Wakely Consulting Group, Inc. Summary of 2015 Medicare Advantage Final Rate Notice April 9, 2014

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1 Wakely Consulting Group, Inc. Summary of 2015 Medicare Advantage Final Rate Notice April 9, 2014 CMS released the 2015 Final Rate Notice and Call Letter on April 7, This summary provides a high level description of the information included in the Notice. It contains the material Wakely views as important and should not be viewed as an all-inclusive summary. It has been written for those who are familiar with MA/PD programs and methods and condensed in order to keep it brief. The document in its entirety can be found at the following location: It should be noted that there are still several outstanding proposed policy, guidance and instructions changes that were included in the 2015 draft BPT instructions, released on February 24, 2014 and in the 2015 proposed rule, Contract Year 2015 Policy and Technical Changes to the Medicare Advantage and the Medicare Prescription Drug Benefit Programs, released on January 6, Final BPT instructions are expected to be released on Friday, April 11, CMS has indicated that they do not know when the proposed rule will be finalized. Page 1

2 Table of Contents Executive Summary... 3 Attachment I - Final Estimate of the National Per Capita MA Growth Percentage and the National Medicare Fee-for-Service Growth Percentage for 2015 (pp. 7-8)... 6 Attachment II - Key Assumptions and Financial Information (pp. 9-16)... 7 Attachment III Responses to Public Comments (pp.17-33)... 9 Attachment IV. Changes in the Payment Methodology for Medicare Part D for CY 2015 (pp ) Attachment V. Final Updated Part D Benefit Parameters for Defined Standard Benefit, Low-Income Subsidy, and Retiree Drug Subsidy (pp ) Section A. Annual Percentage Increase in Average Expenditures for Part D Drugs per Eligible Beneficiary Section B. Annual Percentage Increase in Consumer Price Index, All Urban Consumers (all items, U.S. city average) Section C. Calculation Methodology Section D. Retiree Drug Subsidy Amounts Section E. Estimated Total Covered Part D Spending at Out-of-Pocket Threshold for Applicable Beneficiaries Attachment VI: 2015 Call Letter Section I Parts C & D (pp 47-83) Section II Part C (pp ) Section III Part D (pp ) Appendices 1 & 2: Contract Year 2015 Guidance for Prescription Drug Plan (PDP) Renewals and Non- Renewals Appendix 3: Comments on Changes to 2015 Star Ratings and Beyond APPENDIX I Wakely Estimated Impact of Growth Rates combined with Payment Reform APPENDIX II Part D Defined Standard Benefit Parameters APPENDIX III MOOP and Cost Sharing Limit Tables Page 2

3 Executive Summary Overall Impact of the Final Rate Notice The majority of the changes in the 2015 Final Rate Notice and Call Letter are the result of continuing implementation of the provisions of the Affordable Care Act. Many changes such as calculation/rebasing of the county Benchmarks, revisions to benefit parameters, and updates to risk score calculation components will affect nearly all Medicare Advantage and Prescription Drug Plans. Other changes such as expiration of the Quality Bonus Payment Demonstration program and updates to default star ratings for low enrollment plans will only affect certain plans. Wakely has developed an estimate of the overall impact of the changes discussed in the Final Rate Notice on the 2015 Benchmarks compared to the 2014 Benchmarks. We have also performed a similar comparison of the resulting CMS revenue for 2015 versus Plans should be aware that the changes in the Benchmarks can be considerably different (and typically are greater in magnitude) than the change in CMS revenue to the plan. Plans are paid 100% of their Part C basic bid, which is unaffected by the Benchmark for most plans (most plans bid below the Benchmark), plus a percentage of the remaining difference of the excess of the Benchmark above the bid. Therefore a reduction in the Benchmark will impact plans differently based on the disparity of the plan s bid compared to the Benchmark (i.e. the savings ) and the star-based percentage of the savings retained by the plan (i.e. Part C rebate ). Our nationwide average Benchmark change estimate is -8.0% comparing 2014 Benchmarks to estimated 2015 Benchmarks. County specific values were aggregated using February 2014 CMS published MA enrollment and star ratings. Benchmarks are based on a risk score. Our estimated nationwide average revenue change for 2015 is -0.8%. The actual revenue change for individual Medicare Advantage plans will vary significantly. For our purposes, revenue refers to CMS MA payments only (excludes Part D payments and beneficiary premiums). The revenue change includes assumptions regarding risk adjustment factors, Part C basic bid, diagnosis coding trend, and medical cost trend. Details regarding our calculations and assumptions are provided in Appendix I. The remainder of this summary includes many details discussed at length in the Final Rate Notice and Call Letter. Some of the more universal and immediately impactful items include: Rebasing of county benchmarks as a result, benchmark changes will vary by county. Expiration of the Quality Bonus Payment Demonstration plans below 4 stars will receive no bonus payment. New plan and low enrollment plans will receive a 3.5% bonus payment. Fee-for-Service Normalization Factors have been reduced, significantly for MA. Page 3

