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CMS ANNOUNCES 2010 PAYMENT INFORMATION FOR PART C MEDICARE ADVANTAGE PLANS AND PART D PRESCRIPTION DRUG PLANS

The Centers for Medicare & Medicaid Services (CMS) today issued the Announcement of Calendar Year (CY) 2010 Medicare Advantage Capitation Rates and Medicare Advantage and Part D Payment Policies.  The Announcement updates and makes final provisions of the Advance Notice that CMS released on February 20, 2009, and responds to comments on that Notice.

The Announcement makes final the Part C and D payment policies and methods CMS will use to calculate 2010 Part C capitation payment rates.  These changes are explained below.

Medicare Advantage Growth Percentage

For the Medicare Advantage (MA) program, CMS calculates a unique capitation rate for each county.   These MA capitation rates define the upper limit for Part C payments to plans.  For 2010, the law requires that Part C capitation rates be based on the 2009 capitation rates for counties updated by the Medicare Advantage Growth Percentage. 

The Advance Notice included a preliminary estimate of a 0.5 percent increase in the National Per Capita Medicare Advantage Growth Percentage.  The Announcement includes a Medicare Advantage Growth Percentage of 0.81 percent  As with the preliminary estimate in the Advance Notice, the final growth percentage will reflect the estimated 21 percent physician fee reduction for 2010 contained in current law  The Announcement provides a Web link to the final capitation rates for each county.

Risk Adjustment

The Announcement also describes changes in the methodology used to adjust payments to Medicare Advantage organizations and sponsors of Medicare prescription drug plans to ensure that capitated payments to plans reflect the health status and associated cost differences of individual enrollees.  Under risk adjustment, higher payments are directed to plans that enroll beneficiaries with greater health care costs.  To ensure that the risk adjustment of payments is budget neutral, CMS makes several adjustments to beneficiary risk scores.  The Announcement provides the final 2010 factors for these adjustments.

The Announcement finalizes the normalization factors used under risk adjustment to balance the growth in Part C and Part D risk scores and maintain a constant 1.0 average in each payment year.  The normalization factor to be applied to Part C risk scores in 2010 for aged and disabled beneficiaries is 1.041.  The Part D normalization factor is 1.146.  As previously announced in the Advance Notice, in 2010, the Part D normalization factor will take into account only those beneficiaries who actually have enrolled in a Part D plan, as opposed to all Part D-eligible beneficiaries.  CMS anticipates that this change will help ensure that the beneficiary premium is at the appropriate proportion of plan payments.

Coding Pattern Differences Adjustment

For the first time, for plan year 2010, CMS will make a “coding pattern differences adjustment” to Medicare Advantage risk scores, reducing MA payments to account for differences in disease coding patterns between MA organizations under Part C and the Original Medicare program (Parts A and B).  CMS is required by law to adjust MA payments where it finds differences in coding patterns between Medicare Advantage plans and Part A and Part B providers   The MA coding pattern differences adjustment factor will adjust for the growth in MA risk scores that occurs above and beyond the average growth captured in the normalization factor.

The adjustment will be applied as a uniform 3.41 percentage reduction to all plans’ Part C risk scores in 2010.  CMS calculated the coding pattern differences adjustment factor using the methodology described in Advance Notice, with some modifications made in response to stakeholder concerns.

Part D Benefit Parameters

The Announcement updates the statutory parameters for the defined standard Part D prescription drug benefit.  Updating the parameters helps ensure that the government’s share of Part D costs remains constant over time.  The annual percentage increase in average per capita Part D spending — used to update the deductible, initial coverage limit, and out-of-pocket threshold for the defined standard benefit for 2010 — is 4.66 percent.  The annual percentage increase in the Consumer Price Index — used to update the 2010 maximum copayments below the out-of-pocket threshold for certain dual eligible enrollees — is approximately 2.65 percent.  CMS revised these percentages to correct calculation errors identified following release of the Advance Notice.  As a result, several of the 2010 Part D benefit parameters differ from those in the Advance Notice (see the table below).

