2023 CMS Proposed Rule: The Impact on Medicare Advantage and Part D Plans

In this commentary, Sara Ratner, senior vice president, government markets and strategic initiatives, Icario, reviews a recent CMS proposed rule that will impact Medicare Advantage and Part D plans.

On January 6, 2022, CMS issued the CY 2023 Medicare Advantage and Part D Proposed Rule. This proposal focuses on a number of key areas that have been core to CMS’s recent focus, such as those most at risk and underserved (eg, dual eligible special needs plans, or D-SNPs), social determinants of health (SDoH), Star Rating administration amidst the COVID-19 pandemic, and pharmacy transparency. Separately, several other areas experienced proposed changes such as maximum out-of-pocket cost (MOOP), network adequacy, and how CMS may use past performance to create better accountability and greater medical loss ratio (MLR) transparency.

This article briefly highlights these but focuses in greater depth on some of the proposals that are key to CMS’s recent initiatives.

Before analyzing the key changes, the following briefly summarizes some of the other proposals which CMS is considering:

• Through this proposed rule, CMS is focused on improving D-SNPs requiring that Medicare Advantage (MA) organizations offering a D-SNP must establish one or more enrollee advisory committees in each State to solicit direct input on enrollee experiences. These committees have been successful for Medicare and Medicaid Plans (MMP) and create a forum for feedback that enables improvements in plan benefits and beneficiary experience. Separately, and to encourage greater alignment between Medicare and Medicaid for D-SNPs, CMS is also proposing that all fully integrated dual eligible SNPs have exclusively aligned enrollment and cover Medicaid home health, durable medical equipment, and behavioral health services through a capitated contract with the State Medicaid agency. In addition, each highly integrated dual eligible SNP’s capitated contract with the State must apply to the entire service area for the D-SNP. This proposal also establishes new mechanisms through which States can require that certain D-SNPs with exclusively aligned enrollment address provider network overlap, duplicate member materials, and foster a more aligned State and CMS coordination. This is particularly relevant to State monitoring and oversight of certain D-SNPs when there are these additional levels of integration, including the ability to give the State visibility to certain CMS information systems.
• The beneficiary cost-sharing limit, aka MOOP, in an MA plan (after which the plan pays 100% of MA costs) has been established to limit beneficiary out-of-pocket costs. Once MOOP has been met, the plan pays 100% of the cost. MOOP may be counted based on only those amounts an individual enrollee is responsible for paying net of State responsibility or a cost-sharing exemption, rather than cost-sharing amounts in the plan’s benefit package. As a result, the amount a State could pay for a dual-eligible remains uncapped. This inadvertently negatively impacts providers since a D-SNP may continue to deduct payments to providers during this cost-sharing period and, often with D-SNPs, create uncollected debt. The proposal changes the way MOOP is calculated with it being based on the accrual of all cost-sharing in the plan benefit. This happens whether that cost-sharing is paid by the beneficiary, Medicaid, or other secondary insurance, or remains unpaid because of State limits on the amounts paid for Medicare cost-sharing and dual-eligible individuals’ exemption from Medicare cost-sharing. Adding these in would cause cost-sharing MOOP to accrue faster at which point Medicare pays 100% of Parts A and B coverage. 
• The proposed rules clarify that the special requirements to ensure access for enrollees to covered services throughout a disaster or emergency (including public health emergencies [PHEs]) period apply when there is a disruption in access to health care as the triggering event (in addition to a disaster or emergency). The rules also clarify the period of time during which MA organizations must comply with the special requirements to ensure access for enrollees to covered services throughout a disaster or emergency period (including PHEs), especially when the end date is unclear and the period renews several times.
• Currently, through a triennial review process, plans submit their provider networks to CMS for review at the contract level. While plans must attest to meeting the provider network adequacy requirements, they are not required to demonstrate this before a bid is submitted, and network adequacy is not assessed as part of the application process. The proposal changes this process to require plans to demonstrate compliance with network adequacy standards as part of the MA application process for new and expanding service areas. To eliminate difficulties an MA organization has in complying with building a full network, the proposed rule adopts a time-limited 10 percentage point credit toward meeting the applicable network adequacy standards for the application evaluation.
• CMS also proposed to include bankruptcy issue and compliance actions as part of Star Ratings methodology going forward, so that the ratings reflect compliance with CMS rules. As an example of this impact, information from the CMS Ad-Hoc CAP lists 54 total contracts (23 Parent organizations) as being issued an Ad-Hoc CAP for 2021, which is roughly 11% of all contracts being impacted.
• The proposal also reinstates the detailed MLR reporting requirements that were in effect for contract years 2014–2017, which required reporting of the underlying data used to calculate and verify the MLR and any remittance amount. CMS is also proposing the collection of additional details regarding plan expenditures to understand the value of services being provided to enrollees. This requires reporting additional detail behind the different types of supplemental benefits in the following categories: dental, vision, hearing, transportation, fitness benefit, worldwide overage/visitor travel, over-the-counter items, remote access technologies, meals, routine footcare, out-of-network services, acupuncture treatments, chiropractic care, personal emergency response systems, health education, smoking and tobacco cessation counseling, primarily health-related supplemental benefits, non-primarily health-related items, and services that are special supplemental benefits for the chronically ill (SSBCI). 

