1

February 1, 2018
NOTE TO: Medicare Advantage Organizations, Prescription Drug Plan Sponsors, and
Other Interested Parties
SUBJECT: Advance Notice of Methodological Changes for Calendar Year (CY) 2019 for
Medicare Advantage (MA) Capitation Rates, Part C and Part D Payment Policies and 2019
draft Call Letter
Medicare Advantage and Part D have been successful in providing Medicare beneficiaries with
options so that they can choose the healthcare that best fits their individual health needs. These
programs demonstrate the value of private sector innovation and creativity and CMS is
committed to continuing to makes changes that promote greater innovation, transparency,
flexibility, and program simplification.
Since January 2017, CMS has met with numerous stakeholders to discuss how to strengthen
Medicare Advantage and Part D. As part of this outreach, we also released a Request for
Information in the 2018 Rate Announcement and Call Letter. We appreciate the comments and
ideas we received through these meetings and in response to the Request for Information. The
suggestions provided by stakeholders have been thoughtful and creative and have provided
valuable perspectives on changes that can continue to transform these important programs. We
have used that input to develop a set of proposed policies and updates for 2019 that we believe
will remove barriers to innovation and foster greater transparency, flexibility, and program
simplification.
On December 27, 2017, we released for comment proposed changes to the Part C risk adjustment
model used to pay for aged and disabled beneficiaries, and are continuing to solicit comment on
those proposed changes until Monday, March 5, 2018. In accordance with section 1853(b)(2) of
the Social Security Act, we are now notifying you of additional planned changes in the MA
capitation rate methodology and risk adjustment methodology applied under Part C of the Act for
CY 2019. Also included with this notice are proposed changes in the payment methodology for
CY 2019 for Part D and annual adjustments for CY 2019 to the Medicare Part D benefit
parameters for the defined standard benefit. For 2019, CMS will announce the MA capitation
rates and final payment policies on Monday, April 2, 2018, in accordance with the timetable
required by section 1853(b), as established in the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 (MMA) (Pub. L. 108-173) and amended by the Securing Fairness in
Regulatory Timing Act of 2015 (SFRTA) (Pub. L. 114-106). The Advance Notice of
Methodological Changes is published no fewer than 60 days before the publication of the Rate
Announcement and provides a minimum 30-day period for public comment.
Attachment I shows the preliminary estimates of the national per capita MA growth percentage
and the national Medicare fee-for-service growth percentage, which are key factors in

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determining the MA capitation rates. Attachment II sets forth changes in the Part C payment
methodology for CY 2019. Attachment III sets forth the changes in the Part D payment
methodology for CY 2019. Attachment IV presents the annual adjustments for CY 2019 to the
Medicare Part D benefit parameters for the defined standard benefit. Attachment V presents the
preliminary risk adjustment factors.
Attachment VI provides the draft CY 2019 Call Letter for MA organizations; section 1876 costbased contractors; prescription drug plan (PDP) sponsors; demonstrations; Programs of AllInclusive Care for the Elderly (PACE) organizations; Medicare-Medicaid Plan (MMP); and
employer and union-sponsored MA or Part D group plans, including both employer/union-only
group health plans and direct contract plans. The draft CY 2019 Call Letter contains proposals
relating to the quality rating system and information these plan sponsor organizations will find
useful as they prepare their bids for the new contract year. In addition, the draft CY 2019 Call
Letter includes draft bid and operational guidance for plans.
To submit comments or questions electronically, go to https://www.regulations.gov, enter the
docket number “CMS-2017-0163” in the “Search” field, and follow the instructions for
“submitting a comment.”
Comments will be made public, so submitters should not include any confidential or personal
information. In order to receive consideration prior to the April 2, 2018 release of the final
Announcement of Calendar Year 2019 Medicare Advantage Capitation Rates and Medicare
Advantage and Part D Payment Policies, comments must be received by 6:00 PM Eastern
Standard Time on Monday, March 5, 2018.
/s/
Demetrios Kouzoukas
Principal Deputy Administrator
and Director, Center for Medicare
I, Jennifer Wuggazer Lazio, am a Member of the American Academy of Actuaries. I meet the
Qualification Standards of the American Academy of Actuaries to render the actuarial opinion
contained in this Advance Notice. My opinion is limited to the following sections of this
Advance Notice: The growth percentages and United States per capita cost estimates provided in
Attachment I; the qualifying county determination, calculation of Fee for Service cost, IME
phase out, and ESRD rates discussed in Attachment II; Medicare Part D Benefit Parameters:
Annual Adjustments for Defined Standard Benefit in 2019 described in Attachment III and in
Attachment IV.
/s/
Jennifer Wuggazer Lazio, F.S.A., M.A.A.A.
Director

 Parts Actuarial Group
Office of the Actuary

Attachments

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2019 ADVANCE NOTICE
TABLE OF CONTENTS
Attachment I. Preliminary Estimates of the National Per Capita Growth Percentage and the
National Medicare Fee-for-Service Growth Percentage for Calendar Year 2019 . . . . . . 6
Section A. MA Growth Percentage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section B. FFS Growth Percentage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Attachment II. Changes in the Part C Payment Methodology for CY 2019 . . . . . . . . . . . . . . . 9
Section A. MA Benchmark, Quality Bonus Payments and Rebate . . . . . . . . . . . . . . . . . . . 9
Section B. Calculation of Fee for Service Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section C. IME Phase Out . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section D. ESRD Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section E. Clinical Trials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section F. Location of Network Areas for PFFS Plans in Plan Year 2020 . . . . . . . . . . . . 24
Section G. MA Employer Group Waiver Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section H. CMS-HCC Risk Adjustment Model for CY 2019 . . . . . . . . . . . . . . . . . . . . . 30
Section I. ESRD Risk Adjustment Model for CY 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section J. Frailty Adjustment for PACE organizations and FIDE SNPs . . . . . . . . . . . . . . 34
Section K. Medicare Advantage Coding Pattern Adjustment . . . . . . . . . . . . . . . . . . . . . . 35
Section L. Normalization Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section M. Medical Loss Ratio Credibility Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section N. Encounter Data as a Diagnosis Source for 2019 . . . . . . . . . . . . . . . . . . . . . . . 42
Section O. Quality Payment Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Attachment III. Changes in the Payment Methodology for Medicare Part D for CY 2019. . . .
Section A. Update of the RxHCC Model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Section B. Encounter Data as a Diagnosis Source for 2019 . . . . . . . . . . . . . . . . . . . . . . .
Section C. Part D Risk Sharing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Section D. Medicare Part D Benefit Parameters: Annual Adjustments for Defined
Standard Benefit in 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Section E. Reduced Coinsurance for Applicable Beneficiaries in the Coverage Gap . . . . .
Section F. Dispensing Fees and Vaccine Administration Fees for Applicable Drugs in
the Coverage Gap . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Section G. Part D Calendar Year Employer Group Waiver Plans Prospective
Reinsurance Payment Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Section H. Enhanced Medication Therapy Management (MTM) Model. . . . . . . . . . . . . .

45
45
46
46
49
54
56
56
56

Attachment IV. Medicare Part D Benefit Parameters for the Defined Standard Benefit:
Annual Adjustments for 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Section A. Annual Percentage Increase in Average Expenditures for Part D Drugs per
Eligible Beneficiary (API) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58

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Section B. Annual Percentage Increase in Consumer Price Index (CPI) . . . . . . . . . . . . . .
Section C. Calculation Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Section D. Retiree Drug Subsidy Amounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Section E. Estimated Total Covered Part D Spending at Out-of-Pocket Threshold for
Applicable Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

59
60
63
63

Attachment V. RxHCC and ESRD Risk Adjustment Factors . . . . . . . . . . . . . . . . . . . . . . . . 65
Attachment VI. Draft CY 2019 Call Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
How to Use This Call Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
Section I – Parts C and D . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
Section II – Part C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168
Section III – Part D . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 193
Section IV – Medicare-Medicaid Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 222
Appendix 1: Methodology for Plan Finder (PF) Composite Price Accuracy Display Measure 227
Contract Selection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 227
PF Composite Price Accuracy Score . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 227

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Attachment I. Preliminary Estimates of the National Per Capita Growth Percentage and
the National Medicare Fee-for-Service Growth Percentage for Calendar Year 2019
For 2019, the MA county rates are based on the specified amount as defined in Section A2
below. Section 1853(n)(4) of the Social Security Act requires that the benchmark (increased by
quality bonus percentages where applicable) be capped at the level of the 1853(k)(1) applicable
amount. The 2019 FFS cost is calculated, in part, using the FFS growth percentage. CMS
intends to rebase the county FFS rates for 2019 as part of the calculation of the rates for 2019.
Throughout this document, the Social Security Act will be referred to as “the Act.”
Section A. MA Growth Percentage
The current estimate of the change in the national per capita MA growth percentage for aged and
disabled enrollees combined in CY 2019 is 5.44 percent. This estimate reflects an underlying
trend change for CY 2019 in per capita cost of 4.05 percent and, as required under section
1853(c)(6)(C) of the Act, adjustments to the estimates for prior years as indicated in the table
below.
Table I-1 below summarizes the estimates for the change in the national per capita MA growth
percentage for aged/disabled beneficiaries.
Table I-1. Increase in the National Per Capita MA Growth Percentages for 2019
Prior
Increases
2003 to
2018
Aged+Disabled
1

58.76%

Current Increases
2003 to
2018
60.88%

2018 to
2019
4.05%

2003 to
2019

NPCMAGP for
2019
With
§1853(c)(6)(C)
adjustment1

67.40%

5.44%

Current increases for 2003-2019 divided by the prior increases for 2003-2018

Section B. FFS Growth Percentage
Section 1853(n)(2) of the Act requires that the specified amount for a county be calculated as a
percentage of the county FFS costs. Table I-2 below provides the current estimate of the change
in the Aged/Disabled FFS United States per capita cost (USPCC), which will be used as the basis
for the county FFS rates. The percentage change in the FFS USPCC is shown as the current
projected FFS USPCC for 2019 divided by the prior projected FFS USPCC for 2018.
Table I-2 also shows the change in the FFS USPCC for dialysis-only ESRD. Statewide dialysisonly ESRD rates are determined by applying a historical average geographic adjustment to a
projected FFS dialysis-only ESRD USPCC. We will use a 5-year average of State data to

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determine the average geographic adjustment, similar to the method used to determine the
geographic adjustments for non-ESRD rates.
Table I-2. Increase in the USPCC Growth Percentage for CY 2019
Current projected 2019
USPCC
Prior projected 2018
Percent
USPCC increase

Total USPCC – Non-ESRD FFS USPCC – Non-ESRD Dialysis-only ESRD
$910.38
$882.33
$7,495.03
USPCC
$863.39
$847.73
$7,133.42
5.44%
4.08%
5.07%

Table I-3 compares last year’s estimate of the total non-ESRD USPCC with current estimates for
2003 to 2021, and Table I-4 compares last year’s FFS non-ESRD USPCC estimates with current
estimates. The total USPCCs are the basis for the National Per Capita MA Growth Percentages.
In addition, these tables show the current projections of the USPCCs through 2021. Caution
should be employed in the use of this information. It is based upon nationwide averages, and
local conditions can differ substantially from conditions nationwide. None of the data presented
here pertain to the Medicare prescription drug benefit.
In accordance with the CY 2017 Quality Payment Program (QPP) final rule with comment
period (81 FR 77008), we expect that clinician payment adjustments will be made in CY 2019.
Consistent with current policy, FFS incentives will continue to be included in the calculation of
FFS costs for MA ratesetting purposes such that an estimate of the aggregate impact will be
taken into account in the projected FFS USPCC for 2019. Attachment II Section B contains
additional information regarding the calculation of FFS costs.

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Table I-3.-Comparison of Current & Previous Estimates of the Total USPCC – Non-ESRD
Part A
Calendar
Year
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021

Current
Estimate

Part B

Last
Year’s
Estimate

$296.18
$314.08
$334.83
$345.30
$355.44
$371.90
$383.91
$383.93
$387.95
$377.47
$381.19
$371.96
$375.48
$380.16
$386.19
$389.05
$400.71
$416.99
$437.08

$296.18
$314.08
$334.83
$345.30
$355.44
$371.90
$383.91
$383.94
$386.94
$378.95
$381.19
$371.71
$374.40
$374.68
$378.11
$382.86
$396.50
$412.63

Current
Estimate

Last
Year’s
Estimate

$247.66
$271.06
$292.86
$313.70
$330.68
$351.04
$367.93
$376.81
$386.23
$392.75
$399.46
$418.42
$435.69
$446.33
$464.62
$485.88
$509.67
$535.66
$566.33

$247.66
$271.06
$292.86
$313.70
$330.68
$351.04
$367.93
$376.82
$386.24
$392.77
$399.56
$418.73
$436.25
$447.60
$462.05
$480.53
$511.10
$538.17

Part A & Part B
Last
Current
Year’s
Ratio
Estimate
Estimate
$543.84
$585.14
$627.69
$659.00
$686.12
$722.94
$751.84
$760.74
$774.18
$770.22
$780.65
$790.38
$811.17
$826.49
$850.81
$874.93
$910.38
$952.65
$1,003.41

$543.84
$585.14
$627.69
$659.00
$686.12
$722.94
$751.84
$760.76
$773.18
$771.72
$780.75
$790.44
$810.65
$822.28
$840.16
$863.39
$907.60
$950.80

1.000
1.000
1.000
1.000
1.000
1.000
1.000
1.000
1.001
0.998
1.000
1.000
1.001
1.005
1.013
1.013
1.003
1.002

Table I-4. Comparison of Current & Previous Estimates of the FFS USPCC – Non-ESRD
Part A
Calendar
Year
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021

Current
Estimate
$371.17
$371.38
$357.17
$365.51
$366.25
$371.54
$375.00
$377.95
$379.90
$390.02
$404.71
$423.38

Part B

Last
Year’s
Estimate
$371.17
$370.01
$359.17
$365.50
$365.80
$370.14
$367.52
$369.28
$377.28
$390.42
$405.85

Current
Estimate
$374.91
$384.39
$391.94
$395.73
$408.81
$429.12
$436.56
$456.08
$470.02
$492.31
$515.98
$544.43

Last
Year’s
Estimate
$374.91
$384.39
$391.94
$395.85
$409.16
$430.15
$439.16
$455.72
$470.45
$498.55
$524.10

Part A & Part B
Last
Current
Year’s
Ratio
Estimate
Estimate
$746.08
$755.77
$749.11
$761.24
$775.06
$800.66
$811.56
$834.03
$849.92
$882.33
$920.69
$967.81

$746.08
$754.40
$751.11
$761.35
$774.96
$800.29
$806.68
$825.00
$847.73
$888.97
$929.95

1.000
1.002
0.997
1.000
1.000
1.000
1.006
1.011
1.003
0.993
0.990

These estimates are preliminary and could change when the final rates are announced no later
than April 2, 2018 in the Announcement of CY 2019 Medicare Advantage Capitation Rates and
Medicare Advantage and Part D Payment Policies. Further details on the derivation of the
national per capita MA growth percentage and the FFS growth percentage will also be presented
in the April 2, 2018 Announcement.

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Attachment II. Changes in the Part C Payment Methodology for CY 2019
Section A. MA Benchmark, Quality Bonus Payments and Rebate
Section 1853(c)(1)(D)(ii) of the Act requires CMS to rebase the county FFS rates, which form
the basis of the specified amount described in Section A2 below, periodically but not less than
once every three years. When the rates are rebased, CMS updates its estimate of each county’s
FFS costs using more current FFS claims information. CMS intends to rebase the county FFS
rates for 2019. (Please note that throughout this document, the terms “benchmark” and ”county
rate” are used interchangeably, and the term “service area benchmark” indicates the bidding
target for an MA plan based on its specific service area.)
The Programs of All-Inclusive Care for the Elderly (PACE) plans are exempt from the use of the
specified amount, per section 1853(n)(5) of the Act.
A1. Applicable Amount
The applicable amount is the rate established under section 1853(k)(1) of the Act. As CMS
intends to rebase the rates in 2019, the applicable amount for 2019 is the greater of: (1) the
county’s 2019 FFS cost or (2) the 2018 applicable amount increased by the CY 2019 National
Per Capita Medicare Advantage Growth Percentage. As discussed in Section A5, section
1853(n)(4) of the Act requires that the benchmark (determined taking into account the quality
bonus percentage increase) for each county must be capped at the county’s applicable amount.
A2. Specified Amount
Under section 1853(n)(2)(A) of the Act, the specified amount is based upon the following
formula:
(2019 FFS cost minus IME phase-out amount) × (applicable percentage + applicable percentage
quality increase)
Where:
IME phase-out amount is the indirect costs of medical education phase-out amount as
specified at section 1853(k)(4) and sections 1853(n)(2)(E) and (F);
Applicable percentage is a statutory percentage applied to the county’s base payment
amount, as described at section 1853(n)(2)(B); and
Applicable percentage quality increase, referred to in this document as the quality bonus
payment (QBP) percentage, is a percentage point increase to the applicable percentage
for a county in a qualifying plan’s service area.

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Section 1853(n)(2)(C) of the Act requires CMS to determine applicable percentages for a year
based on county FFS rate rankings for the most recent year that was a rebasing year. To
determine the CY 2019 applicable percentages for counties in the 50 States and the District of
Columbia, CMS will rank counties from highest to lowest based upon their 2018 average per
capita FFS rate, because 2018 is the most recent rebasing year prior to 2019. CMS will then
place the rates into four quartiles. For the territories, CMS will assign an applicable percentage
to each territory county based on where the territory county rate falls in the quartiles established
for the 50 States and the District of Columbia.
CMS is publishing the 2019 applicable percentages by county with the Advance Notice at
https://www.cms.gov/Medicare/Health-Plans/MedicareAdvtgSpecRateStats/Announcementsand-Documents.html. Each county’s applicable percentage is assigned based upon its quartile
ranking, as follows:
Table II-1. FFS Quartile Assignment
Quartile
4th (highest)

Applicable
Percentage
95%

3rd

100%

2nd

107.5%

1st (lowest)

115%

Section 1853(n)(2)(D) of the Act provides that, beginning in 2013, if there is a change in a
county’s quartile ranking for a payment year compared to the county’s ranking in the previous
year, the applicable percentage for the area for the year shall be the average of: (1) the applicable
percentage for the previous year and (2) the applicable percentage for the current year. For both
years, CMS will calculate the applicable percentage that would otherwise apply for the area for
the year in the absence of this transitional provision. For example, if a county’s ranking changed
from the second quartile to the third quartile, the applicable percentage would be 103.75 percent
for the year of the change – the average of 107.5 percent and 100 percent.
A3. Quality Bonus Payment Percentage
The Act provides for CMS to make quality bonus payments to MA organizations that meet
quality standards measured under a five-star quality rating system. In this document, we refer to
this quality bonus as the quality bonus payment (QBP) percentage instead of using the statutory
term applicable percentage quality increase. The QBP percentage is a percentage point increase
to the applicable percentage for each county in a qualifying plan’s service area, before
multiplying the percentage by the FFS rate for the year to determine the specified amount.

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Table II-2 shows the QBP percentage for each Star Rating for 2019 payments. For CY 2019
payments, plans with fewer than four stars will not receive a QBP percentage increase to the
county rates, and plans with four or more stars will receive a QBP percentage increase to the
county rates, as set forth in sections 1853(n) and 1853(o) of the Act. See Section A6 for rebate
percentages for CY 2019.
Table II-2 Percentage Add-on to Applicable Percentage
for Quality Bonus Payments
Star Rating
Fewer than 4
stars
4 stars

2019 QBP Percentage
0%
5%

4.5 stars

5%

5 stars

5%

An MA plan’s Star Rating is the rating assigned to its contract; the contract rating is applied to
each plan under that contract. MA plans with a Star Rating of four or more stars will bid against
their service area benchmarks that include the 5-percentage point QBP add-on to the applicable
percentage for the benchmark in each county in the service area. For 2019, MA plans with a Star
Rating of fewer than four stars will bid against service area benchmarks that do not include QBP
add-ons to the county rates, with the exceptions of new MA plans and low enrollment plans. As
discussed below, all benchmarks (determined after application of the QBP percentage) are
capped at the section 1853(k)(1) applicable amount per section 1853(n)(4) of the Act.
New MA Plans
New MA plans are treated as qualifying plans that are eligible to receive a QBP percentage
increase to the county rates, except that the QBP percentage will be 3.5 percentage points, per
section 1853(o)(3)(A)(iii)(I)(cc) of the Act. That is, new MA plans will bid against a service
area benchmark that reflects a 3.5 percentage point increase to the applicable percentage used to
set the benchmark for each county in the plan’s service area. Per section 1853(o)(3)(A)(iii)(II) of
the Act, for the purpose of determining a QBP percentage, the term “new MA plan” refers to an
MA plan offered by a parent organization that has not had another MA contract in the preceding
three-year period. As discussed below, all rates are capped at the section 1853(k)(1) applicable
amount (determined after application of the QBP percentage) – per section 1853(n)(4) of the Act.
For 2019, CMS intends to continue the policy finalized in the 2012 Rate Announcement
(https://www.cms.gov/Medicare/Health-Plans/MedicareAdvtgSpecRateStats/Announcementsand-Documents.html) that for a parent organization that has had a contract with CMS in the
preceding three-year-period, any new MA contract under that parent organization will receive an
enrollment-weighted average of the Star Ratings earned by the parent organization’s existing

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MA contracts. Such plans may qualify for a QBP increase based on the enrollment-weighted
average rating of the parent organization.
The Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) (Pub. L. 114-10)
contained provisions to permit reasonable cost reimbursement contracts to transition into MA
plans through CY 2019, and allowed Medicare Advantage Organizations (MAOs) to deem the
enrollment of their cost enrollees into successor affiliated MA plans that meet specific
conditions. MACRA amended section 1853(o)(4) of the Act such that, for its first three years as
a converted MA plan receiving deemed enrollment, the converted plan shall not be treated as a
new MA plan.
Low Enrollment Plans
Section 1853(o)(3)(A)(ii)(II) of the Act, as implemented at § 422.258(d)(7)(iv)(B),1 provides that
for 2013 and subsequent years, CMS shall develop a method for determining whether an MA
plan with low enrollment is a qualifying plan for purposes of receiving an increase in payment
under section 1853(o). We apply this determination at the contract level, and thus determine
whether a contract (meaning all plans under that contract) is a qualifying contract. Pursuant to §
422.252, a low enrollment contract is one that could not undertake Healthcare Effectiveness Data
and Information Set (HEDIS) and Health Outcome Survey (HOS) data collections because of a
lack of a sufficient number of enrollees to reliably measure the performance of the health plan.
Section 1853(o)(3)(A)(ii) of the Act does not address the amount of the increase for low
enrollment contracts. For 2019 payments, we intend to continue the current policy that low
enrollment contracts be included as qualifying contracts that receive the QBP percentage of 3.5
percentage points, similar to the QBP percentage increase applied to new MA plans. We
discussed the basis of this policy in detail in the 2018 Rate Announcement
(https://www.cms.gov/Medicare/Health-Plans/MedicareAdvtgSpecRateStats/Announcementsand-Documents.html).
Contract Consolidations and QBP
CMS proposed in the Contract Year 2019 Policy and Technical Changes to the Medicare
Advantage and the Medicare Prescription Drug Benefit Programs Proposed Rule (CMS-4182-P)
(82 FR 56336) that when consolidations involve two or more contracts for health and/or drug
services of the same plan type under the same legal entity combining into a single contract at the
start of a contract year, the rating used to determine QBP status (“QBP rating”) for that first year
following the consolidation would be the enrollment weighted average of what would have been
the QBP ratings of the surviving and consumed contracts using the contract enrollment in
November of the year the Star Ratings were released. For example, if two contracts consolidate
starting in January 2020, the 2020 QBP rating would be based on the 2019 Star Ratings released
1

All regulatory cites are to Title 42 of the Code of Federal Regulations unless otherwise noted.

 13
in October 2018 using the November 2018 enrollment of the surviving and consumed contracts.
The application of this policy for CY 2019 and future periods will be addressed in the pending
rulemaking.
A4. Qualifying County Bonus Payment
Beginning with contract year 2012, section 1853(o)(2) of the Act extends a double QBP
percentage to a qualifying plan located in a “qualifying county.” For 2019, a qualifying county
is a county that meets the following three criteria:
(1) has an MA capitation rate that, in 2004, was based on the amount specified in section
1853(c)(1)(B) for a Metropolitan Statistical Area with a population of more than 250,000;
(2) as of December 2009, had at least 25 percent of MA-eligible beneficiaries residing in
the county enrolled in a MA plan; and
(3) has per capita FFS County spending for 2019 that is less than the national monthly per
capita cost for FFS for 2019.
See section 1853(o)(3)(B) of the Act.
As an example, a qualifying plan with a rating of 4.5 stars will have 5 QBP percentage points
added to the applicable percentage of each county in its service area. For each qualifying county
in that plan’s service area, an additional 5 percentage points will be added to that county’s
applicable percentage for a total increase of 10 percentage points used to calculate the
benchmark. If this qualifying county otherwise has an applicable percentage of 95 percent, this
is increased to 105 percent to reflect the quality bonus payment percentage for that county. As
discussed below, all benchmarks are capped at the section 1853(k)(1) applicable amount
(determined after application of the QBP percentage) per section 1853(n)(4) of the Act.
CMS will publish a complete list of qualifying counties in the final 2019 Rate Announcement.
The listing will contain all counties that meet all three criteria stated above. Two of the three
elements for determining a qualifying county (2004 urban floors (Y/N) for each county, and
2009 Medicare Advantage penetration rates) can be found in the 2018 Rate Calculation Data file
(columns Z and AA) on the CMS website at https://www.cms.gov/Medicare/Health-Plans/
MedicareAdvtgSpecRateStats/Ratebooks-and-Supporting-Data.html. The 2019 FFS rates, which
are necessary for the third criterion, are not available at the time this Advance Notice is
published. The FFS rates and the national average FFS spending amount will be published in the
final 2019 Rate Announcement.
A5. Cap on Benchmarks
Section 1853(n)(4) of the Act requires that the benchmark (determined taking into account
application of the QBP percentage) for a county must be capped at the level of the county’s

 14
applicable amount determined under section 1853(k)(1). We interpret this provision as requiring
that the QBP increase must be included in the benchmark before the comparison is made to
determine if the cap is applied. Thus, for all counties, post-QBP percentage rates are capped at
the section 1853(k)(1) applicable amount.
CMS shares the concerns stakeholders have raised about any rate-setting mechanism that
diminishes incentives for MA plans to continuously improve the care provided to Medicare
beneficiaries, and agrees that a primary goal of the Star Rating system for MA is to encourage
plans to continuously improve the quality of the care provided to their enrollees. However,
while we appreciate the concerns stakeholders have raised in connection with the cap on
benchmarks, CMS has not identified an approach under section 1853(n)(4) of the Act to
eliminate application of the rate cap or exclude the bonus payment from the cap calculation.
A6. Rebate
Under section 1854(b)(1)(C) of the Act, except for MSA plans, the level of rebate for each plan
is based on the plan’s Star Rating. Rebates for each plan are calculated as a percentage of the
amount by which the risk-adjusted service area benchmark exceeds the risk-adjusted bid. Under
§ 422.266(b), plans may use rebates to fund mandatory supplemental benefits and/or to buy
down beneficiary premiums for Part B and/or prescription drug coverage. Section 1854(b)(1)(C)
stipulates rebate percentages that apply based on a plan’s Star Rating, as shown in Table II-3.
Table II-3. MA Rebate Percentages
Star Rating

2019

4.5+ Stars

70%

3.5 to < 4.5 stars

65%

< 3.5 stars

50%

Section 1854(b)(1)(C)(vi)(II) of the Act requires that, for purposes of determining the rebate
percentage, a new MA contract under a new parent organization will be treated as having a Star
Rating of 3.5 stars for 2012 and subsequent years. The statute is silent on the rebate percentage
to assign to low enrollment plans in years after 2012. We view this as a gap in the statute,
particularly in light of the direction in section 1853(o)(3)(A)(ii) to treat low enrollment plans as
qualifying plans for purposes of the quality bonus payment percentage. As we have in prior
years, CMS intends to treat low enrollment plans as having a Star Rating of 3.5 stars for
purposes of determining the rebate percentage for 2019.
As mentioned above, MACRA amended section 1853(o)(4) of the Act such that, for the first
three years that a former reasonable cost reimbursement contract is a converted MA plan
receiving deemed enrollment, the converted plan shall not be treated as a new MA plan.

