Volume 22, Number 9
May 5, 2016
News and Analysis of Medicare Advantage, Medicare Part D and Managed Medicaid
Contents
2
Medicaid Insurers See
Ups and Downs During
Busy RFP Season
3
Table: Enrollment Changes
For Medicare/Medicaid
Sponsors, 1Q 2015-2016
4
Amid Industry Consolidation,
MA Plans Foresee Growth
Opportunities
5
Plans Cite Vendors,
Providers as Key to Lifting
Their Star Ratings
8
News Briefs
Final Medicaid Managed Care Rule Retains
MLR, Network Adequacy Standards
CMS on April 25 issued a long-awaited Medicaid managed care rule, finalizing a
sweeping set of provisions for states and health plans intended in part to better align
Medicaid with other health care programs, strengthen actuarial soundness payment
provisions and improve the quality of care for Medicaid and Children’s Health Insurance Program beneficiaries. While industry observers say the regulations provide a
proper update — the first major one to the Medicaid program since 2002 — and reflect
the changes that have occurred in Medicaid since then, there’s much work to be done to
implement and comply with the far-reaching rule.
The final rule, slated for publication in the May 6 Federal Register, came nearly a year
after its May 2015 proposal (MAN 6/4/15, p. 1). The fact that it more than doubled in
length to 1,425 pages to accommodate the 900 or so comments it received from stakeholders yet contained very few changes “indicates that CMS clearly had an idea where
they wanted to go and spent a lot of time thinking about it,” observes Jeff Myers, president and CEO of the Medicaid Health Plans of America (MHPA) trade group.
Among some of the many key provisions, CMS with only one minor tweak finalized a requirement that the medical loss ratio be calculated, reported and used in the
Medicaid managed care rate setting by establishing an 85% minimum MLR. Instead of
requiring that fraud prevention activities be included in the numerator of the MLR calculation, the agency specified that expenditures on fraud prevention activities adopted
for the private market would be incorporated into the Medicaid MLR calculation only if
such regulations were amended in the private market.
continued on p. 7
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One-Third Financial Audit Provision Creates
Unknowns Around Fines, Past Performance
While much of the attention stemming from last month’s release of the final 2017
payment notice and Call Letter has been focused on payment-related modifications for
plans — most notably, a new bidding process for Medicare Advantage Employer Group
Waiver Plans and greater use of the encounter data system for MA risk adjustment
(MAN 4/7/16, p. 1) — there’s one seemingly minor provision in the letter that could
impact plans if it factors into CMS’s annual past performance assessments, industry observers caution. That provision for the first time attaches potential enforcement actions,
such as civil monetary penalties (CMPs), to the findings of so-called “one-third financial
audits.”
In the Call Letter posted April 4, CMS said these annual audits of the financial
records of at least one-third of MA organizations and Prescription Drug Plans (PDPs)
have uncovered “certain findings with adverse beneficiary impact, such as incorrect or
increased cost-sharing or copayments for beneficiaries” that “warrant further enforcement actions.” The one-third financial audits are separate from program audits and
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2 Medicare Advantage News
annual past performance reviews that look at compliance with program requirements, and are conducted by
CMS’s Office of Financial Management.
“Typically policy in these areas is driven by anecdote and I think what this tells us is there were enough
instances of poor financial performance — not fiscal
solvency, but being able to keep the books, having significant controls, etc. — that the agency decided, ‘No,
this is going to be part of what we require,’ especially if it
proves that it negatively impacts beneficiaries,” observes
Bruce Merlin Fried, managing partner in the Washington,
D.C., office of the Dentons law firm.
But details are still murky and likely to be hashed
out in forthcoming guidance, and the biggest unknowns
are what type of enforcement action CMS will take and
whether it will factor into annual past performance assessments conducted annually by CMS, suggest Fried
and others. Although CMS could potentially issue a corrective action plan, a dunning notice to resolve financial
errors and a fine, insiders suspect the likely action would
be the CMP.
