The Effect of the New Part B Drug Payment Proposal on Medicare Advantage and Part D
It's no secret drug costs have skyrocketed in the past decade, and drug payment policymakers face an uphill battle in figuring out how to curb this exponential growth. The Centers for Medicare & Medicaid Services (CMS) has already taken a beating on its proposal to test a new alternative payment design to pay for drugs covered under Medicare Part B, calling into question whether this new methodology will go through looking anything like originally proposed. Part B spending is just a fraction of drug spending in Medicare, covering the drugs administered by a physician or hospital outpatient department. A major question for our industry is what effect this new proposal will have on Medicare Advantage (MA) and Part D plans if implemented.
Part B spending on drugs has increased annually by 7.7% since 2005. Currently, most Medicare Part B drugs are paid using the Average Sales Price (ASP) plus a statutorily mandated 6% add-on. This creates an incentive to prescribe more expensive drugs due to the higher payment amount. Under the new model, Medicare Part B would pay the ASP plus an add-on of 2.5% and a flat fee of $16 per drug per day. The lower add-on and inclusion of the flat fee would decrease the incentive to provide more expensive drugs as the revenue for the drugs would be more evenly distributed. CMS will then roll out the second part of the experiment in which they will test several other pricing methodologies currently utilized by commercial health plans and pharmacy benefit managers, such as discounting or eliminating cost-sharing, providing feedback on prescribing patterns and decision support tools, basing pricing on a drug's clinical effectiveness, and setting benchmarks for a group of therapeutically similar drug products.
The industry was quick to respond, arguing the proposal will lower incentives to give beneficiaries access to vital drugs due to the cost, leading to a reduction in patient outcome as well as patient satisfaction. Some physician groups threatened, if this new payment methodology doesn't adequately cover the cost of the drug, a physician would opt not to prescribe the more expensive, even if more appropriate, medication. The proposal is also facing much scrutiny from both sides of the aisle in Congress, although some Democrats did offer their support. The House and Energy Committee will hold a hearing on the demo on May 17, 2016, along with a bill aiming to quash the demo entirely.
We probably won't see a similar proposal under Part D, as CMS argued it is actually using some of the principles of Part D to inform their payment methodology in Part B. However, as America's Health Insurance Plans (AHIP) pointed out in their comments to CMS, this proposal would likely have some significant downstream effects on MA and Part D plans. AHIP noted the historical tendency of a reduction on pharmaceutical prices in one market segment to lead to cost-shifting practices by manufacturers, such as setting higher prices for new drugs and higher drug price increases for existing drugs. MA and Part D also lose out because they lack the flexibilities of the new value-based tools proposed under Phase II that could also benefit MA and Part D plans. The rollout of the new model could also the affect MA and Part D bid process for 2018, due to the cost-shifting effect of the proposal.
CMS has already noted it will seriously consider making changes to the proposal. For example, CMS announced it will re-examine whether certain types of practices would not be adequate enough to cover certain types of drugs — such as small rural oncology practices. We could also see CMS propose an alternative tiered approach instead of the ASP and add-on formula. CMS is also considering excluding the new oncology care model from this proposal. Despite these changes, questions as to the effect on the remaining Medicare drug programs remain.
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Are Your Members Giving Your Plan A Thumbs Up?
It's that time of year when health plans are designing their benefit packages for the upcoming selling season, setting goals for their sales team, and implementing strategies to achieve greater success than the year before. But have health plans lost sight of what really matters to membership growth? Are health plans thinking about their current members while planning for their future members? If not, you should know each retained member contributes an incremental amount annually. Do you know the impact of a single member?
Member retention is key to long-term success. Net growth does not happen with new sales alone but with a careful balance between new sales and the retention of members once they have enrolled. Plans can meet all sales goals and still end up significantly below membership and revenue targets if members disenrolll from the plan.
