AHLA. L. Medicare Advantage New Developments and Key Legal Issues. Anne W. Hance McDermott Will & Emery LLP Washington, DC

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1 AHLA L. Medicare Advantage New Developments and Key Legal Issues Anne W. Hance McDermott Will & Emery LLP Washington, DC Institute on Medicare and Medicaid Payment Issues March 26-28, 2014

2 Recent Developments in the Medicare Advantage and Part D Programs ((a/k/a CMS Has Been Busy in 2014!) Anne W. Hance McDermott Will & Emery LLP AHLA Institute on Medicare and Medicaid Payment Issues March 26-28, 2014 Overview Proposals for Medicare Advantage (MA) Plan payment policies and the potential ripple effects Programmatic changes set out in the Draft Call Letter Big changes proposed in the 2014 MA/Part D proposed rule Questions and comments 2 1

3 MA Plan Payment Policies 3 MA Plan Payments Under the Affordable Care Act (ACA) MA Plan benchmarks are linked to FFS spending in the geographic area Counties assigned to a quartile, based on FFS spending in the county Benchmark for each county equals a percentage of FFS spending, with the percentage determined according to the county s quartile assignment Highest FFS-spending quartile benchmark is 95% FFS costs Second highest FFS-spending quartile benchmark is 100% FFS costs Third highest FFS-spending quartile benchmark is 107.5% FFS costs Lowest FFS-spending quartile benchmark is 115% FFS costs Transition to new payment methodology is incremental between 2012 and 2017, depending on the PMPM reduction calculated in percent of counties have transition to ACA-based payment methodology Remaining 20 percent will fully transition by CY 2017 Social Security Act (SSA)

4 MA Payments Under the ACA (cont.) Quality bonus payment (QBP) for high-ranking MA Plans Bonus eligibility based on CMS 5-star quality rating system 5% bonus for 4- and 5-star MA Plans Double bonuses (up to 10%) for qualifying plans in qualifying counties Bonuses available for new and low-enrollment MA Plans Reduction in MA rebates The rebate is a percentage of the difference between the MA Plan bid and the applicable benchmark ACA reduced the rebate from 75 to 50% for all MA Plans High ranking quality MA Plans eligible for 65-70% rebate Social Security Act (SSA) MA Payments Under the ACA (cont.) Plan #1: 2 stars Plan #2: 4 stars Plan #3: 5 stars Benchmark = $800 Benchmark = $832 Benchmark = $ Bid = $750 Bid = $750 Bid = $750 = = = $50 $82 $90 x X x 50% 65% 70% = = = Rebate = $25 Rebate = $53 Rebate = $63 Total Payment = $775 Total Payment = $803 Total Payment = $813 Morgan Stanley Research, Managed Care: Expecting Improvement in Medicare Adv. Star Ratings October 5,

5 CMS Quality Bonus Payment Demonstration Project Announced in November 2010 and described in CY 2012 Advance Notice and Announcement (Feb. and April 2011) Enhanced quality bonuses for CY star MA Plans eligible for 5% bonus 4-star and 4.5-star MA Plans eligible for 4% bonus for CY and 5% bonus in CY star MA Plans eligible for 3.5% bonus in CY (versus no bonus under the ACA methodology) 3-star MA Plans eligible for 3% bonus in CY (versus no bonus under the ACA methodology) 7 Post-Demo Transition Only 4- and 5-Star MA Plans will receive a QBP Reduced MA rebate percentages fully phased-in Statutory cap on payment level (pre-aca level) applies 8 4

6 CY 2015 Advance Notice Released February 21, 2014 with CY 2015 Draft Call Letter MA Plan payment changes Growth percentages incorporated into MA benchmark calculation percent change in the National Per Capita MA Growth Percentage for aged and disabled enrollees combined percent FFS USPCC Growth Percentage change Adjustments in county FFS rates upon which benchmarks are determined Statutorily-mandated Coding Intensity Adjustment percent to Plan payments Recalibration of the CMS HCC and Rx risk adjustment models for determining beneficiary risk scores (and thus beneficiary-level payment modifications) Favorable normalization factors for risk adjustment models 9 CY 2015 Advance Notice (cont.) Enrollee risk assessments (a/k/a home risk assessments) Health care professional performs home visit to evaluate member status Collect diagnoses Review medication Assess functional status Assess home environment Data incorporated into MA Organizations systems for care management 10 5