“Historically, plans have been given a corrective action plan,” explains Olga Walther, senior legislative and
policy advisor at Gorman Health Group, of the one-third
financial audits. “That’s already pretty time-intensive
and requires plans to go through and review all their
controls and basically change whatever they’re doing
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May 5, 2016
wrong.” With the new provision, there’s the potential
that CMS could impose a CMP instead of offering the
opportunity to submit a corrective action plan, she suggests. “But we don’t know because we haven’t seen the
guidance.”
“While CMS does not explicitly state this, it is likely
that CMPs resulting from the financial audits would tie
into the larger past performance evaluation process,”
weighs in Michael Adelberg, a former top CMS official
who now is senior director at FaegreBD Consulting.
“This means that a poor financial audit result, because
of the points assigned to the fine, could have significant
implications well beyond the audit.”
Each year, CMS conducts a comprehensive review of
the past performance of MA organizations, PDP sponsors
and Medicare cost plans. CMS on a biannual basis posts
“outlier” results from its review, listing those organizations identified as poor performers. If CMS finds a plan’s
performance to be significantly impaired, it may deny
the contractor’s request to expand a service area. Since a
CMP accrues demerits under that system, a poor financial audit could magnify the number of demerits counted
toward the plan.
While it remains to be seen whether the one-third
financial audits will become one of the considerations in
the past performance review, “what we should assume is
more of the same,” suggests Fried. “And by that I mean
CMS and in particular the Medicare Advantage/Part D
team has increasingly over the years been more stringent
in requiring plans to meet their regulatory, subregulatory
and contractual obligations, and I think we should assume that will continue.” “Across the MA program, CMS appears to be
strengthening its regulatory hand,” adds Adelberg. “This
provision is a small piece of a larger trend.”
Contact Adelberg at michael.adelberg@FaegreBD.
com, Fried at [email protected] and Walther via
[email protected]. G
Medicaid Insurers See Ups and
Downs During Busy RFP Season
In the midst of earnings releases and conference calls
held by publicly traded Medicare and Medicaid insurers
in late April and early May, the Pennsylvania Dept. of
Human Services disclosed earlier than anticipated that
eight plans total, including three large insurers, had won
contracts to serve the state’s mandatory Medicaid managed care program for up to five years. The big winners
were incumbent UnitedHealth Group, which won across
all five regions, and Centene Corp., which was new to
the state and selected to serve in three regions. But the
other major incumbent, Aetna Inc., was awarded only
EDITORIAL ADVISORY BOARD: MICHAEL ADELBERG, Senior Director, FaegreBD Consulting, KEITH R. DUNLEAVY, M.D., CEO, Inovalon, Inc., JOHN GORMAN, Executive
Chairman, Gorman Health Group, LLC, GARY JACOBS, Executive Vice President, CareCentrix, Inc., MARK S. JOFFE, Attorney, DANIEL C. LYONS, M.D., CEO, Skippack Creek
Consulting, LLC, TRICIA PURDY, Vice President, UnitedHealth Group.
May 5, 2016
Medicare Advantage News
one region, posing an estimated $1 billion loss in revenue
for 2017.
When questioned by Stifel analyst Thomas Carroll
about the loss, Aetna Inc. Chairman and CEO Mark
Bertolini during an April 28 earning conference call remarked, “[W]e win more than we lose. This is a much
more competitive market than it has been in the past.
Incumbents have less of a lock on these contracts than
they have in the past as state governments struggle to
control the costs around Medicaid, looking for innovation.” He pointed out, however, that Aetna has 230,000
more Medicaid members than it did a year ago, that the
company has gained expansions in other states and that
it expects to grow through the remainder of this year in
Medicaid.
The new Pennsylvania contracts cover Temporary
Assistance for Needy Families, Children’s Health Insurance Program and Aged, Blind and Disabled enrollees in
the state’s mandatory Medicaid managed care program,
pointed out Carroll in an April 27 research note. The
three publicly traded winners may have a better shot
at participating in the long-term care contract, which
remains at large and is worth another $10 billion, he
suggested. The contracts just awarded are valued at approximately $11 billion in overall premium revenue,
added Stifel.
