Medicare Update

CMS Proposes New Medicare Advantage and Prescription Drug Plan Marketing Rules

The Centers for Medicare & Medicaid Services (CMS) recently released a display copy of a Proposed Rule that would enhance the marketing standards for Medicare Advantage (MA) health plans and Medicare Part D prescription drug plans. In the Proposed Rule, CMS incorporates some of the requirements that CMS previously imposed through operational guidance and introduces new MA and Medicare Part D prescription drug plan requirements.  According to the CMS Press Release, the marketing standards would:

• Prohibit cold-calling and expand the current prohibition on door-to-door solicitation to cover other unsolicited circumstances. Any appointment with a beneficiary to market health care-related products would have to be limited to the scope that the beneficiary agreed to in advance. Cross selling of non-health care-related products to a prospective MA or Part D enrollee would also be prohibited.
• Prohibit sales activities at educational events such as health information fairs and community meetings or in areas such as waiting rooms where patients primarily intend to receive health care-related services, as well as limit the value and type of promotional items offered to potential enrollees.
• Require that MA organizations that use independent agents to market MA and Part D plans use state-licensed agents for such marketing, and require that MA organizations report to states, in a manner consistent with state appointment laws, that they are using those agents.
• Require MA organizations to establish commission structures for sales agents and brokers that are level across all years and across all MA plan product types (e.g., HMOs, PPOs, and private fee-for-service plans). Commission structures for prescription drug plans would have to be level across the sponsors' plans as well.  According to CMS, these requirements are designed to discourage "churning" of beneficiaries from plan to plan each year in a manner that earns agents and brokers the highest commissions and would ensure that beneficiaries are receiving the information and counseling necessary to select the best plan based on their needs.

The Proposed Rule also contains provisions for enhancing the protections afforded to Medicare beneficiaries receiving the low income subsidy and those enrolled in special needs plans.  The Proposed Rule is expected to appear in the Federal Register on May 16, 2008.  CMS reports that it will be accepting comments on the Proposed Rule until July 15, 2008.

CMS Releases 2009 Medicare Advantage Capitation Rates

On April 7, 2008, the Centers for Medicare & Medicaid Services (CMS) released the Announcement of Calendar Year 2009 Medicare Advantage Capitation Rates and Medicare Advantage and Part D Payment Policies (Announcement).  According to the Announcement, the aged and disabled capitation rates for MA plans will increase on average about 3.6 percent.  Furthermore, the final estimate of the 2009 national per capita MA growth percentage for aged and disabled enrollees is 4.24 percent, which includes 3.74 percent for the underlying trend change and approximately 0.5 percent due to corrections to prior years' estimates.  In addition to the Announcement, CMS has posted a Fact Sheet on the CMS website.

CMS Issues Advance Notice on CY 2009 Medicare Advantage Capitation Rates

In a February 22, 2008 Memorandum, the Centers for Medicare & Medicaid Services (CMS) issued an advance notice of proposed changes to the Medicare Advantage (MA) capitation rate methodology and risk adjustment methodology under the Medicare Part C program for calendar year (CY) 2009.

In Attachment I of the Memorandum, CMS indicates that the current estimate of the change in the national per capita MA growth percentage for aged and disabled enrollees combined is 4.8 percent for CY 2009. According to CMS, this estimate reflects an underlying trend change in per capita costs of 3.4 percent for CY 2009, and adjustments to the estimates for aged and disabled growth percentages for CYs 2004-2008.

In Attachments II-V of the Memorandum, CMS also addresses:

• changes in payment methodology for CY 2009 for original Medicare benefits
• changes in payment methodology for CY 2009 for Part D benefits
• preliminary CMS-HCC risk adjustment factors
• annual adjustments for 2009 for the Part D benefit parameters for the defined standard benefit

The final rates will be announced on April 7, 2008 in the Announcement of Calendar Year 2009 Medicare Advantage Capitation Rates and Medicare Advantage and Part D Payment Policies.  In order to be considered, comments must be received by 6:00 p.m. (EST) on March 7, 2008.  The Memorandum and a related Fact Sheet contain information regarding the submission of comments to CMS.