7 CY 2015 Advance Notice (cont.) Enrollee risk assessments (a/k/a home risk assessments) CMS supports assessments for wellness, care coordination, and disease prevention but has concerns regarding current role Whether information is being used by members PCPs Whether information actually affects or improves beneficiary care Increase risk scores for MA beneficiaries Proposal to exclude from payment determinations any diagnoses identified during a home visit that are not confirmed by a subsequent clinical encounter 11 Sequestration Not addressed in Advance Notice or Draft Call Letter Still applicable to MA Plan payments 12 6

8 Programmatic Changes in the CY 2015 Draft Call Letter 13 Remote Access Technologies CMS supports use for improving access to and timeliness of needed care, increasing patient/provider communications Should supplement and complement traditional office visits, but not replace them Medicare-covered telehealth benefit services covered as basic benefits under MA Plan (42 C.F.R ) All other remote access services covered as mandatory supplemental benefits Telemonitoring Web- and Phone-based technologies Nurse Hotline Services furnished via real-time interactive audio and video technologies 14 7

9 Exceptions to DME Formulary CMS permits MA Organizations to limit coverage of certain categories of DME to certain brands, items, and supplies of preferred manufacturers Effective with CY 2013 Subject to certain limitations 42 C.F.R For CY 2015, the following categories are subject to coverage requirements Speech-generating devices Oxygen Wheelchairs Powered Mattress Systems Diabetic supplies (monitors) 15 Provider Networks MA Plans that use provider networks must ensure adequate access to Medicare covered services Minimum number of providers for number of enrollees Maximum travel time/distance limitations 42 C.F.R , CY2015 MA HSD Provider and Facility Specialties and Network Adequacy Criteria Guidance MA Plan contracts with physicians may have a termination without cause provision if the notice period is not less than 60 days (42 C.F.R ) MA Organizations must provide enrollees at least 30 days advance notice of provider terminations 16 8

10 Provider Networks (cont.) Recent significant mid-year changes in MA Organizations provider networks prompted CMS to examine guidance regarding provider network requirements Notify CMS at least 90 days in advance of significant changes Upon request, provide CMS with Documentation supporting continued adequacy of remaining provider network Written plan for addressing continuity of care, including transitioning members to new contracted providers If necessary, augment provider network with additional providers or permitting access to care from non-network providers If necessary, permit terminated providers to furnish covered services on a transitional basis 17 Provider Networks (cont.) Enrollee notification best practices Provide more than 30 days notice of provider termination Provide names, phone numbers of network providers Provide information regarding how enrollees may request continuation of ongoing medical treatment or therapies with current providers CMS is considering rulemaking to broaden its regulation of provider terminations without cause Bait and switch concerns if termination occurs after annual enrollment Balance network stability with MA Organizations interests in managing cost-effective, high-performing networks Affording providers more than 60 days notice of termination 18 9

11 Big Changes in the MA/D Proposed Rule (79 Fed. Reg (Jan. 10, 2014)) 19 Compliance Training for FDRs CMS proposes to eliminate Plan Sponsor-specific compliance training First tier, downstream and related entities (FDRs) would be required to complete CMS general compliance FDRs would provide, and Plan Sponsors would be required to accept, certification of training completion (b)(4); 79 Fed. Reg. at 1926,

12 Changes to CMS Audit and Inspection Authority for FDRs Plan Sponsors must incorporate into contracts with first tier/downstream/ related entities a provision by which the contractor acknowledges HHS/designees having the regulatory right to directly access records, etc. rather than having the agency/contractor work through the Plan Sponsor (i)(2)(ii) HHS, the Comptroller General or their designees have the right to audit, evaluate, collect, and inspect any records under (i)(2)(i) directly from any first tier, downstream, or related entity CMS does not perceive this as an expansion of its existing rights but an effort to simplify and expedite the process by which it obtains records from first tier, downstream, and related entities , ; 79 Fed. Reg. at 1991, Prescriber Practices Section A.30 Provider Enrollment To implement ACA 6405, CMS proposes to require prescribers of Part D drugs to have either (1) an approved Medicare FFS enrollment, or (2) a valid opt-out affidavit in order for a claim for Part D drugs prescribed by the prescriber to be payable. Section A.31 Improper Prescribing CMS proposes to deny (or revoke) Medicare enrollment for a physician/professional whose DEA Certificate or license to prescribe drugs is suspended or revoked CMS proposes to adopt the authority to revoke Medicare enrollment if the physician/professional has a pattern or practice of prescribing drugs that is abusive and represents a threat to the health or safety of Medicare beneficiaries 42 C.F.R , ; 79 Fed. Reg. at 1984,