4 Although the HCC models have not been updated, the blend of the 2013 CMS-HCC and 2014 CMS-HCC versions will change to be weighted 66%/33% instead of the originally proposed 25%/75% blend. The RxHCC model will not be updated. We have listed key changes and important items that have not changed from the Advance Notice. Items proposed in the Advance Notice that are not modified or retracted in the final Rate Announcement become automatically become effective as proposed. Key Changes from Advance Notice The National Per Capita MA Growth Percentage (NPCMAGP) and FFS Growth Percentage were decreased as shown in table below. The change is primarily due to further prior period restatements. Advance Final Change NPCMAGP -3.55% -4.07% -0.52% FFS Growth -1.65% -3.30% -1.65% For 2015, CMS will calculate risk scores based on the 2013 CMS-HCC and 2014 CMS-HCC models using a 67%/33% blend. This is different than the Advance Notice which indicated that the same blend as 2014 would be used (a 25%/75% blend of the 2013 CMS-HCC/2014 CMS-HCC models). CMS is not implementing the proposed policy to exclude diagnoses identified during a home visit that are not confirmed by a subsequent clinical encounter. The final normalization factors vary from the Advance Notice. The final 2015 normalization factors are significantly reduced from 2014 and have been overall reduced from the Advance notice: CMS-HCC model: CMS-HCC model: CMS-HCC model for PACE: ESRD Dialysis/Transplant Model: ESRD Functioning Graft model: RxHCC model: The RxHCC Risk Adjustment model as proposed in the Advance notice will not be implemented. CMS will continue to use the RxHCC model used in Since adoption of ICD-10 has been delayed, the risk methodology based on ICD-10 will also be delayed. The ICD-9 standard code sets will be used for 2014 dates of service and 2015 risk scores. The proposed minimum cost-sharing requirements for gap coverage for EA plans were removed. Page 4

5 Proposals Adopted as Issued in the Advance Notice Continued implementation of the ACA benchmark adjustments. End of the Quality Bonus Payment demonstration. County rates have been rebased. Continuation of IME phase-out ESRD dialysis rates will be determined by state. Continuation of policy of paying on a FFS basis for qualified clinical trial items and services provided to MA plan members that are covered under the National Coverage Determinations on clinical trials. The list of network areas for PFFS for plan year 2016 is available at The MA coding pattern difference adjustment of 5.16% percent will be implemented as previously announced. The frailty adjustment for PACE organizations and FIDE SNPs are being finalized as proposed. The MSP adjuster for 2015 is for working aged and working disabled beneficiaries and the ESRD MSP factor for 2015 is The credibility adjustment factors as published in the MLR final rule are being finalized. The 2015 risk percentages and payment adjustments for Part D risk sharing will be finalized as stated. The 2015 Part D benefit parameters for remain unchanged. Page 5

6 Attachment I - Final Estimate of the National Per Capita MA Growth Percentage and the National Medicare Fee-for-Service Growth Percentage for 2015 (pp. 7-8) MA Growth Percentage (also known as NPCMAGP): The Final National per Capita Medicare Advantage Growth Percentage (NPCMGP) for 2015 is -4.07% for aged & disabled beneficiaries (estimate was -3.55% in Advance Notice). Fee-for-Service Growth Percentage: The Final FFS growth rate for 2015 is -3.30% for aged & disabled beneficiaries (estimate was -1.65% in Advance Notice). Wakely estimates the 2015 nationwide average blended benchmarks to be 8.0% below Wakely estimates that, on a nationwide average basis, CMS Part C payments to plans will decrease by 0.8% in 2015 as compared with See Appendix I for more information. Page 6

7 Attachment II - Key Assumptions and Financial Information (pp. 9-16) Comparison of Current & Previous Estimate of Total and FFS USPCC. CMS provided updated estimates of the total (i.e. FFS and MA) and FFS-only costs PMPM by year. The total costs are used to derive the -4.07% NPCMAGP, and the FFS-only costs support the -3.30% FFS growth rate. The tables below summarize these estimates and the derivation of the two growth rates. National Per Capita MA Growth Percentage Rate Announcement Year Restatement 2015 $ $ $ % 2013 $ $ % 2012 $ $ % 2011 $ $ % 2010 $ $ % 2009 $ $ % 2008 $ $ % 2007 $ $ % 2006 $ $ % 2005 $ $ % 2004 $ $ % 2003 $ $ % 2015/ % 2014/ % Total -4.07% FFS Estimates - Non-ESRD Rate Announcement Year $ $ $ $ $ $ $ $ $ $ $ $ FFS Growth Rate: $768.84/$ = -3.30% Page 7

8 CMS Enrollment Projections. CMS provided forecasts of Medicare enrollment in total and for the FFS program. Using these projections, we can also derive the Medicare Advantage enrollment. These projections are summarized below. April 7, 2014 Rate Announcement Enrollment Projections - Aged, Non-ESRD (In Millions) Aged, Non-ESRD Annual Change in Enrollment Year Total FFS Implied MA Total FFS MA % 1.0% 5.4% % 2.6% 9.2% % 0.7% 8.8% % 1.0% 9.4% % 4.6% 0.7% % 3.4% 3.1% % 2.9% 4.5% These projections show a clear uptick in enrollment change in 2012, and that MA enrollment has been growing faster than FFS. It is also interesting to note that the 2015 MA projection shows only a 0.7% increase in MA enrollment, after several years of relatively high growth. Page 8

