Regional Office audit approach that could result in multiple government reviews in a calendar year. "Lean and clean" must define a cultural and management revolution among Medicare plans. If you aren't on the compliance train in these next several years, you're going to be under it.
Tell your compliance staff about our latest Gorman Health Group Compliance Forum. This exclusive GHG event is designed for Medicare Advantage health plans and will provide an intensive examination of the state of compliance in MA, with focus on the changing regulatory environment surrounding both Parts C and D. The meeting is limited to GHG client health plan staff ONLY. No vendors, no CMS representatives, to ensure a frank and open discussion about the way forward.
You'll want your team to be in the room to hear the latest from GHG's compliance experts on:
- Practical tips for implementing a fully-integrated compliance program
- Best practice Sales Oversight strategies that have cross-functional impact
- Part D pitfalls and action steps for oversight and monitoring
- Lessons learned from risk areas in compliance, including sales/marketing, enrollment reconciliation and risk adjustment
For registration information and more details, click here.
To check out the preliminary event agenda, click here.
Have a question? You can always reach our team at ghg@ghgadvisors.com.
I'll look forward to seeing you and your team in Las Vegas.
GHG Revenue Management Forum in Vegas Coming October 6-7
We've been saying since passage of the ACA that the next 3 years' survival in Medicare Advantage is all about revenue management. The rules have changed and MA plans need new processes and new solutions to avoid serious financial troubles these next several years. Clinical initiatives often take years to bear fruit. As rates come down due to the ACA cuts, and more pile on from the Congressional Super-Committee, MA plans must pull every revenue lever they have to offset those losses, stay competitive -- and finance the care coordination and complex case management infrastructure essential to securing our long-term future in government programs.
Our clients said, "how?" We're saying: "come to 'Lost Wages' and we'll show you." The venue couldn't be more appropriate for the subject matter. So please join me and GHG's top experts on revenue management October 6-7 at the fabulous Aria Hotel, for an exclusive event for MA health plan senior leadership with responsibilities for finance, revenue management, Star Ratings, and risk adjustment. We will share our state-of-the-art practical strategies for driving revenue in the new age of austerity and accountability.
This forum will offer actionable, tactical insight regarding:
• Performance optimization and efficiency
• Must-have investments in your STARS programs and where to focus to boost your rating
• A cutting-edge risk adjustment program that drives higher, more compliant revenue and better quality and service for members
• Understanding the various components of MA capitation and their implications for your bottom line
This program is designed for senior-level finance decision makers with leadership responsibilities for Medicare Advantage programs. This event will be advanced, but highly practical and action-oriented. As with our previous events, this program is open to health plans only. The cost of this event is $995; space is limited to 60 for this exclusive event. Pre-register now to secure your plan's attendance.
Click here to pre-register
Click here to view the preliminary agenda
If you're in Medicare Advantage these days you're a gambler, so come to Vegas and we'll show you how to win now that the rules have changed.