The Deeper Dive: 2017 Final Rate Notice Overview

Molly T. Turco – Better Medicare Alliance Policy & Research Director

As is the case every year, the Medicare Advantage (MA) 2017 Final Rate Notice released on April 4 included policy guidance and payment rate information, such as county benchmark information. In addition, the Centers for Medicare & Medicaid Services (CMS) provided detailed answers to questions that were submitted during the formal two-week comment period – in many ways this is the most interesting part of the regulation because it provides insights into how CMS is thinking about key issues in MA (Attachment III: Responses to Public Comments on Part C Payment policy, pages 16-62). Over the past two weeks, we’ve had a chance to look over the 250 pages of the regulation. Better Medicare Alliance’s (BMA) brief primer summarizing what was finalized in the regulation can be viewed here.

As we shift our focus towards the implementation of the elements in the final regulation, BMA will focus our attention on the following key topics:

• EGWPs methodology change: CMS finalized changes to payment for MA retiree plans, officially called Employer Group Waiver Plans (EGWPs). The finalized policy does away with the current bid system but blends 2017 payment with 2016 EGWP bid amounts for a year before the new policy is fully implemented in 2017. The change will result in a 2.5% reduction in payment to EGWPs. As outlined in our recent EGWP Issue Brief, BMA raised serious concerns about the potential impact this change would have on coverage for retirees. We will monitor the implementation and advocate for methodology improvements to mitigate disruption for beneficiaries.
• New Risk Adjustment Model: CMS finalized implementation of the new CMS-Hierarchical Condition Category (HCC) Risk Adjustment Model for 2017. The new Risk Model is divided into six sub-segments based on Medicaid status and age. The stated goal of the model change is to increase payment accuracy in MA, especially for individuals who are dually eligible for Medicare and Medicaid. Though BMA supports this goal, we will continue to work with policymakers to help ensure implementation addresses concerns about the model change, including the compounding impact of iterative changes to the Risk Adjustment Model; discrepancies in state Medicaid eligibility determinations and data; transparency of implementation information and impact assessments.
• Encounter Data: CMS decided to increase the use of encounter data as a diagnosis source for risk adjustment from 10% in 2016 to 25% in 2017. CMS initially proposed to increase the use of encounter data, using the Encounter Data System (EDS), from 10% to 50% for 2017, so we were pleased they ultimately decided to enact a more gradual approach to the change. However, we remain cautious that this change, in addition to the new HCC Risk Model change, comes on the heels of the implementation of the new ICD-10 coding system and the previous change to the Risk Model that removed lower acuity codes. Thus, it is important that providers and other implementation partners have full access to the tools they need for a smooth transition to EDS.
• More Transparency: BMA will continue to call on CMS to release more information to stakeholders to aid in impact assessments and the implementation of policy. Transparency facilitates the flow of meaningful feedback from stakeholders back to CMS throughout the year.  We will focus on the key policies mentioned above in addition to other ongoing policy topics, such as interim and permanent changes to the Star Rating system.

BMA will offer information and analyses as these policy changes are implemented over the coming months and will continue to facilitate discourse on these important topics.

Important Links:

CMS material related to the 2017 MA Final Rate Notice:

Full Regulation – here; Fact Sheet – here

CMS Final Notice EGWP Fact Sheet – here

2017 Advance Notice: Full Regulation – here; Fact Sheet – here

BMA Materials related to the 2017 MA Final Rate Notice:

Final Notice Primer – here

EGWP Primer – here

BMA Letter to CMS in Response to the 2017 Advance Rate Notice – here

Advance Notice Primer – here