9 Attachment III Responses to Public Comments (pp.17-33) CMS addressed numerous comments submitted after the release of the February 21, 2014 Advance Notice. Below we highlight the key comments and CMS responses: Comment: Will CMS make permanent the assumption that the SGR will be overridden by Congress? Response: Intend to use most accurate projection of physician payments each year, including assessment of Congressional intervention Comment: Please provide more information on the causes of the difference in growth rates from the 12/3/2013 OACT call vs. Advance Notice Response: Most significant change is actual 2012 and 2013 inpatient utilization being lower than previously estimated. Key assumptions will be discussed in an upcoming OACT call, and will be posted on the OACT website. Comment: Please quantify the impact of demographic changes on FFS growth percentage. Response: See below Trend Demog Other Total Part A -2.9% -0.8% -3.7% Part B -1.0% 10.7% 9.6% Comment: Please provide more transparency on the calculation of the FFS rates Response: Will consider publishing additional data with Advance Notice, and will look into releasing historical FFS data prior to Advance Notice. Comment: Will CMS consider not rebasing in 2015? Response: It's important to update FFS rates using most current FFS data; anticipate rebasing in each future year. Comment: Will CMS consider a retroactive adjustment to 2014 rates for larger costs associated with DSH change in Puerto Rico? Page 9

10 Response: CMS doesn't have the administrative authority to change the county benchmark method Comment: Ask CMS to not use 25%/75% blend of 2013/2014 HCC models Response: CMS believes more time is needed to transition to the 2014 model; CMS concerned that goal of payment stability will be negatively affected in 2015 given changes to growth rate and the benchmark calculations; therefore, use 67%/33% 2013 HCC/2014HCC. Comment: Don't implement ban on diagnoses obtained from Home Risk Assessment Response: Will not be implemented for 2015; still interested in evaluating how many diagnoses are from home visits. New data will be collected to identify if diagnosis obtained from home visit; request suggestions for how to identify and measure improvement in care as a result of home visits. Page 10

11 Attachment IV. Changes in the Payment Methodology for Medicare Part D for CY 2015 (pp ) Comment & Response Section Section A. Update of the RxHCC Model: Based on comments submitted to CMS and given concerns about the number of payment changes for 2015, CMS will not implement the updated RxHCC model in 2015 in order to provide payment stability. Section B. Payment Reconciliation: No changes based on comments Section C. Part D Benefit Parameters for the Defined Standard Benefit: A number of comments were received asking CMS to confirm the copayment amounts shown for Generic/Preferred Multi-Source Drug for Full Subsidy-Non-FBDE 36 in Table III-1 in the Advance Notice. CMS confirmed that this amount should have been $2.65 instead of $2.60 Page 11

12 Attachment V. Final Updated Part D Benefit Parameters for Defined Standard Benefit, Low-Income Subsidy, and Retiree Drug Subsidy (pp ) See this section for a comparison of the 2014 and 2015 Part D benefit parameters. o Additional detail also summarized in Section A below All parameters were increased by 4.02% o Except for copayments for non-institutionalized beneficiaries up to or at 100% FPL, which increased by CPI (0.87%) Section A. Annual Percentage Increase in Average Expenditures for Part D Drugs per Eligible Beneficiary The following parameters were updated based on the annual percentage increase (4.02%) o Deductible: $310 to $320 o Initial Coverage Limit: $2850 to $2960 o Out of Pocket Threshold: $4,550 to $4700 o Minimum Cost-Sharing in the Catastrophic Coverage Portion of the Benefit $2.55 to $2.65 for generic and preferred multi-source drug $6.35 to $6.60 for all other drugs o Maximum Copayments below the Out-of-Pocket Threshold for certain Low Income Full Subsidy Eligible Enrollees $2.55 to $2.65 for generic and preferred multi-source drug $6.35 to $6.60 for all other drugs o Deductible for Low Income (Partial) Subsidy Eligible Enrollees: $63 to $66 o Maximum Copayments above the Out-of-Pocket Threshold for Low Income (Partial) Subsidy Eligible Enrollees: $2.55 to $2.65 for generic and preferred multi-source drug $6.35 to $6.60 for all other drugs Appendix II of this summary shows the final Part D defined standard benefit parameters. Section B. Annual Percentage Increase in Consumer Price Index, All Urban Consumers (all items, U.S. city average) The following parameters were updated based on CPI (0.87%) o Maximum copayments below the OOP threshold for full benefit dual eligible enrollees with incomes that do not exceed 100 percent of the Federal poverty line $1.20 to $1.20 for generic and preferred multi-source drug $3.60 to $3.60 for all other drugs No change in 2015 due to rounding rules Page 12

