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AIS's Health Business Daily
Featured Story, June 22, 2010 New CMS Regulations Raise Enforcement and Financial Risks for Medicare Advantage and Part D Plans Reprinted from MEDICARE ADVANTAGE NEWS, biweekly news and analysis on the Medicare (and Medicaid) managed care programs. By Barbra Golub, Contributing Editor As CMS attempts to rebalance its status as a regulator and a business partner of Medicare Advantage and Part D organizations through new rules, one industry insider says sponsors may confront major financial challenges from this changing regulatory environment.
Under the regulation released in April, sponsors face increased CMS enforcement through audits, mandatory disclosure requirements and denials of certain contracts and bids. These provisions could impact benefit design and have significant financial implications, said Michael Adelberg, vice president of public policy and government affairs for Universal American Corp. and former director of Medicare Advantage operations at CMS.
According to Adelberg, speaking at World Research Group’s Medicare Revenue Management Conference in Arlington, Va., May 25, there are 10 provisions in CMS’s technical and policy regulations issued April 6 that “may impact [MA sponsors’] business assumptions.” They are:
(1) Appealing risk adjustment data validation (RADV) audit findings. Although Adelberg said the “giant new section on appealing RADV findings is good news,” he contended that the new trend of CMS extrapolating the audit findings and applying them to the entire business at the contract level could have “enormous” financial implications for plans. He noted that the president’s budget anticipates $7 billion in government savings based on future RADV audits.
(2) Audits of reported data. Plans now face a “new direct expense,” said Adelberg, with the requirement to have reported data audited by an independent third party. In addition to the financial burden, plans also face increased compliance risks. “Outliers will get flagged,” he warned, and the results “will become grounds to look at contractors’ performance.”
(3) Mandatory maximum out-of-pocket (MOOP) limit. The new regulation establishes a mandatory MOOP limit for all MA plans on overall cost sharing for Parts A and B services. It also continues to offer MA organizations the option of adopting a lower voluntary MOOP limit with greater flexibility in Parts A and B cost sharing than what is available for MA plans that design their benefit packages consistent with the higher, mandatory limit. “I don’t know who could argue that this is not good policy,” said Adelberg. However, the question is “does it become so expensive as to hinder benefit design?”
(4) Network adequacy requirements for MA plans. The rule establishes prepopulated values for each county in the United States. Therefore, sponsors now are going to know ahead of time, for example, how many skilled nursing facilities it will need in a particular service area.
This requirement does not apply to incumbent plans, Adelberg noted. So “new plans coming into a county with no existing members will have stricter requirements,” he said.
(5) Disclosure of compliance problems. MA and Part D plan sponsors and their contractors are now required to notify the public of compliance problems. Plans now must “divulge to its membership in writing that the organization is in trouble,” noted Adelberg.
In addition to the direct costs of mailing letters and calling enrollees, plans also will face “significant indirect costs,” he said. If a plan fails to satisfy this requirement and is sanctioned by CMS, it will face negative media coverage, potential loss of members and nervousness of investors, explained Adelberg. He pointed out that CMS also has the right to create special election periods for members in such situations.
(6) Terminating contracts on specific grounds. The new regulation sets out 13 specific grounds for CMS to terminate plan contracts. These include failures to provide accurate required data, meet service-access requirements and meet marketing requirements. If a plan’s data are “always consistently in the outlier category, this opens up grounds for eventual termination.”
(7) Denying contract applications. The regulation specifically states that CMS can deny a contract application for a plan’s past performance. For instance, Adelberg said, if a plan had problems in one area last year, CMS may say that it is not the right time for the plan to expand its service area and that it needs a year of “being clean.”
The new regulation “doesn’t take away appeal rights,” but it explicitly states that the burden is on the applicant/appellant, he maintained. “CMS will deny more applications,” Adelberg predicted.
(8) Imposing and lifting sanctions. Under the regulation, CMS can impose sanctions on plans based on the same 13 specific grounds it can use to deny contract applications.
(9) Denying bids that are not “significantly different.” Under the regulation, organizations submitting contracts to market plans must submit bids and benefit packages with “substantial differences.” For Part D plans, explained Adelberg, this means one standard plan and two enhanced plans.
(10) Applying recovery audit contractors (RACs) to MA and Part D plans. The new regulation allows RACs, which got started in Medicare fee-for-service, to turn their attention to Part C and Part D.
There is a silver lining to all of this rebalancing, said Adelberg. “A smaller group of high performing contractors may result in better program outcomes,” he suggested. It now is hard to say that a beneficiary is better off in an MA plan than in an FFS plan, according to Adelberg. “As the landscape slims and data become more robust, it may become easier to prove” the value of MA plans, he contended. |
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