Fact Sheets

2018 Medicare Advantage and Part D Advance Notice and Draft Call Letter

2018 Medicare Advantage and Part D Advance Notice and Draft Call Letter

Today, the Centers for Medicare & Medicaid Services (CMS) released proposed updates to the Medicare Advantage (MA) and Part D programs through the 2018 Advance Notice and Draft Call Letter. CMS will accept comments on all proposals through March 3, 2017, before publishing final versions on April 3, 2017.

2018 Advance Notice

Through the 2018 Advance Notice, CMS is proposing updates to the methodologies used to pay MA plans and Part D sponsors.

Net Payment Impact

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

Year-to-Year Percentage Change in Payment

Impact 2018
Advance Notice
Effective Growth Rate 2.8%
Rebasing/Re-pricing TBD1
Change in Star Ratings -0.4%
MA coding intensity adjustment -0.25%
Normalization -1.9%
Expected Average Change in Revenue from
Advance Notice Proposals
Coding Trend 2.5%
Expected Average Change in Revenue 2.75%

Rebasing/re-pricing impact is dependent on finalization of average geographic adjustment index and will be available with the publication of the 2018 Rate Announcement

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 continued using a blend, incorporating a higher percentage of encounter data-based risk scores. In 2018, CMS is proposing to continue using the 2017 blend for payment. CMS is also soliciting comments on whether and how to apply a uniform industry-wide adjustment to the encounter data-based portion of the blended risk score under the Part C and ESRD models for payment to MAOs in 2018.

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 2018, CMS proposes to make an adjustment reflective of the statutory minimum.   

Medicare Employer Retiree Plans
Medicare Employer Retiree Plans (Employer Group Waiver Plans or EGWPs) serve specific employer groups, and are either offered through negotiated arrangements between Medicare Advantage plans and employer groups or by the employer directly. For 2017, CMS waived the requirement for MA EGWPs to submit Part C bid pricing information, and instead adopted a payment methodology by which their payment rates are administratively set. For 2018, CMS is proposing to continue the policy of administratively setting rates for these plans, but is soliciting comment as to whether we should continue to use the bid-to-benchmark ratios used for 2017 payment which are based on a blend of EGWP bids and individual market plan bids, or to continue the transition by using only individual market plan bids to calculate the bid-to-benchmark ratios for 2018.


2018 Draft Call Letter
Star Ratings Enhancements 
As in 2017, for 2018, CMS is proposing to continue to use an analytic adjustment to the Star Ratings to account for the impact of dual-eligible and disabled status on plans’ Star Ratings. CMS is also proposing modifications to the current “beneficiary access and performance problems” measure to reflect the magnitude of any civil money penalties and to use more recent data. 

Service Category Cost-Sharing Requirements 
CMS has traditionally afforded MA plans greater flexibility in establishing Parts A and B cost sharing by adopting a lower, voluntary maximum out-of-pocket (MOOP) limit than is available to plans that adopt a higher, mandatory MOOP limit. As stated in the final CY 2017 Call Letter, CMS is proposing to eliminate cost sharing for the first 20 days of the SNF benefit for CY 2018 to align with Original Medicare. The final CY 2017 Call Letter described three areas of concern for CMS: cardiac rehabilitation services, intensive cardiac rehabilitation services, and pulmonary rehabilitation services. To protect against potentially discriminatory and high cost sharing CMS is proposing to add cost sharing thresholds for these areas for CY 2018. In addition, we are proposing to increase the Emergency Care/Post Stabilization Care limit for plans for CY 2018 to act as an incentive for beneficiaries to use primary and specialty care services for routine care and reduce the use of emergency room visits for non-emergent routine services. Our research indicates the limits will be below the average emergency room cost sharing amounts under Original Medicare. We anticipate MA organizations will be encouraged to offer more plans with a lower, voluntary MOOP amount because the cost sharing limit will be higher for these types of services.

Improving Drug Utilization Review Controls
To address the opioid epidemic, CMS has implemented a medication safety approach by which sponsors are expected to reduce beneficiary overutilization of opioids and maintain access to needed medications. CMS also implemented the Overutilization Monitoring System (OMS) to help oversee sponsors’ compliance with this CMS overutilization guidance. Building upon these successes, CMS is proposing a number of updates to these policies intended to address drug utilization concerns within the Part D program for 2018, including:

  • Proposing revisions to the retrospective drug utilization review criteria used to identify potential opioid over utilizers through the OMS to better align with the CDC guideline on opioid prescribing, reduce false positives, and maintain a policy that is still manageable for sponsors; and
  • Proposing establishing the expectation for sponsors to, at a minimum, implement hard formulary-level safety edits based on a cumulative morphine equivalent dose (MED) approach to prospectively prevent opioid overuse at point of sale at the pharmacy.   

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 3, 2017. The final 2018 Rate Announcement and Call Letter, including the final Medicare Advantage and FFS growth percentage and final benchmarks will be published by Monday, April 3, 2017. 

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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