2020 Medicare Advantage

Transcription

1 Medicare Advantage Summary of Advance Rate Notice Part 2 February 7, 2019

2 page i Table of Contents Executive Summary... 1 Attachment I: Preliminary Estimates of the National Per Capita Growth Percentage and the National Medicare Fee-for-Service Growth Percentage for CY Attachment II: Changes in the Part C Payment Methodology for CY Attachment III Changes in the Payment Methodology for Medicare Part D for CY Attachment IV Medicare Part D Parameters for the Defined Standard Benefit Annual Adjustments for Attachment VI. Draft CY2020 Call Letter Section I Parts C and D Section II Part C Section III Part D Section IV Medicare-Medicaid Plans Appendix A - Wakely Estimated Impact of Growth Rates... A1

3 page 1 Executive Summary On January 30, 2019, CMS released the payment year (PY) 2020 Advance Notice Part 2 and Call Letter (the Notice). The comment deadline is March 1, The CY2020 fee-for-service (FFS) growth rate, which is now the major driver of Part C benchmark rates, is 4.52%. This is 66 basis points higher than the November 27, 2018 estimate in the CMS early preview of growth rates. As noted in Part 1 of the Advance Notice, released December 20, 2018, a new Part C risk adjustment model was proposed that reflects a new variable for the count of payment conditions. This model is the same as that proposed in the previous year s Advance Notice Part 1; although it was not adopted for Payment Year (PY) CMS estimates that the impact of the new model and a change in the weighting of RAPS- and EDS-based scores on average risk scores nationwide is small at +0.22%; however, the impact can vary substantially by plan. Medicare Advantage Organizations (MAOs) can see their plan-specific impact by downloading risk scores in HPMS. CMS is continuing to observe a significant increase in Part C FFS risk scores for 2018, as was the case with 2016 and 2017 data. The proposed PY2020 FFS normalization factors are 1.075/1.069 for RAPS and the new EDS PCC models, respectively. The RAPS FFS normalization factor was for PY2019, which implies a reduction in RAPS scores of 3.2%, assuming no trend in MAO coding. Since the EDS model is new, there is no comparable normalization factor from PY2019. The EDS model in place for PY2019 had a FFS normalization factor of Following is a brief summary of the key changes and proposals in the PY2020 Notice: Part C Payment Methodology Non-ESRD FFS growth rate percentage for CY2020 is 4.52%. Risk Scores CMS is introducing a new Payment Condition Count (PCC) risk model that will be blended with the existing RAPS-based 2017 HCC model. The blend is 50%/50% 2017 HCC/EDS with PCC model. The FFS Normalization factor for PY2020 is proposed to be a 50%/50% blend of and 1.069, which relate to the 2017 HCC model and the new EDS PCC model, respectively. CMS is proposing a change to the RxHCC model for PY2020. Two models are proposed: one based on a calibration using 2014/2015 data, and the other based on calibration using 2015/2016. The RxHCC FFS normalization factor is proposed to be

4 page and for each of these calibrations, respectively. The PY2019 normalization factor was The PY2020 blend of EDS/RAPS risk scores is proposed to be 50%/50%, which is in line with the proposed schedule presented in the PY2019 Final Announcement. The EDS based risk scores under the HCC PCC model use diagnosis data from encounter submissions as well as RAPS based on diagnoses from inpatient services. The coding pattern adjustment is set at the statutory minimum of 5.90%, which represents no change compared with PY2019. EGWPs Plans will not need to file EGWP bid pricing tools (BPTs) for PY2020, as was the case in PY2019. CMS proposes to continue calculating separate HMO and PPO bid-to-benchmark ratios based on individual plan data and then re-weighted with EGWP enrollment. Benefit Changes Cost sharing standards were updated for MA and PD benefits. Most thresholds stayed the same; however, the maximum allowed cost sharing for inpatient acute and psychiatric stays increased substantially, and the Skilled Nursing Facility maximum copay for days 21 through 100 increased from $172/day to $178/day. The voluntary and mandatory MOOP amounts did not change. Looking ahead to 2021, CMS noted that they are considering a third, higher MOOP limit of $10,000. Part D parameters were updated, including a significant increase in the TrOOP ($6,350 for PY2020 versus $5,100 in PY2019), and decreased member coinsurance in the gap for generic drugs to 25% (was 37% in PY2019). TBC Thresholds The TBC requirements are the same as last year, including the standard threshold amount of $ Benefits and cost sharing reductions offered as part of Part C uniformity flexibility or the VBID model will be excluded from the TBC calculation. Star Rating Changes The quality bonus payment (QBP) for a cross-walked contract will now be determined by the enrollment weighted average of what would have been the QBPs of both contracts using November enrollment from the year the Star Ratings were released. In prior years, the star rating would be determined entirely by the surviving contract, with no consideration for the terminated contract. This can be a major impact for national carriers or plans operating in multiple regions. CMS is proposing to continue adjusting 2020 Star Ratings to take into account the effects of natural disasters (Hurricanes Harvey, Irma, and Maria, and the wildfires in California) that occurred during the performance period. Subject to specific criteria,