Members leave a health plan for a variety of reasons, including dissatisfaction with the health plan, the product, provider access, misinformation/marketing abuse, cost sharing too high, and service or quality of care, but the majority of disenrollments are within the plan's control.
Dissatisfied members may enroll into a competitor's Medicare Advantage or Part D plan, a Medicare Supplement, or return to Original Medicare coverage. Proactively addressing factors which lead to member disenrollment should be the focus of any member retention effort.
What is a member retention program? A member retention program encompasses member engagement, satisfaction, and performance measures. A successful program should be geared around the relationship between the member, the plan, and trusted advisors.
Careful design of retention initiatives and a commitment to communication will deliver a significant and positive impact on enrollment and revenue generation. The foundation of an effective member retention strategy is cross-functional alignment, placing the member at the center of the health plan's initiatives and core business functions.
Sales and Marketing typically are responsible for attracting new members and keeping them engaged during the onboarding process, but a true retention strategy contains efforts from all disciplines inside the health plan. No one department can be responsible for the full engagement of a member. Once a member is part of the health plan, they touch Customer Service, Communications, Risk Adjustment, Care Management, Compliance, and Operations. Their experience in all of these aspects of the health plan drives the retention of that member which in turn helps health plans increase Star Ratings and helps the health plan reinvest their performance bonuses in more and better member benefits.
Utilizing our cross-functional expertise, Gorman Health Group can work with your health plan to create a customized retention program focusing on strategies that address key factors driving your disenrollment and negatively impacting revenue.
For more information, please contact Carrie Barker-Settles at cbarkersettles@ghgadvisors.com.
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50/50 Just Won't Cut It — You Have to Commit 100%. The Top 5 Components for Successful, Compliant, Committed Operations
If you weren't able to make it to the Gorman Health Group 2016 Forum this year, you missed a dynamic time. More than just relevant topics, it included engaged participants who added a wealth of depth to our discussions. The topic garnering a lot of audience participation was "Can Operational Efficiencies and Compliance Co-Exist?" The struggle to align the two is real and takes constant, diligent effort, but the success it can create is priceless.
I told a story about a recent vacation involving a shark swimming in the surf. At one point it started swimming towards a father and son. Those of us on the pier were yelling to warn the man to leave the water, but he couldn't hear us. It wasn't until the people on the beach carried the message to the man that they got out of the water. Oftentimes we rely on the Compliance Department to carry the weight of maintaining compliance, but like the people on the pier, that message only goes so far. To be effective and make a real change, the message has to be embraced by everyone in order to make a real difference.
Here are the five critical points to ensure operations entwines compliance in its core:
- Don't Ignore the Human Factor — Our employees are the most critical factors in our department's productivity and compliance. Make sure our employees are well trained on not only the technical components of the job but on the critical compliance requirements as well. Employee engagement, like member engagement, is critical to success. Our employees want to do a good job, but sometimes they don't fully understand all that success entails.
- Know the "Why" behind an Action — What vision have you imparted to your staff? Are they just keying in applications, or are they setting up and welcoming members into your plan? Do your employees think compliance is an obstacle to be circumvented or a process to be embraced? Making that transition occurs by showing the "why" behind the action. How does what they do, both individually and as a department, impact our members? What is the logic behind why the Centers for Medicare & Medicaid Services (CMS) requires that activity? What they do is important, and making sure they understand all the reasons why makes your vision their vision.
- Have the Right Tools — Manual work-arounds and systems that have been duct taped to manage Medicare Advantage and Part D cause most of us the greatest headaches and compliance failures. There is no magic wand to resolve this—it takes diligence, documentation, and prioritization on a continual basis to raise up the next critical system needing to be resolved. Have your list of things needing to be fixed, the additional costs associated with the status quo, and the member impact ready and on the enhancement list.