Standardizing Housing, Food Insecurity, and Transportation Questions on Health Risk Assessments

SDoH has been a central focus for CMS; however, there hasn’t been a consistent vehicle to understand the barriers and frictions. While data supports the scope and impact, CMS has little programmatic beneficiary insight into these barriers across plans and populations. To help begin to more uniformly understand SDoH across plans, this proposed rule is requiring that all SNPs include standardized questions on housing stability, food security, and access to transportation as part of their health risk assessments (HRAs). Questions will be specified in sub-regulatory guidance.

CMS specified it will align selected questions with the Social Determinants of Health Assessment data element established as part of the USCDI v2. Examples outlined in the proposed rule are from the AHC Model HRSN Screening Tool:

Industry and CMS have been focused on connecting beneficiaries to support their SDoH needs. In this proposal, CMS specifically stated that while “obtaining answers to these questions doesn’t obligate the D-SNP to address these unmet social needs, it does require plans to consult enrollees on their unmet needs as part of the care plan.”

While CMS does not currently collect specific data elements from HRAs, standardizing these elements would enable CMS to collect this information, allowing a better understanding of trends, social risk factors, and other barriers.

As an alternative, CMS is considering requiring that SNPs use the postacute care patient/resident assessment instrument questions on health literacy and social isolation:

• How often do you need to have someone help you when you read instructions, pamphlets, or other written material from your doctor or pharmacy?
• How often do you feel lonely or isolated from those around you?

Recognizing the need for flexibility in questions, CMS is also considering that HRAs address certain domains, without specifying the exact question since not all questions apply ubiquitously to the population. If finalized, these rules would not be enforced until at least 2024 to allow incorporation into plan Models of Care (MoCs).  

Allow CMS to Calculate Star Ratings for Certain Measures for 2023 Given Impacts of the COVID-19 PHE

​​As background, CMS issued an emergency regulation on August 25, 2020 that changed its policy on extreme and uncontrollable circumstances for the 2022 Star Ratings. As part of that, CMS modified its disaster policy, which historically applied if there was a minimum of 60% of enrollees in a qualifying area impacted. This resulted in scores for those contracts being excluded from measure-level cut point calculations, and performance summary and variance thresholds for the Reward Factor. The 2020 emergency regulations modified this, removing the 60% rule, since all States qualified for the exclusion with the impact of COVID-19 and used 2020 contract performance in calculating 2022 Star Rating (non-Consumer Assessment of Healthcare Providers and Systems) cut points. Subsequently, CMS allowed plans to use the higher of their 2020 or 2021 ratings for their 2022 Star Ratings.

