Peak Health Solutions Webinar on the Impact of the 2015 Final Notice of Methodological Change on Medicare-Advantage Plans

The 2015 final notice is no slim read; CMS packed a lot into it, as they always do.  The nail-biting and white-knuckled anticipation is over and now the red-eyed bid development process goes into hyper-drive.  Richard Lieberman’s insightful comments help plans navigate each CMS nuance as they apply the rules to each individual contract.


The key headlines I read below are perhaps framed in the context of what Richard pointed out as the policy goals that CMS is pursuing.  CMS aims to use quality measurement to:

      1. Get rid of weak plans
      2. Allow Stars to guide beneficiaries in purchase process
      3. Keep raising the bar on competition based on quality (and transparency)
      4. Replicate the success of Stars in other areas like the Quality Rating System (QRS) in the health insurance exchange arena

Payment Rates:

Richard notes that the announcement that MA payment rates will rise by .4% (instead of drop like CMS advertised in the advance notice last February) was mostly a “feel good” public relations communication.  In reality, he notes that you need to weigh the changes to each county by the actual membership, which comes up with a different number. The true impact on county payment rates are highly variable, so your specific MA plan contract may or may not be severely hit next year.  This is because of a couple of moving parts that affect plans differently based on a couple of factors.

  • The phase-out of the old Medicare rates in favor of a system based on FFS Medicare payments.  Plans serving 68% of MA members are already phased-in to the new rates, with the remaining 32% of members residing in counties that are phased-in over 6 years to ACA rates.  Fully phased-in plans get base rates that can be up to 8% lower than 2014 rates, before the application of risk adjustment.
  • Risk adjustment is dramatically altered for 2015, with a renewed reliance on the old HCC model.  The revised blending of results from the “old” and “new” HCC models should increase payments by 4-6%, wiping out much of the payment reductions caused by the use of ACA county base rates.
  • The Medicare Stars Demo ends – now payments revert to the original ACA legislation, which eliminates bonus payments for contracts with 3.5 Stars or less, and a full 5% bonus to plans with 4 or more stars
  • Contracts with 4 stars or higher are now bidding against plans with similar ratings, while 3 star plans are bidding against lower quality contracts.  The game changes.

Conclusion: The year 2015 will “amp up” on the “Darwin factor”:  higher star plans will have much richer benefits.  If your contract covers counties that are in the 6-year phase-in of ACA payments (“specified amounts”), your calculus is going to be more challenging.  If your contract areas are already phased-in, your calculus is going to be more challenging because of the FFS Normalization factor.  And, for the fans of the premium tax, let’s not forget that bit of the equation that chips away at margins. Peak Health Solutions estimates that national enrollment-weighted rate book amounts are $790.28 in 2015 vs. $858.84 in 2014 using February 2014 = 8% reduction. Ouch! Factoring in everything = 4.2% reduction.  Still ouch.

In-home Assessments: 

In-home assessments were a point of concern with CMS for some time now, but rather than disqualify diagnoses obtained solely through in-home assessments for RAF score purposes, CMS will continue requiring RAPS and EDPS to be flagged as in-home assessment.  Peak Health’s well-founded opinion is that, as an industry, we need to work out how to document and capture key data for care management and care plan purposes that are uniquely possible with in-home assessments, such as social situation, home assessment, activities of daily living (ADLs) and instrumental activities of daily living (IADLs). 

Why should CMS care so much about the in-home assessment issue?  Richard points out that the foundational notion that CMS has about risk adjustment is that it is a predictor of future healthcare costs.   My interpretation of Richard’s comments are that, when revenues are “coded up” with previously undocumented diagnoses with no increased healthcare cost observed later, CMS views this as a manipulation of the risk adjustment methodology.  They perceive it as essentially gaming the system and boosting revenues at tax-payers’ expense. 

Peak Health’s point of view is that Medicare Advantage Organizations have not approached this in terms of outcomes studies to share with CMS:  what is downstream impact of in-home visits?  What are the statistics on quality measures?  Can the findings from in-home assessments help avert some of the otherwise expected outcomes?  Is there a quality story to tell? 

Conclusion: From a practical perspective, just listing diagnoses for the PCP from in-home assessments is not useful for care management purposes, Richard correctly says.  These must be incorporated in some actionable way into the care plan, first of all.  And then as an industry, he implies, we need to capture the results and tell the story.  The story needs to be “pay for performance”.   We have done a good job tallying up the pay, but not the performance. 


Medicare Stars in 2015:  

Payment for Stars in 2015 is a “cliff” for everyone, as noted above:  the demo ends and the music stops for Medicare Advantage Organizations with less than 4 stars.  The music is dialed down for the 4 and 5 star plans and ramps back up over the next couple years.  The rating model and the scoring, as always, leads the payment year.  That game is (as always) changing again.  In some ways, not too much but there is a potential game-changer with one change.

While the stars bonuses (Quality Based Payments or QBP) are severely changing, the lower-rated plans can still lay claim to some rebates from their bids.  However, the deck is still stacked in favor of higher rated plans, as they will claim a proportionately higher percentage of their rebates, further distancing themselves in financial resources from the lesser plans. 

The big difference, however, is the introduction of the over-weighting of the year-over-year Improvement Score.  For plans that change their performance significantly one way or another, the 5.0 weight of this element can mean as much as a whole star.  On the good side, it adds a whole star to your rating.  On the bad side, it can lop off a whole star!

The Punch Line

Richard noted that low rated plans have 3.9% of the total Medicare Advantage membership (615,000 across the country), and suffer mostly Part D issues.  With all the pressure on revenues, 2015 benefits and premiums are going to begin a process of sorting out the plans, for better or worse.  CMS is hoping that beneficiaries will take note of the Stars program in their shopping process, which, as Peak Health points out, has already shown dramatically affecting enrollment patterns in 2014 over 2013.   Quality is emerging as the differentiator, not just in the Stars as a concept, but in their ability to reward accountable performance in financial terms that directly translate in member benefits and out-of-pocket costs. 

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