- Provide Measurable Results of Success and Failure — Have a highly-visible way to measure individual and team success and failure. Successes should be celebrated. Share the successes and bring the feedback to your team. Failures should be evaluated—it isn't about the "who did it" but about the "why it happened." Everyone should be focused on mitigation. One of the items the audience discussed is ensuring you eliminate a culture of fear so staff is engaged in reporting non-compliance so it can be addressed. When non-compliance is identified, embrace it and thank those who raised the issue. Let them know how this positively impacted the department, company, and members.
- Manage Up — Sometimes we in management are the biggest barriers to compliant operations. We look at the production numbers and don't focus on the compliance measurements. We only give senior management what they ask for—it is our job to make sure the critical metrics and measurements go up to senior management. They often don't know the right questions to ask or measurements to review, and it is our job to bring this forward—it protects the company and our members.
We all have a part to play to ensure efficient, compliant operations are in place for our members. It takes 100% commitment to make sure the vision is carried forward. At Gorman Health Group, we know how important it is to link compliance and productivity. We are available to join with you to ensure that vision is firmly established in your organization. Please contact me directly at jbillman@ghgadvisors.com.
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3 Key Aspects from State of Compliance
They say people fear public speaking more than death. I can tell you from public speaking experience, it is far preferable than death (though if you could bring me back like the red witch did Jon Snow, that could be one heck of a ride). Having an audience of friendly faces is also a huge help when presenting. Today, I share highlights from a recent speaking engagement on the state of compliance. For the sake of time, I boiled it down to three key sections: audits, readiness initiatives, and compliance reviews.
- We are bearing witness to CMS' continual changes to Program Audit layouts and processes. We know more clarifications are to come, and it is our role to keep our clients armed with the most up-to-date knowledge based on our individual experiences and interactions. We shared some common conditions as seen by Gorman Health Group as well as some ideas for addressing low-hanging fruit. For example, audit prep goes a long way with putting your best foot forward when presenting data. This is where penny-wise, pound foolish comes in. If you do not invest the time now to prepare, you could pay for it in the long run. Another recommendation is to evaluate member letters for comprehension. If you have a member advisory panel, show them some denial rationales and get real feedback. If they don't know their next step to getting their drug or service reviewed again, it's a problem. I raise this because, in my experience, this has been an issue for over a decade.
- There are a number of non-audit activities CMS so kindly makes available to the industry, and they come in the form of readiness assessments, reviews, and checklists. CMS may evaluate applicants new to the market for their preparedness to determine how far along they are in supporting all those Part C and Part D attestations submitted with an application. Under the financial alignment initiative, a readiness review is performed on each and every Medicare-Medicaid Plan that comes to market. Finally, all Sponsors are on the receiving end of CMS' annual readiness checklist. CMS gives you the tools; we are always enlightened when we see what folks do with them.
- Finally, we focused on compliance review results of issuers in the Federally-Facilitated Marketplace. CMS shared these findings via report, and the results were not kind. Policies, agent training, notice errors, and contract issues plagued the results. And with the good faith policy ending at the close of 2015, this means civil money penalties can be leveraged this year, and past performance will be taken into account.
It's a struggle to boil down valuable industry insight for a presentation, since I risk leaving no time for audience questions, and it's even harder to pare down a blog post. Luckily, I can take questions at any time. I won't close with Game of Thrones' most popular Stark family tagline but instead with a sentiment from Ser Davos: "Loyal service means telling hard truths." We share our perspective of those hard truths in the service of our clients, who in turn are in the service of beneficiaries, the people who matter most. Email me at rpennypacker@ghgadvisors.com.
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Medicaid Final Rule Aligns the Program with MA and Exchange Regulations
The Centers for Medicare & Medicaid Services (CMS) issued the final Medicaid "mega-rule," a huge regulation that makes changes to every part of the current managed care rules. Although the final rule makes some tweaks based on the comments received from the industry, it largely adopts the proposals released last May. The new changes will be phased in over the course of three years, with some provisions going into effect starting July 1, 2017.
