There’s a Lot to Like and to Fear in the 2017 Medicare Advantage Call Letter

On Friday after the close, the Centers for Medicare & Medicaid Services (CMS) released the 2017 Medicare Advantage (MA) Call Letter with proposed policy and payment changes. There’s a lot to like — and much to fear. On payments, CMS came in with higher-than-expected rates that make clear the long walk in the desert from cuts in the Affordable Care Act (ACA) is over. But on compliance, they are rolling out the firing squad with a broad mandate, and the Administration will leave its mark long after Obama has left office.

What We Like:

  • The draft offers all-in rates of +1.35% and a trend of +3.05%, better than last year and better than expected.
  • CMS is leaving home visits for MA risk adjustment untouched. If ever CMS was going to clamp down on this after years of threats, this was the time — in the last year of the Administration. By not doing so, we think they’re closing the book, acknowledging much good also comes from these house calls, and the home is the most underutilized source of care in the delivery system for seniors.  Despite MedPAC recommendations and a drumbeat of op-eds, CMS didn’t want to throw the baby out with the bathwater.
  • There are big proposed changes to risk adjustment and Star Ratingsfor MA plans serving dual eligibles.
    • CMS would launch a new payment system with six subcategories: full duals, partial duals, and non-duals, for both aged and disabled beneficiaries. The net effect is like a crude, mega-risk adjuster, paying plans with more duals bigger, more accurate payments, while paying slightly less to plans with fewer duals.
    • On Star Ratings, CMS is proposing an adjustment on three key measures — the overall plan rating, and Part C and D summary ratings — which will increase ratings for plans with higher proportions of duals and could increase bonus payments if the plan is 4+ stars. This is a big win for the industry.
  • The health insurer issuer tax has been suspended for a year (and will return in 2018).

What We’re Worried About:

  • The rapid acceleration from 10% to 50% encounter data driving risk adjustment could depress risk scores. It’s clear CMS is moving to 100% encounter data as quickly as possible and likely presages the use of encounters and not Fee-for-Service (FFS) claims to calculate risk factors as well as the phase-out of the coding intensity adjustment.
  • CMS is proposing changes for Employer Group Waiver Plans (EGWPs) that amount to a “tax” on sponsors designed to reduce Medicare’s spend on these 3 million of the 18 million beneficiaries in MA. EGWPs typically bid much higher than individual MA plans, and the proposal will likely result in a cost-shift to group members or a reduction in supplemental benefits. There was no estimated impact given, so watch this closely.
  • CMS made it clear Star Ratings low performers will be executed by firing squad as early as next week. The Call Letter states plans rated below 3 stars for 3 consecutive years will be terminated in February 2016 for a December 31 effective date.  Three to six plans qualify for termination. This will be the timeline for future years, and CMS states these decisions are non-negotiable.
  • Huge news here on the compliance front:
    • CMS notified Part D sponsors it’s stepping up enforcement actions on coverage disputes and complaints, the leading noncompliance issue for plans.
    • Plans failing the financial audits conducted on one-third of plans each year will no longer be subject to corrective action plans but rather sanctions and civil monetary penalties.
    • CMS is ramping up audits and enforcement actions in network adequacy, provider directory accuracy, and medication therapy management programs.

As always, we now enter the frenzied public comment/lobbying phase where the industry tries to get an even better deal, with the final policies announced April 4. As these things go, MA plans should be generally happy about the financial picture while getting down to the busy work of getting the compliance house in order. Most of what’s proposed here, we think, becomes the “new normal” long after Obama has left office.



Join John Gorman, GHG Executive Chairman, and colleagues, Olga Walther, Senior Legislative & Policy Advisor, and Leslie Mullins, GHG’s Senior Consultant, as they provide a hard-hitting analysis of critical areas addressed in the document. Learn what the proposed “methodology changes” could mean for your organization and its partners, and the steps you can take to soften the impact on Tuesday, March 1 from 2:30-3:30 pm ET. Register now >>

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John Gorman
John Gorman

Under John's leadership, Gorman Health Group has become the leading professional services and solutions firm for government-sponsored health care, providing thought leadership and expert strategic, operational, and technology-based solutions. Read more

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