5 page 3 CMS is proposing to use the higher of the 2019 or 2020 Star Ratings for each CAHPS or HEDIS measure, as well as allowances related to HOS adjustments. Part D Tier Placement of Generics and Brand Drugs CMS is considering (though not yet proposing) discouraging or disallowing a mix of generic and brand products on the same tier. FDA-approved therapeutically equivalent generics would automatically be placed on the generic tier. Overall MA Payment Impact Wakely estimates that, on average, PY2020 Part C standardized benchmarks will increase 4.55% over PY2019 nationwide. This reflects the impact of the growth rate, change in star ratings and changes to applicable percentages (i.e. quartile rankings). We also estimate that the change in CMS revenue for PY2020 versus PY2019 is expected to be +1.45%. This takes into account changes in the FFS normalization factor. Plans should be aware that the changes in the benchmarks can be considerably different (and typically are greater in magnitude) than the change in CMS revenue to the plan. Plans are paid 100% of their Part C basic bid (assuming they bid below the benchmark), which is unaffected by the benchmark for most plans, plus a percentage of the remaining difference of the excess of the benchmark above the bid. Therefore, a change in the benchmark will impact plans differently based on the disparity of the plan s bid compared to the benchmark (i.e. the savings ) and the star-based percentage of the savings retained by the plan (i.e. Part C rebate ). Our analysis of county specific benchmarks and plan revenue was aggregated using January 2019 CMS published MA enrollment and star ratings for PY2020. Details regarding our calculations and assumptions are described in Appendix A at the end of this summary. The remainder of this summary includes many details discussed at length in the Notice.

6 page 4 Attachment I: Preliminary Estimates of the National Per Capita Growth Percentage and the National Medicare Fee-for-Service Growth Percentage for CY2020 Section A. MA Growth Percentage Preliminary estimates of the MA growth rates were announced as +4.84% (last year the rate was +5.93%). Section B FFS Growth Percentage. Fee-for-service growth rate estimated at +4.52% (last year rate was +5.11%). Wakely estimates that the nationwide average change in blended standardized (non-risk adjusted) MA Benchmarks from 2019 to 2020 will be 4.55% and the nationwide average change in the blended risk adjusted benchmark will be 1.45%. See Appendix A at the end of this summary for additional detail. As has been the case in past years, the change in benchmarks can vary significantly depending on geographic area, plan star rating and applicable percentage. The table below shows the top five and bottom five growth rates by State (these changes include changes due to star rating, double bonus status, applicable percentage, and benchmark cap). Table 2 States with Highest and Lowest Benchmark Change Rank State Change 1 DC 11.4% 2 HI 7.0% 3 ID 6.4% 4 MS 5.7% 5 LA 5.6% 49 NH 3.0% 50 KS 2.4% 51 NE 2.2% 52 NJ 2.0% 53 OK 1.2%

7 page 5 Attachment II: Changes in the Part C Payment Methodology for CY2020 Section A. MA Benchmark, Quality Bonus Payments and Rebate CMS intends to rebase county FFS rates in 2020 (which is the basis of the Specified Amount ). County benchmark rates are capped at the Applicable Amount (defined below). CMS interprets that the comparison occurs after the Quality Bonus Payment Percentage ( QBP ) has been included. Like in last year s notice, CMS states that they share stakeholder concerns about a rate-setting mechanism (i.e. the benchmark cap) that diminishes incentives for MA plans to continuously improve the care provided to Medicare beneficiaries. Below are the key components of the Part C benchmark calculation: 2020 Applicable Amount (pre-aca amount): The greater of a county s 2020 FFS cost and the 2019 Applicable Amount increased by the 2020 National Per Capita MA Growth Percentage Specified Amount (FFS benchmark): 2020 FFS Cost less IME phase-out amount multiplied by the Applicable Percentage plus the QBP Applicable Percentage varies by county and is based on the county s rank of 2018 per capita FFS rate, assigned by quartiles per below: FFS Quartile Assignment Quartile Applicable Percentage 4th (highest) 95.0% 3rd 100.0% 2nd 107.5% 1st (lowest) 115.0% If a county s quartile changed from last year, the Applicable Percentage is the average of the current and prior year s applicable percentage. Quality Bonus Percentage (QBP), or applicable % quality increase : The QBP is 5% for 4, 4.5 and 5 star MAOs, and is 0% for plans with a star rating below 4. For new plans under a new parent and low enrollment plans, a 3.5% QBP applies. Contract year 2020 will be the first year the new contract consolidation rule for calculating star ratings becomes effective. For consolidations of two or more contracts of the same plan type and legal entity approved on or after January 1, 2019, the QHP rating for the

8 page 6 first year following consolidation is determined by the enrollment weighted average of what would have been the QBPs of both contracts using November enrollment from the year the Star Ratings were released. Example: for two contracts consolidating for January 2021, the 2021 QBP rating is based on 2020 Star Ratings released in 2019, using November 2019 enrollment of the two contracts. Double QBP percentages are awarded to qualifying plans located in qualifying or double bonus counties. Double bonus counties must: 1. Have a population of over 250,000 (as of 2004). 2. Have at least 25% of MA-eligible beneficiaries enrolled in MA plans (as of December 2009). 3. Have 2020 per capita FFS spending lower than the national average. The final 2020 rate notice will contain a list of all double bonus counties, as the third criterion above is not yet known. Rebates. Rebate levels are based on plan Star Ratings as follows: MA Rebate Percentages Star Rating Stars 70% 3.5 to < 4.5 Stars 65% < 3.5 Stars 50% The percentage is applied to the amount by which the risk-adjusted service area benchmark exceeds the risk-adjusted bid. New plans are treated as having 3.5 Stars; CMS intends to treat low enrollment plans the same way. Section B. Calculation of Fee for Service Cost 2020 FFS County Cost = [(National FFS Cost) or (US Per Capita Cost)] x [County-level Geographic Index aka AGA]. With the Advance Notice, CMS is releasing county-level 2017 FFS cost data used to develop 2020 rates: Data.html AGA Development Overview:

