Fact Sheets

Supporting Medicare in Puerto Rico

Supporting Medicare in Puerto Rico

Secretary Burwell and the U.S. Department of Health and Human Services (HHS) are a core part of the Administration’s team working closely with Puerto Rico and other key stakeholders to address the fiscal crisis in the Commonwealth. HHS has taken a number of steps to provide residents of Puerto Rico with access to quality and affordable health care and a more sustainable future.

The Administration continues to call on Congress to act on a legislative package that provides Puerto Rico with the tools it needs to address its worsening crisis and create a path to recovery.  Current law has resulted in differences in the Medicare and Medicaid programs in Puerto Rico as compared to the states, and the Centers for Medicare & Medicaid Services (CMS) is therefore limited in its ability to address many of the concerns raised by stakeholders. Additionally, given its disproportionate risk of the Zika virus, the supplemental package proposed by the Administration seeks a temporary one-year increase in Puerto Rico’s Medicaid Federal Medical Assistance Percentage (FMAP) to provide an estimated $250 million in additional Federal assistance to support health services for pregnant women at risk of infection or diagnosed with Zika virus and for children with microcephaly, and other health care costs. 

That said, CMS proposed a number of important changes to the Medicare Advantage and Part D programs that, as finalized in the 2017 Rate Announcement and Final Call Letter, will improve stability in the Medicare Advantage program in Puerto Rico.  Over the past year, the Department has worked with stakeholders and the government of Puerto Rico to solicit input on opportunities to support health care delivery in Puerto Rico.

Medicare Advantage in Puerto Rico

Currently, the Medicare Advantage program covers 567,000 beneficiaries in Puerto Rico. Approximately 277,000 beneficiaries – approximately 49 percent of all Medicare Advantage enrollees in Puerto Rico – are enrolled in Medicare Advantage Dual-Eligible Special Needs Plans. 

Changes to Payments

CMS will implement a number of changes in the 2017 Rate Announcement that will significantly benefit Medicare Advantage enrollees in Puerto Rico.

As a result of the finalized policies, the expected revenue change for Medicare Advantage Plans in Puerto Rico is 1.25 percent, not accounting for the expected growth in coding acuity that has typically added another 5.1 percent.  

Risk Adjustment Model

CMS will implement a revised risk adjustment model that will increase the payments made to plans that enroll a large proportion of full benefit dually eligible enrollees. CMS uses the risk adjustment model to adjust payments to plans to reflect the relative health of their enrollees based on diagnostic, demographic, and other factors. Stakeholders have suggested that the current risk adjustment model fails to capture the full costs of providing care to dually eligible beneficiaries. The revised model has separate coefficients for full benefit dually eligible beneficiaries; partial benefit dually eligible beneficiaries; and non-dually eligible beneficiaries. 

Based on our modeling, Puerto Rico would benefit more from these changes than any other state or territory. All of the dually eligible beneficiaries in Puerto Rico are in the full benefit category, due to the lack of a Medicare Savings Program. As such, plans enrolling dually eligible beneficiaries – including Dual Special Needs Plans – will likely see a significant increase in risk scores.

Incorporating Increased Hospital Payments

At the end of 2015, Congress passed a law increasing the payments made to Puerto Rico hospitals for inpatient services under Medicare fee-for-service (FFS). As fee-for-service payments are part of the basis for Medicare Advantage payments, CMS will adjust the fee-for-service basis for 2017 Medicare Advantage payments to reflect the higher payments that will be made to Puerto Rico hospitals in 2016; ordinarily this change would not be reflected until 2018 given the timing of the enactment and implementation of this change in FFS.

Zero claims adjustment

The Secretary directed the Office of the Actuary to adjust the fee-for-service experience for beneficiaries enrolled in Puerto Rico to reflect the propensity of zero dollar claimants nationwide, rather than based off the propensity of zero dollar claimants solely in Puerto Rico. CMS sought public comment on this issue in the Advance Notice due to the larger proportion of FFS Medicare beneficiaries in Puerto Rico with no Medicare claim reimbursements and concerns that this was leading to lower Medicare Advantage Rates in Puerto Rico. This change resulted in an average increase in the standardized FFS costs in Puerto Rico of 4.4 percent for 2011 through 2013. Accordingly, a 4.4 percent adjustment was applied to the pre-standardized Puerto Rico FFS rates supporting the CY 2017 ratebook development. 

Changes to Star Ratings

Medicare Advantage plans that achieve high Star Ratings are eligible for Quality Bonus Payments. Stakeholders in Puerto Rico have raised concerns that it is more difficult for plans serving in Puerto Rico to achieve high Star Ratings, making these payments more difficult to attain. Beginning in 2017, CMS will make a number of changes to address these concerns and to create a more level playing field for these plans. 

Adjusting for Socioeconomic Status

Plans and other stakeholders have raised concerns that the current Part C and D Star Rating system is sensitive to the low income subsidy/dually eligible and disability status of a contract’s enrollees.  In response, CMS conducted extensive research on this issue last year, released findings in 2015, and requested comment on the proposed methodological changes. 

Following this public process, CMS will implement as proposed an interim analytical adjustment to account for low income subsidy/dual eligible and/or disability status.  The adjustment factor will vary by a contract’s proportion of low income subsidy/dually eligible and disability status beneficiaries. This interim adjustment should have an overall positive effect on Puerto Rico plans with high numbers of vulnerable enrollees.  

Changes for Low Income Subsidy Status

By statute, residents of Puerto Rico are ineligible for the low income subsidy, which provides cost-sharing and premium assistance to low income Part D enrollees. CMS is finalizing its proposal to estimate a low income subsidy indicator for Puerto Rico to be used in conjunction with the interim analytical adjustment. The low income subsidy indicator will identify beneficiaries in contracts operating solely in Puerto Rico whose incomes would result in a low income subsidy designation in the 50 states and DC. Stakeholders have suggested that the lack of the low income subsidy makes compliance with some measures – like medication adherence – more difficult. To address this difference in benefits, CMS will implement a differentiated weighting for the three medication adherence measures in the calculation of the overall and summary Star Ratings for contracts operating solely in Puerto Rico. 

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