 15
Section B. Calculation of Fee for Service Cost
The FFS cost for each county is a product of (1) the national FFS cost, or United States percapita cost (USPCC), and (2) a county-level geographic index called the average geographic
adjustment (AGA).
For 2019, we are proposing to continue to incorporate refinements developed in prior years to
update the claims data used to calculate the AGAs and to continue the repricing of historical data
in the AGA calculation. Specifically, we will incorporate updates and refinements to the AGA
calculation methodology to reflect changes in FFS payment rules. Historical claims data will be
repriced to reflect the most current wage and cost indices. CMS will re-price hospital inpatient,
hospital outpatient, skilled nursing facility, and home health claims to reflect the most current
wage indices, and re-tabulate physician claims with the most current Geographic Practice Cost
Index. We will also reprice historical claims to account for legislative and regulatory changes
made to payments to disproportionate share hospitals and reprice durable medical equipment
claims to account for the change in prices associated with the competitive bidding program.
Repricing historical claims, in conjunction with rebasing rates for 2019, ensures that the 2019
FFS rates for each county reflect the most current FFS fee schedules and payment rules.
With this Advance Notice, we are releasing the 2016 FFS cost data by county used in the
development of the 2019 ratebook. This data is available on the CMS website at
https://www.cms.gov/Medicare/Health-Plans/MedicareAdvtgSpecRateStats/FFSData.htmlhttps://www.cms.gov/Medicare/HealthPlans/MedicareAdvtgSpecRateStats/Ratebooks-and-Supporting-Data.html. This data will not
reflect adjustments for ACO shared savings and losses and will not reflect adjustments for claim
repricing for the most recent Medicare FFS payment rules and parameters.
B1. AGA Methodology for 2019
In the first step, CMS is proposing to add the 2016 cost and enrollment data to, and drop the
2011 cost and enrollment data from, the historical claims experience used to develop new
geographic cost indices for each county. As a result, the five-year rolling average will be based
on original Medicare claims data from 2012–2016. CMS will then perform a series of
adjustments to the original Medicare data to estimate FFS rates per county, explained below as
successive steps.
In the second step, CMS will exclude hospice expenditures and FFS claims paid on behalf of
cost plan enrollees from the 2016 claims. Comparable adjustments were previously made to
2012–2015 claims data in the development of the FFS rates for prior years.
For Puerto Rico, CMS will continue to only include claims and enrollment for beneficiaries with
Part A eligibility and Part B enrollment for all five years (2012–2016). While most Medicare
beneficiaries are automatically enrolled in Part B and must opt out to decline it, beneficiaries in

 16
Puerto Rico must take affirmative action to opt-in to Part B coverage. CMS continues to believe
it is appropriate to adjust the FFS rate calculation in Puerto Rico used to determine MA rates so
that it is based on beneficiaries who are enrolled in both Part A and Part B in order to produce a
more accurate projection of FFS costs per capita in Puerto Rico.
In 2017 and 2018, the Secretary had directed the Office of the Actuary to adjust the fee-forservice experience for beneficiaries enrolled in Puerto Rico to reflect the nationwide propensity
of beneficiaries with zero claims. For the 2017 and 2018 Rate Announcements, the Office of the
Actuary evaluated experience exclusively for beneficiaries who were enrolled in both Parts A
and B and were not dually eligible for Veterans Affairs (VA) coverage. The 2018 study
analyzed experience for calendar years 2011 through 2015 and only considered FFS beneficiaries
enrolled mid-year. On average, 14.4 percent of A and B Puerto Rico FFS beneficiaries were
found to have no Medicare claim reimbursements per year. This compares to a nationwide, nonterritory, proportion of 6.0 percent of FFS beneficiaries without Medicare spending. These
results were applied to the Puerto Rico FFS experience by adjusting the weighting of the
enrollment and risk scores for the zero-claim cohort to reflect the nationwide proportion of zeroclaim beneficiaries. The resulting impact was measured as an average increase in the
standardized FFS costs in Puerto Rico of 4.4 percent for 2011 through 2015. Accordingly, a 4.4
percent adjustment was then applied to the pre-standardized Puerto Rico FFS rates supporting
the CY 2018 ratebook development.
We are considering whether a similar adjustment should be applied for 2019. The Office of the
Actuary will perform an analysis that is similar to the analysis performed in 2017 and 2018, but
with an updated five years of data: 2012–2016. We welcome comments regarding a similar
update to Puerto Rico’s experience in the development of the 2019 FFS rate. We will review the
results of this study and any comments that we receive, and we will specify in the final Rate
Announcement any adjustment that we determine may be necessary based on those results and
comments.
We appreciate the concerns previously raised by stakeholders regarding FFS data and MA
benchmarks in Puerto Rico, and continue to welcome public input and suggestions regarding
methodological changes that may be appropriate.
In the third step, CMS will re-price the historical inpatient, hospital outpatient, skilled nursing
facility, and home health claims from 2012–2016 to reflect the most current (i.e., FY 2018) wage
indices, and re-tabulate physician claims with the most current (i.e., CY 2018) Geographic
Practice Cost Indices. For 2019, CMS will also continue to adjust historical FFS claims to
account for legislative changes to section 1886(d)(5)(F) of the Act, and the enactment of 1886(r).
These changes reduced Medicare Disproportionate Share Hospital (DSH) Payments to inpatient
hospitals by 75 percent, and created new uncompensated care payments (UCP), effective
October 1, 2013. Consistent with the methodology implemented beginning in 2016, CMS will
adjust claims for fiscal year (FY) 2012 and FY 2013 for each DSH hospital to reflect the

 17
reduction in DSH payments and the allocation of the UCP by incorporating the corresponding
requirements of the final FY 2018 Inpatient Prospective Payment System (IPPS) rule. Similarly,
we are proposing to adjust the UCP represented in the FY 2014 through 1st quarter FY 2017
claims to reflect the requirements of the final FY 2018 IPPS rule. For 2019, repricing for Puerto
Rico inpatient claims will continue to reflect the Consolidated Appropriations Act, 2016 (Pub. L.
114-113, Division O, section 601), which amended section 1886(d)(9)(E) of the Act.
We will continue re-pricing Durable Medical Equipment, Prosthetics, Orthotics, and Supplies
(DMEPOS) claims from 2012–2016 to reflect the most current DMEPOS prices associated with
the Competitive Bidding Program (CBP), and will continue using the latest Round 1 and Round
2 prices in making these adjustments. Section 1847(b)(5) of the Act requires that “single
payment amounts” replace the current Medicare DMEPOS fee schedule amounts for
selected DMEPOS items in specific competitive bidding areas (CBAs). Eight HCPCS codes for
diabetic supplies were included in the National Mail Order (NMO) program. We will continue
to include the latest single payment amounts for NMO DMEPOS items to reprice the historical
payments for DMEPOS claims. Section 1834(a)(1)(F) of the Act requires CMS to adjust the fee
schedule amounts for DMEPOS furnished on or after January 1, 2016 in non-CBAs based on
information from the Competitive Bidding Program (CBP). We propose using the 2018 fully
adjusted fees to reprice the non-CBA FFS claims for 2012–2016.
As done for 2018, we are proposing to make an additional adjustment to the 2012, 2013, 2014,
and 2015 claims to account for shared savings payments and shared losses made to Medicare
Shared Savings Program (SSP) ACOs and Pioneer ACOs for experience in the respective year.
For 2019, the adjustments will also include 2016 shared savings, shared losses, and performance
based payments under the following programs and models: SSP, Pioneer ACO model,
Comprehensive Care for Joint Replacement (CJR) Model, Next Generation ACO (NGACO) and
Oncology Care Model (OCM). The shared savings payments made under the Comprehensive
Primary Care (CPC) Initiative will be reflected in the repricing of 2014, 2015, and 2016 claims.
The adjustment reflects an allocation of the shared payments and losses based on the distribution
of the ACO’s enrollment by county. The adjustment includes the application of the two percent
sequestration reduction on these ACO adjustments for claims incurred on or after April 1, 2013.
ACO experience for 2016 may be found at https://innovation.cms.gov/initiatives/Pioneer-ACOModel for the Pioneer model; at https://innovation.cms.gov/initiatives/Next-Generation-ACOModel for the NGACO model; and at https://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/sharedsavingsprogram for the SSP.
The key aspects of these adjustments are:
 Allocate ACO shared savings or shared loss amounts geographically, as applicable based
on each ACO’s unique population and performance, according to the distribution of
counties in which each ACO’s assigned beneficiaries reside.

 18






Represent such allocated shared savings payments and shared losses recoupment on a
per-capita basis based on total FFS enrollment as of July 1 of the experience year.
Exclude per-capita shared savings and losses attributed to beneficiaries in ESRD status as
of July 1 of the experience year.
Similar to last year, shared savings payments made to ACOs in SSP, Pioneer ACOs,
NGACOs, and CPC practices, and reconciliation payments made under the Bundled
Payment for Care Improvement (BPCI) model will be reflected as additional
expenditures in the experience year (i.e., the year when the savings were generated rather
than when they were paid). Shared losses will be included as negative expenditures in
the experience year. The amounts will be represented in the county level Part A and Part
B expenditures proportional to the Part A and Part B share of the FFS USPCC for the
experience year.
We are also proposing an adjustment for population-based payment models for a limited
number of Pioneer ACO claims from 2014, 2015, and 2016 and NGACO claims for
2016. Under this optional feature of the model, certain participants receive a monthly fee
that ultimately offsets a percentage reduction in marginal FFS payments over the same
year. For each affected claim, the reduction amount represents the portion of the fee
associated with that particular claim and is therefore added back to the reduced FFS
amount so that the total reimbursement amount is represented.

A further adjustment is being proposed for Medicare shared savings payments made under the
Medicare-Medicaid managed fee-for-service financial alignment model for 2013-2015
experience. The payment will be allocated by county based on the distribution of the program
enrollment.
Consideration has been given to adjusting the FFS claims experience for care management fees,
per-beneficiary-per-month fees, and/or advance payment of shared savings paid to providers for
other innovation models conducted in 2012-2016 period.2 We have determined that the fees paid
under the Multi-Payer Advanced Primary Care Practice Demonstration are already reflected in
historical FFS claims, and therefore, no adjustment is warranted.
We also intend to use for 2019, as the source of the county designation of beneficiaries used in
the summarization of the risk scores, the county assignment used for the ratebook FFS claims
and enrollment. For contract years 2016 and earlier, the county assignment for each FFS
beneficiary was based on the ZIP code associated with the beneficiary’s mailing
address. Beginning with the 2017 ratebook, we used the county provided by the Social Security
Administration, which is the same county assignment as the ratebook FFS claims and
enrollment.

2

Information about the various innovation models is available in the Report to Congress,
available at: https://innovation.cms.gov/Files/reports/rtc-2016.pdf.

 19
The statutory component of the Regional MA benchmarks will also be based on this proposed
county designation of beneficiaries. Under our implementation of section 1858(f)(2) of the Act,
the standardized PPO benchmark for each MA region includes a statutory component consisting
of the weighted average of the county capitation rates across the region for each appropriate level
of star rating. The enrollment weights for the statutory component will reflect the proposed
county designation of beneficiaries.
As in prior years, (1) CMS will make additional adjustments to the FFS costs for the items
detailed below, and (2) the average of the five year geographic indices, based on the adjusted
claims data, will be divided by the county’s average five-year risk score from the 2019 risk
model in order to develop the AGA for that county.
Additional Adjustments
Note that incentive payments for adoption and meaningful use of electronic health record (EHR)
technology are not included in the claims used to develop the FFS costs and therefore no explicit
adjustment is needed to exclude these payments from the FFS costs to comply with section
1853(c)(1)(D).
These adjustments are made after the AGA is calculated:







Direct Graduate Medical Education: removed from FFS county costs (section
1853(c)(1)(D)(i) of the Act)
Indirect Medical Education: removed from FFS county costs (sections 1853(n)(2)(E) and
(F) of the Act)
Credibility: for counties with less than 1,000 members, blend county experience with that
of others in the market area
Department of Defense (DoD): apply a cost ratio (an increase to claim costs) to counties
with significant Tricare enrollment in the Uniformed Services Family Health Plan
(USFHP) (section 1853(c)(1)(D)(iii) of the Act).
Veterans Affairs (VA): apply an adjustment for experience of Medicare beneficiaries
who are also eligible to receive care through the Veterans Health Administration (VHA).

Some of these adjustments are described in more detail below.
B2. Adjustment to FFS per Capita Costs for VA and DoD Costs
Last year for CY2018 FFS per capita cost projections, we did not apply the VA and DoD
adjustments concurrently because we were unable to obtain the necessary data in time; the
CY2018 VA and DoD adjustments were the same as those used in the CY2017 ratebook
development. For CY 2019, we propose two related changes to the adjustment to fee for service
(FFS) per capita costs for beneficiaries dually enrolled in Veterans Affairs (VA) and/or the
Department of Defense (DoD) health programs. First, we propose to adjust the FFS rates by the

 20
VA ratios and the DoD ratios, using results from a study based on FFS data from calendar years
2011-2015. Second, to address potential “double counting” of the effect, we are proposing to
replace the separate VA and DoD adjustments with a consolidated adjustment.
To approximate an adjustment to the county FFS payment rates for VA, we first analyzed the
cost impact of removing Veterans Affairs (VA) dual-benefit eligibles from the Medicare claims
and enrollment. Specifically, we calculated the ratio of standardized per capita costs of all
Medicare beneficiaries excluding VA dual-benefit eligibles (that is, all non-veteran beneficiaries)
to all Medicare beneficiaries (that is, all beneficiaries) for each county.
We then multiplied 2018 FFS rates by the ratios calculated and analyzed the resulting change in
rates for each county. We looked at the rate changes between the 2018 FFS rates calculated for
all beneficiaries based on the new ratio and the old ratio. The rate changes do not reflect the
impact of any payment rate minimums. OACT found that the impact for adjusting total FFS
costs using the new ratio is that approximately 74% of the counties would receive an increase,
and 26% of the counties would receive a decrease. The average of the impact on 2018 FFS rate
is $3.78. Additionally, we have tabulated the impact of the VA adjustment on the CY 2018 QBP
payment rates, which are presented in the below Table B2-1.
Similar analysis was done on Department of Defense (DoD) ratios. This analysis was performed
separately for all DoD and Uniformed Services Family Health Plan (USFHP)-only enrollees to
compare the average FFS costs to determine if there were significant differences between the
DoD groups and the total Medicare population. To approximate an adjustment to the county FFS
payment rates, we analyzed the cost impact of removing the dual-benefit eligibles from the
Medicare claims and enrollment. For this analysis, dual-benefit eligibles were defined as those
Medicare beneficiaries who are also eligible to receive care through the Department of Defense.
We calculated the ratio of standardized per capita costs of all Medicare beneficiaries excluding
dual-benefit eligibles (DoD) to all Medicare beneficiaries (or all beneficiaries) for each county.
We analyzed the ratios in counties with at least 10 members in the respective groups and found
that there was no statistical significance of the DoD ratios, but did find that the USFHP-only
ratios were significant. Accordingly, adjustments were made to counties with at least 10 USFHP
members and CMS then adjusted the FFS rates by the ratios calculated.
Based on the analysis of Medicare claims for DoD dual enrollees for calendar years 2011-2015,
we found that the impact for adjusting total FFS costs based on the new ratio and the old ratio is
that approximately 5.3% of the counties would receive an increase, and 0.2% of the counties
would receive a decrease. The average of the impact on 2018 FFS rate for DoD alone is $3.21.
Additionally, we have tabulated the impact of the DoD adjustment on the CY 2018 QBP
payment rates, which are presented in the below Table B2-2.
In the 2018 FFS rates, the majority of counties had an adjustment for VA, whereas less than
6 percent, or 179 of 3,247, of the county FFS rates reflected an additional adjustment for DoD

 21
dual-benefit eligibles. Further, the average absolute value of the adjustment for the counties with
a DoD adjustment averaged only 0.4 percent in 2018. Despite the relatively small impact of the
DoD adjustment, there could be interaction between the VA and DoD adjustment that was not
accounted for in the methodology used in the CY 2018 rate development.
Therefore, we are proposing to apply the DoD and VA adjustments concurrently for CY 2019
instead of the independent application of the adjustments for CY 2018. We believe that
concurrent calculation of the adjustment will have minimal impact versus independent
application of the adjustments, and will eliminate the double-counting impact of DoD and VA
dual-benefit eligibles. The corresponding impact of the proposed consolidated VA-DoD
adjustment on the CY 2018 QBP payment rates are presented in the below Table B2-3.
Additionally, the impact by county of the new methodology can be found on the CMS website at
https://www.cms.gov/Medicare/Health-Plans/MedicareAdvtgSpecRateStats/Announcementsand-Documents.html .
Table B2-1 Impact of VA Adjustment on 2018 QBP
Payment Rates

% of counties with rate increase
% of counties with rate decrease
Average impact

0.0%
QBP
Rate

3.5%
QBP
Rate

5.0%
QBP
Rate

62.3%
37.7%
$2.87

56.9%
43.1%
$2.48

53.4%
46.6%
$2.23

Table B2-2 Impact of DoD Adjustment on 2018 QBP
Payment Rates

% of counties with rate increase
% of counties with rate decrease
Average impact on counties with
change

0.0%
QBP
Rate
4.7%
0.8%

3.5%
QBP
Rate
4.4%
1.1%

5.0%
QBP
Rate
4.0%
1.5%

$2.60

$2.35

$2.01

Table B2-3 Impact of Proposed Combined VA-DoD
Adjustment on 2018 QBP Payment Rates

% of counties with rate increase
% of counties with rate decrease
Average impact

0.0%
QBP
Rate
62.5%
37.5%
$2.97

3.5%
QBP
Rate
57.1%
42.9%
$2.57

5.0%
QBP
Rate
53.5%
46.5%
$2.31

 22
Section C. IME Phase Out
Section 161 of the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA)
(Pub. L. 110-275) amended section 1853(k)(4) of the Act to require CMS to phase out indirect
medical education (IME) amounts from MA capitation rates. Sections 1853(n)(2)(E) and (F)
apply the same phase-out to FFS costs in the calculation of the specified amount in setting MA
rates. Pursuant to section 1894(d)(3) of the Act, PACE programs are excluded from the IME
payment phase-out. Payment to teaching facilities for indirect medical education expenses for
MA plan enrollees will continue to be made under fee-for-service Medicare.
For purposes of making this adjustment for 2019, we will first calculate the 2019 FFS rates
including the IME amount. This initial amount will serve as the basis for calculating the IME
reduction that we will carve out of the 2019 rates. The absolute effect of the IME phase-out on
each county will be determined by the amount of IME included in the initial FFS rate. Under
section 1853(k)(4)(B)(ii) of the Act, the maximum reduction for any specific county in 2019 is
6.0 percent of the FFS rate. To help plans identify the impact, CMS will separately identify the
amount of IME for each county rate in the 2019 ratebook. We will also publish the rates with
and without the IME reduction for the year.
Section D. ESRD Rates
In developing the 2019 ESRD Medicare Advantage benchmarks, we obtain the FFS dialysis
reimbursement and enrollment data for each state for the years 2012–2016. For each year, we
compute the per capita costs by state. The geographic indices for each year are calculated by
dividing the state per capita cost by the total per capita cost of the nation. The average
geographic adjustment (AGA) by state is then determined by calculating a 5-year weighted
average of the geographic indices, which is standardized by dividing by the 5-year average risk
scores. We calculated the 2016 FFS ESRD dialysis United States per capita cost (USPCC) based
on the 2016 data above, and using trend factors, develop the prospective 2019 FFS ESRD
dialysis USPCC.
We have recently incorporated enhancements to the ESRD data system and projection
methodology, and will now be able to apply repricing adjustments to the CY2019 ESRD rates.
Similar to the non-ESRD rate methodology, we are proposing to reprice the ESRD historical
inpatient, hospital outpatient, and skilled nursing facility claims from 2012-2016 to reflect the
most current (i.e., FY 2018) wage indices, and re-tabulate physician claims with the most current
(i.e., CY 2018) Geographic Practice Cost Indices. We are proposing to reprice the ESRD PPS
dialysis claims for the years 2014-2016, given that 2014 was the first year that the dialysis PPS
system was fully phased in. We are also proposing to adjust historical FFS claims for ESRD
beneficiaries to account for legislative and regulatory changes to the provisions under section
1886(d)(5)(F) of the Act, and the establishment of 1886(r). These changes replaced 75 percent
of hospital Medicare Disproportionate Share Hospital (DSH) payments with uncompensated care

 23
payments (UCP) beginning on October 1, 2013. CMS would adjust claims for fiscal year (FY)
2012 and FY 2013 for each DSH hospital to reflect the reduction in DSH payments and the
allocation of the UCP by incorporating the corresponding requirements of the final FY 2018
Inpatient Prospective Payment System (IPPS) rule. Similarly, we are proposing to adjust the
UCP represented in the FY 2014 through 1st quarter FY 2017 claims to reflect the requirements
of the final FY 2018 IPPS rule. For 2019, the adjustments will also include 2016 shared savings,
and shared losses performance based payments made under the Comprehensive ESRD Care
model.
The 2019 ESRD dialysis rates by state are determined by multiplying the 2019 FFS ESRD
dialysis USPCC by the state AGA. The 2019 ESRD dialysis rate is adjusted by removing the
direct graduate medical education (GME) expenses and the gradual phase-out of indirect medical
education (IME) expenses.
Section E. Clinical Trials
In 2019, CMS intends to continue to pay on a fee-for-service basis for qualified clinical trial
items and services provided to MA enrollees in clinical trials that are covered under the National
Coverage Determination (NCD) for Routine Costs in Clinical Trials (Medicare NCD Manual,
Pub. 100-3, Part 4, Section 310.1). The payment and coverage standards applicable to NCDs
under 42 CFR 422.109 apply to NCD 310.1, which provides coverage under original Medicare
for clinical trials that meet its criteria and are not addressed by a separate NCD. CMS has
previously made the determination that all clinical trials covered under NCD 310.1 trigger the
significant cost threshold such that coverage and payment are controlled by § 422.109(c).
As detailed in the 2017 Rate Announcement, MA enrollees are able to participate in any
qualifying clinical trial that is open to beneficiaries in original Medicare. CMS does not require
MA enrollees to relinquish their MA coverage if they wish to participate in a clinical trial.
CMS requires MAOs, in accordance with § 422.109(c)(2), to provide coverage for: (1) services
to diagnose conditions covered by clinical trial services, (2) most services furnished as follow-up
care to clinical trial services, and (3) services already covered by the MAO. Should an MA
enrollee choose to participate in a clinical trial, he or she may remain in his or her MA plan while
paying FFS costs for a qualifying clinical trial. As finalized in the CY 2011 Rate
Announcement, effective for CY 2011 and subsequent years, MAOs must reimburse enrollees
for cost sharing incurred for clinical trial services that exceed the MA plans’ in-network cost
sharing for the same category of service. The MAO owes this difference even if the enrollee has
not yet paid the clinical trial provider. The enrollee’s clinical trial cost sharing must also count
towards the in-network out-of-pocket maximum. This cost-sharing requirement applies to all
qualifying clinical trials; MAOs cannot choose the clinical trials or clinical trial items and
services for which this policy applies. The policy of requiring MAOs to pay the difference

 24
between original Medicare cost sharing and in-network cost sharing for clinical trial services is
unchanged from 2011.
By requiring MAOs to provide in-network cost sharing for clinical trial services, CMS is
requiring MAOs to provide MA enrollees with coverage for clinical trial services consistent with
the coverage they have for all other similar services. These policies ensure that MA enrollees do
not have unexpected cost sharing liability for clinical trials, as those cost sharing amounts will
not be different from the cost sharing amounts applicable to in-network services of a similar
kind.
If an MAO conducts its own clinical trial, the MAO may explain to its enrollees the benefits of
participating in its clinical trial; however, the MAO may not require prior authorization for
participation in a Medicare-qualified clinical trial not sponsored by the MAO, nor may it create
impediments to an enrollee’s participation in a non-MAO-sponsored clinical trial, even if the
MAO believes it is sponsoring a clinical trial of a similar nature. However, an MAO may
request, but not require, that enrollees notify the MAO when they choose to participate in
Medicare-qualified clinical trials.
In addition, clinical trial sponsors/providers are permitted to submit original Medicare “paid”
clinical trial claims to MAOs on behalf of MA enrollees in order to obtain reimbursement for the
difference between original Medicare cost sharing liabilities and in-network MA cost sharing
liabilities. A trial sponsor/provider need only collect cost sharing from such an enrollee once
both Medicare and the MAO have paid.
MAOs are responsible for coverage and payment of items and services furnished in certain
clinical studies that are not covered under NCD 310.1. These include investigational device
exemption (IDE) trials and studies conducted under NCDs (separate from NCD 310.1) that
require coverage with evidence development (CED). MAOs are responsible for payment of
items and services in CMS-approved CED studies unless CMS determines that the significant
cost threshold is exceeded for that item or service as per § 422.109. Approved CED studies are
posted on the CMS Coverage with Evidence Development webpage at https://www.cms.gov/
Medicare/Coverage/Coverage-with-Evidence-Development/index.html. Billing instructions are
issued for each NCD.
For more information on these policies, please refer to the Medicare Managed Care Manual, Pub.
100-16, Chapter 4 (Benefits and Beneficiary Protections), section 10.7 (Clinical Trials).
Section F. Location of Network Areas for PFFS Plans in Plan Year 2020
Section 1852(d)(4) of the Act requires MAOs offering certain non-employer MA PFFS plans in
network areas to enter into signed contracts with a sufficient number of providers to meet the
access standards applicable to coordinated care plans. Specifically, non-employer MA PFFS
plans that are offered in a network area (as defined in section 1852(d)(5)(B) of the Act) must