Senate Finance Committee Hears Testimony on Medicare Advantage Marketing Practices

On February 13, 2008, Kerry Weems, Acting Administrator for the Centers for Medicare & Medicaid Services (CMS), will testify before the Senate Finance Committee during a hearing on the need for accountability and oversight of the marketing and sales by Medicare private plans. 

This hearing will be the second hearing on the issue. During a February 7, 2008 hearing, the Senate Finance Committee heard testimony on the issue from a number of witnesses, including the Director of the Illinois Division of Insurance and a Vice President-Medicare Sales for Humana, Inc.

In brief, the Director of the Illinois Division of Insurance recommended expanding state insurance regulatory oversight over Medicare Advantage (MA) and Prescription Drug Plans.  In testimony before the Senate Finance Committee, Humana offered the following recommendations:

• Department of Health and Human Services (HHS) should require that:
  • MA plans adhere to state department of insurance agent appointment rules; and
  • total commission compensation paid to agents be limited to a fixed percentage of premium with level commission payments year-over-year (for renewal and replacement sales);
• HHS in conjunction with state regulators should establish a registry of agents (with civil immunity to companies reporting data) where companies can share and access information related to verified beneficiary allegations of sales practice violations and questionable sales tactics; and
• CMS should continue to work with state regulators to enhance data exchange and enforcement actions, especially in the areas that affect market conduct.

According to the testimony of Humana's Vice President-Medicare Sales, Humana also supports the adoption of more stringent Federal standards in areas related to:

• cold calling.
• cross-selling of non-health related products;
• consumer disclosures;
• agent training and certification; and
• other marketing practice related areas, including co-branding, standardization of certain benefit terms, clarity in plan type, and more easily understood plan/benefit comparisons.

As reflected in the Senate Finance Committee Chairman Max Baucus' hearing statement, there have been reports of questionable MA marketing and sales practices by some agents.  Through the hearings, the Senate Finance Committee apparently intends to gather information to determine whether CMS guidance and enforcement actions are adequate to protect beneficiaries from any abusive sales practices.

GAO Reports on Medicare Improper Payments Estimate for 2007

On January 23, 2008, the Government Accountability Office (GAO) released a report indicating that the major executive branch agencies report a total improper payments estimate of $55 billion for fiscal year (FY) 2007.  In the report, the fee-for-service component of the Medicaid program has an improper payment estimate of $12.9 billion, which is the largest estimate for FY 2007.  The fee-for-service component of the Medicare program follows with the third largest total improper payments estimate of $10.8 billion.   However, the report does not include estimates for 14 Federal programs with outlays totaling about $170 billion for FY 2007.   Among the Federal programs without estimates are the Medicare Advantage program and Medicare prescription drug benefit with combined total outlays of about $124.4 billion for FY 2007.

President Bush Signs Medicare, Medicaid and SCHIP Extension Act of 2007

On December 29, 2007, President Bush signed the Medicare, Medicaid and SCHIP Extension Act of 2007 (Act) into law, extending the State Children's Health Insurance Program (SCHIP) and temporarily addressing a number of Medicare program issues.

As widely reported, the Act prevents the 10.1 percent reduction in Medicare physician payments that was scheduled for 2008 and gives physicians a 0.5 percent increase through June 30, 2008.  The 10.1 percent reduction in Medicare physician payments is driven by the statutory sustainable growth rate (SGR) formula, which is intended to control the growth in aggregate Medicare expenditures for physician services. Therefore, Congress will have to revisit the issue before July 1, 2008 or the 10.1 percent reduction will take effect at that time.  The 109th session of Congress passed similar legislation averting a 5 percent reduction in Medicare physician payments for 2007. The 5 percent reduction for 2007 was also driven by the SGR formula.