13 Part D Non-Interference Provision CMS proposes to modify and codify its interpretation of the non-interference provision of SSA 1860D-11(i): The provision would protect Part D drug manufacturers relationships with pharmacies and Part D Plan Sponsors The proposed regulation would limit CMS involvement in discussions and role as an arbiter of agreements The statutory limitation would not be construed as applying to Sponsor-pharmacy relationships: Nothing in this section limits CMS authority to require full disclosure or uniform treatment and reporting of drug costs, prices, or price concessions consistent with rules established by CMS. The legal premise for the changed interpretation of the statute is that the Part D statute includes numerous requirements of Sponsor-pharmacy relationships such that CMS s role in negotiations between Sponsors and pharmacies is not prohibited 42 C.F.R ; 79 Fed. Reg. at 1969, Any Willing Pharmacy CMS proposes to modify its interpretation of the any willing pharmacy provision in SSA 1860D-4(b) Currently, Part D Plan Sponsors may offer standard terms and conditions (T&Cs) to any willing pharmacy and have separate T&Cs available to a select subset of pharmacies with preferred status CMS proposes to require Sponsors to maintain a set of T&Cs for standard and preferred networks and allow any pharmacy the opportunity to have preferred status if willing to offer preferred drug pricing This opportunity for pharmacies to gain entry into previously limited networks should be a component of the any willing pharmacy requirements for retail pharmacies, allowing more pharmacies the option to offer preferred level cost sharing if they are willing to charge no more than the ceiling price stated in the contract 24 12

14 Any Willing Pharmacy (cont.) In establishing its contracted pharmacy network, a Part D sponsor (i) Must offer and publicly post standard terms and conditions for network participation for each type of pharmacy in the network (iii) Must offer payment terms for every level of cost-sharing under the sponsor s plans consistent with CMS limitations on the number and type of cost sharing levels (preferred, standard, extended day) and for every type of similarly, situated retail pharmacy, and (iv) Must contract with any willing pharmacy able to meet one set of the [T&Cs] offered by the that plan 42 C.F.R (a)(8); 79 Fed. Reg. at 1978, Preferred Pharmacy Networks Pursuant to 1860D-4, reductions in cost-sharing for drugs dispensed by preferred pharmacies may not result in increased payments to Part D Plan Sponsors under 1860D-15 CMS expected that higher cost-sharing for non-preferred pharmacies and lower negotiated prices would offset the reduced cost-sharing at preferred pharmacies and prevent increased payments to Part D Plan Sponsors CMS describes its implementation of a limit on the cost-sharing associated with non-preferred pharmacies (to prevent discrimination issues) as effectively limiting the extent to which cost-sharing at non-preferred pharmacies can be raised in order to offset lower cost-sharing at preferred pharmacies, thus necessitating lower pricing at preferred pharmacies 26 13

15 Preferred Pharmacy Networks (cont.) CMS proposes to clarify its interpretation of the statutory provision permitting lower cost-sharing at a subset of network pharmacies A Part D Plan Sponsor offering a Part D Plan that provides coverage other than defined standard coverage may reduce copayments or coinsurance for covered Part D drugs obtained through a subset of network pharmacies as long as such preferred cost sharing is offered in accordance with the requirements of (a)(8) and for Part D drugs with consistently lower negotiated prices Consistently lower is described in the preamble (but not the regulation) as meaning the offering of lower negotiated prices on all drugs in return for the lower cost-sharing 42 C.F.R (a)(9); 79 Fed. Reg. at 1974, Pharmacy Price Concessions in Negotiated Prices To prohibit Part D Plan Sponsors practice of reporting pharmacy price concessions as DIR, and require that they apply the concessions to the negotiated price at POS, CMS proposes to modify the definition of negotiated price Negotiated prices means prices for covered Part D drugs that meet all of the following: i. The [Sponsor/PBM] and the network dispensing pharmacy have negotiated as the amount such network entity will receive, in total, for a particular drug. ii. Are inclusive of all price concessions and any other fees charged to network pharmacies; and iii. Include any dispensing fees, but iv. May exclude additional contingent amounts, such as incentive fees, only if these amounts increase prices and cannot be predicted in advance. v. May not be rebated back to the [Sponsor/PBM] in full or in part. 42 C.F.R ; 79 Fed. Reg. at 1972,

