What You Should Know: CMS 2021 Advance Notice & New 2021 & 2022 Proposed Rule

In a significant departure from past practice, the Centers for Medicare & Medicaid Services (CMS) published key information regarding Calendar Year (CY) 2021 Medicare Advantage (MA) Part C and Part D bids, payments, and rules in a series of documents released Wednesday, February 5, 2020. Previously, CMS had provided its proposed methodology for Part C rates, projected Part D growth rates, and changes to benefits, Star Ratings, application requirements, and other items through the Advance Notice and Draft Call Letter. This was released in advance of the Final Announcement of Part C rates and Call Letter to allow time for stakeholder comment.

Following the passage of the 21st Century Cures Act (Cures Act), CMS divided the Advance Notice into Parts I and II, allowing 60- and 30-day comment periods, respectively. This latest move of releasing information through a combination of rulemaking, Advance Notice, and instructions reflects CMS’ move toward codifying longstanding and new MA and Part D policies, which had previously been announced through sub-regulatory guidance (i.e., the Call Letter).

To get a full picture of CY2021, plans and other stakeholders need to review all the pieces listed below:

Advance Notice

Part C Rates

The Advance Notice projects an aggregate increase in MA Part C rates of 0.93% for CY2021. The estimated aggregate impact breaks down as follows:

  • Effective Growth Rate: 2.99%
  • Change in Star Ratings: 0.23%
  • Risk Model Revision: 0.25%
  • Normalization: -2.54%
  • Expected Average Change: 0.93%

This is a decrease from the 2020 Final Announcement (2.53% increase) but can be expected to change, perhaps significantly between now and the Final Announcement. The key drivers of the decrease are the effective Growth Rate (2.99%), which is less than the early preview estimate of 4.46%, and the impact of normalization of the risk adjustment model. Some highlights worth noting include:

  • “Risk Model Revision” included in the summary reflects the impact of the phase-in of the Cures Act, which created new coefficients for mental health and an adjustment for multiple conditions.
  • CY2021 will see encounter data counting as 75% of risk scores, up from 50% in CY2020, as we move to the next phase in the transition from RAPS. CMS has not included any rate impact of the transition, stating in Part I of the Advance Notice that they do not expect the continued transition from RAPS to EDS to have an impact on aggregate payments; however, the industry consensus is that it will reduce risk adjustment factors, and thus, payments.
  • Normalization is the result of a complex statistical adjustment intended to recalibrate the risk adjustment model to its base year. This figure isn’t really predictable and has been trending up in recent years. Further, it has been observed to change from the Advance Notice to Final Announcement.
  • Although not included in the average rate increase projection, CMS has estimated an increase in overall MA Part C rates of 3.56% for CY2021 as a result of industry coding practices, an increase compared to their estimate of 3.3% for CY2020.

It’s important to note that these estimates apply to the average across all counties. Rebasing, the recalculation of county-level fee-for-service costs based on current fee schedules, will be included in the final rates. This can cause significant swings at the county level, although it tends to net out close to zero for the aggregate average rate.

Proposed Rule

The document released as the proposed rule for CY2021 and CY2022 amounts to nearly 900 pages impacting all aspects of MA Parts C and D. While the majority of the document appears to codify existing guidance, there are some significant parts that will affect the industry. Comments are due on the same date as the final rate announcement, but CMS has not committed to a release date for the final rule. Therefore, plans should not assume there will be clarity on some of these items in time for bids. Although certainly not an exhaustive list, we have highlighted some key items below:

  • ESRD – As mandated by the Cures Act, beneficiaries with end-stage renal disease (ESRD) will be able to enroll in MA plans. The proposed rule codifies this requirement and other requirements related to kidney care, home infusion, and transplants from the Cures Act, as well as 2019 Kidney Care First Executive Order and CMS’ Triple Aim cost control strategy.
  • Part D – Plans will be able to offer a second tier for specialty drugs with lower beneficiary cost sharing, which is intended to allow plans to negotiate better deals with manufacturers in exchange for placing their drugs on the preferred tier. Also, CMS proposes to require plans to provide beneficiaries with real-time drug price comparison tools by 2022, which aligns with the administration’s focus on beneficiary choice and price transparency.
  • Telehealth – Plans will have more flexibility to include telehealth providers in certain specialty areas (e.g., psychiatry, neurology, and cardiology) and allowing a 10% reduction in the number of beneficiaries required to meet time and distance standards.
  • Star Ratings – For both Part C and Part D, the impact of patient experience and access measures will become greater by increasing their weights from 2 to 4 beginning in measurement year 2021. (Note, the payment impact will not be realized for several years.) Numerous measures are being added, removed, and adjusted in measurement years 2020 and 2021. Additionally, there is an adjustment proposed to the statistical clustering algorithms for non-CAHPS measures, which is expected to shift cut-points higher, eroding plan’s ratings. In fact, related to the last item, CMS indicates the changes set forth in this proposed rule will save the Medicare Trust Fund approximately $4.4B over 10 years, largely due to reduced Star Ratings and the resulting quality bonus payments. (For a deeper dive on big changes coming to Stars, read our recent blog from Melissa Smith, GHG Senior Vice President of Stars & Strategy.)
  • Supplemental Benefits – CMS is clarifying and codifying its previous guidance on supplemental benefits. Also, for Special Supplemental Benefits for the Chronically Ill (SSBCI), there is a minor clarification to expand the chronic conditions for which SSBCI may be offered.
  • D-SNP Crackdown – In last year’s Advance Notice, CMS signaled its intent to take action on plans that enroll significant numbers of Medicare-Medical dual eligibles without meeting the necessary requirements for Dual Special Needs Plan (D-SNP). For plans where either the bid or actual enrollment exceed 80% of members entitled to medical assistance, CMS proposes to not enter or non-renew the plan’s contract. (Where threshold exceeds 80%, members could be transitioned to a D-SNP offered by the organization.)

More than ever, there is a lot for plans to consider when preparing for CY2021. GHG’s experts are available to help you evaluate all aspects of your plan’s readiness. Contact Jeff Fox at jfox@gormanhealthgroup.com to learn more about our services.

Jeff Fox
Jeff Fox

Jeff Fox is President of Gorman Health Group (GHG). In this role as a member of GHG’s senior leadership team for more than a decade, he is intimately involved with aspects of both business development and client engagement management. Jeff brings GHG clients more than 25 years of experience as one of the nation’s leading experts on government-sponsored programs as well as a passion for health insurance sales, marketing, and product development.

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