13 Section C. Calculation Methodology Annual Percentage Increases For the 2015 contract year, Part D program data is used to calculate the annual percentage trend as follows: August 2013 July 2014 Part D Program Data = $2, = August 2012 July 2013 Part D Program Data $2, The August 2013 July 2014 is based on PDE data incurred from August December 2013 and projected through July This factor is also adjusted for prior year restatements. The prior year restatement adjustment is -0.05%, yielding the final annual factor of x ( ) = , or 4.02% CPI The annual percentage trend in CPI for contract year 2015 is calculated as follows Projected September 2014 CPI = = Actual September 2014 CPI This factor is also adjusted for prior year restatements. The prior year restatement adjustment is -0.60%, yielding the final CPI adjustment of Section D. Retiree Drug Subsidy Amounts x ( ) = , or 0.87% The cost threshold and cost limit for qualified retiree prescription drug plans are adjusted in the same manner as the annual Part D deductible and out-of-pocket threshold, respectively o Deductible: $310 to $320 o Out of pocket threshold: $6,350 to $6,600 Section E. Estimated Total Covered Part D Spending at Out-of-Pocket Threshold for Applicable Beneficiaries For 2015, the total covered Part D spending at out-of-pocket threshold for applicable beneficiaries is $7, Page 13

14 Attachment VI: 2015 Call Letter Section I Parts C & D (pp 47-83) Annual Calendar Following are some of the major milestones for 2015 bid submission. The Notice contains significantly more detail on pages /25/ Applications due to CMS 04/07/ Final Call Letter released, including final announcement of 2015 MA Benchmarks 05/09/2014 Release of 2015 bid upload functionality in HPMS 06/02/ formulary due 06/02/ bid submission deadline Early August CMS releases 2015 Part D National Average Bid Mid-September All 2015 MA & PDP contracts fully executed 10/15/ Annual Election Period begins 12/07/ Annual Election Period ends Incomplete and Inaccurate Bid Submissions Incomplete bid submissions will not be accepted by CMS. Complete bid submissions must contain the following components (if applicable): PBP & BPT Service Area Verification Plan Crosswalk Formulary Crosswalk Substantiation / Supporting Documentation CMS will send out compliance notices to all organizations/sponsors that submit clearly inaccurate bids under Part D requirements. Organizations may not have the opportunity to correct such inaccuracies should they arise and their bids will be denied. Examples of bids that are clearly inaccurate under Part D requirements are: An MA organization that offers Part D benefits without the required drug coverage. A PDP submits a bid for a non-defined standard plan that does not meet the Part D Benefit Parameters set forth in the applicable law. A Part D bid that includes an incorrect PBP to formulary crosswalk. Formulary Submissions The 2015 formulary submission date is 06/02/2014. The first Formulary Reference File (FRF) will be released in March The final FRF before submission will be released in late May. Changes from the March FRF to the final will not be incorporated in the OOPC model. Additionally, the summer formulary update will be limited so sponsors should carefully consider any newly added drugs on the May update. Page 14

15 CMS expects that the formulary structure for a defined standard plan will be consistent with a PBP that does not include tiers. CMS will continue to make an exception this year to allow defined standard plans that are linked to a tiered formulary for another non-defined standard benefit. However, beginning in 2015, formularies that are only associated with defined standard plans must be limited to one formulary tier. All marketing materials for defined standard plans must also reflect a single tier formulary. Plan Corrections The final actuarial certification serves as documentation that the bids were complete and accurate at the time of submission. A request for a plan correction indicates the presence of inaccuracies and calls into question the organization s ability to submit correct bids and the validity of the actuarial certification. After bids are approved, CMS will only reopen the gates to correct errors identified by the plan during the correction window from early September to September 24, At this time, only changes to the PBP that are supported by the BPT are allowed. No changes to the BPT will be permitted. Organizations that have demonstrated a consistent pattern of bid submission errors over multiple years and/or that have received a compliance notice for 2014 may receive a more severe compliance action if a plan correction is requested for Contracting Organizations with Ratings of Less Than Three Stars in Three Consecutive Years Effective Date of Termination Authority CMS has authority to terminate the contracts of organizations that fail to achieve at least 3 stars on the Part C or Part D plans for three consecutive years. The transition period for plans to achieve at least 3 stars will end with the release of star ratings in the fall of At that time, CMS plans to terminate, effective 12/31/2014, those contracts that have failed to achieve a three-star rating for Part C or D in each of the 2013, 2014, or 2015 sets of ratings. Sponsors that are at risk for contract termination should consider not renewing those contracts at risk or should explore options to consolidate membership into a contract which is not at risk. Enhancements to the 2015 Star Ratings and Beyond CMS principles for all quality programs: Plans should be scored on their achievement relative to national or other benchmarks. Scoring methodologies should be more weighted towards outcome, patient experience and functional status measures. Scoring methodologies should be reliable, stable and enable consumers, providers, and payers to make meaningful distinctions among plans performance. Improvement and achievement are distinct goals. Page 15

