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2017 Medicare Advantage and Part D Advance Notice and Draft Call Letter

2017 Medicare Advantage and Part D Advance Notice and Draft Call Letter

2017 Medicare Advantage and Part D Advance Notice and Draft Call Letter

Today, CMS released proposed updates to the Medicare Advantage (MA) and Part D programs through the 2017 Advance Notice and Draft Call Letter. Through these policies, CMS is proposing updates to the program designed to improve the accuracy of payments to plans serving beneficiaries who are dually eligible for Medicare and Medicaid.     

CMS is committed to making the Medicare Advantage and Part D programs high quality health care options for all Medicare beneficiaries – including low income and dually eligible beneficiaries.  As part of that commitment, the 2017 Advance Notice and Draft Call Letter propose program adjustments designed to improve the precision of payments to plans serving these important populations. Specifically, CMS is proposing updates to the Risk Adjustment Model used to calculate payments to Medicare Advantage plans and to the Star Rating system used to evaluate plan performance. In both cases, the updates reflect a public process through which CMS shared research findings and solicited public comment. 

A Growing and Improving Program that Remains Affordable

The Medicare Advantage and Part D programs continue to grow and thrive. In the Medicare Advantage program:

  • Enrollment continues to grow – MA enrollment increased by more than 50 percent since passage of the Affordable Care Act to an all-time high of more than 17.1 million – or 32 percent of – Medicare beneficiaries enrolled in a Medicare Advantage plan.
  • Plan quality continues to improve – the percentage of MA enrollees in four or five star contracts has almost quadrupled since 2009 to 71 percent.
  • Premiums remain affordable – average premiums today are lower than before the Affordable Care Act went into effect, dropping about 10 percent between 2010 and 2016.

2017 Advance Notice/Payment Changes

Proposed changes in the 2017 Advance Notice are intended to improve payment precision and encourage quality, while continuing to protect beneficiaries from significant increases in premiums and out of pocket costs. 

Net Payment Impact

The chart below shows the expected impact of the proposed policy changes on plan payments relative to last year.  

Year-to-Year Percentage Change in Payment






Advance Notice

Effective Growth Rate



Transition to ACA rules






Improved star ratings



Risk model revision



MA coding intensity adjustment






Expected Average Change in Revenue from Advance Notice Policies



Coding trend



Expected Average Change in Revenue



1 Rebasing/re-pricing impact is dependent on finalization of average geographic adjustment index and will be available with the publication of the Rate Announcement


Risk Adjustment Model

Last year, CMS received significant input from stakeholders that the current Risk Adjustment Model does not effectively capture the full cost to Medicare Advantage plans of serving dually eligible beneficiaries. In response, CMS conducted extensive research and released a description of potential revisions to the model for comment last fall (

Following this public process, CMS is proposing to implement a new Risk Adjustment Model for 2017. The proposed new model has separate coefficients for partial benefit dually eligible beneficiaries, full benefit dually eligible beneficiaries, and non-dually eligible beneficiaries.  These proposed changes will improve the precision of the payments made to plans, including increases in payments for plans serving full benefit dually eligible beneficiaries.

Coding Pattern Adjustment

Each year, as required by law, CMS makes an adjustment to plan payments to reflect differences in diagnosis coding between Medicare Advantage organizations and fee-for-service (FFS) providers. In CY 2017, CMS proposes to make an adjustment reflective of the statutory minimum.   

Using Encounter Data

CMS calculates risk scores using diagnoses submitted by FFS providers and by Medicare Advantage organizations. Historically, CMS has used Medicare Advantage diagnoses submitted into CMS’ Risk Adjustment Processing System (RAPS). In recent years, CMS began collecting encounter data from MA organizations to develop more accurate payment models. In 2016, CMS began using diagnoses from encounter data to calculate risk scores, by blending encounter data-based risk scores with RAPS-based risk scores. In 2017, CMS is proposing to continue using a blend, using a higher percentage of encounter data-based risk scores.

