Last week, the Centers for Medicare & Medicaid (CMS) released its 2016 Advance Rate Notice and draft Call Letter (2016 Call Letter) for the Medicare Advantage (MA) and Medicare Part D programs. The 2016 Call Letter outlines proposed changes to the Part C risk adjustment and Part D payment methodologies, as well as policy modifications for calendar year 2016. With the final 2016 Call Letter to be released April 6, 2015, CMS is providing interested stakeholders until next Friday, March 6th to provide comments.

Starting on Monday, we will offer a 5-part series analyzing several key provisions of the 2016 Call Letter that could have a significant impact on plans, PBMs, pharmacies, and providers in the coming year.  This series will cover the following provisions of the 2016 Draft Call Letter: (i) Star Ratings; (ii) PBM and Pharmacy Issues; (iii) Risk Adjustment; (iv) D-SNPs, MMPs, and Low-Income Subsidy Issues; and (v) MA Contracting Issues. 

In the interim, there are several major provisions that we wanted to highlight as organizations develop their comments:

  • Average MA Payment Increase: Even with a 0.9 percent decrease in payment as a result of the new MA benchmark methodology under the Affordable Care Act, CMS stated in its press release that it anticipates an average 1.05 percent growth in revenue for MA plans when combined with expected growth in risk scores.
  • CMS-Hierarchical Condition Categories (HCC) Risk Adjustment Model for 2016: CMS proposes that for 2016, it will fully transition to the clinically-revised CMS-HCC model that was proposed in the 2014 Call Letter, instead of the blended model used in calendar years 2014 and 2015.
  • ICD-10 Codes: Once again, CMS indicates that the full transition from ICD-9 to ICD-10 codes will take place this October.
  • Updates to the RxHCC Model: In addition to updates made to the RxHCC risk adjustment model to reflect the 2016 benefit structure and updates to the data years used to calibrate the model, CMS is proposing to update the RxHCC Model by adding two new HCCs to account for some of the recent high-cost drugs entering the market. Specifically, CMS is developing new HCCs for 1) Secondary Cancers of Bone, Lung, Brain and Other Specified Sites; Liver Cancer, and 2) Chronic Viral Hepatitis C (which is actually a split from the chronic viral hepatitis RxHCC).
  • Star Ratings: CMS proposes several technical changes to the Star Ratings, including the addition of one new measure, the retirement of three measures, and the temporary removal of one, along with changes to the methodology for several others. Additionally, in response to a Request for Information released last fall seeking comments on how dual status reduces quality scores, CMS is proposing reducing the weight of select Parts C and D measures by half.
  • Clarification of the Annual Physical Exam Supplemental Benefit: CMS proposes minimum criteria necessary for an Annual Physical Exam to qualify as a supplemental benefit.
  • In-Home Health Risk Assessments: After proposing to exclude for payment purposes diagnoses identified during a home visit and not confirmed by a subsequent clinical encounter in both the 2014 and 2015 Call Letters, this year, CMS changes gears and releases best practices that plans are encouraged to follow when conducting a home visit.
  • Verifying Network Adequacy and Provider Directories: To address CMS’s concerns that MA plans are relying on providers with closed panels to meet network adequacy standards, the 2016 Caller Letter clarifies that MA plans are expected to establish policies that enable them to assess the true availability of its contracted providers. Plans are also expected to keep online directories updated in real-time and include information on which providers are accepting new beneficiaries. CMS will undertake direct monitoring of this and will develop new audit protocols to ensure plans are compliant. For 2017, CMS is also considering a national provider database, which may involve Qualified Health Plans as well, to provide better transparency on the availability of providers.
  • Preferred Cost-Sharing Pharmacies (PCSP): CMS proposes that, during the bid review and negotiation, it will work with plans whose PCSP networks are outliers. CMS will either work with them to increase access to PCSPs or it will prevent plans from marketing themselves as offering preferred cost sharing, where PCSPs are not meaningfully available.
  • Maximum Allowable Cost (MAC) Pricing: The 2016 Call Letter reminds Part D Sponsors that starting January 1, 2016, they are subject to new regulations governing disclosures of MAC pricing to pharmacies in advance of reimbursement. CMS used this as an opportunity to remind Part D Sponsors that, while the regulations do not dictate the format of the MAC price updates, Plan D Sponsors must disclose MAC prices “in a manner usable by pharmacies.”
  • Mail Order and Changes to the Auto-Ship Policy: Starting in 2016, Part D Sponsors will no longer need to submit requests to CMS to enable them to automatically ship prescriptions not directly initiated by the beneficiary. Sponsors must continue to meet all of the conditions listed in CMS’s applicable earlier memoranda.