9 page 7 A five-year average of FFS costs from 2013 to 2017 is initially calculated (last year was 2012 to 2016), and is then adjusted. Puerto Rico data only includes beneficiaries with Part A & B for all five years of the base period. (Puerto Ricans are not auto-enrolled into Part B, they must opt in). An adjustment is made to reflect Puerto Rico s high proportion of no-claim members to the national average. CMS is seeking comment regarding treatment of Puerto Rico claim experience. CMS will re-price the 2013 to 2017 to the most current wage and geographic practice cost indices and adjust historical FFS claims for legislative changes. Adjustments are made for shared savings and losses from programs like the MSSP, Pioneer and NextGen ACO programs GME and IME costs are removed. Counties with less than 1,000 members are blended with other counties in the market area for credibility. Adjustments are made for beneficiaries in Veteran Affairs and/or the Department of Defense health programs. VA and DoD adjustments are proposed to be applied concurrently for 2020, which was proposed in 2018, but not enacted until Section C. IME Phase Out IME is being phased out from MA capitation rates. For 2020, CMS will first calculate FFS rates including IME. The maximum reduction for any county in 2020 is 6.6% of the FFS rate. As in prior years, CMS will publish rates with and without the 2020 IME reduction. Section D. ESRD Rates ESRD Rates = [2017 FFS ESRD dialysis USPCC] x [trend to 2020] x [State AGA] x [GME and IME removal factor]. State AGA is the weighted average of state ESRD FFS dialysis costs for 2013 to 2017 divided by the national average for the same timeframe normalized for risk score. CMS proposes to reprice historical inpatient, outpatient and SNF claims for 2013 to 2017 to reflect the most recent wage indices (in this case FY2019), and reprice physician claims with the most recent Geographic Practice Cost Indices (CY2019). This is a continuation of an enhancement introduced last year. CMS is also proposing to reprice ESRD PPS dialysis claims for 2014 to 2017 (2014 is the first year the dialysis PPS was fully phased in). CMS will also adjust historical FFS claims for ESRD beneficiaries to account for legislative and regulatory changes.

10 page 8 Section E. Location of Network Areas for PFFS Plans in Plan Year 2020 Non-employer MA PFFS plans offered in a network area must meet certain access standards. Network area is defined as an area that the Secretary identifies as having at least two networkbased plans. CMS will include the list of network areas for plan year 2020 in the Final Announcement. Section F. MA Employer Group Waiver Plans For 2020, CMS will continue to waive bid pricing tool requirements. CMS is also proposing to continue the payment methodology implemented for MA EGWPs finalized in the 2019 Rate Announcement. The steps of the EGWP payment rate calculations are outlined below: The bid to benchmark (B2B) ratio within each quartile is calculated as follows using February 2019 individual market MA enrollment for weighting: ISAR = Intra-Service Area Rate Adjustment 2019 The 2019 individual market B2B ratios will be calculated separately for HMO plan types and PPO plan types. B2Bs for PPOs and HMOs will be weighted by the total proportion of EGWP PPO and HMO plan type enrollment, respectively, to result in the final B2B ratios for 2020 by quartile. The EGWP Part C Base payment rate is calculated as follows, with the MA county benchmark reflecting the published 5.0%, 3.5%, and 0.0% bonus county rate book rates (vary based on star rating, including adjustments for qualifying double bonus counties): EGWP Base RateB2B Ratio for Applicable Quartile*MA County Benchmark EGWP Rebate RateRebate % MA County Benchmark EGWP Base Rate EGWP Total Payment EGWP Base RateEGWP Rebate RateRisk Score Regional PPO (RPPO) EGWP rates will be derived as follows: RPPO EGWP Base RateB2B Ratio2019 Monthly Capitation Rate RPPO EGWP Regional Rebate 1 B2B Ratio 2019 Regional RateRebate %

11 page 9 Regional PPO EGWP Total Payment RPPO Base RateRegional Rebate Rate Risk Score For 2020, CMS is proposing to reverse its prohibition against MA EGWPs using a portion of Part C payment to buy down enrollee Part B premium (this prohibition was in effect between 2017 and 2019). CMS is proposing to collect Part B premium buy-down amounts in the EGWP PBP submission. EGWPs that choose to use a portion of their payment to buy-down Part B premium will have that amount reduced from their capitated payment. Similarly, the Part B buy-down amount cannot vary among beneficiaries within a plan. Section G. CMS-HCC Risk Adjustment Model for CY2020 CMS published for public comment the proposed Part C risk adjustment model in Part 1 of the Advance Notice, released December 20, The proposed model is the same as the Payment Condition Count (PCC) model first introduced in the December 27, 2017 Advance Notice Part 1. CMS also proposed for consideration an alternative PCC model that adds the following HCCs: HCC 51 Dementia with Complications HCC 52 Dementia without Complication HCC 159 Pressure Ulcer of Skin with Partial Thickness Skin Loss Section H. ESRD Risk Adjustment Model for CY2019 CMS is proposing a revised CMS-HCC ESRD risk adjustment model (2020 ESRD model) calibrated with diagnoses filtered using the same approach currently used to filter encounter data records to calculate EDS risk scores for MA plans. This change in filtering is the same change that was made for the CY 2019 CMS-HCC risk adjustment model. The recalibrated ESRD model uses similar HCCs as the other CMS risk adjustment models, but is calibrated on the FFS ESRD population to reflect cost and disease patterns of this subgroup. The 2020 ESRD model will be calibrated using the same underlying data years and Medicaid factors as the 2019 ESRD model. As has been the case since 2005, separate coefficients will be maintained for dialysis, transplant, and post-graft beneficiaries. Two key model updates: diagnoses codes selected with EDS filtering logic applied, and adjustments made to the coefficients for dialysis new enrollee, post-graft new enrollee, and post graft Long-Term Institutionalized (LTI) segments. Section I. CMS-HCC Risk Adjustment Model Used for PACE Organizations in CY 2020 CMS is proposing to change the model used to pay PACE organizations for non-esrd enrollees in CY PACE risk scores will be calculated using the 2017 CMS-HCC model instead of the PACE CMS-HCC model that has been in place since CY 2012.

