CMS Largely Holds Firm on Most Proposed MA Payment & Policy Changes for 2017

On April 4th, the Centers for Medicare & Medicaid Services (CMS) issued the Final Notice of Methodological Changes for Calendar Year (CY) 2017 for Medicare Advantage (MA) Capitation Rates, Part C and Part D Payment Policies, and 2017 Call Letter. This is the final notice of changes in rates of payment and overall policy.

CMS finalized most of its proposals from the Advance Notice and Call Letter, however did make some notable changes:

• Rates and Trend: The final trend is 3.12% inclusive of underlying trend and prior period adjustments. The underlying trend was slightly higher than estimated while the correction to the prior period was lower than expected (0.14%), so in the end, the trend nets out close to the original estimate. CMS estimates a 0.85% increase of all-in rates.
• Normalization Factor: CMS notes a technical error which affected the proposed normalization factors in the Draft Call Letter. The normalization factor was updated from 0.993 to 0.998.
• Encounter Data: CMS will increase the use of encounter data-based risk scores to 25% in 2017, instead of 50% as proposed in the Draft Call Letter.
• Employer Group Waiver Plans (EGWP): CMS is finalizing its new policy for calculating EGWP county payment rates, with two modifications. First, CMS will blend individual market plan bids and EGWP bids from 2016 for 2017, in order to allow for a two year transition period. Second, CMS will use prior payment year information to calculate base payment amounts in order to release the final EGWP payment rates in the Rate Announcement instead of August as previously expected. It is also important to note that while the methodology waives the bidding requirements, MA EGWPs must still submit plan benefit package and formulary in accordance to the 2017 Final Call Letter.
• Star Reduction Policy: As noted in a March HPMS memo, CMS is suspending the reduction of the overall and summary Star Ratings of contracts that are under sanction, while CMS re-evaluates the impact of sanctions, audits, and CMPs on the Star Ratings. CMS plans to describe the new proposals in Fall 2016.
• Low rated plans to be terminated: Although CMS will continue with termination of plans falling below 3 stars, CMS announced it may ‘stay’ a termination, including notification of beneficiaries, if the organization holding the poorly-rated contract is prepared to consolidate that contract into a higher rated contract during the bid cycle for the upcoming plan year.

The following major proposals were finalized as proposed:

• Risk Model for Dual Eligibles: Although the proposed methodology will be implemented, data will be updated, so the original estimated rate impact by category may change. Despite the new rate impact, organizations should still expect increase in payments for non-institutional full-duals and reduced payments for all other categories. CMS estimates a net impact on rates of -0.6%.
• Stars dual Interim Adjustment: CMS is moving forward with its proposal to apply the Categorical Adjustment Index factor to overall, Part C Summary and Part D Summary Ratings as an interim solution to account for the Star Ratings impact of dual-eligible and disabled beneficiaries.
• Opioid Overutilization: CMS is finalizing its proposal to combat opioid overutilization by implementing new edits to prevent overutilization at the Point of Sale (POS). CMS expects sponsors to implement either a soft edit or hard edit, or use both as originally proposed in the draft Call Letter, and work toward at minimum a hard edit in 2018.

Compliance Updates:

• CMS again reminds Part D sponsors that it is stepping up enforcement actions on coverage disputes and complaints, the leading noncompliance issue for plans.
• Plans failing financial audits conducted on one-third audits will now also be subject to sanctions and civil money penalties
• CMS is ramping up audits and enforcement actions in network adequacy, provider directory accuracy, and medication therapy management programs.

These are just the major highlights of from CMS’ Final Notice and Call Letter. Stay tuned for Gorman Health Group’s (GHG’s) industry experts summary and analysis of the final changes for 2017, coming out shortly. questions about the summary? Contact us to start a dialogue.

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