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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

Recession Proofing Your Insurance

With many in the valley being laid off or facing deceasing budgets, it may be worthwhile to review your insurance policies.   Many forget your premiums are not only determined by what deductible you may have but by the optional benefits that may come with the policy.  For example, in health insurance policies, you may be able to look into the cost of optional benefits like doctor office co-pays, coinsurance levels, prescription drug benefits, and/or preventative services.   Determine your usage and look closely at the premium differences among different insurance carriers with the optional benefits of your policy.

If you have been recently laid off from work, look into the cost of COBRA or State Continuation of Coverage but also look into temporary health insurance to minimize your cost.  Temporary health insurance is short term health insurance for less than a year; but perfect for people in between jobs, waiting to become eligible for their new group health plan, or waiting to go onto Medicare.  It is often times the least expensive way to go to have health insurance coverage in these situations.

Lastly, if you have not shopped around – take the time to do so.  Many people, unfortunately, do not shop around for the most effective insurance and it ends up meaning hundreds or even thousands of dollars being wasted.  Remember, insurance companies change their rates and benefits and it is worthwhile to keep on top of it.

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.