12 page 10 The 2017 CMS-HCC model has a similar impact on the average PACE risk score as would an updated recalibrated version of the current PACE CMS-HCC model. CMS evaluated the impact of the model change on CY 2016 risk scores for PACE enrollees by comparing PACE risk scores under two models: 1. A recalibrated PACE model with 2014 diagnoses predicting 2015 costs, and 2. The 2017 CMS-HCC model When comparing the risk scores, CMS measured only a 0.25% difference in average risk scores between the two models. In a February 4, 2019 Stakeholders call, CMS noted that the RAPS/EDS blend would remain the same as in past years. Section J. Frailty Adjustment for PACE organizations and FIDE SNPs CMS is permitted to make additional payment adjustments to take into account the frailty of Fully Integrated Dual Eligible (FIDE) Special Needs Plans (SNP) if the FIDE SNP has similar average levels of frailty as the PACE program. CMS has also provided an alternative Payment Condition Count (APCC) model for consideration for CY 2020, and separate frailty factors for this model. Since CMS is proposing a new Payment Condition Count model for 2020, CMS is also proposing to calculate PACE frailty scores with the frailty factors associated with the 2017 CMS-HCC model. Proposed FIDE SNP Frailty Factors for CY2020 Activities of Daily Living (ADL) Non-Medicaid Medicaid Proposed FIDE SNP Frailty Factors for the CY 2020 APCC model Activities of Daily Living (ADL) Non-Medicaid Medicaid

13 page 11 Current Frailty Factors associated with the 2017 CMS-HCC model Activities of Daily Living (ADL) Non-Medicaid Medicaid Section K. Medicare Advantage Coding Pattern Adjustment. The coding pattern adjustment for Payment Year (PY) 2020 is the statutory minimum of 5.90%. This is the same adjustment used for PY2019. Section L. Normalization factors Proposed Normalization Factors for PY2020: Model 2019 Payment Year 2020 Payment Year Year-to-Year Impact 2017 CMS-HCC Model % CMS Payment Condition Count Model 1 NA NA Blended 50% 2017 Model /50% Payment Condition Model (illustration of NA NA approximate impact) PACE % ESRD Dialysis % ESRD Functioning Graft % RxHCC Calibrated on 2014/2015 Data % RxHCC Calibrated on 2015/2016 Data % 1 Model change in PY 2020 Model recalibration in PY 2020 For the CMS-HCC model used for PY 2020, normalization factor (1.075) is higher than the 2019 HCC factor of This will reduce revenue for any MA-PD plans that do not keep pace in terms of their coding trend. Note that for 2020, CMS proposes to blend the 2017 HCC model (50% weight) with the newly established Payment Condition Count Model (50%). Two separate RxHCC normalization factors have been proposed, based on two different calibration periods. Depending on the final factor chosen by CMS, the RxHCC model

14 page 12 normalization factor (1.020) will drive either a 2.2% decrease (calibrated on 2014/2015 data) or a 1.4% decrease (calibrated on 2015/2016 data) to Part D risk scores from 2019 to For payment year 2020, CMS is proposing to maintain the same linear slope projection method as was used in payment year 2019 to calculate the normalization factor. Section M. Medical Loss Ratio Credibility Adjustment. No changes for Section N. Encounter Data as a Diagnosis Source for 2020 CMS is proposing the following EDS/RAPS mix: 50% EDS (supplemented with RAPS inpatient data) and FFS. 50% RAPS and FFS. EDS Part C risk scores will be calculated with the PCC CMS-HCC model, while ESRD dialysis and functioning graft risk scores will be calculated using the updated 2020 ESRD model. RAPS Part C risk scores will be calculated with the 2017 CMS-HCC model, while ESRD dialysis and functioning graft risk scores will be calculated using the 2019 ESRD model. Attachment III Changes in the Payment Methodology for Medicare Part D for CY2020 Section A. Update of the RxHCC Model Following are the changes to the RxHCC model for 2020: Re-Calibration for 2020 Benefit Structure: Updated to reflect gap plan liability for non-lis beneficiaries will be 75% for generics and 5% for brand scripts this increases plan liability for non-lis beneficiaries relative to LIS beneficiaries. CMS is considering recalibration of the model under two different data sets: 2014 diagnoses and 2015 PDE data: Note that this is the same as the current model. Updating the model to include 2015 diagnoses and 2016 PDE data would have reflected a mixture of ICD-9 and ICD-10 data; therefore, CMS decided not to push the diagnoses and PDE data forward one year diagnoses and 2016 PDE: Since RxHCCs are determined based on ICD-9 codes, ICD-10 codes submitted during the last quarter of 2015 were mapped to associated RxHCCs based on a standard crosswalk between ICD-9 and ICD-10.

15 page 13 For payment year 2020, the model was recalibrated using diagnoses from FFS and MA-PD beneficiaries enrolled in a Part D plan. Diagnoses from the prior year PDE data were used to predict PDE expenditures. Comments were requested in relation to the data set that will be used for model recalibration. Quantification of the changes was not provided. Section B. Encounter Data as a Diagnosis Source for 2020 Consistent with the approach used for PY2019, CMS proposes calculation of PY2020 risk score based on diagnoses with CY2019 dates of service from two separate data sources: 1. Risk Adjustment Processing System (RAPS) and Fee-for-Service (FFS) data 2. Encounter Data System (EDS) and FFS data The final risk score will be a blend of the above two risk scores with 50% weight on the first and 50% on the second. For PACE, CMS proposes to continue the same method for CY2020 that has been in place since CY2015. Section C. Part D Risk Sharing There are no changes to the Part D risk corridor calculations for Section D. Medicare Part D Benefit Parameters: Annual Adjustments for Defined Standard Benefit PY2020 Part D Defined Standard benefit changes: $435 deductible ($415 in 2019) $4,020 ICL ($3,820 in 2019) $6,350 TrOOP ($5,100 in 2019) $1.30/$3.90 copays for full subsidy full benefit duals ($1.25/$3.80in 2019) It is important to note that the value of the TrOOP is increasing significantly for PY2020. This is the direct result of Section 1860D-2(b)(4) of the Social Security Act, which modified the out-ofpocket threshold growth rate for 2014 through More specifically, for 2014 and 2015, the Act required that the out-of-pocket threshold be updated by the API 1 minus 0.25%, while for 1 API is defined as the annual percentage increase in average per capita aggregate expenditures for covered Part D drugs in the United States for Part D eligible individuals, as determined by the Secretary for the 12-month period ending in July of the previous year using such methods as the Secretary shall specify

