Objective 3 (C): Government Programs

Question 1

Individuals eligible for Medicare coverage (4)

Answer 1

1) Aged - at least age 65 and eligible for Social Security or Railroad Retirement benefits
2) Disabled - entitled to Social Security or Railroad Retirement disability benefits for at least two years
3) End-stage renal disease (ESRD) - insured workers with ESRD, including spouses and children with ESRD
4) Some other aged and disabled individuals who pay mandatory premiums

Question 2

Types of Medicare coverage (5)

Answer 2

1) Part A - hospital insurance (HI) - eligible persons receive coverage automatically with no premium charge
2) Part B - supplementary medical insurance (SMI)
a) Requires a monthly premium ($99.90 in 2012, except higher for high incomes)
b) Beneficiaries can decline coverage, but a premium penalty (10% per year) applies if coverage is elected at a later date
3) Part C - Medicare Advantage
a) Alternative to Parts A and B. Offered by private plans, which receive a capitation from Medicare, which varies by county and enrollee risk.
b) Typically offer lower cost sharing plus coverage for some services not covered under Medicare
4) Part D - covers most prescription drugs. Provided through private insurers
5) Medicare Supplement - private insurance to cover out-of-pocket costs and some other benefits not covered by Medicare

Question 3

Services covered by Medicare Part A (4)

Answer 3

1) Inpatient hospital - semi-private room and ancillary services and supplies
2) Skilled nursing facility (SNF) - semi-private room, meals, skilled nursing, and rehabilitative services after a related three-day inpatient hospital stay
3) Home health agency - services following discharge from a hospital or SNF
4) Hospice care - provided to terminally ill patients with life expectancies less than six months

Question 4

Medicare Part A cost sharing and coverage limits

Answer 4

Based on a benefit period, which starts at admission and ends 60 days after discharge from hospital or SNF. The dollar amounts are indexed, and values shown are from 2015.

1) Inpatient hospital
a) Cost-sharing: $1,260 deductible per benefit period; $315 per day for days 61-90 each benefit period; $630 per day for days 91-150 each lifetime reserve day
b) Coverage limits: 60 lifetime reserve days; no coverage beyond lifetime reserve

2) SNF
a) Cost-sharing: $157.50 per day for days 21-100 of each benefit period
b) Coverage limits: No coverage after 100 days each benefit period

3) Home health agency
a) Cost-sharing: None
b) Coverage limits: 100 visits per illness

4) Hospice care
a) Cost-sharing: None
b) Coverage limits: None

5) Blood
a) Cost-sharing: Cost of first 3 pints of blood
b) Coverage limits: None

Question 5

Services covered by Medicare Part B (14)

Answer 5

1) Outpatient hospital (including emergency room)
2) Medical care by qualified health practitioners (including diagnostic tests, supplies, and durable medical equipment)
3) An initial preventive care visit within 12 months of enrolling in Part B and yearly wellness visits thereafter
4) Ambulance
5) Clinical laboratory and radiology
6) Physical and occupational therapy
7) Speech pathology
8) Outpatient rehabilitation
9) Radiation therapy
10) Transplants
11) Dialysis
12) Home health care beyond that covered by Part A
13) Drugs and biologicals that cannot be self-administered
14) Certain preventive services (such as an annual flu shot and cancer screenings)

Question 6

Medicare Part B cost sharing (2)

Answer 6

1) Calendar year deductible ($147 in 2015)
2) Coinsurance after the deductible (usually 20% of the Medicare-approved amount, but does not apply to clinical lab and certain preventive care services)

Question 7

Drug types excluded from standard Part D coverage (7)

Answer 7

1) Drugs covered by Part A or B
2) Anorexia and weight loss drugs
3) Fertility drugs
4) Cosmetic drugs (including hair loss)
5) Drugs used to relieve cough and cold symptoms
6) Vitamins and minerals (except for prenatal vitamins and fluoride)
7) Over-the-counter drugs

Question 8

Funding sources for the Medicare program (3)

Answer 8

1) Medicare is funded on a pay-as-you-go basis
2) SMI
a) Part B is financed through contributions from the general fund of the Treasury (75%) and beneficiary premiums (25%)
b) Part D is financed through a separate account in the SMI trust fund, from general revenues (74.5%) and premiums (25.5%)
3 HI (Part A)
a) Payroll tax rate is 1.45% of all earnings (not capped), with a matching employer tax
b) The ACA added an additional 0.9% payroll tax and 3.8% tax on investment income for high-income taxpayers

Question 9

Approaches for improving Medicare solvency (6)

Answer 9

1) Increase taxes
2) Reduce or eliminate some covered services
3) Increase Medicare cost sharing through higher deductibles and copays
4) Raise the eligibility age for benefits to age 66 or 67
5) Adjust reimbursement to providers of care
6) Encourage new initiatives and expand existing initiatives that lower trend

Question 10

Medicare provider reimbursement (3)

Answer 10

1) Hospitals - reimbursed on a prospective payment system basis using the diagnosis-related grouping (DRG) methodology. Paid a set amount for each admission (which encourages hospitals to provide services efficiently) based on the patient’s condition and the services provided.

2) Physicians - uses a complex fee schedule to assign relative values to services. Reimbursement equals the sum of area-adjusted unit values, multiplied by a nationwide conversion factor. Unit values for the procedures are based on:
a) Work value - measuring the time and skill required
b) Practice expense - reflecting the cost of rent, staff, supplies, equipment, and overhead
c) Malpractice value - measuring the associated professional liability costs

3) Outpatient services - reimbursed on an outpatient prospective payment system known as ambulatory payment classification

Question 11

Categories of Medicaid-eligible individuals (4)

Answer 11

1) Categorically eligible groups
a) These groups include children, parents, or other caretakers with dependent children, pregnant women, individuals with disabilities, and seniors
b) Individuals in these categories must also meet income and asset requirements (the minimum criteria is set by the federal government). For example, states must cover all pregnant women and children under age 6 with incomes below 138% of the federal poverty level (FPL).
2) Medically-needy individuals - states often extend coverage to these individuals, who qualify when their medical expenses reduce income below defined limits
3) The State Children’s Health Insurance Program (CHIP) allows states to expand coverage to uninsured children from low-income families not eligible for Medicaid, typically with an upper limit of 200% of FPL
4) The ACA expanded eligibility to everyone under age 65 with income up to 138% of FPL (in states that choose to expand)

Question 12

Workers in the US who are not covered by Social Security (5)

Answer 12

1) Federal employees hired before 1984
2) About one-fourth of state and local government workers (those who are covered by plans that are comparable to Social Security)
3) A very small number of people who object to receiving governmental benefits on religious grounds
4) Certain agricultural and domestic workers
5) Railroad employees, who are covered by a program similar to Social Security

Question 13

Requirements for insured statuses under Social Security (3)

Answer 13

One credit is earned for each $1,200 of wages (year 2014, amount is indexed), up to a maximum of four per year. All four credits can be earned at any time during the year

1) Disability-insured status - requires between six credits (at young ages) to 40 credits (at ages 62 or older). Some credits must have been earned recently, as follows:
a) For those required to have 20 or more credits, 20 credits must be from the last 40 quarters
b) For those required to have more than 6 and less than 20 credits, at least half must have been earned after age 21
c) For those required to have 6 credits, all must be from the last 12 quarters
2) Fully-insured status - requires credits equal to the worker’s age minus 22, with a minimum of 6 and a maximum of 40
3) Currently-insured status - requires 6 credits in the 13 calendar quarters ending with the quarter of death

Question 14

Eligibility and benefit amounts for Social Security disability and survivor benefits (2)

Answer 14

1) Disabled-worker benefits
a) Eligibility - must be disability insured and fully insured and be unable to engage in any “substantial gainful activity” because of a physical or mental impairment that has lasted or is expected to last for 12 months or to result in death
b) Benefit amounts - calculated using essentially the same procedures used for retired-worker benefit amounts, using an assumed age of 62 and no early-retirement reduction factor

2) Survivor benefits
a) Eligibility - family members may receive benefits if the worker was either fully insured or currently insured at time of death
b) Benefit amounts - the worker’s primary insurance amount (PIA) is computed using the standard procedures and assuming an age of 62. Survivors receive a percentage of the PIA:
i) 75% for eligible children
ii) Grading linearly from 71.5% at age 60 to 100% at normal retirement age for eligible widows or widowers
iii) 82.5% for an eligible surviving parent, or 75% each for two parents
iv) A family maximum applies, which is typically 175%