 25
meet the access standards described in section 1852(d)(4)(B) through written contracts with
providers. These PFFS plans may not meet access standards by establishing payment rates that
are at least the rates that apply under original Medicare and having providers deemed to be
contracted as described in § 422.216(f).
Network area is defined in section 1852(d)(5)(B) of the Act, for a given plan year, as an area that
the Secretary identifies (in the announcement of the proposed payment rates for the previous plan
year under section 1853(b)(1)(B)) as having at least 2 network-based plans (as defined in section
1852(d)(5)(C)) with enrollment as of the first day of the year in which the Announcement is
made. We will include a list of network areas for plan year 2020 in the final Announcement of
Calendar Year (CY) 2019 Medicare Advantage Capitation Rates and Medicare Advantage and
Part D Payment Policies. We will also make the list available on the CMS website at
https://www.cms.gov/Medicare/Health-Plans/PrivateFeeforServicePlans/
NetworkRequirements.html. We will use January 1, 2018 enrollment data to identify the
location of network areas for plan year 2020.
Section G. MA Employer Group Waiver Plans
We intend to continue to waive the Bid Pricing Tool bidding requirements for all MA
employer/union-only group waiver plans (EGWPs) for 2019. CMS proposes, as a condition of
the waiver of the bidding requirements and the waivers otherwise provided to EGWPs, to
establish payment amounts as described herein. As in 2017 and 2018, for 2019, Part C entities
offering employer/union-only group waiver plans would not be required to submit Part C bid
pricing information in the Part C bid pricing tool. CMS has authority under section 1857(i) of
the Act to waive or modify requirements that hinder the design of, the offering of, or the
enrollment in employment-based Medicare plans offered by employers and unions to their
members. CMS believes that waiving the requirement to submit 2019 Part C bid pricing
information will facilitate the offering of Part C plans for employers and unions seeking to
establish high quality coverage for their Medicare eligible retirees by avoiding the cost and
administrative burden of submitting the complex bids required from non-EGWPs. We refer the
reader to the detailed discussion of our rationale and responses to commenters’ questions in the
CY 2017 Rate Announcement, Attachment III, Section F (pages 27-44) for additional
information, and to responses to questions received by the Office of the Actuary,
https://www.cms.gov/Medicare/Health-Plans/MedicareAdvtgSpecRateStats/
ActuarialBidQuestions.html.
In connection with the continuation of this waiver, for 2019 CMS is proposing to fully transition
in 2019 to using only individual market plan bids to calculate the bid-to-benchmark (B2B) ratios
to set EGWP payments, as initially discussed in the 2017 Advance Notice and Rate
Announcement. The completion of this transition was initially contemplated for implementation
in 2018, but was delayed for the reasons articulated in the 2018 Rate Announcement. We are
now proposing to complete this transition for 2019. The payment policy described in more detail

 26
below for EGWPs is being proposed for implementation for 2019 in connection with the waiver
of submission of bid pricing information.
First, for 2019, we will use the average B2B ratio for individual market plan bids, including
RPPOs, from the prior payment year (2018) to calculate the 2019 Part C base payment amounts
for EGWPs by quartile3.
The calculations for the ratios will therefore be as follows:
First: [(weighted average of the intra-service area rate adjustment (ISAR) adjusted county
bid amounts for 2018 individual market plan bids by February 2018 actual
enrollment)/(weighted average of the county standardized benchmarks for 2018
individual market plan bids by February 2018 actual enrollment)] = 2018 individual
market B2B ratios (percentage by quartile).
The bid-to-benchmark ratios used for 2019 payment will be announced in the 2019 Rate
Announcement, calculated using February 2018 enrollment.
Second, as in 2017 and 2018:

3



The B2B ratios are applied to each of the published 5%, 3.5%, and 0% bonus county
ratebook rates for the payment year to establish Part C base payment amounts for EGWPs
based on their star rating for each county.



In order to calculate a county rebate payment, each county level EGWP Part C base
payment amount is compared to the corresponding published 5%, 3.5% and 0% bonus
county benchmarks for the payment year (2019), which include adjustments for
qualifying counties, to determine the amount of savings. The savings amount is
multiplied by the corresponding rebate percentage to determine the Part C EGWP county
level rebate amount.



The EGWP Part C base payment amount is added to the Part C EGWP rebate amount to
establish the county level local EGWP total payment amount.



The total payment amount will be risk adjusted in payment using beneficiary-specific risk
scores. Therefore, the formula applied for local EGWP payment on a per beneficiary
basis will be: (base county payment rate + county rebate) × beneficiary level risk score.

Territories will not be included in the weighted average B2B ratio, but will be assigned the
weighted average of the quartile within which their counties fall. To determine the CY 2019
applicable percentages, CMS ranks counties from highest to lowest based upon their 2018
average per capita FFS costs and places the rates into four quartiles. When calculating the 2018
B2B ratios, CMS would group counties by the 2018 unblended quartiles and these B2B ratios
would then be applied to the 2019 unblended quartiles.

 27
For RPPO EGWPs, the weighted average B2B ratios will be calculated as described above. To
establish the Part C base RPPO EGWP payment amount, we will then also apply the same
methodology as described above.
In order to calculate the RPPO EGWP rebate amounts, these percentages will be applied for each
county within a region to the published payment year regional benchmarks to establish the
savings amount and rebate amounts by star rating and quartile.
The RPPO EGWP Payment Formula is (Base County Payment Rate + Regional Rebate) ×
beneficiary level risk score where each is calculated as follows:


Base County Payment Rate = Bid to Benchmark Ratio × 2019 MA Monthly Capitation
Rate



Regional Rebate = (1 − Bid to Benchmark Ratio) × 2019 Regional Rate × Rebate
percentage



The 2019 Regional rate is based on a blend of the statutory and bid component. As with
non-EGWPs, if there is no bid component of the 2019 Regional rate (i.e., no individual
bids in a region), then the EGWP rate will be based solely on the statutory component.

As was the case in 2017 and 2018, for 2019 there will be no Part C Regional PPO EGWP bids to
include in the calculation of the MA regional benchmarks. The statutory components of the
regional standardized A/B benchmarks will continue to be published each year as part of the
Announcement of Medicare Advantage Payment Rates. CMS will also continue to publish the
final MA regional standardized A/B benchmarks in late summer, which will reflect the average
bid component of the regional benchmark based on non-EGWP bid submissions.
As a result of this proposal, each 3-star local EGWP in a given county would receive the same
payment amount that includes the same rebate amount, multiplied by their beneficiaries’ risk
scores. MA EGWPs would not be able to distinguish between the amount they are paid for basic
benefits and the amount they are paid for supplemental benefits. In light of this, CMS proposes
to continue to waive the requirement for MA EGWPs to allocate rebate dollars to any specific
purpose for 2019; further, MA EGWPs would also not be permitted to buy down Part B
premiums for their enrollees from the Part C payment as part of these waivers.
Under current rules, when a non-EGWP MAO uses rebates to buy-down a portion of the Part B
premiums for their beneficiaries, CMS retains the rebate amount identified by the MAO and
coordinates directly with the Social Security Administration to ensure that each beneficiary’s
Part B premiums is appropriately calculated and withheld from the beneficiary’s Social Security
check or billed to the beneficiary. However, under this payment methodology for MA EGWPs,
plan specific rebate amounts would not be identifiable; therefore, this process would continue to
be unavailable to MA EGWPs in 2019. MA EGWPs would also continue to be prohibited from
separately refunding Part B premiums for their enrollees.

 28
Moreover, in 2019, the following rules will continue to apply as they did in 2017 and 2018 under
this proposed payment methodology:


MA EGWPs will not receive payment for members that elect Hospice given that plan
specific rebate amounts are not identifiable under the proposed payment methodology.



MA-EGWPs will continue to be paid using the ESRD ratebook for their ESRD
beneficiaries in Transplant and Dialysis status and the MA ratebook for those
beneficiaries in Functioning Graft status, in keeping with the current payment policy for
non-EGWP MAOs.



Consistent with how CMS pays capitation for Part B-only enrollees in the non-EGWP
context, Part B-only MA EGWPs will continue to receive only the Part B portion of the
EGWP payment amount, which is determined by multiplying it by the Part B percentage
of the rate.



MA EGWP MSA plans will not submit Bid Pricing Tools for 2019, but the 2019 local
EGWP payment rates will not be applied to EGWP MSA plans. The monthly
prospective payments for EGWP MSAs will be based on the following formula: 2019
MA Monthly Capitation County Rate x beneficiary risk score – 1/12 of the Annual MSA
Deposit Amount. The 2019 Annual MSA Deposit Amount must be submitted in the
appropriate Plan Benefit Package field.

Notwithstanding the proposed payment policies as described above, entities offering MA
EGWPs must continue to meet all of the CMS requirements that are not otherwise specifically
waived or modified, including, but not limited to, submitting information related to plan service
areas, plan benefit packages and formularies in accordance with the rules for 2019.
Organizations must make a good faith effort in projecting CY 2019 member months for each
plan and place the amount in the appropriate section of the 2019 Plan Benefit Package (PBP)
submissions to CMS.
Notwithstanding the foregoing, we are also considering the inclusion of an additional step in
calculating the B2B ratios as described above whereby an adjustment would be made to the
calculation used to determine the B2B ratios to account for the difference in the proportion of
beneficiaries enrolled in Health Maintenance Organization (HMO) vs Preferred Provider
Organization (PPO) plan types between EGWPs and individual-market plans
Under this alternative, for 2019, the 2018 individual market B2B ratios would be adjusted to
account for the difference in the proportion of beneficiaries enrolled in HMO vs PPO between
EGWPs and individual market plans. Specifically, to determine the weighted individual market
B2B ratios, the individual market ratios would be calculated separately by plan type. HMO and
HMOPOS plans would be combined into an “HMO plan type” and LPPO and RPPO plans

 29
would be combined into a “PPO plan type.”4 Then the plan type individual market B2B ratios
by quartile would each be weighted by the total proportion of 2018 EGWP enrollment in the plan
type across all quartiles. The calculations for the ratios would therefore be as follows:
First: [(weighted average of the intra-service area rate adjustment (ISAR) adjusted county bid
amounts for 2018 individual market plan bids by February 2018 actual enrollment)/(weighted
average of the county standardized benchmarks for 2018 individual market plan bids by
February 2018 actual enrollment)] = 2018 individual market B2B ratios by quartile.5
Second: The 2018 individual market B2B ratios would be calculated separately for HMO plan
types and PPO plan types by quartiles. The PPO B2Bs by quartile would be weighted by the total
proportion of EGWP PPO plan type enrollment, and the HMO B2Bs by quartile would be
weighted by the total proportion of EGWP HMO plan type enrollment to result in the final B2B
ratios for 2019 by quartile.
Alternatively, we are also seeking comment as to whether we should maintain the payment
methodology that was applied in calculating the 2017 and 2018 MA EGWP payment rates for
2019. The bid-to-benchmark ratios used in 2017 and 2018 payment were calculated using a
blend of all individual market plan bids and all EGWP bids from 2016, each weighted by 50
percent to determine the B2B ratios by quartile.
In addition, if we maintain the payment methodology that was applied in calculating the 2017
and 2018 MA EGWP payment rates, we are seeking comment on whether to include an
additional step whereby an adjustment would be made to the calculation used to determine the
B2B ratios to account for the difference in the proportion of beneficiaries enrolled in Health
Maintenance Organization (HMO) vs Preferred Provider Organization (PPO) plan types between
EGWPs and individual-market plans.
Under this approach, the 2016 individual plan bid-to-benchmark ratios would be re-weighted,
using February 2016 enrollment, based on the proportion of EGWP enrollment in PPOs vs.
HMOs to determine the individual market portion of the blended bid-to-benchmark ratios.6

“HMO” Health Maintenance Organization, “HMOPOS” Health Maintenance Organization
Point of Service, “PPO” Preferred Provider Organization, “LPPO” Local Preferred Provider
Organization “RPPO” Regional Preferred Provider Organization.
5
These calculations will use the same exclusions and methods outlined in the footnote to the
First step in the proposed methodology, except “PFFS” Private Fee For Service individual
market plans would be excluded from these calculations.
6
For purposes of this calculation, HMO and HMOPOS 2016 bids are combined for the HMO
plan type portion of the weighting methodology, and LPPO, RPPO and PFFS 2016 bids are
combined for the PPO plan type portion of the weighting methodology.
4

 30
Then, as in 2017 and 2018, the individual market plan bids would be weighted by 50 percent and
EGWP bids would be weighted by 50 percent to determine the B2B ratios by quartile.
The calculation under this alternative would therefore be:
[(weighted average of the intra-service area rate adjustment (ISAR) adjusted county bid amounts
for 2016 individual market final bids by February 2016 actual enrollment by HMO/PPO plan
type)/(weighted average of the county standardized benchmarks for individual market plan 2016
final bids by February 2016 actual enrollment by HMO/PPO plan type) weighted by percentage
of EGWP HMO plan type enrollment and percentage EGWP PPO plan type enrollment] × 50%
plus
[(weighted average of the 2016 intra-service area rate adjustment (ISAR) adjusted county bid
amounts for 2016 EGWP final bids by February 2016 actual enrollment)/(weighted average of
the county standardized benchmarks for EGWP 2016 final bids by February 2016 actual
enrollment)] × 50% = percentage by quartile.
We welcome comments on these and other approaches, and seek comment on whether an
adjustment for HMO/PPO plan type as described above would be appropriate to implement and
why.
Section H. CMS-HCC Risk Adjustment Model for CY 2019
On December 27, 2017, CMS published for public comment the proposed Part C risk adjustment
model. As noted in that notice, all comments must be submitted to https://www.regulations.gov/,
enter the docket number “CMS-2017-0163” in the “Search” field, and follow the instructions for
“submitting a comment” no later than 6pm EST on Monday, March 5, 2018, so that they may be
addressed in the 2019 Rate Announcement that will be released no later than April 2, 2018.
Section I. ESRD Risk Adjustment Model for CY 2019
CMS uses a separate model to pay for the Part A and Part B benefits provided to beneficiaries in
ESRD status when enrolled in Medicare Advantage (MA) plans, PACE organizations, and
certain demonstrations. For 2019, CMS proposes implementing an updated version of this
ESRD risk adjustment model. The ESRD model currently used in payment was implemented in
2012 and has not been recalibrated since then. Therefore, for 2019, we propose to update the
ESRD model. Furthermore, the 21st Century Cures Act allows all Medicare beneficiaries with
ESRD to enroll in MA plans beginning in 2021, in addition to those already enrolled in Medicare
Advantage (MA) plans when they enter ESRD status or able to enroll in MA plans under 42 CFR
§ 422.50. Since plan sponsors may experience an increase in the MA ESRD population in future
years, we believe that it would be preferable to update the ESRD model prior to that time and are
proposing the implementation of an ESRD model calibrated on data that are more recent. The

 31
updated version of the model will result in payment that is more accurate and provides MAOs
time to adjust to payments based on this new model prior to experiencing potential increases in
enrollment.
While the HCCs used in the ESRD model are similar to those used in other Part C risk
adjustment models, we calibrate the ESRD model using the FFS ESRD population and,
therefore, the resulting coefficients reflect cost and disease patterns for this subgroup of
beneficiaries.
Updates for 2019:
While the basic structure of the model and the HCCs will remain the same, CMS proposes the
following two updates to the ESRD model for 2019:



Update the data years underlying the model, and;
Update the Medicaid factors to be concurrent with the payment year.

Model Recalibration
CMS recalibrated all of the components of the ESRD risk adjustment model for 2019 using data
from FFS claims: we used 2014 diagnoses to predict 2015 expenditures. We estimated the
coefficients for the condition categories by regressing the total expenditure for A/B benefits for
each FFS ESRD beneficiary onto their demographic factors and condition categories, as
indicated by their diagnoses. Resulting dollar coefficients represent the marginal (additional)
cost of the condition or demographic factor (e.g., age/sex group, Medicaid status, disability
status).
For all applicable model components, Medicaid designation in the recalibrated 2019 model is
based on payment year status. Specifically, CMS will use the following data to indicate
Medicaid status during any month in the payment year:


One of the following dual status codes for beneficiaries who are entitled to Medicare:
o 01 (Qualified Medicare Beneficiary (QMB) only)
o 02 (QMB AND Medicaid coverage)
o 03 (Specified Low-Income Medicare Beneficiary (SLMB) only)
o 04 (SLMB AND Medicaid coverage)
o 05 (Qualified Disabled and Working individuals (QDWI))
o 06 (Qualifying individuals)
o 08 (Other Dual Eligibles (Non QMB, SLMB, QDWI or QI) with Medicaid coverage)
o 10 (Other Full Dual) (This category comprises dual eligible beneficiaries in the
Territories, including those reported on the monthly report from the Commonwealth
of Puerto Rico.)

 32


To operationally align with the Part C model, we will only use the following sources of
Medicaid data:
o State-reported Medicaid data (MMA State files)
o Puerto Rico monthly Medicaid file
o Point of Sale data

Structure of ESRD Model
The ESRD risk adjustment model that we are proposing for 2019 is structurally the same ESRD
model that we have used since 2005 in that it retains separate coefficients for dialysis, transplant,
and post-graft beneficiaries. Further, it is the same clinical version of the ESRD model that is
currently being used in payment (i.e., we have not made any changes to the HCCs from the 2012
model, which are being used to calibrate the new ESRD model).
The components of the ESRD model are used to pay for populations with different ESRD
statuses:
1. Dialysis: The ESRD dialysis component of the ESRD model is used to pay for beneficiaries
who are in dialysis status.
2. Transplant: Transplant factors are used to pay for beneficiaries who have a kidney
transplant. Factors are used in conjunction with the ESRD dialysis state ratebook to pay for
the month in which a transplant occurred and the following two months.
3. Post-graft: The post-graft component of the ESRD model is used to pay for beneficiaries
starting with the fourth month after a kidney transplant, for as long as they have a functioning
graft (i.e., do not return to dialysis status).
The components of the ESRD model are described in more detail below.
Dialysis component
The dialysis component of the ESRD risk adjustment model comprises the following
characteristics:


A single set of coefficients for both community and institutional enrollees in dialysis
status. The dialysis component of the ESRD model is calibrated using diagnoses and
expenditure data for all beneficiaries in FFS who are in dialysis status. We constrain to
zero the relative factors for kidney-related HCCs and interaction terms, because all of the
beneficiaries in this model are in dialysis status.



For new enrollees in dialysis status, the average projected spending is based on
demographic factors. The demographic-only new enrollee factors are applied to
beneficiaries in dialysis status who do not have 12 months of Part B in the data collection
year. The dialysis new enrollee factors are estimated using data from:

 33
o New enrollees with dialysis months in the payment year;
o Continuing enrollees with dialysis months in the payment year with up to three
years of dialysis.


Disease and Disabled-Disease Interactions: There are five Disease Interactions and seven
Disabled-Disease Interactions in the dialysis component of the ESRD model.
o Disease Interactions:


SEPSIS_CARD_RESP_FAIL



CANCER_IMMUNE



DIABETES_CHF



CHF_COPD



COPD_CARD_RESP_FAIL

o Disabled-Disease Interactions:


NONAGED_HCC6



NONAGED_HCC34



NONAGED_HCC46



NONAGED_HCC54



NONAGED_HCC55



NONAGED_HCC110



NONAGED_HCC176

Transplant factors:
Transplant factors are estimated for the first three months following a transplant. To
accommodate the high one-time cost of a transplant, CMS makes payments over three months to
cover the transplant and immediate subsequent services. The first month’s factor is the largest,
as that is the month within which the transplant takes place, while the factors for months 2 and 3
are smaller for post-transplant recovery. CMS calibrated the payments by using fee-for-service
hospital stay payments for the transplant, and physician and other services rendered for the
hospital stay and the two months after discharge. The national average was converted to a
relative factor by dividing by the predicted national average expenditures for dialysis patients.
This allows CMS to use the State ESRD dialysis rates to make payments for beneficiaries who
have a kidney transplant.
Most of the costs of a transplant accrue in the month of the transplant and the ESRD transplant
factors account for this fact. By paying the majority of the cost in the month of transplant, CMS
is ensuring that plans are not disadvantaged if the enrollee dies in the month of transplant.
Post-graft component:

 34
To estimate the coefficients for the post-graft component of the ESRD model, CMS starts by
calibrating both a single community and a single institutional model segment for the general FFS
population, using the FFS aged/disabled, non-ESRD, model sample. Taking the resulting
coefficients and holding them constant, we then use the post-graft population (the population of
beneficiaries who are in the fourth or later month after kidney transplant) to calibrate coefficients
for additional variables, as described below. In this second calibration step, the following
adjustments are made:


Kidney-related conditions are constrained to zero. The HCC for dialysis status
(HCC134) is constrained to zero, because this is a population defined by having a
functioning kidney and not in dialysis status. We have also constrained nephritis
(HCC141) and acute and chronic kidney conditions (HCC134 through HCC 140) to be
zero, because the post-graft population is expected to have functioning kidneys and
reports of kidney disease may be reflections of inconsistent coding, rather than changes in
health status.



The following HCCs were not estimated using the aged/disabled population, but were
instead estimated specifically using the post-graft population because the predicted
expenditures for these HCCs are systematically different for the post-graft population:
o HCC176: Complications of Specified Implanted Device or Graft
o HCC186: Major Organ Transplant or Replacement Status



There is a set of post-graft “add on” factors, which vary depending on the amount of time
that has elapsed since kidney transplant. These “add on” factors take into account the
additional cost of immunosuppressant drugs, as well as health status differences between
the post-graft population and the non-ESRD population. There are separate factors for
beneficiaries during the 4-9 months after a transplant and 10+ months after a transplant.
Note that payment for the post-graft population is dependent on when a kidney transplant
occurred, and not on Medicare entitlement due to ESRD status. Therefore, risk adjusted
payments for a beneficiary who has had a kidney transplant and remains in post-graft
status will be calculated based on the post-graft model.

Updating the handling of Medicaid and recalibrating a model with more recent data can change
the marginal cost attributed to specific HCCs. Because of changes in the coefficient estimates
and relative factors, risk scores for individuals and plan risk scores may change, depending on
each individual’s contribution of diagnoses.
Section J. Frailty Adjustment for PACE organizations and FIDE SNPs
Section 1894(d)(2) of the Act requires CMS to take into account the frailty of the PACE
population when making payments to PACE organizations. Section 1853(a)(1)(B)(iv) allows
CMS to make an additional payment adjustment that takes into account the frailty of Fully

 35
Integrated Dual Eligible (FIDE) Special Needs Plans (SNPs), if the FIDE SNP has similar
average levels of frailty to the PACE program.
CMS estimates frailty factors to explain additional cost not explained by diagnoses in the CMSHCC model. The factors are updated whenever the CMS-HCC model is updated. Since CMS is
proposing to implement the “Payment Condition Count” model in 2019, we are also proposing
updated frailty factors based on this model. These frailty factors are included in the calculation
that determines frailty scores for FIDE SNPs. There is no change proposed to the frailty factors
included in the frailty score calculation for PACE organizations in PY 2019.
Consistent with CMS’ proposal to blend risk scores, for FIDE SNP’s a blended frailty score will
be compared with PACE frailty in the same manner as for PY 2018 to determine whether that
FIDE SNP has a similar average level of frailty as PACE. The frailty factors for the CMS-HCC
model used in payment years 2017 and 2018 can be found in the Announcement of Calendar
Year (CY) 2017 Medicare Advantage Capitation Rates and Medicare Advantage and Part D
Payment Policies and Final Call Letter.
MAOs that are planning to sponsor a FIDE SNP, and that wish to receive frailty payments in
2019, must contract with a certified vendor to field the 2018 Health Outcomes Survey (HOS), or
the 2018 Modified Health Outcomes Survey (HOS-M) at the PBP level. CMS uses activities of
daily living (ADLs) obtained from the HOS survey or HOS-M survey, to calculate frailty scores.
Table II-4 presents the preliminary recalibrated frailty factors for CY 2019 using the “Payment
Condition Count” model proposed in Part I of the Advance Notice, published December 27,
2017.
Table II-4. FIDE SNP Frailty Factors for CY 2019
ADL
0
1-2
3-4
5-6

Non-Medicaid
−0.078
0.161
0.303
0.303

Medicaid
−0.141
0.021
0.151
0.371

Section K. Medicare Advantage Coding Pattern Adjustment
For 2019, CMS proposes to apply the statutory minimum MA coding pattern adjustment of 5.90
percent.
We are considering multiple methodologies to inform our final decision regarding the factor for
PY 2019. Three methodologies that have been publicly discussed include:

 36


The methodology discussed in the Payment Year 2010 Advance Notice and Rate
Announcement, found here: https://www.cms.gov/Medicare/Health-Plans/
MedicareAdvtgSpecRateStats/Announcements-and-Documents.html



The methodology discussed in the Payment Year 2016 Advance Notice and Rate
Announcement, also found at the same Web page.



