Government News
of the Week:
Medicare Compliance, Medicare Advantage and Part D, and Other Federal and State Developments

1. The White House Office of National Drug Control Policy said April 7 that federal employees will be covered for certain substance-abuse prevention and treatment procedures. The Screening and Brief Intervention (SBI) coverage will reimburse doctors who screen their patients for a full spectrum of substance-use behaviors, including ones related to alcohol, illicit drugs and prescription drug abuse/addiction.

The Office of Personnel Management (OPM) asked carriers that participate in the Federal Employees Health Benefits Program (FEHBP) to review new CPT codes for screening and short-term intervention for alcohol and substance abuse. OPM spokesperson Michael Orenstein tells AIS that the carriers are being asked to cover SBI, but that it is not a requirement.

According to OPM, at least 70% of federal employees participate in FEHBP plans, which will recognize the CPT codes for their claims-processing systems.

CMS adopted SBI codes in January 2007, while the American Medical Association's addition of two CPT codes became effective in January 2008. CMS has also line-itemed SBI in its annual budget, with a $265 million set-aside to match state contributions for Medicaid for those states implementing the codes and reimbursing for SBI services.

For more information about SBI, visit www.ondcp.gov/treat/screen_brief_intv.html.

Reprinted from the April 14, 2008, issue of HEALTH PLAN WEEK.

2. The average capitation rate paid to health plans that sell Medicare Advantage (MA) products will increase by approximately 3.6% for 2009, according to final figures released April 7 by CMS. A year ago, CMS boosted MA rates by an average of 3.5% for the 2008 plan year.

While the increase for 2009 is slightly lower than anticipated, the announcement was met with largely favorable reaction from equities analysts and other industry observers. And CMS's surprising decision to eliminate a planned coding-intensity adjustment for 2009 was seen as another favorable development for MA carriers.

Equities analysts say many MA carriers will actually receive rate increases of between 4% and 6% for 2009. Although the rate hikes probably won't cover cost trends in 2009, and could prompt some plans to modestly reduce benefits, MA enrollment will continue to grow at a "significant rate," Oppenheimer & Co. analyst Carl McDonald said in his April 8 note to investors. "Seniors will still be receiving a lot more benefits at a lower cost through private plans than through the government Medicare program," he said.

"It's always a mixed bag," Pat Dunks, a principal and consulting actuary with the Milwaukee office of Milliman, Inc., said of the CMS rate announcement. "Revenue increases won't be quite as great [as previously anticipated], but if you add to that the fact that CMS canned the coding-intensity adjustment, maybe on average [2009 plan payment rates] will rise."

If plans are getting better at coding, that could be the effect, agreed Bill MacBain, senior vice president of finance for Gorman Health Group, LLC and a former commissioner for the Medicare Payment Advisory Commission (MedPAC).

In addition, CMS announced that the deductible for Medicare prescription drug plans will increase to $295 in 2009 from $275 this year and that the initial coverage limit (before enrollees enter the doughnut-hole gap) will increase to $2,700 from $2,510.

Although MA payments are relatively secure for the 2009 plan year, they could be at risk once a new president takes office, equities analyst Christine Arnold wrote in an April 7 note to investors. "Beyond 2009, we view [MA] cuts as a near certainty," she said. "Each of the three major presidential candidates seems to support MA payment reduction."

But McDonald argues that Congress probably won't have time to pass a Medicare rate cut that would take effect before 2011. Congress will begin its first session with the new administration in mid-January 2009. That will give Congress about a month to adjust Medicare funding for 2010 before the initial rate announcement in mid-February, McDonald explained in his research note. "The first 100 days of a new administration is always about the President's agenda, and our sense is that if there are any health care priorities in the first 100 days it will probably focus more on the uninsured than on Medicare cuts," he wrote. McDonald added that Medicare-focused companies, such as Humana Inc., will be able to maintain their 20% annual earnings growth rate for at least the next three years.

CMS received a significant number of comments in opposition to the coding-intensity adjustment it proposed in February. Under that proposal, MA plans with Hierarchical Condition Category (HCC) risk scores at least two times greater than the difference between the MA and fee-for-service (FFS) averages would have faced dramatic reductions in risk-adjusted payments for 2009. "This policy would have removed legitimate profit from large managed care organizations achieved from more accurate coding," said Stifel Nicolaus equity analyst Thomas Carroll in an April 8 note to investors.

CMS determined it lacked the comprehensive data needed to track coding patterns and determine whether plans are getting better at coding as opposed to attracting more sick enrollees, Abby L. Block, director of CMS's Center for Beneficiary Choices, said during the April 7 conference call unveiling the 2009 final figures. Instead, CMS will use a new audit initiative to determine the accuracy of diagnosis coding information submitted by MA plans. The agency will audit medical records from a sample of plans, including those with high, medium and low risk-score differences. As coding errors are found, the agency will reconcile payments to correct for those errors at the plan level. CMS expects to begin the process by the end of this year and could implement the coding- intensity adjustment for 2010, Block indicated.

CMS also announced that it would adjust reimbursement rates — based on the health status of members enrolled in each plan — for 139 counties for 2009. At least every three years, CMS must recalculate, or "rebase," each county's average per-capita expenditures for original Medicare services using the most recent FFS spending data. MacBain said the rate picture all boils down to the weighted average of members that a plan has in each county based on 2009 enrollment.

Health plans that have large membership in Florida's Miami-Dade County, for example, will see reimbursement rates jump by about 13%, analysts predict. According to McDonald, Miami-Dade has one of the highest per-member-per-month reimbursement rates in the country. Humana has 41% of that market, while HealthSpring, Inc. has 16%. The increased reimbursement could be worth 3 cents per share for Humana and HealthSpring, Carroll suggested in his note to investors.