The new regulation, in essence, brings Medicaid managed care into the 21st century. Many of the new changes align the Medicaid program with Medicare Advantage (MA) and Exchange regulations currently in place. The rule encourages efficient, realistic use of limited resources, creating more incentives to improve clinical outcomes, reduce cost, and improve benefit coverage. Below is a synopsis of the major changes in the final regulation:
Medical Loss Ratio (MLR)
The final rule directs states to comply with a federal MLR standard of a minimum 85%, with a one-year reporting year. The new MLR requirement begins with contracts starting on or after July 1, 2017. This does not prevent states from setting loss ratios higher than 85%, however. Several states already impose MLR standard on plans, and many plans are already in compliance or close to an 85% MLR, so the impact of this new regulation is uncertain. Time will tell if the imposed 85% MLR will be effective as a way to standardize the varying state rules. CMS estimates the federal government would collect from $7 to $9 billion over a span of two year from plans failing to meet the ratio.
While the calculation details largely align with MA, CMS did make some slight variations in order to account for program differences between Medicaid/Children's Health Insurance Program (CHIP) and MA. The proposed rule also originally suggested fraud prevention activities would be included in the MLR calculation, however, decided since MA and the private insurance industry have yet to adopt this, the new regulation would read that Medicaid will adopt fraud prevention activities when the private market does.
In addition to the development of the MLR, CMS is requiring more transparency and fairness between health plans and States in the rate setting process — this will mean a closer look into how health plans and States are utilizing government funds.
Quality Rating System (QRS)
CMS plans to develop a Medicaid and CHIP QRS, similar to the one currently being implemented in the Exchanges. The new system will align with Exchange indicators but will retain flexibility to use different measures in order to reflect the differences in populations served by Medicaid/CHIP. CMS will expand on the methodology it plans to use in a forthcoming proposed regulation and expects to implement the QRS over the next five years. Overall, the major quality provisions of the rule all work to increase plan transparency of quality information, making it more available to the consumers and to facilitate identification of high risk members with special health care needs. States will also have the option of waiving out of the federal QRS and establishing their own, as long as it is substantially similar.
Quality Incentives
CMS also included several avenues in which states can now develop quality incentive systems in order to move forward with delivery reform and the movement toward value-based care, similar to the MA and Exchange spaces. States can now enter contractual agreements with plans in which plans agree to work on delivery system reform and performance improvement activities. This will be especially helpful in managing members in need of long term services and support and/or have special health care needs. States can also include value-based purchasing agreements that would tie provider reimbursement to performance on quality measures. Finally, states can develop other incentive and penalty arrangements to reward plans meeting quality or performance.
Marketing
CMS is updating the marketing standards in order to provide more beneficiary protections due to both the creation of Qualified Health Plans (QHPs) and the changes in managed care delivery systems in the past decade. For example, the new regulation updates rules on the use of mail, email, and websites. The final rule also requires plans to regularly update provider directories and drug formularies and make these readily available. The final rules also codify accessibility and anti-discrimination rules. The new rules greatly align with MA and the Exchange.
Appeals and Grievances
This is yet another area in which CMS streamlines the process with MA and the Exchange. The new regulation sets clear timelines, definitions, and guidelines for the appeals and grievances process and sets an expedited appeals process. Plans will need to ensure completion of the new required turnaround times for requests for external review; availability of case file medical records, and other documents used to conduct coverage determinations to the member; and documentation of notices and recordkeeping. Enrollees will now also be required to use the new internal process before utilizing state fair hearings.
Network Adequacy
Though CMS leaves network adequacy details up to the states, it does direct states to establish time and distance standards for primary and specialty care, behavioral health, OB/GYN, pediatric dental, hospital, pharmacy providers, and Managed Long Term Services and Supports (MLTSS). States will be required to certify the adequacy of the network at least annually or if there is a substantial change in the program design.