16 page 14 contract years 2016 through 2019 the Act required that the out-of-pocket threshold be updated from the previous year by the lesser of (1) the API or (2) two percentage points plus the annual percentage increase in the Consumer Price Index (CPI). For 2020, the out-of-pocket threshold must be calculated as if the calculation of the out-ofpocket threshold for years 2014 through 2019 had not be modified (i.e., as if the thresholds for each of years 2014 through 2019 had been updated using the API). For 2021 and future years, the TrOOP increase will increase the prior year s value by the API. See table below for detail of all Part D defined standard parameters. Part D Benefit Parameters Standard Benefit Deductible $415 $435 Initial Coverage Limit $3,820 $4,020 Out-of-Pocket Threshold $5,100 $6,350 Total Covered Part D Spending at Out-of-Pocket Threshold for Non-Applicable $7, $9, Beneficiaries Estimated Total Covered Part D Spending for Applicable Beneficiaries $8, $9, Minimum Cost-Sharing in Catastrophic Coverage Portion of the Benefit Generic/Preferred Multi-Source Drug $3.40 $3.60 Other $8.50 $8.95 Full Subsidy-Full Benefit Dual Eligible (FBDE) Individuals Deductible $0.00 $0.00 Copayments for Institutionalized Beneficiaries [category code 3] $0.00 $0.00 Copayments for Beneficiaries Receiving Home and Community-Based Services [category code 3] Maximum Copayments for Non-Institutionalized Beneficiaries Up to or at 100% FPL [category code 2] Up to Out-of-Pocket Threshold $0.00 $0.00 Generic/Preferred Multi-Source Drug $1.25 $1.30 Other (6) $3.80 $3.90 Above Out-of-Pocket Threshold $0.00 $0.00 Over 100% FPL [category code 1] Up to Out-of-Pocket Threshold Generic/Preferred Multi-Source Drug $3.40 $3.60 Other $8.50 $8.95 Above Out-of-Pocket Threshold $0.00 $0.00 Full Subsidy-Non-FBDE Individuals Applied or eligible for QMB/SLMB/QI or SSI and income at or below 135% FPL and resources $8,890 (individuals) or $14,090 (couples) [category code 1] Deductible $0.00 $0.00 Maximum Copayments up to Out-of-Pocket Threshold Generic/Preferred Multi-Source Drug $3.40 $3.60 Other $8.50 $8.95 Maximum Copayments above Out-of-Pocket Threshold $0.00 $0.00

17 page 15 Part D Benefit Parameters, cont Partial Subsidy Applied and income below 150% FPL and resources below $13,820 (individual) or $27,600 (couples) [category code 4] Deductible $85.00 $89.00 Coinsurance up to Out-of-Pocket Threshold 15% 15% Maximum Copayments above Out-of-Pocket Threshold Generic/Preferred Multi-Source Drug $3.40 $3.60 Other $8.50 $8.95 Retiree Drug Subsidy Amounts Cost Threshold $ $ Cost Limit $8, $8, Section E. Reduced Coinsurance for Applicable Beneficiaries in the Coverage Gap Phase-in of reduced non-lis cost sharing in the gap continues, with ultimate levels (95% for brand drugs and 25% for generic drugs) to be accomplished by PY2020. The non-lis gap cost sharing for 2020 is as follows: Non-LIS 25% coinsurance for non-applicable drugs (mainly generics) in the gap (was 37% in 2019). Non-LIS 95% coinsurance for non-applicable drugs (mainly brand) in the gap (versus 85% in 2019). Note that member liability is approximately 25% after 70% manufacturer discount. This is the same cost sharing scheme used in PY2019. Reductions in non-lis coinsurance will result in lower TrOOP, which will be reflected in the 2020 bids. Section F. Dispensing Fees and Vaccine Administration Fees for Applicable Drugs in the Coverage Gap Consistent with the gap cost sharing reductions discussed above, beneficiary/plan liability will be 25%/75%, respectively, for dispensing fees and vaccine administration fees related to applicable drugs in the gap. Section G. Part D Calendar Year Employer Group Waiver Plans Beginning in 2017, CMS began making prospective payments for Part D federal reinsurance for calendar year Employer Group Waiver Plans (EGWPs) offering Part D, due to rising specialty drug costs. Consistent with Part D non-egwps, the prospective payment will be reconciled with actual expenses several months after the conclusion of the plan year.