Indirect Medical Education Adjustment Phase-out

In addition, the 2010 rates announced today reflect a provision in the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) that requires a multi-year phase-out of the inclusion of costs of indirect medical education in Medicare Advantage rates.  The maximum reduction as part of this phase-out is approximately 0.60 percent per year.

Medicare Secondary Payer Adjustment

Starting in 2010, CMS will use an in-house data source that contains a comprehensive health care insurance profile on all Medicare beneficiaries to identify those beneficiaries who have a payer that is primary to Medicare.   As a result of this change in data source, plans will no longer be required to survey enrollees regarding other payers. 

Private Fee-For-Service Network Provisions

Under MIPPA, beginning in plan year 2011 Medicare Advantage private fee-for-service (FFS) plans that are operating in a “network area” must meet MA access standards through contracts with providers.  The Advance Notice announced the geographic areas that qualify as “network areas” for 2011.  There is no change to this list of “network areas” in the Announcement.

Part D Drug Cost Reporting

Pursuant to a final rule with comment period, published on Jan. 12, 2009, and effective for plan year 2010, Part D sponsors must use the amount paid to the pharmacy as the basis for determining beneficiary cost sharing, developing Part D bids, and reporting drug costs to CMS.  Part D sponsors that contract with a pharmacy benefit manager (PBM) are no longer permitted to use the amount paid to the PBM to report drug costs to CMS and to determine beneficiary cost sharing.  The Advance Notice reminds Part D sponsors to take this change into account in developing their Part D bids for 2010.  There is no change to this item in the Announcement.

Veterans’ Health Care Benefits Adjustment

The statute requires that CMS make an adjustment to per capita fee-for service (FFS) costs to reflect differences in costs attributable to use of services received by individuals eligible for Veteran’s benefits and the Department of Defense.  The Announcement states that, based on a CMS Office of the Actuary analysis, no such adjustment is warranted in 2010 for the additional amount that would have been paid by Medicare if beneficiaries who received care from Department of Veterans Affairs had received that care through Original Medicare instead.   The Office of the Actuary anticipates conducting a similar analysis for beneficiaries who received care from the Department of Defense once those data become available.

The Announcement of Calendar Year (CY) 2010 Medicare Advantage Capitation Rates and Medicare Advantage and Part D Payment Policies may be viewed at http://www.cms.hhs.gov/MedicareAdvtgSpecRateStats/AD/list.asp#TopOfPage.

A news release on the Announcement may be viewed at http://www.cms.hhs.gov/apps/media/press_releases.asp

Know Your Insurance Options When It Comes to Medicare

With many Medicare beneficiaries facing tighter wallets in 2009, it may be worthwhile to review your insurance options when it comes to supplementing Medicare.   If you have a Medicare Supplement, remember that these are standardized plans – meaning that all insurance companies offer the same supplement plans (typically plans A-J).  With this in mind, you always want to be with the best “A” Rated or better insurance company for the lowest price.  It is also important to ask about their rate history as you don’t want to be with an insurance company that has history of raising rates faster than an average between 5-10%.    Determine your usage and look closely at the premium differences among different insurance carriers with the optional Medicare Supplement Plans.

If you are on a Medicare Cost Plan, such as Rocky Mountain HMO, or a Medicare Advantage Plan; the Open enrollment period is now over and you are now locked in till the end of 2009.  Annual election for 2010 will not open up on November 15^th, 2009; but this year it may be more important than ever to review your options.  With the Obama administration cutting millions of dollars from these plans we are expecting significant cost increases or decreases in benefits in these plans beginning in 2010.  Look for information on these plans to be released on Medicare.gov around October 15^th.  Remember, insurance companies change their rates and/or benefits annually and it is worthwhile to keep on top of it.

