On April 29, 2022, the Centers for Medicare & Medicaid Services (CMS) released its final rule and a fact sheet, containing policies for Medicare Advantage (MA) and Medicare Part D plans in CY (contract year) 2023.

The rule includes the following changes:

• Redefining ‘negotiated price’ for Part D drugs so prices at point of sale are inclusive of all pharmacy price concessions at point of sale for all phases of Part D benefit,
• Calculating the maximum out-of-pocket (MOOP) limit for dually eligible beneficiaries based on the accrual of all cost-sharing,
• Revising and clarifying timelines and standards for MA plans in ensuring beneficiary access to care during disasters and emergencies,
• Raising the standards for MA plans for contract participation by using past performance,
• Finalizing requirements for MA network adequacy at application,
• Making technical changes for the 2023 Part C Star Ratings calculations for certain measures due to COVID-19 Public Health Emergency (PHE),
• Reinstating Medical Loss Ratio Reporting requirements that were in effect for contract years 2014 to 2017,
• Establishing an enrollment advisory committee to inform Dual eligible special needs plans (D-SNP) operations,
• Requiring SNPs to include housing, food insecurity, and transportation questions as part of the health risk assessment (HRA),
• Modifying definitions for fully integrated and highly integrated D-SNPs,
• Making changes to D-SNP Appeals and Grievances Procedures, and
• Providing states with the opportunity to collaborate with CMS on oversight activities for certain D-SNPs.

The rule will be published in the Federal Register on May 9, 2022.

CMS REDIFINES “NEGOTIATED PRICE” TO BE INCLUSIVE OF ALL PHARMACY PRICE CONCESSIONS AT POINT OF SALE FOR ALL PHASES OF PART D BENEFIT, LOWERING BENEFICIARY COST-SHARING AT PHARMACY

Currently, many Part D plans have engaged in arrangements with pharmacies that pay less for dispensed drugs if pharmacies do not meet specific criteria. Beneficiary cost-sharing which is based on “negotiated prices” that are reported at the point of sale do not include these retroactive price concessions. This results in greater cost-sharing for patients and beneficiaries advancing through the Part D benefit faster. Under current law, “negotiated prices” must include all network pharmacy price concessions, but not contingent pharmacy price concessions that cannot “reasonably be determined” at the point of sale.

In January’s proposed rule, CMS had proposed accounting for all pharmacy price concessions at the point of sale which would reduce beneficiary cost-sharing and slow beneficiary movement through the Part D benefit.

In this final rule, CMS finalizes this proposal to require all Part D plans apply all price concessions they receive from network pharmacies to the negotiated price at point of sale for all phases of the Part D benefit, including the coverage gap phase. As part of the changes finalized, CMS is redefining the negotiated price as the lowest amount a pharmacy could receive as reimbursement for a covered Part D drug under its contract with the Part D plan sponsor or the sponsor’s intermediary effective January 1, 2024. CMS had previously proposed in January to require application of all pharmacy price concessions to negotiated price, but to allow flexibility for plans in applying this negotiated price in the coverage gap. However, in response to comments received regarding beneficiary confusion, additional administrative burden and costs, and implementation challenges posed by maintaining two approaches for purposes of the two definitions of negotiated price, CMS cited their authority to require this negotiated price be applied throughout the Part D benefit, including the coverage gap phase. CMS indicated sponsors continue to have the flexibility to elect which non-pharmacy price concessions are to be passed through at the point of sale.

In addition, CMS has added a new definition for pharmacy price concessions as “any form of discount, direct or indirect subsidy, or rebate received by the Part D sponsor or its intermediary contracting organization from any source that serves to decrease the costs incurred under the Part D plan by the Part D sponsor.”

CMS indicated that they estimate this will reduce total beneficiary costs by $26.5 billion between 2024 and 2032 (2 percent), cost $46.8 billion in Part D costs for the government between 2024 and 2032 due to increases in direct subsidy and low-income premium subsidy payments (3 percent) and save manufacturers $16.8 billion over the same period. They anticipate a one-time cost to plan sponsors of $0.1 million to update systems and ongoing costs of $0.1 million for added prescription drug event (PDE) transmission costs.