Actuarial Soundness and Rate Setting
CMS established and updated its rate setting procedures in order to bring clarity and ease to setting and reviewing Medicaid managed care payment rates. Currently, rates must simply be "actuarially sound." The new regulation defines actuarially sound rates as "rates that are projected to provide for all reasonable, appropriate and attainable costs under the terms of the contract and for the time period and population covered under the contract." CMS also set standards that capitation rates must meet and that CMS will apply in the review and approval of actuarially sound capitation rates.
Fraud Prevention
CMS also updates procedures to prevent, monitor, and identify fraud, including internal monitoring, audits, and mandatory reporting to CMS. The new rules include procedures for suspending providers when fraud has been alleged. The rule leaves some rulemaking to the states, however, states will need to submit a plan to CMS on how they intend to recover discovered fraud, waste, and abuse.
As previously noted, the final regulation makes changes to virtually every part of Medicaid Managed Care regulations and makes many more updates than we have gone into here. However, the big takeaway is many of these new regulations bring the Medicaid program up to date by borrowing from the successes and lessons learned from the MA and Exchange spaces. Plans would be well served to educate themselves on successful MA and Exchange plan compliance strategies and operations going forward in order to prepare themselves for the upcoming changes.
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Let the team of experts at Gorman Health Group (GHG) help you prepare for the upcoming changes that could impact your organization. GHG's risk adjustment experts can help analyze the financial impact, develop feasibility models to help with meeting the new MLR requirements, and provide guidance on streamlining operations. GHG's Compliance Solutions can assist in the development and monitoring of these new contract requirements, and our clinical team can assist with reviewing and developing integrated care models to provide quality initiatives that are effective and efficiently managed to get optimal results.
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The ABCs of Member Satisfaction
Member satisfaction. Customer centricity. Member retention. Consumer experience. Regardless of the term used, the Consumer Assessment of Healthcare Providers and Systems (CAHPS®) survey measures continue to be the common denominator by which the Centers for Medicare & Medicaid Services (CMS) measures a health plan's success, creating a positive member experience. CAHPS® survey responses now represent 16% of a Medicare Advantage (MA) plan's overall Star Rating, and an additional 33% is comprised of member-reported health outcomes and administrative measurements of member access and experience. With approximately 50% of the overall Star Rating now driven by some element of the member's experience, many health plan leaders now better appreciate the value of consistently providing members with excellent service and a positive experience.
I recently had the pleasure of listening to a group of members from a variety of MA plans share their health plan experiences with industry leaders. Though health plan discussions regarding member experience are often abstract and very general in nature, listening to the experiences of actual members is always a refreshing way to remind ourselves not only what a privilege it is to service the healthcare needs of Medicare beneficiaries but also how emotionally our "routine hiccups" impact members. Not surprisingly, this group of MA members shared stories that illustrate we've still got room for improvement in our quest to create a 5-star customer experience. The experiences of these members spotlight some of the ABCs for a successful member experience:
Access — When members discover providers with closed panels, struggle to make timely appointments with physicians, experience arduous referral or service authorization requirements, or are unable (even if only temporarily) to obtain medications at the retail pharmacy, we reduce the likelihood of the member reporting positive experiences with our plan on their CAHPS® survey. Because many problems have multiple and/or multi-layered root causes, use of a technique such as the "5 Whys" can efficiently and effectively support root cause analysis of issues so impactful improvements can be rapidly deployed.
Better Communication — Many plans struggle to effectively communicate with members and often compensate by over-communicating to members, particularly via low-cost channels such as mail and IVR. By carefully crafting outreach strategies, letters, mailings, and scripts and using each member's preferred communication channel(s), plans can improve the effectiveness of their communications and demonstrate customer-centricity to members.
Coordination and Clinical Context — During the early years of Star Ratings, many plans deployed measure-specific tactics and interventions which were often conducted by disparate teams. In many cases, such tactics were implemented without anyone "connecting the dots" to ensure such strategies passed the "common sense" test from the member's perspective or that such tactics were appropriate within the clinical context of the member's overall health status. By strategically planning and developing outreach scripts and workflows, leveraging Health Risk Assessment (HRA) and claims data, and developing effective business rules through which to identify member interventions, plans can identify the right intervention for the right member at the right time.
