Session 23 PD, What's New in Medicaid Managed Care Regulation? Moderator/Presenter: Jennifer L. Gerstorff, FSA, MAAA

Transcription

1 Session 23 PD, What's New in Medicaid Managed Care Regulation? Moderator/Presenter: Jennifer L. Gerstorff, FSA, MAAA Presenters: Jeremy D. Palmer, FSA, MAAA Christopher John Truffer, FSA, MAAA

2 2016 SOA Health Meeting Session 23: What s New in Medicaid Managed Care Regulation Moderator: Jennifer Gerstorff, FSA, MAAA Presenters: Christopher Truffer, FSA, MAAA Jeremy Palmer, FSA, MAAA

3 Introduction and Background

4 The writing was on the wall 3

5 Actuarial Soundness 2.0 -Presented in September 2010 at MMC Conference (Palmer) Will the GAO findings change current practice? Should the state specific assumptions be more regulated? Will Medicaid follow Commercial with minimum LR standards (already present in several states)? How would a binding Actuarial Standard of Practice change the process? Should CMS become more involved in capitation rate-setting? Would national managed care data assist in developing actuarially sound capitation rates? 4

6 Evolution of Actuarial Soundness Pre CMS Checklist for RO - Draft AAA Practice Note Nonbinding GAO Report CMS Guidance for New Populations CMS Review of Rates for Same CMS Guidance for All Populations CMS Review of Rates for Same ASOP 49 CMS Guidance Enhanced Draft Mega Reg Mega Reg Finalized Alignment between binding ASOP and CMS Regs 5

7 Evolution of Actuarial Soundness What s New What s New-ish What s Not Eliminate rate ranges and addition of +/-1.5% Use MLR in rate dev Phase out of passthrough payments Age of base data Prescribed methodology Documentation requirements CMS actuarial review Binding standards on actuaries (ASOP) Actuarial soundness Rate certification Generally accepted practice Actuarial judgment 6

8 CMS Rate Consultation Guide Replaces use of Rate-Setting Checklist for CMS RO Provides template for how rate certifications should be completed Allows CMS to objectively review rates from states Now codified in CFR

9 CMS Rate Reviews and Medicaid Managed Care Regulation Christopher Truffer, FSA, MAAA Centers for Medicare & Medicaid Services Society of Actuaries Spring Health Meeting June

10 Overview Overview of Medicaid managed care regulation Key provisions of regulation and implications for rate setting CMS managed care rate reviews

11 Managed Care Regulation Final rule displayed April ; published in Federal Register May Effective beginning July First update to managed care regulations since

12 Managed Care Regulation Rate setting Network adequacy Quality of care and quality rating system Beneficiary experience and protections Program integrity Delivery system reform Managed long-term services and supports CHIP 11

13 Key Issues for Actuaries Rate setting Actuarial soundness Process and requirements Certification and report Pass-through payments IMDs Rate ranges MLR 12

14 Rate Setting Definition of actuarial soundness Actuarially sound capitation rates are projected to provide for all reasonable, appropriate, and attainable costs that are required under the terms of the contract and for the operation of the MCO, PIHP, or PAHP for the time period and the population covered under the terms of the contract, and such capitation rates are developed in accordance with the requirements in [42 CFR 438.4]. 13

15 Rate Setting Process and requirements Base data Projected benefit trends and costs Non-benefit costs Adjustments Medical loss ratio Risk adjustment 14

16 Rate Setting Reporting requirements Report describing rate development (including items listed under process) Final contracted rates Additional information as requested for CMS review Effective date: Contracts starting on or after July (some exceptions) 15

17 Pass-Through Payments Payments to hospitals Limit to difference between base payments and Medicare payments 10-year phase-down, 10% per year Contracts starting on or after July Payments to physicians, nursing facilities Not permitted for contracts starting on or after July

18 IMD Limitations Permissible as in lieu of services Requirements for cost assumptions Effective July

19 Rate Ranges Actuaries will be required to certify rates No longer permitted to certify rate ranges Rate changes within +/- 1.5% will be permitted without new certification Effective date: Contracts starting on or after July

20 Medical Loss Ratio Requires calculating, reporting of MLR Sets standards for calculating MLR Relationship to actuarial soundness Minimum medical loss ratio: 85 percent Considerations for high loss ratios Does not require states to collect remittances from plans if MLR is below minimum Effective dates Reporting: Contracts starting on or after July As part of actuarial soundness: Contracts starting on or after July