16 Unless noted, 2014 methodology applies. The 2014 methodology can be found here: It is reiterated that best practices of high-performing plans were focused on continuous longterm improvements rather than year to year changes. Following are the proposed enhancements for 2015: A. New 2015 Measure A SNP Care Management measure that captures the percentage of new enrollees and existing eligible enrollees that receive and annual risk assessment is being added for organizations with at least 30 SNP enrollees. B. Changes to Measure for Star Ratings will be released in fall 2014 and are used for 2016 Quality Bonus Payments. CMS is modifying methodology for the following measures: 1. Breast Cancer Screening (Part C) 2. Annual Flu Vaccine (Part C) 3. High Risk Medication (Part D) 4. Medication Adherence for Diabetes Medications (Part D) 5. Beneficiary Access and Performance Problems (Part C and D) 6. Medication Adherence Measures (Part D) 7. Obsolete NDCs C. Retirement of Measures for 2015 The Glaucoma testing measure is being removed for D. Contracts with Low Enrollment CMS is changing threshold for receiving a Star Rating from 1,000 to 500 enrollees based on July enrollment. Enactment will be delayed until 2016 Star Ratings and 2015 display pages will include simulated Star Ratings for contracts with enrollees. Using most recent data, the distribution is 13% (2.5 stars), 26% (3 stars), 39% (3.5 stars), 10% (4 stars), 13% (not enough information). E. Data Integrity CMS will continue to reduce a contract s measure rating to 1 star if biased or erroneous data is submitted. Due to industry comments, CMS will not pursue the option for independent audits to dispute CMS reductions. F. Changes for Measures Posted on the CMS Display Page Organizations retain the opportunity to preview their data prior to public release. All 2014 display measures will continue to be shown unless otherwise noted. The following measures will remain on the display page for Pharmacotherapy Management of COPD Exacerbation (PCE) (Part C) 2. Initiation and Engagement of Alcohol and Other Drug Dependence Treatment (IET) (Part C) 3. Medication Therapy Management Program Completion Rate for Comprehensive Medication Reviews (Part D) Page 16

17 The following measures are expected to be added to the 2015 display page: 1. CAHPS measures about contact from a doctor s office, health plan, pharmacy, or prescription drug plan (Part C) 2. CAHPS Health Information Technology EHR measures (Part C) 3. Transition monitoring (Part D) 4. Combined MPF Price Accuracy (Part D) 5. Disenrollment Reasons (Part C and D) The following changes will be made to measure specifications on the 2015 display page (note that the Notice numbers these 6 8): 1. (6.) Drug-Drug Interactions Measure (Part D) 2. (7.) Diabetes Medication Dosing (Part D) 3. (8.) Enrollment Timeliness (Part C and D) G. Weighting Changes: The weight of the improvement measure(s) is being increased from 3 to 5; measure only applies to plans with at least 2.5 stars The weight (3x) of the three Part D Medication Adherence measures will not change H. Forecasting to 2016 and Beyond CMS is considering the following changes for 2016 and beyond: 1. Changes in the Calculation of the Overall Rating and the Part C and D Summary Ratings: The current whole-star individual measures, as well as pre-determined 4-star thresholds, results in a loss of information when aggregating up to the overall and summary ratings as the range of values between whole numbers is not differentiated. CMS is moving to a new methodology by removing the predetermined measure thresholds for CMS will continue to use the Reward Factor for contracts with consistently high performance. Contract-specific information of the impact of this change will be posted in HPMS. 2. Expected Changes to Measure Specifications or Calculations: a. CMS is monitoring any changes to measures or additional measures developed by NCQA for incorporation into the Star Ratings b. Osteoporosis Management in Women who had a Fracture (Part C) c. Monitoring Physical Activity (Part C) d. Plan All-Cause Readmissions (Part C) e. Improving Bladder Control (Part C) f. Plan Makes Timely Decisions about Appeals (Part C) g. Appeals Upheld (Part D) h. Adherence (DM and Hypertension) and Diabetes Treatment (Part D) i. Complaints about the Health/Drug Plan (CTM) (Part C and D) j. MPF Accuracy (Part D) k. CAHPS measures (Part C and D) I. Measurement Concepts CMS is committed to improving Star Rating by identifying new measures and methodological enhancements. Page 17

18 Providing Materials to Individuals with Disabilities Organizations must comply with Section 503 of the Rehabilitation Act of Materials must be made available in an understandable format to individuals with disabilities upon request. Summary of Benefits CMS is revising the summary of benefits template for Revised SB template will be released in April 2014 with the PBP and SB software Expected revisions: Limit descriptions to plan benefits and remove comparison to Medicare Revise language used to describe benefits and cost sharing to more beneficiary-friendly language Section II Part C (pp ) Overview of CY 2015 Benefits and Bid Review CMS will issue automatic Compliance Notice for failing ANY of the following (even if the organization is allowed to correct the deficiency): Bid fails the published Part C service category cost sharing PMPM actuarial equivalent cost sharing Meaningful difference Total Beneficiary Cost (TBC) Optional Supplemental Benefit requirements A. Plans with Low Enrollment (Plans in existence three or more years) CMS sent list of all low enrollment plans (<500 enrollees in non-snp plans in existence for at least three years) in March 2014 MA plans must confirm that such plans must then: o Be eliminated, or o Consolidated with another of the organization s plans, or o Be justified via submission of such justification to CMS B. Meaningful Difference CMS will combine HMO and HMO-POS as one plan type for evaluating meaningful difference unless all Parts A and B services are covered outside the network for the HMO-POS plans. Meaningful difference among non-employer and non-cost contractor plans offered by the same MAO in the same county as follows: o Non-SNP plans split into the following plan types: HMO and HMO-POS not offering all parts A and B services out-of-network HMO POS offering Parts A and B services out-of-network Page 18