The methodology discussed in MedPAC’s March 2017 Report to Congress: Medicare
Payment Policy. The report can be found here: http://medpac.gov/docs/default-source/
reports/mar17_medpac_ch13.pdf?sfvrsn=0

We are considering these methodologies and seeking comments on them and alternative
methodologies for finalizing the MA coding adjustment factor in the 2019 Rate Announcement.
Section L. Normalization Factors
The Part C risk adjustment model is calibrated with diagnosis and cost information for
beneficiaries enrolled in Original Medicare (who are entitled to Part A, enrolled in Part B, and
not in End Stage Renal Disease (ESRD) or hospice status). For a historical period (“calibration
year”), the model estimates incremental cost for a variety of beneficiary characteristics (e.g., age
and gender) and health conditions. Each incremental cost, known as a dollar coefficient, is
divided by the predicted average per capita expenditure for beneficiaries in Original Medicare in
a given year to create relative factors. Risk scores are the sum of relative factors assigned to
each beneficiary based on their demographic characteristics and health status. For beneficiaries
in Original Medicare, the average risk score is 1.0 in the denominator year.
When a risk adjustment model predicts expenditures in future years, the average risk score for
Original Medicare beneficiaries may no longer be 1.0 due to changes in coding and population
characteristics. CMS applies a normalization factor to each year’s risk scores to account for the
trend in risk scores – encompassing these coding and population changes – that CMS projects to
occur between the denominator year and the payment year.7 Effectively, the normalization
factor keeps the average risk score at 1.0 in the payment year for beneficiaries in Original
Medicare.
Part C normalization factors are the predicted average risk scores of beneficiaries in Original
Medicare for a model in the payment year. RxHCC normalization factors are the predicted
average risk scores of beneficiaries enrolled in Part D plans, including MA-PD plans and PDP
plans. CMS calculates each normalization factor annually with historical risk score data and the
payment year risk adjustment model. This annual update serves two purposes.

7

See the Social Security Act at §1853(a)(1)(C)(ii)(I).

 37
First, it is important to keep the average risk score at 1.0 for beneficiaries in Original Medicare
so that risk scores in the payment year align with the rates. A risk score accounts for the degree
to which a beneficiary’s health status results in expected cost that are more or less than the
expected cost of the average beneficiary in Original Medicare. The rates, which are the
benchmarks for Part C bidding, are standardized to represent the cost of an average beneficiary
in Original Medicare in the payment year. Normalization helps to ensure that risk adjustment
results in payments for individual beneficiaries that are adjusted for relative differences in
expected costs but, on average, would not change the expected per capita cost if Medicare
Advantage enrolls beneficiaries with the same risk profile as Original Medicare.
Second, updating the normalization factor annually stabilizes payments between model
calibrations. Periodically, CMS updates the risk adjustment model with more current data,
which resets the year that the average risk score is 1.0 (i.e., the denominator year). Applying a
normalization factor to risk scores to account for trend between the denominator year and the
payment year provides year-over-year stability and avoids the volatility that would otherwise
occur in risk scores in years when the model is updated.
In payment year 2018, CMS returned to using a linear slope method of projecting normalization
factors that we used prior to payment year 2015, after using a quadratic functional form for
several years. Using this method, we projected the slope of the observed trend over five years of
historical risk scores, from the denominator year to the payment year. We propose to maintain
this methodology for all models in payment year 2019.
In Part I of the Advance Notice published December 27, 2017, CMS proposed to blend 75
percent of the risk score calculated with the CMS-HCC model used for payment in 2017 and
2018 with 25 percent of the risk score calculated with the proposed “Payment Condition Count”
model. Consistent with that proposal, for payment year 2019, CMS proposes to calculate two
normalization factors for Part C, one for the CMS-HCC model used in payment year 2017 and
2018, and one for the proposed “Payment Condition Count” model, that would be blended with
their respective risk scores in payment.
The proposed Part C normalization factor for the CMS-HCC model used in payment years 2017
and 2018 is 1.041 and the proposed Part C normalization factor for the “Payment Condition
Count” model is 1.038. The trend includes 2013 through 2017 risk scores to calculate the
normalization factor for the CMS-HCC model, PACE model, ESRD Dialysis model, and ESRD
Post-Graft model. The preliminary normalization factors and annual trends for each of these
models are in L1 through L4.
We propose to use 2012 through 2016 risk scores to calculate the normalization factor for the
RxHCC model; these factors and annual trends are shown in L5. The normalization factors for
payment year 2019 will be finalized in the 2019 Announcement, to be released no later than
April 2, 2018.

 38
L1. Normalization for the CMS-HCC Model
The proposed 2019 normalization factor for Part C is 1.041 for the CMS-HCC model used for
payment in 2017 and 2018, and 1.038 for the proposed “Payment Condition Count” model.
Both the proposed “Payment Condition Count” model and the CMS-HCC model used for
payment in 2017 and 2018 have a 2015 denominator. Between 2013 and 2017, the average
annual trend estimated from the population of FFS beneficiaries, excluding ESRD and hospice,
is 0.0100 for the CMS-HCC model used in payment year 2017 and 2018 and 0.0093 for the
proposed “Payment Condition Count” model. There are four years of trend between the
denominator year and the payment year for both models.
The Part C normalization factor for the CMS-HCC risk adjustment models is applied to the
community non-dual aged, community non-dual disabled, community full benefit dual aged,
community full benefit dual disabled, community partial benefit dual aged, community partial
benefit dual disabled, institutional, new enrollee, and C-SNP new enrollee risk scores.
The risk scores used to calculate the proposed 2019 normalization factor for the CMS-HCC
model used in 2017 and 2018 and the proposed “Payment Condition Count” model are included
in Table II-5. Part C Normalization Factor Trend.
Table II-5. Part C Normalization Factor Trend
Year
2011
2012
2013
2014
2015
2016
2017

CMS-HCC Model used in
Payment Year 2017 and 2018
0.988
0.996
0.995
0.998
1.000
1.020
1.034

Proposed “Payment
Condition Count” model
0.987
0.996
0.994
0.998
1.000
1.019
1.030

L2. Normalization Factor for the PACE Model
The proposed 2019 normalization factor for the CMS-HCC risk adjustment model used for the
PACE program is 1.159.
The CMS-HCC model for PACE beneficiaries has a 2009 denominator. Between 2013 and
2017, the trend estimated from the population of FFS beneficiaries, excluding those with ESRD
and hospice is 0.0149. There are ten years of trend between the denominator year and the
payment year.

 39
We are soliciting input on whether to apply a different approach to determing the normalization
factor for the model used for the PACE program. We welcome thoughts on criteria to use to
determine any different approach.
The normalization factor for the CMS-HCC model used for PACE is applied to the community,
institutional, and new enrollee risk scores.
The risk scores used to calculate the proposed 2019 normalization factor for the PACE CMSHCC risk adjustment model are included in Table II-6 PACE Normalization Factor Trend.
Table II-6. PACE Normalization Factor Trend
Year
2011
2012
2013
2014
2015
2016
2017

CMS-HCC Model
used for PACE
1.030
1.042
1.042
1.048
1.052
1.079
1.101

L3. Normalization Factor for the ESRD Dialysis Model
The proposed 2019 normalization factor for the ESRD dialysis model is 1.033.
The ESRD Dialysis model has a 2015 denominator. Between 2013 and 2017, the trend
estimated from the population of FFS beneficiaries with ESRD is 0.0082. There are four years of
trend between the denominator year and the payment year.
The normalization factor for the ESRD Dialysis model is applied to dialysis, dialysis new
enrollee, and transplant risk scores.

 40
The risk scores used to calculate the proposed normalization factor for the proposed 2019 ESRD
Dialysis model are included in Table II-7 ESRD Dialysis Normalization Factor Trend.
Table II-7. ESRD Dialysis Normalization Factor Trend
Year
2011
2012
2013
2014
2015
2016
2017

ESRD Dialysis Model
0.984
0.996
0.994
0.997
1.000
1.015
1.026

L4. Normalization Factor for ESRD Post-Graft Model
The proposed 2019 normalization factor for the Functioning Graft segment of the ESRD risk
adjustment model is 1.048.
The Post-Graft segment of the ESRD model has a 2015 denominator. Between 2013 and 2017,
the trend estimated from the population of FFS with ESRD is 0.0117. There are four years of
trend between the denominator year and the payment year.
The normalization factor for the CMS-HCC functioning graft model is applied to the functioning
graft community, functioning graft institutional, and functioning graft new enrollee risk scores.
The risk scores used to calculate the proposed normalization factor for the Post-Graft segment of
the ESRD model are included below in Table II-8 ESRD Post-Graft Segment Normalization
Factor Trend.

Table II-8. ESRD Post-Graft Segment Normalization Factor Trend
Year ESRD Post-Graft Model
2011
0.985
2012
0.995
2013
0.993
2014
0.998
2015
1.000
2016
1.023
2017
1.039

 41
L5. Normalization Factor for the Rx Hierarchical Condition Category (RxHCC) Model
The proposed 2019 normalization factor for the RxHCC model is 1.020.
The revised RxHCC model has a 2015 denominator. Between 2013 and 2016, the trend
estimated from the population of beneficiaries enrolled in a PDP or an MA-PD is 0.0049. The
normalization factor for the RxHCC model is applied to all Part D risk scores for beneficiaries
enrolled in an MA-PD or PDP plan. There are four years of trend between the denominator year
and the payment year.
The risk scores used to calculate the proposed 2019 normalization factor for the RxHCC model
are included in Table II-9 RxHCC Normalization Factor Trend.
Table II-9. RxHCC Normalization Factor Trend
Year
2010
2011
2012
2013
2014
2015
2016

RxHCC Model
0.980
0.989
0.996
0.989
0.995
1.000
1.015

Section M. Medical Loss Ratio Credibility Adjustment
In the May 23, 2013 Medicare Medical Loss Ratio (MLR) final rule (CMS-4173-F) (78 FR
31284), CMS finalized the requirements for calculating the Medicare MLR at 42 CFR §§
422.2400 through 422.2480 and 42 CFR §§ 423.2400 through 423.2480, including application of
credibility adjustments at §§ 422.2440 and 423.2440, which provide that CMS will define and
publish definitions of partial credibility, full credibility, and non-credibility and the credibility
factors through the annual notice and comment process of publishing the Advance Notice and
Final Rate Announcement.
In the Medicare MLR final rule at 78 FR 31295, we published two sets of credibility
adjustments: one for MA-PD contracts and one for Part D stand-alone contracts. For CY 2019,
we are not proposing any changes to the credibility adjustments for MA-PD and Part D standalone contracts published in the final rule. The applicable credibility adjustments would remain
as provided below in Table II-10 and Table II-11.

 42
Table II-10. MLR Credibility Adjustments
for MA-PD Contracts
Member months
< 2,400
2,400
6,000
12,000
24,000
60,000
120,000
180,000
> 180,000

Credibility adjustment
Non-credible
8.4%
5.3%
3.7%
2.6%
1.7%
1.2%
1.0%
Fully credible

Table II-11. MLR Credibility Adjustments
for Part D Stand-Alone Contracts
Member months
< 4,800
4,800
12,000
24,000
48,000
120,000
240,000
360,000
> 360,000

Credibility adjustment
Non-credible
8.4%
5.3%
3.7%
2.6%
1.7%
1.2%
1.0%
Fully credible

Section N. Encounter Data as a Diagnosis Source for 2019
On December 27, 2017, CMS published for public comment the proposed Part C risk adjustment
model. Information regarding the use of encounter data as a diagnosis source for 2019 for
payments for aged and disabled beneficiaries based on the CMS-HCC model and PACE model
were also included in the Part C notice. As noted in that notice, all comments must be submitted
to www.regulations.gov, enter the docket number “CMS-2017-0163” in the “Search” field, and
follow the instructions for “submitting a comment” no later than 6:00 pm EST on Monday,
March 5, 2018, so that they may be addressed in the 2019 Rate Announcement that will be
released no later than April 2, 2018.
For PY 2019, CMS is also proposing to blend risk scores calculated using the ESRD risk
adjustment model by adding 25% of the risk score calculated with diagnoses from encounter data

 43
(supplemented with RAPS inpatient data) and FFS with 75% of the risk score calculated with
diagnoses from RAPS and FFS.
Section O. Quality Payment Program
The purpose of the Quality Payment Program, enacted by the MACRA statute, is to promote
greater value in Part B payments to clinicians in the Medicare program. Clinicians have two
paths to choose from: the Merit-Based Incentive System (MIPS); or Advanced Alternative
Payment Models (Advanced APMs). APMs are defined under section 1833(z)(3)(D) of the Act
as a model under section 1115A of the Act (excluding a health care innovation award), the
Medicare Shared Savings Program under section 1899 of the Act, a demonstration under section
1866C of the Act, or a demonstration required by federal law. Advanced APMs are a subset of
APMs that meet certain criteria including requiring participants to use certified EHR technology,
providing for payment for covered professional services based on MIPS-comparable quality
measures, and either requiring participants to bear greater than nominal financial risk for
monetary losses or being a Medical Home Model expanded under CMS Innovation Center
authority (414.1415). Examples of Advanced APMs include certain tracks of the Medicare
Shared Savings Program and Comprehensive Primary Care Plus (CPC+) Model. By meeting
threshold levels of participation in Advanced APMs (in terms of Part B payments or patient
counts), eligible clinicians can become qualifying APM participants (QPs) for a year. Eligible
clinicians who are QPs for a year earn a lump sum 5% APM incentive payment and are excluded
from the MIPS reporting requirements and payment adjustment.
For 2019, CMS will begin implementing an additional way for eligible clinicians to become QPs
that considers their participation not only in Advanced APMs, but also in innovative alternative
payment arrangements through other payers such as Medicaid, Medicare Advantage and
commercial payers (Other Payer Advanced APMs). Beginning in 2019, eligible clinicians who
participate in Advanced APMs but do not meet the thresholds to become QPs on that basis will
have the opportunity to qualify as QPs through the All-Payer Combination Option. The AllPayer Combination Option takes into account eligible clinician participation in both Advanced
APMs and in Other Payer Advanced APMs, which are non-Medicare payment arrangements that
meet criteria similar to Advanced APMs (§ 414.1420).
CMS will need to obtain information from outside sources on payment arrangements with other
payers in order to determine whether they are Other Payer Advanced APMs. Unlike Advanced
APMs, CMS does not currently possess this information.
We will do this using both a payer-initiated process and a clinician-initiated process. The payerinitiated process will be carried out in 2018 prior to the 2019 performance period. On a
voluntary basis, payers will submit information on payment arrangement they believe are Other
Payer Advanced APMs. CMS is implementing the payer-initiated process prior to 2019 so that
we can publicly announce which payment arrangements are Other Payer Advanced APMs prior

 44
to the 2019 performance period. We believe this will benefit participating APM Entity and
eligible clinicians. The clinician-initiated process for determining Other Payer Advanced APMs
will generally occur after the 2019 performance period. APM Entities and eligible clinicians will
be allowed to submit information on payment arrangements they are participating in that they
believe are Other Payer Advanced APMs, but were not identified through the payer-initiated
process.
As part of the 2019 bid submission, Medicare Health Plans (including MA plans, cost plans, and
MMPs) may submit applications to determine if their payment arrangements are Other Payer
Advanced APMs. Guidance and submission forms will be part of a Quality Payment Program
module of the bid submission package released in April 2018. Payment arrangements must meet
certain criteria to qualify as Other Payer Advanced APMs that are similar to the Advanced APM
criteria. These criteria include requiring providers to use Certified EHR Technology (CEHRT),
tying quality measurement to payment, and requiring providers to assume a certain level of
financial risk (414.1420). More information about Other Payer Advanced APMs and the Quality
Payment Program is available at https://qpp.cms.gov/.

 45
Attachment III. Changes in the Payment Methodology for Medicare Part D for CY 2019
Section A. Update of the RxHCC Model
For 2019, we are proposing to implement an updated version of the RxHCC risk adjustment
model used to adjust direct subsidy payments for Part D benefits offered by stand-alone
Prescription Drug Plans (PDPs) and Medicare Advantage-Prescription Drug Plans (MA-PDs).
The RxHCC model that is being used for PY 2018 was updated to reflect 2019 benefit structure.
A1. Update to reflect the 2019 benefit structure
CMS recalibrated the RxHCC risk adjustment model to reflect the 2019 benefit structure. This
update involved adjustments to the Prescription Drug Event (PDE) data from the prediction year
to approximate the 2019 benefit structure. The adjustments to the PDE data are similar to those
made in previous years’ model calibrations in that we incorporated the payment year 2019 plan
liability in the coverage gap into the prediction year (2015) expenditure data. For 2019, plan
liability for non-LIS beneficiaries in the coverage gap will be 63 percent for non-applicable
(generic) drugs and 20 percent plan liability for applicable (brand) drugs in the coverage gap. In
addition, we mapped all PDEs to the defined standard benefit across all phases of the Part D
benefit. All other things being equal, the increase in plan liability due to the reduction in
beneficiary cost sharing for non-applicable drugs and applicable drugs will differentially affect
the risk scores of LIS and non-LIS beneficiaries. This is because plan liability for non-LIS
populations, relative to LIS populations, will increase.
A2. Recalibration
The model being used for PY 2018 is calibrated on 2014 diagnoses and 2015 expenditure data
from the PDE records. For this recalibration for 2019, we maintained the use of diagnosis data
from 2014 fee-for-service (FFS) claims and MA-PD RAPS files, along with expenditure data
from 2015 PDE records. The use of 2015 diagnoses and 2016 expenditures would have included
a mix of ICD-9 diagnoses (January 2015 – September 2015) and ICD-10 diagnoses (October
2015 – December 2015). In order to maintain stability and reflect a year of diagnoses submitted
under a single classification system we continued to use the 2014/2015 modeling sample for the
2019 recalibration. Beneficiaries in the model sample had to be: (1) FFS or Medicare Advantage
(MA-PD or MA-only) for all 12 months of the base year (2014); and (2) enrolled in a PDP or an
MA-PD for at least one month in the prediction year (2015).
Consistent with existing methodology, coefficients for condition categories were estimated by
regressing the plan liability, adjusted as discussed in A1, for the Part D basic benefit for each
beneficiary onto their demographic factors and condition categories, as indicated by their
diagnoses. We imposed hierarchies on the condition categories, ensuring that more advanced
and costly forms of a condition are reflected with a coefficient at least as high as related

 46
conditions with lower severity. The resulting dollar coefficients represent the marginal
(additional) cost of the condition or demographic factor (for example, age/sex group, low-income
subsidy status, and disability status).
In order to calculate risk scores for payment, the dollar coefficients must be denominated to
create relative factors. For the PY 2019 model calibration, we divided the dollar coefficient for
each demographic factor and RxHCC in the model by the average predicted per capita
expenditure in 2015. Consistent with the decision to continue to use the 2014/2015 modeling
sample for the recalibration, CMS will continue to use a 2015 denominator to create the relative
factors. These relative factors are then used to calculate risk scores for individual beneficiaries
in the payment year. We developed the denominator for the revised RxHCC risk adjustment
model using data from Medicare beneficiaries enrolled in both MA-PDs and PDPs, which results
in an average risk score for the enrolled Part D population in the denominator year of 1.0. The
denominator used to create relative factors for all segments of the model, is $1,062.31.
When the RxHCC model is recalibrated to reflect an updated benefit structure, it can result in
changes in condition category coefficients. Changes in the relative (denominated) factors can
occur when the marginal cost attributable to an RxHCC changes differently than the average
beneficiary cost. Recalibration of the RxHCC model can result in changes in risk scores for
individual beneficiaries and for plan average risk scores, depending on each individual
beneficiary’s combination of diagnoses.
In Attachment V of this Notice, we provide draft factors for each RxHCC for each segment of
the model.
Section B. Encounter Data as a Diagnosis Source for 2019
For PY 2018, CMS calculated risk scores by adding 15% of the risk score calculated using
encounter data and FFS diagnoses with 85% of the risk score calculated using RAPS and FFS
diagnoses.
For PY 2019, CMS proposes to calculate risk scores by adding 25% of the risk score calculated
with diagnoses from encounter data (supplemented with RAPS inpatient data) and FFS with 75%
of the risk score calculated from RAPS data and FFS diagnoses.
For PACE organizations for PY 2019, we propose to continue the same method of calculating
risk scores that we have been using since PY 2015, which is to pool risk adjustment-eligible
diagnoses from the following sources to calculate a single risk score (with no weighting): (1)
encounter data, (2) RAPS, and (3) FFS claims.
Section C. Part D Risk Sharing
The risk sharing payments provided by CMS limit Part D sponsors’ exposure to unexpected drug
expenses. Pursuant to section 1860D-15(e)(3)(C) of the Act and § 423.336(a)(2)(ii) of our

 47
regulations, CMS may establish a risk corridor with higher threshold risk percentages for Part D
risk sharing beginning in contract year 2012. Widening the risk corridor would increase the risk
associated with providing the Part D benefit and reduce the risk sharing amounts provided (or
recouped) by CMS. While CMS may widen the risk corridors, the statute does not permit CMS
to narrow the corridors relative to the 2011 thresholds.
CMS has evaluated the risk sharing amounts for 2008 – 2016 to assess whether they have
decreased or stabilized. A steady decline or stabilization in the Part D risk sharing amounts
would suggest that Part D sponsors have significantly improved their ability to predict Part D
expenditures. However, CMS has found that risk sharing amounts continue to vary significantly
in aggregate from year to year and among Part D sponsors in any given year. Therefore, we do
not believe it is appropriate to adjust the parameters at this time, and we will apply no changes to
the current threshold risk percentages for contract year 2019. We will continue to evaluate the
risk sharing amounts each year to determine if wider corridors should be applied for Part D risk
sharing.
Thus, the risk percentages and payment adjustments for Part D risk sharing are unchanged from
contract year 2018. The risk percentages for the first and second thresholds remain at +/- 5
percent and +/- 10 percent of the target amount, respectively, for 2019. The payment
adjustments for the first and second corridors are 50 percent and 80 percent, respectively. Figure
1 below illustrates the risk corridors for 2019.

 48
Figure 1. Part D Risk Corridors for 2019
Plan
Pays
20%

Government
Pays 80%

Government
Pays 50%

+ 10%

Plan Pays
50%

+ 5%
Plan Pays 100%
Target Amount

Plan Keeps 100%

- 5%
Government
Recoups 50%

Plan Keeps
50%

- 10%
Government
Recoups 80%

Plan Keeps
20%

C1. Risk sharing when a plan’s adjusted allowable risk corridor costs (AARCC) exceed
the target amount
For the portion of a plan’s adjusted allowable risk corridor costs (AARCC) that is between the
target amount and the first threshold upper limit (105 percent of the target amount), the Part D
sponsor pays 100 percent of this amount. For the portion of the plan’s AARCC that is between
the first threshold upper limit and the second threshold upper limit (110 percent of the target
amount), the government pays 50 percent and the plan pays 50 percent. For the portion of the
plan’s AARCC that exceeds the second threshold upper limit, the government pays 80 percent
and the plan pays 20 percent.
Example: If a plan’s AARCC is $120 and its target amount is $100, the Part D sponsor and the
government cover $9.50 and $10.50, respectively, of the $20 in unanticipated costs. The
sponsor’s responsibility is calculated as follows:
100% of ($105 − $100) + 50% of ($110 − $105) + 20% of ($120 − $110).

 49
C2. Risk sharing when a plan’s adjusted allowable risk corridor costs (AARCC) are below
the target amount
If a plan’s AARCC is between the target amount and the first threshold lower limit (95 percent
of the target amount), the plan keeps 100 percent of the difference between the target amount and
the plan’s AARCC. If a plan’s AARCC is between the first threshold lower limit and the second
threshold lower limit (90 percent of the target amount), the government recoups 50 percent of the
difference between the first threshold lower limit and the plan’s AARCC. The plan would keep
50 percent of the difference between the first threshold lower limit and the plan’s AARCC, as
well as 100 percent of the difference between the target amount and first threshold lower limit.
If a plan’s AARCC is less than the second threshold lower limit, the government recoups 80
percent of the difference between the plan’s AARCC and the second threshold lower limit, as
well as 50 percent of the difference between the first and second threshold lower limits. In this
case, the plan would keep 20 percent of the difference between the plan’s AARCC and the
second threshold lower limit, 50 percent of the difference between the first and second threshold
lower limits, and 100 percent of the difference between the target amount and the first threshold
lower limit.
Example: If a plan’s AARCC is $80 and its target amount is $100, the Part D sponsor keeps
$9.50 while the government recoups $10.50 of the $20 in unexpected savings generated. The
sponsor’s share is calculated as follows:
100% of ($100 − $95) + 50% of ($95 − $90) + 20% of ($90 − $80).
Section D. Medicare Part D Benefit Parameters: Annual Adjustments for Defined
Standard Benefit in 2019
In accordance with section 1860D-2(b) of the Act, CMS must update the statutory parameters for
the defined standard Part D prescription drug benefit each year. As required by statute, the
following Part D benefit parameters are updated using the annual percentage increase in average
expenditures for Part D drugs per eligible beneficiary (“Annual Percentage Increase” or API):





8

the deductible, initial coverage limit, and out-of-pocket threshold8 for the defined
standard benefit;
minimum copayments for costs above the annual out-of-pocket threshold;
maximum copayments below the out-of-pocket threshold for certain low-income full
subsidy eligible enrollees;
the deductible for partial low-income subsidy (LIS) eligible enrollees; and

According to section 1860D-2(b)(4)(B)(i)(IV), for years 2016 through 2019, the out-of-pocket
threshold is updated from the previous year by the lesser of (a) the API or (b) two percentage
points plus the annual percentage increase in the consumer price index.

 50


maximum copayments above the out-of-pocket threshold for partial LIS-eligible
enrollees.

The remaining parameters are indexed to the annual percentage increase in the Consumer Price
Index (CPI) (all items, U.S. city average). Accordingly, the actuarial value of the drug benefit
changes along with any change in Part D drug expenses, and the defined standard Part D benefit
continues to cover a constant share of Part D drug expenses from year to year.
D1. Annual Percentage Increase in Average Expenditures for Part D Drugs
The benefit parameters indexed to the API will be increased by 1.94 percent for 2019, as
summarized by Table III-1 below. This increase reflects the 2018 annual percentage trend of
3.96 percent as well as a multiplicative update of -1.95 percent for prior year revisions. See
Attachment IV for additional information on the calculation of the annual percentage increase.
Per § 423.886(b)(3) of our regulations, the cost threshold and cost limit for qualified retiree
prescription drug plans are also indexed to the API. Thus, the cost threshold and cost limit for
qualified retiree prescription drug plans will be increased by 1.94 percent from their 2018 values.
D2. Annual Percentage Increase in Consumer Price Index
Section 1860D-14(a)(4) of the Act requires CMS to use the annual percentage increase in the
CPI for the 12 month period ending in September 2018 to update the maximum copayments up
to the out-of-pocket threshold for full benefit dual eligible enrollees with incomes not exceeding
100 percent of the Federal Poverty Level for 2019. These maximum copayments will be
increased by 1.78 percent for 2019 as summarized in Table III-1 below.
This increase reflects the 2018 annual percentage trend in CPI of 1.95 percent as well as a
multiplicative update of -0.17 percent for prior year revisions.
Additionally, section 1860D-2(b)(4) of the Act requires that the out-of-pocket threshold for
contract years 2016 through 2019 be updated from the previous year by the lesser of (1) the API
or (2) two percentage points plus the annual percentage increase in CPI. The change in CPI in
this case is measured over the 12-month period ending in July of the previous year, as required
by statute. The cumulative annual percentage increase in CPI for 2018 as of July 2018 is 1.83
percent. This figure reflects the 2018 annual percentage increase in the July CPI of 2.58 percent,
as well as a multiplicative update of -0.73 percent for prior year revisions. The cumulative
annual percentage increase in the July CPI for 2018 plus two percentage points is greater than the
1.94 percent cumulative API described above. Thus, the out-of-pocket threshold will be
increased by 1.94 percent for 2019.
See Attachment IV for additional information on the calculation of the annual percentage
increase in the CPI.

