CMS Proposes Significant Changes for Medicare Advantage and Part D Plans, Including Telehealth Expansion and New Integrity Initiatives

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On November 1, 2018, the Centers for Medicare & Medicaid Services (“CMS”) released a proposed rule (the “Proposed Rule”), available here, that updates requirements of the Medicare Advantage program (“MA”), also known as Medicare Part C, and the Medicare Prescription drug benefit program (“Part D”). The Proposed Rule would:

• Allow MA plans to cover additional telehealth benefits;
• Improve coordination for dual-eligible beneficiaries;
• Update the Part D, as well as certain components of the Part C, Quality Star Ratings program; and
• Take steps toward increasing CMS’s ability to recover improper payments made to MA organizations.

While targeted at MA plans, the Proposed Rule would have direct implications for insurers and providers alike by opening alternatives to traditional in-office visits for aging populations and implementing oversight requirements with respect to program integrity.

Additional Telehealth Benefits for Medicare Advantage Plans (including in-home options)

The Proposed Rule would authorize MA plans to offer expanded telehealth benefits as part of the basic benefit package starting in plan year 2020. That would permit MA plans to offer additional telehealth benefits not available through traditional Medicare.

Current Telehealth Benefits

Currently, MA plans are limited in how they may offer telehealth benefits to enrolled beneficiaries. Plans may include only telehealth services covered under Parts A and B in their basic benefit packages. Plans also generally may cover telehealth services only in rural areas and when the patient is present at an institutional health care facility. Current rules do allow MA plans to offer expanded telehealth services as supplemental rather than basic benefits, but supplemental offerings often impose burdensome cost-sharing requirements for beneficiaries.

Expansion of Telehealth Benefits under the Proposed Rule

The Proposed Rule would afford MA plans greater flexibility to offer additional telehealth benefits as part of the MA basic benefits package, rather than as supplemental benefits, thereby reducing co-payment requirements. Under the Proposed Rule, an MA plan could include in its basic benefit package any Part B service that the plan identified as “clinically appropriate” to be furnished through “electronic information and telecommunications technology” including “[s]ecure messaging, store and forward technologies, telephone, videoconferencing, other internet enabled technologies, and other evolving technologies as appropriate for non-face-to-face communication.” This change (i) would expand telehealth benefits to all enrollees, regardless of whether they live in a rural or urban area, and (ii) would remove the restriction on the type of facilities at which enrollees may receive telehealth care—rather than requiring MA enrollees to go to a health care facility to receive telehealth services, the Proposed Rule would enable them to receive services from a variety of locations, including their homes.

If finalized, the Proposed Rule would be expected to yield much broader telehealth coverage through MA plans. With more MA plans offering enrollees the convenience of accessing care when and where they want through telehealth, and traditional Medicare lagging in telehealth options, MA plans may become more appealing to beneficiaries than traditional Medicare coverage—and, of course, providers will have more opportunities to provide care through telehealth, and more reason to invest in telehealth technology.

Limitations to the Telehealth Expansion

While greatly expanding telehealth benefits, the Proposed Rule contains several notable limitations.

First, if an MA plan elects to cover a Part B service as an additional telehealth benefit, the plan must also make the service available through an in-person visit. For instance, an MA plan could not include depression screenings as a telehealth benefit unless the plan also covers in-person depression screenings. Similarly, MA plans would be unable to offer a service as a covered additional telehealth benefit if the service is not currently covered by Part B when provided in-person. However, MA plans could continue to elect to offer such service as a supplemental benefit. For example, an MA plan might cover a videoconference to assess dental needs only as a supplemental benefit, since a service primarily provided for the care, treatment, removal, or replacement of teeth or structures directly supporting teeth is not currently covered by Part B, and therefore could not be offered as an additional telehealth benefit. CMS is currently soliciting comments regarding how to implement this provision.

Second, additional telehealth benefits must be provided through contracted providers that meet plan selection and credentialing standards, although CMS is soliciting comments regarding whether to adjust this requirement.

Third, the Proposed Rule would require any capital and infrastructure costs and investments related to the additional telehealth benefits to be excluded from MA plans’ bids, and not reimbursed by CMS.

Market Effect

The Proposed Rule’s telehealth provisions have implications across the industry. Most obviously affected are MA plans that, in addition to evaluating what telehealth benefits to offer with the rule’s increased flexibility, will need to assess how to stay competitive as an increasing number of plans offer expanded telehealth benefits. The Proposed Rule also would open new avenues of reimbursement and care delivery options for medical centers, hospitals, providers, and even physician practice management organizations. Finally, expanded telehealth reimbursement models would offer investment opportunities in developing telehealth and related-IT markets.

Dual-Eligible Special Needs Plans

D-SNPs coordinate targeted care for high-risk, special needs beneficiaries who are eligible for both Medicare and Medicaid. The Proposed Rule imposes new requirements for greater integration of Medicaid and Medicare benefits in D-SNPs, and unifies Medicare and Medicaid grievance and appeals procedures.

