May 28, 2020

CMS Final Rule Strengthens Medicare Advantage and Part D Programs

On May 22, 2020, the Centers for Medicare and Medicaid Services (CMS) issued a final rule that implements a subset of the proposals from the February 18, 2020, proposed rule (85 FR 9002).

The rule features several immediate regulatory actions that can be implemented before the contract year 2021 bid deadline. CMS understands that the entire healthcare sector is focused on caring for and providing coverage for COVID-19, so this will be the first iteration of a final rule, with a second release expected to follow.

CMS plans to make any provisions adopted in the subsequent, second final rule, although they will be effective on or before January 1, 2021 and applicable no earlier than January 1, 2022.

The first final rule provides additional transparency and program stability and allows Medicare Advantage (MA) organizations and Part D plan sponsors to develop more innovative plan designs. The provisions in this final rule will result in an estimated $3.65 billion net reduction in spending by the federal government over 10 years.

Providers participating with these plans are encouraged to review a fact sheet on major provisions finalized in this rule. They include several changes to strengthen and improve the MA and Part D programs for contract year 2021.


Enhancements to the Part C and D Programs

CMS adopted a series of changes in the March 31, 2020, Interim Final Rule with Comment (CMS-1744-IFC) for the 2021 and 2022 Star Ratings to accommodate challenges arising from the COVID-19 public health emergency. These changes modify the calculation of the 2021 and 2022 Part C and D Star Ratings to address the expected disruption to data collection and its impact on measure scores posed by the COVID-19 pandemic. Also, CMS increased measure weights for patient experience/complaint measures and access measures to empower patients to work with their doctors to make healthcare decisions that are best for them.

Part C and Part D Medical Loss Ratio (MLR)

CMS is finalizing its proposal to amend the MA medical loss ratio (MLR) regulation, so the incurred claims portion of the MLR numerator includes all amounts that an MA organization pays (including under capitation contracts) for covered services. They include amounts paid to individuals or entities that do not meet the definition of “provider.”

An MLR is expressed as a percentage, generally representing the percentage of revenue used for patient care rather than for such other items as administrative expenses or profit. MA organizations and Part D sponsors are required to report their MLRs and are subject to financial and other sanctions for a failure to meet the statutory requirement that they have an MLR of at least 85%.

In addition, CMS added a deductible-based adjustment to the MLR calculation for MA medical savings account (MSA) contracts receiving a credibility adjustment. These changes will help MA organizations that may be concerned about their inability to meet the MLR requirement as a result of random variations in claims experience, or the increased risk of working with high-deductible plan enrollees.

Medicare Advantage (MA) and Cost Plan Network Adequacy

MA organizations maintain a contracted network that can deliver medically necessary care and is compliant with CMS network adequacy standards. In the final rule, CMS will not be making any changes to its base time and distance standards and is finalizing the standards as proposed. Time and distance metrics measure the relationship between the approximate locations of beneficiaries and the locations of the network providers and facilities. For diagnostic radiology here are the following base and distance standards for each county type designation, unless modified through customization:

MA plans must ensure both of the following:

  • At least 85% of the beneficiaries, who reside in micro, rural or CEAC counties, have access to at least one provider/facility of each specialty type within the published time and distance standards.
  • At least 90% of the beneficiaries, who reside in large metro and metro counties,
    have access to at least one provider/facility of each specialty type within the published time and distance standards.

As proposed and finalized, there will be a customization process to allow CMS to adjust standards at the county and provider/facility type level, where needed, to account for factors, such as utilization or supply patterns that indicate the base time and distance standards do not reflect prevailing patterns of community healthcare delivery.

To encourage and account for telehealth providers in contracted networks, CMS will provide MA plans a 10% credit towards the percentage of beneficiaries that must reside within required time and distance standards when the plan contracts with telehealth providers for dermatology, psychiatry, cardiology, otolaryngology, neurology, ophthalmology, allergy and immunology, nephrology, primary care, gynecology/ OB/GYN, endocrinology and infectious diseases.

Finally, in states with Certificate of Need (CON) laws or other state-imposed, anti-competitive restrictions that limit the number of providers or facilities in the state or a county in the state, CMS will award the MA organization a 10-percentage point credit toward the percentage of beneficiaries residing within published time and distance standards for affected providers and facilities.

Implementing Certain BBA of 2018 Provisions

Special Supplemental Benefits for the Chronically Ill (SSBCI)

CMS is finalizing a minor policy modification to SSBCI. Previously, CMS limited the chronic conditions an enrollee must have to be eligible under SSBCI to those conditions outlined in the Medicare Managed Care Manual. However, the agency recognizes there may be other chronic conditions that may meet the statutory definition of a chronic condition but are not included in the manual. Therefore, beginning in contract year 2021, CMS will allow plans to target other chronic conditions.

“Look-Alike” Dual Eligible Special Needs Plan

CMS is finalizing its proposal to limit Dual Eligible Special Needs Plan (D-SNP) “look-alikes.” These look-alike plans have similar levels of dual eligible enrollment as D-SNPs but void the federal regulatory and state contracting requirements applicable to D-SNPs.

The Bipartisan Budget Act (BBA) of 2018 requires CMS to establish additional requirements related to Medicaid integration for D-SNPs. Phasing out D-SNP look-alikes will strengthen the ability of states and CMS to meaningfully implement existing and new statutory requirements for D-SNPs that Congress created in the BBA.

The final rule allows one additional year for existing D-SNP look-alikes to phase out. Under the final rule, D-SNP look-alikes may transition their membership into a D-SNP or another qualifying zero-premium plan offered by the MA organization beginning for the 2021 plan year.

Questions about these provisions may be directed to Alicia Blakey, American College of Radiology® senior economic policy analyst.