For some measures, such as the cross-sectional measures collected through the Health Outcomes Survey (HOS), Star Ratings are based on performance up to 3 calendar years prior to the Star Rating year. For example, the HOS survey administered in 2021 asks about care received (eg, whether a health care provider advised the member to start, increase, or maintain their level of exercise or physical activity) in the 12 months prior to the survey’s administration—that is a period of time covering parts of the 2020 and 2021 calendar years—and the data are used for the 2023 Star Ratings. 

As described in the 2019 final Part C and D rule, for measures derived from the HOS survey (Monitoring Physical Activity, Reducing the Risk of Falling, and Improving Bladder Control), the disaster policy adjustment is for 3 years after the extreme and uncontrollable circumstance. As such, the 2023 Star Ratings would adjust measures derived from the HOS survey for 2020 extreme and uncontrollable circumstances. 

The proposed rule addresses the 2023 Star Ratings, for measures derived from the 2021 HOS survey only to remove the 60% rule for affected contracts. This amendment would ensure that CMS is able to calculate the Star Ratings cut points for the 3 HEDIS measures derived from the HOS survey and include these measures in the determination of the performance summary and variance thresholds for the reward factor for the 2023 Star Ratings.

Without removing the 60% rule for HEDIS measures derived from the HOS survey, CMS would not be able to calculate these measures for the 2023 Star Ratings or include them in the 2023 reward factor calculation. By removing the 60% rule, all affected contracts (that is, contracts affected by the 2020 COVID-19 pandemic) with at least 25% of their enrollees in Individual Assistance areas at the time of the disaster will receive the higher of the 2022 or 2023 Star Rating (and corresponding measure score) for each of the HEDIS measures collected through the HOS survey. 

As outlined in the August 5, 2021 CMS memo, 2022 and 2023 Star Ratings will be calculated without Improving or Maintaining Physical Health and Improving or Maintaining Mental Health. 

Marketing and Communication Requirements on MA and Part D Plans to Assist Their Enrollees  

CMS proposed changes to marketing and communication requirements to address the concerns with third-party marketing organizations (TPMOs). It is also proposing to require MA and Part D plans to create a multi-language insert that would inform the reader, in the top 15 languages used in the United States, that interpreter services are available for free.

CMS has increased concern about the activities of TPMOs due to the increase in the number of complaints reported about these organizations that allege misleading beneficiaries about advertised benefits. As a result, CMS is proposing regulatory oversight of TPMOs defined as “organizations that are compensated to perform lead generation, marketing, sales, and enrollment-related functions as a part of the chain of enrollment, that is the steps taken by a beneficiary from becoming aware of a plan or plans to make an enrollment decision.” TPMOs may be a first tier, downstream, or related entity (FDR) but may also be customers of an MA or Part D plan or customers of an MA or Part D plan’s FDRs.

TPMOs must also use the following disclaimer in any marketing materials and on their website, and potentially verbally and in writing depending on the circumstance: “We do not offer every plan available in your area. Any information we provide is limited to those plans we do offer in your area. Please contact Medicare.gov or 1-800-MEDICARE to get information on all of your options.”

CMS is also proposing that plans have additional oversight obligations for TPMOs that function in tandem with FDR requirements when applicable. Plans that directly or indirectly work with TPMOs are responsible for ensuring that the TPMO adheres to any requirements that apply to the plan.

CMS is also proposing to require plans (and their FDRs), in their contracts, written arrangements, or agreements with TPMOs, to require TPMOs to disclose to the plan any subcontracted relationships used for marketing, lead generation, and enrollment. This extends to requiring sales calls with beneficiaries to be recorded in their entirety and having TPMOs report to plans any staff disciplinary actions associated with Medicare beneficiary interaction on a monthly basis.

TPMOs conducting lead generating activities must inform the beneficiary that his or her information will be provided to a licensed agent for future contact, or that the beneficiary is being transferred to another individual for further assistance.

Should this proposal become part of the final rule, plans will need to ensure their FDR oversight teams understand these requirements and allocate resources for additional oversight and monitoring activities. By expanding oversight in this area, CMS expects plans to be more transparent and accountable for member experience during this part of the sales and marketing process.