On January 1^st, 2009, the State of Colorado became a Long Term Care Partnership State.  In essence if you purchase a Long Term Care Partnership Policy, every dollar that is paid out in benefits, a dollar of personal assets can be protected if you need to begin qualifying for Medicaid.  The State of Colorado is encouraging and rewarding citizens of Colorado with estate preservation protection for planning for their future Long Term Care and Home Health Care needs.

Colorado has two goals which are to assist their citizens in planning their future Long Term Care insurance needs through quality Long Term Care Insurance.  Secondly, the State wants to do this without depleting all their resources (assets) to pay for Long Term Care and Home/Community Based Services (HCBS).

A Partnership policy requires that a 5% compound inflation rider for individuals applying before 61 years of age.  From 61 to 75 years of age they require a 5% simple inflation rider.  For individuals 76 years of age or older there is no inflation protection required.

Remember, the most often used benefit in a Long Term Care insurance policy is for custodial home health services.  Insurance companies are suggesting policies that provide for at least $150-$200 in daily benefits.  Generally, the cost of waiting is between 2.5-5% after age 50.  After 65 years of age the cost of waiting to purchase a LTC policy is generally 10% a year making it very costly for individuals after age 70. 

Not everyone will want to purchase a Long Term Care Partnership Policy.  For some a short term Convalescent Policy (LTC/HCBS benefits up to 1 year) may be sufficient with assets and planning and can find these priced at under $100/month.  Other options include self-funding, LTC life insurance riders, LTC riders with annuities, or family care options.

Based on 2009 Medicare Annual Election feedback, we have compiled our Medicare beneficiaries preferred choice for physicians, urgent care, physician groups, and hospitals.  Congratulations to the following medical providers for being selected for outstanding service, patient understanding, and acceptance of Medicare and senior health plans.

Top 5 2009 Senior Preferred Family Physicians:

Dr. Mynette Foley - Western Valley Family Practice (Grand Junction/Fruita)

Dr. Kent Fryberger - Desert Sun Medical Center (Grand Junction)

Dr. Andrew Mohler - Primary Care Partners (Grand Junction)

Dr. Rosalind Rafanelli - Delta Family Physcians (Delta)

Dr. Monica Reed - Delta Internal Medicine Associates (Delta)

2009 Preferred Senior Physican Groups

St. Mary’s Family Medicine (Grand Junction)

Desert Sun Medical Center (Grand Junction)

Western Valley Family Practice (Grand Junction/Fruita)

Western Medical Associates (Grand Junction)

Delta Family Physcians (Delta)

Surface Creek Medical (Cedaredge)

Delta Internal Medical Associates (Delta)

2009 Preferred Urgent Care Facility

Urgent Care of Grand Junction

Western Valley Family Practice

2009 Preferred Hospital

Community Hospital

St. Mary’s Medical Center

The average Part D Medicare Prescription Drug Plan jumped to $30.36/month for 2009.  That is an increase of over 30% just in premium price in one year.  Many insurance companies indicated losses on their Part D prescription drug plans in 2008 and this is one part of Medicare you will want to hone in on.  In Mesa County, Colorado we had a decrease in drug plan offerings for 2009 from 55 different prescription drug plans down to 48.

However, premiums are just one part of the equation.  You also need to evaluate co-pays amongst the different levels of drugs such as generics, preferred brand names, and non-preferred brand names.  Also, you will want to make sure your prescription drugs are still within the formulary of the plan and in what drug tier. 

There are still some drug plans in 2009 without a prescription drug deductible such as the Wellcare Signature and the AdvantraRx Value.  Some drug plans are even still offering generic drug co-pays at a $0 co-pay such as the Wellcare Classic.  And look to the Advantra Rx Premier, Prescriba RX Platinum, and Blue Medicare RX Premier for generic drug coverage in the coverage gap. 

The only way to ensure you are in the most cost efficient Medicare prescription drug plan is to run your personalized list of prescriptions through medicare.gov.  It will rank your unique list of prescriptions amongst different plans in order of most cost efficient to least cost efficient.

