CMS Publishes CY2023 Medicare Advantage and Part D Proposed Rule

CMS Publishes CY2023 Medicare Advantage and Part D Proposed Rule

January 14, 2022, Covington Alert

On January 12, 2022, the Centers for Medicare & Medicaid Services (CMS) published the Contract Year (CY) 2023 Medicare Advantage (MA) and Medicare Prescription Drug Benefit (Part D) Programs Proposed Rule. The rule proposes changes to various MA and Part D provisions, including the definition of negotiated price, medical loss ratio reporting, requirements for dual eligible special needs plans, network adequacy, and marketing and communications. A brief overview of the published rule is below.

• Defining Negotiated Price to Include Pharmacy Price Concessions. CMS proposes redefining “negotiated price” for the purposes of Part D as the “lowest amount a pharmacy could receive as reimbursement for a covered Part D drug under its contract with the Part D plan” and requiring that all price concessions be passed through to beneficiaries at the point of sale. The current definition of negotiated price exempts contingent pharmacy price concessions that cannot reasonably be determined at the point of sale, and as a result, the negotiated price typically does not include performance-based pharmacy price concessions. CMS explains that in implementing this change, Part D sponsors and PBMs would “load revised drug pricing tables reflecting the lowest possible reimbursement into their claims processing systems that interface with contracted pharmacies.” The proposed rule would also establish a broad definition of “price concession” to include all discounts, subsidies, or rebates.
• Reinstating Detailed MLR Reporting. CMS proposes to reinstate detailed medical loss ratio (MLR) reporting requirements that were in effect for contract years 2014-2017, including requirements to report underlying data such as incurred claims, total revenues, expenditures on quality improvement activities, non-claims costs, and regulatory fees. In addition, CMS proposes requiring additional information related to plan expenditures to assess the accuracy of submissions, value of services provided by the plan, and the impact of recent changes to remove limitations on expenditures that count towards the 85% MLR requirement.
• Changing Requirements for D-SNPs. CMS proposes several changes related to Dual Eligible Special Needs Plans (D-SNP) beneficiaries (i.e., those who are dually enrolled in Medicare and Medicaid) in order to address barriers to coordinated care. These proposed changes include:
  • Advisory Committees: Requiring MA organizations to establish at least one enrollee advisory committee in each state, made up of a reasonably representative sample of D-SNP enrollees, “to solicit direct input on enrollee experience,” including “ways to improve access to covered services, coordination of services, and health equity for underserved populations.”
  • FIDE SNPs and HIDE SNPs: Requiring (1) fully integrated dual eligible special needs plans (FIDE SNPs) to limit enrollment to patients in an affiliated Medicaid MCO and to cover Medicaid home health, durable medical equipment, and behavioral health services through a capitated contract with the state Medicaid agency; and (2)highly integrated dual eligible special needs plans (HIDE SNPs) to apply capitated contracts with the state to the entire service area.
  • Increased Integration: Codifying pathways to allow states to require an MA organization to establish contracts only with D-SNPs and to require that D-SNPs provide enrollees with integrated Medicare-Medicaid materials. Improving ability of CMS and the state to coordinate monitoring and oversight of D-SNPs where a state has elected to implement these pathways.
• Changing Calculation of Medicare MOOP Limit. CMS proposes to require that MA plans include all cost-sharing, including costs paid by the beneficiary, Medicaid, other secondary insurance, and amounts that are unpaid due to state limits, in calculating whether the maximum out-of-pocket (MOOP) limit is met. Under the current guidance, Medicaid-paid and unpaid amounts for dual-eligible beneficiaries are not included in the calculation for the MOOP limit, and as a result, CMS notes that states bear an increased burden in cost-sharing and that providers serving dual eligible individuals are disadvantaged.
• Adding Social Determinants of Health Questions to Health Risk Assessments. CMS proposes to require that all MA organizations offering special needs plans include questions related to housing stability, food security, and access to transportation as part of their health risk assessments in order to better meet the needs of members and help connect members to needed services.
• Ensuring Access to Care During Disaster or Emergency. In light of the ambiguous end date for certain emergencies, like the ongoing public health emergency, CMS proposes to clarify that MA plans must comply with special requirements for disasters and emergencies through the entirety of the disaster or emergency period. CMS also proposes that, in order to trigger the special requirements, there must be a disruption in access to health care at the same time as the disaster or emergency.
• Requiring MA Plan Applicants to Demonstrate Network Adequacy. CMS proposes to require that, as part of the application process, MA plan applicants demonstrate that they meet network adequacy standards for the service area and to allow for denial of an application if the network is inadequate. The current rules require that applicants attest to an adequate provider network, and CMS does not deny applications based on the plan’s network. CMS acknowledges that it may be difficult for MA plans to have a full network in place a year ahead of the contract start date, and therefore, the proposal includes a 10-percentage point credit towards the percentage of beneficiaries residing within the published time and distance standards for new and expanding service area applicants. The change would apply to applications submitted in 2023 for the 2024 contract year.
• Expanding Factors For Consideration With Respect to Contract Expansion.CMS proposes to include an organization’s record of Star Ratings, bankruptcy issues, and compliance actions in its past performance methodology for determining whether an organization may enter into or expand an existing contract. Currently, the past performance methodology considers only negative net worth and sanctions during the performance timeframe.
• Establishing Additional Requirements for Marketing and Communications. As a result of the frequency of complaints received related to marketing practices of third-party marketing organizations (TPMOs) who sell multiple MA and Part D products, CMS proposes additional requirements to better regulate TPMOs. TPMOs would be required to include a new disclaimer when marketing MA plan and Part D products. In addition, CMS proposes additional oversight requirements if the TPMO “is a first tier, downstream or related entity.”

These proposed changes may raise a number of considerations, concerns, and questions for stakeholders. For example, with respect to the proposed change to the treatment of pharmacy price concessions, stakeholders may want to consider the following:

• Whether and how the application of CMS’s new definition of negotiated price will differ depending on whether a beneficiary is in or out of the coverage gap.
• Whether the rule implicates the Part D non-interference clause; CMS asserts that the rule does not, given that plan sponsors, PBMs, and pharmacies may still engage in negotiations.
• Operational considerations regarding the requirement to pass through price concessions at the point of sale, and in particular the implications where pharmacies are under common ownership with a PBM.
• The possibility that, where an arrangement includes a form of lagging price concession, plans and pharmacies may deploy different operational models in order to remain in compliance, including adjusting contract terms in agreements between pharmacies and plan sponsors.
• Whether the new definition of price concession is so broad as to include all possible price concessions or whether there may be areas where plan sponsors can maneuver.

Similarly, regarding the proposed change to MLR reporting, stakeholders may want to consider:

• Whether the disclosures made under the reinstated reporting requirements will demonstrate significant differences as compared to the reports made during the prior 2014-2017 reporting period.
• Whether, as a result of any differences, CMS will institute additional guidance on classification of expenditures or otherwise revisit whether the 85 percent ratio is adequate or overly generous.
• Whether there will be other notable differences that are made apparent by the reinstated reporting requirements, such as whether plans associated with PBMs or plans that have embraced significant technological support report meaningfully different expenditures.

As a result of the proposed change to require MA plans to demonstrate network adequacy, stakeholders may want to consider:

• Whether this change may present challenges to MA plan efforts to narrow networks in order to drive program cost savings.
• How CMS’s focus on network adequacy may change contracting dynamics between plans and providers.

The deadline for stakeholders and interested parties to submit comments on the proposed rule is March 7, 2022.

If you have any questions concerning the material discussed in this client alert, please contact the members of our Health Care practice.