On April 4, 2016, CMS released the CY 2017 final Call Letter for Medicare Advantage (MA) and Medicare Part D plans. The Call Letter includes requirements and benefit parameters for plan year 2017.

This year’s Call Letter was relatively mild and did not contain major policy proposals, even though high drug costs have continued to plague the Medicare program in general.

Medicare Advantage Plans May See Smaller-than-Expected Payment Increases, Employer Group Waiver Plans Win a Reprieve

• CMS is expecting a smaller increase in capitated MA plan payments than initially thought: the average plan can expect an increase of +0.85% in 2017, while CMS had initially predicted an average increase of +1.35%. These projections are based on Medicare fee-for-service spending and a host of other factors, and are updated as new data come in.
• Average MA plan payments are estimated to increase by 3.05% (compared with an estimated increase of 3.55% in February’s draft Call Letter). Actual differences in plan payments between 2016 and 2017 will also vary widely between individual plans.
• In response to public comments, CMS has decided to phase in cuts to employer-sponsored MA plans (Employer Group Waiver Plans) over two years instead of instituting the full cuts in 2017.

Specialty Cost Threshold Increased for the First Time to Account for Higher Overall Drug Spending

• Since the program inception, CMS has used a cost threshold of $600 per month to identify “high cost” drugs in which plan sponsors are shielded from tiring exception requests.
• CMS finalized an increase in the threshold to $670 per month for 2017.
• This move will mean that some drugs that are currently considered specialty will no longer be eligible for placement on the specialty tier; this could impact overall plan costs depending on the cost-sharing differences between tiers.
• CMS also announced plans to analyze specialty tier placement’s impact on beneficiary utilization and/or enrollment decisions and the impact of tiering exceptions for specialty tier drugs.

In Response to Stakeholder Concerns, CMS Does Not Finalize Proposal to Extend Adjudication Timeframes for Certain Coverage Determinations

• Currently, Part D plans are required to review prior authorization and other exception requests within 72 hours for standard requests and 24 hours for expedited requests. When a plan is unable to obtain the needed documentation from a prescriber, despite efforts to reach the prescriber, the plan must issue a denial notice to the beneficiary, requiring the beneficiary to file an appeal for further consideration.
• In response to concerns that the 72-hour timeframe may not be adequate in all circumstances (especially around weekends and holidays), and that can lead to unnecessary beneficiary appeals, CMS had proposed to allow plans to extend the initial adjudication period in limited circumstances.
• Plans expressed concerns that the process may be confusing and overly administratively burdensome, beneficiary and patient advocacy organizations expressed concerns that the extensions would be overused by plans, and prescribers expressed opposition to utilization management in general.

New “Non-Preferred” Drug Tier May Increase Number of Non-Preferred Generic Drugs

• CMS will allow plan sponsors to incorporate a “non-preferred” tier option in 2017 that allows for a combination of both branded and generic drugs. This was proposed in response to comments from plan sponsors provided through a request for comments in June 2015.
• This will likely increase the number of generic products that are considered “non-preferred,” as CMS anticipates that “non-preferred” tiers will contain a greater number of non-preferred generic drugs than current “non-preferred brand” tiers.
• The cost-sharing parameters for the new non-preferred tier are the same as the parameters for the non-preferred brand tier (60% coinsurance, $100 copayment). As a beneficiary protection measure, CMS is encouraging plans to use co-insurance for the non-preferred tier to protect beneficiaries taking lower-cost generic products.
• Sponsors will not be allowed to have both a “non-preferred” tier and a “non-preferred brand” tier.

Formulary-Level Opioid Overutilization Edit Requirements Expanded to All Plans in 2017, But CMS Grants Plans Flexibility in Implementation

• Initially, CMS had proposed to require all plans to implement both soft and hard formulary-level cumulative morphine equivalent dose (MED) POS edits.
• However, plans will have the option of implementing both edits, or implementing either a soft or hard edit for 2017. Plans will have until September 1, 2016
• Plan Pharmacy & Therapeutics (P&T) committees will be responsible for establishing specifications for the edits.
• CMS is proposing the following parameters:
  • Soft edits (which can be overridden at the pharmacy level) when a beneficiary exceeds a daily cumulative MED between 90 mg and 120 mg.
  • Hard edits (which require prior authorization or coverage determinations) for daily cumulative MED of 200 mg or higher.
  • Plans may establish a provider count if they wish.
• Beneficiaries with certain conditions, such as cancer, or those in hospice, would be exempted from the edits.
• Additionally, plans should also implement a soft POS edit for concurrent use of opioids and buprenorphine. CMS will monitor concurrent beneficiary use of opioids of benzodiazepines.
• CMS will consider additional updates in light of the CDC prescribing guidelines for opioids, released March 15, 2016. Any revisions would be included in next year’s Call Letter.

Part D Benefit Parameters Finalized With No Changes from Proposal

*When a beneficiary’s true out-of-pocket (TrOOP) costs reach the Out-of-Pocket Threshold (OOPT), the beneficiary enters catastrophic coverage. The total drug costs at the point when the beneficiary hits the OOPT (and enters catastrophic coverage) will vary for each beneficiary. The numbers presented here represent estimates calculated by CMS of the total drug costs (including OOP costs, manufacturer rebates, and plan-covered costs) the average beneficiary will spend before qualifying for the catastrophic coverage portion of the benefit.

Part D Benefit Parameters – Non-Standard Benefit

Maximum copayments for generic drugs increase, maximum copayments for brands stay stable.