Reporting earnings a day before Pennsylvania disclosed plans to negotiate contracts with the eight managed care organizations, Centene Corp. boasted overall
membership growth in the first quarter of 162% to 11.5
million enrollees, which was driven by its recent acquisition of Health Net, Inc. and includes 47% more Medicaid
members. The company also reported adjusted earnings
of 74 cents per share, excluding Health Net acquisitionrelated costs and other items, compared with 55 cents
in the first quarter of 2015, and a 36% year-over-year
revenue increase to $7 billion. The company’s results
included eight days of Health Net’s financials.
3
During an April 26 conference call to discuss earnings for the quarter ending March 31, Chairman, President and CEO Michael Neidorff added that there are a
“lot of contracts” left to be awarded by states this year,
including Alabama in the fourth quarter, Louisiana on
July 1 and Missouri, which just issued a RFP on April 29
(see brief, p. 8).
Meanwhile, Molina Healthcare, Inc. reported a
decline in adjusted net income per share from 62 cents
in the first quarter of 2015 to 51 cents in the most recent
quarter. Strong enrollment growth of 1.3 million members from the first quarter of last year — representing the
largest membership gain during sequential quarters in its
35 years of doing business — generated approximately
$1 billion or 34% more premium revenue in the first
quarter than in the comparable 2015 quarter.
During an April 28 conference call to discuss firstquarter earnings, CEO J. Mario Molina, M.D., explained
that higher-than-anticipated enrollment growth, particularly in the exchanges, “stretched” the company’s operational resources. And a drop in per-member per-month
revenue from $354 to $324 — due in part to “lower
Medicaid expansion rates…and the general failure of
Medicaid rates to keep [up] with the growing medical
care costs” — outpaced a 5% decline in medical costs to
$291 PMPM, he said.
As a result, the company lowered its 2016 adjusted
earnings per share outlook to a range of $2.50 to $2.95.
Despite the revision, the company said it expects to
achieve its long-term goal of 1.5% to 2% profit margin by
the fourth quarter of 2017. And although the insurer did
not compete for the Pennsylvania contracts, Molina added that the company will continue to respond to RFPs,
“primarily to enter new states, especially as they relate to
Medicaid long-term supports and services.”
WellCare Health Plans, Inc., which also did not bid
for the Pennsylvania business, said it experienced modest membership growth in Medicaid health plans and
Enrollment Changes for Selected Medicare/Medicaid Sponsors by Product Line,
1Q 2015 – 1Q 2016
Company
Medicare Advantage
% Change
Medicare PDP
% Change
Medicaid
% Change
Aetna Inc.
1,332
8%
2,873
26%
1,567
17%
Anthem, Inc.
571
-2%
953
-2%
6,049
8%
Centene Corp.
303
1278%
NM
NA
6,222
47%
3,156
0%
4,834
10%
388
15%
43
-4%
NM
NA
3,547
21%
3,530
10%
4,990
-2%
5,450
8%
326
-5%
1,025
-6%
2,379
1%
Humana Inc.
Molina Healthcare, Inc.
UnitedHealth Group
WellCare Health Plans, Inc.
Enrollment figures in thousands
NM=no membership; NA=not applicable
SOURCE: AIS, based on estimates from Stifel and company reports; reflects enrollment as of March 31, 2016, compared with the first quarter of 2015.
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4 Medicare Advantage News
medical loss ratio improvement, mainly due to an improved cost structure and its new PBM agreement with
CVS Health Corp.’s CVS/caremark unit that went into
effect on Jan. 1.
During a May 3 conference call to discuss first quarter earnings, CEO Kenneth Burdick said the company
foresees “many growth opportunities in Medicaid and
Medicare, particularly with program expansion to include complex populations and a growing M&A pipeline.” He cited WellCare being selected as one of three
insurers (along with UnitedHealth and Centene) to serve
Nebraska’s new integrated Medicaid managed care program as an example, as well as its pending acquisition
of Advicare Corp., a Medicaid MCO in South Carolina
(MAN 3/10/16, p. 8).
