2017 CMS Call Letter: Implications for MA and PDP plans

With CMS releasing the 2017 Final Rate Announcement for Medicare Advantage (MA) and Part D plan sponsors (PDP), plans must take the next steps to determine how the proposed changes will affect them financially and operationally.

Doing so can help plans identify goals and prepare implementation strategies with respect to benefit strategy, operational compliance and efficiency and reporting accuracy. This is necessary to develop realistic targets and assumptions for bidding purposes that will align with expectations and assure the ability to be successful under 2017 revenue expectations.

Perhaps the most critical change in the Final Letter are estimate revisions in both directions from the prior Advance Notice, as well as changes in the speed with which CMS will phase in announced EGWP and EDS changes.

Overview of key changes for 2017

  • Estimated MA and FFS growth rate of about 3.0%, which results in a net 0.85% national average change in plan payments after considering all proposed changes, which can vary significantly by county and plan
    • Estimated ESRD growth percentage of -1.84%
  • One-year holiday from Health Insurance Tax in addition to the MA increase
  • ACA FFS-based rates are now 100% phased in for all counties in 2017 (rate caps still apply)
  • Proposed changes below will impact plans differently:
    • HCC risk score model includes significant changes in relative risk factors for full dual eligible, partial dual eligible and institutional members, and statutory minimum +0.25% change in coding pattern adjustment factor (to 5.66%)
    • Stars adjustments for impact of socioeconomic status (SES) on outcomes
    • Employer Group Waiver Plan (EGWP) Part C bids no longer required, and payment tied to non-EGWP bids intended to reduce CMS costs, plus a prospective reinsurance payment
  • Annual Part D policy and larger-than-typical benefit parameter changes; and continued increase in standard coverage in the gap
  • Part C meaningful difference test limits unchanged, with some proposed equivalence and TBC test adjustments
  • 2017 risk scores will be based on 25% EDS/FFS and 75% RAPS/FFS
  • PBP tool changes to streamline and clarify copay input and display

No mention of any policy as proposed in recent years for in-home assessments for risk adjustment

Needed action for plan sponsors for 2017

  • Plan sponsors must perform due diligence on those variables that can be estimated to minimize the uncertainty of 2017, and minimize risk associated with benefit and pricing options for 2017.
  • Limitations on year-over-year changes (TBC and OOPC) will continue to present challenges in terms of response to revenue and operational changes imposed by CMS.
  • Large Part D cost increases will accelerate pressure on MA-PD and PDP plan liabilities, and competitive premium and benefit options.

It is more imperative than ever that plans continue to execute effectively on the remaining levers available to them in the areas of quality, risk adjustment and cost of care if they are to produce achievable, competitive bids and products to reach the goals for benefits, member premiums and margins.

Download the 2017 Call Letter fact sheet
We provide a thorough, point-by-point review of the changes and implications associated with the 2017 Final Rate Announcement in our 2017 Call Letter: Implications for MA and PDP Plans fact sheet.


About the Author:

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Mary Larson
Director, Risk Adjustment Consulting

Mary Larson is the Risk Adjustment Lead within Network and Population Health Consulting for Optum. She has over 10 years experience improving payer revenues with specific focus on Medicare, Commercial Exchange, and Medicaid risk adjustment. Mary has expertise across the entire risk adjustment spectrum, including data analytics, member outreach, provider education and engagement, data capture, risk adjustment submissions, reporting and measuring results, and risk and quality integration. She has experience in healthcare operations leadership, strategy development, process and system reengineering, system and services implementations, data management, organizational redesign, technology development, and compliance.

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