19 Local PPO Regional PPO PFFS o SNPs (D-SNPs are excluded from the meaningful difference requirement): Chronic Care SNPs separated by chronic disease served Institutional SNPs Institutional (Facility); Institutional Equivalent (Living in the Community); and a combination of Institutional (Facility) and Institutional Equivalent (Living in the Community) o MA-Only evaluated separately from MA-PD Must be a combined Part C and D difference of at least $20 PMPM C. Total Beneficiary Cost (TBC) CMS may deny bids that propose too significant an increase in cost sharing or decrease in benefits. TBC = Plan-specific Part B premium + Plan Premium + Estimated beneficiary OOP costs TBC standard will be $32 (vs. $34 last year) CMS will calculate and communicate adjustments in TBC threshold for plan s payment rate, quality bonus change, and other technical adjustments CMS will include an adjustment for the coding pattern adjustment Consolidating plans will be evaluated on enrollment weighted average of CY2014 plan values CMS will provide operational guidance regarding additional margin flexibility related to TBC in mid-april D Maximum Out-of-Pocket (MOOP) Limits The 2015 MOOP limits are shown in Appendix III of this summary. E. Per Member Per Month (PMPM) Actuarial Equivalent (AE) Cost Sharing Limits Cost Sharing must not exceed Original Medicare on an actuarially equivalent basis. CMS will apply this requirement to cost sharing in total and separately to the following service categories: inpatient, skilled nursing facility (SNF), home health, durable medical equipment (DME), and Part B drugs. Worksheet 4 of the BPT shows the comparison of values by service category. Appendix III includes an example of the actuarial equivalent cost comparison. F. Part C Cost-Sharing Standards Appendix III of this document shows the 2015 cost sharing limits by service category. G. Part C Optional Supplemental Benefits Page 19

20 CMS will review for reasonable value and non-discrimination: Margin <=15% Retention (=margin + administrative expenses) <=30% Part C Policy Updates A. IP Cost Sharing - CMS wants to increase beneficiary awareness of the differences in IP cost sharing among plans. Revised the templates for: Evidence of Coverage (EOC) Annual Notice of Change (ANOC) Medicare Plan Finder (MPF) B. Transferability of accumulated cost sharing toward MOOP - MOOP amounts can be transferred if enrollee makes a mid-year change from one MA plan to another MA plan of any type (HMO, PPO, PFFS) offered by the same Medicare Advantage Organization (was only for same type last year). C. Memory Fitness Activities - CMS will allow Memory Fitness Activities as a component within a broader health education supplemental benefit if the following conditions are met: Must be offered to all enrollees. Stand-alone memory fitness activities will be disapproved D. PBP Notes: provides relevant information reviewers need for bid evaluation - Multiple changes that address supplemental benefits E. ER/Urgent Care Deductible - CMS clarifies that while Emergency Care or Urgently Needed Care benefits are not subject to deductible (in-network, out-of-network, and combined deductibles), any associated member cost sharing always applies toward a plan level deductible. All costs associated with emergency care/urgent care are applicable to the MOOP limit. PBP inputs have been adjusted accordingly. F. Home Health Services - Home Health services are only covered under Medicare when a health care professional declares the home health service meets the needs of the beneficiary. This applies to MA plans as well. G. Tiered Cost Sharing of Medical Benefits Different cost sharing amounts may be linked with different physicians as long as: - all plan enrollees are charged the same cost sharing for any one physician - all physicians are available to all enrollees MAOs must submit their tiering proposals for CMS review Page 20

21 H. Part C Services Via Remote Access Technologies - CMS will continue to allow MAOs to use the following technologies in 2015 as mandatory supplemental benefits: Telemonitoring Web- and Phone-based Technologies Nurse Hotline Other similar services. Real-time interactive audio and video technologies (new for CY 2015) I. Exceptions to policies that allow plans to restrict members use of specific providers for DME: Speech-generating devices may not be subject to full limitation The following may be subject to partial limitation: - Oxygen - Wheelchairs - Powered Mattress systems - Diabetic supplies J. SNP Reauthorization MA SNP plans are authorized to continue through 12/31/16. K. Innovation in Health Plan Designs - CMS wants to partner with MAOs to test innovations in health plan design for beneficiaries (CMS will be issuing formal request for information). L. Minimum Enrollment Guidance Organizations must meet minimum enrollment requirements to continue their MA contract. CMS allows for a transition period for new organizations. M. Part C Provider Contract Termination Guidance Define Significant Network Changes - MAOs required to notify CMS of network changes - CMS will determine, after consultation with the MAO whether additional actions are required. CY2015 requirement: MAOs must notify CMS at least 90 days prior to network changes for any no cause termination they deem significant. Notification to Enrollees Affected by Provider Contract Terminations: MAOs are encouraged to give beneficiaries at least 30 days notice to beneficiaries concerning terminating providers from network with no cause Contracted Provider Notification and Right of Appeal: for CY 2015, MAOs are encouraged to provide 60 days notice to terminated providers Part C ANOC/EOC Review Timeframe Retrospective reviews of ANOC and/or EOCs must be completed by November 1, Page 21