 51
D3. Determining Total Covered Part D Spending at Out-of-Pocket Threshold
Each year, CMS releases the Total Covered Part D Spending at the Out-of-Pocket Threshold,
which is the amount of total drug spending, regardless of payer, required to reach the out-ofpocket threshold in the defined standard benefit. Due to reductions in beneficiary cost-sharing
for drugs in the coverage gap phase for applicable (i.e., non-LIS) beneficiaries per section
1860D-2 of the Act, the total covered Part D spending may be different for applicable and nonapplicable (i.e., LIS) beneficiaries. Therefore, CMS is releasing the two values described below:


Total Covered Part D Spending at Out-of-Pocket Threshold for Non-Applicable
Beneficiaries. This is the amount of total drug spending for a non-applicable (i.e., LIS)
beneficiary to reach the out-of-pocket threshold in the defined standard benefit. If the
beneficiary has additional prescription drug coverage through a group health plan,
insurance, government-funded health program, or similar third party arrangement, this
amount may be higher. This amount is calculated based on 100 percent cost-sharing in
the deductible and coverage gap phases and 25 percent cost-sharing in the initial
coverage phase.



Estimated Total Covered Part D Spending at Out-of-Pocket Threshold for Applicable
Beneficiaries. This is an estimate of the average amount of total drug spending for an
applicable (i.e., non-LIS) beneficiary to reach the out-of-pocket threshold in the defined
standard benefit. If the beneficiary has additional prescription drug coverage through a
group health plan, insurance, government-funded health program or similar third party
arrangement, this amount may be higher. This amount is estimated based on 100 percent
beneficiary cost-sharing in the deductible phase, 25 percent cost-sharing in the initial
coverage phase, and in the coverage gap, 37 percent cost sharing for “non-applicable”
drugs and 80 percent cost-sharing – consisting of 30 percent beneficiary coinsurance and
50 percent Coverage Gap Discount Program discount – for “applicable” drugs. Please
see Attachment IV for additional information on the calculation of the estimated total
covered Part D spending for applicable beneficiaries.

The values can be found in Table III-1 below.

 52
Table III-1. Updated Part D Benefit Parameters for Defined Standard Benefit, LowIncome Subsidy, and Retiree Drug Subsidy
Annual Percentage Increases
Annual
Annual
Prior
percentage
percentage
year
trend for
increase
revisions
2018
for 2019
API: Applied to all parameters but (1) and (2)
3.96% −1.95%
1.94%
July CPI (all items, U.S. city average): Applied to (1)
2.58% −0.73%
1.83%
September CPI (all items, U.S. city average): Applied to (2)
1.95% −0.17%
1.78%
Part D Benefit Parameters
2018
Standard Benefit
Deductible
Initial Coverage Limit
Out-of-Pocket Threshold (1)
Total Covered Part D Spending at Out-of-Pocket Threshold for NonApplicable Beneficiaries (3)
Estimated Total Covered Part D Spending for Applicable Beneficiaries (4)
Minimum Cost-Sharing in Catastrophic Coverage Portion of the Benefit
Generic/Preferred Multi-Source Drug
Other
Full Subsidy-Full Benefit Dual Eligible (FBDE) Individuals
Deductible
Copayments for Institutionalized Beneficiaries [category code 3]
Copayments for Beneficiaries Receiving Home and Community-Based
Services ] [category code 3] (5)
Maximum Copayments for Non-Institutionalized Beneficiaries
Up to or at 100% FPL [category code 2]
Up to Out-of-Pocket Threshold
Generic/Preferred Multi-Source Drug (6)
Other (6)
Above Out-of-Pocket Threshold
Over 100% FPL [category code 1]
Up to Out-of-Pocket Threshold
Generic/Preferred Multi-Source Drug
Other
Above Out-of-Pocket Threshold

$405
$3,750
$5,000

2019
$415
$3.820
$5,100

$7,508.75 $7,653.75
$8,417.60 $8,906.55
$3.35
$8.35

$3.40
$8.50

$0.00
$0.00

$0.00
$0.00

$0.00

$0.00

$1.25
$3.70
$0.00

$1.25
$3.80
$0.00

$3.35
$8.35
$0.00

$3.40
$8.50
$0.00

 53
2018

2019

Full Subsidy-Non-FBDE Individuals
Applied or eligible for QMB/SLMB/QI or SSI, income at or below 135%
FPL and resources ≤ $9,060 (individuals, 2018) or ≤ $14,340 (couples,
2018) [category code 1] (7)
Deductible
$0.00
$0.00
Maximum Copayments up to Out-of-Pocket Threshold
Generic/Preferred Multi-Source Drug
$3.35
$3.40
Other
$8.35
$8.50
Maximum Copayments above Out-of-Pocket Threshold
$0.00
$0.00
Partial Subsidy
Applied and income below 150% FPL and resources below $14,100
(individual, 2018) or $ 28,150 (couples, 2018) [category code 4] (7)
Deductible (6)
$83.00
$85.00
Coinsurance up to Out-of-Pocket Threshold
15%
15%
Maximum Copayments above Out-of-Pocket Threshold
Generic/Preferred Multi-Source Drug
$3.35
$3.40
Other
$8.35
$8.50
Retiree Drug Subsidy Amounts
Cost Threshold
$405
$415
Cost Limit
$8,350
$8,500
(1) Pursuant to section 1860D-2(b)(4)(B)(i)(IV) of the Act, for each of years 2016 through 2019, the outof-pocket threshold increase is the lesser of the annual percentage increase or the July CPI plus two
percentage points.
(2) September CPI adjustment applies to copayments for non-institutionalized beneficiaries up to or at
100% FPL.
(3) For a beneficiary who is not considered an “applicable beneficiary,” as defined at section 1860D14A(g)(1), and is not eligible for the Coverage Gap Discount Program, this is the amount of total drug
spending required to reach the out-of-pocket threshold in the defined standard benefit.
(4) For a beneficiary who is considered an "applicable beneficiary," as defined at section 1860D14A(g)(1), and is eligible for the Coverage Gap Discount Program, this is the estimated average amount
of total drug spending required to reach the out-of-pocket threshold in the defined standard benefit.
(5) Per section 1860D-14(a)(1)(D)(i) of the Act, full-benefit dual eligible beneficiaries qualify for zero
cost-sharing if they would be institutionalized individuals (or couple) if the individuals (couple) were not
receiving home and community-based services.
(6) The partial LIS deductible is increased from the unrounded 2018 value of $83.46, and the maximum
copayments for non-institutionalized FBDE individuals with incomes no greater than 100 percent of the
FPL are increased from the unrounded 2018 values of $1.24 for generic/preferred multi-source drugs and
$3.73 for all other drugs.
(7) These resource limit figures will be updated for contract year 2019. Additionally, these amounts
include $1,500 per person for burial expenses. See the HPMS memorandum titled, “2018 Resource and
Cost-Sharing Limits for Low-Income Subsidy (LIS)” for additional details.

 54
Section E. Reduced Coinsurance for Applicable Beneficiaries in the Coverage Gap
The law requires phased reduction in applicable beneficiary cost-sharing for drugs in the
coverage gap phase of the Medicare Part D benefit. This gradual reduction in cost-sharing began
in CY 2011 and continues through CY 2020, ultimately resulting in 75 percent cost-sharing for
applicable drugs, prior to the application of the 50 percent manufacturer discounts required by
statute, and 25 percent cost-sharing for other covered Part D drugs (non-applicable drugs). An
applicable drug is defined in section 1860D-14A(g)(2) of the Act to generally include covered
Part D brand drugs that are either approved under a new drug application (NDA) under section
505(b) of the Federal Food, Drug, and Cosmetic Act or, in the case of a biologic, licensed under
section 351 of the Public Health Service Act (PHSA) (other than a product licensed under
subsection (k) of such section 351) using a Biologics License Application (BLA). Nonapplicable drugs generally are covered Part D drugs that do not meet the definition of an
applicable drug, such as generic drugs. Note that non-applicable drugs also include any
biosimilar products, or biologics licensed under section 351(k) of the PHSA using a BLA, per
section 1860D-14A(g)(2)(A) of the Act. The reductions in cost-sharing, in conjunction with the
Coverage Gap Discount Program, will effectively serve to close the Medicare Part D coverage
gap for non-LIS beneficiaries by CY 2020.
In 2019, the coinsurance for applicable beneficiaries under basic prescription drug coverage is
reduced to 37 percent for non-applicable covered Part D drugs purchased during the coverage
gap phase of the Part D benefit. After applying the 50 percent manufacturer discount, the
beneficiary coinsurance under basic prescription drug coverage is reduced to 30 percent for
applicable covered Part D drugs purchased during the coverage gap phase of the Part D benefit
in 2019.

 55
Table III-2. Cost-Sharing for Applicable Drugs in the Coverage Gap
Beneficiary Coinsurance

2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020

100% minus $250 rebate9
50%
50%
47.5%
47.5%
45%
45%
40%
35%
30%
25%

Plan Liability
0%
0%
0%
2.5%
2.5%
5%
5%
10%
15%
20%
25%

Manufacturer
Discount
0%
50%
50%
50%
50%
50%
50%
50%
50%
50%
50%

Table III-3. Cost-Sharing for Non-Applicable Drugs in the Coverage Gap
Beneficiary
Coinsurance
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020

100%
93%
86%
79%
72%
65%
58%
51%
44%
37%
25%

Plan
Liability
0%
7%
14%
21%
28%
35%
42%
49%
56%
63%
75%

To be eligible for reduced cost-sharing, a Part D enrollee must have incurred gross covered drug
costs above the initial coverage limit but true out-of-pocket costs (TrOOP) below the out-of9

The law authorized a coverage gap rebate payment of $250 to any Part D beneficiary who
reached the initial coverage phase in 2010. The rebate was not required to be spent on drugs.

 56
pocket threshold. Moreover, Medicare beneficiaries enrolled in a qualified retiree prescription
drug plan or those entitled to the low-income subsidy are not eligible for this reduced costsharing.
As beneficiary liability for covered Part D drug costs in the coverage gap decreases, plan liability
increases. The increased plan liability amounts do not count toward TrOOP. Part D sponsors
must account for the reductions in cost-sharing and increased plan liability when developing
their Part D bids for payment year 2019.
Section F. Dispensing Fees and Vaccine Administration Fees for Applicable Drugs in the
Coverage Gap
As described in the previous section, the law phases in a reduction in beneficiary cost-sharing for
drugs in the coverage gap phase of the Medicare Part D benefit. Consistent with our policy on
liability for dispensing and vaccine administration fees, as described in the Announcement of
Calendar Year (CY) 2013 Medicare Advantage Capitation Rates and Medicare Advantage and
Part D Payment Policies and Final Call Letter, applicable beneficiaries will pay a portion of the
dispensing fee (and vaccine administration fee, if any) that is commensurate with their
coinsurance in the coverage gap, after the application of the coverage gap discount program
discount when applicable. The Part D sponsor will pay the remainder of the dispensing fee and
vaccine administration fee, if any.
In 2019, applicable beneficiaries will pay 30 percent and plans will pay 70 percent of dispensing
fees and vaccine administration fees for applicable drugs in the coverage gap.
Section G. Part D Calendar Year Employer Group Waiver Plans Prospective Reinsurance
Payment Amount
CMS makes prospective reinsurance payments to all Part D Calendar Year EGWP (CY EGWP)
sponsors based on the average per member-per month (PMPM) actual (final) reinsurance
amounts paid to Part D CY EGWP sponsors for the most recently reconciled payment year,
which for PY 2019 is PY 2016. The average PMPM actual reinsurance amount paid to Part D
CY EGWPs for 2016 was $36.10.
Section H. Enhanced Medication Therapy Management (MTM) Model
CMS released an HPMS memo on September 28, 2015 announcing information pertaining to the
Part D Enhanced Medication Therapy Management (MTM) Model. The memo stated that CMS
would “offer a performance-based incentive payment in return for a minimum reduction [2%] in
Medicare costs of care and successful data and quality reporting. The incentive will be set at a
fixed $2.00 per-member amount, which is equal to the level of recent LIS benchmark de minimis
amounts. This performance-based payment will be in the form of an increase in government
contribution to the plan premium, i.e., as an increase in the direct subsidy component of Part D

 57
payment or an equivalent payment. The plan would still be receiving the total payment specified
in its bid, not an additional add-on payment. However, the government-funded portion of the
monthly bid would increase, and the beneficiary portion (premium) would correspondingly
decrease for all plan enrollees. Thus, plan sponsors will submit standardized bids as usual based
on their cost requirements, and then any additional premium subsidy earned will be subsequently
applied to the plan premium prior to its inclusion in CMS low-income-premium-subsidy
calculations. In other words, the premium reduction will be considered in determining the lowincome premium benchmark.” Also, the memo indicated that, “Performance results in model
Year One (2017) will translate into a performance-based payment in Year 3 (2019).”
Since this memo release, CMS has continued to implement and operationalize the Enhanced
MTM model. Given timing and operational considerations, CMS is currently determining
whether it will be possible for the model’s premium reductions to be considered when
determining the 2019 low-income premium benchmarks.

 58
Attachment IV. Medicare Part D Benefit Parameters for the Defined Standard Benefit:
Annual Adjustments for 2019
The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) (Pub. L.
108-173) directs CMS to update the statutory parameters for the defined standard Part D drug
benefit each year. These parameters include the standard deductible, initial coverage limit,
catastrophic coverage threshold, and minimum copayments for costs above the annual out-ofpocket threshold. In addition, CMS is required by statute to update the parameters for the lowincome subsidy benefit and the cost threshold and cost limit for qualified retiree prescription
drug plans eligible for the Retiree Drug Subsidy each year. Included in this notice are (1) the
methodologies for updating these parameters, (2) the updated parameters for the Part D defined
standard benefit and the low-income subsidy benefit for 2019, and (3) the updated cost threshold
and cost limit for qualified retiree prescription drug plans in 2019.
All of the Part D benefit parameters are updated using one of two indexing methods specified by
statute:
(i)
(ii)

the annual percentage increase in average expenditures for Part D drugs per eligible
beneficiary (API); or
the annual percentage increase in the Consumer Price Index (CPI) (all items, U.S. city
average).

Section A. Annual Percentage Increase in Average Expenditures for Part D Drugs per
Eligible Beneficiary (API)
Section 1860D-2(b)(6) of the Act defines the API as “the annual percentage increase in average
per capita aggregate expenditures for covered Part D drugs in the United States for Part D
eligible individuals, as determined by the Secretary for the 12-month period ending in July of the
previous year using such methods as the Secretary shall specify.” The following parameters are
updated using the “annual percentage increase”:
Deductible: From $405 in 2018 and rounded to the nearest multiple of $5.
Initial Coverage Limit: From $3,750 in 2018 and rounded to the nearest multiple of $10.
Out-of-Pocket Threshold: From $5,000 in 2018 and rounded to the nearest multiple of $50.
Minimum Cost-Sharing in the Catastrophic Coverage Portion of the Benefit: From $3.35
per generic or preferred drug that is a multi-source drug and $8.35 for all other drugs in 2018,
rounded to the nearest multiple of $0.05.

 59
Maximum Copayments up to the Out-of-Pocket Threshold for Certain Low-Income Full
Subsidy Eligible Enrollees: From $3.35 per generic or preferred drug that is a multi-source
drug and $8.35 for all other drugs in 2018, rounded to the nearest multiple of $0.05.
Deductible for Low Income (Partial) Subsidy Eligible Enrollees: From $8310 in 2018 and
rounded to the nearest $1.
Maximum Copayments above the Out-of-Pocket Threshold for Low Income (Partial)
Subsidy Eligible Enrollees: From $3.35 per generic or preferred drug that is a multi-source
drug and $8.35 for all other drugs in 2018, rounded to the nearest multiple of $0.05.
Section B. Annual Percentage Increase in Consumer Price Index (CPI)
Annual Percentage Increase in Consumer Price Index, September (September CPI)
Section 1860D-14(a)(4) of the Act specifies that CMS use the annual percentage increase in the
CPI, All Urban Consumers (all items, U.S. city average) as of September of the previous year to
update the maximum copayment amounts up to the out-of-pocket threshold for full benefit dual
eligible enrollees with incomes not exceeding 100 percent of the Federal Poverty Level. These
copayments are increased from $ 1.25 per generic or preferred drug that is a multi-source drug
and from $3.70 for all other drugs in 2018 and rounded to the nearest multiple of $0.05 and
$0.10 respectively.11
Annual Percentage Increase in Consumer Price Index, July (July CPI)
Additionally, section 1860D-2(b)(4) of the Act requires that the “annual percentage increase”
applied to the out-of-pocket threshold in 2019 be the lesser of the API or CPI+2%. The change
in CPI in this case is measured over the 12-month period ending in July of the previous year, as
required by statute. The API over the 12-month period ending in July of 2018 is lower than the
change in CPI+2% during that period, and, therefore, the API will apply to the out-of-pocket
threshold. The threshold is increased from $5,000 in 2018 and rounded to the nearest multiple of
$50.

10

Per section 1860D-14(a)(4)(B) of the Act, the update for the deductible for partial low income
subsidy eligible enrollees is applied to the unrounded 2018 value of $83.46.
11
Per section 1860D-14(a)(4)(A) of the Act, the copayments are increased from the unrounded
2018 values of $1.24 for multi-source generic or preferred drugs, and $3.73 for all other drugs.

 60
Section C. Calculation Methodology
Annual Percentage Increase in Average Expenditures for Part D Drugs per Eligible
Beneficiary (API)
For contract years 2007 and 2008, the APIs, as defined in section 1860D-2(b)(6) of the Act, were
based on the National Health Expenditure (NHE) prescription drug per capita estimates because
sufficient Part D program data was not available. Beginning with contract year 2009, the APIs
are based on Part D program data. For the contract year 2019 benefit parameters, Part D
program data is used to calculate the annual percentage trend as follows:
𝐴𝑢𝑔𝑢𝑠𝑡 2017– 𝐽𝑢𝑙𝑦 2018 $3,730.80
=
= 1.0396
𝐴𝑢𝑔𝑢𝑠𝑡 2016– 𝐽𝑢𝑙𝑦 2017 $3,588.60
In the formula, the average per capita cost for August 2016 – July 2017 ($3,588.60) is calculated
from actual Part D PDE data, and the average per capita cost for August 2017 – July 2018
($3,730.80) is calculated based on actual Part D PDE data incurred from August 2017 –
December 2017 and projected through July 2018.
The 2019 benefit parameters reflect the 2018 annual percentage trend, as well as an update for
revision to prior year estimates for API. Based on updated NHE prescription drug per capita
costs and PDE data, the annual percentage increases are now estimated as summarized by Table
IV-1.
Table IV-1. Revised Prior Years’ Annual Percentage Increases

Year
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018

Prior Estimates
of Annual
Percentage
Increases
7.30%
5.92%
4.69%
3.14%
2.36%
2.16%
2.53%
−3.14%
10.09%
9.90%
4.14%
3.94%

Revised Annual
Percentage
Increases
7.30%
5.92%
4.69%
3.14%
2.36%
2.15%
2.53%
−3.14%
10.12%
9.92%
4.00%
2.02%

 61
Accordingly, the 2019 benefit parameters reflect a multiplicative update of -1.95 percent for
prior year revisions. In summary, the 2018 parameters outlined in Section A are updated by 1.94
percent for 2019, as summarized by Table IV-2.
Table IV-2. Annual Percentage Increase
Annual percentage trend for July 2018
Prior year revisions
Annual percentage increase for 2019

3.96%
-1.95%
1.94%

Note: Percentages are multiplicative, not additive.
Values are carried to additional decimal places and may
not agree to the rounded values presented above.
Annual Percentage Increase in Consumer Price Index, September (September CPI)
To ensure that plan sponsors and CMS have sufficient time to incorporate cost-sharing
requirements into the development of the benefit, any marketing materials, and necessary
systems, CMS includes in its methodology to calculate the annual percentage increase in the CPI
for the 12-month period ending in September 2018, an estimate of the September 2018 CPI
based on projections from the President’s FY2019 Budget.
The September 2017 value is from the Bureau of Labor Statistics. The annual percentage trend
in the September CPI for contract year 2019 is calculated as follows:
Projected September 2018 CPI
251.6
𝑜𝑟
= 1.0195
Actual September 2017 CPI
246.8
(Source: President’s FY2019 Budget and Bureau of Labor Statistics, Department of
Labor)
The 2019 benefit parameters reflect the 2018 annual percentage trend in the September CPI of
1.95 percent, as well as a revision to the prior estimate for the 2017 CPI increase over the 12month period ending in September 2017. Based on the actual reported CPI for September 2017,
the September 2017 CPI increase is now estimated to be 2.23 percent. Accordingly, the 2019
update reflects a -0.17 percent multiplicative correction for the revision to last year’s estimate.
In summary, the maximum copayments below the out-of-pocket threshold for full benefit dual
eligible enrollees with incomes not exceeding 100 percent of the Federal Poverty Level are
updated by 1.78 percent for 2019, as summarized by Table IV-3.

 62
Table IV-3. Cumulative Annual Percentage Increase in September CPI
Annual percentage trend for September 2018
Prior year revisions
Annual percentage increase for 2019

1.95%
−0.17%
1.78%

Note: Percentages are multiplicative, not additive.
Values are carried to additional decimal places and may
not agree to the rounded values presented above.
Annual Percentage Increase in Consumer Price Index, July (July CPI)
As is the case when calculating the annual CPI trend as of September 2018, the methodology to
calculate the annual percentage increase in the CPI for the 12-month period ending in July 2018
includes an estimate of the July 2018 CPI based on projections from the President’s FY2019
Budget.
The July 2017 value is from the Bureau of Labor Statistics. The annual percentage trend in CPI
for contract year 2019 is calculated as follows:
Projected July 2018 CPI
251.1
𝑜𝑟
= 1.0258
Actual July 2017 CPI
244.8
(Source: President’s FY2019 Budget and Bureau of Labor Statistics, Department of
Labor)
The 2019 benefit parameters reflect the 2018 annual percentage trend in the July CPI of 2.58
percent as well as a revision to the prior estimate for the 2017 CPI increase. Based on the actual
reported CPI for July 2017, the CPI increase over the 12-month period ending in July 2017 is
estimated to be 1.73 percent. The prior year revision here reflects the difference between this
actual 1.73 percent increase in CPI observed in July 2017 and the 2017 CPI increase estimate
from the CY 2018 Rate Announcement.
In summary, the cumulative annual percentage increase in July CPI for 2019 is 1.83 percent, as
summarized by Table IV-4. This value plus two percentage points is greater than the 1.94
percent cumulative API for 2019 described above. Thus, the out-of-pocket threshold will be
increased by 1.94 percent for 2019.

 63
Table IV-4. Cumulative Annual Percentage Increase in July CPI
Annual percentage trend for July 2018
Prior year revisions
Annual percentage increase for 2019

2.58%
-0.73%
1.83%

Note: Percentages are multiplicative, not additive.
Values are carried to additional decimal places and may
not agree to the rounded values presented above.
Section D. Retiree Drug Subsidy Amounts
Per 42 CFR 423.886(b)(3), the cost threshold and cost limit for qualified retiree prescription drug
plans are also updated using the API, as defined previously in this document. The updated cost
threshold is rounded to the nearest multiple of $5 and the updated cost limit is rounded to the
nearest multiple of $50. The cost threshold and cost limit are defined as $400 and $8,250,
respectively, for plans that end in 2017, and as $405 and $8,350 for plans that end in 2018. For
2019, the cost threshold is $415 and the cost limit is $8,500.
Section E. Estimated Total Covered Part D Spending at Out-of-Pocket Threshold for
Applicable Beneficiaries
For 2019, the total covered Part D spending at out-of-pocket threshold for applicable
beneficiaries is $8,906.55. The figure is calculated given the following basic assumptions:







100 percent beneficiary cost-sharing in the deductible phase.
25 percent beneficiary cost-sharing in the initial coverage phase.
37 percent beneficiary cost-sharing for non-applicable drugs purchased in the coverage
gap phase of the benefit.
80 percent cost-sharing for the ingredient cost and sales tax for applicable drugs
purchased in the coverage gap phase of the benefit—comprised of 30 percent beneficiary
coinsurance and 50 percent Coverage Gap Discount Program discount.
30 percent cost-sharing for the dispensing and vaccine administration fees for applicable
drugs purchased in the coverage gap phase of the benefit.

In this estimate, it is assumed that the dispensing and vaccine administration fees account for
0.072 percent of the gross covered brand drug costs used by non-LIS beneficiaries in the
coverage gap. Therefore, a 70 percent reduction in cost-sharing for dispensing and vaccine
administration fees results in an overall reduction of 0.04 percent to 79.96 percent in cost-sharing
for applicable (brand) drugs in the coverage gap.
The estimated total covered Part D spending at out-of-pocket (OOP) threshold for applicable
beneficiaries is calculated as follows:

 64

ICL+

100% beneficiary cost sharing in the gap
$3,833.75
𝑜𝑟 $3,820 +
= $8,906.55
weighted gap coinsurance factor
75.3704%



ICL is the Initial Coverage Limit equal to $3,820



100 percent beneficiary cost-sharing in the gap is the estimated total drug spending in the
gap assuming 100 percent coinsurance and is equivalent to:
(OOP threshold) – (OOP costs up to the ICL) or $5,100 − $1,266.25= $3,833.75



Weighted gap coinsurance factor is calculated as follows:
(Brand Gross Drug Cost Below Catastrophic [GDCB] % for non-LIS × 79.96% gap costsharing for applicable drugs) + (Generic GDCB % for non-LIS × 37% gap cost-sharing
for non-applicable drugs)
or
(89.31% × 79.96%) + (10.69% × 37%) = 75.3704%
o Brand GDCB % for non-LIS is the percentage of gross covered drug costs below
the OOP threshold for applicable beneficiaries (i.e., non-LIS) attributable to
applicable drugs, as reported on the 2017 PDEs.
o Gap cost-sharing for applicable drugs is the coinsurance incurred by applicable
beneficiaries (i.e., non-LIS) for applicable drugs in the coverage gap, where:


Coinsurance for applicable drugs = is calculated as follows:
[(percentage of gross covered brand drug costs attributable to ingredient
cost and sales tax) × (cost-sharing percentage)] + [(percentage of gross
covered brand drug costs attributable to dispensing and vaccine
administration fees) × (cost-sharing coinsurance percentage)]
or
79.96 % = [(99.928% × 80%) + (0.072% × 30%)]

o Generic GDCB % for non-LIS is the percentage of gross covered drug costs below the
OOP threshold for applicable beneficiaries (i.e., non-LIS) attributable to nonapplicable drugs as reported on the 2017 PDEs.
o Gap cost-sharing for non-applicable drugs is the coinsurance incurred by applicable
beneficiaries (i.e., non-LIS) for non-applicable drugs in the coverage gap.

