Managed Care Chap 24: Health Plans and Medicare

Question 1

Introduction

Answer 1

• The ACA made dramatic changes to Medicare Advantage (MA)
• MA plans saw the introduction of a new payment methodology, advent of performance-based bonuses, and had their enrollment season cut in half
• Much of the cost of the ACA was paid for by Medicare payment reductions

Question 2

Types of Medicare Advantage Plans

1. Coordinated Care Plan
2. HMO
3. PPO
4. Special Needs Plans (SNPs)
5. PFFSP
6. Special Rules for Group Retiree Plans
7. Medical Savings Account
8. Medicare Cost Plans

Answer 2

1. Coordinated Care Plans
- Use a network of providers to deliver the benefit package approved by Medicare. CMS must approve the provider network
- May use financial incentives or utilization review to control the use of services
- Must meet quality requirements
- Other than in an emergency, no obligation to cover the cost of care if a non-network provider is used
- Coordinated care plans include HMOs, regional and local PPOs, and SNPs (special needs plans)

**2. Health Maintenance Organizations **
- They offer more controlled and limited networks
- Medicare offers a point-of-service (POS) option where HMOs can cover services out of network

3. Preferred Provider Organizations
- They do not use primary care physician “gatekeepers”, typically have larger networks and provide some coverage for non-contracting providers
- MA-PPOs must meet MA quality requirements
- Must have maximum out-of-pocket limit for in-network services and a catastrophic limit on in and out-of-network services
- Local PPOs can choose the service area where they will operate (e.g. one or multiple counties)
- Regional PPOs (RPPOs) must serve all counties in one or more of 26 regions designated by CMS
- RPPOs have more flexibility than local PPOs

4. Special Needs Plans (SNPs)
- Usually offered by HMOs
- Limit enrollment to individuals with special needs
- 3 Types of SNPs:
(1) D-SNPs - Dual Eligible SNPs - Beneficiaries that are eligible for both Medicare and Medicaid
(2) I-SNPs - Institutional SNPs - Beneficiaries who are institutionalized in a SNF, NF, ICF/MR, or psychiatric facility
(3) C-SNPs - Chronic care SNPs
i. Beneficiaries with one or more severe or disabling chronic conditions
ii. Must include supplemental health benefits related to the chronic condition, specialized provider networks, and appropriate cost-sharing
iii. CMS specified 15 chornic conditions: chronic alcohol and other drug dependence, auto-immune disorders, cancer, certain cardio-vascular disorders, chronic heart failure, dementia, diabetes mellitus, end-stage liver disease, end-stage renal disease requiring dialysis, Hematrological disordres, HIV/AIDS, Chronic lung disorders, certain mental health disorders, certain neurological disorders, stroke

5. Private FFS Plans (PFFS plans)
- Enrollees self-refer to any Medicare provider willing to accept the patient
- PFFS plans pay providers on a FFS basis at Medicare fee schedule rates, do not place the provider at financial risk, and do not vary rates by utilization

6. Special Rules for Group Retiree Plans
- CMS waivers allow group retiree MA plans to:
(1) Enroll only retirees in MA plans following the employer or union’s eligibility rules
(2) Group enroll and disenroll retirees
(3) Disregard the minimum enrollment requirement
(4) Extend service areas to where retirees reside
(5) Enroll beneficiaries with end-stage renal disease (ESRD) and Part B-only retirees
(6) Modify websites, call centers and marketing
(7) Vary cost-sharing levels and premiums
(8) Offer non-calendar year plans
(9) No requirement to submit a Part D bid
(10) Provide flexibility on state licensure for employer-direct contracting plans

7. Medical Savings Account Plans
- Combine a high-deductible MA plan and a medical savings account for paying the qualified medical expenses on a pretax basis
- Only medicare may make a deposit into the account
- The plans are confusing to beneficiaries and do not allow beneficiaries to contribute to their tax-free accounts

8. Medicare Cost Plans
- Is not a MA plan
- Similar to MA-HMO, with 2 key differences
(1) Paid based on the actual costs incurred by the plan
(2) Beneficiaries may go to a non-network provider, and the services are covered under traditional FFS Medicare

