May 18, 2022

Last week, the Centers for Medicare and Medicaid Services (CMS) published in the Federal Register a final rule (FR) relating to Medicare Part C, also known as Medicare Advantage (MA), and Medicare Part D, relating to drugs.  The agency also released a fact sheet that provides an overview of the changes.  The following will act to summarize some of the key provisions of the FR that may be of interest to hospitals.

Key Dates

The FR lists two sets of dates.  Under the heading “effective dates,” The FR states the following: “These regulations are effective on June 28, 2022, except for amendatory instructions 27 and 36 (regarding the definition of “negotiated price” at §§ 423.100 and 423.2305), which are effective January 1, 2024.”  Under the heading “applicability dates,” the FR states the following: “The applicability date of the provisions in this rule is January 1, 2023, except as explained in SUPPLEMENTARY INFORMATION.”

Pharmacy Counter

CMS is finalizing a policy that requires Part D plans to apply all price concessions they receive from network pharmacies to the negotiated price at the point of sale.  This allows the beneficiary to also share in the savings. Specifically, CMS is redefining the negotiated price as the baseline, or lowest possible, payment to a pharmacy, effective January 1, 2024. CMS is applying the finalized policy across all phases of the Part D benefit. This policy reduces beneficiary out-of-pocket costs and improves price transparency and market competition in the Part D program.

Marketing and Communications

CMS is finalizing changes to marketing and communications requirements that will protect Medicare beneficiaries by ensuring they receive accurate and accessible information about Medicare coverage. These include strengthening oversight of third-party marketing organizations to detect and prevent the use of confusing or potentially misleading activities to enroll beneficiaries in MA and Part D plans, reinstating the inclusion of a multi-language insert in all required documents to inform beneficiaries of the availability of interpreter services, codifying enrollee ID card standards.

Past Performance

To hold plans to a higher standard, CMS is finalizing additional bases for denying an MA and Part D organization’s application for a new contract or a service area expansion of an existing contract based on an organization’s past performance. The current regulations permit CMS to deny applications from organizations under sanction or failing CMS’ net worth requirements during the performance period. The final rule adds Star Ratings (2.5 or lower), bankruptcy or bankruptcy filings, and exceeding a CMS-designated threshold for compliance actions as bases for CMS denying a new application or a service area expansion application.

Network Adequacy

To strengthen its application standards and oversight, CMS is requiring that MA applicants demonstrate they have a sufficient network of contracted providers to care for beneficiaries before CMS will approve an application for a new or expanded MA contract. Due to the changes in the timing of the network adequacy reviews and potential difficulties MA organizations may face with building a full network almost one year in advance of the contract year, CMS also will allow applicants a 10-percentage point credit toward the percentage of beneficiaries residing within published time and distance standards.

Additionally, CMS is finalizing a change to allow applicants to use Letters of Intent (LOIs) in lieu of a signed provider contract at the time of application and for the duration of the application review to meet network adequacy standards. Once the coverage year starts (January 1), organizations must be in full compliance; the 10-percentage point credit and permission to use LOIs will no longer apply, and signed provider and facility contracts must be in place for the network.

Medical Loss Ratio (MLR) Reporting

To increase value for taxpayers and beneficiaries, CMS is reinstating MLR reporting requirements that are in effect for contract years 2014 through 2017. The current regulations require that MA organizations and Part D sponsors report to CMS the percentage of revenue spent on patient care and quality improvement and the amount of any remittance that must be paid to CMS for failure to meet the 85 percent minimum MLR requirement. The FR requires MA organizations and Part D sponsors to report the underlying cost and revenue information needed to calculate and verify the MLR percentage and remittance amount, if any. In addition, the FR will allow CMS to require that MA organizations report the amounts they spend on various types of supplemental benefits not available under original Medicare (e.g., dental, vision, hearing, transportation).

Part C and Part D Quality Rating System

The government is finalizing a technical change to enable CMS to calculate 2023 Part C Star Ratings for the three Healthcare Effectiveness Data and Information Set (HEDIS) measures collected through the Health Outcomes Survey (HOS): Monitoring Physical Activity, Reducing the Risk of Falling, and Improving Bladder Control. Without this technical change, CMS would be unable to calculate 2023 Star Ratings for these measures for any MA contract since all contracts qualify for the extreme and uncontrollable circumstances adjustment for COVID-19. CMS is also finalizing a series of changes that were established in the March 31, 2020 COVID-19 interim final rule with comment (IFC) and the September 2, 2020 COVID-19 IFC to the 2021 and 2022 Star Ratings to accommodate the disruption to data collection posed by the COVID-19 pandemic.

Maximum Out-of-Pocket Policy for Dually Eligible Beneficiaries

MA plans are required to set a limit on beneficiary cost-sharing for Medicare Part A and B services after which the plan pays 100 percent of the service costs. Current guidance on calculation of the maximum out-of-pocket (MOOP) amount allows MA plans the option to count only those amounts the individual enrollee is responsible for paying, but not count any state cost-sharing payments or unpaid cost-sharing toward the MOOP limit, rather than all the cost-sharing amounts for services the plan has established in its plan benefit package. In practice, this option does not cap the amount a state could pay for a dually eligible MA enrollee’s Medicare cost-sharing, and results in state Medicaid programs paying more in Medicare cost-sharing for dually eligible enrollees than if the plan calculated attainment of the MOOP limit based on cost-sharing amounts for services in its plan benefit package.

The FR specifies that the MOOP limit in an MA plan (after which the plan pays 100 percent of MA costs) is calculated based on the accrual of all Medicare cost-sharing in the plan benefit, whether that Medicare cost-sharing is paid by the beneficiary, Medicaid, or other secondary insurance, or remains unpaid (including when the cost-sharing is not paid because of state limits on the amounts paid for Medicare cost-sharing and dually eligible individuals’ exemption from Medicare cost-sharing). CMS projects that the change will save state Medicaid agencies $2 billion over ten years while increasing payment to providers serving dually eligible beneficiaries by $8 billion over ten years.

To view the CMS fact sheet on the FR, go to: https://www.cms.gov/newsroom/fact-sheets/cy-2023-medicare-advantage-and-part-d-final-rule-cms-4192-f.  The final rule can be downloaded from the Federal Register at: https://www.federalregister.gov/public-inspection/2022-09375/medicare-program-contract-year-2023-policy-and-technical-changes-to-the-medicare-advantage-and.  As always, you can reach us at info@miramedgs.com.