Previously, CMS required plans to include the multi-language insert with the Summary of Benefits, Annual Notice of Change/Evidence of Coverage (ANOC/EOC), and the enrollment form informing the reader that interpreter services are available in Spanish, Chinese, Tagalog, French, Vietnamese, German, Korean, Russian, Arabic, Italian, Portuguese, French Creole, Polish, Hindi, and Japanese—the 15 most common nonEnglish languages in the United States. Separately, CMS requires translation services for any nonEnglish language that is the primary language for at least 5% of the individuals in a benefit plan service area. However, the multi-language insert was not required for languages that met the 5% language threshold. In addition, the Office of Civil Rights (OCR) separately required all “significant communications” to include taglines informing the availability of interpreter services for the 15 languages above.

Because of the duplication, CMS removed the multi-language insert; however, OCR also issued a final rule repealing the “significant communications” requirements and requiring that a covered entity (including health plans) take reasonable steps to ensure meaningful access to its programs or activities by individuals of limited English proficiency (LEP). CMS contends the nonEnglish requirements should be maintained by OCR, including oversight and management, since its rulemaking is HHS-wide rather than exclusively limited to CMS.

While interpreter services have been required, the notice of availability requirements was lost and created a gap. The notification of interpreter services provides a vehicle for LEP individuals to gain access to required interpreter services. These proposed regulations reinstitute the multi-language insert requirement, requiring the insert in the 15 most common languages above, stating the following;

“We have free interpreter services to answer any questions you may have about our health or drug plan. To get an interpreter, just call us at [1-xxx-xxx-xxxx]. Someone who speaks [language] can help you. This is a free service.”

This statement is also required for any languages that meet the 5% threshold, and in all required materials.¹

Pharmacy Price Concessions to Drug Prices at the Point-of-Sale

This proposed rule creates significant changes for how plans calculate Direct and Indirect Remuneration (DIR) impacting bids, revenue, and cost-sharing. As background, Part D sponsors must provide beneficiaries with negotiated prices for covered Part D drugs. Negotiated price is the price paid to the network pharmacy for a covered Part D drug dispensed to a plan enrollee at the point-of-sale. This point-of-sale price is the basis upon which the Part D benefit is adjudicated and dictates the enrollee cost-sharing.  

Negotiated Price must include all price concessions from network pharmacies except those that cannot reasonably be determined at the point-of-sale. This “reasonably determined” exception is the focus of the CMS proposed rule. While negotiated price shall take into account price concessions (discounts, direct/indirect subsidies, rates, and DIR), since many price concessions cannot “reasonably be determined,” plans may, but are not required to, apply rebates and other price concessions at the point-of-sale to lower cost-sharing. 

At the end of the year, these price concessions must be reported to CMS as DIR and used in the calculation of the final plan payment. Aggregate price concessions in the form of lower subsidies, reduced beneficiary premium, and lower prices must be reported as DIR and factored into the plan’s bid for the upcoming year. Amounts received in DIR above amounts factored into the plan bids can increase plan revenue. Applying price concessions as DIR after the point-of-sale inures to the benefit of the plan sponsor (although it can also create lower premiums), and applying at the point-of-sale can reduce beneficiary cost-sharing. In addition, applying price concessions as DIR moves a beneficiary through the coverage gap faster since they assume a greater cost-sharing obligation. 

Pharmacy price concessions now account for a larger share than ever before of reported DIR and a larger share of total gross drug costs in the Part D program. Much of this growth occurred after 2012, when the use by Part D sponsors tied price concessions to a pharmacy’s performance (performance adjustments) on measures defined by the Part D sponsor (such as Star Ratings). Performance adjustments occur after the point-of-sale and have not been included in the price of the drug at the point-of-sale since they cannot be “reasonably be determined” at that time.

