CY 2023 Medicare Advantage and Part D Final Rule (CMS-4192-F)
CMS is issuing a final rule that advances CMS’ strategic vision of expanding access to affordable health care and improving health equity in Medicare Advantage (MA) and Part D through lower out-of-pocket prescription drug costs and improved consumer protections.
An increasing number of Medicare beneficiaries receive services through MA and Part D plans. Over 27 million beneficiaries are enrolled in MA plans (including plans that offer Part D prescription drug coverage), and approximately 24 million beneficiaries are enrolled in standalone Part D plans. Additionally, an increasing number of beneficiaries who are dually eligible for both Medicare and Medicaid are enrolled in MA plans, Medicaid managed care, or both. About 4.1 million dually eligible beneficiaries currently receive their Medicare services through MA dual eligible special needs plans (D-SNPs).
This final rule revises the MA and Part D regulations related to marketing and communications; the criteria used to review applications for new or expanded MA and Part D plans, including compliance with MA provider network adequacy requirements; quality ratings for MA and Part D plans; medical loss ratio reporting; special requirements during disasters or public emergencies; how MA organizations calculate attainment of the maximum out-of-pocket (MOOP) limit for Parts A and B services; and the use of pharmacy price concessions to reduce beneficiary out of pocket costs for prescription drugs under Part D. This final rule also revises regulations for D-SNPs, and in some cases, other special needs plans, related to enrollee advisory committees, health risk assessments, and ways to improve integration of Medicare and Medicaid. Many finalized policies are based on lessons learned from the Medicare-Medicaid Financial Alignment Initiative.
Summary of Changes
Lowering Beneficiary Cost-Sharing at the Pharmacy Counter
In recent years, more Part D plans have been entering into arrangements with pharmacies that may pay less money for dispensed drugs if pharmacies do not meet certain criteria. The negotiated price for a drug is the price reported to CMS at the point of sale, which is used to calculate beneficiary cost-sharing and generally adjudicate the Part D benefit. With the emergence of these payment arrangements, the negotiated price is frequently higher than the final payment to pharmacies. Higher negotiated prices lead to higher beneficiary cost-sharing and faster beneficiary advancement through the Part D benefit. CMS is finalizing a policy that requires Part D plans to apply all price concessions they receive from network pharmacies to the negotiated price at the point of sale, so that the beneficiary can also share in the savings. Specifically, CMS is redefining the negotiated price as the baseline, or lowest possible, payment to a pharmacy, effective January 1, 2024. CMS is applying the finalized policy across all phases of the Part D benefit. This policy reduces beneficiary out-of-pocket costs and improves price transparency and market competition in the Part D program.
Marketing and Communications Oversight
CMS is finalizing changes to marketing and communications requirements that will protect Medicare beneficiaries by ensuring they receive accurate and accessible information about Medicare coverage. These include strengthening oversight of third-party marketing organizations to detect and prevent the use of confusing or potentially misleading activities to enroll beneficiaries in MA and Part D plans, reinstating the inclusion of a multi-language insert in all required documents to inform beneficiaries of the availability of interpreter services, codifying enrollee ID card standards, requirements related to a disclaimer for limited access to preferred cost sharing pharmacies, plan website instructions on how to appoint a representative, and website posting of enrollment instructions and forms.
Beneficiary Access to Care During Disasters and Emergencies
To ensure that beneficiaries have uninterrupted access to needed services, CMS is revising and clarifying timeframes and standards associated with coverage obligations of MA plans during disasters and emergencies. Current regulations have special requirements for MA plans during disasters or emergencies, including requirements for plans to cover services provided by non-contracted providers and to waive gatekeeper referral requirements. The final rule will clarify that an MA plan must comply with the special requirements when there is both a declaration of disaster or emergency (including a public health emergency) and disruption in access to health care in the MA plan’s service area.
To hold plans to a higher standard, CMS is finalizing additional bases for denying an MA and Part D organization’s application for a new contract or a service area expansion of an existing contract based on an organization’s past performance. The current regulations permit CMS to deny applications from organizations under sanction or failing CMS’ net worth requirements during the performance period. The final rule adds Star Ratings (2.5 or lower), bankruptcy or bankruptcy filings, and exceeding a CMS designated threshold for compliance actions as bases for CMS denying a new application or a service area expansion application.
To strengthen its application standards and oversight, CMS is requiring that MA applicants demonstrate they have a sufficient network of contracted providers to care for beneficiaries before CMS will approve an application for a new or expanded MA contract. We believe that requiring applicants to demonstrate compliance with network adequacy standards as part of the application process will strengthen our oversight of an organization’s ability to provide an adequate network of providers to deliver care to MA enrollees. This change will also provide MA organizations with information regarding their network adequacy ahead of bid submissions, mitigating current issues with late changes to the bid that may impact bid integrity. Due to the changes in the timing of the network adequacy reviews and potential difficulties MA organizations may face with building a full network almost one year in advance of the contract year, we also will allow applicants a 10-percentage point credit toward the percentage of beneficiaries residing within published time and distance standards. Additionally, based on comments received, we are finalizing a change to allow applicants to use Letters of Intent (LOIs) in lieu of a signed provider contract, at the time of application and for the duration of the application review to meet network adequacy standards. Once the coverage year starts (January 1), organizations must be in full compliance; the 10-percentage point credit and permission to use LOIs will no longer apply, and signed provider and facility contracts must be in place for the network.
Greater Transparency in Medical Loss Ratio (MLR) Reporting
To increase value for taxpayers and beneficiaries, we are reinstating MLR reporting requirements that were in effect for contract years 2014 – 2017. The current regulations require that MA organizations and Part D sponsors report to CMS the percentage of revenue spent on patient care and quality improvement and the amount of any remittance that must be paid to CMS for failure to meet the 85 percent minimum MLR requirement. The final rule requires MA organizations and Part D sponsors to report the underlying cost and revenue information needed to calculate and verify the MLR percentage and remittance amount, if any. In addition, the final rule will allow CMS to require that MA organizations report the amounts they spend on various types of supplemental benefits not available under original Medicare (e.g., dental, vision, hearing, transportation).
Part C and Part D Quality Rating System
We are finalizing a technical change to enable CMS to calculate 2023 Part C Star Ratings for the three Healthcare Effectiveness Data and Information Set (HEDIS) measures collected through the Health Outcomes Survey (HOS): Monitoring Physical Activity, Reducing the Risk of Falling, and Improving Bladder Control. Without this technical change, CMS would be unable to calculate 2023 Star Ratings for these measures for any MA contract since all contracts qualify for the extreme and uncontrollable circumstances adjustment for COVID-19. We are also finalizing a series of changes that were established in the March 31, 2020 COVID-19 interim final rule with comment (IFC) and the September 2, 2020 COVID-19 IFC to the 2021 and 2022 Star Ratings to accommodate the disruption to data collection posed by the COVID-19 pandemic.
Enrollee Input on D-SNP Operations
We believe the health system is stronger when we listen to the people we serve. Federal rules require enrollee advisory committees for Medicaid managed care plans that cover Medicaid long term services and supports (LTSS) and for Programs of All-Inclusive Care for the Elderly (PACE) organizations. CMS applies similar requirements for demonstration Medicare-Medicaid Plans. We are finalizing a requirement that all D-SNPs establish and maintain one or more enrollee advisory committees for each state in which the D-SNP is offered and that D-SNPs consult with advisory committees on various issues, including ways to improve health equity for underserved populations.
Social Determinants of Health and Special Needs Plan Health Risk Assessments
Certain social risk factors can lead to unmet social needs that directly influence an individual’s physical, psychosocial, and functional status. Many dually eligible individuals contend with multiple social risk factors such as housing insecurity and homelessness, food insecurity, lack of access to transportation, and low levels of health literacy. All SNPs must complete enrollee health risk assessments (HRAs) at enrollment and annually. We proposed to require that all SNP HRAs include specific standardized questions on housing stability, food security, and access to transportation – all of which we know to be important contributors to overall health. Based on the comments we received, we are finalizing a requirement that all SNP HRAs include at least one question from a list of screening instruments specified by CMS on each of these three domains, but we are not requiring that all SNPs use the same specific standardized questions. The final rule will help better identify the risk factors that may inhibit enrollees from accessing care and achieving optimal health outcomes and independence and enable MA SNPs to take these risk factors into account in enrollee care plans.
Simplified Appeals and Grievance Processes
The Bipartisan Budget Act of 2018 (Pub.L. 115–123) charged the Secretary of the Department of Health and Human Services with establishing unified appeals and grievance procedures across Medicare and Medicaid to the maximum extent possible. New requirements took effect in 2021 for certain D-SNPs that enroll the same beneficiaries who receive their Medicaid coverage through an affiliated Medicaid managed care organization (MCO). Beneficiaries in these plans go through one Medicare-Medicaid appeals process at the plan level, rather than filing separate, potentially duplicative, appeals with both the D-SNP and the Medicaid MCO. We are expanding the universe of D-SNPs for which the unified appeals and grievance processes apply. This final rule simplifies the appeals and grievance processes and extends the protection of continuation of benefits pending appeal to additional dually eligible beneficiaries.
New Pathways to Have Star Ratings Specific to the Performance of the Local D-SNP
MA Star Ratings are a powerful motivator for plan performance and an important tool to help beneficiaries comparison shop for plans. Star Ratings are calculated at the contract level for MA and Part D plans. In many cases, contracts contain D-SNPs and other non-SNP MA plans, which can make it impossible to fully assess the performance of a specific D-SNP within a specific state. CMS is finalizing a pathway to allow certain states with integrated care programs to require that MA organizations establish a contract that only includes one or more D-SNPs, which will allow for Star Ratings for that contract to reflect the D-SNPs’ local performance. This provision of the final rule will help to more easily identify disparities between D-SNPs and other MA plans and help CMS and states better drive quality improvement for dually eligible beneficiaries.
New Pathways to Simplify D-SNP Enrollee Materials
Many dually eligible beneficiaries have low health literacy yet need to navigate a more complex system of coverage than non-dually eligible beneficiaries. Currently, most dully eligible beneficiaries receive separate materials (e.g., provider directories) for their Medicare benefits and their Medicaid benefits, which can cause confusion. With input from dually eligible individuals, we have successfully integrated many enrollee materials for demonstration programs and with a small number of D-SNPs to help people better understand their coverage. This final rule codifies a mechanism through which states can require the D-SNPs in D-SNP-only contracts to use integrated materials to make it easier to understand the full scope of Medicare and Medicaid benefits available through the D-SNPs.
Maximum Out-of-Pocket Policy for Dually Eligible Beneficiaries
MA plans are required to set a limit on beneficiary cost-sharing for Medicare Part A and B services after which the plan pays 100 percent of the service costs. Current guidance on calculation of the maximum out-of-pocket (MOOP) amount allows MA plans the option to count only those amounts the individual enrollee is responsible for paying, but not count any state cost-sharing payments or unpaid cost-sharing toward the MOOP limit, rather than all the cost-sharing amounts for services the plan has established in its plan benefit package. In practice, this option does not cap the amount a state could pay for a dually eligible MA enrollee’s Medicare cost-sharing, and results in state Medicaid programs paying more in Medicare cost-sharing for dually eligible enrollees than if the plan calculated attainment of the MOOP limit based on cost-sharing amounts for services in its plan benefit package.
This final rule specifies that the MOOP limit in an MA plan (after which the plan pays 100 percent of MA costs) is calculated based on the accrual of all Medicare cost-sharing in the plan benefit, whether that Medicare cost-sharing is paid by the beneficiary, Medicaid, or other secondary insurance, or remains unpaid (including when the cost-sharing is not paid because of state limits on the amounts paid for Medicare cost-sharing and dually eligible individuals’ exemption from Medicare cost-sharing). We project that the change will save state Medicaid agencies $2 billion over ten years while increasing payment to providers serving dually eligible beneficiaries by $8 billion over ten years.
Technical and Definitional Updates for FIDE SNPs and HIDE SNPs
Dually eligible individuals have an array of choices for how to receive their Medicare coverage, including fully integrated dual eligible special needs plans (FIDE SNPs) and highly integrated dual eligible special needs plans (HIDE SNPs). While we have defined these terms through rulemaking, there remains nuance and variation that make it difficult for members of the public – and even the professionals who support them – to readily understand what may be unique about a certain type of plan or what a beneficiary can expect from a plan. This final rule requires, for 2025 and subsequent years, that all FIDE SNPs have exclusively aligned enrollment (i.e., limit enrollment to individuals in the affiliated Medicaid MCO) and cover Medicaid home health, durable medical equipment, and behavioral health services through a capitated contract with the state Medicaid agency. It also requires that each HIDE SNP’s capitated contract with the state apply to the entire service area for the D-SNP for plan year 2025 and subsequent years. It also codifies specific limited benefit carve-outs, consistent with existing policy, for FIDE SNPs and HIDE SNPs.