Anthem, Inc., meanwhile, remained positive on its
Medicaid outlook despite margin compression in the
segment. “We continue to expect Medicaid margins to
compress from 2015 levels to a more normalized level,
and we are monitoring the performance of this business
appropriately,” said President and CEO Joe Swedish
during an April 27 conference call. With an estimated $68
billion of new business to be awarded by the end of 2020,
he said the pipeline for Anthem’s Medicaid business
“remains substantial.”
Contact Carroll at [email protected]. G
Amid Industry Consolidation, MA
Plans Foresee Growth Opportunities
Publicly traded Medicare Advantage plan sponsors see continued enrollment growth in their Medicare
products, according to earnings reports and conference
calls with investors held in late April and early May. Yet
some expressed concerns about upcoming changes to the
Employer Group Waiver Plan (EGWP), risk adjustment
and star ratings programs that could impact their MA
business.
Reporting earnings for the quarter ending March
31, 2016, Aetna Inc. observed 9% sequential individual
MA member growth, which Chairman and CEO Mark
Bertolini during an April 28 earnings conference call
suggested was a reflection of attractive product design
as well as “industry-leading star ratings.” Up from 81.3%
in the year-ago quarter, its government medical loss ratio
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May 5, 2016
(MLR) in the first quarter of 2016 was 83.4%, which the
company attributed to “lower favorable development of
prior years’ health care cost estimates in 2016.”
And while net income in the health care segment fell
from $766.5 million in the first quarter of 2015 to $758.8
million in the most recent period, operating revenue was
up 4% to a record quarterly level of $15.7 billion. That
increase was driven by “higher health care premium
yields and membership growth in our Government
business, partially offset by membership declines in our
group commercial insured products,” said Chief Financial Officer (CFO) Shawn Guertin during the company’s
earnings call.
Humana Inc., which Aetna plans to acquire in the
second half of 2016, also observed lower net income and
increased MA membership. Reporting earnings on May
4, Humana said it had more than 2.8 million individual
MA members as of March 31, up 5% from the prior-year
quarter. And membership in its stand-alone Prescription
Drug Plan offerings grew 10% to more than 4.8 million
members. Membership increases in both segments contributed to a 6% rise in revenue to $6.18 billion for the
health care services segment. Meanwhile, net income for
the recent quarter was $234 million, or adjusted earnings
per share of $1.56, compared with $430 million or $2.82
for the comparable 2015 quarter.
Who Would Acquire Divested MA Assets?
As Aetna prepares to buy Humana and Anthem, Inc.
expects to close its planned acquisition of Cigna Corp.
later this year, talk of potential MA divestitures surfaced
on some earnings calls. When asked by Chris Rigg of
Susquehanna Financial Group whether Centene Corp.
is looking to purchase MA assets divested as a result of
the large pending acquisitions, Chairman, President and
CEO Michael Neidorff stated that Centene does not currently participate in any asset auctions. “The controlling
issue, and particularly in the Medicare-related business,
will be the network,” he explained. “If they have a network that’s not in our sweet spot, which is at the lower
socioeconomic level, then we won’t have any interest
in it.” He pointed to Centene’s own robust pipeline and
organic growth opportunities.
In addition to growing its Medicaid membership
from the March 24 acquisition of Health Net, Inc., the
company served more than 303,000 Medicare and dualeligible beneficiaries and expects to launch additional
MA products in four Centene states in 2017, said Neidorff. Centene reported an 88.7% MLR, compared with
89.8% in the first quarter of 2015, but gave 2016 MLR
guidance in the range of 87% to 87.5% to reflect the addition of Health Net, which CFO Jeffrey A. Schwaneke
said operates with a “lower health benefits ratio due to
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May 5, 2016
Medicare Advantage News
the higher-mix commercial business and growth in the
health insurance marketplace, which operates in a lower
[HBR]/higher [administrative] ratio.”
With a year-over-year MA membership increase
of 10%, or more than 325,000 seniors, UnitedHealth
Group recorded first-quarter revenues in its Medicare
& Retirement segment exceeding $14 billion, up from
nearly $12.8 billion in the first quarter of 2015. And while
Part D membership decreased by 70,000 people due to
a planned pull-back in subsidized Part D products, the
company said it expects to return to growth in that segment in 2017.