View the rate information at www.cms.hhs.gov/MedicareAdvtgSpecRateStats/
Downloads/Announcement2009.pdf.

Reprinted from the April 14, 2008, issue of HEALTH PLAN WEEK.

3. While there were no significant changes between CMS's recently released final 2009 call letter for MA and Part D plans and a draft released in January, the agency did clarify a key marketing issue. A plan's marketing representative is allowed to discuss multiple lines of Medicare business — MA, stand-alone Prescription Drug Plan (PDP) or Medigap — only if the agent tells the beneficiary of all specific products that will be discussed prior to the in-home appointment, CMS says in the final call letter.

CMS states that the agent must set up separate appointments with the beneficiary if additional lines of business are not identified prior to the in-home appointment, and that there must be a marketing "cooling off" period: Follow-up appointments may not be rescheduled until 48 hours after the initial appointment. David Lewis, director of CMS's Medicare Advantage Group, speaking April 1 at a Medicare marketing conference in Washington, D.C., stressed similar points.

CMS issued the 267-page final call letter March 17, after releasing the draft document Jan. 16 and accepting public comments on it until Jan. 30. At the time of the draft's release, Abby L. Block, director of CMS's Center for Beneficiary Choices, told MAN that MA organizations would not be able to circumvent the moratorium on MA Special Needs Plans (SNPs) for 2009.

Valerie Wilbur, vice president of the National Health Policy Group, which represents 30 member SNPs through a lobbying organization called the SNP Alliance, says the final 2009 call letter is "very clear on the SNP moratorium." She cites a sentence in the document stating that CMS "will not approve any reconfiguration of SNP type, SNP subset or SNP service area" for 2009.

Wilbur tells AIS that this leaves concerns for some SNP sponsors for next year. For example, she says, she knows of SNPs that want to expand their focus from nursing-home residents to people who are nursing-home certifiable but still living independently in the community, and this is not possible. Next year's moratorium also puts a crimp on plans of states, including Wisconsin, which had envisioned expanding some SNPs statewide, she asserts.

"We talked to them [i.e., CMS staff], we sent comments, we had follow-up meetings," Wilbur says. "They were very clear that Congress wanted them to completely shut down all new approvals of SNPs."

The call letter, which is designed to help MA and Medicare drug plan sponsors in preparing for the 2009 contract year, also stresses systems improvements for 2009. Gorman Health Group, LLC, a consulting firm based in Washington, D.C., notes that the document indicates that CMS intends to improve the MARx electronic system for plans in spring 2009 by decoupling the membership service from the payment service. The firm points out that CMS also has postponed until 2010 some changes related to e-prescribing for Part D plans.

The call letter is found at www.cms.hhs.gov/PrescriptionDrugCovContra/ Downloads/CallLetter.pdf.

4. Iowa's Senate approved a $25 million expansion of the state's health care system aimed at providing coverage for most children in the state. The measure was approved on April 7 by a margin of 42-6 and will now head to the House, where approval is expected in the closing weeks of the session, according to the Chicago Tribune. The bill, if signed by Gov. Chet Culver (D) would provide health care coverage to the majority of the state's 53,000 children who now lack coverage. Under the bill, the state would spend $4.8 million in the first year and $10 million in each of the next two years to broaden programs that offer health coverage to children of the working poor.

Reprinted from the April 14, 2008, issue of HEALTH PLAN WEEK.

5. Maine Gov. John Baldacci (D) said he supports LD 2247, a bill designed to continue Maine's role in covering the uninsured. According to Baldacci's office, the bill reforms the individual health care market to make individual health care more affordable. Among other reforms, the bill would authorize individual plan pilots for those under 30 years of age that have a "medical-loss ratio of at least 70%." The bill also replaces the Savings Offset Payment (SOP) for the state's DirigoChoice plan with a more predictable source of funding, the office says.

Reprinted from the April 14, 2008, issue of HEALTH PLAN WEEK.

6. A ruling in favor of Blue Cross Blue Shield of Texas was upheld by the Texas Court of Appeal. The health plan had been sued by Robert Cunningham, whose wife, Patricia Cunningham, was insured for wrongful death, according to Cunningham's counsel, Katherine Youngblood. Although the wife was insured by the Texas Health Insurance Risk Pool, the state's high-risk pool, the policy was administered through the Texas Blues plan. The wife died from complications of malnutrition that could have been avoided with the use of a feed tube, Youngblood said. But the alleged wrongful conduct of the insurer was found to be too remote to constitute legal causation as a matter of law. Instead, the Blues plan's case management duties were limited to assessing continuing needs in catastrophic and chronic high-cost cases, and discussing more cost-effective alternative methods of care with the treating physicians, Youngblood said.

Reprinted from the April 14, 2008, issue of HEALTH PLAN WEEK.

7. If private MA plans were paid at the same rate as traditional Medicare pays, the hospital insurance trust fund would remain solvent for an additional 18 months past the projected insolvency date in early 2019, according to testimony by Richard Foster, CMS chief actuary, at an April 1 House Ways and Means Health Subcommittee hearing. Foster testified that under current law, MA plan payments are projected to be 13% higher than those of traditional Medicare. He said that if the law was changed to have MA plan payments more directly based on what they bid to provide care, the plans would save money for Medicare in some markets and cost more in others, but overall the change would reduce Medicare spending. To view Foster's testimony, visit http://waysandmeans.house.gov/
media/pdf/110/RSFTestimony.pdf.

Reprinted from the April 10, 2008, MEDICARE ADVANTAGE NEWS.

Additional government news appears in
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