CMS proposes policy changes to Medicare Advantage, Medicare prescription drug benefit

The Centers for Medicare and Medicaid Services (CMS) on Thursday, November 17, 2017, released a proposed rule outlining policy changes to Medicare Advantage (MA) and the Medicare Part D prescription drug benefit (Part D). The proposed rule is intended to provide an opportunity for stakeholders to provide feedback to CMS ahead of the annual call letter process, with the draft call letter historically released in February.

The proposed rule includes policies intended to further CMS’ recently announced Patients Over Paperwork initiative, which aims to reduce regulatory and administrative requirements for health care stakeholders. In addition, the proposed rule continues the Administration’s efforts to exercise regulatory authority to help reduce out-of-pocket spending on prescription drugs.

The policies outlined in the proposed rule would apply to contract year 2019.

The proposed rule is scheduled for publication in the Federal Register on November 28, 2017, and CMS will accept comments through January 16, 2018.

Key provisions of the proposed rule are highlighted below.


Medicare Advantage and Part D

Participation in MA and Part D

The proposed rule would eliminate the requirement that providers and prescribers participate in Medicare Part B as a condition of participating in MA, Part D or the Program for All-inclusive Care for the Elderly (PACE). As an alternative, CMS proposes adopting a “preclusion list” of individuals and entities that fall within either of two categories:

  1. Are currently revoked from Medicare, are under a re-enrollment bar, and CMS determines that the underlying conduct that led to the revocation is detrimental to the Medicare program
  2. Have engaged in behavior for which CMS could have revoked the individual or entity to the extent applicable if they had been enrolled in Medicare, and CMS determines that the underlying conduct that would have led to the revocation would have been detrimental to the Medicare program

Under this policy, CMS would provide the Preclusion List to MA and Part D plans, which would be required to deny claims from or written by providers or prescribers on the list. However, before Part D plan sponsors could reject a claim or deny a beneficiary request for reimbursement for a drug because a prescriber is included on the preclusion list, the plan sponsor would have to provide a 90-day provisional supply of the drug and provide individualized written notice to the beneficiary that the drug is being covered on a provisional basis.

Star ratings

The proposed rule would codify provisions of the methodology for Star ratings, including how measures are added, updated and retired, and the methodology for calculating and weighting measures.

In addition, the proposed rule also would include new rules focused on contract consolidations in an effort to improve the accuracy of the Star rating for the surviving and consumed contracts in an effort to prevent lower-rated plans that do not receive a quality bonus payment (QBP) being subsumed into higher-rated plans that do receive a QBP, thereby increasing the size of QBPs paid to Medicare Advantage organizations (MAOs). CMS proposes to adopt an enrollment-weighted mean of the surviving and consumed contracts so that the ratings reflect the performance of all contracts involved in the consolidation.

The proposed rule also would provide for a process that would allow for scaled reductions to Star ratings in cases in which independent review entity (IRE) data for appeals measures is incomplete.

Medicare Advantage

Timing and method of disclosure documents

The proposed rule would permit plans to deliver in electronic format, rather than hard copies, of certain documents, such as the Evidence of Coverage (EOC). In addition, CMS has proposed changing the timeframe for delivery of the EOC to the first day of the annual election period rather than 15 days prior to that date.

CMS estimates that plans would save $51 million for not producing and mailing hard-copy EOCs to members.

Meaningful difference

Under the proposed rule, CMS would eliminate the requirement that permits MAOs to submit multiple bids for the same area only if the plans substantially different from one another based on key plan characteristics such as premiums, cost sharing, or benefits offered. The policy is intended to foster greater “competition, innovation, available benefit offerings, and provide beneficiaries with affordable plans that are tailored for their unique health care needs and financial situation.”

Uniformity requirements

The proposed rule would permit MAOs greater flexibility by permitting plans to reduce cost sharing for certain covered benefits, offer specific tailored supplemental benefits and offer different deductibles for beneficiaries who meet specific medical criteria. In addition, CMS proposes to permit plans to vary supplemental benefits, as well as premium and cost sharing, by each segment of an MA plan.

CMS plans to address the operational aspects of this policy in the upcoming call letter.

Medical loss ratio (MLR)

CMS proposes to allow MAOs to include spending on fraud reduction activities and medical therapy management (MTM) programs in the numerator of the medical loss ratio (MLR) formula (i.e., treat spending on fraud reduction and MTM as medical costs rather than administrative costs).

In addition, the proposed rule would reduce the amount of data that MAOs and Part D plan sponsors would have to provide to CMS annually under the MLR requirement.