CMS FINALIZES NEW CALCULATION OF MAXIMUM OUT-OF-POCKET (MOOP) POLICY FOR DUAL-ELIGIBLES TO INCLUDE ALL MEDICARE COST-SHARING IN PLAN BENEFIT

To ensure MA plan benefits do not discriminate against higher cost, less healthy enrollees, MA plans are required to set a limit on beneficiary cost-sharing for Medicare Part A and B services. Once the limit is met, MA plans must pay 100% of the cost of the service. Current guidance allows MA plans to not count Medicaid-paid amounts or unpaid amounts toward the maximum out-of-pocket (MOOP) limit. This results in higher state payments of Medicare cost-sharing and unfairly disadvantages providers serving dually eligible beneficiaries in MA plans.

In this rule, CMS finalizes its proposal that the MOOP limit in an MA plan (after which the plan pays 100 percent of MA costs) be 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 believes this will create more equitable payment for MA providers who serve dual eligible beneficiaries.

CMS estimates that these changes will result in increased bid costs for the MOOP in some MA plans. A percentage of the higher bids would result in higher Medicare spending of $3.9 billion over 10 years. This additional cost will be partially offset by lower federal Medicaid spending of $2.7 billion and the portion of Medicare spending paid by beneficiary Part B premiums, totaling $600 million over 10 years.  The net 10-year cost estimate for the proposal is $614.8 million.

CMS FINALIZES AND CLARIFIES MA RESPONSIBILITIES DURING DISASTERS AND EMERGENCIES

Section 1852(d) of the Social Security Act generally requires MA organizations to provide enrollees with continued available access to benefits. In 2015, CMS clarified and codified MA organizations’ responsibilities during disasters and emergencies to ensure continued enrollee care access.^[1] However, there has been confusion among stakeholders who are unsure if expanded flexibilities during a state of disaster or emergency end after 30 days end or apply after the time period has elapsed.

Currently, MA organizations must ensure enrollee access to covered services at in-network rates even when provided by out-of-network providers when a disaster or emergency impairs enrollee healthcare service access from in-network providers. Plans must apply these special requirements uniformly to similarly situated enrollees effected by a state of disaster or emergency.

CMS finalizes the following proposals:

• To limit application of the special requirements to when there is a disruption in health care access.^[2] MA organizations would assume responsibility for evaluating whether there is a disruption in health care access. CMS, however, will closely monitor care access during disasters and emergencies to ensure that care disruption is avoided.
• Technical changes relating to the Secretary of Health and Human Services declaration of a public health emergency and consistent reference to disasters and emergencies.
• To clarify that regulatory language at § 422.100(m)(3) refers to the end of a disaster or emergency’s special requirements and not the end of the emergency or disaster itself. In addition, CMS finalizes a 30-day required transition period following its end.

CMS TO REQUIRE NETWORK ADEQUACY AT TIME OF APPLICATION

Under current policy, MA organization applicants must attest that they have adequate provider networks to provide sufficient covered service access to enrollees, not that they meet network requirements prior to submitting a bid for the following contract year. CMS previously removed a network adequacy review from the MA organization application process for contract year 2019. However, CMS notes that there have been unintended consequences that have called into question the accuracy of contract bids with respect to network adequacy.

In this rule, CMS finalizes proposals requiring MA organizations to demonstrate that they meet network adequacy standards as part of an application for a new or expanded service area. CMS believes that an MA applicant’s demonstration of these network adequacy standards in its application will enhance the agency’s oversight of MA organizations to ensure adequate provider access for plan enrollees.

Given the potential difficulty for MA organization applicants to have a complete provider network in place a year in advance of the contract, CMS finalizes a proposal to provide a temporary 10-percentage point credit toward the percentage of beneficiaries residing within applicable time and distance standards. This 10-percentage point credit will no longer apply at the beginning of the applicable contract year, and MA organizations must then meet full compliance.

Additionally, CMS adds one modification; to allow applicants to use Letters of Intent (LOIs) to fulfill network standards in counties and specialty types, as needed. Once a contract is operational, MA organizations will be required to have signed contracts with providers and facilities to meet full compliance.

CMS TO USE MA’S STAR RATING, BACKRUPTCY HISTORY, AND COMPLIANCE ACTIONS TO DETERMINE CONTRACT PARTICIPATION

Current regulatory requirements prohibit MA organizations from expanding or entering into new contracts if they have a negative net worth or are under sanction. CMS notes that only three MA organization applications have been denied since 2017. CMS also notes that this low number has not impacted MA plan access, and that approximately 99.7% of beneficiaries currently have access.

CMS finalizes proposals to increase the application standards by expanding the denial criteria to include:

• An MA organization’s past year rating of 2.5 or fewer stars;
• Historic or active bankruptcy filings; and
• Compliance actions including Notices of Non-Compliance (NONCs), Warning Letters (WLs), and Corrective Action Plans (CAPs). CMS will assign points to each type based on the notice type and apply an action threshold.

CMS also finalizes proposals to correct a series of technical issues as well as correct a drafting error that failed to include medical loss ratio-based enrollment sanctions.

CMS FINALIZES TECHNICAL CHANGES TO 2023 STAR RATINGS

CMS is finalizing a technical change to the Calculation of Star Ratings (§ 422.166(i)(12)) to enable CMS to calculate 2023 Star Ratings. As all contracts qualify for the extreme and uncontrollable circumstances adjustment for COVID-19, CMS would be unable to calculate 2023 Star Ratings for certain measures without this change.

The technical change applies to 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.

For measures derived from the 2021 Health Outcomes Survey (HOS), CMS will remove the 60 percent rule for affected contracts. Due to the COVID-19 PHE, applying the 60 percent rule in the current regulations would result in the removal of all contracts from threshold calculations and CMS would be unable to calculate ratings for these three measures.

By removing the 60 percent requirement, CMS indicates that contracts affected by the 2020 COVID-19 pandemic will receive the 2022 or 2023 (whichever is higher) Star Rating for each of the HEDIS measures collected through the HOS survey with at least 25 percent of enrollees in Individual Assistance areas.

Additionally, CMS finalized certain technical 2021 and 2022 Star Ratings provisions that were included in COVID-19 interim final rules from March 31, 2020 and September 2, 2020, which were implemented to accommodate disruptions to data collection from the pandemic.^[3]

CMS REINSTATES MEDICAL LOSS RATIO REPORTING

To improve transparency and enhance oversight concerning Medicare Trust Fund dollars, CMS will reinstate, as proposed, detailed Medical Loss Ratio (MLR) reporting requirements that were in effect for contract years 2014 to 2017 with proposed modifications. Particularly, submitted MLR reports must include amounts paid for incurred claims for covered services, including both Medicare and supplemental benefits (or covered drugs, as applicable), and prescription drugs, total revenue, expenditures on quality improving activities, non-claims costs, taxes, and regulatory fees, and expenditures for supplemental benefits not available under traditional Medicare, exclusive of those that extend or reduce Medicare Parts A and B cost sharing. CMS also finalizes its proposal that limited MLR data collection requirements would apply only to MLR reporting for contract years 2018 through 2022.

Under current law, ^[4] MA organizations and Part D sponsors are required to report an MLR. The MLR is a measure of the percentage of revenue allocated for patient care, rather than for items such as profit or administrative expenses. For MA and Part D contracts, it generally reflects the ratio of costs to revenues for all enrollees under the contract.