Determination and Decision-making — Organizations with a sustained, strong customer experience are intensely focused on consistently making decisions that deliver value to their customers and meet customer expectations. This requires persistent determination, particularly as problems arise which necessitate process improvements or additional resources to resolve. Transforming a health plan into a consumer-focused organization with strong CAHPS® measure performance often requires a new or refreshed consumer focus within each operational area (from benefit design to care management to customer service to sales/marketing) supported by an effective customer experience leader and customer experience governance structure.
The member experience will continue to be a necessary core competency as the industry evolves over the next few years. Gorman Health Group (GHG) understands this can be challenging, both logistically and politically.
Whether your plan needs help establishing an effective member experience or member communication strategy, cataloging and evaluating existing member communications, or identifying opportunities to streamline and strengthen the return on investment from existing materials, tactics, or interventions, we can help. For additional questions and inquiries about how GHG can support your organization's member experience efforts, please contact me directly at msmith@ghgadvisors.com.
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Our distinguished team of experts collaborated to provide our interpretation of this announcement and the key features that will have the greatest impact on the industry, emphasizing core business functions in Risk Adjustment, Provider Network, Quality, Compliance, Pharmacy, and Data Integrity. Download our full Summary & Analysis of the Final Rate Announcement & Final Call Letter >>
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Where is Healthcare Now? The Long March to Value-Based Care.
"Why won't the Centers for Medicare & Medicaid Services (CMS) let health plans gather some health information at the point of sale?
How is CMS going to use the data they are collecting?
What is CMS going to do when the first round of Accountable Care Organizations (ACOs) comes to an end?"
At the Gorman Health Group 2016 Forum in Fort Worth, these and other questions were on the minds of our clients. It can be challenging to guess what the agency will do going forward in an election year when the water is choppy. But that forecast is a critical factor in your planning.
In "The March to Value-Based Payment," I described something that is a long march indeed. The Republican-driven Medicare Modernization Act of 2003 ushered in the attenuation of payments to hospitals, first for quality reporting and soon after for quality results. Then, the Affordable Care Act driven by the Democratic Obama Administration doubled down on this "good government" approach. The program was extended to more provider types, outcomes and efficiency were added to the measures, and we began to see downside risk associated with less-than-average performance.
Under the provisions of the 2015 Medicare Access and CHIP Reauthorization Act (MACRA), physicians and other practitioners will face a Hobson's choice: live with a more aggressive risk-based adjustment to payments or join forces with an alternative delivery model, like an Accountable Care Organization (ACO), that is taking risk. The goal moving forward is to render unto Caesar what is Caesar's: the government is willing to bear the risk associated with each patient's demographic characteristics and health history. They will render unto providers the risks of inefficiency and poor performance. This could encourage more doctors to choose alternative payment models like ACOs or to affiliate with Medicare plans. Are you ready?
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The Gorman Health Group 2016 Forum concluded last week with over 200 of our closest clients and partners. There was great news and rough news, so here are a few takeaways >>
Our distinguished team of experts collaborated to provide our interpretation of this announcement and the key features that will have the greatest impact on the industry, emphasizing core business functions in Risk Adjustment, Provider Network, Quality, Compliance, Pharmacy, and Data Integrity. Download our full Summary & Analysis of the Final Rate Announcement & Final Call Letter >>
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What's Good for Obamacare Is Good for Medicare Advantage, and Vice Versa
I'm really excited to join Gorman Health Group (GHG) after more than 30 years at the Centers for Medicare & Medicaid Services (CMS), and I'm especially excited about the GHG Forum next week in Fort Worth. If you are sitting on the fence, now is a great time to jump in. Make no mistake — we are at the tipping point where public finance at the federal level is quickly becoming the dominant driver of change in the whole system. In 1966, Medicare was erected on the 30-year-old chassis that was the Blue Cross model. Now the tables are turned: Obamacare is determining the shape of new market entrants, often in a push-pull with Medicare Advantage (MA), and nowhere is that more evident than in my adopted homeland of the People's Republic of California.
