CMS proposes Medicare Advantage, drug rebate changes
- CMS released a proposed rule on Thursday to make revisions to the Medicare Advantage program for contract year 2019, with an aim toward improving quality and affordability. The rule would implement certain provisions of the Comprehensive Addiction and Recovery Act and the 21st Century Cures Act.
- The number of plans available to individuals will increase from about 2,700 to more than 3,100, according to the agency.
- During this year’s open enrollment, which runs until December 7th, seniors enrolling in Medicare Advantage have seen average monthly premiums drop by 6%, the agency said.
Medicare Advantage has gained a lot of traction in the industry, inspiring many to form or expand company offerings in attempts to take advantage of the opportunity as baby boomers age into Medicare. Clover Health, Bright Health and Todd Park's Devoted Health are leading a wave of young companies focused on the plan.
The new 713-page proposal adds to CMS Administrator Seema Verma's commitment to enhance the program. In September, Verma stated Medicare Advantage “demonstrates what a strong and transparent health market can do — increase quality while lowering costs.”
CMS expects Medicare Advantage members would have more choices and lower premiums in 2018 and enrollment to increase by 9% to 20.4 million in 2018.
According to the agency, the proposed rule provides flexibility for customized benefit designs that address the specific health needs of certain beneficiaries, allowing additional plan variety and options, reduced cost sharing for customized benefits and different cost-sharing for beneficiaries that meet specific medical criteria.
The agency is proposing to expand the definition of quality improvement activity to include fraud reduction activities, changing the medical loss ratio (MLR) requirements for Medicare Advantage plans. This change should excite payers where they can add the administrative service to the MLR ratio they are required to spend on healthcare, which is at least 85%. CMS states it believes the service will help combat fraud.
The CMS on Wednesday also announced that improper payments make up 9.5% of total Medicare payments in 2017, down from 11% in 2016. While the agency wants to continue to combat fraud, the proposed change will likely also help insurers' bottom lines.
On the drug side of the rule, CMS proposed changes to how drugmaker rebates are passed on to customers when they buy medicines covered under Part D, a move aimed at lowering out-of-pocket drug costs. The regulator notes that rebates and price concessions from manufacturers to payers and pharmacy benefit managers (PBMs) have grown by more than 20% per year from 2010 through 2015.
But those savings aren't typically passed on to patients. If the regulator moves forward, Medicare drug plans could be required to channel savings they extract from drugmakers more directly to customers.
Changing how rebates are passed on would likely come with trade-offs, however. If a plan sponsor has to use negotiated savings to lower drug costs, there would be less money to reduce plan liability and premiums could rise across the board.
CMS believes lowering cost-sharing obligations for drugs would likely offset any increase in premiums. But expect insurers and PBMs to argue this won't be the case.
- CMS Proposed Rule