22 Part C Third-Party Marketing of Non-Health Related Benefits Health clinics may not be paid for with Medicare dollars. May not be advertised as plan benefits Ongoing, Off-cycle Submission of Summaries of MOC Changes CMS continues to require model of care (MOC) summaries for SNPs. Part C Change of Ownership Transactions Requiring Service Area Expansion Must Notify CMS at least 60-days in advance of ownership change. Organizations should keep in mind that CMS may not approve off-cycle service area expansion requests, even if due to change in ownership. Section 1876 Cost Contract Provisions No new cost plan applications accepted Will accept applications to modify service area Section III Part D (pp ) Additional Guidance for All EA plans Proposed CY2015 policy of required gap coverage for EA plans as indicated in the Advance Notice will not be finalized. CMS will no longer will approve changes from basic PDP benefit to an EA PDP benefit. CMS will also not allow a non-renewal of its current basic plan in a PDP region, and offering a brand new basic plan in the same region. The CY 2015 gap coverage descriptions (few, some, many, all brand/generic drugs) will no longer be displayed in marketing materials or on Plan Finder. Access to Preferred Cost Sharing Network adequacy standards for preferred cost-sharing pharmacies are not being adopted at this time, although CMS is continuing to review this and is encouraging plans to monitor access to preferred cost sharing in plans that offer it. CMS reserves the right to ask for changes in the preferred cost-sharing network. Appropriate Utilization of Prior Authorization Requirements to Determine Part D Drug Status CMS is concerned that some non-covered Part D drugs are being covered by Part D. CMS has listed criteria for which they expect plan sponsors to implement POS edits for prior authorizations. These criteria are for qualifying drugs and/or drug classes the pose the greatest risk for non-part D covered uses. The criteria are: High likelihood that coverage is available under Parts A or B (versus D) for the drug as prescribed and dispensed or administered, Page 22

23 High likelihood that the drug is excluded from Part D coverage (e.g., a drug or drug class or its medical use that is excluded from coverage or otherwise restricted under Part D as defined in section 1927(d)(2) of the Act), or High likelihood of use for non-medically accepted indications as defined in section 1860D- 2(e)(4) of the Act. CMS will be checking formularies for outliers during the annual formulary review process. CMS reminds that even though EGWP plans may not want to include PA edits, they still are responsible for determining whether a drug is Part D covered. Also in this section, CMS clarifies the guidance of how to use POS prior authorization edits for transition periods. Enhancements and Clarifications on Improving Utilization Review Controls This section contains discussion and clarifications on the following: Summaries of prior CMS guidance on effective utilization management programs. Controlling the overutilization of Acetaminophen (APAP). Controlling the overutilization of Opioids. Medication Therapy Management In this section, CMS describes steps they are taking to ensure MTM programs are in compliance with the regulations and related guidance, increase standardization among these programs, and encourage the use of MTM services to overutilization of opioids. Some highlights of this section: Targeted beneficiaries are those with Part D drugs in an amounts greater than $3017 Part D sponsors must provide an individualized written summary. The Paperwork Reductions Act is requiring some minor changes to that summary for It lists the main findings of the MTM monitoring effort from last year. Sponsors must auto-enroll targeted beneficiaries into MTM when they become eligible. Sponsors identified as non-compliant with MTM program requirements may be subject to compliance actions. New audit performance elements are being developed. A memo containing MTM program guidance is released each year. See this location for the CY2014 guidance. CMS considers MTM program services to targeted beneficiaries as administrative costs. Plans should include appropriate MTM costs for the applicable contract year in the bid development. Targeted beneficiary eligibility requirements are a minimum. Plan sponsors could include a broader set of eligibility requirements. If they do, all of those additional costs should be included as administrative costs in the bids. More guidance is coming regarding MTM costs for purposes of calculating the MLR. Page 23

24 Part D Benefit Parameters for Non-Defined Standard Plans CMS comments on cost sharing: No longer using preferred networks language, rather preferred cost-sharing For non-specialty tiers where the plan is charging a coinsurance, CMS will compare the expected cost-sharing amounts submitted by sponsors in the PBP to the copay thresholds below. CMS will continue to disallow incentives such as $0 or very low cost-sharing for 230-day supplies at mail services, unless offering the same cost sharing at their retail network. The required OOPC differences between basic and enhanced will be $20, and between two enhanced PDP will be $25. Tier labeling and hierarchy requirements in PBP are unchanged from Cost-sharing for the specialty tier is limited to 25% after the standard deductible, 33% after a $0 deductible, and interpolated amounts for other deductible amounts. Minimum specialty tier eligibility remains at $600. Part D plans must not have any cost-sharing above the following thresholds. See page 126 of the announcements for the footnotes, which are not included below. Page 24

25 EGWP Policy Reminders Effective January 1, 2014, there are no longer any supplemental benefits under the part D component. Any additional benefits offered by EGWPs should be reported on PDEs as OHI, Other Health Insurance. For 2015, EGWPs must keep the maximum out of pocket limit on their plans at or below the catastrophic troop limit of $4,700 For 2015, EGWPs must keep the maximum deductible limit on their plans at or below $320. Sponsors must submit one base-level formulary, with only enhancements available to individual EGWP plans. The base-level formulary are subject to the same rules as applicable to all part D plans. Antipsychotic Drug Use Data CMS is concerned about the rates of atypical antipsychotic drugs and will be working to improve it. Coordination of Benefits (COB) User Fee 2015 COB user fee will be $0.136 per enrollee for the first 9 months. This equates to an annual rate of $0.102 per enrollee per month or $1.22 per enrollee per year. Activities that this fee will cover are listed in the Final Notice. Extended Days Supply Indicator The requirement to provide an extended day s supply indicator by drug level in sponsor marketing materials will not be implemented for Low Enrollment CMS urges sponsors with less than 1,000 enrollees to consider consolidation/withdrawal options. By April 2014, CMS will notify plans with this issue of their options. CMS reserves the right to require low enrollment plans to consolidate/withdraw in the future. Page 25