16 Protected Classes CMS proposes to modify the bases upon which it extends Protected Class status, requiring coverage of all/substantially all drugs in the category/class with minimal UM requirements The new criteria for protected status include (A) Hospitalization, persistent or significant disability or incapacity or death will likely result if initial administration (including self-administration) of a drug in the category or class does not occur within 7 days of the date the prescription for the drug was presented to the pharmacy to be filled. (B) More specific CMS formulary requirements will not suffice to meet the universe of clinical drug-and-disease-specific applications due to the diversity of disease or condition manifestations and associated specificity or variability of drug therapies necessary to treat such manifestations. 29 Protected Classes (cont.) Of the current Protected Classes Antineoplastics, anticonvulsants, and antiretrovirals would continue to be protected Antipsychotics do not meet the proposed criteria for protection but for CY2015 will not lose protected status based on CMS s discretion Antidepressants and immunosuppressants would lose protected status for CY 2015 Cost, and specifically the inability to negotiate rebates for drugs in these classes, was noted as a significant driver of the policy 42 C.F.R (b)(2) implementing ACA Section 3307; Fed. Reg. at 1936,

17 Overpayment Reporting Section 6402 of the ACA imposes a deadline for reporting and refunding overpayments of Medicare and Medicaid funds that is the later of: (A) the date which is 60 days after the date on which the overpayment was identified; or (B) the date any corresponding cost report is due, if applicable. Overpayments defined in statute as funds that a person receives or retains to which the person, after applicable reconciliation is not entitled. No statutory definition of when an overpayment is identified to trigger this deadline 31 Overpayment Reporting (cont.) Defining the scope of an overpayment An overpayment is funds that a Plan Sponsor has received or retained under title XVIII of the SSA to which the Plan Sponsor after applicable reconciliation, is not entitled Funds are payments that the Plan Sponsor has received based on data submitted to CMS for payment purposes and for which the Plan Sponsor has responsibility for the accuracy, completeness, and truthfulness of such data Data submitted by an MA Organization includes enrollment data ( (f)) and risk adjustment data ( ) Data submitted by a Part D Plan Sponsor includes drug claims data ( (b)(3)), cost data applicable to risk sharing arrangements ( (c)(1)), cost data applicable to retroactive adjustments and reconciliations ( ) and data provided for purposes of supporting allowable costs, including direct/indirect remuneration ( ) 32 16

18 Overpayment Reporting (cont.) CMS proposes to define when an overpayment has been identified as the point when a Plan Sponsor: (i) Has actual knowledge of the overpayment; (ii) Shows reckless disregard to whether an overpayment occurred, or (iii) Remains deliberately ignorant to the presence of an overpayment Six-year lookback period Except overpayments resulting from fraud not subject to any time limitation 33 Overpayment Reporting (cont.) CMS also proposed deadlines (reconciliation dates) after which a payment can become an overpayment For MA Organizations, the reconciliation date is the date that CMS announces as the final deadline for risk adjustment data submission for the benefit year For Part D Plan Sponsors, the reconciliation date would be the later of: The annual deadline for submitting PDE data for the benefit year, or The deadline for submitting DIR data for the benefit year Proposed 42 C.F.R ,

19 Other Issues of Interest Independent Auditor Performance Audits Medication Therapy Management Program Expanded Part D Data Disclosure Collections of Premiums and Cost Sharing Limits on Part D Plan Offerings New Part D Plan Sponsor Applicant Standards Enrollment Eligibility for Individuals Not Lawfully Present in the United States 35 March 10, 2014 Letter from Administrator Tavenner to Congressman Waxman (D-CA) acknowledging receive of numerous concerns from members of Congress and stakeholders Lifting the Protected Class status for three categories of drugs Setting standards for preferred pharmacy networks Reducing the number of Part D Plans a Sponsor may offer Clarifications to the non-interference provisions Given the complexities of these issues and stakeholder input, we do not plan to finalize these proposals at this time. We will engage in further stakeholder input before advancing some or all of the changes in these areas in future years

20 What s Next Announcement of Final Payment Parameters and CY 2015 Final Call Letter will be issued April 7, 2014 Timing of final rule unclear, but several provisions are proposed to be effective for CY 2015 CY 2015 bidding deadline is Monday, June 2, Questions and Comments Anne W. Hance ahance@mwe.com 38 19