Question 15

Types of Part D plans (2)

Answer 15

1) Prescription drug plans (PDPs) - private stand-alone plans that offer drug-only coverage
2) Medicare Advantage prescription drug plans (MA-PDs) - plans that offer both prescription drug and health coverage

Question 16

Requirement for both PDP and MA-PD plans (6)

Answer 16

1) It must offer a basic drug benefit called the “defined standard benefit”
2) It may offer supplemental benefits called “enhanced benefits”
3) It can be flexible in benefit design
4) It must follow marketing guidelines
5) It must meet fairly restrictive formulary guidelines
6) Mandatory mail-order is not permitted

Question 17

Late enrollment penalty for Part D plans (4)

Answer 17

1) Applies to those who do not sign up for Part D when they are first eligible
2) Is 1% of the base beneficiary premium for every month the person waited to enroll
3) Is paid every month for the beneficiary’s lifetime
4) Does not apply if the individual had creditable coverage through another source (such as an employer or retirement plan). Coverage is creditable if it is at least as good as Medicare Part D.

Question 18

Employer and union options to provide retiree Rx coverage (3)

Answer 18

1) Employer group waiver plan (EGWP) two options are:
a) Direct contract EGWP - contract directly with CMS to become a PDP
b) “800” series EGWP - outsource to a third-party PDP or MA-PD, who performs the administrative and financial functions of the plan

2) Medicare non-EGWP plan - The payer provides funds for members to enroll in an individual PDP plan

3) Retiree drug subsidy (RDS)
a) The plan sponsor offers its benefit plan as a substitute for Part D
b) The government reimburses the sponsor for 28% of prescription drug spending otherwise covered by Part D for drug costs between the deductible and the RDS cost limit
c) Drug rebates are subtracted from the amount eligible for the subsidy
d) This option is now less attractive after the ACA eliminated the employer tax deduction for the subsidy

Question 19

Beneficiary cost sharing for the standard Part D benefit design

Answer 19

Note that deductible, initial coverage limit, TrOOP, and catastrophic copays are all indexed annually. Values shown are for 2018.

1) Deductible of $405
2) Initial coverage limit of $3,750, beneficiary pays 25% coinsurance in this range (after deductible)
3) True out-of-pocket cost (TrOOP) of $5,000. In the coverage gap (“donut hole”) between initial coverage limit and TrOOP, beneficiary pays 44% coinsurance for generics and 35% coinsurance for brand drugs.
a) In the coverage gap, manufacturers pay a percentage of brand drug costs that count towards meeting the beneficiaries TrOOP
b) Coinsurance percentages listed are gradually decreasing until they reach 25% in 2020, due to the ACA
4) Catastrophic coverage: After TrOOP, beneficiary pays greater of 5% coinsurance or a copay of $3.35 for generics and preferred multiple source drugs or $8.35 for other drugs

Low-income beneficiaries have a different benefit design

Question 20

Impact of regulations on the Medicare Advantage (MA) program (4)

Answer 20

MA is the current name of this program wherein Medicare contracts with private plans to provide benefits to seniors and the disabled

1) The Tax Equity and Fiscal Responsibility Act (TEFRA) of 1982 authorized the Medicare program to pay HMOs on a capitated basis. These HMOs were able to lower costs and use the savings to offer more comprehensive benefits than FFS Medicare, so these plans grew steadily.
2) The Balanced Budget Act (BBA) of 1997 significantly reduced health plan payments. About half of the beneficiaries in Medicare health plans exited over the next few years.
3) The Medicare Modernization Act (MMA) of 2003 reignited enrollment by:
a) Creating the Medicare Part D drug benefit
b) Creating regional MA PPOs
c) Creating special needs plans (SNPs)
d) Dramatically increasing payment for MA plans
e) Introducing competitive bidding and risk-adjusted payments
4) The ACA made dramatic changes to MA:
a) MA plans suffered cuts of $136 billion over 10 years
b) A new payment methodology was introduced, reducing county benchmark rates to between 95% and 115% of FFS Medicare rates
c) Bonus payments were introduced for plans that achieve at least four stars under a new star rating system. High-quality plans will receive a bonus of 5% of the new benchmark payment rate, with certain counties being eligible for double bonuses. Rebates were also tied to quality ratings.
d) A minimum medical loss ratio standard of 85% was also imposed