18 page 16 For 2020, CMS proposes to continue making prospective reinsurance payments to calendar year Part D EGWPs. The payment will be based on the average reinsurance amount paid to CY2017 EGWPs. This amount is $40.77 PMPM (versus $36.10 PMPM in 2019). Consistent with 2019 and prior years, non-calendar year EGWPs are excluded from the Part D federal reinsurance program. Attachment IV Medicare Part D Parameters for the Defined Standard Benefit Annual Adjustments for 2020 Attachment IV contains detailed calculations of the annual adjustments to the Part D Defined Standard benefit parameters. Two annual percentage adjustments are calculated to develop the 2020 benefit parameters: the annual percentage increase (API) and the annual Consumer Price Index (CPI) increase. These adjustments are described below. The API is applied to all Part D parameters, except for copayments that apply to full benefit dual-eligible enrollees with incomes up to or at 100% FPL, which increase based on CPI. Section A. Annual Percentage Increase in Average Expenditures for Part D Drugs per Eligible Beneficiary (API) The API is defined as the annual percentage increase in the average per capita expenditures for Part D for the 12-month period ending in July of the previous year. Section B. Annual Percentage Increase in Consumer Price Index (CPI) The CPI is defined as the annual percentage increase in the CPI, All Urban Consumers (all items, U.S. city average) as of September of the previous year. Section C. Calculation Methodology The API uses prescription drug event (PDE) data to calculate the per capita Part D costs from August 2018 to July 2019 divided by the per capita Part D costs from August 2017 to July Since PDE data are not yet available for 2019, the per capita costs for this time period are estimated using August 2018 to December 2018 PDE data. This calculation results in an estimated 5.25% annual increase in per capita costs. This increase is further adjusted based on revisions to prior years estimates. The cumulative adjustment for prior year revisions is -0.04%, primarily driven by an update to last year s API. This results in a total 2020 API of 5.21%. The CPI increase is based on the projected September 2019 CPI divided by actual September 2018 CPI, which results in an estimated increase of 2.27%. This increase is further adjusted

19 page 17 based on revisions to prior years estimates. The cumulative adjustment for prior year revisions is 0.32%. In total, this produces a 2019 CPI increase of 2.59%. Section D. Retiree Drug Subsidy Amounts The Part D parameters, including the retiree drug subsidy amount, are each multiplied by the appropriate increase (CPI or annual percentage increase). For 2020, the retiree subsidy cost threshold is $435 (was $415 in 2019) and the cost limit is $8,950 (was $8,500 in 2019). Section E. Estimated Total Covered Part D Spending at Out-of-Pocket Threshold for Applicable Beneficiaries The 2019 total covered Part D spending at out-of-pocket threshold for applicable beneficiaries is calculated to be $9, ($8, for 2019). This amount is calculated as the ICL plus 100 percent beneficiary cost sharing in the coverage gap divided by the weighted gap coinsurance factor. Further detail on these calculations and inputs is provided in the Advance Notice. Attachment VI. Draft CY2020 Call Letter Section I Parts C and D ANNUAL CALENDAR: KEY UPCOMING DATES The following bullet points contain major/key items for 2020 bid submission. The full detailed list can be found on pages of the Advance Notice. February 13, 2019: Initial and Service Area Expansion Application due to HPMS by 8:00PM EST. Mid-late March 2019: Release of CY2020 Formulary Reference File (FRF). March/April 2019: CMS works with MAOs and PDPs to resolve low enrollment issues for Early April 2019: CY2020 OOPC Model and OOPC estimates for each plan made available. April 1, 2019: 2020 Final Announcement of MA Capitation Rates and MA/Part D Payment Policies released along with Final Call Letter. April 5, 2019: Release of the CY2020 Plan Creation Module, PBP, and BPT software in HPMS. April 10, 2019: Deadline for MAOs to submit requests for full contract consolidations for CY Mid-April 2019: Release of HPMS Memo: Contract Year 2020 MA Bid Review and Operations Guidance. Late April 2019: TBC data for CY2020 released.

20 page 18 May 2019: Final ANOC/EOC, LIS rider, formularies, provider directory and other items for CY2020 available. Early May 2019: MA/MA-PD/PDP plans to notify CMS of its intention to non-renew county(ies) for individuals, but continue the county(ies) for 800 series EGWP members, or reduce its service area at the contract level. May 4, 2019: Release of the CY2020 Bid Upload Functionality in HPMS. May 14, 2019: Release of CY2020 Formulary Submission Module in HPMS. May 17, 2019: Release of CY2020 Actuarial Certification Module in HPMS. June 3, 2019: o Deadline for submission of CY2020 bids for all MA/MAPD/PDP plans. o Deadline for submission of CY2020 Formularies. o Deadline for submission of a CY2020 contract non-renewal, service area reduction notice to CMS from MA/MAPD/PDP plans. June 2019: CMS Conducts Network Adequacy Reviews. Late July/Early August 2019: CMS releases the 2020 Part D national average monthly bid amount, the Medicare Part D base beneficiary premium, the Part D regional lowincome premium subsidy amounts, the MA regional PPO benchmarks, and the de minimis amount. Late July/Early August 2019: Rebate reallocation period begins after release of the above bid amounts. Late August/Early September 2019: Plan preview period of Star Ratings in HPMS. October 1, 2019: Tentative date for 2020 plan and drug benefit data to be displayed on Medicare Plan Finder on Medicare.gov. October 9, 2019: Star Ratings go live on medicare.gov. October 15, 2019: 2020 Annual Election Period (AEP) begins. December 7, 2019: End of AEP. ENHANCEMENTS TO THE 2020 STAR RATINGS AND FUTURE MEASUREMENT CONCEPTS Unless noted below, CMS does not anticipate methodology changing from the 2019 Star Ratings. For reference, a list of measures and methodology included in the 2019 Star Ratings is described in the Technical Notes: Changes to Measures for 2020 Improvement Measures (Part C & D) A detailed list of the measures proposed to calculate 2020 improvement measures is included on pages Medication Therapy Management (MTM) Program Completion Rate for Comprehensive Medication Reviews (CMR) Measure (Part D) Continue to exclude beneficiaries from the MTM program who did not receive a CMR within 60 days of enrollment of the program; do however include the beneficiaries in the denominator and the numerator if they received a CMR within that 60 day time frame.

