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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

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.

In response to emails Insurance Advisors Agency, Inc. sent Congressman Ken Salazar, he had this to say:

“Thank you for contacting me regarding H.R. 6331, the Medicare Improvements for Patients and Providers Act of 2008. I appreciate your comments on this important issue.

On July 15th, the Senate and the House of Representatives both voted to override the President’s veto of H.R. 6331. The Senate voted 70-26 in favor of overriding the veto, and I am very pleased that my colleagues and I came together in a bipartisan fashion to ensure that H.R. 6331 would become law.

As you know, due to an outdated Medicare formula that must be permanently corrected, Medicare reimbursement rates for doctors were scheduled to drop over ten percent on July 1st. As a result, over half a million Colorado seniors on Medicare were at risk of finding that their doctors could no longer afford to treat them. The cut would also affect tens of thousands of the service members and their families stationed in Colorado at places like Fort Carson and Buckley Air Force Base who are serving our country and rely on Tricare for their health needs.

To the relief of Medicare and Tricare patients and providers across our state and country, H.R. 6331 replaced the drastic 10.6 percent Medicare reimbursement rate cut for physicians with a modest increase. In addition to this reimbursement rate fix, H.R. 6331 also included important Medicare improvements, such as an extension of the therapy cap exception, a plan to reduce mental health co-payments from 50 percent to 20 percent, and coverage of both cardiac and pulmonary rehabilitation and more preventative care.

H.R. 6331 also included a number of measures that will help health care providers across our state, including rural hospitals, independent pharmacies, community health centers, and others. Many constituents shared with me how important these measures are to their lives, and I am proud that my colleagues on the Senate Finance Committee and I were able to successfully work towards the passage of this bipartisan bill.

I supported the need to enact changes early on and you can be assured that I will continue to work to strengthen the Medicare program, and address the broader reforms to our health care system that are so desperately needed.

For more information about my priorities as a U.S. Senator and about issues of importance to Colorado and our nation, I invite you to visit my website at http://salazar.senate.gov/.”

In response to emails that Insurance Advisors Agency, Inc. sent our Colorado congressmen, Wayne Allard had this to say:

“Thank you for contacting me about Medicare. I appreciate your taking the time to write about this issue. Medicare for seniors is an important issue to me and I have worked diligently to maintain quality Medicare coverage. During my tenure in the Senate I sponsored a number of pieces of legislation that aim to ensure the continued stability of the Medicare program. Unfortunately, many of my colleagues in the Senate are more interested in temporary, minor fixes to our current Medicare system, even if it is to the detriment of millions of seniors who take part in the Medicare Advantage program. I believe it is wrong to take options away from seniors and place greater control of their health into the hands of bureaucrats. Choice and competition are necessary to fit the needs and desires of beneficiaries and ensure long term solvency of the program. The funding cuts to the Medicare Advantage Program in House Resolution 6331, the “Medicare Improvements for Patients and Providers Act of 2008″, will put many Colorado seniors at a disadvantage. That is why I supported different bi-partisan legislation which contained identical physician reimbursement language to HR 6331. I had hoped a bi-partisan solution to this issue could be reached. I am hopeful that in the future Congress will work to pass legislation that enacts long- term reform and fixes the physician reimbursement formula for longer than a few months. I am very appreciative of your comments. We share a common goal: access to quality Medicare benefits for seniors. I will continue to work towards that goal on the behalf of all Coloradans and seniors. For more information regarding this and other important issues, please feel free to visit my website at http://allard.senate.gov . I look forward to hearing from you in the future.

President Bush vetoed this bill and sent it back to Congress who in turn quickly overrode it.  Bush said he supports the objectives of the bill (one of which is to avoid the rate cuts to doctors), but the funds shouldn’t have to come out of the private health plans available for Medicare Beneficiaries.  In effect, the bill will deter Medicare Beneficiaries from being able to find a private plan to “supplement” or replace their Medicare Benefits.  FEWER CHOICES FOR SENIORS.  Be sure you know the facts of this bill. 

YES, It will eliminate the Medicare cuts to doctors — AT THE EXPENSE of seniors’ choices.  Fewer choices in insurance add up to more out-of-pocket costs.  This bill may effectively eliminate choices - especially in the arena of Private-Fee-For-Service plans that so many people in rural areas - non-Metropolitan - rely on for comprehensive health coverage.  We do not support reducing reimbursement for Medicare services to doctors, but we do want to see choice and competition remain in place for seniors who need or want extra supplemental or other insurance coverage in conjunction with their basic Medicare.  If not, we estimate that more and more out-of-pocket costs will become the norm.  When Medicare beneficiaries struggle with these additional costs and possibly are unable to pay their medical bills, healthcare rates rise to make up for it. 

Colorado lawmakers passed about 50 bills dealing with healthcare this year.  We have posted some information on a couple of them (see below).  Some of the bills add additional regulations for insurance companies in Colorado which could cause additional administrative costs for the providers and the insurers.  These bills are intended to make health care more readily available to people and promote consumer protection in the insurance industry.  Democrats & Republicans are at odds as to whether or not these bills will actually improve coverage options and healthcare for the average consumer.