 65
Attachment V. RxHCC and ESRD Risk Adjustment Factors
Table V-1. RxHCC Model Relative Factors for Continuing Enrollees . . . . . . . . . . . . . . . . . . 66
Table V-2. RxHCC Model Relative Factors for New Enrollees, Non‑Low Income . . . . . . . . . 72
Table V-3. RxHCC Model Relative Factors for New Enrollees, Low Income . . . . . . . . . . . . . 73
Table V-4. RxHCC Model Relative Factors for New Enrollees, Institutional . . . . . . . . . . . . . 74
Table V-5. List of Disease Hierarchies for RxHCC Model . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Table V-6. ESRD Model Continuing Enrollee Dialysis Relative Factors . . . . . . . . . . . . . . . . 76
Table V-7. ESRD Model Demographic Relative Factors for New Enrollees in Dialysis
Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
Table V-8. ESRD Kidney Transplant CMS-HCC Model Relative Factors for Transplant
Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
Table V-9. ESRD Model Functioning Graft Relative Factors for Community Population . . . . 82
Table V-10. ESRD Model Functioning Graft Relative Factors for Institutionalized
Population . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
Table V-11. ESRD Model Demographic Relative Factors for Functioning Graft New
Enrollees Duration Since Transplant of 4-9 Months . . . . . . . . . . . . . . . . . . . . . . . . . . 93
Table V-12. ESRD Model Demographic Relative Factors for Functioning Graft New
Enrollees Duration Since Transplant of 10 Months or More . . . . . . . . . . . . . . . . . . . . 94
Table V-13. List of Disease Hierarchies for the ESRD Model . . . . . . . . . . . . . . . . . . . . . . . . 95

 66

Table V-1. RxHCC Model Relative Factors for Continuing Enrollees
Continuing Enrollees (CE) RxHCC Model Segments
Community,
Non-Low
Income,
Age≥65

Community,
Non-Low
Income,
Age<65

Community,
Low Income,
Age≥65

Community,
Low Income,
Age<65

Institutional

0-34 Years

-

0.306

-

0.429

1.765

35-44 Years

-

0.452

-

0.617

2.005

45-54 Years

-

0.555

-

0.716

1.691

55-59 Years

-

0.525

-

0.694

1.542

60-64 Years

-

0.487

-

0.630

1.404

65-69 Years

0.237

-

0.384

-

1.474

70-74 Years

0.237

-

0.360

-

1.350

75-79 Years

0.222

-

0.350

-

1.243

80-84 Years

0.202

-

0.311

-

1.151

85-89 Years

0.178

-

0.278

-

1.061

90-94 Years

0.130

-

0.225

-

0.944

95 Years or Over

0.064

-

0.140

-

0.752

0-34 Years

-

0.272

-

0.468

1.800

35-44 Years

-

0.390

-

0.592

1.792

45-54 Years

-

0.491

-

0.658

1.654

55-59 Years

-

0.526

-

0.665

1.472

60-64 Years

-

0.504

-

0.613

1.348

65-69 Years

0.263

-

0.362

-

1.307

70-74 Years

0.269

-

0.338

-

1.260

75-79 Years

0.242

-

0.337

-

1.190

80-84 Years

0.181

-

0.300

-

1.143

85-89 Years

0.134

-

0.283

-

1.075

90-94 Years

0.076

-

0.237

-

0.985

95 Years or Over

0.039

-

0.221

-

0.865

0.103

-

0.196

-

0.065

-

-

0.133

-

0.065

3.287

3.969

3.732

4.071

2.538

0.274

0.115

0.173

0.160

0.180

Variable

Disease Group

Female

Male

Originally Disabled Interactions with Sex
Originally
Disabled_Female
Originally
Disabled_Male
Disease
Description Label
Coefficients
RXHCC1
HIV/AIDS
RXHCC5

Opportunistic
Infections

 67

Continuing Enrollees (CE) RxHCC Model Segments
Community,
Non-Low
Income,
Age≥65

Community,
Non-Low
Income,
Age<65

Community,
Low Income,
Age≥65

Community,
Low Income,
Age<65

Institutional

7.391

7.515

8.032

9.772

4.846

3.955

4.178

3.184

3.614

1.081

RXHCC17

Secondary Cancers of
Bone, Lung, Brain,
and Other Specified
Sites; Liver Cancer

1.791

1.723

1.579

1.566

0.575

RXHCC18

Lung, Kidney, and
Other Cancers

0.299

0.264

0.320

0.311

0.069

RXHCC19

Breast and Other
Cancers and Tumors

0.098

0.088

0.078

0.113

0.069

RXHCC30

Diabetes with
Complications

0.442

0.477

0.495

0.685

0.469

RXHCC31

Diabetes without
Complication

0.289

0.269

0.312

0.384

0.318

RXHCC40

Specified Hereditary
Metabolic/Immune
Disorders

2.988

10.419

3.071

10.310

0.465

RXHCC41

Pituitary, Adrenal
Gland, and Other
Endocrine and
Metabolic Disorders

0.104

0.207

0.059

0.225

0.087

RXHCC42

Thyroid Disorders

0.103

0.182

0.098

0.163

0.077

RXHCC43

Morbid Obesity

0.060

-

0.073

0.067

0.170

RXHCC45

Disorders of Lipoid
Metabolism

0.037

-

0.068

0.087

0.055

3.198

3.675

2.882

2.907

0.929

0.561

0.363

0.847

0.526

0.361

Variable

RXHCC15
RXHCC16

RXHCC54
RXHCC55

Disease Group
Chronic Myeloid
Leukemia
Multiple Myeloma
and Other Neoplastic
Disorders

Chronic Viral
Hepatitis C
Chronic Viral
Hepatitis, Except
Hepatitis C

RXHCC65

Chronic Pancreatitis

0.279

0.194

0.156

0.201

0.171

RXHCC66

Pancreatic Disorders
and Intestinal
Malabsorption,
Except Pancreatitis

0.109

0.194

0.114

0.201

0.119

RXHCC67

Inflammatory Bowel
Disease

0.547

0.472

0.451

0.819

0.213

 68

Continuing Enrollees (CE) RxHCC Model Segments
Community,
Non-Low
Income,
Age≥65

Community,
Non-Low
Income,
Age<65

Community,
Low Income,
Age≥65

Community,
Low Income,
Age<65

Institutional

0.077

0.061

0.140

0.167

0.075

0.179

0.252

0.108

0.143

0.114

0.780

0.751

1.277

2.037

0.653

RXHCC83

Rheumatoid Arthritis
and Other
Inflammatory
Polyarthropathy

0.382

0.415

0.477

0.794

0.185

RXHCC84

Systemic Lupus
Erythematosus, Other
Connective Tissue
Disorders, and
Inflammatory
Spondylopathies

0.216

0.339

0.236

0.349

0.173

RXHCC87

Osteoporosis,
Vertebral and
Pathological
Fractures

0.053

0.159

0.119

0.201

-

RXHCC95

Sickle Cell Anemia

0.087

0.293

0.047

0.778

0.333

RXHCC96

Myelodysplastic
Syndromes and
Myelofibrosis

0.966

1.144

0.761

0.700

0.544

RXHCC97

Immune Disorders

0.565

0.521

0.481

0.448

0.347

RXHCC98

Aplastic Anemia and
Other Significant
Blood Disorders

0.087

0.160

0.047

0.217

0.044

RXHCC111

Alzheimer`s Disease

0.496

0.255

0.175

0.034

-

RXHCC112

Dementia, Except
Alzheimer`s Disease

0.205

0.111

0.040

-

-

RXHCC130

Schizophrenia

0.275

0.305

0.399

0.691

0.193

RXHCC131

Bipolar Disorders

0.264

0.285

0.280

0.438

0.193

RXHCC132

Major Depression

0.130

0.213

0.142

0.306

0.163

RXHCC133

Specified Anxiety,
Personality, and
Behavior Disorders

0.130

0.175

0.142

0.306

0.107

RXHCC134

Depression

0.130

0.175

0.136

0.203

0.107

RXHCC135

Anxiety Disorders

0.050

0.114

0.084

0.169

0.107

RXHCC145

Autism

0.130

0.175

0.363

0.369

0.107

Variable

RXHCC68

RXHCC80
RXHCC82

Disease Group

Esophageal Reflux
and Other Disorders
of Esophagus
Aseptic Necrosis of
Bone
Psoriatic Arthropathy
and Systemic
Sclerosis

 69

Continuing Enrollees (CE) RxHCC Model Segments
Disease Group

Community,
Non-Low
Income,
Age≥65

Community,
Non-Low
Income,
Age<65

Community,
Low Income,
Age≥65

Community,
Low Income,
Age<65

Institutional

RXHCC146

Profound or Severe
Intellectual
Disability/Developm
ental Disorder

-

0.175

0.363

0.330

-

RXHCC147

Moderate Intellectual
Disability/Developm
ental Disorder

-

-

0.237

0.156

-

RXHCC148

Mild or Unspecified
Intellectual
Disability/Developm
ental Disorder

-

-

0.094

0.032

-

RXHCC156

Myasthenia Gravis,
Amyotrophic Lateral
Sclerosis and Other
Motor Neuron
Disease

0.370

0.574

0.383

0.566

0.183

RXHCC157

Spinal Cord
Disorders

0.118

0.093

0.093

0.056

0.056

RXHCC159

Inflammatory and
Toxic Neuropathy

0.172

0.386

0.167

0.326

0.079

RXHCC160

Multiple Sclerosis

2.371

3.986

1.985

4.012

0.960

RXHCC161

Parkinson`s and
Huntington`s
Diseases

0.524

0.720

0.312

0.430

0.226

RXHCC163

Intractable Epilepsy

0.310

0.570

0.307

1.017

0.093

RXHCC164

Epilepsy and Other
Seizure Disorders,
Except Intractable
Epilepsy

0.124

0.078

0.047

0.146

-

RXHCC165

Convulsions

0.054

0.026

0.029

0.067

-

RXHCC166

Migraine Headaches

0.141

0.213

0.126

0.139

0.109

RXHCC168

Trigeminal and
Postherpetic
Neuralgia

0.136

0.302

0.155

0.209

0.194

RXHCC185

Primary Pulmonary
Hypertension

0.746

2.210

0.624

1.775

0.252

RXHCC186

Congestive Heart
Failure

0.168

0.147

0.221

0.141

0.136

RXHCC187

Hypertension

0.123

0.071

0.187

0.106

0.058

RXHCC188

Coronary Artery
Disease

0.127

0.013

0.140

-

0.010

RXHCC193

Atrial Arrhythmias

0.296

0.104

0.138

0.010

0.090

Variable

 70

Continuing Enrollees (CE) RxHCC Model Segments
Community,
Non-Low
Income,
Age≥65

Community,
Non-Low
Income,
Age<65

Community,
Low Income,
Age≥65

Community,
Low Income,
Age<65

Institutional

RXHCC206

Cerebrovascular
Disease, Except
Hemorrhage or
Aneurysm

0.046

-

0.039

-

-

RXHCC207

Spastic Hemiplegia

0.197

0.154

0.032

0.158

-

0.149

0.195

0.093

0.105

0.049

-

-

0.021

-

-

Variable

RXHCC215
RXHCC216

Disease Group

Venous
Thromboembolism
Peripheral Vascular
Disease

RXHCC225

Cystic Fibrosis

0.756

5.483

0.360

5.191

1.143

RXHCC226

Chronic Obstructive
Pulmonary Disease
and Asthma

0.342

0.143

0.360

0.253

0.199

RXHCC227

Pulmonary Fibrosis
and Other Chronic
Lung Disorders

0.342

0.143

0.172

0.253

0.041

RXHCC241

Diabetic Retinopathy

0.321

0.240

0.223

0.148

0.159

0.284

0.239

0.330

0.267

0.227

0.354

0.181

0.375

0.413

0.188

RXHCC243
RXHCC260

Open-Angle
Glaucoma
Kidney Transplant
Status

RXHCC261

Dialysis Status

0.262

0.542

0.478

0.916

0.401

RXHCC262

Chronic Kidney
Disease Stage 5

0.097

0.125

0.083

0.042

0.056

RXHCC263

Chronic Kidney
Disease Stage 4

0.097

0.125

0.083

0.042

0.056

RXHCC311

Chronic Ulcer of
Skin, Except Pressure

0.168

0.175

0.101

0.097

0.056

RXHCC314

Pemphigus

0.360

0.647

0.193

0.121

0.041

RXHCC316

Psoriasis, Except
with Arthropathy

0.209

0.255

0.403

0.711

0.276

0.829

1.355

0.640

1.332

0.250

1.298

0.814

0.971

0.849

0.879

RXHCC355
RXHCC395

Narcolepsy and
Cataplexy
Lung Transplant
Status

RXHCC396

Major Organ
Transplant Status,
Except Lung,
Kidney, and Pancreas

1.059

0.814

0.971

0.849

0.188

RXHCC397

Pancreas Transplant
Status

0.354

0.181

0.375

0.229

0.188

 71

Continuing Enrollees (CE) RxHCC Model Segments
Community,
Non-Low
Income,
Age≥65

Community,
Non-Low
Income,
Age<65

Community,
Low Income,
Age≥65

Community,
Low Income,
Age<65

Institutional

Non-Aged Disease Interactions
NonAged_RXHC
NonAged *
C1
HIV/AIDS
NonAged_RXHC
NonAged *
C130
Schizophrenia

-

-

-

-

0.897

-

-

-

-

0.275

NonAged_RXHC
C131

NonAged * Bipolar
Disorders

-

-

-

-

0.274

NonAged_RXHC
C132

NonAged * Major
Depression

-

-

-

-

0.181

NonAged_RXHC
C133

NonAged * Specified
Anxiety, Personality,
and Behavior
Disorders

-

-

-

-

0.221

NonAged_RXHC
C134

NonAged *
Depression

-

-

-

-

0.111

NonAged_RXHC
C135

NonAged * Anxiety
Disorders

-

-

-

-

0.189

NonAged_RXHC
C160

NonAged * Multiple
Sclerosis

-

-

-

-

1.308

NonAged_RXHC
C163

NonAged *
Intractable Epilepsy

-

-

-

-

0.243

Variable

Disease Group

NOTE: The Part D Denominator used to calculate relative factors is $1,062.31. This Part D Denominator is based on the
combined PDP and MA-PD populations.
SOURCE: RTI Analysis of 100% 2015 PDE, 2014 Carrier NCH, 2014 Inpatient SAF, 2014 Outpatient SAF, 2015 HPMS, 2015
CME, 2014-2015 Denominator, Part D Intermediate File, and 2014 Medicare Advantage Diagnoses File.

 72

Table V-2. RxHCC Model Relative Factors for New Enrollees, Non‑Low Income

Variable
Female
0-34 Years
35-44 Years
45-54 Years
55-59 Years
60-64 Years
65 Years
66 Years
67 Years
68 Years
69 Years
70-74 Years
75-79 Years
80-84 Years
85-89 Years
90-94 Years
95 Years or Over
Male
0-34 Years
35-44 Years
45-54 Years
55-59 Years
60-64 Years
65 Years
66 Years
67 Years
68 Years
69 Years
70-74 Years
75-79 Years
80-84 Years
85-89 Years
90-94 Years
95 Years or Over

Not Concurrently
ESRD, Not
Originally Disabled

Concurrently
ESRD, Not
Originally Disabled

Originally Disabled,
Not Concurrently
ESRD

Originally
Disabled,
Concurrently
ESRD

0.708
1.223
1.326
1.268
1.259
0.534
0.585
0.599
0.616
0.642
0.671
0.690
0.627
0.623
0.354
0.354

0.979
1.233
1.624
1.790
1.978
1.983
1.983
1.983
1.983
1.983
1.983
1.983
1.983
1.983
1.983
1.983

1.158
1.185
1.185
1.185
1.185
1.074
0.821
0.627
0.623
0.354
0.354

1.983
1.983
1.983
1.983
1.983
1.983
1.983
1.983
1.983
1.983
1.983

0.469
0.865
1.163
1.235
1.207
0.599
0.645
0.663
0.693
0.713
0.759
0.787
0.714
0.667
0.317
0.317

0.857
1.284
1.619
1.832
2.146
2.005
2.005
2.005
2.005
2.005
2.005
2.005
2.005
2.005
2.005
2.005

1.042
1.037
1.037
1.037
1.037
0.964
0.787
0.714
0.667
0.317
0.317

2.005
2.005
2.005
2.005
2.005
2.005
2.005
2.005
2.005
2.005
2.005

NOTES:
1. The Part D Denominator used to calculate relative factors is $1,062.31. This Part D Denominator is based on the
combined PDP and MA-PD populations.
2. Originally Disabled is defined as originally entitled to Medicare by disability only (OREC = 1).
3. For new enrollees, the concurrent ESRD marker is defined as at least one month in the payment year of ESRD status—
dialysis, transplant, or post-graft.
SOURCE: RTI Analysis of 100% 2015 PDE, 2014 Carrier NCH, 2014 Inpatient SAF, 2014 Outpatient SAF, 2015 HPMS, 2015
CME, 2014-2015 Denominator, Part D Intermediate File, and 2014 Medicare Advantage Diagnoses File.

 73

Table V-3. RxHCC Model Relative Factors for New Enrollees, Low Income

Variable
Female
0-34 Years
35-44 Years
45-54 Years
55-59 Years
60-64 Years
65 Years
66 Years
67 Years
68 Years
69 Years
70-74 Years
75-79 Years
80-84 Years
85-89 Years
90-94 Years
95 Years or Over
Male
0-34 Years
35-44 Years
45-54 Years
55-59 Years
60-64 Years
65 Years
66 Years
67 Years
68 Years
69 Years
70-74 Years
75-79 Years
80-84 Years
85-89 Years
90-94 Years
95 Years or Over

Not Concurrently
ESRD, Not
Originally Disabled

Concurrently
ESRD, Not
Originally Disabled

Originally Disabled,
Not Concurrently
ESRD

Originally
Disabled,
Concurrently
ESRD

1.010
1.510
1.562
1.446
1.357
0.889
0.593
0.593
0.593
0.593
0.598
0.655
0.655
0.655
0.556
0.556

2.122
2.168
2.254
2.368
2.204
2.156
2.156
2.156
2.156
2.156
2.156
2.156
2.156
2.156
2.156
2.156

1.232
0.825
0.825
0.825
0.825
0.776
0.655
0.655
0.655
0.556
0.556

2.156
2.156
2.156
2.156
2.156
2.156
2.156
2.156
2.156
2.156
2.156

0.871
1.246
1.442
1.358
1.271
0.884
0.571
0.546
0.494
0.514
0.520
0.541
0.541
0.521
0.406
0.406

2.217
2.221
2.299
2.159
2.112
2.006
2.006
2.006
2.006
2.006
2.006
2.006
2.006
2.006
2.006
2.006

1.129
0.732
0.732
0.732
0.732
0.583
0.541
0.541
0.521
0.406
0.406

2.006
2.006
2.006
2.006
2.006
2.006
2.006
2.006
2.006
2.006
2.006

NOTES:
1. The Part D Denominator used to calculate relative factors is $1,062.31. This Part D Denominator is based on the
combined PDP and MA-PD populations.
2. Originally Disabled is defined as originally entitled to Medicare by disability only (OREC = 1).
3. For new enrollees, the concurrent ESRD marker is defined as at least one month in the payment year of ESRD status—
dialysis, transplant, or post-graft.
SOURCE: RTI Analysis of 100% 2015 PDE, 2014 Carrier NCH, 2014 Inpatient SAF, 2014 Outpatient SAF, 2015 HPMS, 2015
CME, 2014-2015 Denominator, Part D Intermediate File, and 2014 Medicare Advantage Diagnoses File.

 74

Table V-4. RxHCC Model Relative Factors for New Enrollees, Institutional
Variable
Female
0-34 Years
35-44 Years
45-54 Years
55-59 Years
60-64 Years
65 Years
66 Years
67 Years
68 Years
69 Years
70-74 Years
75-79 Years
80-84 Years
85-89 Years
90-94 Years
95 Years or Over
Male
0-34 Years
35-44 Years
45-54 Years
55-59 Years
60-64 Years
65 Years
66 Years
67 Years
68 Years
69 Years
70-74 Years
75-79 Years
80-84 Years
85-89 Years
90-94 Years
95 Years or Over

Not Concurrently ESRD

Concurrently ESRD

2.747
2.747
2.440
2.440
2.092
2.177
1.907
1.907
1.907
1.907
1.780
1.550
1.415
1.351
1.078
1.078

2.761
2.761
2.761
2.761
2.761
2.761
2.761
2.761
2.761
2.761
2.761
2.761
2.761
2.761
2.761
2.761

2.386
2.568
2.342
2.140
2.084
2.038
1.775
1.775
1.775
1.775
1.679
1.679
1.490
1.327
1.327
1.327

2.776
2.776
2.776
2.776
2.776
2.776
2.776
2.776
2.776
2.776
2.776
2.776
2.776
2.776
2.776
2.776

NOTES:
1. The Part D Denominator used to calculate relative factors is $1,062.31. This Part D Denominator is based on the combined
PDP and MA-PD populations.
2. For new enrollees, the concurrent ESRD marker is defined as at least one month in the payment year of ESRD status—
dialysis, transplant, or post-graft.
SOURCE: RTI Analysis of 100% 2015 PDE, 2014 Carrier NCH, 2014 Inpatient SAF, 2014 Outpatient SAF, 2015 HPMS, 2015
CME, 2014-2015 Denominator, Part D Intermediate File, and 2014 Medicare Advantage Diagnoses File.

 75
Table V-5. List of Disease Hierarchies for RxHCC Model
Rx Hierarchical
Condition
Category
(RxHCC)

If the Disease Group is listed in this column…

…Then drop the RxHCC(s)
listed in this column

Rx Hierarchical Condition Category (RxHCC) LABEL
15

Chronic Myeloid Leukemia

16

18

Multiple Myeloma and Other Neoplastic Disorders
Secondary Cancers of Bone, Lung, Brain, and Other Specified
Sites; Liver Cancer
Lung, Kidney, and Other Cancers

30

Diabetes with Complications

31

54

Chronic Viral Hepatitis C

55

65

Chronic Pancreatitis

82

Psoriatic Arthropathy and Systemic Sclerosis

83

Rheumatoid Arthritis and Other Inflammatory Polyarthropathy

84

95

Sickle Cell Anemia

98

96

Myelodysplastic Syndromes and Myelofibrosis

98

111

Alzheimer's Disease

130

Schizophrenia

131

Bipolar Disorders

112
131, 132, 133, 134, 135, 145,
146, 147, 148
132, 133, 134, 135

132

Major Depression

133, 134, 135

133

Specified Anxiety, Personality, and Behavior Disorders

134

Depression

145

Autism

146

Profound or Severe Intellectual Disability/Developmental Disorder

147

Moderate Intellectual Disability/Developmental Disorder

163

Intractable Epilepsy

164

Epilepsy and Other Seizure Disorders, Except Intractable Epilepsy

185

Primary Pulmonary Hypertension

186

Congestive Heart Failure

225

Cystic Fibrosis

226

Chronic Obstructive Pulmonary Disease and Asthma

260

Kidney Transplant Status

261

Dialysis Status

262

Chronic Kidney Disease Stage 5

395

Lung Transplant Status

396

Major Organ Transplant Status, Except Lung, Kidney, and Pancreas

17

16, 17, 18, 19, 96, 98
17, 18, 19, 96, 98
18, 19
19

66
83, 84, 316

134, 135
135
133, 134, 135, 146, 147, 148
147, 148
148
164, 165
165
186, 187
187
226, 227
227
261, 262, 263, 397
262, 263
263
396, 397
397

How Payments are Made with a Disease Hierarchy: If a beneficiary triggers Disease Groups 163 (Intractable Epilepsy) and 164
(Epilepsy and Other Seizure Disorders, Except Intractable Epilepsy), then DG 164 will be dropped. In other words, payment will always
be associated with the DG in column 1, if a DG in column 3 also occurs during the same collection period. Therefore, the organization’s
payment will be based on DG 163 rather than DG 164.
SOURCE: RTI International.