26 Renewal of LI NET Demonstration The current Medicare Part D Demonstration for Retroactive and Point of Sale Coverage for Certain Low-Income Beneficiaries ends December 31, CMS is working toward renewing the demonstration for a period of five years. Appendices 1 & 2: Contract Year 2015 Guidance for Prescription Drug Plan (PDP) Renewals and Non-Renewals These appendices contain guidance on how PDP sponsors can expand or reduce its service area. To expand, the sponsor must submit a PDP Service Area Expansion (SAE) application and CMS approves that application and then approves the sponsor s submitted bids for the new region or regions. To reduce service areas, PDP sponsors must notify CMS in writing (by sending an to nonrenewals@cms.hhs.gov) of its intent to non-renew one or more plans under a contract by the first Monday in June (June 2, 2014). Crosswalk requirements are listed in table format. Appendix 3: Comments on Changes to 2015 Star Ratings and Beyond This appendix includes comments CMS received after the Advance Notice regarding proposed changes to 2015 star ratings and beyond. Page 26

27 APPENDIX I Wakely Estimated Impact of Growth Rates combined with Payment Reform Wakely estimates that, on a nationwide average basis, CMS Part C payments to plans will decrease by 0.8% in 2015 as compared with This estimate is based on the following components: Updated pre-aca and FFS rates by county, including effects of rebasing Change in blended benchmarks due to all reform changes for 2015 Impact of change in fee-for-service normalization factor Impact of revised blend of 2013 and 2014 HCC models (now 67%/33%, respectively) Change in coding pattern difference adjustment Assumed change in bid level and rebate The actual revenue change for individual Medicare Advantage plans will vary significantly depending on star rating, counties served, risk score trends, population changes, and many other factors. Change in Blended Benchmarks. Overall, we estimate that blended benchmarks will decrease by 8.0% on average, nationwide. Plans with a star rating of 3 or 3.5 will see the biggest decreases due to the expiration of the quality bonus payment demonstration. The graph below shows estimated benchmark changes by star rating. Impact of the Part C Fee-for-Service (FFS) Normalization Factor. In the Advance and Final Notices, CMS indicated that the recent significant influx of baby boomers is causing Part C risk scores to decrease. Consequently, CMS will use only two recent years (2012 and 2013) of FFS Page 27

28 risk score experience to set the FFS normalization factor. The table below compares the 2014 and 2015 FFS normalization factors Rate Announcement 2014 Rate Announcement HCC Model Factor Blend Factor Blend % % % % Blended % % If plans continue to experience risk score trend as in past years, this change in FFS normalization factor will have a positive impact on revenue of 4.3%; however, that will not necessarily be the case if plans see population changes similar to that noted by CMS. Change in Coding Pattern Adjustment. The coding pattern adjustment for 2015 will be -5.16%, which is the minimum adjustment required by the Affordable Care Act. This represents a reduction of 0.25% as compared with Change in Bids and Rebate. In order to properly estimate the impact of the various MA payment components addressed in the Advance Notice, Medicare Advantage plans must consider the aggregate effect on actual payments from CMS, which is not necessarily the same as the change in benchmarks. As noted above, we estimate the overall impact to MA payments to be -0.8% after taking bid levels and rebates into account. This estimate is based on the following assumptions: Plans bid at 80% of the benchmark in 2014 Bid trend from 2014 to 2015 will be 2% assuming a static population Annual risk score coding trend is 1.3% for a static population Nationwide average star ratings, which result in an average rebate percentage of 64% No consideration for sequestration or insurer fee The tables on the following page show the calculations underlying our estimates. Page 28

29 Static Population [1] / MA Benchmark [2] $ $ % Raw MA Risk Adjustment Factor (RAF) HCC Change FFS Normalization Factor Coding Pattern Difference RAF after FFS Norm & Coding Pattern Risk-adjusted Benchmark $ $ % Risk-adjusted Bid $ $ % Savings $ $ Rebate $ $83.09 Total CMS Payment $ $ % [1] Assume no population change and that risk scores trend similar to past years' FFS normalization trends [2] Based on nationwide average MA enrollment by county and star ratings as of February 2014 Page 29

30 APPENDIX II Part D Defined Standard Benefit Parameters Page 30

31 Page 31

32 APPENDIX III MOOP and Cost Sharing Limit Tables 2015 Voluntary and Mandatory MOOP Range Amounts by Plan Type Illustrative Comparison of Service-Level Actuarial Equivalent Costs to Identify Excessive Cost Sharing Page 32

33 2015 In-Network Service Category Cost Sharing Requirements Page 33