Finally, first-quarter earnings reported on May 3
by WellCare Health Plans, Inc. exceeded company and
analyst expectations, leading the insurer to raise its 2016
financial guidance to between $4.55 and $4.70 from a
previous guidance range of $4.35-$4.60. The company
reported adjusted earnings per share of $1.06, up from
53 cents in the prior-year quarter, and an improved
Medicare MLR of 84.6%, compared with 87.1% in firstquarter 2015.
As expected, year-over-year Medicare membership
fell by 60,000 lives, due to a “more disciplined bid process” for 2016 aimed at “stabilizing and improving the
business,” explained CEO Ken Burdick during the company’s May 3 conference call. Nevertheless, Burdick said
the company is anticipating growth in the remainder of
the year.
MCOs Brace for EGWP, Risk Changes
During Aetna’s April 28 conference call, Bertolini
expressed concerns about several items in the final 2017
payment notice and Call Letter released April 4, including the new bidding process for EGWPs that will result
in pay cuts in 2017 and 2018 (MAN 4/7/16, p. 1). “We will
continue to work with CMS to refine the employer group
payment methodology for 2018 to appropriately reflect
the differences between employer group and individual
plans,” he vowed. In response to a question from Andy
Schenker of Morgan Stanley on EGWPs, Bertolini said
Aetna continues to “see strength in the employer pipeline on Medicare Advantage,” and hasn’t seen “anyone
dissuaded from considering [the plans] given what the
economic dynamics will be for 2017.” It’s 2018, he said,
that is “particularly concerning.”
He added that CMS’s decision to implement the Categorical Adjustment Index option for offering short-term
relief on star quality ratings for MA plans serving lowsocioeconomic status beneficiaries and a six-category risk
adjustment system for dual-eligible beneficiaries brings
“unnecessary complexity to star ratings and instability in
the risk adjustment program.”
5
Likewise, UnitedHealth CEO and Director Stephen
Hemsley expressed his disappointment about the EGWP
pay cuts and said the MA group benefit continues to be a
“very strong value proposition” and the insurer is seeing
that play out in pipeline development for 2017. “There’s
a lot of work for us to do in terms of continuing to advocate for seniors on behalf of this very popular and effective program,” he added.
Burdick, meanwhile, said WellCare was pleased with
the changes to both risk adjustment and star ratings.
Nevertheless, CFO Andrew Lynn Asher added that WellCare’s own modeling showed the change to star ratings
having a “fairly minimal impact” and that “we’ve got
more work to do so that it fully adequately reflects the
difference in serving this population.” G
Plans Cite Vendors, Providers as
Key to Lifting Their Star Ratings
Medicare Advantage plans can and should do more
in working with vendors and providers if they want to
boost their CMS star quality ratings, executives of two
high-star-rated plans told a session of the World Health
Care Congress in Washington, D.C., April 12. And part
of the work may involve the federal Consumer Assessment of Healthcare Providers and Systems (CAHPS)
survey, which forms the basis for numerous star-rating
measures. Both executives called CAHPS problematic
but said additional surveying of their members can help
illuminate and suggest solutions to the issues in it.
One ratings area on which work with vendors is
critical is pharmaceuticals, said Robert Brett, vice president, Medicare at Dayton, Ohio-based insurer CareSource. The key vendor on this is the pharmacy benefit
manager, and “make sure you hold their feet to the fire
with performance guarantees” that affect drug-related
star measures, advised Brett, who formerly was an executive at the CVS Caremark PBM unit of CVS Corp.
He suggested that MA plans negotiate both “upside and
downside” risk for their PBMs based on creating metrics
tied to specific Part D star-rating measures.
All PBMs, he said, have or can develop clinical
programs involving “face-to-face interaction” with plan
members. Brett recommended that MA plans use those
programs despite potential “sticker shock” regarding
their cost because of the potential benefits in star ratings.