CMS announced today that there will be no increase in the standard Medicare Part B monthly premium for 2009 leaving it at $96.40.  However, the Part A deductible will increase 4.3% from $1,024 in 2008 to $1,068 in 2009.  CMS has not kept Part B rates unchanged since the year 2000.  The Part B deductible will also hold steady at $135 for 2009.

 Medicare Part A covers inpatient hosipitalization, skilled nursing, and certain home health care services while Medicare Part B covers part of the cost for physician services, durable medical equipment, certain administered drugs, outpatient hospital and certain home health services.  About 95 percent of of the nearly 44 million medicare beneficiaries pay the standard Part B premium.  The other 5 percent are subject to a higher premium which is based on their taxable income (see below).

 Although this is great news for Medicare beneficiaries for 2009, 2010 will likely have to reflect higher costs in Part B as the premiums ususally reflect the higher costs of medical services.  Traditionally, medical cost inflation has risen faster than overall inflation.  With the baby boomers readily entering Medicare at a rapid and increasing rate demand for medical services is likely to increase.  With Medicare expecting to cost $500 billion in 2009, Congress will likely be keeping a watchful eye on expenditures.

Insurance companies have filed their modifications and benefits with Centers for Medicare Services for the year 2009 for Medicare Part D Prescription Drug Plans, Medicare Advantage Plans, and Medicare Choice Plans.  Around October 15^th, this information will be released and can be viewed on medicare.gov and of course Medicare Annual Election begins November 15^th and runs to December 31^st.  With this in mind, Medicare beneficiaries need to begin thinking about how this may affect them and to reflect upon coverage in 2008.  Here are just a couple of points to consider:

1)      Medical Inflation – with medical inflation varying amongst areas and segments between 5-10% a year, you can bet you will see higher costs.  Many Medicare beneficiaries only look at the price of the plan to determine if their plan is cost efficient.  However, plans have several ways of increasing costs such as increasing co-pays (such as doctor office co-pays going from $15 to $20), increasing coinsurance for certain benefits, excluding certain procedures, limiting your network to certain areas, or even increasing your maximum out of pocket costs.  All these factors should be evaluated in determining if you plan is still the most cost effective for you.

2)      Part D Medicare Prescription Drug Plans – with several insurance companies indicating losses on their Part D prescription drug plans, this is one part of Medicare you will want to hone in on. Rumblings have been heard that we will see significant increases in the Part D this year – not only in premium but in co-pays amongst the different levels of drugs such as generics, preferred brand name, and non-preferred brand name.  Also, you will want to make sure your prescription drugs are still within the formulary of the plan.  The only way to ensure you are in the most cost efficient Medicare prescription drug plan is to run your personalized list of prescriptions through medicare.gov.  It will rank your unique list of prescriptions amongst different plans in order of most cost efficient to least cost efficient.

3)      Run all scenarios – many Medicare Beneficiaries don’t look at their options separately.  Yes, you can have a separate Part D Prescription Drug Plan with one insurance company with a Medicare Advantage Plan or Medicare Choice Plan with a different one.  Yes, you may look at a Medicare Supplement versus a Medicare Advantage Plan and you should evaluate this annually.  Rarely, do you see one insurance company solve everyone’s medical and prescription drug needs every single year.

4)      Physician Acceptance – let’s face it, Mesa County is far different than our Delta sister county to the south.  Many of their clinics are considered rural based and therefore get higher subsidization and therefore have to accept all insurance carriers.  Not so in Mesa County - here we are home to a Medicare Choice Contract with Rocky Mountain HMO that will be up for Federal review in 2010.  This competes against Medicare Advantage Plans as they pay doctors a higher reimbursement above the Medicare Assignment Rate whereas Medicare Advantage Plans pay the physicians 100% of the Medicare assignment rate.  Even though they are both federally subsidized programs, the different reimbursement rates cause insurance discrimination amongst these two programs.  Last year this was particularly the case with Primary Care Partners and Dr. Vincient, as they restricted their Medicare beneficiary patients to just RMHMO or original Medicare with a Medicare supplement.  It will be advisable again to make sure your physician will bill and/or accept your plan of insurance.