According to CMS, these performance adjustments have disproportionately impacted poor performers more than high performers, meaning pharmacy benefit managers are recouping greater amounts from poor performers than paid to high performers. While these price adjustments may be reflected in lower Part D premiums, they do not necessarily translate into lower cost-sharing obligations, potentially resulting in a beneficiary paying a larger portion of the actual drug cost. 

The proposed rule directly addresses pharmacy price concessions included in the definition of “Negotiated Price” and modifies the definition to the lowest possible reimbursement a network pharmacy will receive, in total, for a particular drug, taking into account all pharmacy price concessions. The definition deletes the “reasonably determined” exception. This proposed rule changes the reporting requirements by Part D plans but does not affect what sponsors may include in their network agreements with pharmacies regarding payment adjustments at the point-of-sale. The goal of the rules is to influence beneficiary cost-sharing and not what is ultimately paid to the pharmacy. 

This would also require negotiated prices to reflect the lowest possible reimbursement that a network pharmacy could receive from a particular Part D sponsor for a covered Part D drug. All price concessions would need to be included at the point-of-sale but do not need to include any upside incentive payments. As a result, the point-of-sale price of a drug reported to CMS would equal the final reimbursement that the network pharmacy would receive for that drug under the arrangement if the pharmacy’s performance score were the lowest possible. Any incentive payments received by the pharmacy would be reported as negative DIR. 

The proposal also creates a distinction in negotiated price definition between drugs in and out of coverage gap. For non-applicable drugs in the coverage gap, and during the non-coverage gap phases of the Part D benefit for applicable drugs, claims would be adjudicated using the negotiated price determined using the lowest possible reimbursement to the pharmacy. For applicable drugs during the coverage gap, plans would have the flexibility to determine how much of the pharmacy price concessions to pass through at the point-of-sale, and beneficiary, plan, and manufacturer liability in the coverage gap would be calculated using this alternate negotiated price. 

The impact of this proposal could be far-reaching, changing the performance incentive for pharmacies with implications for the levers plans use for Part D incentive payments. This rule creates greater predictability for pharmacies and eases the out-of-pocket burden for enrollees; however, the industry could see Part D premiums increase without the backend surplus that’s used to fund reduced premiums. We anticipate there will be a variety of comments on this, especially with the feasibility of a quick implementation date.

CMS has used the proposed rule to focus on several areas central to the administration’s current policy agenda. CMS will have a 60-day comment period for these proposed regulations, and we anticipate issuance of a final rule by April for plans to submit bids by June. Stay tuned for that date. Icario will be issuing a summary of any final rule as well as the Rate Announcement.

1. EOB, EOC, ANOC, preenrollment checklist materials, summary of benefits, enrollment/election form, enrollment notice, disenrollment notice, mid-year change notification, non-renewal notice, provider directory, provider termination notice, star ratings document, organization determination notice, excluded provider notice, notice of denial of medical coverage or payment, notice of Medicare noncoverage, detailed explanation of non-coverage, appointment of representative, important message from Medicare about your rights, detailed notice of discharge form, Medicare outpatient observation notice, appeal and grievance data form, request for administrative law judge hearing, Attorney Adjudicator Review in Lieu of ALJ Hearing, Notice of Right to an Expedited Grievance, Waiver of Liability Statement, Notice of Appeal Status, Notice of Dismissal of Appeal, Federal Contracting Statement, Star Ratings Disclaimer, SSBCI Disclaimer, Accommodations Disclaimer, Mailing Statements, Promotional Give-Away Disclaimer, Provider Co-branded Material Disclaimer, Out of Network Non-Contracted Provider Disclaimer, NCQA SNP Approval Statement, Formulary, Low Income Subsidy (LIS) Notice, Low Income Subsidy (LIS) Rider, Part D Transition Letter, Pharmacy Directory, Prescription transfer letter, Notice of Denial of Medicare Prescription Drug Coverage, Medicare Prescription Drug Coverage and Your Rights, Medicare Part D Coverage Determination Request Form, Request for Additional Information, Notice of Inquiry, Notice of Case Status, Request for Reconsideration of Medicare Prescription Drug Denial, LEP Reconsideration Request Form.