Radar on Medicare Advantage

The U.S. will likely save billions of dollars in the first few years of Medicare drug price negotiation — a provision of the Inflation Reduction Act (IRA) — suggests a recent study published in JAMA Health Forum. Acting as though the IRA had been implemented from 2018 to 2020, researchers from Harvard Medical School and Brigham and Women’s Hospital created a simulation of the drug selection process, and found that Part D and Part B drug spending would have been reduced by 5% — $26.5 billion — over those three years.

Overall, 40 drugs were selected. CMS’s criteria are strict — spending on each drug must exceed $200 million in the year prior to its selection, and products must have been on the market for at least nine years (or 13, if the drug is a biologic). Selected therapies cannot have any generic or biosimilar alternatives, and orphan drugs and plasma-derived products are also ineligible. Then, the negotiated price must fall below a drug’s “ceiling price,” which is determined by the lesser of two figures: the average net price of a drug after its existing rebates and discounts, or between 40%-75% of the drug’s nonfederal average manufacturer (non-FAMP) price, depending on the drug’s age.

Medicare Advantage organizations may not have gotten the outcome they were hoping for in CMS’s recently finalized Risk Adjustment Data Validation rule, but industry experts say they weren’t surprised by the position CMS ultimately took after years of pressure to close out RADV audits and recover identified overpayments. And while one aspect of the rule could expose it to litigation and further delay CMS’s attempts to collect overpayments from MAOs, experts say plans still would be wise to sharpen their risk adjustment practices in order to limit their audit exposure.

Issued on Jan. 30 and slated for Federal Register publication on Feb. 2, the final rule pertains to contract-level audits that CMS began conducting more than a decade ago to verify the accuracy of payments made to MA organizations and recover improper payments. The agency in 2012 said it planned to adopt a “fee-for-service adjuster” to account for any impact from unaudited diagnosis codes in FFS data that are used to calibrate the MA risk adjustment model. But in a November 2018 proposed rule (83 Fed. Reg. 54982, Nov. 1, 2018), CMS said its plans to recoup improper payments would not involve an FFS adjuster and that it may apply an extrapolation methodology when finalizing audits dating back to payment year 2011. The RADV provisions of the 2018 proposed rule received pushback from insurers and were never finalized by the Trump administration.

Medicaid managed care organizations this year will have their hands full as they support state efforts to resume eligibility redeterminations and try to help members avoid gaps in coverage, or “churn” historically associated with failing to meet cumbersome paperwork requirements. At the same time, MCOs may have more opportunities to address health-related social needs (HRSNs) as CMS encourages states to pursue new funding flexibilities around items like food and housing, industry experts tell AIS Health, a division of MMIT.

As a condition of receiving enhanced federal matching funds during the COVID-19 public health emergency —which will end on May 11 — states had to maintain continuous coverage for Medicaid enrollees. But the Consolidated Appropriations Act of 2023 (CAA) decoupled that requirement from the expiration of the PHE. Per the CAA, the temporary 6.2 percentage-point increase in the Federal Medical Assistance Percentage will phase down over three quarters starting on April 1, when states may begin terminating Medicaid coverage for individuals who no longer qualify. States have up to 12 months to begin — and 14 months to complete — eligibility redeterminations for all individuals enrolled in Medicaid.