These are just a few of many suggestions to consider when you are evaluating Medicare options.  As 2009 information is released - utilize medicare.gov, contact your local SHIP office, or work with an insurance agency that represents multiple insurance companies to evaluate all your options.

Deciding where to retire and then moving into an area is often a daunting task. Especially as we get older change is often hard on us… several decisions have to be thoughtfully considered. Such as, do we move next to our children or grandchildren? In addition, if we do, which family pack to we choose to move near? Alternatively, do we move to a place with a friendly climate than the current climate we live in? What is the medical community like? Will they accept our insurance? How health insurance friendly is the medical community? Unfortunately, during this time in our lives, we simply cannot put a blindfold over our eyes turn around three times and put a pen on the map and say, “this is where we are going to retire”. Our carefree days of choice an happenstance are far better left to memories. We are at a point on our lives where our decisions need to be based more in fact than simple armchair analogies. Economists often use supply and demand curves as a tool to make decisions about the market place. More importantly, how a change in price will change the demand or supply for a good. We often recommend this analogy to our clients to help them make a decision about their health insurance. Ultimately this is used as a tool, to help them decide if the place they chose to retire or the current place they are living in is a safe place for them to live and retire in regards to their healthcare needs. In other words, we ask them to do an opportunity cost analysis in regards to their health insurance and medical needs, which is one of the most important decisions we will make for ourselves as we age. We briefly explain to our clients that when making a decision on where to retire you must also consider how health insurance friendly the medical community is in the community you choose to retire in. If the medical community is not very health insurance friendly, your retirement might not be as comfortable as to a community with a more health insurance friendly environment. We recommend looking for a community that widely accepts all health insurance – one that does not discriminate. The meat and potatoes of our philosophy is to be a smart and savvy shopper… shop for a community that has a medical community with a somewhat elastic demand and supply curve, in other words find medical providers and suppliers who will bill all health insurance. Watch out for a community that has an inelastic demand, a medical community that supports one insurance provider but does not support other health insurance choices that might actually be better for the medical consumer. The lack of insurance choices can raise the price of a good without much loss in demand for the product because there are no other options. The price and product become inefficient and the consumer suffers… better known as a monopoly or even in some cases an oligopoly. More importantly, a good or service is considered to be highly elastic if a slight change in price leads to a sharp change in the quantity demanded or supplied. Usually these kinds of products are readily available in the market and a person may not necessarily need them in his or her daily life. On the other hand, an inelastic good or service is one in which changes in price witness only modest changes in the quantity demanded or supplied, if any at all. These goods tend to be things that are more of a necessity to the consumer in his or her daily life such as health insurance. However, when there are more choices in regards to health insurance the consumer has more control of the price and that is very important to retirees. There are a couple ways to find out if your community is health insurance friendly. You can call the State Insurance Commissioner’s Office. You can do research on Medicare.gov or contact your local SHIP office.

Many medicare beneficiaries have asked how the new Medicare Improvements for Patients and Providers Act of 2008 would affect our local Rocky Mountain HMO cost contract in Mesa County.  Below you will find Section 167 of the Act.  In this Act, bascially Rocky Mountain HMO would have to have convincing evidence and reasons why they are unable to become Medicare Advantage Plans to continue this cost contract.  As of the 2008, there are currently 32 different Medicare Advantage Plans available in Mesa County with likely more options in 2009.  In our opinion it would be very diffcult to defend a cost contract to be continued in this area.

SEC. 167. ACCESS TO MEDICARE REASONABLE COST CONTRACT PLANS.