Integration Requirements

The Proposed Rule requires D-SNPs to improve long-term and clinical and financial care integration standards. The Proposed Rule does that by mandating that all D-SNPs fulfill at least one of three criteria for integration of benefits by 2021. Overall, the criteria require providers and health plans to improve coordination of long-term services and supports (“LTSS”) or behavioral health services, or to assume greater clinical and financial responsibility for beneficiaries by meeting the requirements of a fully integrated D-SNP or a highly integrated D-SNP. Operationally, integration could take a variety of forms, such as the D-SNP's verifying an enrollee’s Medicaid eligibility for LTSS and/or behavioral health services after identifying functional limitations or mental health needs in the enrollee’s health risk assessment or individualized care plan.

The Proposed Rule also requires D-SNPs that are not fully or highly integrated to notify their respective Medicaid agency whenever high-risk, full-benefit dual-eligible beneficiaries are admitted to hospitals or skilled nursing facilities, in an attempt to bridge gaps during a beneficiary’s transition from a Medicare-covered care setting to one covered under Medicaid. MA organizations offering D-SNPs in 2021 through 2025 that fail to comply with the integration requirements may face an intermediate enrollment sanction.

While the Proposed Rule is intended to reduce administrative burdens and costs for MA plans and their enrollees over time, plans could experience increased costs upon rollout. The heightened care coordination requirements could lead to increased utilization and coordination with LTSS and behavioral health providers, thereby increasing the burden for MA plans to provide beneficiaries with resources to steer the newly integrated process adequately.

Improving Accountability and Program Integrity

Quality Star Ratings

In addition to its focus on integrating Medicare and Medicaid benefits, the Proposed Rule contemplates changes to the Medicare Star Rating system, which measures the quality of Medicare beneficiaries’ experience with health plans. Plans rely heavily on Star Rating to drive profits, both indirectly by attracting customer interest in higher-quality plans and directly by determining plans’ eligibility for quality bonus payments and MA rebate percentages.

More specifically, the Proposed Rule updates and adds Star Rating program measures (e.g., controlling high blood pressure, MPF price accuracy, and plan all-cause readmissions) that focus on beneficiary protections and readmissions. While these updates impose heightened obligations on health plans, they may also affect providers, as health plans will likely effect the rule by charging providers with implementing on-the-ground quality changes and imposing financial penalties upon those who fail to make changes.

The Proposed Rule also takes steps to benefit MA plans by (i) accounting for natural disasters and other uncontrollable situations that negatively affect plans’ performance, and (ii) modifying the methodology that CMS uses to categorize Star Rating scores, in order to increase the Ratings’ stability and predictability over time.

Changes to Medicare Advantage RADV Audit Penalty Calculation and Extrapolation Methodology

Finally, the Proposed Rule seeks to make significant changes to CMS's methodology for calculating penalties for MA claims errors identified in its risk adjustment data validation (“RADV”) audits. These changes would eliminate an offset applied to such penalties originally announced by CMS in 2012, which was established as a method to ensure that MA payments be actuarially equivalent to traditional Medicare payments. Eliminating this offset would result in much higher penalty amounts for audited MA organizations. As with other CMS audits, findings will be extrapolated across all claims (and not just audited claims) based on the error rate identified in the audit, which heightens the financial exposure that MA plans would face due to errors. Often, participating network provider agreements pass resulting repayment obligations on to physicians and physician practices. Perhaps most significant for audited plans, this methodology would be applied for audits of claims submitted in 2011 or later, so any MA organization that has submitted claims since 2011 would be subject to this new penalty calculation. CMS estimates the proposed changes would result in an estimated $4.5 billion in savings to the Medicare Trust Funds (and thus cost to MA plans) over a ten-year period.

By eliminating the penalty offset, CMS has indicated that it is standing by its position that no adjustments to overpayment calculations in RADV audits are needed, even though the District Court recently ruled to the contrary in United HealthCare Insurance Co. v. Azar, No. 16-cv-157 (D.D.C. September 7, 2018). In this case, the court struck down a 2014 Final Rule from CMS that set forth MA audit methodology that did not include an offset to account for diagnosis errors in traditional Medicare claims that were used to calibrate the audit metrics, ruling that the absence of such an offset failed to meet the statutory requirement for actuarial equivalence between MA and traditional Medicare payments. In the Proposed Rule, CMS acknowledges that it is still determining how to respond to this ruling. CMS notes, however, that a study published alongside the Proposed Rule concludes that no offset should be applied to overpayment penalties because diagnosis errors in traditional Medicare claims that are used to calibrate the MA risk adjustment model would not have a statistically significant effect on the identification of overpayments to MA plans in RADV audits. CMS maintains that the District Court did not have the benefit of the study in the administrative record when it announced the United Healthcare Insurance ruling. The conflict between these two positions appears to be a potential source for future challenges to CMS’s methodology for calculating MA overpayments going forward.

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The comment period for the Proposed Rule runs through December 31, 2018. Should you have any questions regarding this Alert, please contact your usual Ropes & Gray advisor.