For contracts beginning in 2014, MA organizations and Part D sponsors were required to report MLRs and are subject to penalties for failing to achieve an MLR of at least 85 percent. In the 2013 final rule^[5] establishing Medicare MLR regulations, CMS codified requirements for MA organization and Part D sponsors to submit annual MLR reports to CMS with detailed MLR data.

However, beginning with contract year 2018, CMS significantly reduced the amount of MLR data MA organizations and Part D sponsors were required to submit annually to CMS – limited to the contract’s MLR and remittance amount for failure to meet the 85 percent minimum MLR requirement.

Since CMS’ elimination of detailed MLR reporting requirements, the agency has observed an increase both in the number of contracts that failed to meet MLR requirements as well as the number of remittances that were reported owing.

In the proposed rule, CMS considered expanding MLR reporting requirements beyond those in effect for contract years 2014 through 2017 to include 17 supplemental benefit category-related expenditures.^[6] CMS solicited feedback on whether the agency should increase or decrease the supplemental benefit types or categories, among other suggestions. Some commenters urged CMS to either collapse or expand proposed benefit categories. However, CMS believes it important for the agency to retain its flexibility to modify the supplemental benefit category list and data field cost to collect sufficient data to assess benefit expenditures and better ensure MLR calculation accuracy.

CMS indicates that the proposed supplemental benefit category list should be viewed as an example of the categories that the agency is interested in collecting. CMS will set forth data modifications to the MLR data requirements for supplemental benefits expenditures in a revision to the MLR Paperwork Reduction Act (PRA) package,^[7] which the agency will make available to the public for review and comment under the standard PRA process. CMS will publish this information in a 60- and 30-day Federal Register notice and post the collection of information documents on the agency’s PRA website.

Further, CMS is finalizing its proposal to require MA organizations and Part D sponsors to submit MLR data to CMS with the same MLR Reporting Tool that was used for reporting during contract years 2014 through 2017. The agency will make three changes to the MLR Reporting Tool:

1. Revise formulas to incorporate changes to MLR calculation that were finalized since CMS stopped developing the tool;
2. Separate out specific items currently consolidated or otherwise included in the tool’s existing lines; and
3. Separate out the current line for claims into separate lines for benefits covered by Medicare A and B and certain additional supplemental benefits not covered by Medicare A, B, or D.

Many stakeholders agreed with CMS’ proposal to reinstate MLR reporting requirements on the basis that it would improve transparency for Medicare beneficiaries and the public; however, others expressed concern that it will add administrative costs and burden for MA organizations and Part D sponsors. CMS believes that these organizations will incur only minimal startup costs associated with capturing required data, and is therefore finalizing this proposal without modification.

CMS anticipates that these MLR reporting requirements will result in MA organizations and Part D sponsors being expected to pay an additional $268.6 million in remittances to the Treasury over a 10-year period. CMS indicates that there would be an annual additional $2.3 million administrative compliance cost for MA organizations and Part D sponsors, as well as a $0.2 million cost to the government for federal contractors to perform desk reviews and analyses of reported data.

CMS ESTABLISHES ENROLLMENT ADVISORY COMMITTEE TO INFORM D-SNP OPERATIONS

CMS is finalizing its proposal without modification requiring that any MA organization that offers at least one D-SNP in a state must establish and maintain enrollee advisory committees to collect feedback on enrollee^[8] experiences. In the proposed rule, CMS indicated that such a committee would provide valuable feedback to better resolve obstacles to high-quality care for dual Medicare-Medicaid eligible individuals. Numerous commenters expressed support for the agency’s proposal, including the Medicaid and CHIP Payment and Access Commission (MACPAC).

This committee must include a reasonably representative sample of the individuals enrolled in the D-SNP(s), including geographic, service area, and demographic characteristics. An MA organization offering distinct D-SNPs in multiple state counties could however convene one enrollee advisory committee across the membership of all D-SNP plans so long as the participants consist of a reasonably representative sample of the totality of D-SNP membership. Some commenters expressed concern about this approach, although CMS noted that state Medicaid agencies may adopt more restrictive requirements.

