CMS PROPOSES 2014 PAYMENT AND POLICY UPDATES FOR MEDICARE HEALTH AND DRUG PLANS

Beneficiaries will get greater protections, value, and care in the Medicare services they receive through proposed policies released today by the Centers for Medicare & Medicaid Services (CMS). Today’s 2014 Advance Notice and draft Call Letter takes important steps to improve payment accuracy for Medicare Advantage (Part C) and in Medicare prescription drug (Part D) plans for 2014, without shifting costs to beneficiaries. Since the Affordable Care Act was passed in 2010, Medicare Advantage premiums have fallen by 10 percent and enrollment is expected to increase by an estimated 28 percent through this year. In addition, costs of the defined standard Part D plan will be lower in 2014 than they are in 2013. The standard Part D deductible will be $310, down from $325 in 2013, and cost-sharing amounts will also be lower.

CMS also announced today a proposed rule implementing the Affordable Care Act’s medical loss ratio (MLR) requirements for Medicare Advantage and prescription drug (Part C and Part D) plans that promote greater accountability and transparency. The proposed rule limits how much plans can spend on marketing, overhead, and profit. Similar MLR requirements are already benefiting consumers in the private health insurance market. 

“The Affordable Care Act helps us strengthen Medicare Advantage and Part D,” said Jonathan Blum, CMS acting principal deputy administrator and director of the CMS’ Center for Medicare. “We are working to ensure that people with Medicare have affordable access to health and drug plans, while making certain that plans are providing value to Medicare and taxpayers.”

The minimum medical loss ratio (MLR) outlined in today’s proposed rule will ensure more value for Medicare beneficiaries enrolled in Medicare Advantage and Medicare Prescription Drug plans. Under the Affordable Care Act, Medicare health and drug plans must meet a minimum medical loss ratio, beginning in 2014.  Plans must spend at least 85 percent of revenue on clinical services, prescription drugs, quality improvements, and/or direct benefits to beneficiaries in the form of reduced Medicare premiums. Enrolled seniors and individuals with disabilities will get more value and better benefits as plans spend more on health care.   

Guidance released today includes the Advance Notice and the draft Call Letter. CMS is accepting public comment on the proposed guidance released today.

Proposed guidance in today’s Advance Notice and draft Call Letter increases value and protections for beneficiaries:

• Lower Out-of-Pocket Drug Spending: Due to decreases in the cost of the Medicare prescription drug program, CMS is announcing for the first time since the inception of the program that the 2014 defined standard Part D prescription drug benefit will have lower co-payments and a lower deductible than in 2013. These costs are decreasing at the same time that coverage for Medicare beneficiaries in the Part D prescription drug coverage gap, or “donut hole” will continue to increase in 2014. As a result of the Affordable Care Act, in 2014, enrollees with liability in the donut hole will receive coverage and discounts of 52.5 percent on covered brand name drugs and 28 percent on covered generic drugs.
• Greater Protection for Beneficiaries: CMS proposes to require Part D plan pharmacies to obtain enrollee consent prior to each delivery, unless the enrollee personally requests the refill. This proposal is in response to complaints from beneficiaries who have received and been charged for unnecessary and unwanted prescriptions because of “auto-ship” services. CMS intends to again use its authority, provided by the health care law, to protect Medicare Advantage enrollees from significant increases in costs or cuts in benefits, and, for the 2014 contract year, proposes reducing the amount of any permissible increase to $30 per member per month (down from $36 per member per month in previous years). CMS proposes to maintain existing limits on beneficiaries’ out-of-pocket spending, but clarifies that enrollees’ dollar contributions towards these limits are transferable when they move to another plan of the same type offered by the same organization. CMS also continues to require plans to refine their offerings so that beneficiaries can easily identify the differences between their options.
• Improved Coordination of Care: CMS urges plans to broaden their target enrollee populations for medication therapy management (MTM). In support of the Million Hearts initiative, CMS suggests ways that plans improve access and adherence to anti-hypertensive medications. In accordance with the Affordable Care Act, CMS is interested in expanding shared decision-making within the Medicare Advantage program. 

Other proposals include those aiming to closely align payments in Medicare Advantage (Part C) with fee-for-service Medicare (Parts A and B) and to improve payment accuracy:

• Preliminary estimate of the combined effect of the Medicare Advantage growth percentage and the fee-for-service growth percentage is estimated to be -2.2 percent.  This metric measures the estimated growth in per capita expenditures for Medicare beneficiaries and will help determine the payment benchmarks for Medicare Advantage plans.  This negative growth trend is due to historically low growth in Medicare per-capita spending, tied, in part, to successful initiatives undertaken to promote value over volume and help curb fraud, waste, and abuse in the Medicare fee-for-service program in recent years.
• Continue to implement changes under the Affordable Care Act by phasing in alignment of MA benchmarks with Medicare fee-for-service (FFS) costs and basing part of MA payment on plan quality.  In addition, CMS proposes to update the 2014 ratebook to reflect the latest FFS costs.
• Continue to adjust for diagnostic coding differences between Medicare Advantage plans and Medicare fee-for-service providers.  In compliance with statutory requirements, CMS proposes applying a 4.91 percent adjustment for 2014 to MA plan payments, a 1.5 percentage point increase over 2013, consistent with recent legislation. CMS is also proposing to address differential coding patterns in Medicare Advantage by refining the risk adjustment model to exclude certain conditions that are most commonly coded by Medicare Advantage plans.  These changes have been implemented in a budget neutral manner for plans for 2014.

In addition, the 2014 statutory updates to the annual parameters for the defined standard Part D prescription drug benefit are: