Andy Slavitt (House Energy hearing screen capture)

Officials at the Centers for Medicare & Medicaid Services (CMS) are telling health insurers to be more mindful of other players’ needs in the new final 2017 Medicare Advantage plan call letter package.

See also: CMS increases 2017 Medicare Advantage rates less than expected

CMS needs cooperation from commercial health insurers to keep the Medicare Advantage plan and Medicare Part D prescription drug plan markets humming as the country heads toward the November presidential and congressional elections.

CMS also needs cooperation from commercial health insurers to maintain a strong supply of individual health insurance plans for both the off-exchange market and the Patient Protection and Affordable Care Act (PPACA) public exchange market.

Andy Slavitt, the acting CMS administrator, previously ran the Ingenix Consulting Inc. unit at UnitedHealth Group Inc. (NYSE:UNH), a major player in the Medicare Advantage, Medicare drug plan and Medicare supplement insurance policy markets.

But CMS officials have knocked down insurers’ and employers’ arguments in responses to industry efforts to change the way CMS is handling employer group waiver (EGWP) plans, or group Medicare Advantage plans, and the way CMS is fine-tuning the Medicare risk-adjustment program.

The Medicare Advantage program gives insurers a chance to use Medicare program payments to provide plans that serve as an alternative to traditional Medicare coverage.

CMS originally proposed replacing the current group Medicare Advantage plan subsidy amounts with those based on the individual market bidding process.

Insurers, employers and industry groups blasted the proposal, arguing that EGWP enrollees are more likely to live in rural and small-city areas with high health care costs and limited access to health care providers than members of Medicare Advantage plans, and that group plan enrollees generally tend to have higher costs than individual policyholders.

See also: Chamber, insurers blast proposed Medicare group coverage change

CMS has agreed to ease up, and to phase in the change over two years.

But, in responses to industry commenters on the EGWP controversy, CMS officials note that statutes give CMS the authority to require that each employer submits its plan benefit package and bids to CMS for review.

One statute gives CMS the authority to waive provisions that hinder employer access to group Medicare Advantage plans, but the current process certainly provides more flexibility than the individual plan review process, CMS officials say.

CMS officials also note that they’re making the change because they are getting little information about what’s going on in the EGWP market.

“CMS does not know how many EGWP plans any [Medicare Advantage organization (MAO)] offers, what specific benefits are provided in each of those plans, or the associated underlying costs,” officials say. “This lack of transparency has significantly impaired CMS’ ability to comprehensively review and assess the reasonableness of the underlying actuarial assumptions and projections included in the bids submitted for EGWPs and to trace how federal funds, in the form of the capitation payments and the rebates, are spent for beneficiaries in specific EGWPs. This lack of transparency, combined with the fact that EGWPs do not compete in the open market, has resulted in EGWP bids that are systematically higher than bids for individual market.”

The current EGWP bidding process is unsustainable, and shifting to the new, more transparent system may lower employers’ costs, by helping them use the additional information to strike better bargains, according to officials.

Elsewhere, insurers’ objected to a CMS decision to keep conditions such as dementia out of the Medicare risk-adjustment system, which uses government money to compensate plans that end up with an unusually high percentage of high-risk enrollees, and to calibrate the system using data from the traditional fee-for-service (FFS) Medicare program, rather than Medicare Advantage cost data.

CMS is still using the FFS data because it has better FFS data, and it wants to run the risk-adjustment program in such a way that the ratio between Medicare Advantage costs and FFS costs stays about the same, even if the Medicare Advantage risk scoring is more accurate, officials say.

The law “does not require that risk adjustment be revenue neutral for [Medicare Advantage] plans,” officials say. 

See also: 

How Medicare Advantage might change

Having Problems with Retiree Drug Subsidy Under Part D? Try EGWP

   

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