Fact Sheets

CMS ISSUES PRELIMINARY 2011 PAYMENT POLICIES FOR MEDICARE ADVANTAGE AND PRESCRIPTION DRUG PLANS

The Centers for Medicare & Medicaid Services (CMS) today issued the “Advance Notice” of changes to methods used to calculate health care capitation rates for payments to Medicare Advantage organizations for Calendar Year (CY) 2011.   The Advance Notice is issued annually 45 days before the final rates are announced, and also addresses policy and technical changes to payment methodologies for Medicare Advantage (Part C) and Medicare prescription drug (Part D) plans. 

This year, CMS is combining the Advance Notice with the annual Call Letter to health plans, which outlines non-payment policy changes for the upcoming calendar year. 

Highlights of the Advance Notice and Call Letter include:

·        A preliminary estimate of a 1.38 percent change in the National Per Capita Medicare Advantage Growth Percentage.   The Growth Percentage is the estimated growth in per capita expenditures for Medicare beneficiaries.

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·        Changes in the methodologies for risk adjusting payments to Medicare Advantage and Medicare prescription drug plans. Through risk adjustment, plans’ capitation payments are adjusted based on their enrollees’ predicted health care costs.

·        Preliminary estimates of normalization factors used to maintain average Part C and Part D risk scores at 1.0 in the payment year.  The preliminary estimate of the normalization factor applied to Part C risk scores for aged and disabled beneficiaries is 1.031.  The preliminary estimate of the normalization factor that applied to Part D risk scores is 1.029.

·        CMS proposes to continue making an adjustment for differences in coding patterns between Medicare Advantage plans and Medicare’s Part A and Part B providers identified by CMS. The adjustment is calculated based on the amount by which the disease scores for beneficiaries in Medicare Advantage have grown faster than the disease scores for beneficiaries in Original Medicare.  The proposed adjustment of 3.41 percent would, if adopted in the final rate announcement, be applied as a uniform percentage reduction to all plans’ Part C risk scores in 2011.

·        Announcements of the annual updates to the Medicare Part D benefit parameters.    Every year CMS is required to update the statutory parameters for the defined standard Part D prescription drug benefit by the annual percentage increase in average per capita Part D spending. Due to rounding, all of the 2011 Part D benefit parameters are virtually unchanged from the 2010, with the exception of a small increase in the Initial Coverage Limit. 

(Note: The changes from 2010 to 2011 are rounded to the closest appropriate unit)

Highlights of Provisions in the Call Letter:

·        Announcements of a combined calendar listing with side-by-side key dates and timelines applicable to MA, MA-PD, Part D and cost-based plans.   The calendar contains important operational dates for plans, such as the date that CMS will begin accepting bids, dates for non-renewing plans, and dates for beneficiary mailings.

·        A provision encouraging sponsor practices to curb waste of unused drugs dispensed in the retail setting, information about reassignment, information about the release of data, information on the Medicare Enrollment Assistance Demonstration, and information on potential new B versus D coverage determination for beneficiaries with ESRD.

The Advance Notice and draft Call Letter may be viewed at http://www.cms.hhs.gov/MedicareAdvtgSpecRateStats/AD/list.asp#TopOfPage.

Comments on the Advance Notice and draft Call Letter are invited from the industry and other stakeholders and must be submitted by 6 p.m. Eastern Standard Time on Friday, March 5, 2010.  Comments may be submitted by e-mail to AdvanceNotice2011@cms.hhs.gov.