Employer Group Waiver Plans

Employer Group Waiver Plans (EGWPs) serve specific employer groups, and are either offered through negotiated arrangements between Medicare Advantage plans and employer groups or by the employer directly. Because of the nature of these unique agreements, EGWPs do not compete against other plans through the bidding process, and therefore have little incentive to submit lower bids. CMS has previously waived bidding requirements for Part D for EGWPs and set payment amounts for Part D plans based on the competitive bids submitted for non-EGWP Part D plans. CMS is proposing a similar waiver and payment policy for EGWP Part C plans for 2017.

2017 Draft Call Letter

Star Ratings – Adjusting for Socioeconomic Status

Medicare Advantage plans that achieve high star ratings are eligible for Quality Bonus Payments. Plans and other stakeholders have raised concerns that the current Part C and D Star Rating system creates a disincentive for plans to serve dually eligible or low income beneficiaries. In response, CMS conducted extensive research on this issue, releasing findings and requesting comment on proposed methodological changes in the fall of 2015. 

Following this public process, CMS is proposing to implement a new analytical adjustment for a subset of Star Rating measures that is meant to adjust for plans serving dually eligible enrollees and/or enrollees receiving the low income subsidy, as well as enrollees with disabilities. Through this interim adjustment, CMS seeks to more accurately capture true plan performance, while work continues by the HHS Assistant Secretary for Planning and Evaluation (ASPE) and measure stewards in this important area.

Service Category Cost-Sharing Requirements

CMS has traditionally afforded plans that adopt a lower, voluntary maximum out-of-pocket (MOOP) limit greater flexibility in establishing Parts A and B cost sharing than is available to plans that adopt a higher, mandatory MOOP limit. The number of Medicare Advantage plans with voluntary MOOPs has decreased significantly over the past several years. To address this, CMS is proposing to reduce the cost sharing limit for skilled nursing facility stays (days 1 through 20) in CY 2017 and CY 2018, to reduce cost sharing flexibilities for other service categories, and to make other adjustments. In addition, CMS is requesting comments about other incentives to encourage Medicare Advantage organizations to offer plans with a lower voluntary MOOP for enrollees. Such incentives could include flexibilities to highlight voluntary MOOP plans in marketing materials or a special indicator or priority sorting on Medicare Plan Finder.

Drug Utilization

CMS is proposing a number of updates intended to address drug utilization within the Part D program.

  • Allowing Part D plans to designate specific drugs for which a beneficiary’s initial fill could be limited to a 1 month supply, regardless of whether the drug is otherwise available as an extended days’ supply. This change should eliminate waste when patients’ initial doses may change or if they are removed from therapy due to side effects, adverse reactions, or lack of clinical response. After the first one month supply, the change to extended days’ supply would be seamless for the beneficiary.
  • Encouraging sponsors to inform beneficiaries directly of additional formulary drugs that become available mid-year, as such drugs may provide more value or better quality options.
  • Adding, by 2017 (or possibly sooner), a link from the Medicare Plan Finder website to the Medicare Drug Spending Dashboard to raise beneficiary awareness.

Opioid Use

The Administration is committed to addressing the growing opioid epidemic. Last fall, CMS released information on the success of the Part D Overutilization Monitoring System in lowering the number of Part D beneficiaries identified as potential opioid overutilizers. CMS also released a new mapping tool showing geographic comparisons of Medicare Part D opioid prescription claims. 

Continuing this record of success, CMS is proposing a number of updates in the 2017 Draft Call Letter.  Specifically, CMS is proposing expectations for Part D plans to implement edits to prevent opioid overutilization at point of sale. CMS is also reminding Part D sponsors that beneficiaries who are in need of medication-assisted treatment (MAT) should not be subject to unnecessary hurdles.  Part D formulary and plan benefit designs that hinder access to MAT, either through overly restrictive utilization management strategies or high cost-sharing, will not be approved.  


Comments on the proposed Advance Notice and Draft Call Letter are invited from the industry, seniors, consumer advocates, and the public, and must be submitted by March 4, 2016. The final 2017 Rate Announcement and Call Letter, including the final Medicare Advantage and FFS growth percentage and final benchmarks will be published by Monday, April 4, 2016.

Comments can be emailed to:

The Advance Notice and Draft Call Letter may be viewed through: and selecting “Announcements and Documents.”



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