Fact Sheets

2018 Medicare Advantage and Part D Rate Announcement and Call Letter, and Request for Information

2018 Medicare Advantage and Part D Rate Announcement and Call Letter, and Request for Information 

Today, the Centers for Medicare & Medicaid Services (CMS) released final updates to the Medicare Advantage (MA) and Part D programs through the 2018 Rate Announcement and Call Letter. The Advance Notice and Draft Call Letter were posted on February 1, 2017 and CMS accepted comments on all proposals through March 3, 2017.

In addition to finalizing rates and program rules in the 2018 Rate Announcement and Call Letter, CMS is releasing a Request for Information (RFI) to welcome continued feedback on MA and Part D. We wish to use transparency, flexibility, program simplification and innovation to transform the MA and Part D programs. The RFI requests recommendations from stakeholders and the public for regulatory, sub-regulatory, policy, practice, and procedural changes to achieve these goals.

2018 Rate Announcement
Through the 2018 Rate Announcement, CMS has finalized 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
2018 Rate
Effective Growth Rate 2.8% 2.7%
Rebasing/Re-pricing N/A 0.3%
Change in Star Ratings -0.4% -0.4%
MA coding intensity adjustment -0.25% -0.25%
Normalization -1.9% -1.9%
Expected Average Change in Revenue 0.25% 0.45%
Coding trend 2.5% 2.5%
Expected Average Change in Revenue
with Coding trend
2.75% 2.95%

Using Encounter Data
CMS calculates risk scores using diagnoses submitted by Medicare Fee-For-Service (FFS) providers and by Medicare Advantage organizations (MAOs). Historically, CMS has used MA diagnoses submitted into CMS’ Risk Adjustment Processing System (RAPS). In recent years, CMS began collecting encounter data from MA organizations. In 2015, CMS used encounter data as an additional source of diagnoses for enrollee risk scores. 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 the 2018 Advance Notice, we proposed to continue using the 2017 blend of 75% RAPS and 25% encounter data for payment. CMS also solicited 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 End-Stage Renal Disease (ESRD) models for payment to MAOs in 2018.

CMS appreciates feedback related to the implementation of encounter data and is committed to working with stakeholders to resolve outstanding issues in a timely manner. After reviewing comments, in order to provide payment stability while also continuing to provide an incentive for plans to submit complete data, CMS will use a risk score blend of 85% of the RAPS score and 15% of the encounter data score for PY2018 with no additional adjustment.

Medicare Employer Retiree Plans
Medicare Employer Retiree Plans (also called Employer Group Waiver Plans or EGWPs) serve specific employer groups, and are either offered through negotiated arrangements between MA plans and employer/union groups or by the employer/union directly. In 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.

In the 2018 Advance Notice, CMS solicited 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. After reviewing comments, CMS will continue to use the bid-to-benchmark ratios used for 2017 payment to calculate EGWP payments for 2018.

Prior to making a decision about fully implementing payments based on individual market plan bids for 2019, CMS would like to develop a better understanding of the impact that these changes are having on beneficiaries. This pause in the transition will allow CMS to seek input and data from EGWP sponsors and other stakeholders on changes in plan offerings in 2017 and 2018 and associated beneficiary impacts.

Puerto Rico
In Puerto Rico, the majority of Medicare beneficiaries receive benefits through MA in a far greater proportion than in any state. The policies being finalized will help stabilize MA payments in the Commonwealth and make adjustments that will positively impact plans serving large numbers of Medicare beneficiaries in Puerto Rico. CMS has made adjustments to the methodology used to set rates in Puerto Rico over the past several years, and for 2018, CMS solicited comment whether to continue to make a zero claims adjustment that began in 2017. In the 2018 Rate Announcement, CMS is once again making the zero claims adjustment and basing the rates on the estimated FFS costs of beneficiaries with both Medicare Parts A and B. CMS is also incorporating increases to the Geographic Price Indices in Puerto Rico in the 2017 Physician Fee Schedule. In addition to finalizing these policies as proposed, for 2018 CMS has also determined that some counties in Puerto Rico will be eligible to receive an increased quality bonus adjusted benchmark, which will enable high quality MA plans that operate in particular areas of Puerto Rico to qualify for this adjustment.

2018 Final Call Letter

Star Ratings Enhancements
As in 2017, for 2018, CMS will 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. While CMS will include the current “beneficiary access and performance problems” measure in the 2018 Star Ratings, CMS plans to remove the measure from the 2019 Star Ratings and introduce a revised measure for the 2019 display page that removes enforcement actions from this measure.

