silw?tgHEALTH 3: HUMAN SERVICES lCenters for Medicare 3. Medicaid Services ?a . ?an Administrator Washington, DC 20201 MAY {1 92913 The Honorable Tom Price U.S. House of Representatives Washington, DC 20515 Dear Representative Price: Thank you for your letter regarding the Centers for Medicare tic Medicaid Services? (CMS) Advance Notice of Methodological Changes for Calendar Year (CY) 2014 for Medicare Advantage (MA) Capitation Rates, Part and Payment Policies (Advance Notice), and the 2014 draft Call Letter released on February 15, 2013. On April 1, 2013, CMS released the Announcement of Methodological Changes for CY 2014 for Medicare Advantage Capitation Rates, Part and Part Payment Policies (Final Rate Notice), . and the 2014 Final Call Letter. As we stated in the Advance Notice, we recognize that plans face several legislatively mandated changes affecting payment for 2014. As such, we solicited comments on suggestions to address these challenges within the parameters of current law. With respect to the issues you would like CMS to consider, allow me to respond to each in turn based on our policies for 2014: Risk Adjustment Model Changes You also expressed concerns about the proposed risk adjustment model changes and noted that these changes will impact plans that treat bene?ciaries with multiple chronic conditions. The risk adjustment model proposed for 2014 includes important clinical updates, as well changes to address differences in coding between MA plans and fee-for-service Medicare. I appreciate, however, the concern you have raised regarding these risk adjustment changes being implemented at the same time as other program changes and we took these concerns into consideration as we ?nalized the policy for 2014. In the Final Rate Announcement, we announced that we will implement the updated, clinically revised CMS-HCC risk adjustment model proposed in the Advance Notice with the following differences: (1) we will not apply a budget neutrality adjustment and (2) we will blend the risk scores calculated using this model with the risk scores calculated using the 2013 CMS-HCC model, weighting the risk scores from the 2013 model by '25 percent and the risk scores from the 2014 CMS-HCC model by 75 percent. We ?nalized this approach to mitigate the changes in risk scores faced by individual MA organizations. Five-Star Rating System You expressed concern regarding the proposed changes in the ?ve- star rating system. CMS solicited comments on the proposed calculation changes to Star Ratings in the draft Call Letter. Currently, a plan?s summary rating is calculated by averaging the individual measures? stars (1, 2, 3, 4, or 5 stars) rather than the underlying scores that plans Page 2 The Honorable Tom Price achieve on each of the measures. Averaging stars rather than underlying scores (actual performance) results in a loss of information about di??erences between plans and increases the risk of misclassifying the plan in the summary rating. The proposed method for computing the overallz?summary ratings averages using the underlying measures? scores would improve the correspondence between a plan?s true performance in measures and its summary rating. Plans responded by requesting clari?cation on the calculation and a delay in implementation of the proposed changes to calculate the summary rating. In response to comments, CMS intends to delay the implementation of this change. Instead, we will conduct additional research regarding this calculation and will provide plans with advance notice of any potential changes. Physician Payment Assumption - You note that payment rates to MA plans would be arti?cially low because CMS assumed in the Advance Notice that the scheduled physician payment out under the sustainable growth rate formula (SGR) will occur in 2014. You have also asked CMS to use our authority to asstune that the physician payment cut will not occur when setting the MA rates for 2014. The Social Security Act requires that the national MA growth percentage re?ect the Secretary?s estimate of the projected per capita rate of growth in expenditures ?under this title? (Title CMS historically has responded to comments urging CMS to assume a legislative SGR ?x by indicating that we interpreted the use of the phrase ?under this title" tp mean that the estimate was to be based on the provisions of Title as in effect on the date that the rates are announced. Given the increasing number of years in a row for which Congress has enacted an SGR ?x after the MA rates for the upcoming year have been released in April, CMS agrees that it would be more reasonable to instead interpret the phrase ?under this title? as a general reference to the nature of the expenditures, namely expenditures from the Part A and Part trust funds, rather than necessarily interpreting the phrase to incorporate current provisions of law into best estimate of the extent to which Medicare expenditures are actually expected to change. Accordingly, we changed our interpretation of how we calculate the estimate of projected per capita rate of growth under this title under section1353(c)(6)(A) of the Social Security Act from an estimate of what would occur to the physician fee schedule for the following year under current law to a best estimate of what CMS believes actually will occur to the physician fee schedule for the following year based on recent history, and we revised the growth rate to assume a zero percent change for the physician fee schedule for 2014. We made this change to re?ect the fact that Congress has armually changed the law every year since 2003, such that the projected SGR cut does not occur. CMS believes it is more reasonable to base the estimate of projected growth in Medicare expenditures on the assumption that a ?x will occur than it would be to base the estimate on current law. The ?nal MA Growth Percentage and the FPS Growth . .. Percentage are calculated based on the assumption of a zero percent change for the physician fee schedule for 2014. Details on the growth percentages are contained in Attachment I of th? Final Rate Announcement. Page 3 The Honorable Tom Price Thank you for your interest in the Advance Notice and Call Letter. We look forward to working together with you to maintain a strong MA program so that our nation?s Medicare bene?ciaries can continue to have a wide range of quality plan choices. I will also provide this response to the co-signers of your letter. Sincerely, Marilyn Tavenner Acting Administrator (Congress of the llititrh gtates lilaaliingtou. E305 20-315 March 15, 2013 Marilyn Tavenner Acting Administrator Centers for Medicare 8.: Medicaid Services Department of Health and Human Services 200 Independence Avenue, SW Washington, DC. 20201 Dear Ms. Tavenner: We are concerned about the cumulative negative impact of provisions contained in the 45 Day Notice and draft Call Letter. First, proposed changes in risk adjustment will disadvantage vulnerable bene?ciaries with multiple chronic conditions. Medicare Advantage (MA) plans have a proven track record when it comes to coordinating care for chronically ill individuals and this proposal will reduce their ability to continue to do so. Second, proposal with respect to the star ratings would lead to unwarranted downward shifts in the ratings. Third, CMS continues the illogical policy of assuming the scheduled 25 percent reduction in the Medicare physician fee schedule (SGR) will be implemented on January 1, 2014. The assumption on the SGR is particularly problematic because it almost certainly will turn out to be wrong and it directly translates into lower funding to support the health bene?ts of the 14 million Medicare bene?ciaries who currently are enrolled in MA plans. The combined effects of the Affordable Care Act (ACA) and the new payment cuts proposed by CMS in its 45 Day Notice are estimated to result in a 6.9 to 7.3 percent cut to Medicare Advantage plans in 2014. Those cuts could translate into bene?t reductions and premium increases of $50 to $90 per month for each MA enrollee next year. This reduction in funding will leave many vulnerable seniors with fewer bene?ts, higher out-of-pocket costs, and in some cases the loss of their current MA coverage. Considering these cumulative impacts, we urge you to use your authority under Sections [853(c)(6) and 1876(a)(4) of the Social Security Act to calculate Medicare Advantage (MA) rates for 2014 based on an assumption that legislation will be enacted later this year to maintain Medicare physician payment rates at their current levels in 2014, without any reduction. CMS requires that plan sponsors incorporate likely SGR legislative ?xes in their bids. It makes no sense that plans should have to incorporate this assumption while CMS does not. Won 1 [f1 shift t'iw?i Over the past decade, Congress repeatedly has approved Medicare physician payment ?fixes? to block similar reductions from taking effect. These bills consistently have been passed with strong bipartisan support and we are con?dent that such legislation will be passed again in the 2013 session. In fact, there is growing momentum in Congress for passing legislation this year to achieve a permanent for the Medicare physician payment system. Having closely examined the relevant statutory provisions of the Social Security Act, we believe it is abundantly clear that Sections 1853(c)(6) and 1876(a)(4) require CMS to develop ?estimates? of the projected growth rate in Medicare expenditures and applicable county-specific fee-for?service costs that serve as the basis for MA rates and would permit the agency to rely on the best available information. These statutory provisions grant CMS a significant degree of ?exibility in determining how to calculate estimated rates for MA payments. Based on our analysis of these provisions, we believe you have authority under current law to calculate 2014 MA rates based on an assumption that a Medicare physician payment ?fix? will be enacted later this year. The SGR assumption, in addition to the changes in risk adjustment and the star ratings, will have signi?cant, negative impacts on the MA program. We urge you to use your administrative discretion to fix these problems that will, ultimately, only penalize beneficiaries. Thank for your attention to this important issue. We look forward to hearing from you regarding your decision. incere] y, Rep. John Barrow Marsha Elackbum Rep. Ron Kind Rep. Tim Murphy? Re??l?eg Walden . @wdm Rep. Kevin Cramer Rep. Brett Guthrie Rep. Bill Cassidy, Rep. Diane Black Rep. Joseph Pitts Rep. MBucshon. MD. Rep. Paulsen Rep. Leonard Lance . on yan Rep. 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