One related means that CareSource is looking into as
a way to improve patient adherence on Part D drugs and,
as one result, aid star ratings is “medication synchronization” programs. The term refers to efforts by pharmacists
to adjust prescription quantity and refill schedules so that
the plan member comes into the pharmacy perhaps once
a month, meeting with the pharmacist and obtaining
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6 Medicare Advantage News
May 5, 2016
all the needed refills on maintenance medications. This,
along with allowing “90-day fills” of such medications,
could result in “less opportunity for failure” on Part D
measures, Brett said, as well as save money.
Healthfirst has started to use medication synchronization itself, said the session’s other speaker, Joyce Chan,
vice president, clinical improvement at New York Citybased four-star MA plan Healthfirst. She noted, however,
that this does not overcome a basic problem for the notfor-profit plan’s largely very poor population: they often
can’t afford the copayments on drugs.
Integrate Provider Actions When Possible
Incentivizing providers to take specific actions is
another key for improving star ratings, both speakers
said, but there are obstacles in accomplishing this as well.
Brett, for instance, noted that CareSource serves many rural areas where its network providers don’t have a lot of
its plan members. It therefore is a challenge to convince
those providers to take specific steps that could increase
their workload, he said. CareSource, he added, tries to
find ways to integrate tasks that could aid star ratings
into the providers’ existing daily workflows, but this too
is a “big challenge.”
Healthfirst also faces these kinds of issues, according
to Chan, since even though it is provider-sponsored, it
is “not fully integrated.” While it serves an urban area,
the insurer still needs providers to have at least about 50
Medicare members in the plan to yield reliable data, she
said. Obstacles notwithstanding, she added, Healthfirst
has been able, with the aid of a portal on its website, to
get more “robust reporting” from providers that is helping its scores on star measures.
Both speakers indicated their plans face major hurdles in getting good scores on star measures stemming
from CAHPS questions because of the nature of that
survey, which was developed by the federal Agency for
Healthcare Research and Quality.
CAHPS Survey Has Drawbacks
Access to care, for instance, is an issue in the New
York area Healthfirst serves, said Chan, and “CAHPS
is not adjusted for geography.” Since members may
respond to the CAHPS questions with concerns about
access, “this is an area where we continue to struggle and
focus,” she acknowledged.
Chan pointed out that another issue on CAHPS is
small sample sizes that could mean a plan deserving a
four-star rating on a measure might get only two stars
depending on who responds to a question.
Brett had somewhat of a related concern about
member dissatisfaction regarding problems in getting
their prescriptions filled. CareSource, he said, found a big
correlation between such dissatisfaction, as reflected in
CAHPS, and patients who use mail order for obtaining
Rx drugs, “so we need to look at this.”
One thing potentially aiding in such investigations,
Chan observed, is that CMS will allow plans to ask members supplemental questions to get more information
about problems turning up in CAHPS responses.
Contact Brett at [email protected] and
Chan at [email protected]. G
Upcoming AIS Webinars
Case Study of a Medicare
Advantage Health Plan/
Health System Partnership
CMS’s Final Medicaid
Managed Care Rule: Sweeping
Changes Ahead for MCOs
May 12, 2016
May 19, 2016
Michael Van Scoy, M.D., of Essentia
Health and Ghita Worcester of UCare
discuss the details of how their valuebased partnership to offer a Medicare
Advantage PPO is organized and what
its goals are.
Bob Atlas of EBG Advisors, Jeff Myers
of the Medicaid Health Plans of America
and Matt Salo of the National Association
of Medicaid Directors will detail and
assess the impact of CMS’s huge new
final Medicaid managed care rule.
Visit www.AISHealth.com/webinars or call 800-521-4323
Web addresses cited in this issue are live links in the PDF version, which is accessible at
MAN’s subscriber-only page at http://aishealth.com/newsletters/medicareadvantagenews.
May 5, 2016
Medicaid Rule Includes MLR Floor
continued from p. 1
MHPA, however, “respectfully disagrees” with a
standardized MLR, says Myers. “We continue to view
that a federalized MLR is unnecessary and arbitrary in
the Medicaid system because the MLR is already built
into health plans’ contracts and that the states have an
incentive to ensure the plans are spending appropriately
on the medical loss side and on the administrative side
because of the needs that Medicaid enrollees have,” he
argues.