Question 21

Types of MA plans (3)

Answer 21

1) Coordinated care plans
a) These plans use a network of providers, which CMS must approve to ensure beneficiaries have sufficient access to covered services
b) Other than in an emergency, beneficiaries must use the network in order for the care to be covered

2) Private FFS plans
a) Enrollees can self-refer to any Medicare provider willing to accept the plan’s coverage rules
b) Providers are paid on a FFS basis at Medicare fee schedule rates and do not accept financial risk

3) Medical savings account plans
a) These plans combine a high-deductible MA plan and a medical savings account
b) The account is similar to commercial HSAs, but only Medicare may make a deposit into the account

Question 22

Types of MA coordinated care plans (5)

Answer 22

1) HMOs - similar to commercial HMOs and represent most MA enrollments. Can offer a POS option to cover services out of network.
2) PPOs - like commercial PPOs, they do not use gatekeepers, have larger networks than HMOs, and provide some coverage for non-contracted providers. Types include:
a) Local PPOs - can choose which counties to operate in
b) Regional PPOs - must serve all counties within their region. They are given more flexibility in meeting access standards
3) Special needs plans (SNPs) - enrollment is limited to individuals with special needs. Most are offered by HMOs. Types include:
a) Dual-eligible SNPs (D-SNPs) - for those eligible for both Medicare and Medicaid. They coordinate the benefits and requirements of the two programs.
b) Institutional SNPs (I-SNPs) - for beneficiaries institutionalized for 90 days (such as in a skilled nursing facility or psychiatric facility)
c) Chronic care SNPs (C-SNPs) - for those with a severe disabling chronic condition (defined by CMS). Must include certain benefits beyond Medicare Part A and Part B services.
4) Religious and Fraternal Benefit Society plans
5) Senior housing facility plans

Question 23

Payment calculation for MA plans (5)

Answer 23

1) MA plans submit bids to CMS each year, representing their projected costs to cover Part A and B services, net of cost sharing, plus administrative costs and profit
2) The bid amount is normalized to a risk score of 1.0 and then compared to the benchmark. When a plan covers more than one county, the bid and benchmark are calculated as weighted averages of the county-specific amounts.
3) If the bid exceeds the benchmark, the plan must charge beneficiaries a monthly premium to cover the difference
4) If the bid is less than the benchmark, the plan receives a percentage of the resulting savings as a rebate and must use this to provide additional benefits or pay beneficiaries’ Part B or Part D premiums. The rebate is 70% for plans with a rating of 4.5 or 5 stars, 65% for plans with a rating of 3.5 or 4 stars, and 50% for plans with a rating below 3.5 stars.
5) CMS may require changes to the bid if:
a) Beneficiary costs are increasing at an unacceptable rate
b) The proposed profit margin is considered too high
c) The benefit design is considered discriminatory, which could discourage enrollment of sicker beneficiaries
d) The cost sharing design is not at least as generous as FFS Medicare

Question 24

Payment calculation for Medicare Part D plans (4)

Answer 24

1) Part D plans submit bids to CMS each year, representing their projected costs to provide the standard Part D benefit package, net of cost sharing, plus administrative costs and profit
2) CMS then calculates the following:
a) National average monthly bid = the enrollment-weighted average of all Part D bids received
b) Base beneficiary premium = national average monthly bid * 25.5% / (1 - projected reinsurance payments to Part D plans / projected total claim payments to Part D plans)
c) Direct subsidy - national average monthly bid - base beneficiary premium
3) CMS makes the following payments to plans:
a) Risk-adjusted direct subsidy
b) Low-income premium and cost-sharing subsidies for beneficiaries who qualify for financial assistance
c) Reinsurance to cover 80% of members’ costs in excess of the catastrophic threshold
d) Risk corridor payment
i) The payment is 50% of actual costs that exceed projected costs by between 5% and 10%, plus 80% of the amount exceeding 10% of projected costs
ii) Conversely, the plan must pay CMS using those same percentages when actual costs are at least 5% less than projected costs
4) The plan must charge beneficiaries a premium equal to the difference between the plan’s bid and the direct subsidy

Question 25

Long-range financing challenges for the Medicare program (3)