(a) Extension of Reasonable Cost Contracts- Section 1876(h)(5)(C)(ii) of the Social Security Act (42 U.S.C. 1395mm(h)(5)(C)(ii)), as amended by section 109 of the Medicare, Medicaid, and SCHIP Extension Act of 2007 (Public Law 110-173), is amended by striking `January 1, 2009′ and inserting `January 1, 2010′ in the matter preceding subclause (I).

(b) Requirement for at Least Two Medicare Advantage Organizations To Be Offering a Plan in an Area for the Prohibition To Be Applicable- Subclauses (I) and (II) of section 1876(h)(5)(C)(ii) of the Social Security Act (42 U.S.C. 1395mm(h)(5)(C)(ii)) are each amended by inserting `, provided that all such plans are not offered by the same Medicare Advantage organization’ after `clause (iii)’.

(c) Revision of Requirements for a Plan That Are Used To Determine if Prohibition Is Applicable-

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  (1) IN GENERAL- Section 1876(h)(5)(C)(iii)(I) of the Social Security Act (42 U.S.C. 1395mm(h)(5)(C)(iii)(I)) is amended by inserting `that are not in another Metropolitan Statistical Area with a population of more than 250,000′ after `such Metropolitan Statistical Area’.

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  (2) CLARIFICATION- Section 1876(h)(5)(C)(iii)(I) of the Social Security Act (42 U.S.C. 1395mm(h)(5)(C)(iii)(I)) is amended by adding at the end the following new sentence: `If the service area includes a portion in more than 1 Metropolitan Statistical Area with a population of more than 250,000, the minimum enrollment determination under the preceding sentence shall be made with respect to each such Metropolitan Statistical Area (and such applicable contiguous counties to such Metropolitan Statistical Area).’.

(d) GAO Study and Report-

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  (1) STUDY- The Comptroller General of the United States shall conduct a study of the reasons (if any) why reasonable cost contracts under section 1876(h) of the Social Security Act (42 U.S.C. 1395mm(h)) are unable to become Medicare Advantage plans under part C of title XVIII of such Act.

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  (2) REPORT- Not later than December 31, 2009, the Comptroller General of the United States shall submit to Congress a report containing the results of the study conducted under paragraph (1), together with recommendations for such legislation and administrative action as the Comptroller General determines appropriate.

The new Medicare law, highlighed by the democrats, reversed scheuduled payment cuts to physicians, however, what is being quietly overshadowed are the cuts in payments to the Medicare Advantage Plans and how this will affect them and the seniors enrolled in them.  2.3 million medicare beneficiaries are enrolled in Medicare PFFS plans up from 209,000 since  2005.  Since many of the 2009 plan benefits have been filed with CMS for 2009, Medicare beneficiaries will likely see the effect of these changes beginning in 2010 coverage. 

Insurance companies have not fully evaluated how this will affect the benefits they offer but it can be assured we will likely see costs of these plans increase, copays or coinsurance increase, or additional benefits such as vision care phased out.  In addition, most PFFS plans effective in 2011 will be required to set up provider networks.  That has been a very important attribute to PFFS as seniors had freedom of choice to use any provider that was willing to bill the insurance company for the service provided.   

 What is ironic is how the democrats have praised this change as a “great day for Medicare and a great day for seniors.”  However, seniors utilizing these PFFS plans tend to be fixed income Medicare beneficiaries that would otherwise have just traditional medicare.  Fixed income seniors often view traditional Medicare supplements or Medigap plans to expensive or unaffordable despite the more comprehensive coverage - and there in lies the problem.  These cuts to Medicare Advantage Plans mean that the population of seniors that will be affected the most are the ones slightly above the poverty line surviving on fixed income often times only social security.

 Many seniors in this segment of Medicare beneficiaries have not realized what Medicare laws have been passed nor do they know how this may bring about changes in the coverage they now have.  Rest assured a sleepy giant may awake once the changes do come about and answers from their Senators and Representatives will be needed.