Industry Response to the Medicare Advantage Advance Notice and Draft Call Letter

With the comment period to respond to the Centers for Medicare & Medicaid Services’ (CMS’) annual Medicare Advantage (MA) Advance Rate Notice and Draft Call Letter behind us, we now wait for the CMS response, expected April 3, 2017.

MA is facing record levels of overwhelming bipartisan support. It is still unclear whether we will see the trend of deregulation begin to take shape with the takeover by the Trump administration and Department of Health and Human Services (HHS) Secretary Price, especially with his nominee for CMS, Seema Verma, not yet at the helm, however, with or without their contribution, chances are some changes will develop due to the feedback received during the 30-day comment period.

Despite its lackluster contents and predictable rates, the Call Letter did contain a few surprises that paved the way for some stern commentary from the industry. The following comments were most notable and could lead to some changes in the final Call Letter.

  • CMS proposed not to move forward with increasing the weight of encounter data, leaving the ratio at 75% Risk Adjustment Processing System (RAPS)/25% Encounter Data System (EDS) for 2018. While the majority of commentary agreed with this proposal, many voiced their concern with the use of encounter data at all or even at 25%. Most cited the Government Accounting Office’s (GAO’s) report that found deficiencies in CMS’ to-date efforts to ensure the accuracy and adequacy of encounter data. Note that CMS also proposed new measures to address accuracy and completeness of encounter data.


  • Although CMS stated it does not have the authority to disregard the benchmark cap put forth by the Affordable Care Act (ACA), comments nonetheless called for CMS to revisit their position on their legal authority and take efforts to address the decreased payments. It will be interesting to see whether the new administration interprets the statute differently. Some contend President Trump’s executive order on the ACA gives CMS the authority to revise their position on benchmark caps. While the wide consensus is the order was more of a policy directive than a grant of new authority, it is possible we will see CMS take a different position once Verma and Price take the lead.


  • Last year, CMS implemented a new payment structure for Employer Group Waiver Plans (EGWPs) under which CMS would pay EGWPs based on non-EGWP bids. CMS chose to phase in this proposal with a 50% blend in 2017 and is exploring whether to fully phase in in 2018. In reviewing the comments, it is likely CMS will continue the blend in 2018, however, there is strong opposition to the move that affects over 3 million beneficiaries and does not take into account the structural differences between an EGWP and non-EGWP MA plan.


  • Though this is an action to be taken up by Congress, the industry also called for another moratorium on the health insurance tax. This tax repeal is currently written into the ACA repeal bill before the House Ways & Means Committee but has not surfaced as a separate bill.


  • There is strong opposition to the agency’s proposal to make a normalization factor adjustment to its risk adjustment calculations. The change in formula is estimated to decrease payments by 1.9 percent overall.


  • Finally, there is a strong call for CMS to implement incentives similar to those under the Medicare Access and CHIP Reauthorization Act’s (MACRA’s) Quality Payment Program’s Advanced Alternative Payment Model (APM) track for providers who take on financial risk in MA. The letters cited studies that show APMs in MA have better rates of mortality and lower hospitalization and inpatient stays.


For more information on the Advance Notice and Draft Call Letter, or for assistance with any other policy matters, contact us at



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