Answer 25

1) Income to the Hospital Insurance (HI) trust fund is not adequate to fund the HI portion of Medicare benefits. The HI trust fund is projected to be depleted in 2026, at which time payroll tax revenues are projected to cover only 91% of program costs.
2) Increases in Supplementary Medical Insurance (SMI) costs increase pressure on beneficiary household budgets and the federal budget. The SMI trust fund is expected to remain solvent because its financing is tied to projected future costs. However, this will require increases in beneficiary premiums and general revenue contributions
3) Increases in total Medicare spending threaten the program’s sustainability. Total Medicare expenditures were 3.7% of GDP in 2017. Under the baseline scenario, they are expected to grow to 6.2% of GDP in 2092.

Question 26

Considerations involving data that Medicare Advantage organizations (MAOs) face during bid development (12)

Answer 26

1) Missing information - Is data at the level of detail needed for bid pricing?
2) Aggregate data - Can the data be split as needed to populate the Bid Pricing Tool (BPT)?
3) Integration of benefits - Exclude proportions of claims that are paid by other benefits, i.e. Medicaid
4) Medicare vs. non-Medicare covered benefits - Claims are split this way to populate the BPT
5) Incomplete data - The payment lag in claims, possibly any new vendor data, etc.
6) Eligibility - MAOs must confirm claims and encounter records are consistent with the eligibility records
7) Utilization considerations - Identify any claim records that could lead to over or under reporting
8) Paid amount - Consider possible different interpretations of paid amount fields from vendors
9) Classification - Classification of claims required for bid pricing
10) Claims audit - Claim paid amounts should be consistent with benefit parameters and provider contracts
11) Actual to expected comparison - Claims experience should be compared to internal expectations
12) External benchmarking - Adjust claims for the plan’s area, benefits, risk score, and utilization management

Question 27

Benefit and plan design flexibility offered from MA organizations due to recent regulatory changes (4)

Answer 27

1) Value-Based Insurance Design (VBID) - VBID plans can offer benefit adjustments for members with targeted chronic conditions. Only a VBID plan may offer nonuniform Part D benefits.
2) Standard - The benefit satisfies the expanded definition of “primarily health-related” and is available to all members
3) Targeted - The benefit satisfies the expanded definition of “primarily health-related” and is available to all members with a particular disease or health status
4) Chronic - The benefit is available to chronically ill members the plan believes will benefit from the supplemental benefit. Chronic supplemental benefits do not need to be primarily health-related.

Question 28

Options to expand standard supplemental benefits under the expanded “primarily health-related” definition (3)

Answer 28

1) Diagnose, prevent, or treat an illness or injury, or compensate for physical impairments
2) Act to ameliorate the functional and/or psychological impact of injuries or health conditions
3) Reduce avoidable emergency and health care utilization

Question 29

Federally-mandated services that Medicaid programs must cover (11)

Answer 29

1) Physicians’ services
2) Hospital services (inpatient and outpatient)
3) Laboratory and x-ray services
4) Early and periodic screening, diagnostic, and treatment (EPSDT) services for individuals under age 21
5) Federally-qualified health center and rural health clinic services
6) Family planning services and supplies
7) Pediatric and family nurse practitioner services
8) Nurse midwife services
9) Nursing facility services for individuals 21 and older
10) Home health care for persons eligible for nursing facility services
11) Transportation services

Question 30

Optional services that are commonly offered by Medicaid programs (14)

Answer 30

1) Prescription drugs
2) Clinic services
3) Care furnished by other licensed practitioners
4) Dental services and dentures
5) Prosthetic devices, eyeglasses, and durable medical equipment
6) Rehabilitation and other therapies
7) Case management
8) Nursing facility services for individuals under age 21
9) Intermediate care facility services for individuals with intellectual disabilities
10) Home and community-based care
11) Inpatient psychiatric services for individuals under age 21
12) Respiratory care services for ventilator-dependent individuals
13) Personal care services
14) Hospice services

Question 31

Definition of long-term services and supports (LTSS) (3)

Answer 31

1) Services and supports that provide assistance with activities of daily living (ADLs such as eating, bathing, and dressing) and also with instrumental ADLs, such as preparing meals and managing medication
2) Includes, but is not limited to:
a) Nursing facility care
b) Adult daycare programs
c) Home health aide services
d) Personal care services
e) Transportation
f) Assistance provided by a family caregiver
g) Care planning and care coordination services to help beneficiaries navigate the health system
3) Often provided by unpaid caregivers (relatives and friends), but as care needs grow, paid professionals may be needed, and are primarily paid for by Medicaid (51%), other public sources (21%), the patient (out-of-pocket, 19%), and private insurance (8%).