CMS is not requiring certain meeting frequency, location, format, enrollee recruitment, training, among other parameters, though the agency urges D-SNPs to adopt best practices to ensure meetings are accessible to enrollees.

CMS TO INCLUDE HOUSING, FOOD SECURITY, AND TRANSPORTATION QUESTIONS ON SNP HEALTH RISK ASSESSMENTS

CMS notes that social risk factors, such as food insecurity, housing, and transportation access, can lead to unmet social needs that directly impact an individual’s functional, physical, and psychosocial status.

Section 1859(f)(5)(A)(ii)(I) of the Social Security Act requires a special needs plan (SNP) to conduct both an initial and annual reassessment of an individual’s physical, psychosocial, and functional needs and to address identified needs in the individual’s care plan. CMS previously codified this requirement as a required component of the D-SNP’s Model of Care (MOC).

CMS is finalizing its proposal to require all SNPs to include at least one standardized question regarding topics of housing stability, food security, and transportation access as part of the health risk assessment (HRA).^[9] However, CMS will not require SNPs to use specific standardized questions.

CMS MODIFIES FULLY INTEGRATED AND HIGHLY INTEGRATED D-SNPY DEFINITIONS

Dually Medicare-Medicaid eligible individuals have a variety of choices on how to receive their Medicare coverage. However, CMS notes that these choices can be complex for beneficiaries, and beneficiary access to MA plans has only increased.^[10]

CMS finalizes several changes on how to define fully integrated dual eligible special needs plans (FIDE SNPs) and highly integrated dual eligible special needs plans (HIDE SNPs) that the agency believes will help differentiate and clarify D-SNP options for beneficiaries.

Particularly, CMS is finalizing its proposal that beginning in plan year (PY) 2025, a requirement that all FIDE SNPs have exclusively aligned enrollment and cover Medicare cost-sharing and three Medicaid benefit categories, including home health services, certain medical equipment, supplies, and appliances, and behavioral health services through a capitated contract between a state Medicaid agency and the Medicaid managed care organization. This organization must be the same legal entity as the MA organization offering the FIDE SNP.

CMS is also requiring that each HIDE SNP have a service area completely overlapping the service area of the affiliated Medicaid managed care plan with the capitated contract with the state in PY 2025 and thereafter.

CMS FINALIZES CHANES TO D-SNP APPEALS AND GRIEVANCES PROCEDURES

In 2019, CMS established unified appeals and grievances procedures and required certain D-SNP and Medicaid MCO compliance beginning in 2021.^[11] In response to an evolving integrated plan landscape, CMS believes a unified grievance and appeals process is necessary for integrated D-SNPs other than FIDE and HIDE SNPs. CMS is finalizing it’s expansion of D-SNPs for which a unified appeals and grievance processes apply.

In the proposed rule, CMS sought to expand the definition of an applicable integrated plan to include an additional type of D-SNP that is not a FIDE or HIDE SNP but meets three conditions:

• The D-SNPs’ enrollment is limited to beneficiaries enrolled in an affiliated Medicaid managed care plan that provides Medicaid managed care benefits to the beneficiary;
• Enrollees’ Medicaid managed care benefits are covered under a capitated contract between the MA organization or its parent organization or an entity owned by its parent organization and the state Medicaid agency or Medicaid managed care organization (MCO); and
• Medicaid coverage under the capitated contract includes primary and acute care, including Medicare cost-sharing.^[12]

CMS is finalizing its proposal with slight modifications to further provide clarity.^[13] Specifically, CMS clarifies that capitated contracts include at minimum either Medicaid home health services, certain medical supplies, equipment, and appliances, or nursing facility services.

Many commenters supported a single pathway for Medicare and Medicaid appeals and grievances, integrated notices, and access to continuation of benefits during a pending appeal. Some commenters raised that concerns that the rule would impose additional requirements for the states; however, CMS noted that states can choose whether to take advantage of any of the rule’s finalized proposals. CMS believes that these changes will extend the protection of continuation of benefits pending appeal to additional dually-eligible beneficiaries and would simplify the appeals and grievance process.

