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Maximize Value April 06, 2017

The 2018 MA Call Letter: What Plans Need to Know and Do

Partner, Health & Life Sciences, Oliver Wyman
Partner, Health and Life Sciences, Oliver Wyman
Key Takeaway
Details on the #CMS #MedicareAdvantage Call Letter and next steps for MA plans

Unlike the uncertainty associated with the ACA and Medicaid markets, Medicare, and in particular Medicare Advantage (MA), continues to be a profitable and growing segment for health insurers. And the recently released 2018 Rate Announcement and Call Letter signals continued support of MA by CMS.

Here, Oliver Wyman’s Melinda Durr and Martin Graf provide a summary of the Call Letter and offer advice for where plans should keep their strategic focus in 2018.   

What’s in the Call Letter?

For plan year 2018, CMS will implement a handful of changes that will impact MA plans. These include:

  • Plans will receive a 0.45 percent average revenue increase and a 2.95 percent average increase with Risk Adjustment Coding trend. This is a 0.2 percent increase from the 2.75 percent increased proposed in the 2018 Advanced Notice.
  • CMS will use the blend of 85 percent RAPS and 15 percent encounter data to calculate 2018 risk scores, slowing the use of encounter data for Risk Adjustment.
  • CMS will continue to adjust the Star Ratings program to account for the impact of Dual Eligibiles and the Disabled on Plans’ performance and signaled a 2019 revision to the “beneficiary access and performance problems” measure that will remove enforcement actions.
  • The CMS Innovation Center will continue to test the new payment and service delivery models:
    • The Medicare Advantage Value-Based Insurance Design allows Medicare Advantage organizations (MAOs) to offer supplemental benefits or reduced cost sharing to enrollees with CMS-specified chronic conditions. For 2017, CMS will test the model in Arizona, Indiana, Iowa, Massachusetts, Oregon, Pennsylvania, and Tennessee, with expansion to Alabama, Michigan, and Texas slated for calendar year 2018.
    • The Part D Enhanced Medication Therapy Management (MTM) model provides Part D Plans with additional payment incentives and regulatory flexibilities related to MTM program enhancements. This model is intended to right-size investments, drive innovative strategies to optimize medication use, improve coordination of care, and strengthen system linkages. For 2017, six Part D Plans, encompassing 22 PBPs, will participate in this model test.
  • For Medicare Employer Retiree Plans (Employer Group Waiver Plans or EGWPs), the use of individual market plan bids will be delayed until 2019, and the bid-to-benchmark ratios used for 2017 payment will continue to be used for 2018. This phase-in will generally result in slower reduction of CMS reimbursement for employer MA plans.
  • Building on efforts to curb opioid overutilization, CMS will update the Overutilization Monitoring System criteria to improve identification of inappropriate use. For 2018, the criteria will use a 6-month measurement period and an average morphine equivalent dose of 90mg and group prescribers within the same practice.
  • In Puerto Rico, ongoing efforts to stabilize MA payment will continue with the zero claims adjustment and basing the rates on the estimated FFS costs of beneficiaries with both Medicare Parts A and B extended into 2018.

What comes next?

While these regulatory changes are relatively minor and suggest business as usual, MA plans must continue to build and enhance requisite capabilities to serve the diverse retiree population. It’s also clear that CMS is looking to accelerate its stated goals of transparency, flexibility, program simplification, and innovation, and more requirements and incentives can be expected in future Call Letters.

To support sustainable MA market success, MA plans should keep strategic focus on the following areas:

Proactive management of administrative and medical cost
Recent history shows MA plans can manage with lower reimbursement through vigilant cost management. While 2018 will see an increase in average reimbursement, the years of outsized annual increases are history. Going forward, sustained financial performance in MA requires proactive management of both administrative and medical cost through the following:

  • Use of data and analytics to understand historical cost trend and estimated plan year cost, conducted in aggregate and by member cohort to identify underlying drivers
  • Increased provider collaboration to support identification and management of high cost members/cohorts
  • Standardized processes related to “medical cost action planning” to manage MLR “hot-spots” across the plan year

Greater risk-adjustment focus
Risk adjustment presents both an opportunity and risk for MA plans. Accurate coding and oversight is required to ensure proper identification, documentation, reimbursement, and compliance. Leading plans focus not only on code capture for existing conditions, but also frequent data mining and increased collaboration with providers to deliver accurate documentation that drives appropriate coding across members.

In addition, plans are also assessing the difference in Risk Scores utilizing the historical RAPS process vs. encounter data. While CMS has slowed movement to encounter data, plans are formulating strategies that support enhancing encounter data and managing the longer term overall of risk adjustment model change.

Continued focus on stars and provider quality
Stars continues to be a bright spot for MA plans. In 2017, enrollment weighted MA Star Ratings averaged a 4.0. Annual measure adjustments by CMS require a multi-year program view to mitigate the impact of retired and newly introduced measures. For plans that reach and maintain a 4.0 Star Rating, this multi-year view is driven by a clear strategy that articulates target performance levels (aggregate and by measure) and prioritized initiatives (provider and member focused).  

Purpose-built MA networks
To support member health, quality and outcomes, development of high-performance MA networks continues to be a focus for MA Plans. These networks utilize provider reimbursement, performance incentives and care management to support end-to-end member management, taking P4P programs to the next level. Plans are also adopting a nuanced view of provider readiness and maturity – actively partnering with provider partners to outline performance targets (in year and multi-year), identify performance opportunities, and provide additional capabilities to address critical gaps.

Optimizing communication
Given the importance of Risk Adjustment and Stars, as well as the critical role providers play in these programs, MA plans are developing strategies to more effectively communicate plan priorities related to these programs. Building a holistic strategy that aligns messaging across to Risk Adjustment, Stars and other important initiatives allows plans to consistently reinforce key strategic messages. Ongoing performance monitoring and feedback loops allow for in-year adjustments that optimize end-to-end plan-driven communication.

Coordination between EGWP and Individual MA
The delayed introduction of individual market plan benchmarks provides not only rate relief but an opportunity to invest in capabilities that benefit both group and individual MA. Risk Adjustment, Stars, and Medical Cost Management are table stakes for EGWP and individual MA segments; greater collaboration allows plans to optimize scarce resources and realize performance benefits across both areas.

Bottom line? 

The 2018 Call Letter shows that continued focus in MA can yield rewards for plans that understand the Medicare Advantage performance drivers and have the needed competencies to continue to win in an evolving marketplace.

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