21 CMS Rate Reviews Brief history of rate reviews Changes to rate review process Common issues and questions Upcoming 20

22 Brief History of Rate Reviews Pre-2014: Review conducted by Regional Offices, use of rate setting checklist 2014: Consultation guide and actuarial review of new adult group rates 2015: Rate development guide and actuarial review of all rates 2016: Update rate guide, continuing actuarial review of all rates 21

23 Changes to Rate Review Process Key 2016 changes More detailed rate development guide Changes to rate review questions More technical assistance calls Goals Improve timeframes for reviews More effective reviews Better coordination, communication between CMS and States ASOP 49 22

24 Common Issues and Questions Data Paid encounter data, repricing adjustments Trends and Benefit Costs Sources, comparisons to actual experience Adjustments Non-Benefit Costs Comparison to actual experience, level of detail Margin New Adult Group Rates Incorporating data, experience Results of risk mitigation strategies 23

25 Upcoming 2017 rate guide Implementation of managed care regulation 24

26 Session 23: What s New in Medicaid Managed Care Regulation Jeremy Palmer FSA, MAAA June 15, 2016

27 From Regulation Into Practice

28 Implications on Rate Certifications More rigor More transparency More credibility More time More costly More documentation CMS questions from in 2015 to in most cases for Gap is narrowing! 27

29 Evolution of Documentation Before The state changed enrollment criteria We modeled the movement Selected factors were After The state changed enrollment criteria We modeled the movement We used CDPS version X...and looked Y and Z Results of the analysis were Reasonable because of Selected factors were 28

30 Eliminate Rate Ranges But Allow De Minimis Changes States used ranges for several reasons Negotiate with MCOs Reduce interim rate modifications Flexibility in rate-setting process Concerns with ranges How can rates that are 10% apart both be actuarially sound Reduced precision with assumptions Some consider arbitrary CMS will allow de minimus changes without recertification Every rate must be individually certified but can be modified by +/-1.5% Balance of practical uses and concerns of losing the ranges 29

31 Allowing De Minimis Changes (cont.) Practical uses of the +/- 1.5% allowance Program changes mid-rate year that fall within this tolerance Correcting minor errors found in rate calculations Reflection of emerging experience good or bad Concerns MCOs requesting the add based on selected assumptions States going to the bottom because of budget pressures 30

32 Practical Use of MLR in Rate Development Rates are certified prospectively Composite of all assumptions don t always hit the mark Review of MLR can assist in future rate setting ( lookback study ) Codifies general practice already employed by many actuaries 31

33 Acceptable Data Sources Age of data < 3 years old Three most complete years most complete year is still 2 years of trend Generally not a problem except when it is Most use newest data available Selection of source data in practice Encounters get priority FFS data for new(er) programs Financial data as a support or last resort for base 32

34 Pass-through Payments Medicaid financing is complex IGTs, special taxes, FMAP, etc. From state perspective this is largest impact of the Medicaid Regulation Loss of pass-through could put pressure on risk side of payments Hospitals looking to replace lost revenue MCOs will be asked to assist with the solutions Change pass-through to a quality incentive payment Increase FFS fee schedule to replace loss of pass-through 33

35 The Role of Actuarial Judgment in Rate- Setting

36 ASOP 49 Definition of Actuarial Soundness Actuarially Sound/Actuarial Soundness Medicaid capitation rates are actuarially sound if, for business for which the certification is being prepared and for the period covered by the certification, projected capitation rates and other revenue sources provide for all reasonable, appropriate, and attainable costs. For purposes of this definition, other revenue sources include, but are not limited to, expected reinsurance and governmental stop-loss cash flows, governmental risk adjustment cash flows, and investment income. For purposes of this definition, costs include, but are not limited to, expected health benefits, health benefit settlement expenses, administrative expenses, the cost of capital, and government-mandated assessments, fees, and taxes. 35

37 Actuarial Judgment in the Regulation the actuary s interest in preserving professional judgment and autonomy in the objective exercise of an actuary s judgment The actuary developing the rates should use reasonable actuarial judgment the actuary s professional judgment using generally accepted actuarial principles and practices The actuary may use his or her judgment we proposed that the actuary exercise professional judgment we would expect the actuary to make appropriate and reasonable judgments we provided that the actuary would exercise professional judgment 36

38 Key Words Projected Capitation Rates Actuarial soundness is prospective in nature The actuary uses judgment and is guided by generally accepted practice 37

39 Key Words Reasonable, Appropriate, and Attainable As determined by the certifying actuary and approved by CMS Judgment and experience play a key role in this determination Documentation required 38

40 Tricky Situations