CMS's Proposed Cut for Managed Care Leads to Flurry of Comments on Both Sides

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By Mindy Yochelson  

March 24 --With 2015 Medicare Advantage payment rates and policy changes pending, some lawmakers and associations are urging the Centers for Medicare & Medicaid Services to stick to the cut it proposed while others are calling for rates not to drop.

Among those lobbying against the cuts were two physician groups that argued that a rate cut would hurt enrollees and the beneficial aspects of the program itself.

One of the groups, the California Association of Physician Groups (CAPG), said that cuts to the MA program negatively affect beneficiaries and physicians.

The CMS said Feb. 21 that it expects MA rates to fall about 2 percent in 2015 as a national average. The reduction reflects changes to MA that were in the Affordable Care Act .

Comments were due on the rate notice and accompanying Call Letter March 7, and the final notice is due April 7.

Impact on Providers

“Health plans pay physician group[s] a defined amount for each enrolled patient for services over a span of time, which is usually a percentage of the premium,” according to a letter to the CMS from the CAPG, which represents 140 local groups.

“Therefore, cuts to the Medicare Advantage program have a direct impact on physician organizations and downstream on beneficiaries,” the CAPG said.

MA, the state group continued, has helped move care delivery away from fee-for-service Medicare.

“As the best model for coordinated care, Medicare Advantage provides the infrastructure and experience to drive such change,” the group said. Cutting MA payments will erode its “care coordination infrastructure,” as well as enrollees' benefits.

The CMS should “counterbalance cuts” from the ACA by using funds from such areas as “risk adjustment, health risk assessments and properly structured quality incentive programs,” the CAPG said.

Cuts Threaten Stability

Another physician group, the American Medical Group Association, said that proposed cuts would threaten the stability of the program and asked the CMS to keep 2015 rates flat.

“MA plans are popular with beneficiaries because they provide incentives to maintain health and wellness, along with additional services not found in fee-for-service Medicare,” the AMGA said. “These incentives help reduce readmissions for MA enrollees and reduce bed days for patients with chronic illness.”

AMGA's letter asked the CMS to use its “considerable administrative discretion to mitigate the cuts to the extent possible,” to avoid disruption to beneficiaries and their care management programs.

Others urging that rates not be cut included about 200 House members who wrote to the CMS March 11 asking that payments be kept at 2014 levels .

Trade Association Estimate

Although the CMS's estimate of a reduction was about 2 percent, America's Health Insurance Plans said the impact would be more like 6 percent when combined with other elements, including a projected insurer fee, changes in coding intensity and elimination of bonuses for plans rated less than four stars.

“MA plans have led the way in developing innovative programs that have significantly improved healthcare outcomes for their enrollees,” and funding cuts to plans would hamper “health plan innovations in care and service delivery and quality.”  
--America's Health Insurance Plans

In a March 7 letter to the CMS, AHIP said that, “unless significant changes are made when the agency releases the final rate notice on April 7,” not only will enrollees “likely experience higher costs and benefit disruption,” but the reduction will “have a disturbing rippling effect throughout the healthcare system.”

AHIP said that “MA plans have led the way in developing innovative programs that have significantly improved healthcare outcomes for their enrollees,” and funding cuts to plans would hamper “health plan innovations in care and service delivery and quality.”

Rate Cut Should Stay

Those on the other side of the rate issue include the Medicare Rights Center, the Center for Medicare Advocacy and the AFL-CIO, along with four leading Democrats on the two House committees with Medicare jurisdiction.

The committee Democrats reminded the CMS that, despite the ACA's requirements to “rein in overpayments,” MA enrollment continues to grow.

The letter to the CMS was from Reps. Sander M. Levin (D-Mich.), ranking member on the Ways and Means Committee; Henry A. Waxman (D-Calif.), ranking member on Energy and Commerce; and Jim McDermott (D-Wash.) and Frank Pallone Jr. (D-N.J.), ranking members on the respective subcommittees with Medicare jurisdiction.

