Industry Ducks Bullets in 2016 Medicare Advantage Rate Proposal

Friday, February 20th after close of business, the Centers for Medicare and Medicaid Services (CMS), released its 2016 Advance Notice of Medicare Advantage Payment, known affectionately as “the call letter.”

This one was the most anticipated in years, and the industry unexpectedly ducks bullets in it, in risk adjustment, Star Ratings, and elsewhere. It’s got a few unicorn farts in it, and a couple puffs of Chanel No. 5 as well.

The lack of any shockers is the bigger positive for the industry, a turning point really.  CMS is saying it won’t settle its scores with payers through policy, but through enforcement, where the facts are often too tough for politicians to stick their necks out.

Last fall’s surprise positive announcement that MA benchmarks were tracking to increase 2.02% next year started this year’s dance.  Now comes the draft call letter, and on April 6, the final, all of which will be different as CMS winds through its process and the full fury of industry lobbying is brought to bear.  It’s worth noting that this year a first-time majority of 53 Senators signed the annual “don’t hurt Medicare Advantage (MA)” letter to CMS, vs. only 40 last year.  The increased Congressional pressure and the fact that MA now represents one out of three beneficiaries is driving this call letter.

By our calculations, the 0.95% reduction in MA benchmarks claimed by CMS is really negative 1.76% all-in.  This is the unicorn fart. The final number quoted by CMS, 1.1% positive, is in part because CMS is taking credit for a 2.0% improvement in risk scores as plans continue to improve their risk adjustment management skills.  Kinda cheeky.  Our read on the underlying trend is +1.53%, frankly, better than we anticipated.

On risk adjustment, anticipation was that CMS would take a lethal shot at prospective in-home evaluations, a tough fee-for-service normalization factor, and an increase in the coding intensity adjustment, but NONE of those happened.

On home visits, despite a hailstorm of bad press and advocacy group investigations, CMS isn’t even dealing anymore, just laying out “best practices” and saying “we’re watching you.”  The regulators laid out 8 criteria that would make the prospective evaluation more like a risk assessment conducted by a Special Needs Plan, including:

• Evaluation performed by a physician or qualified non-physician practitioner
• Includes all components of the wellness visit including health risk assessment
• Medication review and reconciliation
• Scheduling appointments and referrals with appropriate providers and community resources
• Environmental scan of the home for safety risks and need for adaptive equipment
• Verifies that the information obtained during the assessment is furnished to appropriate plan staff and providers
• Provides enrollees with a summary of the information collected
• Enrolls the beneficiary in disease management or care management programs.

Taking these steps and embedding risk adjustment management inside a health plan’s Medical Management department would effectively audit-proof the company from the dreaded data validation audits expected to intensify this year.

Another shocker: CMS did the absolute bare-minimum on the coding intensity adjustment, and then heaved up a dangerous proposal to recalculate it starting in 2017.  If implemented, CMS would cut payments to all MA plans by enough so that total payments would be no greater than under the pre-HCC, pre-PIP-DCG, pre-2000 AAPCC demographic model.   This would make risk adjustment a zero sum game, in which individual plans could win or lose, but in which CMS would never pay out more than under the old AAPCC model.  That would settle the score on home visits once and for all, and indelibly damage risk adjustment as a healthcare financing innovation.

A final surprise: CMS acknowledges it has a problem on Star Ratings for health plans serving dual eligibles and the low-income.  The agency is cutting the weight of several Stars measures where vulnerable members score poorly, by a whopping 50% in 2016. This buys time for CMS and several plans overweight with low-income members and highly exposed to Stars underperformance to conduct additional research and take steps against what is driving the correlation.

It was, in the end, a surprisingly favorable call letter for health plans and other stakeholders, particularly capitated provider organizations.  But we’re still a long way from the Final Notice on April 6. How plans should react:

• First, write comment letters. Deadline is March 6 at 5 pm EST.
• The proposal to cap total MA payments at the same level as would have been paid under the pre-2000 demographic-only risk adjustment system is dangerous.  Plans need to point out how the Congress, in the 1997 Balanced Budget Act, mandated a health-based risk adjustment system because the demographic adjustments were inadequate.  We are not aware of any authority in that, or any other law, to allow CMS to set a cap on total MA payments.
• Take the guidance on home risk assessments seriously, and implement CMS’ suggestions before they become mandates.  Plans must hard-wire their risk adjustment program into their care management program, so they are actively managing the risks they identify.
• Don’t rely on averages:  the impact of CMS rates and other changes will vary from county to county, market by market.  Let us help you examine the impact on your service area.
• Continued rate pressure means plans have to continue to get better and better at the key components of their business:  risk adjustment, care management, Stars, and enrollment data reconciliation.
• Focus on the Stars metrics with the greatest weights, especially the intermediate outcomes measures and the plan-wide quality improvement measures.  Determine if the reweighting of seven metrics will have a positive or negative impact on your plan, and react to offset any negative effects, by emphasizing other metrics where there is room for improvement.

It’s going to be an interesting 45 days to the Final Notice, but one thing is sure in this call letter: CMS is conceding that Medicare Advantage has gone mainstream, and that its support in Congress can no longer be tangled with.  CMS is showing its preference to impact industry behavior through its boot rather than its pen.

Resources

Join John Gorman, GHG Executive Chairman, and colleague, Bill MacBain, GHG’s Senior Vice President of Strategy and former health plan CFO,  as they provide a hard-hitting analysis of critical areas addressed in the document, including a look at the various components that make up the trend factor, a proposed change to how risk scores are determined, health risk assessments, and Star Rating measures on March 3, 2015. Register Now >>

Registration for the Gorman Health Group 2015 Forum is now open! Attendees can expect timely, actionable advice on the trends shaping health care from notable speakers, including Barclay’s analyst, Joshua Raskin, and regulatory guidance directly from Jennifer Smith, a Director in the Medicare Parts C and D Enforcement Group at the Centers for Medicare & Medicaid Services (CMS). Register your team for The Gorman Health Group 2015 Forum today!