Open enrollment

The proposed rule would implement a provision of the 21st Century Cures Act of 2016 that eliminates the current MA disenrollment period and establishes a new MA open enrollment period from January 1 to March 31, beginning in CY 2019. During this time, beneficiaries could make a one-time election to change MA plans or to disenroll from an MA plan and enroll in traditional Medicare. Beneficiaries making a change in the open enrollment period would be permitted to make a corresponding change in Part D coverage.

Default enrollment

The proposed rule would codify requirements for default enrollments of individuals upon Medicare eligibility. In general, individuals dually eligible for Medicaid and Medicare (dual eligibles, or duals) could be default enrolled in dual eligible special needs plans (D-SNPs) in states that have agreed to the default enrollment and in cases in which D-SNPs have been previously approved by CMS for default enrollment. Additional conditions would apply.

Part D update

Expedited substitution of certain generics and mid-year formulary changes

The proposed rule would permit Part D plan sponsors to immediately substitute newly released equivalent generics for brand-name drugs at the same or lower cost sharing if they meet revised requirements, including informing enrollees that such changes could be made.

Tiered formularies

The proposed rule would eliminate a provision of existing regulations that permits plans to exclude a dedicated generic tier from the tiering exceptions process, which is intended to lower the cost-sharing requirements of a specific drug when a specific patient demonstrates medical necessity. As an alternative, the proposed rule would provide for plans to establish a framework based on the type of drug (brand, generic, biologic product) requested and the cost sharing of the applicable alternative drugs.

Under the proposed rule, Part D plans would be permitted to immediately substitute a new equivalent generic drug for a brand-name drug at the same or lower cost-sharing level without seeking approval from CMS, provided that beneficiaries are adequately informed of the formulary change.

Meaningful difference standards

The proposed rule would provide further flexibility on Part D “meaningful difference” standards, with the policy goal of encouraging plan sponsors to offer a greater number of plans in a given service area, increasing competitive pressures. The proposed rule would allow plan sponsors to release more than one “basic” plan, as long as they are actuarially equivalent. Meaningful difference standards between “basic” and “enhanced” plans would be retained.

Part D and opiods

The Comprehensive Addiction and Recovery Act of 2016 requires CMS to promulgate new rules around drug monitoring and dispensing of opioids and other substances with abuse potential. Accordingly, CMS proposes a new framework for Part D plans to identify and manage beneficiaries deemed “at-risk” for abuse or misuse of drugs determined by CMS to be “frequently abused.” Of note, frequently abused drugs are not defined by whether they are classified as controlled substances, but by a more open process of assessing clinical experience.

Under the proposed rule, plans would be able to limit this class of beneficiaries to certain providers or pharmacies. CMS would be able to continue to enforce existing rules around opioid Drug Utilization Review, and the Overutilization Monitoring System, as well as enact a more stringent standard for drug management programs’ structural and reporting requirements.

Payment redeterminations and IRE reconsiderations

The proposed rule would lengthen the adjudication timeframe for Part D payment redeterminations and IRE reconsiderations from a maximum of 7 days to a maximum of 14 days.

Any willing pharmacy

Current regulation enforces the principle that Part D plans must offer a standard contract to pharmacies that is accessible to any pharmacy willing to dispense drugs under that plan. Responding to anecdotal evidence that these standard contracts effectively preclude certain classes of pharmacy from plan participation, the proposed rule would require that such contracts must have more readily achievable terms and conditions. This proposed change is intended to ensure beneficiary access to a range of mail-order, retail, compounding, and other pharmacy types.

Manufacturer rebates and pharmacy price concessions of point of sale

In the proposed rule, CMS also includes a Request for Information on potential policy approaches to apply some manufacturer rebates and all pharmacy price concessions to the price of a drug at the point of sale. Comments submitted could inform proposals for future rulemaking aimed at reducing Medicare beneficiaries’ out-of-pocket costs.

Maximum Out of Pocket (MOOP) amounts

In the proposed rule, CMS considers changes to the formula used to determine MOOP amounts in an effort to encourage Part D sponsors to voluntarily offer plans with lower MOOP limits, based on local market conditions, rather than actuarial standards set by national Medicare Part A and B cost sharing benchmarks. Any change to MOOP policy would occur in future rulemaking.


Anne Phelps
Principal | Deloitte Risk and Financial Advisory
US Health Care Regulatory Leader
Deloitte & Touche LLP
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Tom Delegram
Managing Director| Deloitte Risk and Financial Advisory
Deloitte & Touche LLP

Daniel Esquibel
Senior Manager | Deloitte Risk and Financial Advisory
Deloitte & Touche LLP

Ethan Joselow
Manager | Deloitte Risk and Financial Advisory
Deloitte & Touche LLP

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