Not finalizing the cut in payments, they said, “would raise costs for taxpayers and all Part B beneficiaries, drain years from Trust Fund solvency, and expand beneficiary inequities that disadvantage the overwhelming majority of Medicare beneficiaries who remain in fee-for-service.”

Beneficiary Advocates

The two beneficiary advocacy groups told the CMS that continuing to align MA reimbursements with fee-for-service Medicare is “critical to stabilizing the fiscal health of the Medicare program, and to ensuring efficient spending of taxpayer dollars.”


Two beneficiary advocacy groups tell the CMS that continuing to align MA reimbursements with fee-for-service Medicare is “critical to stabilizing the fiscal health of the Medicare program, and to ensuring efficient spending of taxpayer dollars.”  


One of the groups, the Center for Medicare Advocacy, said in an “alert” that the reduction is “good news for Medicare” in that it would continue to move MA plans closer to traditional Medicare rates.

The proposed estimate is a result of Medicare per-beneficiary spending continuing to grow slower than previously projected, the center said.

According to the center, “as cost growth in Medicare slows, payment increases to MA plans also slow, to reflect actual costs.” Because the CMS uses this factor in its MA payment calculations, it “revised downward its cost assumptions” and lowered rates.

Maintaining MA payment levels as flat or increasing payments, as some have suggested, contradicts current law, the center said.

Home Risk Assessments

The CMS proposed in the rate notice to exclude from payment calculations enrollees' diagnoses identified during a home risk assessment visit that aren't confirmed by a later clinical visit--a move that is expected to negatively affect payments.

Plans' payments are affected by the level of illness of their enrollees--the sicker the enrollee, the higher the risk score and payment.

Enrollee risk assessments are used as a tool to identify diagnoses that can be submitted to the CMS for the purpose of risk adjusting plan payments.

However, the proposed rate notice said the agency has found “little evidence” that beneficiaries' primary care providers use the information collected in home risk assessments for later care.

A “significant increase in the prevalence” of such home visits by MA organizations has contributed “to increased risk scores and differences in coding patterns between MA” and fee-for-service Medicare, the CMS said.

Lawmakers Urge Caution

In their letter, the House committee Democrats supported the proposal but urged the agency to be cautious.

“Home visits with proper clinical follow-up are an important tool to identify and serve the needs of MA enrollees,” the four lawmakers said. However, they “should not be used merely to maximize reimbursement.”

The Medicare Rights Center and the Center for Medicare Advocacy said they shared the CMS's concern that at-home risk assessments aren't being applied appropriately and might be used as “simply a means for collecting risk adjustment diagnoses without ensuring that meaningful follow-up care is delivered.”

Home Assessments Praised

However, the Blue Cross and Blue Shield Association (BCBSA) and its member plans praised the value of home visits.

Specifically, BCBSA said it disagreed with the CMS's “concerns that member health assessments taking place inside the member's home do not routinely lead to adequate follow-up care.”

Instead, the association views home visits as an “opportunity for providers to assess other social, psychological, behavioral, and physical conditions” that affect an enrollee's health status.

Similarly, AHIP called in-home clinical encounters “an important component of disease management activities to promote early identification of chronic conditions and focus on prevention, wellness, and care coordination.”

The proposed provision on their use “would eliminate an essential element of problem identification, medication management, and continuity of care” and should be withdrawn, AHIP said.

Provider Contract Termination

In one of the more controversial issues in the accompanying proposed Call Letter, which addresses policy issues, the BCBSA strongly objected to proposals that would put new requirements on plans that remove providers and make other changes to their networks during the contract year.

One proposal would require MA organizations to notify their CMS regional offices within 90 days of “significant” terminations in their provider networks.

The CMS said that such notification would allow coordination between MA organizations (MAOs) and the CMS “to ensure that affected providers and enrollees receive timely notification of such changes” and that MAOs continue to meet required network standards.

The Call Letter also proposed that MAOs submit to CMS, upon request, a written plan that provides a detailed description of the steps the MAO will take to ensure that affected enrollees are able to locate new providers.