21 page 19 Medication Adherence (ADH) for Hypertension (RAS Antagonists), Medication Adherence for Diabetes Medications, and Medication Adherence for Cholesterol (Statins) (Part D) CMS is proposing to exclude beneficiaries who elected to receive hospice care at any time in the measurement period for CY 2020 Star Ratings instead of applying a Proportion of Days (PDC). Statin Use in Persons with Diabetes (SUPD) (Part D) SUPD measurement was added with a weight of 1 for CY In 2020 and beyond, this measure will be weighted at three. Statin Use in Persons with Diabetes (SUPD) (Part D) SUPD measurement was added with a weight of 1 for CY In 2020 and beyond, this measure will be weighted at three. Temporary Removal of Measures from Star Ratings Controlling High Blood Pressure (Part C) CMS is proposing to move the controlling high blood pressure measure to 2022 given that the target for HEDIS 2019 will be revised to <140/90 mmhg and to incorporate some structural changes to the measurement: Allowing two outpatient encounters to identify the denominator and remove the medical record confirmation for hypertension; Allowing the use of telehealth services for one of the outpatient encounters in the denominator, adding an administrative approach that utilizes CPT category II codes for the numerator; Allowing remote monitoring device readings for the numerator Star Ratings Program and the Categorical Adjustment Index The Categorical Adjustment Index (CAI) values and abridged details of the methodology are provided in the annual Medicare Part C & D Star Ratings Technical Notes available on the CMS webpage at The CAI was implemented to address the within-contract disparity in performance associated with a contract s percentages of beneficiaries with low income subsidy and dual eligible (LIS/DE) and disability. The PQA examined their medication adherence measures, which are currently used in the Star Ratings Program, for potential risk adjustment (i.e., adjustment for socioeconomic status, aka SES, and demographic factors). Beginning in 2018, the PQA included in the 2018 PQA Measure Manual draft recommendations on risk adjustment of the three medication adherence measures: Medication Adherence for Diabetes Medications, Medication Adherence for Hypertension, and Medication Adherence for Cholesterol. The draft recommendations are as follows: All three adherence measures should be risk adjusted for sociodemographic status (SDS) characteristics to adequately reflect differences in patient populations. The measures should be adjusted for the following beneficiary-level SDS characteristics: Age Gender Dual eligibility/lis status, and Disability status

22 page 20 The three adherence measures should be stratified by the beneficiary-level SDS characteristics listed above to allow health plans to identify disparities and understand how their patient population mix is affecting their measure rates. CMS is proposing to expand the adjusted measure set for the determination of the 2020 CAI values. The proposed methodology for the 2020 Star Ratings is the same methodology that has been finalized for the 2021 Star Ratings in the Contract Year 2019 Final Rule. For the 2020 CAI adjusted measure set, CMS is proposing that all measures identified as candidate measures will be included in the determination of the 2020 CAI values. A measure will be included as a candidate measure if it remains after applying the following four bases for exclusions: The measure is already case-mix adjusted for SES (for example, CAHPS and HOS outcome measures); The focus of the measurement is not a beneficiary-level issue but rather a plan or provider-level issue (for example, appeals, call center, Part D price accuracy measures); The measure is scheduled to be retired or revised during the Star Rating yin which the CAI is being applied; or The measure is applicable to only Special Needs Plans (SNPs) (for example, SNP Care Management, Care for Older Adults measures). The candidate measure set for the 2020 CAI is as follows: Adult BMI Assessment Annual Flu Vaccine Breast Cancer Screening Colorectal Cancer Screening Diabetes Care Blood Sugar Controlled Diabetes Care Eye Exam Diabetes Care Kidney Disease Monitoring Improving Bladder Control Medication Reconciliation Post-Discharge MTM Program Completion Rate for CMR Monitoring Physical Activity Osteoporosis Management in Women who had a Fracture Plan All-Cause Readmissions Reducing the Risk of Falling Rheumatoid Arthritis Management Medication Adherence for Diabetes Medications Medication Adherence for Hypertension Medication Adherence for Cholesterol Statin Therapy for Patients with Cardiovascular Disease Statin Use in Persons with Diabetes 2020 Categorical Adjustment Index (CAI) Values

23 page 21 MA contracts have up to three mutually exclusive and independent adjustments one for the overall Star Rating and one for each of the summary ratings (Part C and Part D). PDPs have one adjustment for the Part D summary rating. Tables 4 13 on pages 115 through 119 in the Advance Notice provide the rating-specific categories for classification of contracts based on the percentage of LIS/DE and disabled beneficiaries along with the final adjustment categories. Extreme and Uncontrollable Circumstances Policy CMS is proposing to adjust the 2020 Star Ratings to take into account the effects of extreme and uncontrollable circumstances that occurred during the performance period using a similar methodology to the one adopted for the 2019 Star Ratings in the CY 2019 Call Letter. This policy is largely the same as that described in the final 2019 Call Letter and used for 2019 Star Ratings, with two substantive exceptions: Eliminating the difference-in-differences adjustment for survey data. The difference-indifferences adjustment showed no consistent, negative impact of extreme and uncontrollable circumstances on the 2019 Star Ratings; therefore, CMs is proposing to eliminate this adjustment to simplify the methodology. Clarifying the rules around measures with missing or biased data in the prior or current year. Identification of Affected Contracts CMS proposes a policy to identify MA and Part D contracts affected by extreme and uncontrollable circumstances that may impact their performance on Star Ratings measures and/or may impact their ability to collect necessary measure-level data. Contracts must meet all of the following criteria: The service area is within an emergency area during an emergency period as defined in Section 1135(g) of the Act. The service area is within a county or county-equivalent entity designated in a major disaster declaration under the Stafford Act that served as a condition precedent for the Secretary s exercise of authority under Section 1135 of the Act based on the same triggering event(s). Certain minimum percentage (25% measure adjustment or 60% for exclusion from cut point calculations) of the enrollees under the contract must reside in a FEMA-designated Individual Assistance area at the time of the extreme and uncontrollable circumstance. CMS proposes that the policy be tailored to the specific areas experiencing the extreme and uncontrollable circumstances. For purposes of this policy, a narrower geographic scope than the full emergency area would ensure that the Star Ratings adjustments are focused on the specific geographic areas that experienced the greatest adverse effects of the extreme and uncontrollable circumstances and are not applied to areas sustaining little or no adverse effects. Tables 14 and 15 on page 121 show the list of Section 1135 waivers issues and the Individual Assistance counties from FAMA major disaster declarations, respectively.