The Act also extends the Medicare therapy cap exception process through June 30, 2008.  The Balanced Budget Act of 1997 required that the Centers for Medicare & Medicaid Services (CMS) impose the therapy caps on Medicare payments for outpatient physical therapy (OPT), speech-language pathology (OSP) and occupational therapy (OOT) services in all settings, except hospital outpatient departments.  However, the Deficit Reduction Act of 2005 directed CMS to create a clinically-based exception process to the therapy caps for 2006. The Tax Relief and Health Care Act of 2006 extended that exception process through 2007. If Congress had not acted to extend the exception process through June 30, 2008, the Medicare Physician Fee Schedule Final Rule for 2008 would have imposed a combined therapy cap of $1,810 per beneficiary for OPT and OSP, and a separate cap of $1,810 for OOT, beginning January 1, 2008.  Unless Congress repeals the therapy caps or further extends the therapy cap exception process prior to July 1, 2008, the therapy caps will take effect when the Act's extension expires on June 30, 2008.

The Act also contains a number of other provisions impacting Medicare providers and suppliers, such as provisions freezing the inpatient rehabilitation facility compliance threshold at 60 percent and allowing certain comorbidities to count toward that threshold.

UPDATE: House Passes Medicare, Medicaid and SCHIP Extension Act of 2007

Today, the U.S. House of Representatives passed the Medicare, Medicaid and SCHIP Extension Act of 2007 (S.2499) in a 411-3 vote,  On December 18, 2007, the U.S. Senate passed the Act by unanimous consent.  The Act contains a number of Medicare provisions, including a provision that would prevent the 10.1 percent cut to Medicare physician payments beginning January 1, 2008, and instead gives physicians a 6-month 0.5 percent increase through June 30, 2008.

UPDATE: Senate Passes Medicare, Medicaid and SCHIP Extension Act of 2007

On December 18, 2007, the U.S. Senate passed the Medicare, Medicaid and SCHIP Extension Act of 2007 (S.2499) by unanimous consent.  Among other things, the Act would prevent the 10.1 percent cut to Medicare physician payments beginning January 1, 2008 and instead gives a 6-month 0.5 percent increase for physicians through June 30, 2008.  Under the Act, the physician payment changes would be offset, in part, by  an adjustment to the  Medicare  Advantage  stabilization fund.  The Act has been sent to the U.S. House of Representatives.

Congress to Consider Medicare Legislation Blocking Physician Payment Cuts

Today, Senate Finance Committee Chairman Max Baucus announced in Press Release that Congress will consider the Medicare, Medicaid and SCHIP Extension Act of 2007 (Act) this week.

If enacted, the Act would block the 10.1 percent reduction in the Medicare payment rates for physician services in 2008 for a period of 6 months.  In fact, the Act would replaced the scheduled 10.1 percent reduction with a 0.5% increase through June 30, 2008.  As reflected in the Press Release, the Act is expected to contain the following Medicare provisions:

• Increase in physician payment update; extension of the physician quality reporting system. Replaces the scheduled 10.1% cut to the Medicare physician reimbursement rate in 2008 with a 0.5% increase through June 30, 2008. Extends the physician quality reporting system. Revises the Physician Assistance and Quality Initiative fund.
• Extension of incentive payment program for physician scarcity areas. Extends a provision that provides a 5% bonus payment to physicians practicing in physician shortage areas through June 30, 2008.
• Extension of the floor on work geographic adjustment. Extends for six months the work geographic index (GPCI) floor of 1.0 through June 30, 2008.
• Extension of treatment of certain physician pathology services. Extends for six months the provision that allows independent laboratories to continue to bill Medicare directly for the technical component of certain physician pathology services provided to hospitals as authorized by the Balanced Budget Act of 1997 through June 30, 2008.
• Extension of exceptions process for therapy caps. Ensures Medicare beneficiaries access to therapy services through June 30, 2008.
• Extension of payment rule for brachytherapy; extension to therapeutic radiopharmaceuticals. Extends the current “charges to cost” methodology which provides a separate payment for brachytherapy services through June 30, 2008. Includes therapeutic radiopharmaceuticals in this provision.
• Extension of reasonable costs payments for certain clinical diagnostic laboratory tests in rural areas. Provides reasonable cost reimbursement for clinical lab tests performed by certain small rural hospitals as part of their outpatient services through June 30, 2008.
• Extension of authority of specialized Medicare Advantage plans for special needs individuals. Extends the authority of specialized plans to target enrollment to certain populations through 2009. Includes a moratorium on new plans and expanded service areas through December 31, 2009.
• Access to Medicare reasonable cost contract plans. Extends section 1876 authority for cost contracts through December 31, 2009.
• Adjustment to the Medicare Advantage stabilization fund. Removes $1.5 billion from the stabilization fund for regional preferred provider organizations in 2012.
• Medicare secondary payer reporting requirements. Requires the submission of data by group health plans and liability insurers to the Secretary of Health and Human Services that is necessary to appropriately identify individuals for whom Medicare is the secondary payer.
• Payment for Part B drugs. Implements HHS OIG recommendation to require CMS to adjust its Average Sales Price (ASP) calculation to use volume-weighted ASPs based on actual sales volume. Establishes an appropriate reimbursement rate for generic albuterol.
• Payment rate for certain diagnostic laboratory tests. Reimburses certain diabetes laboratory tests that are approved for home use at the same rate as other glycated hemoglobin tests beginning April 1, 2008.
• Long-term care hospitals. Provides regulatory relief for three years to ensure continued access to current long-term care hospital services, while also imposing a limited moratorium on the development of new long-term care facilities. Establishes new facility and medical review requirements to ensure patients are receiving appropriate levels of care at these facilities and freezes the market basket update for the last quarter of rate year 2008. Requires the Secretary to conduct a study on long-term care hospital facility and patient criteria.
• Payments for inpatient rehabilitation facility (IRF) services. Permanently freezes the inpatient rehabilitation services compliance threshold at 60%, effective for cost reporting periods starting July 1, 2006, and allows comorbid conditions to count toward this threshold. Sets the market basket update factor at 0% from April 1, 2008 through FY09. Requires the Secretary to study beneficiary access to inpatient rehabilitation services and care at IRFs and to make recommendations for classifying inpatient rehabilitation facility hospitals and units.
• Accommodation of physicians ordered to active duty in the Armed Services. Extends until June 30, 2008 a provision that permits physicians in the armed services to engage in substitute billing arrangements for longer than 60 days when they are ordered to active duty.
• Treatment of certain hospitals for payment under Medicare. Extends until September 30, 2008, provisions that have allowed certain hospitals to be eligible for wage index reclassification that were otherwise unable to qualify for administrative wage index reclassification.
• Medicare enrollment assistance. Provides $15 million to State Health Insurance Assistance Programs and $5 million for Area Agencies on Aging and Aging Disability Resource Centers for beneficiary outreach and assistance.

Quality Measures Proposed for Medicare Special Needs Plans

On December 14, 2007, the Centers for Medicare & Medicaid Services (CMS) and the National Committee for Quality Assurance (NCQA) announced in a Press Release that they are seeking public comment on a set of proposed quality measures for Medicare Special Needs Plans.

CMS reports that the proposed quality measures examine how Special Needs Plans set up case management programs for members with complex needs and how they act to improve clinical care and patient experience. According to the Press Release, CMS will also require Special Needs Plans to begin reporting 13 Healthcare Effectiveness Data and Information Set (HEDIS) measures that will assess clinical performance.

CMS invites public comment on the proposed quality measures through January 18, 2008. NCQA is expected to summarize the comments and provide the proposed final requirements to CMS for final approval in March 2008.  CMS expects to make the final requirements and data collection tools available to Special Needs Plans in April 2008.  Special Needs Plans will be required to submit HEDIS data by June 30, 2008.

Under the Medical Prescription Drug, Improvement and Modernization Act of 2003, Congress created a type of Medicare Advantage plan focused on individuals with special needs. In doing so, "special needs individuals" were identified by Congress to include Medicare beneficiaries living in institutions such as nursing homes, beneficiaries with severe or disabling chronic conditions, and beneficiaries eligible for both Medicare and Medicaid (i.e., dually eligible).

CMS reports that Special Needs Plans are one of the fastest growing health plan options available as part of the Medicare Advantage program.  As of 2007, there were more than 470 Special Needs Plans serving more than 1 million beneficiaries. However, more than 760 Special Needs Plans will be available in 2008.