 76
Table V-6. ESRD Model Continuing Enrollee Dialysis Relative Factors
Variable

Description Label

Relative
Factors

Female
0-34 Years

0.618

35-44 Years

0.567

45-54 Years

0.522

55-59 Years

0.535

60-64 Years

0.553

65-69 Years

0.635

70-74 Years

0.653

75-79 Years

0.658

80-84 Years

0.671

85-89 Years

0.671

90-94 Years

0.671

95 Years or Over

0.671

Male
0-34 Years

0.527

35-44 Years

0.502

45-54 Years

0.478

55-59 Years

0.495

60-64 Years

0.498

65-69 Years

0.562

70-74 Years

0.611

75-79 Years

0.634

80-84 Years

0.652

85-89 Years

0.663

90-94 Years

0.663

95 Years or Over

0.663

Medicaid, Originally Disabled, and Originally ESRD Interactions with Age and Sex
Medicaid_Female_Aged

0.067

Medicaid_Female_NonAged
(Age <65)
Medicaid_Male_Aged

0.065

Medicaid_Male_NonAged
(Age <65)
Originally Disabled_Female2

0.090

Originally ESRD_Male

-

2

-

3

-0.078

Originally Disabled_Male
Originally ESRD_Female

0.122

3

-0.049

Disease Coefficients
HCC1

HIV/AIDS

0.154

 77
Variable

Description Label

HCC2
HCC6

Septicemia, Sepsis, Systemic Inflammatory Response
Syndrome/Shock
Opportunistic Infections

HCC8

Metastatic Cancer and Acute Leukemia

0.295

HCC9

Lung and Other Severe Cancers

0.169

HCC10

Lymphoma and Other Cancers

0.136

HCC11

Colorectal, Bladder, and Other Cancers

0.076

HCC12

Breast, Prostate, and Other Cancers and Tumors

0.046

HCC17

Diabetes with Acute Complications

0.244

HCC18

Diabetes with Chronic Complications

0.091

HCC19

Diabetes without Complication

0.066

HCC21

Protein-Calorie Malnutrition

0.055

HCC22

Morbid Obesity

0.073

HCC23

Other Significant Endocrine and Metabolic Disorders

0.013

HCC27

End-Stage Liver Disease

0.204

HCC28

Cirrhosis of Liver

0.086

HCC29

Chronic Hepatitis

0.069

HCC33

Intestinal Obstruction/Perforation

0.072

HCC34

Chronic Pancreatitis

0.073

HCC35

Inflammatory Bowel Disease

0.053

HCC39

Bone/Joint/Muscle Infections/Necrosis

0.061

HCC40

0.072

HCC46

Rheumatoid Arthritis and Inflammatory Connective Tissue
Disease
Severe Hematological Disorders

HCC47

Disorders of Immunity

0.097

HCC48

0.059

HCC51

Coagulation Defects and Other Specified Hematological
Disorders
Dementia With Complications

HCC52

Dementia Without Complication

0.045

HCC54

Drug/Alcohol Psychosis

0.048

HCC55

Drug/Alcohol Dependence

0.048

HCC57

Schizophrenia

0.142

HCC58

Major Depressive, Bipolar, and Paranoid Disorders

0.091

HCC70

Quadriplegia

0.274

HCC71

Paraplegia

0.200

HCC72

Spinal Cord Disorders/Injuries

0.102

HCC73

Amyotrophic Lateral Sclerosis and Other Motor Neuron
Disease
Cerebral Palsy

0.117

HCC74

Relative
Factors
0.081
0.052

0.180

0.097

0.036

 78
Variable

Description Label

HCC75

Polyneuropathy

HCC76

Muscular Dystrophy

0.062

HCC77

Multiple Sclerosis

0.069

HCC78

Parkinson's and Huntington's Diseases

0.065

HCC79

Seizure Disorders and Convulsions

0.066

HCC80

Coma, Brain Compression/Anoxic Damage

0.043

HCC82

Respirator Dependence/Tracheostomy Status

0.242

HCC83

Respiratory Arrest

0.114

HCC84

Cardio-Respiratory Failure and Shock

0.044

HCC85

Congestive Heart Failure

0.082

HCC86

Acute Myocardial Infarction

0.131

HCC87

Unstable Angina and Other Acute Ischemic Heart Disease

0.116

HCC88

Angina Pectoris

0.048

HCC96

Specified Heart Arrhythmias

0.093

HCC99

Cerebral Hemorrhage

0.078

HCC100

Ischemic or Unspecified Stroke

0.078

HCC103

Hemiplegia/Hemiparesis

0.086

HCC104

Monoplegia, Other Paralytic Syndromes

0.077

HCC106

0.321

HCC107

Atherosclerosis of the Extremities with Ulceration or
Gangrene
Vascular Disease with Complications

HCC108

Vascular Disease

0.065

HCC110

Cystic Fibrosis

0.072

HCC111

Chronic Obstructive Pulmonary Disease

0.072

HCC112

Fibrosis of Lung and Other Chronic Lung Disorders

0.066

HCC114

Aspiration and Specified Bacterial Pneumonias

0.063

HCC115

Pneumococcal Pneumonia, Empyema, Lung Abscess

0.013

HCC122

Proliferative Diabetic Retinopathy and Vitreous
Hemorrhage
Exudative Macular Degeneration

HCC124
HCC157

Relative
Factors
0.059

0.126

0.055
0.277

HCC158

Pressure Ulcer of Skin with Necrosis Through to Muscle,
Tendon, or Bone
Pressure Ulcer of Skin with Full Thickness Skin Loss

HCC159

Pressure Ulcer of Skin with Partial Thickness Skin Loss

0.147

HCC160

Pressure Pre-Ulcer Skin Changes or Unspecified Stage

0.147

HCC161

Chronic Ulcer of Skin, Except Pressure

0.119

HCC162

Severe Skin Burn or Condition

0.042

HCC166

Severe Head Injury

0.043

HCC167

Major Head Injury

0.017

0.161

 79
Variable

Description Label

Relative
Factors
0.065

HCC169

Vertebral Fractures without Spinal Cord Injury

HCC170

Hip Fracture/Dislocation

0.050

HCC173

Traumatic Amputations and Complications

0.042

HCC176

Complications of Specified Implanted Device or Graft

HCC186

Major Organ Transplant or Replacement Status

0.154

HCC188

Artificial Openings for Feeding or Elimination

0.078

HCC189

Amputation Status, Lower Limb/Amputation Complications

0.090

SEPSIS_CARD_RESP_FAIL

Sepsis*Cardiorespiratory Failure

0.038

CANCER_IMMUNE

Cancer*Immune Disorders

0.025

DIABETES_CHF

Diabetes*Congestive Heart Failure

-

Disease Interactions

CHF_COPD

-

Congestive Heart Failure*Chronic Obstructive Pulmonary
Disease
COPD_CARD_RESP_FAIL
Chronic Obstructive Pulmonary Disease*Cardiorespiratory
Failure
NonAged (Age <65)/Disease Interactions

0.022

NONAGED_HCC6

NonAged, Opportunistic Infections

0.073

NONAGED_HCC34

NonAged, Chronic Pancreatitis

0.113

NONAGED_HCC46

NonAged, Severe Hematological Disorders

0.157

NONAGED_HCC54

NonAged, Drug/Alcohol Psychosis

0.133

NONAGED_HCC55

NonAged, Drug/Alcohol Dependence

0.122

NONAGED_HCC110

NonAged, Cystic Fibrosis

0.298

NONAGED_HCC176

NonAged, Complications of Specified Implanted Device or
Graft

0.040

0.024

NOTES:
1. The CMS ESRD Dialysis Denominator used to calculate the relative factors is $82,113.76.
2. Originally Disabled indicates beneficiary originally entitled to Medicare for reasons of disability other than ESRD.
3. Originally ESRD indicates beneficiary originally entitled to Medicare due to ESRD. Beneficiaries who are Originally
ESRD cannot be Originally Disabled.
4. In the “disease interactions,” the variables are defined as follows:
Sepsis = HCC 2.
Cardiorespiratory Failure = HCCs 82-84.
Cancer = HCCs 8-12.
Immune Disorders = HCC 47.
Diabetes = HCCs 17, 18, 19.
Congestive Heart Failure = HCC 85.
Chronic Obstructive Pulmonary Disease = HCCs 110-111.
SOURCE: RTI International analysis of 2014/2015 Medicare 100% ESRD claims and enrollment data.

 80
Table V-7. ESRD Model Demographic Relative Factors for New Enrollees in Dialysis Status
Non-Medicaid &
Non-Originally
Disabled

Medicaid & NonOriginally
Disabled

Non-Medicaid &
Originally Disabled

Medicaid &
Originally
Disabled

Female
0-34 Years

0.793

1.066

1.120

1.328

35-44 Years

0.793

1.028

1.120

1.328

45-54 Years

0.877

1.029

1.120

1.368

55-59 Years

0.917

1.049

1.120

1.368

60-64 Years

0.975

1.112

1.181

1.387

65-69 Years

1.121

1.295

1.236

1.409

70-74 Years

1.191

1.397

1.331

1.444

75-79 Years

1.191

1.397

1.380

1.488

80-84 Years

1.221

1.397

1.380

1.488

85 Years or Over

1.164

1.454

1.380

1.488

Male
0-34 Years

0.700

0.897

1.001

1.246

35-44 Years

0.700

0.922

1.001

1.246

45-54 Years

0.759

0.950

1.001

1.271

55-59 Years

0.865

1.015

1.033

1.292

60-64 Years

0.905

1.064

1.033

1.361

65-69 Years

1.025

1.249

1.033

1.361

70-74 Years

1.127

1.382

1.220

1.474

75-79 Years

1.181

1.382

1.253

1.474

80-84 Years

1.175

1.382

1.253

1.474

85 Years or Over

1.161

1.485

1.253

1.474

NOTES:

1.
2.

The CMS ESRD Dialysis Denominator used to calculate the relative factors is $82,113.76.
Originally Disabled terms refer to beneficiaries originally entitled to Medicare for reasons of disability other than ESRD.
SOURCE: RTI International analysis of 2014/2015 Medicare 100% ESRD claims and enrollment data.

 81
Table V-8. ESRD Kidney Transplant CMS-HCC Model Relative Factors for Transplant
Beneficiaries
Beneficiaries
Month 1
Months 2 and 3
Total (Actual Months 1-3)

Kidney Transplant Actual
Dollars

Kidney Transplant
Relative Risk Factor

9,606

$41,260.76

6.030

18,651

6,126.29

0.895

$53,493.60

NOTES:
1. Kidney transplant is identified by MS-DRG 652.
2. The transplant month payments were computed by aggregating the costs for each of the three monthly payments.
3. The transplant factor is calculated in this manner: (kidney transplant month’s dollars/Dialysis Denominator) ×12. The
CMS ESRD Dialysis Denominator value used was $82,113.76.
SOURCE: RTI International analysis of 2014/2015 Medicare 100% ESRD claims and enrollment data

 82

Table V-9. ESRD Model Functioning Graft Relative Factors for Community Population
Variable

Description Label

Relative Factors

Functioning Graft Factors
Aged 65+, with duration since transplant of 4-9 months

2.562

Aged <65, with duration since transplant of 4-9 months

2.174

Aged 65+, with duration since transplant of 10 months or more

1.121

Aged <65, with duration since transplant of 10 months or more

0.840

Female
0-34 Years

0.196

35-44 Years

0.219

45-54 Years

0.256

55-59 Years

0.306

60-64 Years

0.360

65-69 Years

0.291

70-74 Years

0.350

75-79 Years

0.406

80-84 Years

0.480

85-89 Years

0.590

90-94 Years

0.724

95 Years or Over

0.737

Male
0-34 Years

0.067

35-44 Years

0.076

45-54 Years

0.149

55-59 Years

0.226

60-64 Years

0.297

65-69 Years

0.274

70-74 Years

0.353

75-79 Years

0.425

80-84 Years

0.499

85-89 Years

0.625

90-94 Years

0.775

95 Years or Over

0.914

Medicaid and Originally Disabled Interactions with Age and Sex
Medicaid_Female_Aged

0.275

Medicaid_Female_NonAged (Age <65)

0.137

Medicaid_Male_Aged

0.367

Medicaid_Male_NonAged (Age <65)

0.190

Originally Disabled_Female_Age ≥65

0.184

Originally Disabled_Male_Age ≥65

0.115

 83
Variable

Description Label

Relative Factors

Disease Coefficients
HCC1

HIV/AIDS

0.350

HCC2

Septicemia, Sepsis, Systemic Inflammatory
Response Syndrome/Shock

0.428

HCC6

Opportunistic Infections

0.426

HCC8

Metastatic Cancer and Acute Leukemia

2.627

HCC9

Lung and Other Severe Cancers

0.975

HCC10

Lymphoma and Other Cancers

0.668

HCC11

Colorectal, Bladder, and Other Cancers

0.298

HCC12

Breast, Prostate, and Other Cancers and Tumors

0.156

HCC17

Diabetes with Acute Complications

0.243

HCC18

Diabetes with Chronic Complications

0.243

HCC19

Diabetes without Complication

0.094

HCC21

Protein-Calorie Malnutrition

0.593

HCC22

Morbid Obesity

0.278

HCC23

0.234

HCC27

Other Significant Endocrine and Metabolic
Disorders
End-Stage Liver Disease

HCC28

Cirrhosis of Liver

0.384

HCC29

Chronic Hepatitis

0.243

HCC33

Intestinal Obstruction/Perforation

0.285

HCC34

Chronic Pancreatitis

0.282

HCC35

Inflammatory Bowel Disease

0.362

HCC39

Bone/Joint/Muscle Infections/Necrosis

0.468

HCC40

Rheumatoid Arthritis and Inflammatory Connective
Tissue Disease

0.398

HCC46

Severe Hematological Disorders

1.325

HCC47

Disorders of Immunity

0.688

HCC48

Coagulation Defects and Other Specified
Hematological Disorders

0.234

HCC51

Dementia With Complications

0.643

HCC52

Dementia Without Complication

0.328

HCC54

Drug/Alcohol Psychosis

0.352

HCC55

Drug/Alcohol Dependence

0.352

HCC57

Schizophrenia

0.442

HCC58

Major Depressive, Bipolar, and Paranoid Disorders

0.260

HCC70

Quadriplegia

1.112

HCC71

Paraplegia

0.943

HCC72

Spinal Cord Disorders/Injuries

0.456

1.028

 84
Variable

Description Label

HCC73

Amyotrophic Lateral Sclerosis and Other Motor
Neuron Disease

HCC74

Cerebral Palsy

-

HCC75

Polyneuropathy

0.284

HCC76

Muscular Dystrophy

0.544

HCC77

Multiple Sclerosis

0.546

HCC78

Parkinson's and Huntington's Diseases

0.583

HCC79

Seizure Disorders and Convulsions

0.221

HCC80

Coma, Brain Compression/Anoxic Damage

0.184

HCC82

Respirator Dependence/Tracheostomy Status

1.231

HCC83

Respiratory Arrest

0.540

HCC84

Cardio-Respiratory Failure and Shock

0.345

HCC85

Congestive Heart Failure

0.336

HCC86

Acute Myocardial Infarction

0.258

HCC87

0.258

HCC88

Unstable Angina and Other Acute Ischemic Heart
Disease
Angina Pectoris

HCC96

Specified Heart Arrhythmias

0.303

HCC99

Cerebral Hemorrhage

0.252

HCC100

Ischemic or Unspecified Stroke

0.252

HCC103

Hemiplegia/Hemiparesis

0.467

HCC104

Monoplegia, Other Paralytic Syndromes

0.307

HCC106

Atherosclerosis of the Extremities with Ulceration
or Gangrene

1.385

HCC107

Vascular Disease with Complications

0.431

HCC108

Vascular Disease

0.271

HCC110

Cystic Fibrosis

0.494

HCC111

Chronic Obstructive Pulmonary Disease

0.313

HCC112

Fibrosis of Lung and Other Chronic Lung Disorders

0.281

HCC114

Aspiration and Specified Bacterial Pneumonias

0.596

HCC115

Pneumococcal Pneumonia, Empyema, Lung
Abscess
Proliferative Diabetic Retinopathy and Vitreous
Hemorrhage

0.155

HCC124

Exudative Macular Degeneration

0.512

HCC134

Dialysis Status

–

HCC135

Acute Renal Failure

–

HCC136

Chronic Kidney Disease, Stage 5

–

HCC137

Chronic Kidney Disease, Severe (Stage 4)

–

HCC122

Relative Factors
1.030

0.129

0.248

 85
Variable

Description Label

HCC138

Chronic Kidney Disease, Moderate (Stage 3)

–

HCC139

Chronic Kidney Disease, Mild or Unspecified
(Stages 1-2 or Unspecified)

–

HCC140

Unspecified Renal Failure

–

HCC141

Nephritis

–

HCC157

Pressure Ulcer of Skin with Necrosis Through to
Muscle, Tendon, or Bone

2.492

HCC158

1.285

HCC161

Pressure Ulcer of Skin with Full Thickness Skin
Loss
Pressure Ulcer of Skin with Partial Thickness Skin
Loss
Pressure Pre-Ulcer Skin Changes or Unspecified
Stage
Chronic Ulcer of Skin, Except Pressure

HCC162

Severe Skin Burn or Condition

0.370

HCC166

Severe Head Injury

0.184

HCC167

Major Head Injury

0.184

HCC169

Vertebral Fractures without Spinal Cord Injury

0.456

HCC170

Hip Fracture/Dislocation

0.350

HCC173

Traumatic Amputations and Complications

0.290

HCC176

0.599

HCC186

Complications of Specified Implanted Device or
Graft
Major Organ Transplant or Replacement Status

HCC188

Artificial Openings for Feeding or Elimination

0.643

HCC189

Amputation Status, Lower Limb/Amputation
Complications

0.654

SEPSIS_CARD_RESP_FAIL

Sepsis*Cardiorespiratory Failure

0.133

CANCER_IMMUNE

Cancer*Immune Disorders

0.773

DIABETES_CHF

Diabetes*Congestive Heart Failure

0.160

CHF_COPD

Congestive Heart Failure*Chronic Obstructive
Pulmonary Disease

0.227

CHF_RENAL

Congestive Heart Failure*Renal Disease

COPD_CARD_RESP_FAIL

Chronic Obstructive Pulmonary
Disease*Cardiorespiratory Failure

HCC159
HCC160

Relative Factors

0.955
0.799
0.503

0.075

Disease Interactions

–
0.453

NonAged (Age <65)/Disease Interactions
NONAGED_HCC6

NonAged, Opportunistic Infections

0.561

NONAGED_HCC34

NonAged, Chronic Pancreatitis

0.534

NONAGED_HCC46

NonAged, Severe Hematological Disorders

2.791

NONAGED_HCC54

NonAged, Drug/Alcohol Psychosis

0.549

 86
Variable

Description Label

Relative Factors

NONAGED_HCC55

NonAged, Drug/Alcohol Dependence

0.066

NONAGED_HCC110

NonAged, Cystic Fibrosis

2.746

NONAGED_HCC176

NonAged, Complications of Specified Implanted
Device or Graft

–

NOTES:
1. The Denominator used to calculate the relative factors is $9,366.89.
2. The coefficients estimated for this model are the Functioning Graft add-on factors for being in a month after the 3
months accounted for in the Transplant segment of the ESRD system. Early months post-transplant incur higher
Medicare spending than later months. The model differentiates the six months, months 4-9, from months further
from the transplant period.
3. Originally Disabled terms refer to beneficiaries originally entitled to Medicare for reasons of disability other than
ESRD.
4. In the “disease interactions,” the variables are defined as follows:
Sepsis = HCC 2.
Cardiorespiratory Failure = HCCs 82-84.
Cancer = HCCs 8-12.
Immune Disorders = HCC 47.
Diabetes = HCCs 17, 18, 19.
Congestive Heart Failure = HCC 85.
Chronic Obstructive Pulmonary Disease = HCCs 110-111.
Renal Disease = HCCs 134-141.
SOURCE: RTI International analysis of 2014/2015 100% ESRD sample claims and enrollment data and 2014/2015 Medicare
100% sample.

 87
Table V-10. ESRD Model Functioning Graft Relative Factors for Institutionalized
Population
Variable

Description Label

Relative Factors

Functioning Graft Factors
Aged 65+, with duration since transplant of 4-9 months

2.562

Aged <65, with duration since transplant of 4-9 months

2.174

Aged 65+, with duration since transplant of 10 months or more

1.121

Aged <65, with duration since transplant of 10 months or more

0.840

Female
0-34 Years

0.848

35-44 Years

1.061

45-54 Years

0.992

55-59 Years

1.014

60-64 Years

1.017

65-69 Years

1.212

70-74 Years

1.120

75-79 Years

0.988

80-84 Years

0.861

85-89 Years

0.780

90-94 Years

0.651

95 Years or Over

0.484

Male
0-34 Years

1.055

35-44 Years

0.956

45-54 Years

0.924

55-59 Years

0.971

60-64 Years

1.013

65-69 Years

1.267

70-74 Years

1.306

75-79 Years

1.295

80-84 Years

1.188

85-89 Years

1.101

90-94 Years

0.969

95 Years or Over

0.799

Medicaid and Originally Disabled
Medicaid

0.074

Originally Disabled_Age ≥65

-

Disease Coefficients
HCC1

HIV/AIDS

1.708

 88
Variable

Description Label

Relative Factors

HCC2

0.274

HCC6

Septicemia, Sepsis, Systemic
Inflammatory Response
Syndrome/Shock
Opportunistic Infections

HCC8

Metastatic Cancer and Acute Leukemia

1.289

HCC9

Lung and Other Severe Cancers

0.604

HCC10

Lymphoma and Other Cancers

0.451

HCC11

Colorectal, Bladder, and Other Cancers

0.284

HCC12

0.194

HCC17

Breast, Prostate, and Other Cancers and
Tumors
Diabetes with Acute Complications

HCC18

Diabetes with Chronic Complications

0.373

HCC19

Diabetes without Complication

0.165

HCC21

Protein-Calorie Malnutrition

0.252

HCC22

Morbid Obesity

0.429

HCC23

0.359

HCC27

Other Significant Endocrine and
Metabolic Disorders
End-Stage Liver Disease

HCC28

Cirrhosis of Liver

0.479

HCC29

Chronic Hepatitis

0.479

HCC33

Intestinal Obstruction/Perforation

0.346

HCC34

Chronic Pancreatitis

0.422

HCC35

Inflammatory Bowel Disease

0.341

HCC39

Bone/Joint/Muscle Infections/Necrosis

0.375

HCC40

Rheumatoid Arthritis and Inflammatory
Connective Tissue Disease

0.274

HCC46

Severe Hematological Disorders

0.766

HCC47

Disorders of Immunity

0.549

HCC48

Coagulation Defects and Other Specified
Hematological Disorders

0.173

HCC51

Dementia With Complications

-

HCC52

Dementia Without Complication

-

HCC54

Drug/Alcohol Psychosis

0.112

HCC55

Drug/Alcohol Dependence

0.112

HCC57

Schizophrenia

0.217

HCC58

0.217

HCC70

Major Depressive, Bipolar, and Paranoid
Disorders
Quadriplegia

HCC71

Paraplegia

0.435

HCC72

Spinal Cord Disorders/Injuries

0.256

0.568

0.373

0.863

0.512

 89
Variable

Description Label

HCC73

Amyotrophic Lateral Sclerosis and Other
Motor Neuron Disease

HCC74

Cerebral Palsy

-

HCC75

Polyneuropathy

0.323

HCC76

Muscular Dystrophy

0.296

HCC77

Multiple Sclerosis

HCC78

Parkinson's and Huntington's Diseases

0.141

HCC79

Seizure Disorders and Convulsions

0.065

HCC80

1.602

HCC83

Coma, Brain Compression/Anoxic
Damage
Respirator Dependence/Tracheostomy
Status
Respiratory Arrest

HCC84

Cardio-Respiratory Failure and Shock

0.311

HCC85

Congestive Heart Failure

0.186

HCC86

Acute Myocardial Infarction

0.392

HCC87

0.392

HCC88

Unstable Angina and Other Acute
Ischemic Heart Disease
Angina Pectoris

HCC96

Specified Heart Arrhythmias

0.247

HCC99

Cerebral Hemorrhage

0.105

HCC100

Ischemic or Unspecified Stroke

0.105

HCC103

Hemiplegia/Hemiparesis

-

HCC104

Monoplegia, Other Paralytic Syndromes

-

HCC106

Atherosclerosis of the Extremities with
Ulceration or Gangrene

0.754

HCC107

Vascular Disease with Complications

0.300

HCC108

Vascular Disease

0.086

HCC110

Cystic Fibrosis

0.435

HCC111

Chronic Obstructive Pulmonary Disease

0.299

HCC112

0.299

HCC124

Fibrosis of Lung and Other Chronic
Lung Disorders
Aspiration and Specified Bacterial
Pneumonias
Pneumococcal Pneumonia, Empyema,
Lung Abscess
Proliferative Diabetic Retinopathy and
Vitreous Hemorrhage
Exudative Macular Degeneration

HCC134

Dialysis Status

–

HCC135

Acute Renal Failure

–

HCC82

HCC114
HCC115
HCC122

Relative Factors
0.446

-

-

0.466

0.392

0.143
0.143
0.388
0.209

 90
Variable

Description Label

HCC136

Chronic Kidney Disease, Stage 5

–

HCC137

Chronic Kidney Disease, Severe (Stage
4)
Chronic Kidney Disease, Moderate
(Stage 3)
Chronic Kidney Disease, Mild or
Unspecified (Stages 1-2 or Unspecified)

–

HCC140

Unspecified Renal Failure

–

HCC141

Nephritis

–

HCC157

Pressure Ulcer of Skin with Necrosis
Through to Muscle, Tendon, or Bone

0.968

HCC158

0.378

HCC161

Pressure Ulcer of Skin with Full
Thickness Skin Loss
Pressure Ulcer of Skin with Partial
Thickness Skin Loss
Pressure Pre-Ulcer Skin Changes or
Unspecified Stage
Chronic Ulcer of Skin, Except Pressure

HCC162

Severe Skin Burn or Condition

-

HCC166

Severe Head Injury

-

HCC167

Major Head Injury

-

HCC169

Vertebral Fractures without Spinal Cord
Injury
Hip Fracture/Dislocation

0.237

Traumatic Amputations and
Complications
Complications of Specified Implanted
Device or Graft
Major Organ Transplant or Replacement
Status
Artificial Openings for Feeding or
Elimination
Amputation Status, Lower
Limb/Amputation Complications

0.061

CHF_COPD

Congestive Heart Failure*Chronic
Obstructive Pulmonary Disease

0.190

CRFAIL_COPD

Cardiorespiratory Failure*Chronic
Obstructive Pulmonary Disease

0.416

SEPSIS_PRESSURE_ULCER

Sepsis*Pressure Ulcer

0.226

SEPSIS_ARTIF_OPENINGS

Sepsis*Artificial Openings for Feeding
or Elimination

0.452

HCC138
HCC139

HCC159
HCC160

HCC170
HCC173
HCC176
HCC186
HCC188
HCC189

Relative Factors

–
–

0.225
0.225
0.225

-

0.599
0.075
0.482
0.339

Disease Interactions

 91
Variable

Description Label

ARTIF_OPENINGS_
PRESSURE_ULCER

Artificial Openings for Feeding or
Elimination*Pressure Ulcer

0.295

DIABETES_CHF

Diabetes*Congestive Heart Failure

0.159

COPD_ASP_SPEC_
BACT_PNEUM

0.220

ASP_SPEC_BACT_PNEUM_
PRES_ULCER

Chronic Obstructive Pulmonary
Disease*Aspiration and Specified
Bacterial Pneumonias
Aspiration and Specified Bacterial
Pneumonias*Pressure Ulcer

SEPSIS_ASP_SPEC_
BACT_PNEUM

Sepsis*Aspiration and Specified
Bacterial Pneumonias

0.347

SCHIZOPHRENIA_COPD

Schizophrenia*Chronic Obstructive
Pulmonary Disease
Schizophrenia*Congestive Heart Failure

0.402

Schizophrenia*Seizure Disorders and
Convulsions

0.541

NONAGED_HCC85

NonAged, Congestive Heart Failure

0.263

NONAGED_PRESSURE_ULCER

NonAged, Pressure Ulcer

0.528

NONAGED_HCC161

0.469

NONAGED_HCC77

NonAged, Chronic Ulcer of the Skin,
Except Pressure Ulcer
NonAged, Bone/Joint Muscle
Infections/Necrosis
NonAged, Multiple Sclerosis

NONAGED_HCC6

NonAged, Opportunistic Infections

0.314

SCHIZOPHRENIA_CHF
SCHIZOPHRENIA_SEIZURES

Relative Factors

0.252

0.122

NonAged (Age <65)/Disease Interactions

NONAGED_HCC39

0.447
0.448

NOTES:
1. The Denominator used to calculate the relative factors is $9,366.89.
2. The coefficients estimated for this model are the Functioning Graft add-on factors for being in a month after the 3
months accounted for in the Transplant segment of the ESRD system. Early months post-transplant incur higher
Medicare spending than later months. The model differentiates the six months, months 4-9, from months further from
the transplant period.
3. Originally Disabled terms refer to beneficiaries originally entitled to Medicare for reasons of disability other than
ESRD.
4. In the “Disease interactions” and “Non-Aged interactions,” the variables are defined as follows:
Sepsis = HCC 2.
Cardiorespiratory Failure = HCCs 82-84.
Diabetes = HCCs 17, 18, 19.
Congestive Heart Failure = HCC 85.
Chronic Obstructive Pulmonary Disease = HCCs 110-111.
Pressure Ulcer = HCCs 157-160.
Artificial Openings for Feeding or Elimination = HCC 188.
Aspiration and Specified Bacterial Pneumonias = HCC 114.
Schizophrenia = HCC 57.
Seizure Disorders and Convulsions = HCC 79.
Chronic Ulcer of Skin, except Pressure = HCC 161.
Bone/Joint/Muscle Infections/Necrosis = HCC 39.
Multiple Sclerosis = HCC 77.
Opportunistic Infections = HCC 6.

