On June 19, 2009, Democrats from three key committees of the U.S. House of Representatives revealed their draft plan for health reform, which would require most individuals to obtain health insurance and would create a national health insurance exchange through which qualifying individuals and employers could obtain health insurance. The draft bill (the House Bill) also would modify the MA Program in several significant ways, if enacted. Select proposals include the following:

Modifying Benchmarks and Payment Rates

Beginning in 2011, the benchmark upon which MA Plan payment rates are calculated would be gradually reduced to reflect average per capita costs under traditional Medicare fee-for-service (Medicare FFS) for the applicable service area.

The House Bill differs from the adjustments proposed by the Obama administration in its CY 2010 budget and by the Senate Finance Committee in its April 2009 white paper on Medicare reform (White Paper). Those proposals, as described during the May 2009 Forum call, include implementing an across-the-board downward adjustment (e.g., 1 percent) of all MA benchmarks in 2011 and targeted adjustments in future years; adjusting benchmarks to reflect a blend of national and local per capita costs for Medicare FFS; or modifying benchmarks to reflect the enrollment-weighted average bid for each service area.

The Senate Finance Committee has not yet released its draft health reform bill, so it is not clear what modification to MA Plan benchmarks, if any, such draft bill might contemplate. The bill put forward by Democrats on the Senate Health, Education, Labor and Pensions Committee does not address the Medicare Program.

Any downward adjustment in benchmarks, regardless of the methodology, would affect MA Plan payment rates as well as the potential scope of supplemental benefits MA Plans would offer.


Bonus Payments for High Quality Plans

The House Bill would increase by up to 1 percent the benchmark upon which payments are calculated for “high quality” MA Plans. Such “high quality” MA Plans would be identified based upon HEDIS data and consumer (CAHPS) surveys until the Secretary of the U.S. Department of Health and Human Services (the Secretary) establishes, no later than 2014, a new metric to assess the quality of care available through MA Plans.

This proposal is very similar to one of the Senate Finance Committee’s proposals, set forth in its White Paper, in which “some portion” of MA Plans’ payments are tied to performance on quality measures as reflected by CMS’s 5-star ranking system.


Coding Intensity Adjustments

Under the House Bill, the Secretary’s authority to implement coding intensity adjustments in the determination of MA Plan payment rates would become permanent. Although the Senate Finance Committee did not address this issue in its White Paper, codification of the Secretary’s authority to implement coding intensity adjustments as part of any final health care reform legislation would not be unexpected, particularly given CMS’s introduction of a 3.41 percent downward adjustment to all MA Plan Members’ risk scores for the 2010 benefit year.


Employer/Union Plans

The House Bill proposes to limit employer- and union-sponsored MA Plans by restricting those employer- and union-sponsored MA Plans that would be eligible for a waiver from the Secretary of a MA Program requirement that hinders the design, the offering of or enrollment in such employers’ MA Plans. Specifically, the Secretary’s authority to waive such requirements for employer-/union-sponsored MA Plans would only apply “if 90 percent of the Medicare Advantage eligible individuals enrolled under such plan reside in a county in which the MA Organization offers a MA local plan.” (The provision would be incorporated by reference into the Part D Program.)

This proposed amendment seems more appropriate for the section of the Social Security Act authorizing the Secretary to waive or modify requirements relating to a health plan (as opposed to an employer or union) sponsoring MA and Part D Plans to the employers’/unions’ workers and/or retirees, and its placement could merely be a drafting error within the House Bill. This modification, however, is accompanied by another amendment that would limit the applicability of the Secretary’s waiver authority to only to those Program requirements in effect upon enactment of the bill. (Program requirements adopted as part of or after enactment of the bill would not be subject to waiver or modification.) These amendments suggest that House Democrats are looking to restrict the ability of Medicare Advantage Organizations and Part D Plan Sponsors (collectively, Plan Sponsors) to offer employer- and union- based MA and Part D Plans that differ significantly from MA and Part D Plans available to individual Medicare beneficiaries.

Enrollee Cost-Sharing

The Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) capped MA Plans’ cost-sharing obligations for certain dual-eligible individuals at the amount the dual-eligible individual would have paid if enrolled in Medicare FFS. (CMS codified this requirement, effective with the CY 2010 benefit year, in its September 2008 interim final rule.)

The House Bill would impose a similar requirement for all Medicare beneficiaries enrolled in MA Plans, limiting MA Plan enrollees’ cost-sharing obligation (whether co-insurance or co-payment) to no more than the amount the individual would pay if enrolled in Medicare FFS. MA Plans’ benefit packages could offer reduced cost-sharing obligations compared to Medicare FFS (e.g., 10 or 15 percent co-insurance for services furnished by in-network providers), but could not impose cost-sharing obligations that exceed Medicare FFS amounts, even as a deterrent to Members’ use of out-of-network providers.

Administrative Cost Requirements

The legislation would require CMS to publish annually MA Plans’ medical loss ratios, risk-adjusted per enrollee payment and average risk score. Additionally, CMS would be required to audit Medicare Advantage Organizations’ (MAOs’) administrative costs to determine whether such costs comply with the applicable requirements of the Federal Acquisition Regulations (FAR), which apply to defense and other government contractors. Although the House Bill provision would not expressly require MAOs to comply with the FAR provisions relating to administrative costs, by authorizing CMS to audit MAOs’ compliance with these provisions, the House Bill could have the effect of applying the requirements indirectly.

MAOs—and Part D Plan Sponsors, who would be subject to the same requirements by virtue of their incorporation into the Part D Program—likely would incur significant expense in order to modify their operations, including accounting methodologies, in order to come into compliance with the FAR.

Special Enrollment Period Stemming from Sanctions

The House Bill would create a new special enrollment period for Medicare beneficiaries enrolled in a MA Plan whose authorization to enroll individuals has been suspended by CMS for the MA Plan’s failure to meet “applicable requirements.” This provision would be incorporated by reference into the Medicare Part D Program.

Fully Integrated Dual Eligible SNP

A new type of special needs plan—“fully integrated dual eligible special needs plan”—would be authorized under the House Bill for purposes of advancing fully integrated Medicare and Medicaid benefits and services for certain dual eligibles. Such special needs plans (SNPs) would be required to provide specific services and coordinate care delivery through “coordinated community care networks.” Contracts with state Medicaid agencies to facilitate the provision of integrated care under these SNPs would be mandated.

Enhanced Penalties

The House Bill would create a new, explicit basis for imposition of civil money penalties (CMPs) on Plan Sponsors: “knowingly” making or causing to be made “any false statement or misrepresentation of a material fact in any data or information submitted to support a claim for payment for items or services” furnished under the Medicare, Medicaid or SCHIP Programs. This new statutory authority to impose CMPs would be in addition to, and not in lieu of, the government’s ability to pursue charges of false claims for the same actions. The House Bill also would authorize intermediate sanctions “of not more than 3 times the amount paid” to a Plan Sponsor “based upon the misrepresentation or falsified information” that is submitted to the Secretary.

Penalties for Marketing Violations

Intermediate sanctions, including CMPs, also could be imposed on Plan Sponsors for specific, marketing-related abuses identified in the House Bill, including enrollment of a Medicare beneficiary without his or her consent, transfer of an individual from one Plan to another without his or her consent, failure to comply with marketing regulations (including state appointment laws for agents and brokers as well as federal prohibitions on certain marketing activities), or employment or contracting with an individual or entity who engages in prohibited conduct.

Future Reform Proposals

House Democrats are expected to issue a revised bill in the next several days, which likely would be the subject of mark ups and an eventual House vote prior to the start of the House August recess.