Covered California is making the call about which hospitals health plans should work with. In the CMS world, the drive toward value-based purchasing and quality reporting is going precisely in the same direction across the spectrum of care. It used to be acceptable to have a provider who was within 30 miles or 30 minutes away. That's your father's MA model. The insistent drumbeat toward quality reporting and performance across the spectrum of services is only going to become more strident. You need to deliver consistent value across the whole supply chain that touches your member or attributed beneficiary.
What is a health plan or Accountable Care Organization (ACO) to do? The path is clear to me. Years ago I took the Deming seminar and drank the Kool Aid about developing long-term relationships with a small group of high-quality suppliers that could integrate and commit to your production model. Jumping up to 2017, I believe that is what MA plans and ACOs must do: orchestrate the players in their ecosphere to get great outcomes and kudos from patients and caregivers. When the stars are in alignment, we can all party like it's 1999.
Looking forward to working with our clients to achieve great things, and it starts in Fort Worth, so come on down!
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We are proud to announce a new session at the Gorman Health Group 2016 Forum featuring David Sayen, a former Centers for Medicare & Medicaid Services (CMS) Regional Administrator, who will provide a CMS update on "The March to Value-Based Payment." Register now to reserve your seat for next week!
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To Everything There Is a Season: Marketing Materials
There is a season for every activity within your organization: one for bids, one for applications, one for data validation. We are soon to come upon marketing material season, when a flurry of activity usually gets underway in Marketing Communications and Compliance Departments nationwide. Here are three reasons to ramp up:
- Now more than ever, we have seen a growing trend towards high-quality service and retention. How does this affect marketing materials? In our estimation, submitting the bare minimum, core materials is no longer good enough if an organization wants to be leader of the pack. Sponsors are getting creative with benefits, maintaining robust networks, doing their best to keep premiums low — and while those factors are key in member retention, so is service. If an organization wants to work on maintaining relationships (through retention) rather than establishing only (through the sale), we expect to see additional, more personalized materials coming through Compliance Departments. While each piece may not require CMS submission, all member- and beneficiary-facing materials must be reviewed by Compliance.
- CMS clarified in their draft guidance that while designations of "approved" or "accepted" do not have an expiration date, the status remains valid so long as the material is still compliant with the most current version of the marketing material guidelines. Therefore, if this was not occurring in the past, organizations should be reconciling their past approved and accepted materials to ensure they are still compliant. We anticipate a flurry of questions to roll into Compliance Departments about whether or not an update needs to be submitted (because, remember, some changes do not require resubmission!)
- The reach of the Duals Demonstration continues to stretch across the nation, and with that comes a significant amount of required coordination. This also includes the review of materials. Timing is everything, and unless one agency (CMS or the state) chooses to defer to the other for the review and approval of materials, an additional party is added to the process. This should certainly light a fire under every business owner responsible for updating their materials. The sooner the process begins, the better it will be for the review, printing, and distribution processes.
Compliance might feel the pinch this year of business owners asking for more assistance and guidance in the wake of sub-regulatory changes. Consider that beneficiaries, too, are asking health plans to be something more than a claims processor. We find in all aspects of a successful organization, the bare minimum is not enough. Therefore, instead waiting until someone starts asking for more, think about proactive ways you can deliver more before they even ask.
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Let's face it: the marketing staff is at a disadvantage with the shortened period between bid submission and the start of the annual enrollment period. We can develop or review your sales collateral and creative by product type to help ensure your high-impact messaging is both targeted and compliant. Visit our website to learn more >>
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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
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