Since the majority of states with MLR mandates
require at least an 85% MLR, a federal-level requirement
is not a dramatic shift for plans. But in the long term it
could have some impact on states’ efforts to innovate
care management, suggests Myers. “As the feds do more
and more to define what is an MLR and what is an ALR
[administrative loss ratio] — which has traditionally been
a state prerogative — to make decisions about how…to
divvy up the cost of services, it makes it more and more
standardized,” he tells MAN. “And one of the underlying principles that MHPA fully supports is that state
Medicaid programs should be tailored to their citizens,
and our belief [is] that over time this is going to have an
impact on how states design future programs.”
MLR Minimum May Impact Innovation
So if a plan, for example, uses text messaging to reach
beneficiaries who are between residences, some states
could consider the phone and potentially the data charges as administrative costs, whereas others may view them
as part of care management that would be included in the
cost of providing medical services. “I know that’s a small
issue, but it’s becoming more of an important issue and it
illustrates why a national MLR where it’s already in state
contracts makes very little sense,” he adds.
But CMS acknowledged it lacks statutory authority
to enforce the MLR standard through remittances, points
out Bob Atlas, president of the EBG Advisors unit of
health care law firm Epstein, Becker & Green. CMS had
initially proposed that states impose a remittance requirement on plans that fail to meet the state-established MLR,
but in response to comments said that enforcing the
minimum MLR by demanding remittances will be up to
state discretion. Still, CMS “encourages” states to impose
remittance requirements on plans that fail to meet the
state-established MLR and determine the methodology
for doing so, according to the rule. Eliminating the remittance requirement “substantially takes the teeth out of
the MLR minimum,” remarks Atlas.
“It appears that CMS will use their rate approval
authority under the rubric of actuarial soundness to as-
Medicare Advantage News
7
sess whether proposed rates are likely to yield at least
an 85% MLR,” he continues. “If a set of rates suggests an
MLR will come in low, CMS may judge the rates to be
actuarially unsound. That, presumably, would nudge the
state to lower the capitation amounts and thus increase
the expected MLR.”
The rule did not, however, establish a specific upper
MLR limit, on the basis that “states are better positioned
to establish and justify a maximum MLR threshold,
which takes into account the types of services being delivered, the state’s administrative requirements, and the
maturity of the managed care program.”
Rule Specifies Pediatric, Specialty Providers
The rule also establishes a first-ever federal mandate
that states put in place network adequacy standards with
time and distance requirements. While network adequacy has always been a “general requirement” and this is
nothing new given that 31 states have time and distance
standards for primary care, the new requirement is significant because it specifies providers at a high level of
detail beyond primary and specialty care, observes Megan Renfrew, a former CMS technical director who now
is a director in Medicaid IT firm Cognosante’s Solutions
Lab. “What CMS has done in this new rule is specify a
list of providers for whom it thinks it is particularly important that adequate access be provided,” she says. For
example, it distinguishes between pediatric and adult
providers in a number of settings, including dental care,
and mentions pharmacy providers.
“Plans are going to have to…see if networks are
adequate for these types of providers,” she recommends.
“So the initial burden on plans may be just evaluating
their own networks, but if they feel like they’re not close,
they’re going to have to go out and find other providers
to contract with.”
Myers points out that this is another change that
doesn’t necessarily support innovation. While MHPA
is generally in favor of time and distance standards,
“they don’t take into account MCO innovations like
telehealth,” he says. MHPA was pleased, however, to see
that a provision that states may make a capitation payment for enrollees with a short-term stay in an Institution
for Mental Disease (IMD) was finalized as proposed.
“It shows that CMS realizes the importance of access to
behavioral health services for this population,” he adds.
In addition, the rule adopted several proposed
changes to the way grievances and appeals are handled
by managed Medicaid plans. These include adding prepaid ambulatory health plans to the types of entities
subject to grievance and appeals standards, eliminating
time limits for filing grievances, and allowing an enrollee
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8 Medicare Advantage News
or provider 60 days from the time of receiving notice of
an adverse benefit determination to request an appeal.
