The Centers for Medicare & Medicaid Services (CMS) is required by law to notify Medicare Advantage (MA) organizations no later than the first Monday in April of payment rates for the following year.  In accordance with the law, CMS issued its Announcement of CY 2011 Medicare Advantage Capitation Rates and Medicare Advantage and Part D Payment Policies (Annual Notice) on April 5, 2010.  It also issued the final Call Letter providing information to MA organizations and prescription drug plan (PDP) sponsors about submitting a bid for the following year.

These documents incorporate changes made by the new health care reform laws -- the Patient Protection and Affordable Care Act (PPACA) and the Health Care Education and Reconciliation Act (HCERA) -- that go into effect in 2011.  Thus, the documents provide important information about implementation of changes made by the new laws.  Additionally, CMS indicates in the Annual Notice and Call Letter that it will be issuing further guidance about implementation of beneficiary-specific protections under Part D.

Final regulations concerning Part C and Part D plans were published in the Federal Register on April 15, 2010.  These regulations will be the subject of a future Alert. 

1. ANNUAL NOTICE OF PAYMENT RATES AND CAPITATION POLICIES 

Payment Rate Changes

There will be no payment rate changes for MA plans in 2011.  HCERA requires that the capitation rates for 2011 be the same as the capitation rates for 2010.  Thus, CMS has decided not to implement a number of payment updates, including those for End Stage Renal Disease (ESRD) beneficiaries and for certain risk adjustment models and frailty adjustments for certain special needs plans for dual eligibles (D-SNPs).

CMS will, however, adopt a new methodology for adjusting risk scores for certain enrollees in a special needs plan for chronic conditions (C-SNP).  PPACA requires that such risk scores be adopted for these plans for 2011. 

CMS will continue to readjust payments based on "coding pattern differences" and apply the same adjustment for 2011 as used in 2010. CMS has authority to reduce each Part C beneficiary's risk score when it determines that MA plans "upcode" their enrollees to make the enrollees appear sicker than they actually are. The new health reform law extends the authority of CMS to account for differences in coding patterns between Medicare Advantage plans and traditional Medicare in its risk-adjusted payments.

Changes and Discounts in the Part D Coverage Gap (or Donut Hole)

In 2011, pharmaceutical manufacturers will be required to provide qualified beneficiaries who reach the Part D Donut Hole[1] with discounted prices of 50% of the Part D plan sponsor's negotiated price for brand name drugs, minus any applicable dispensing fees.  The discounts are to be applied before other prescription drug coverage under another health plan but after any supplemental benefits provided by the drug plan sponsor. The discounts must be made available at the pharmacy, and the costs paid by drug manufacturers toward the negotiated price must count toward a beneficiary's out-of-pocket threshold.

Also starting in 2011, the co-insurance for generic drugs in the Donut Hole will be reduced from 100% to 93%.  The Annual Notice indicates that plans may employ an actuarially equivalent payment structure for generic drugs in the coverage gap if it is actuarially equivalent to an average expected payment of 93% 

Part D Defined Standard Benefit for 2011

The Annual Notice includes the parameters for the defined standard benefit for Part D plans, as well as cost-sharing for LIS-eligible beneficiaries.  As the CMS chart below indicates, there will be a $10 increase in the initial coverage limit for 2011, from $2,830 to $2,840.  There are no other changes.

Advocates should note that CMS states that the total spending needed to reach catastrophic coverage may be higher for beneficiaries who use generic drugs in the gap.  CMS projects a $7.50 increase, from $6440.00 to $6447.50, in out-of-pocket spending needed to get out of the Donut Hole.  The increase reflects the reduction in co-insurance for generic drugs in the coverage gap.

Annual Parameter Updates to Medicare Part D Benefits are unchanged, with the exception of a $10 increase in the Initial Coverage Limit and the projected $7.50 spending increase.

(Note: The changes from 2010 to 2011 are rounded to the closest appropriate unit)http://www.cms.gov/MedicareAdvtgSpecRateStats/Downloads/Announcement2011.pdf

2. THE 2011 CALL LETTER

The 2011 Call Letter does not contain many of the details included in past Call Letters.  CMS has chosen to include more of the guidance previously included in its Call Letters in its new final regulations.  Advocates have been asking CMS to codify its guidance for many years, as regulations have greater legal weight than agency guidance such as the Call Letter.  The change in policy may reflect CMS's increased interest in oversight of plans.[2]

Special Needs Plans (SNPs)

CMS will continue its overview of, and work with, SNPs.  The agency has established a State Resource Center to help State Medicaid agencies in their efforts to coordinate with D-SNPs.  CMS will also oversample SNP plan benefit packages as part of its on-going monitoring of SNP quality and performance measures.  Note that a memo from CMS to MA plan sponsors in January 2010 indicated that many SNP benefit packages did not appear to be specially-directed to the populations the plans were to serve, and some were less generous than other MA plans offered by the same organization.  The memo is available at: www.medicareadvocacy.org\InfoByTopic\MedicareAdvantageAndHMOs\10_01.11.SNPMemo.pdf.

Potential Part D Benefit Policy Changes

The Call Letter discusses a number of potential policy changes.  CMS issued proposed regulations to implement a provision of the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA).  This provision would change the way that Medicare pays for some services for people with End Stage Renal Disease (ESRD), so that certain drugs and biologicals previously paid for under Part D would be paid for under Part B.  CMS indicates that final rules should be published in 2010.

CMS had also proposed in the draft Call Letter to allow enrollees the option of requesting a trial supply of a medication for a chronic condition when it is first prescribed, with a pro-rated cost-sharing.  The idea behind the proposal was to curb waste of unused drugs.  While many beneficiary organizations supported the proposal, plans raised concerns about administration.  CMS did not adopt the proposal, but intends to explore the possibility.

CMS had also proposed to change its re-assignment policies for beneficiaries in plans that will lose their LIS-status.  Specifically, CMS had requested comments on whether the agency should reassign LIS-eligible beneficiaries who had chosen their own plan if they would be required to pay premiums of $10 or more in the following year.  It also requested comments on using "strategic" or "beneficiary-centered" reassignment methods rather than its current reassignment.  Neither proposal was adopted, though CMS will continue to explore both possibilities.

3. MA, MA-PD, PDP CALENDAR FOR 2011

The Calendar contains dates of importance to beneficiaries and their advocates:

• Plan notices relating to enrollment will be available in May 2010.  CMS states that models with significant revisions will be available for public comment.
• Updates of the Marketing Guidance and the Enrollment, Eligibility, and Disenrollment guidance will be available in late spring or early summer 2010.
• CMS intends to post model plan non-renewal notification letters in August 2010.
• Marketing by plans may begin on October 1, 2010.
• Beneficiaries in plans that are not renewing their contracts must receive a personalized letter by October 2, 2010.
• CMS has scheduled October 8, 2010 as the tentative date for 2011 information to be displayed on Medicare Options Compare.
• By October 31, 2010, the combined Annual Notice of Change (ANOC)/Evidence of Coverage (EOC), as well as LIS riders and formularies, are to be received by enrollees of all plans except D-SNPs that are fully integrated with States.  D-SNP enrollees are to receive the ANOC by that date.
• The Annual Coordinated Election Period for the 2011 plan year remains November 15-December 31 for 2010.  The change made by health care reform goes into effect in October 2011 for plan year 2012.
• Enrollees in D-SNPs that are fully integrated with States must receive the EOC, LIS rider, and formulary by December 31, 2010.
• Beneficiaries who are enrolled in a SNP and who are not a member of the special population served by that SNP must be disenrolled by the end of 2010.
• As per the changes made by health reform, there will no longer be an Annual Open Enrollment Period.  Instead, beneficiaries will have a 45 Day Disenrollment Period, starting on January 1, 2011, during which they may disenroll from an MA plan and return to Original Medicare.

CONCLUSION

The Annual Notice and Call Letter, while designed to help organizations that want to offer Medicare Advantage and/or prescription drugs plans, also provide important information for Medicare beneficiaries and their advocates.  Fortunately, the 2011 documents indicate CMS's dedication to implementing provisions of the new health care reform laws.  They also reflect an increased interest in beneficiary concerns.