CMS Releases Advance Notice and Draft Call Letter

May 02, 2016

Earlier this year, CMS released proposed changes to the 2017 Medicare Advantage and Part D programs via the Advance Notice and Draft Call Letter.

Companies with Medicare Advantage plans saw stocks rally because of the 1.35% proposed increase in payment for next year. In a news release announcing the proposal, CMS highlighted the growth of the Medicare Advantage program:

  • Medicare Advantage enrollment has increased by more than 50% since passage of the Affordable Care Act (ACA); 17.1 million individuals (32% of all Medicare beneficiaries) are now enrolled in a Medicare Advantage plan
  • The percentage of Medicare Advantage enrollees in 4- or 5-star contracts has almost quadrupled since 2009, to 71%
  • Average premiums dropped about 10% between 2010 and 2016

The Advance Notice also includes a change to Employer Group Waiver Plans (EGWPs). CMS has previously waived bidding requirements for Part D for EGWPs and set payment amounts for Part D plans based on the competitive bids submitted for non-EGWP Part D plans. For 2017, CMS is proposing a similar waiver and payment policy for EGWP Part C plans for 2017.

On the Medicare prescription drug benefit side, highlights of the Draft Call Letter include a proposal to allow Part D plans to limit initial fills on certain drugs to a 1-month supply, even if the drugs normally would come with an extended days’ supply. The intention is to limit waste, for example, in cases where patients end up switching to a different drug or dose. CMS is also encouraging plan sponsors to inform beneficiaries of additional formulary drugs that become available mid-year. For the first time since 2008, CMS is proposing to increase the cost threshold for placing drugs in the specialty drug tier, from $600 to $670.

The following changes to the Part D Standard Benefit would apply under the proposal for 2017:

  2016  2017 (Proposed)
Deductible  $360  $400
Initial coverage limit  $3,310  $3,700
Out-of-pocket threshold  $4,850  $4,950
Total covered Par D spending at out-of-pocket threshold for non-applicable beneficiaries  $7,062.50  $7,425.00
Estimated total covered Part D spending for applicable beneficiaries  $7,515.22  $8,071.16
Minimum Cost-Sharing in Catastrophic Coverage Portion of the Benefit
Generic/preferred multi-source drug  $2.95  $3.30
Other (brand)  $7.40  $8.25

As expected, CMS is planning a new Risk Adjustment Model to reimburse Medicare Advantage plans more effectively for the cost of serving full-benefit dual eligibles. The agency is also proposing changing the Part C and Part D Star Rating System by making plans that achieve higher star ratings eligible for quality bonus payments. Critics have charged the existing system penalizes plans serving dual-eligible and low-income beneficiaries. They also propose adding a link from the Medicare Plan Finder website to the Medicare Drug Spending Dashboard in the fall of 2016.