Question 3

Medicare Advantage Benefits

Answer 3

1. MA Plans can offer multiple “benefit plans” such as high option and low option
2. Each must have a uniform premium and benefit structure, and be available to all residents of the service area
3. Plans must offer at a minimum the FFS level of services and cost-sharing
4. Must offer a least one benefit plan with Medicare Part D coverage. 3 Exceptions
   (1) PFFS plans have the option of including Part D
   (2) MSA plans are not permitted to include Part D
   (3) All benefit plans offered by SNPs must include Part D drug coverage
5. Beneficiaries in a coordinated care MA plan can only get Part D from the MA plan. They cannot enroll in a stand-alone PDP
6. Beneficairies in a PFFS plan without Part D or an MSA enroll in a stand-alone PDP for drug coverage

7. The Medicare Part D Benefit Design
- Most MA-PDs do not use standardized benefit design (other than for submitting Part D bids)
- MA-PDs typically offer an actuarially equivalent benefit design
- Many MA-PDs offer an enhanced benefit design
- The basic Part D plan
(1) Annual deductible
(2) In the first phase the enrollee pays 25% coinsurance and government pays 75% up to an initial coverage limit
(3) In second phase between initial coverage limit and catastophic limit (“the gap” or the “donut hole”), where enrollee had been responsible for 100% of the costs
(4) In third or catastrophic phase, the beneficiary pays 5%, the government pays 80% and the part D plan pays 15%

• The primary difference between an MA-PD and a PDP drug benefit is that the MA-PD plan can make the Part D drug more attractive by offering better drug coverage or lower cost-shating
• ACA begins to close the coverage gap between 2011 and 2020
  (1) Cost Sharing will be reduced each year until beneficairies pay only 25% of the cost of covered Part D drugs

8. Formularies
- Formularies are lists of drugs that are covered under the plan
- Formularies are developed by a Pharmacy and Therapeutics (P&T) committee
- Part D formularies must include drug categories that cover all disease states
- Each category must include at least 2 drugs
- Part D formularies must include all drugs in the following classes: immunosuppressant, antidepressant, antipsychotic, anticonvulsant, antiretroviral, and antineopalstic
- CMS reviews the formulary
- Part D plans typically have four or five tier formularies, where the fifth tier is a specialty tier
- The P&T committee recommends prior authorizations, step therapies, quantity limitations, generic substitutions, and other drug utilization review

9. Medication Therapy Management Programs (MTM)
- Part D plan sponsors are required to offer MTM that targets beneficiaries with multiple chronic diseases and high drug costs
- MTM must target four of seven specified chronic conditions
- MTM must target beneficiaries who incur annual drug costs of $3000 or more

Question 4

Medicare Advantage Payment

Answer 4

1. MMA (Medicare Modernization Act)
- MMA introduced a better risk adjustment methodology
- The new methodology added hierarchical condition categories (HCCs) to the other risk adjustments used since the passage of TEFRA
- MMA established a new payment to MA plans, based on bids submitted by each plan and the relationship to a county benchmark

2. Payment Calculation and Bidding Process
a. The Bid
(1) Bids represent per capita projected cost for Part A and B services net of cost-sharing, plus administrative costs, plus a profit

(2) Since bids are due at the beginning of June, plans forecast claims for next year based primarily on last year’s data

(3) This requires estimating trends in utilization, and unit costs for 2 years into the future

(4) Plans without sufficient claims history need to substitute a manual rate, based on average Medicare cost data

(5) The bid is normalized to a risk score of 1.0 (divided by the risk score of the population that generated the data)

(6) If the bid exceeds the benchmark, the plans receive a percentage of the savings as a rebate, and CMS retains the rest. Plans must use rebates to provide additional benefits

(7) When a bid covers more than one county, the bid and the benchmark are weighted by projected enrollment in each county

(8) RPPOs calculated their benchmark somewhat differently
- (Weighted avg RPPO bid x % of beneficiaries in MA plans) + (Weighted avg county benchmarks x % of beneficiaries in FFS Medicare) = RPPO Benchmark