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. CMS will maintain the same Skilled Nursing Facility (SNF) cost sharing limit permitted in CY 2017 for MA plans that use a voluntary MOOP. MA plans that establish a lower, voluntary MOOP may have cost sharing for the first 20 days of a SNF stay. The per-day cost sharing for days 21 through 100 must not be greater than the Original Medicare SNF amount and total cost sharing for the overall SNF benefit must be no higher than the actuarially equivalent cost sharing in Original Medicare. We finalized an increase in the Emergency Care/Post Stabilization Care cost sharing limit for plans in CY 2018. Our research indicates the cost sharing 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. CMS also considered whether to establish additional cost sharing thresholds for cardiac and pulmonary rehabilitation services. CMS is not finalizing the addition of these cost sharing thresholds for CY 2018, but plan benefit designs must continue to comply with applicable regulatory standards.

Improving Drug Utilization Review Controls
In response to the growing national opioid epidemic, over time CMS has implemented a two-pronged approach to specifically address opioid overuse in Medicare Part D from a medication safety perspective:

  • The Overutilization Monitoring System (OMS) to retrospectively identify and provide case management to potential opioid overutilizers; and
  • The use of soft or hard cumulative morphine equivalent dose (MED) point of sale edits to prospectively identify potential opioid overutilization.

CMS is implementing enhancements to both the retrospective and prospective aspects of our approach to reducing opioid misuse in Medicare Part D. First, we are revising OMS potential overutilizer identification criteria to align with the recently updated CDC Guideline for Prescribing Opioids for Chronic Pain. Second, as in 2017, we will expect sponsors to implement soft and/or hard safety edits for opioids for 2018, but hard edits will not be required, as had been proposed in the Draft Call Letter. Cumulative MED point of sale edits help identify and prevent opioid misuse in real-time and alert prescribers who may not be aware their patients are receiving high cumulative levels of opioids. Point of sale edits are not intended to substitute physician judgment or dictate a prescribing limit. If a sponsor chooses to implement a hard edit, CMS expects the sponsor to rely only on prescriber attestation that the MED is medically necessary to override the hard edit, and to not require additional clinical criteria.    

CMS believes that MAOs and Part D sponsors, working with prescribing physicians, are in the best position to identify and employ best practices and the most appropriate care management interventions for enrollees using high dosage opioids. We expect all Part D sponsors to focus on improving the coordination of care among these beneficiaries using high dosage of opioids, and MA plans with prescription drug coverage in particular should consider expanding the care management they provide enrollees. CMS encourages Part D sponsors and members of their Pharmacy and Therapeutics (P&T) committees to keep abreast of current research, guidelines, and training materials related to the appropriate use of opioids and best practices for care management.

Request for Information

CMS is committed to maintaining benefit flexibility and efficiency throughout the MA and Part D programs. The MA and Part D programs have been successful in allowing for innovative approaches for providing Medicare and Part D benefits to millions of Americans. We wish to continue this trend through transparency, flexibility, program simplification and innovation to transform MA and Part D so Medicare enrollees have options that fit their individual health needs.  

CMS is soliciting ideas for regulatory, sub-regulatory, policy, practice and procedural changes to better accomplish these goals. Ideas could include recommendations regarding benefit design, operational or network composition flexibility, supporting the doctor-patient relationship in care delivery, facilitating individual preferences. They could also include recommendations regarding changes to the way plans are paid, monitored and measured. Or they could include recommendations regarding when and how CMS issues regulations and policies and how CMS can simplify rules and policies for beneficiaries and providers and plans.

In responding to the RFI, please provide CMS with clear and concise proposals that include data and specific examples that could be implemented to increase benefit flexibility, innovation and more affordable plan choices for beneficiaries. If the proposals involve novel legal questions, analysis regarding CMS’ authority is welcome for CMS’ consideration. Language illustrating the suggested approach is also welcome so that CMS may understand more precisely the parameters of the suggestion.

We are accepting feedback through April 24, 2017 at Please include “2017 Transformation Ideas” in the subject line.

The 2018 Rate Announcement and Call Letter, and the Request for Information may be viewed through: and selecting “2018 Announcement.”

Ratebooks and supporting calculation data may be viewed through: and selecting “2018.”

2011-2015 FFS data used in the ratebook calculations may be viewed through: