United States: Recent Medicare Advantage And Part D Proposed Rules: Four Things To Watch

Last Updated: December 28 2018
Article by Melissa A. Wong

Melissa A Wong is Associate in Holland & Knight's Boston office

The Centers for Medicare & Medicaid Services (CMS) issued two Medicare Advantage (MA) and Part D proposed rules last month that, if enacted, could significantly impact current benefit designs and operations for both programs. In the last few remaining weeks of the required comment periods for these proposals, MA organizations and Part D sponsors should review and consider potential business implications posed by the following four proposed initiatives in particular:

  1. Additional Telehealth Benefits. CMS would allow MA organizations to provide their enrollees additional telehealth benefits that exceed what is offered under traditional Medicare, and to allow organizations to treat such services as "basic benefits" for the purposes of bid submission and payment by CMS. MA organizations would be given discretion to determine independently from CMS which services would be clinically appropriate to furnish under a telehealth benefit in a given year. MA enrollees must still be allowed access to these services through an in-person visit, and not only as a telehealth benefit, based on the enrollee's preference. Under the proposed rule, MA organizations may only furnish telehealth benefits through the use of contracted providers, and must conduct appropriate provider credentialing and monitoring, including appropriate oversight to ensure that telehealth providers comply with applicable state licensing and other laws governing telehealth services. MA plans could still offer supplemental benefits to provide coverage for telehealth services that would not be covered under traditional Medicare or that do not otherwise meet the requirements for classification as an additional telehealth benefit.
  2. New Preclusion List Requirements. CMS announced that it would no longer require MA providers and Part D prescribers to enroll with the Medicare fee-for-service program. Instead, CMS is installing a "preclusion list" to identify "demonstrably problematic" providers and suppliers, so that payment for any items or services prescribed or furnished by precluded providers or prescribers under MA or Part D respectively would be rejected or denied. This would include providers that are currently revoked from Medicare, are under an active re-enrollment bar, or have engaged in behavior for which CMS could have revoked the provider's enrollment if they had in fact been enrolled. The latest proposed rule seeks to implement many clarifying and technical changes, as well as a proposed consolidation of the Medicare enrollment revocation and preclusion list appeals processes so that they run concurrently, which in turn allows CMS to place providers on the preclusion list months earlier than if such processes were to run consecutively. While the preclusion list goes into effect on Jan. 1, 2019, CMS is allowing MA organizations and Part D sponsors to delay payment denials and claims rejections associated with precluded providers until April 1, 2019, in order to provide enrollees sufficient notification of a precluded provider or prescriber and an opportunity to make other arrangements.
  3. Less Protection for Protected Classes. Part D sponsors are required to include on their plan formularies of all drugs in six protected classes, specifically antidepressants, antipsychotics, immunosuppressants (for treating organ transplant rejection), antiretrovirals and antineoplastics. CMS, however, proposes to allow broader use of prior authorization and step therapy for protected class drugs, including to determine use for protected class indications or to exclude from formularies protected class drugs for non-protected class indications. In addition, CMS would allow Part D sponsors to exclude from formulary coverage drugs that are only a new formulation of an existing, single-source drug or biological. Third, Part D sponsors would be allowed to exclude a protected class drug if the price of the drug increased beyond the rate of inflation over a specified look-back period. CMS' last major attempt to scale back protections for protected class drugs in 2014 was met with significant opposition, and its proposed rule was never finalized. This proposal will likely again generate opposition.
  4. Pharmacy Price Concessions. For several years, CMS has expressed concern that enrollees do not benefit from reduced cost-sharing when certain discounts and price concessions that serve to lower the cost of a drug are not factored into the price of that drug at the point of sale. To recognize these price concessions up front rather than as direct and indirect remuneration (DIR), CMS proposes to require that all price concessions from network pharmacies be reflected in the "negotiated price" that is made available at the point of sale. Currently, Part D sponsors must only recognize as part of negotiated price those price concessions that can be reasonably determined at the point of sale. CMS recognizes that many of the pharmacy price concessions are contingent upon pharmacy performance, and therefore cannot necessarily be determined at the point of sale. To account for this, CMS proposes that the negotiated price must reflect the "lowest possible reimbursement that a network pharmacy could receive from a particular Part D sponsor for a covered Part D drug," but that these prices could then exclude any additional contingent amounts that could flow to network pharmacies, such as incentive fees or performance-based payment arrangements. Those additional contingent amounts would then be reported as negative DIR as part of the annual report filed after the end of the plan year. Many industry observers expect operational difficulties and significant pushback to this proposal.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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