Reprinted from MEDICARE ADVANTAGE NEWS, biweekly news and business strategies about Medicare Advantage plans, product design, marketing, enrollment, market expansions, CMS audits, and countless federal initiatives in MA and Medicaid managed care.
By James Gutman, Managing Editor
June 2, 2011
Volume 17 Issue 11
Days before the June 6 deadline for 2012 Medicare Advantage plan bids, it at least is more clear what to expect — both from the plans and CMS — than it was last year, according to actuaries and consultants working with the plans. They tell MAN there will be fewer and very targeted service-area expansion requests, modest boosts in premiums and cost sharing, and minor benefit reductions — but only in certain geographic areas.
While CMS has given far more specifics before the bid deadline this year than it did a year ago on how it will evaluate bids, the consultants say MA plans are having difficulties reconciling the various requirements. For example, they say, the agency wants “meaningful differences” among a plan’s products, but MA plans under other CMS rules are limited in how much they’re allowed to boost beneficiaries’ out-of-pocket cost or “total beneficiary cost” (TBC) — premium plus OOPC — to achieve those differences. Bids containing TBC hikes of 10% or more will be subject to intense CMS scrutiny and possible rejection, CMS warned early this year (MAN 2/24/11, p. 1).
Any plan exceeding that percentage increase will need “strong actuarial reasons” for doing so, says Pat Dunks, a principal and consulting actuary at Milliman, Inc. Although exactly how CMS will handle such bids is in question, the agency has sent a “very strong message [that] exceptions will be hard to come by,” he tells MAN.
He forecasts only a “modest” level of requests for growth in service areas in the 2012 bids, far below the degree of expansion two years ago. The reason for this decline relates directly to the payment changes in the health reform law, according to Dunks.
Based on what he’s seeing and hearing, Dunks adds, zero-premium MA products already in specific MA markets will continue to “be viable,” as the plans offering them will “do everything” they can to keep them. But most of the markets that are attractive for zero-premium products already have entrants, and there will not be any “big movements” toward new zero-premium markets “because the math doesn’t work,” he says.
Moreover, predicts Dunks, there will be greater cost sharing requested in the bids in situations where it’s permissible under CMS rules, including “almost universal adoption” of $65 emergency room copayments (CMS lifted the ceiling to that from the previous $50). He says that physician office visit copays also will rise.
Benefit changes are a mixed picture, suggests Dunks. “I think plans are trying really hard to keep their vision and dental coverage,” he maintains, but there is some willingness to cut back on extra drug benefits (i.e., beyond what is required under Medicare Part D). There are geographic areas, however, where Dunks doesn’t expect to see any benefit cuts. He cites as an example south Florida, which got a boost in payment levels as a result of CMS’s recent rebasing of counties (MAN 2/24/11, p. 7).
Overall, Dunks doesn’t envision extra conservatism this year from MA plans in response to CMS’s tougher stance on bids. Instead, he says, based on his experience working with MA plans, “they are more attentive to documentation of bids than in the past,” partly because of “our repeated urging….The tone from CMS has been heard by the plans.”
To some degree, he adds, CMS has helped the process by detailing up front this time how it will calculate OOPC and apply the limits. He contrasts that with the situation a year ago, when the specifics about OOPC didn’t emerge until after the bid-submission deadline and as a “black box.”
It is clearer this time on how to come up with the numbers for bids based on what CMS said, agrees actuary Brian Weible, president of Wakely Consulting Group. But how CMS itself came up with the figures is “still somewhat of a black box.”
That reservation notwithstanding, Weible says “it’s a much more predictable process this year,” as MA “plans ran last year’s figures through the CMS model to get a baseline.”
“Predictable” hasn’t necessarily meant easier, as plans still needed to reconcile their situations against restrictive rules such as those governing increases in TBC, he says. Weible cites as an example plans already “on the ropes” that will have a hard time recovering financially given the limits on cost hikes for beneficiaries. Some plans, he tells MAN, are considering submitting bids showing “a negative margin” and hoping that they can overcome the potential red ink by such actions as recontracting with providers and developing “tighter protocols” before 2012. CMS has been “understanding” of such strategies in the past, he adds.
Weible also foresees far fewer service-area expansions sought in the bids for 2012 than in prior years. When 2011 expansion requests were compared with those for 2010, he recalls, the result was about half. For 2012 versus 2010, this figure will be about 10%, he predicts, and the majority of the requested expansions will be “very targeted” and largely based in areas such as Miami and Los Angeles that came out relatively well in the county rebasing. Of the approximately 20 MA plans his firm works with, he tells MAN, perhaps 12 to 15 expanded service areas or product offerings in 2010, but for 2012 that number probably will be two or three.
He envisions the “meaningful differences” rules inhibiting additions to product lines for 2012, although some MA plans may create products largely to meet those rules. However, the prevailing concept among the plans in the bids will be, “Let’s make our existing products work,” Weible says.
Part of the way to do that, according to Weible, may be premium increases, but they won’t be huge because of CMS’s TBC-hike limitations. Furthermore, the boosts will be very “area specific” with, for instance, few jumps likely in areas where zero-premium products are prevalent. Instead, plans facing such markets will focus more on the revenue side, such as by seeking to improve risk scores with better coding, he suggests.
Plans, though, he notes, will boost cost sharing in markets that can support it. Not all will, Weible says, pointing to many of the private-fee-for-service plans still remaining after the end of network “deeming” for those products in most counties at the end of 2010 (MAN 10/14/10, p. 3). It’s “certainly possible” some of those PFFS plans may drop out of the market for 2012, he asserts.
Benefit reductions will not be widespread and “will vary a lot by location,” Weible observes. He does not anticipate widespread cutbacks in dental or vision benefits, although there may be some on hearing benefits, since they’re seen as “not as vital.” However, cutting those or ambulance benefits won’t save plans much, he says, because they’re not widely used.
One plan benefit that may be trimmed, says Stephen Wood, senior vice president of Ingenix Consulting, is “non-retail drug cards” used by members in purchases of over-the-counter drugs (MAN 5/19/11, p. 5). “Members love it,” Wood concedes, but the benefit is “too expensive” in the current MA environment.
For similar reasons, Wood tells MAN, there will be “substantial” premium hikes for 2012 where such increases are permissible. Some zero-premium products may go to $20 a month, and some MA plans now at $20 may go to $30, depending on markets, he forecasts. Over time, Wood adds, zero-premium products will disappear, but in certain markets they’re now more important than are enhanced benefits in attracting and keeping members.
Of those enhanced benefits, pharmacy benefits are among those most valued, according to Wood. But given the limits on TBC hikes, he suggests, plans “are beginning to address” benefits.
They can’t go too far on benefits, because “it’s all about the stars,” suggests Wood. MA plans need satisfied beneficiaries to boost their star ratings and thus boost their revenues under the CMS bonuses for high-star-rated plans (MAN 4/7/11, p. 1).
If plans are below the three-star rating needed for bonuses beginning in 2012, however, and their competitors qualify for the bonuses, the lower-rated plans are going to need to find ways to make up the revenue difference, Wood says.
“Appropriate coding” can help in that, as can a recent CMS decision to apparently change direction and allow “endorsed products” (e.g., the city of Minneapolis chooses a retiree health product, reviews plan quality scores and requires certain benefits in the product, but does not contribute any money to the coverage) in the MA marketplace, he adds.
No comments:
Post a Comment