Life Science Compliance Update

August 22, 2017

CMS Announces Part D Premiums Are Going Down


On July 31, 2017, the Centers for Medicare and Medicaid Services (CMS) announced that Medicare Part D premiums will drop in 2018. The announcement states that the Part D national average monthly bid amount for 2018 will be $57.93, the 2018 Part D base beneficiary premium will be $35.02, and the de minimis amount will be $2.

This decrease is the first drop in five years, in part because of the bids submitted by drug plans for basic coverage in Part D and because rebates and other price concessions are projected to grow faster than drug costs. The decline comes amid reports of surging spending in Medicare on specialty drugs.

"This is encouraging news for the nearly 43 million seniors who are enrolled in the program," said Health and Human Services Secretary Tom Price.

Part D offers “an abundance of competing choices in each region and uses cutting edge, cost-saving tools like pharmacy networks and home delivery,” Mark Merritt, president and chief executive officer of the Pharmaceutical Care Management Association, told Bloomberg BNA after the announcement.

National Average Monthly Bid Amount

The national average monthly bid amount is a weighted average of the standardized bid amounts for each stand-alone prescription drug plan and MA-PD plan described in section 1851(a)(2)(A)(i) of the Act. The weights are based on the number of enrollees in each plan. The reference month for the 2018 calculation was June 2017. As noted above, the national average monthly bid amount for 2018 is $57.93.

Base Beneficiary Premium

The base beneficiary premium is equal to the product of the beneficiary premium percentage and the national average monthly bid amount. The beneficiary premium percentage (“applicable percentage”) is a fraction, with a numerator of 25.5 percent and a denominator equal to 100 percent minus a percentage equal to (i) the total reinsurance payments that CMS estimates will be paid for the coverage year, divided by (ii) that amount plus the total payments that CMS estimates will be paid to Part D plans based on the standardized bid amount during the year, taking into account amounts paid by both CMS and plan enrollees.

De Minimis Amount

Plans will have from Monday, July 31, 2017 until 11:59 PM Pacific Daylight Time on Monday, August 7, 2017 to complete rebate reallocation. Starting Tuesday, August 8, 2017 until 11:59 PM Pacific Daylight Time on Friday, August 11, 2017, plans can inform CMS of their intent to participate in the de minimis program.

Under the Affordable Care Act (ACA) §3303(a), a prescription drug plan (PDP) or Medicare Advantage plan with prescription drug coverage (MA-PD) may volunteer to waive the portion of the monthly adjusted basic beneficiary premium that is a de minimis amount above the low income subsidy (LIS) benchmark for a subsidy eligible individual. The law prohibits CMS from reassigning LIS members from plans who volunteered to waive the de minimis amount. As noted above, the de minimis amount for 2018 will be $2.

This announcement is further evidence that Part D continues to provide beneficiaries with access to affordable prescription drug coverage. Year after year, the monthly premiums have been and continue to be regularly stable. Stable premiums combined with a wide range of plan choices ensure that Part D coverage remains available and affordable for seniors and people living with disabilities.

Medicare will release the actual premiums in mid-September, in time for the Oct. 15 to Dec. 7 open enrollment period. Beneficiaries should be on the lookout then for 2018 information from their own plan to see if their premiums are going up or down. They can decide whether they want to switch to a different company.

May 30, 2017

Medicare Backlog Must Be Fixed


Since 2014, the American Hospital Association (AHA) has been in court with HHS regarding HHS’ failure to meet statutorily-imposed deadlines for Medicare administrative appeals. And, as has been reported, the Medicare appeals backlog has reached its all-time worst. If you’re a healthcare provider or supplier waiting for a hearing before an Administrative Law Judge (ALJ) at the Office of Medicare Hearings and Appeals (OMHA) – the third level of the Medicare appeals process – you’ve likely been waiting years to have your case heard or, at least, you’re expecting such a wait.

The suit centered on the Recovery Audit Contractor program. The RAC program's mission is to correct improper Medicare payments by identifying and collecting over- and underpayments. Healthcare providers have the option of appealing recovery auditors' findings, and HHS' Office of Medicare Hearings and Appeals administers hearings concerning denied Medicare claims. Claim denials that reach the third level (of five possible levels) of the appeals process are brought before administrative law judges, who issue decisions regarding coverage determinations.

Court order

Recently, a court determined that there were equitable grounds to issue a writ of mandamus. The Court reasoned that even with certain good faith efforts made by HHS to reduce the backlog (such as a Proposed Rule issued this past summer), the appeals backlog was “still unacceptably high.” In its decision, the Court found that HHS did not “point to any categorically new administrative actions” and continues “to promise the elimination of the backlog only ‘with legislative action’ — a significant caveat.”

The Court ordered HHS to achieve the following reduction thresholds, as proposed by AHA, from the current backlog of cases pending at the ALJ level:

  • 30% by December 31, 2017;
  • 60% by December 31, 2018;
  • 90% by December 31, 2019; and
  • 100% by December 31, 2020

In the ruling, U.S. District Court Judge James Boasberg ordered HHS to eliminate the backlog in accordance with the timeline AHA outlined in its motion for summary judgment. Boasberg also ordered HHS to file progress reports every 90 days on its efforts to reduce the backlog.

AHA Statement

On December 6, 2016, the AHA released a statement from its general counsel: AHA General Counsel Melinda Hatton said the decision “is a victory for hospitals that continue to have billions of dollars in Medicare reimbursement tied up in a heavily backlogged appeals system. To meet the court-ordered backlog reductions, we trust that HHS will implement real reforms critical to resolving the backlog, including fundamental reforms of the Recovery Audit Contractor program.”

Good news for providers

As cited by the Advisory Board, William Dombi, VP for law at the National Association for Home Care and Hospice, said the "ruling may finally spur concrete action by [CMS] to reduce what are wholly unreasonable delays in providing appeal rights to Medicare beneficiaries and providers of health services." However, HHS has said even with additional resources, it likely will not be able to eliminate the backlog before 2021, so we will continue to monitor this story.

May 29, 2017

GOP Senators Send Letter to CMS, Requesting MA Changes


In a recent letter to the CMS Administrator, Republican Senators highlighted specific policy recommendations they would like to see incorporated into Medicare Advantage (MA) plans. This includes measures relating to the fee-for-service normalization factor, plan performance rating methods and employer group waiver plans.  The Senators also noted the importance of CMS’s willingness to work with stakeholders and Congress on these issues. 

The letter was signed by: Senate Finance Committee Chairman Orrin Hatch (Utah), Majority Leader Mitch McConnell (R-Ky.) and Finance Committee Senators Chuck Grassley (Iowa), Mike Crapo (Idaho), Pat Roberts (Kans.), John Cornyn (Tex.), John Thune (S.D.), Richard Burr (N.C.), Johnny Isakson (Ga.), Rob Portman (Ohio), Pat Toomey (Pa.), Dean Heller (Nev.), Tim Scott (S.C.) and Bill Cassidy (R-La.).

Some specifics of letter

“Specifically, we appreciate that the 2018 Advance Notice proposes to pause the phase-in of the use of encounter data to determine patient risk scores. It is important that CMS continue to work with stakeholders and the Congress to ensure that use of encounter data is viable prior to further implementation.”

Fee-for-Service Normalization Factor: We urge CMS to make additional information available regarding the methodology for calculating the normalization factor and to work with stakeholders to fully understand the data sources and implications.  We recognize the challenges that the agency faces in establishing the normalization factor but believe that increased transparency will help establish the most appropriate adjustment.  We are also concerned with the proposed 2018 normalization factor specific to the ESRD Dialysis Model.  This proposed factor, which is calculated based on a risk score that includes at least one outlier year, would result in an 8 percent decrease in payments to plans for serving this vulnerable, high-need population.”

Star Ratings: We urge CMS to ensure that any reflection of data integrity issues into the MA Star Ratings methodology is fair to plans and helpful to beneficiaries in distinguishing plan performance.  We appreciate the CMS willingness to reconsider its approach in recent years and ask that the agency continue to work with stakeholders and the Congress.”    

Employer Group Waiver Plans (EGWPs): We urge CMS to reconsider the 2017 Final Notice policy that waives the bidding requirements for MA EGWPs.  The decision to set payments to EGWPs administratively, which was made by the previous Administration, is likely to adversely impact the roughly 3.2 million beneficiaries with retiree coverage.  Further, CMS took this action despite a lack of Congressional interest in the policy when it was included in then-President Obama’s budget request.  At a minimum, CMS should use the same blend between the old and new methodology for 2018 to provide more time to broadly consider the issue and its impact.” 

Final Rate Notice

On April 3, after the release of the GOP letter, CMS announced the Medicare Advantage Final Rate Notice, laying out the policies governing plan payment for 2018. CMS estimated that MA funding will increase by 0.45 percent on average in 2018. However, plan costs are expected to increase on average by 4 percent to 5 percent due to projected health care cost increases and the expiration of the one-year moratorium on collecting the health insurance tax.

According to analysis from AHIP, CMS responded to the GOP requests on three particular topics with the following policies:

Fee-for-Service Normalization Factor

CMS finalized the normalization factor as proposed for 2018. CMS made a technical correction to the ESRD normalization factor. As a result, the ESRD normalization factor was 1.015, resulting in a lower impact on payments than proposed.

Star Ratings

CMS retained the current Beneficiary Access and Performance Problems (BAPP) Star Rating measure for 2018. In addition, CMS will incorporate results of Appeals Timeliness Monitoring activity audits, if accurate and valid, into data integrity reviews for the four Star Ratings appeals measures. For 2019, the agency intends to retire the current BAPP measure and introduce a revised BAPP measure on the display page that will no longer include enforcement actions or reductions for plans under sanction due to an audit, and may consider scaling reductions of Star Ratings due to data integrity reviews (rather than continue the policy of automatic downgrades to one star).

Employer Group Waiver Plans (EGWPs)

CMS will use the same methodology for payment of EGWPs in 2018 as in 2017. That is, EGWPs will not submit bids for 2018 and CMS will base payments on a 50/50 blend of individual MA plan and EGWP bids submitted in 2016.


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