(9) Plans may be required to submit revised bids if CMS determines that beneficiary cost would increase by an unacceptable amount, or if profit margin exceeds reasonable

(10) Plans must avoid benefit designs that are discriminatory

(11) Plans must present cost-sharing designs that are no less generoous than FFS Medicare

b. Risk Adjustment
(1) CMS uses the CMS Hierarchical Condition Category model (CMS-HCC)

(2) The model maps ICD-9 diagnosis codes to condition categories

(3) The condition categories are ranked in a hierarchy, in which a higher category trumps a lower category for a patient with multiple categories

(4) Each category is assigned a value (risk adjustment factor, or RAF)

(5) Several problems with the CMS-HCC model
- The nature of the diagnosis data in Medicare claims that are used to determine the risk coefficients, There is no incentive to be complete for most of the claims submitted to Medicare
- The standard professional claim form collects a maximum of four diagnosis codes. Diagnoses more germane to risk adjustment may be omitted from the claim form

(6) Two audit activities
- One by health plans looking for incorrect codes that result in underpayments, and the other by CMS to find overpayments
- High error rates identified in both types of audit point out a weakness in the current CMS-HCC calibration

3. Impact of the ACA on payment
a. By 2010, the average payment to MA plans exceeded the average FFS cost by about 12%

b. Provisions in the ACA return the average payment to health plans to something close to the average FFS cost

c. Benchmark payments set by the ACA vary by county based on a measure of efficiency

d. Benchmarks in counties in the lowest cost FFS quartile (after adjusting for risk scores) will be set at 115% of local FFS

e. Under ACA, high-quality health plans receive a bonus of 5% of the benchmark payment

f. ACA provides double bonsuses for counties that
- Paid at the urban floor rate in 2004 (95% of the AAPCC)
- MA penetration of at least 25% of all Medicare beneficiaries in the county
- Average FFS costs below the national average

g. Bonuses will be paid to plans that achieve a quality score of at least four stars on a scale of one to five

h. Bonus must be used to provide additional benefits, reduce cost-sharing, or reduce beneficiary premiums

i. Under prior law, plan retained 75% of the savings attributable to a bid less than the plan’s benchmark
- These “rebates” provide additional benefits, or reduce beneficary costs
- Under the ACA, plans with a rating of 4.5 or 5 receive a 70% rebate, ratings between 3.5 and 4 receive 65%, plans below 3.5 starts receive 50% rebate

j. At present it appears likely that CMS will apply the same MLR regulations to MA as commercial insurance. This means that MA plans will count activities that improve quality as medical costs and deduct certain tax payments from revenues

4. Medicare Prescription Drug Payment
a. Part D plans may be free-standing PDPs, or offered by MA plans as MA-PDs

b. Both types are paid under the same rules

c. PDPs submit bids to CMS to provide the standard part D package

d. Based on historical data, or manual rates for new plans, and incldue administrative costs and profit

e. The base beneficiary premium is the national average monthly bid multiplied by 25.5% and divided by (1 minus the ratio of projected reinsurance payments to plans to the total payments received by PDPs)

f. Reinsurance is a payment from CMS for beneficiaries whose out-of-pocket cost exceeds a maximum calculated by CMS each year

g. Each PDP receives a direct subsidy equal to the national average monthly bid minus the base beneficiary premium

h. Plan charge beneficiaries a premium that equals the plan’s bid less the base beneficiary premium

i. Payments to PDPs are risk-adjusted, using the RxHCC model

j. The part D program includes a risk-sharing provision
- If a plan’s actual adjusted costs exceed projected by more than 5%, CMS will pay the plan 50% of the amount in excess of 5%
- If the plan’s cost exceed 10% of the expected amount, CMS will pay 80% of the amount in excess of 10%
- The plan must pay CMS 50% or 80% of any amount by which costs are less than 5% or 10% of the expected cost
- These corridors reduce a plan’s potential profit and potential loss

k. CMS also pays PDPs for beneficiaries who qualify for low-income premium subsidies (LIPS) and low-income cost-sharing subsidies (LICS)

l. CMS pays PDPs a reinsurance amount, to cover 80% of the benefits for members whose total out-of-pocket costs exceed the current year’s threshold