As a “best practice,” the CMS said, MAOs that are making significant network changes should provide enrollees more than the required 30 days' advance notice and said it is considering using rulemaking to require a longer period.

Flexibility Needed

In its letter to the CMS, the BCBSA called the provision “misguided” and said that MAOs “require flexibility to manage their business relationships in a manner consistent with their organizations and goals.”

Provider networks “are increasingly critical to the success of managed care organizations' efforts to improve the quality of health care afforded to members while simultaneously controlling health care costs,” BCBSA said.

Further, the association said the proposal fails to define what constitutes “significant” networks terminations. No one standard can be implemented consistently across the industry, BCBSA said.

Unintended Consequences

AHIP warned of unintended consequences that could arise from the network proposal and asked for additional time to comment.

For example, contract negotiations “between MA organizations and providers occur throughout the year,” AHIP said, and in some cases “premature notice to beneficiaries of provider termination would be needlessly disruptive when there is a successful outcome.”

On the other side, the Center for Medicare Advocacy and the Medicare Rights Center supported the CMS's proposed requirements. They recommended that among the factors in determining whether a network change is “significant” could be a certain percentage of physician types leaving a network and the elimination of a hospital or other multi-provider practice.

In addition, plans making significant network changes should provide enrollees and providers at least 60 days' advance notice, the groups said.

“A longer period would give providers sufficient time to exercise their appeal rights and for the appeals process to conclude, perhaps before affected enrollees are notified of the change,” they said.

Congressional Recommendation

In their letter, the four House Democrats encouraged the CMS to use rulemaking to require plans to provide beneficiaries more advance notice when providers are being terminated from a network, to notify beneficiaries of other provider options and to limit the ability of plans to terminate provider contracts without cause during a plan year.

Four House Democrats encourage the CMS to use rulemaking to require plans to provide beneficiaries more advance notice when providers are being terminated from a network.  

They also suggested that notifications to beneficiaries of other provider options should flag providers accepting new patients.

Further, they recommended that those affected midyear receive a special enrollment period or be provided out-of-network care at in-network levels when finishing a course of treatment.

Enhanced Alternative Drug Plans

On an issue concerning the Part D drug benefit, the two industry groups disagreed with a provision in the Call Letter about requiring expanded cost sharing in the coverage gap for enhanced alternative (EA) plans, which offer benefits beyond the defined standard benefit.

As required by the ACA, under the defined standard benefit in 2015, cost sharing for generic drugs in the coverage gap will be lowered to 65 percent and for brand drugs to 45 percent.

However EA plans--both stand-alone prescription drug plans and MA plans that offer the drug benefit--should give their enrollees additional reduced cost sharing in the coverage gap, the Call Letter said.

The Call Letter proposed that EA plans offer a maximum cost sharing of 45 percent for formulary generic drugs and a maximum cost sharing of 15 percent for brand drugs.

“Given the extent of cost-sharing reduction in the gap that is now required of all Part D plans under the defined standard coverage gap benefit, we believe this policy is necessary to ensure meaningful benefits are offered by EA plans,” the Call Letter said.

Consequences of Proposal

AHIP expressed concern about the consequences of offering the same cost sharing for all brand drugs on formulary.

“For example, in an effort to promote preventive care for their enrollees, sponsors commonly offer access to Part D covered vaccines, which are considered brand drugs on formularies approved by CMS, for little to no cost sharing,” AHIP said.

However, under the “proposal, sponsors who employ this practice would be required to offer reduced cost sharing on all of their formulary brand drugs or increase the cost sharing on vaccines.”

BCBSA said that requiring some Part D plans to provide greater actuarial value through lower cost sharing in the coverage gap “seems to be contrary to law and existing regulation and would seem to require formal notice and comment rulemaking to adopt a modified interpretation.”


To contact the reporter on this story: Mindy Yochelson in Washington at

To contact the editor responsible for this story: Ward Pimley at

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