CMS will make updates to the ‘Addendum to the Parts C & D Enrollee Grievances, Organization/Coverage Determinations, and Appeals Guidance’ in order to incorporate changes made in this rule.

CMS PROVIDES INCREASED OPPORTUNITIES FOR OVERSIGHT AND COLLABORATION

Section 164 of Medicare Improvements for Patients and Providers Act of 2008^[14] (MIPPA) amended section 1859(f) of the Social Security Act to require each D-SNP contract with a state Medicaid agency to arrange for or provide those Medicaid benefits to which an enrollee is entitled. Under MIPPA, states are not obligated to contract with a D-SNP, and therefore have significant control over D-SNP availability in their markets. This flexibility provides enhanced opportunities for integration of Medicare and Medicaid benefits from D-SNPs operating in a state.

In this final rule, CMS codifies new pathway through which states can require certain D-SNPs with exclusively aligned enrollment to establish contracts that are limited to one or more D-SNPs within a state. CMS believes this will help beneficiaries to better understand their coverage.

CMS anticipates a $1.1 million one-time impact shared among federal and state governments and MA organizations due to the need to update systems and establish new contracts.

 

[1] 80 Fed. Reg. 7959. https://www.govinfo.gov/content/pkg/FR-2015-02-12/pdf/2015-02671.pdf.
[2] CMS proposes to define ‘disruption of access to health care’ as “an interruption or interference in access to health care throughout the service area such that enrollees do not have the ability to access contracted providers or contracted providers do not have the ability to provide needed services causing MA organizations to fail to meet the prevailing patterns of community health care delivery in the service area under § 422.112(a).”
[3] CMS is finalizing the following provisions from the March 31st COVID-19 IFC and the September 2nd COVID-19 IFC without modification: §§ 417.472(i) and (j), 422.152(b)(6), 422.166(a)(2)(i), (f)(1)(i), (g)(3), (i)(11), and (j)(1)(i) through (iv), 422.252, 423.182(c)(3), and 423.186(a)(2)(i), (f)(1)(i), (g)(3), (i)(9), and (j)(1)(i) through (iii). CMS is not finalizing the following provisions in the March 31st COVID-19 IFC: §§ 422.164(i), 422.166(j)(1)(v) and (j)(2), 423.184(i), and 423.186(j)(1)(iv) and (j)(2).
[4] Pub. L. 111-152.
[5] 78 FR 31284.
[6] These include: Dental, Vision, Hearing, Transportation, Fitness Benefit, Worldwide Coverage/Visitor Travel, Over-the-Counter (OTC) Items, Remote Access Technologies, Meals, Routine Foot Care, Out-of-Network Services, Acupuncture Treatments, Chiropractic Care, Personal Emergency Response System (PRS), Health Education, Smoking and Tobacco Cessation Counseling, All Other Primarily Health Related Supplemental Benefits, and Non-Primarily Health Related items and Services that are Special Supplemental Benefits for the Chronically Ill.
[7] CMS-10476, OMB 0938-1232.
[8] CMS notes that enrollee has the same meaning as member under Medicaid plan requirements.
[9] CMS clarifies that its proposal does not hold responsible SNPs for resolving all identified risks in these assessment questions.
[10] A typical Medicare beneficiary will have access to 54 MA plans in 2022 (exclusive of MMPs and PACE), up from 39 in 2020, nearly a 30 percent increase.
[11] 84 Fed. Reg. 15,680 (April 16, 2019). https://www.govinfo.gov/content/pkg/FR-2019-04-16/pdf/2019-06822.pdf.
[12] Medicare cost-sharing is defined in section 1905(p)(3)(B), (C) and (D) of the Social Security Act. This condition is made without regard to limiting the definition to qualified Medicare beneficiaries.
[14] Pub. L. 110-275.