The rule also clarified as proposed that plans must
cover any drug deemed medically necessary under a
prior authorization process if the drug is not included on
the plan’s formulary. Myers says that provision basically
“makes clear something that plans have always believed,
which is that if you provide outpatient drugs to Medicaid
you have to comply with the requirements of [Section]
1927” of the Social Security Act, which authorized the
Medicaid Drug Rebate Program.
Meanwhile, plans are “breathing a small sigh of relief” now that CMS has ditched a proposal to keep newly
eligible Medicaid beneficiaries in fee-for-service for 14
days before putting them into a managed Medicaid plan,
adds Atlas. “That’s also a relief for states, which might
not want to maintain a whole fee-for-service processing
infrastructure for people who are only going to be on
there for 14 days. And the plans would just as soon get
people from the first day they’re eligible.”
May 5, 2016
The final rule also calls for the creation of the firstever quality rating system in Medicaid. During a news
briefing held April 25, CMS Center for Medicaid and
CHIP Services Director Vikki Wachino said that system
will align with the ratings system currently in place for
health insurance marketplace coverage. The ratings system will be developed and implemented over the next
five years to give CMS time to work with stakeholders,
she said. Wachino added that most of the changes will be
implemented in phases beginning in 2017.
View the final rule under the May 2 From the Editor
entry at your subscriber-only MAN Web page: https://
aishealth.com/newsletters/medicareadvantagenews.
Contact Atlas at [email protected], Myers via
Joe Reblando at [email protected] or Renfrew via Liz
Goar for Cognosante at [email protected]. G
Atlas and Myers will join Matt Salo of the National Association of Medicaid Directors on May 19 for an AIS webinar on
the final rule. To register, go to https://aishealth.com/marketplace/c6a14_051916.
NEWS BRIEFS
u The Missouri Dept. of Social Services on April
29 posted an RFP for vendors to participate in the
Medicaid managed care program, MO HealthNet,
which the state plans to take statewide beginning
May 1, 2017. The program currently operates in
54 counties, with the remaining counties receiving
Medicaid services through a state-run program. Vendors can bid to serve all four regions for a 14-month
contract term through June 30, 2018. The state plans
to award contracts to three plans, which will receive
performance incentives based on a 5% capitation
withhold, compared with the current 2.5% capitation
withhold. Performance measures include encounter
data completeness/accuracy, provider directory
completeness/accuracy and care management. Bids
are due July 1, 2016, and contracts will be awarded
by Oct. 1. Visit http://dss.mo.gov/mhd/mc.
u CMS has released details of its planned Part D
Medication Therapy Management (MTM) Program
Area Pilot. The review of approved MTM programs
will include all beneficiaries enrolled in the sponsor’s
calendar year 2014 MTM programs and all members
enrolled in 2015, according to a March 15 memo released via the Health Plan Management System. The
three areas CMS plans to evaluate are: enrollment/
disenrollment, comprehensive medication review
(CMR) and targeted medication review. For example,
to ensure that MTM program enrollees were offered
and/or provided appropriate, complete and accurate
CMRs and that CMRs were summarized in CMS’s
standardized format, CMS will select a targeted sample of 15 cases from the 2015 MTM universe, according to the March 15 document. Plans will be scored
on four conditions, including an invalid data submission worth one point; IDS conditions will be cited
when a sponsor is not able to produce an accurate
universe within three attempts, said CMS. The pilot
results will not be included in a plan’s overall audit
score nor will they be displayed in the final audit
report. View the memo at www.cms.gov/Medicare/
Compliance-and-Audits/Part-C-and-Part-DCompliance-and-Audits/ProgramAudits.html.
u PEOPLE ON THE MOVE: Anthem, Inc. promoted
John Gallina, senior vice president and chief financial officer for the commercial and specialty business
division, to executive vice president and CFO,
effective June 1. Gallina will replace CFO Wayne
DeVeydt, who will step down due to family commitments and philanthropic work, effective May 31….
Centene Corp. hired Christopher Isaak to serve as
senior vice president, corporate controller and chief
accounting officer. Isaak was most recently vice
president, corporate controller and chief accounting
officer at Viasystems Group, Inc.
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