24 page 22 To further narrow the scope of this policy to ensure it is applied to those contracts most likely to have experienced the greatest adverse effects, CMS proposes to limit to Individual Assistance disaster declarations. To determine whether a contract was impacted (such as that it would be an affected contract eligible for adjustments), CMS proposes to compare the number of enrollees in the Individual Assistance area at the time of the extreme and uncontrollable circumstance compared to the number of enrollees outside the Individual Assistance area. The Hurricanes Florence and Michael, Typhoon Yutu, and the California wildfires trigger the extreme and uncontrollable circumstances policy. CMS proposes to limit adjustments to the star ratings to affected contract for these major disasters. Contracts that do not meet the definition of an affected contract or the parameters discussed below would not be eligible for any adjustments to the 2020 Star Ratings under this policy. CAHPS Adjustments For CAHPS, CMS is proposing to take into account the effects of these extreme and uncontrollable circumstances in the following two ways for affected contracts: For all contracts, the MA organization would be required to administer the 2019 CAHPS survey unless the contract requested and CMS approved an exception because a substantial number of their enrollees have been displaced due to a FEMA-designated disaster in 2018 and it would be practically impossible to contact the required sample for the survey. CMS proposes to make the exception available only to affected contracts that can demonstrate meeting this standard. CMS proposed adjustment is for affected contracts with at least 25% of enrollees residing in FEMA-designated Individual Assistance areas at the time of the extreme and uncontrollable circumstance. These would receive the higher of the 2019 or 2020 Star Rating/corresponding measure for each CAHPS measure. For all adjustments, if the Star Rating is the same in both years, CMS would use the Star Rating and measure score from the most recent year. HOS Adjustments For the HOS survey, CMS proposed to follow similar procedures as CAHPS but the adjustment for 2017 disasters (listed in Tables 15 and 16 on page 121 and 136, respectively of the final CY 2019 Call Letter) will apply to 2020 Star Ratings, and the adjustment for 2018 disasters (listed in Tables 14 and 15 of this CY 2020 Call Letter) will apply to 2021 Star Ratings. For all contracts, the MA organization would be required to administer the 2019 HOS survey unless the contract requested and CMS approved an exception because a substantial number of their enrollees have been displaced due to a FEMA-designated disaster in 2018 and it would be practically impossible to contact the required sample for the survey. CMS proposes to make the exception available only to affected contracts that can demonstrate meeting this standard. CMS proposed adjustment is for affected contracts with at least 25% of enrollees residing in FEMA-designated Individual Assistance areas at the time of the extreme and uncontrollable

25 page 23 circumstance. These affected contracts would receive the higher of the 2021 or 2020 Star Rating/corresponding measure for each HOS outcome measure and HEDIS-HOS measure in the 2021 Star Ratings. For all adjustments, if the Star Rating is the same in both years, CMS would use the Star Rating and measure score from the most recent year. HEDIS Adjustments For HEDIS, all affected contracts would be required to report HEDIS data to CMS unless the MA organization of an affected contract requests and receives from CMS and exception because the MA organization cannot obtain both administrative and medical record data necessary for HEDIS. All contracts in disaster areas can work with NCQA to request modifications to the samples for measures that require medical record review. For affected contracts with more than 25% of beneficiaries in a FEMA designated Individual Assistance area at the time of the disaster, CMS would take the higher of the 2019 or 2020 Star Ratings (and corresponding measure rating) for each HEDIS measure. In contracts with at least 25% of enrollees residing in FEMA-designated Individual Assistance areas that were affected by disasters in 2017 and 2018, CMS proposes they receive the higher of the 2020 Star Rating or what the 2019 Star Rating would have been in the absence of any adjustment that took into account the effects of the 2017 disaster for each measure. For all adjustments, if the Star Rating is the same in both years, CMS would use the Star Rating and measure score from the most recent year. Other Star Ratings Measure Adjustments CMS proposes that for all other measures for affected contracts with at least 25% of beneficiaries in a FEMA-designated Individual Assistance area at the time of the disaster, CMS would take the higher of the 2019 or 2020 measure Star Rating (and corresponding measure rating). In contracts with at least 25% of enrollees residing in FEMA-designated Individual Assistance areas that were affected by disasters in 2017 and 2018, CMS proposes that they will receive the higher of the 2020 Star Rating or what the 2019 Star Rating would have been in the absence of any adjustment that took into account the effects of the 2017 disaster for each measure. For all adjustments, if the Star Rating is the same in both years, CMS would use the Star Rating and measure score from the most recent year. CMS proposes to exclude from this adjustment policy the following measures: Part C Call Center Foreign Language Interpreter and TTY Availability and Part D Call Center Foreign Language Interpreter and TTY Availability. Improvement Measure(s) and Missing Data Rules: Currently, contracts must have data for at least half of the attainment measures used to calculate the Part C or Part D improvement measures to be eligible to receive a rating in each improvement measure. For affected contracts that revert back to the underlying 2019 Star Rating for a particular measure, CMS proposes to exclude that measure in the measure count