Question 32

Components of the Section 115 Medicaid waivers (5)

Answer 32

1) HHS can approve waivers that are likely to assist in promoting the objectives of the Medicaid program
2) Waivers can make broad program changes including eligibility, benefits / cost-sharing, and provider payments
3) Waivers are typically approved for a five-year period and can be extended, typically for three years
4) Waivers must be budget neutral at the federal level. This is enforced by PMPM caps on federal funds.
5) There are rules in place that promote transparency, public input, and evaluation of the waiver

Question 33

Broad measures reported in studies to explain the effects of Medicaid expansion under the ACA (3)

Answer 33

1) Coverage - Expansion states experienced significant coverage gains and reductions in uninsured rates among the low-income population broadly and within specific vulnerable populations
2) Access to care and related measures - Most research demonstrates that expansion has improved access to care, utilization of services, the affordability of care, and financial security among the low-income population
3) Economic measures - multiple studies suggest that expansion can result in state savings by offsetting state cost in other areas

Question 34

Steps for implementing risk adjustment into a Medicaid managed care program (9)

Answer 34

1) Decide which risk adjustment system will be used - there are various commercially-available models. Should choose a system based on the data used and the ability to customize it.
2) Decide what types of data should be used in the risk adjustment system - includes demographic information and claims and pharmacy data
3) Decide which Medicaid eligibility groups will be risk-adjusted and which subpopulations may be excluded
4) Decide whether the risk adjustment system should be prospective (use experience period data to estimate future morbidity) or concurrent (use data from the current period to estimate morbidity for that period)
5) Decide whether to base the risk adjustment factors on the individuals enrolled during the rating period or during the experience period
6) Decide whether to customize the risk weights inherent in the risk adjustment model - may be needed due to differences in the state program as compared to the population used to develop the model
7) Decide on criteria for including individuals in the risk adjustment calculations - many states require at least six months of eligibility exposure
8) Develop criteria for claims records to be included in the risk adjustment model
9) Determine the phase-in schedule and whether or not risk corridors will be used

Question 35

ASOP #49 - Medicaid Managed Care Capitation Rate Development and Certification

Adjustments made to base period data when calculating Medicaid managed care capitation rates (9)

Answer 35

Adjustments may be needed to reflect changes that occurred during the base period (retroactive), between the base period and rating period (interim), or in the rating period (prospective)

1) Missing data adjustment - examples of missing data may include claims or encounter data that was not reported through the same system as the base data
2) Incomplete data adjustment - to account for claim reserves, reinsurance, and claim settlements
3) Population adjustment - to reflect expected changes in the population between the base period and the rating period
4) Funding or service carve-out adjustments - to adjust for payments or services that will not be covered by the capitation rate
5) Retroactive eligibility adjustments - to exclude costs incurred during a period of retroactive eligibility that is not the responsibility of the MCO
6) Program, benefit, or policy adjustments - to reflect differences in benefit or service delivery requirements between the base period and rating period
7) Data smoothing adjustments - to address anomalies or distortions in the base data, such as large claims or limited enrollment
8) Claim cost trends - to reflect changes in demographics, benefit levels, and state-mandated reimbursement schedules that are not captured elsewhere
9) Managed care adjustments - to reflect changes in the level of managed care between the base period and the rating period

Question 36

ASOP #49 - Medicaid Managed Care Capitation Rate Development and Certification

Criteria for Medicaid managed care capitation rates to be considered actuarially sound (3)

Answer 36

Definition - these rates are actuarially sound if, for business for which the certification is being prepared and for the period covered by the certification, projected capitation rates and other revenue sources provide for all reasonable, appropriate, and attainable costs

1) They were developed in accordance with generally accepted actuarial principles and practices
2) They are appropriate for the populations to be covered and the services to be furnished
3) They have been certified as meeting the requirements of 42 CFR 438.6(c) by actuaries who meet the Qualification Standards established by the American Academy of Actuaries