Effective this contract year, the Centers for Medicare and Medicaid Services (CMS) eliminates midyear benefit enhancement (MYBE) to Medicare Advantage (MA) plans. In doing so, CMS stresses that employer and union group health plan sponsors that offer “800-series” waiver MA plans to their Medicare-eligible participants may continue to adopt benefit enhancement at any time, as CMS has never applied the MYBE process to employer- and union-only group “800-series” waiver MA plans. CMS further explains that the MYBE prohibition will not apply to PACE (that is, programs for all-inclusive care for elderly) plans.

CMS issued the MYBE prohibition on July 28, 2008 in 73 Federal Register 43628. That precludes MYBE for the 2008 contract year because CMS has not permitted MYBE to become effective before September 1 of the contract year. CMS proposed the MYBE prohibition on September 1, 2006 at 71 Federal Register 52014, but delayed final adoption to gain experience with MYBE under the competitive bidding process implemented by the Medicare Modernization Act. The MYBE prohibition does not require amendment to the Medicare Advantage Rule at 42 C.F.R. Part 422.

CMS has doubted the wisdom of MYBE since the Medicare Modernization Act transformed the Medicare+Choice program—which used annual “adjusted community rating” to determine plan premiums—into the Medicare Advantage program—which uses annual competitive bidding to set plan premiums. CMS believes that MYBE undermines the integrity of the bidding process. Specifically, CMS thinks that allowing MYBE can result in “bids as much as 2 or 3 percent higher than would be submitted if MYBEs were prohibited.” Nonetheless, CMS permitted MYBE in 2006 and 2007 to observe if MYBE benefited beneficiaries. According to CMS, only six MA plan sponsors applied for MYBE in 2006 and only one in 2007, suggesting there has been little beneficiary benefit in permitting MYBE. So, for 2008 and beyond, CMS will no longer allow MYBE for MA plans. MYBE has never been permitted for the Medicare prescription drug benefit.

Concerned that employer and union group health plan sponsors may misconstrue the MYBE prohibition as applicable to their “800-series” waiver plans, CMS makes clear that MA plan sponsors “retain the longstanding flexibility to customize benefits, including enhancing benefits and reducing premiums and cost-sharing, for all ‘800-series’ [employer- and union-only group waiver plans] in order to be able to accommodate the various needs of employer and union group health plan sponsors throughout the year.” Accordingly, MA plan sponsors furnishing such “800-series” waiver plans “may continue to enhance benefits for employer and union group health plan sponsors at any point during the contract year without submitting MYBEs to CMS.”