4 observations from the 2018 Medicare Advantage call letter

A calculator up close
There's a lot more to this year's Medicare Advantage rate notice and call letter than just the average rate increase figure.

Each year, when the federal government releases its Medicare Advantage rate notice and call letter, the main focus is often on the average rate increase for health plans.

But there is a lot more than that in the 185-page document released by the Centers for Medicare & Medicaid Services (CMS). To help decode it all and give MA plans a sense of what it means for them, JoAnn Bogolin, an associate of the Society of Actuaries, shared her analysis of some of the key takeaways with FierceHealthcare.

Here’s a roundup of her observations:

  • CMS announced that the U.S. per capita costs increased by 2.7% over the prior projected 2017 U.S. per capita costs (USPCC). However, it’s important to note actual impact to plans’ revenue will vary across individual states and markets.

“The USPCC is based on the cost in each individual area, so if you’re rural, your costs are different than if you’re a thriving metropolis,” Bogolin explained. Similarly, “if you’re a city with, let’s say, the Mayo Clinic, or a large medical school, your costs are different than other major cities,” she added.

When CMS applies its county percentage to the USPCC, the highest quarter of counties get their rate reduced by 5%, and the lowest quarter of counties get a 115% bump to their rate, she added.

“So CMS is trying to even these out, just understanding that those costs don’t necessarily tell the whole story of how a health plan can be successful in that market,” Bogolin said.

  • The increased emergency room copay is intended to incentivize patients to go to a non-emergency doctor for their medical needs. Fewer emergency room visits will help plans stabilize costs, and may mitigate premium increases.

In general, CMS has encouraged Medicare Advantage organizations to limit patients’ out-of-pocket costs, recognizing that chronic patients often are the ones that hit the upper threshold. If MA organizations lower their maximum out-of-pocket costs, CMS allows to them have slightly stronger cost-sharing.

But this year brought a new twist: CMS increased the allowed ER copayment from $75 to $100 if plans have a voluntary lower out-of-pocket cost limit, and increased it from $75 to $80 if they have a mandatory one.

“The call letter states what CMS is thinking with that,” Bogolin said. “They’re really trying to help plans incentivize members to go to your doctor’s for office visits or to go more regularly, and to deter the emergency room visits that aren’t true emergencies.”

  • It is notable that the 2018 risk scores are grounded in the current diagnoses-based data submissions, weighting these risk scores at 85% of the total risk score, as opposed to the proposed encounter data systems, weighted at 15% of the total risk score, which mitigates health plans’ concerns about the accuracy of the encounter data they are submitting.

For the past several years, members’ risk scores were based on diagnosis data, Bogolin explained, but CMS believed more detailed information might be helpful, so it began to phase in the electronic data systems (EDS).

As with any new requirement, she noted, it takes people a while to get the hang of the formatting and other quirks. Getting plans to submit the data hasn’t been the problem, Bogolin said, but health plans were concerned about the quality of data being submitted, whether everything was being accepted and whether there were errors in the data.

“So CMS has heard the concerns—and they believe that they’ve noticed some discrepancies as well—and they stepped back and they’re only going to weight in the EDS data to 15%” rather than the originally proposed 25%,” Bogolin said. “Their intention is still to go to the EDS data 100%, but they’re concerned about the quality,” she added.

  • The option to develop provider networks specifically for an individual population in special needs plans (SNPs) is positive as it helps tailor the networks to the specific population’s needs and can make care more effective for these populations.   

CMS has encouraged the SNP program because it believes certain populations with chronic conditions such as diabetes, congestive heart failure and COPD need benefits that are tailored to the specialized care they require, Bogolin said. When health plans design SNPs, they are already gearing their cost-sharing structures and additional benefits toward these populations.

“CMS is now looking at the other piece of that, which are the network requirements,” she said.

In other words, CMS will work with plans to ensure that the providers included in an SNP’s network make sense for the population it serves, rather than having to “jump through extra hoops” to meet a general requirement for network adequacy.

“What they’re doing now and what they’ve indicated in the letter is that they want to see if those restrictions and those qualifications just need to be different” for SNPs, Bogolin added.

This is a new option, but it won’t be available to health plans until 2019, as they have to tell CMS at the beginning of each year what their provider networks will look like for the next year, she said.