 92
SOURCE: RTI International analysis of 2014/2015 100% ESRD sample claims and enrollment data and 2014/2015 Medicare
100% institutional sample.

 93
Table V-11. ESRD Model Demographic Relative Factors for Functioning Graft New
Enrollees Duration Since Transplant of 4-9 Months

Female
0-34 Years
35-44 Years
45-54 Years
55-59 Years
60-64 Years
65 Years
66 Years
67 Years
68 Years
69 Years
70-74 Years
75-79 Years
80-84 Years
85-89 Years
90-94 Years
95 Years or Over
Male
0-34 Years
35-44 Years
45-54 Years
55-59 Years
60-64 Years
65 Years
66 Years
67 Years
68 Years
69 Years
70-74 Years
75-79 Years
80-84 Years
85-89 Years
90-94 Years
95 Years or Over

Non-Medicaid &
Non-Originally
Disabled

Medicaid & NonOriginally
Disabled

Non-Medicaid &
Originally
Disabled

Medicaid &
Originally
Disabled

2.978
3.121
3.189
3.190
3.307
3.082
3.077
3.106
3.159
3.162
3.252
3.422
3.576
3.856
3.856
3.856

3.143
3.376
3.479
3.481
3.582
3.555
3.459
3.481
3.512
3.512
3.547
3.695
3.914
4.097
4.263
4.263

–
–
–
–
–
3.629
3.629
3.629
3.846
3.846
3.846
3.846
3.846
3.846
3.846
3.846

–
–
–
–
–
4.019
4.019
4.565
4.565
4.565
4.565
4.565
4.565
4.565
4.565
4.565

2.616
2.831
3.038
3.077
3.122
3.079
3.095
3.144
3.188
3.252
3.347
3.621
3.808
4.038
4.038
4.038

2.908
3.233
3.527
3.592
3.724
3.706
3.656
3.713
3.764
3.764
3.860
3.969
4.117
4.339
4.339
4.339

–
–
–
–
–
3.388
3.633
3.685
3.685
3.961
3.961
3.961
3.961
3.961
3.961
3.961

–
–
–
–
–
4.373
4.760
4.760
4.760
4.760
4.760
4.760
4.760
4.760
4.760
4.760

NOTES:
1. The relative factors are derived from the Graft New Enrollee model. The Denominator used to calculate the relative
factors is $9,366.89.
2. Originally Disabled terms refer to beneficiaries originally entitled to Medicare for reasons of disability other than ESRD.
In this model, Originally Disabled is defined only for beneficiaries age 65 and greater.
SOURCE: RTI International analysis of 2014/2015 100% ESRD sample claims and enrollment data and 2014/2015 Medicare
100% sample.

 94
Table V-12. ESRD Model Demographic Relative Factors for Functioning Graft New
Enrollees Duration Since Transplant of 10 Months or More

Female
0-34 Years
35-44 Years
45-54 Years
55-59 Years
60-64 Years
65 Years
66 Years
67 Years
68 Years
69 Years
70-74 Years
75-79 Years
80-84 Years
85-89 Years
90-94 Years
95 Years or Over
Male
0-34 Years
35-44 Years
45-54 Years
55-59 Years
60-64 Years
65 Years
66 Years
67 Years
68 Years
69 Years
70-74 Years
75-79 Years
80-84 Years
85-89 Years
90-94 Years
95 Years or Over

Non-Medicaid &
Non-Originally
Disabled

Medicaid & NonOriginally
Disabled

Non-Medicaid &
Originally
Disabled

Medicaid &
Originally
Disabled

1.644
1.787
1.855
1.856
1.973
1.641
1.636
1.665
1.718
1.721
1.811
1.981
2.135
2.415
2.415
2.415

1.809
2.042
2.145
2.147
2.248
2.114
2.018
2.040
2.071
2.071
2.106
2.254
2.473
2.656
2.822
2.822

–
–
–
–
–
2.188
2.188
2.188
2.405
2.405
2.405
2.405
2.405
2.405
2.405
2.405

–
–
–
–
–
2.578
2.578
3.124
3.124
3.124
3.124
3.124
3.124
3.124
3.124
3.124

1.282
1.497
1.704
1.743
1.788
1.638
1.654
1.703
1.747
1.811
1.906
2.180
2.367
2.597
2.597
2.597

1.574
1.899
2.193
2.258
2.390
2.265
2.215
2.272
2.323
2.323
2.419
2.528
2.676
2.898
2.898
2.898

–
–
–
–
–
1.947
2.192
2.244
2.244
2.520
2.520
2.520
2.520
2.520
2.520
2.520

–
–
–
–
–
2.932
3.319
3.319
3.319
3.319
3.319
3.319
3.319
3.319
3.319
3.319

NOTES:
1. The relative factors are derived from the Graft New Enrollee model. The Denominator used to calculate the relative
factors is $9,366.89.
2. Originally Disabled terms refer to beneficiaries originally entitled to Medicare for reasons of disability other than
ESRD. In this model, Originally Disabled is defined only for beneficiaries age 65 and greater.
SOURCE: RTI International analysis of 2014/2015 100% ESRD sample claims and enrollment data and 2014/2015 Medicare
100% sample.

 95
Table V-13. List of Disease Hierarchies for the ESRD Model
DISEASE HIERARCHIES
Hierarchical
Condition
Category
(HCC)

If the Disease Group is Listed in this column…

8
9
10
11
17
18
27
28
46
51
54
57
70
71
72
82
83
86
87
99
103
106
107
110
111
114
134

Hierarchical Condition Category (HCC) LABEL
Metastatic Cancer and Acute Leukemia
Lung and Other Severe Cancers
Lymphoma and Other Cancers
Colorectal, Bladder, and Other Cancers
Diabetes with Acute Complications
Diabetes with Chronic Complications
End-Stage Liver Disease
Cirrhosis of Liver
Severe Hematological Disorders
Dementia With Complications
Drug/Alcohol Psychosis
Schizophrenia
Quadriplegia
Paraplegia
Spinal Cord Disorders/Injuries
Respirator Dependence/Tracheostomy Status
Respiratory Arrest
Acute Myocardial Infarction
Unstable Angina and Other Acute Ischemic Heart Disease
Cerebral Hemorrhage
Hemiplegia/Hemiparesis
Atherosclerosis of the Extremities with Ulceration or Gangrene
Vascular Disease with Complications
Cystic Fibrosis
Chronic Obstructive Pulmonary Disease
Aspiration and Specified Bacterial Pneumonias
Dialysis Status

135

Acute Renal Failure

136

Chronic Kidney Disease, Stage 5

137
138
139

Chronic Kidney Disease, Severe (Stage 4)
Chronic Kidney Disease, Moderate (Stage 3)
Chronic Kidney Disease, Mild or Unspecified (Stages 1-2 or
Unspecified)
Unspecified Renal Failure
Pressure Ulcer of Skin with Necrosis Through to Muscle, Tendon, or
Bone
Pressure Ulcer of Skin with Full Thickness Skin Loss

140
157
158

…Then drop the
HCC(s) listed in this
column

9, 10, 11, 12
10, 11, 12
11, 12
12
18, 19
19
28, 29, 80
29
48
52
55
58
71, 72, 103, 104, 169
72, 104, 169
169
83, 84
84
87, 88
88
100
104
107, 108, 161, 189
108
111, 112
112
115
135, 136, 137, 138,
139, 140, 141
136, 137, 138, 139,
140, 141
137, 138, 139, 140,
141
138, 139, 140, 141
139, 140, 141
140, 141
141
158, 159, 160, 161
159, 160, 161

 96
DISEASE HIERARCHIES
Hierarchical
Condition
Category
(HCC)
159
160
166

If the Disease Group is Listed in this column…

Pressure Ulcer of Skin with Partial Thickness Skin Loss
Pressure Pre-Ulcer Skin Changes or Unspecified Stage
Severe Head Injury

…Then drop the
HCC(s) listed in this
column
160, 161
161
80, 167

How Payments are Made with a Disease Hierarchy: EXAMPLE: If a beneficiary triggers Disease Groups 8 (Metastatic
Cancer and Acute Leukemia) and 9 (Lung and Other Severe Cancers), then DG 9 will be dropped. In other words, payment will
always be associated with the DG in column 1, if a DG in column 3 also occurs during the same collection period. Therefore, the
organization’s payment will be based on DG 8 rather than DG 9.SOURCE: RTI International.

 97
Attachment VI. Draft CY 2019 Call Letter
Draft CY 2019 Call Letter
Table of Contents
Attachment VI. Draft CY 2019 Call Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
How to Use This Call Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
Section I – Parts C and D . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
Annual Calendar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
Enhancements to the 2019 Star Ratings and Future Measurement Concepts . . . . . . . 106
Incomplete and Inaccurate Bid Submissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157
Plan Corrections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 159
Validation Audits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 159
Plan Finder Civil Money Penalty (CMP) Icon or Other Type of Notice . . . . . . . . . . . 164
Enforcement Actions for Provider Directories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165
Audit of the Sponsoring Organization’s Compliance Program Effectiveness . . . . . . . 165
Innovations in Health Plan Design . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 166
New Medicare Card Project (formerly the Social Security Number Removal
Initiative, SSNRI) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167
Section II – Part C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168
Special Needs Plan (SNP) Legislative Sunset Provision . . . . . . . . . . . . . . . . . . . . . . 168
Overview of CY 2019 Benefits and Bid Review . . . . . . . . . . . . . . . . . . . . . . . . . . . 168
Plans with Low Enrollment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 170
Meaningful Difference (Substantially Duplicative Plan Offerings) . . . . . . . . . . . . . . 170
Total Beneficiary Cost (TBC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171
Maximum Out-of-Pocket (MOOP) Limits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 174
Per Member Per Month (PMPM) Actuarial Equivalent (AE) Cost Sharing Limits . . . 175
Part C Cost Sharing Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 176
Part C Optional Supplemental Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180
Employer Group Waiver Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 181
Tiered Cost Sharing of Medical Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 181
Outpatient Observation Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182
Coverage of Supervised Exercise Therapy (SET) for Symptomatic Peripheral Artery
Disease (PAD) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182
Health Related Supplemental Benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182
Enhanced Disease Management (EDM) for Dual Eligible Special Needs Plans (DSNPs) and Institutional Special Needs Plans (I-SNPs) . . . . . . . . . . . . . . . . . . . 183
Medicare Advantage (MA) Uniformity Flexibility . . . . . . . . . . . . . . . . . . . . . . . . . . 184
Medicare Advantage (MA) Segmented Service Area Options . . . . . . . . . . . . . . . . . . 185
Medicare Diabetes Prevention Program (MDPP) Services Clarification . . . . . . . . . . 185
Special Needs Plan (SNP)-Specific Networks Research and Development . . . . . . . . 185

 98
Rewards and Incentives for Completion of a Health Risk Assessment (HRA) . . . . . .
Cost Plan Transition to MA under MACRA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost Plan Competition Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Improving Beneficiary Communications and Reducing Burden for Integrated
D-SNPs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Parts A and B Cost-sharing for Individuals Enrolled in the Qualified Medicare
Beneficiary (QMB) Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Encounter Data Listening Forums, Monitoring and Compliance Activities . . . . . . . .
Transparency & Timeliness with Prior Authorization Processes . . . . . . . . . . . . . . . .
Section III – Part D . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Formulary Submissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expanding the Part D OTC Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Medication Therapy Management (MTM) Annual Cost Threshold . . . . . . . . . . . . . .
Part D Benefit Parameters for Non-Defined Standard Plans . . . . . . . . . . . . . . . . . . .
Benefit Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tier Composition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Improving Access to Part D Vaccines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Specialty Tiers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Low Enrollment Plans (Stand-alone PDPs only) . . . . . . . . . . . . . . . . . . . . . . . . . . .
Improving Drug Utilization Review Controls in Medicare Part D . . . . . . . . . . . . . . .
Coordination of Benefits (COB) User Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
LIS Enrollee Cost-sharing for Out-of-Network Part D Drugs . . . . . . . . . . . . . . . . . .
Timely Updates to LIS Status Based on Best Available Evidence . . . . . . . . . . . . . . .
Using the Best Available Information when making B vs D Coverage
Determinations for Immunosuppressants and Inhalation Durable Medical
Equipment (DME) Supply Drugs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Part D Mail-Order Refill Consent Policy– Solicitation for Comments . . . . . . . . . . . .
Section IV – Medicare-Medicaid Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Medicare-Medicaid Plan Annual Requirements and Timeline for CY 2019 . . . . . . . .

186
186
187
187
190
191
193
193
193
196
197
197
198
198
199
201
202
202
217
217
218

218
220
222
222

Appendix 1: Methodology for Plan Finder (PF) Composite Price Accuracy Display Measure 227
Contract Selection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 227
PF Composite Price Accuracy Score . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 227

 99

How to Use This Call Letter
The draft CY 2019 Call Letter contains information on the Part C and Part D programs that
Medicare Advantage Organizations (MAOs), Part D sponsors, and Medicare-Medicaid Plans
(MMPs) need to take into consideration in preparing their 2019 bids.
CMS has designed the policies contained in this draft Call Letter to improve the overall
management of the Medicare Advantage and Prescription Drug programs. CMS aims to expand
flexibilities so that plans and providers are empowered to meet the needs of Medicare
beneficiaries at the local level, while increasing beneficiary choice and improving the
patient/physician relationship. The policies in the draft Call Letter also reflect CMS efforts to
increase transparency in our decision-making and promote innovation.
If you have questions concerning this Call Letter, please contact: Kim Levin at
Kimberlee.Levin@cms.hhs.gov (Part C issues), Lucia Patrone at Lucia.Patrone@cms.hhs.gov
(Part D issues), or mmcocapsmodel@cms.hhs.gov (MMP issues).

 100

Section I – Parts C and D
Annual Calendar
Below is a combined calendar listing of key dates and timelines for operational
activities that pertain to Medicare Advantage (MA), Medicare AdvantagePrescription Drug) (MA-PD), Prescription Drug Plan (PDP), Medicare-Medicaid Plan
(MMP), and cost-based plans. The calendar provides important operational dates for
all organizations such as the date bids are due to CMS, the date that organizations
must inform CMS of their contract non-renewal, and dates for beneficiary mailings.

2018*Note: The dates listed under Part C include MA and MA-PD plans.
The dates listed under Part D also apply to MA and cost-based plans
offering a Part D benefit.
January 1 –
Annual 45-Day Medicare Advantage Disenrollment
February 14,
Period (MADP).
2018
Release of Contract Year CY 2019 Initial and Service
January 9, 2018
Area Applications for MA/MA-PD/PDP, MMP, SNP,
EGWP, and 1876 Cost Plan Expansions.
January 10,
MOC Renewal Submission period begins for SNP MOCs
2018
with approvals ending 12/31/2018.
Industry Training and Technical Assistance for CY 2019
January 2018
Model of Care (MOC) Submissions.
January 2018
Industry training on 2019 Applications.
CY 2019 Initial and Service Area Expansion Application
February 14,
for MA/MA-PD/PDP, MMP, SNP, EGWP, and 1876
2018
Cost Plan Expansion are due in the Health Plan
Management System (HPMS) by 8pm EST.
MOC Renewals Submissions for SNP MOCs with
February 14,
approvals ending as of 12/31/2018 are due in HPMS by
2018
8pm EST.
Submission of meaningful use HITECH attestation for
Late February,
qualifying MA Employer Plans and MA-affiliated
2018
hospitals.
CMS releases instructional memo concerning updates to
February, 2018
Parent Organization designations in HPMS.
Release of draft CY 2019 Formulary Reference File
February, 2018
(FRF).
Parent Organization Update requests from MAOs and
March 16, 2018
sponsors due to CMS (instructional memo released in
February 2018).
Mid-Late
Release of CY 2019 Formulary Reference File (FRF).
March, 2018
March 30, 2018
Release of the Fiscal Soundness Module in HPMS.
March/April,
CMS coordinates with MAOs and PDP Sponsors to
2018
resolve low enrollment issues for CY 2019.

*Part
C

*Part
D

Cost

MMP


























































































 101
2018*Note: The dates listed under Part C include MA and MA-PD plans.
*Part
The dates listed under Part D also apply to MA and cost-based plans
C
offering a Part D benefit.
CY 2019 Out Of Pocket Cost (OOPC) model and OOPC
estimates for each plan made available to MAOs, 1876
cost plans submitting MA conversion bids, and Part D
Early April,
sponsors for download from the CMS website.

2018
Information will assist plans in satisfying MA and Part D
requirements, such as meeting meaningful difference (if
applicable) and Total Beneficiary Cost (TBC)
requirements prior to bid submission.
Early April,
Information about renewal options for CY 2019

2018
(including HPMS crosswalk charts) provided to plans.
Release of the 2019 Final Announcement of Medicare
April 2, 2018
Advantage Capitation Rates and MA and Part D Payment 
Policies released, including the CY 2018 Call Letter.
Conference call with industry to discuss the Rate

April 2018
Announcement and CY 2018 Call Letter.
Release of the CY 2019 Plan Creation Module, PBP, and 
April 6, 2018
Bid Pricing Tool (BPT) software in HPMS.
Deadline for MAOs and cost plans to submit requests for 
April 10, 2018
full contract consolidations for CY 2018.
Mid-April,
Release of HPMS Memo: Contract Year 2019 Medicare 
2018
Advantage Bid Review and Operations Guidance.
Release of the CY 2019 Medication Therapy
April 16, 2018
Management (MTM) Program Submission in HPMS
(11:59 p.m. PDT).
Industry training on CY 2019 Part D Formulary and

April 18, 2018
Benefit Submission/Compliance Training.
Late April,
Total Beneficiary Cost data for CY 2019 Bid Preparation 
2018
Release.
Deadline for submission of CY 2019 MTM Programs
from all sponsors offering Part D including Medicare
April 30, 2018
Medicaid Plans (except those participating in the
Enhanced MTM Model test) (11:59 p.m. PDT).
Final ANOC/EOC, LIS rider, Part D EOB, formularies,
transition notice, provider directory, pharmacy directory, 
May, 2018
and MMP models for CY 2019 available for all
organizations.
MA, MA-PD and PDP plans to notify CMS of intention
to non-renew, as applicable, a county (ies) or region(s) for
individuals, but continue the county (ies) or region(s) for
“800 series” EGWP members, convert to offering

Early May 2017
employer-only contracts, or reduce its service area at the
contract level. This will allow CMS to make the required
changes in HPMS to facilitate the correct upload of bids
in June.
2018 Medicare Advantage & Prescription Drug Plan

May, 2018
Spring Conference & Webcast.
Release of the CY 2019 Bid Upload Functionality in

May 4, 2018
HPMS.
Deadline for submission of CY 2019 MTM Program

May 14, 2018
attestations in HPMS (11:59pm PDT).

*Part
D



Cost

MMP




































































 102
2018*Note: The dates listed under Part C include MA and MA-PD plans.
*Part
The dates listed under Part D also apply to MA and cost-based plans
C
offering a Part D benefit.
Release of CY 2019 Formulary Submission Module in

May 14, 2018
HPMS.
Release of CY 2019 Actuarial Certification Module in

May 18, 2018
HPMS.
Mid-Late May,
Release of CY 2019 Formulary Reference File Update. 
2018
Plans/Part D sponsors begin to upload agent/broker

May 25, 2018
compensation information in HPMS.
Release of the CY 2019 Marketing Module in HPMS.

June 1, 2018
Plans/Part D sponsors begin to submit 2019 marketing
materials.
Mid to late
Release of the CY 2019 Medicare Marketing Guidelines

June, 2018
in HPMS.
CMS sends qualification determinations to applicants

Late May, 2018
based on review of the CY 2019 applications for new
contracts or service area expansions.
June 2018
Release of state-specific marketing guidance for MMPs. 
May 31, 2018
Release of the 2017 DIR Submission Module in HPMS. 
Deadline for submission of CY 2019 bids (including
Service Area Verification) for all MA plans, MA-PD
plans, PDP, cost-based plans offering a Part D benefit,
Medicare-Medicaid Plans (MMPs), “800 series” EGWP
and direct contract EGWP applicants and renewing
organizations; deadline for cost-based plans wishing to
appear in the 2019 Medicare Plan Finder to submit PBPs
(11:59 p.m. PDT).
Deadline for submission of CY 2019 Formularies,
Transition Attestations, Prior Authorization/Step Therapy
June 4, 2018
(PA/ST) Attestations, and P&T Attestations due from all 
sponsors offering Part D including Medicare-Medicaid
Plans (11:59 p.m. PDT).
Deadline for submission of a CY 2019 contract nonrenewal, service area reduction via HPMS from MA
plans, MA-PD plans, MMPs, PDPs and Medicare costbased contractors and cost- based sponsors to Deadline
also applies to an MAO that intends to terminate a current
MA and/or MA-PD plan benefit package (i.e., Plan 01,
Plan 02) for CY 2019.
CMS completes review and approval of CY 2019 bid
Early June to
data, to include pricing, plan benefit packages, and

Late August,
formularies. Plans/Part D sponsors submit attestations,
2018
contracts, initial actuarial certifications, and final actuarial
certifications.
Window for submitting first round of crosswalk exception

June, 2018
requests through HPMS.
Deadline for submission of CY 2019 Supplemental
Formulary files, Free First Fill file, Partial Gap file,

June 8, 2018
Excluded Drug file, Over the Counter (OTC) drug file,
and Home Infusion file through HPMS (11:59 a.m. EDT).

*Part
D

Cost

MMP
























































Nonbid
related
items
only

















 103
2018*Note: The dates listed under Part C include MA and MA-PD plans.
The dates listed under Part D also apply to MA and cost-based plans
offering a Part D benefit.
Deadline for submission of Medicare Advantage Value
Based Insurance Design (VBID) file (Only applicable to
June 8, 2018
Medicare Advantage Plans that have been preapproved
for Part D VBID benefits) (11:59 a.m. EDT).
Deadline for submission of Additional Demonstration
June 8, 2018
Drug (ADD) file (MMPs only) (11:59 a.m. EDT).
2018 MA and PDP Audit and Enforcement Conference
June, 2018
and Webcast.
CMS sends an acknowledgement letter to all MA, MALate June, 2018
PD, MMP, PDP and Medicare cost-based plans that are
non-renewing or reducing their service area.
Early July, 2018
2019 Plan Finder pricing test submissions begin.
Deadline for D-SNPs to upload required State Medicaid
Early July, 2018
Agency Contract and Contract Matrix to HPMS.
Deadline for D-SNPs requesting to be reviewed as Fully
Early July, 2018
Integrated Dual-Eligible (FIDE) SNPs to submit their
FIDE SNP Matrix to HPMS.
Plans’ deadline to submit non-model Low Income
July 5, 2017
Subsidy (LIS) riders to the appropriate Regional Office
for review.
Release of CY 2019 FRF Update in advance of the
Mid July, 2018
Limited Formulary Update Window.
Mid-Late July,
CY 2019 Limited Formulary Update Window.
2018
Submission deadline for agent/broker compensation
Late July, 2018
information via HPMS.
Second window for submitting HPMS crosswalk
July 2018
exceptions.
CMS releases the 2019 Part D national average monthly
Late July /
bid amount, the Medicare Part D base beneficiary
Early August,
premium, the Part D regional low-income premium
2018
subsidy amounts, the Medicare Advantage regional PPO
benchmarks, and the de minimis amount.
Late July /
Rebate reallocation period begins after release of the
Early August,
above bid amounts.
2018
No Later Than
CMS informs currently contracted organizations of its
July 29, 2018
decision to not renew a contract for 2019.
Plans expected to submit model Low Income Subsidy
August 1, 2018
(LIS) riders in HPMS.
Deadline for organizations to complete the plan
August 17,
connectivity data in HPMS to ensure timely approval of
2018
contracts.
CY 2019 preview of the 2018 Medicare & You plan data
August 16-20,
in HPMS prior to printing of the CMS publication (not
2018
applicable to EGWPs).
August 22-24,
2018

*Part
C

*Part
D

Cost



MMP












































































































MPF
only




First CY 2019 Medicare Plan Finder (MPF) Preview and 
Out- of-Pocket Cost (OOPC) Preview in HPMS.





 104
2018*Note: The dates listed under Part C include MA and MA-PD plans.
The dates listed under Part D also apply to MA and cost-based plans
offering a Part D benefit.
August 31,
CY 2019 MTM Program Annual Review completed.
2018
Late August,
Contracting Materials submitted to CMS.
2018
End of
August/Early
Plan preview periods of Part C & D Star Ratings in
September,
HPMS.
2018
Early
CMS begins accepting plan correction requests upon
September,
contract approval.
2018
MidAll 2018 contracts fully executed (signed by both parties:
September,
Part C/Part D Sponsor and CMS).
2018

*Part
C

























September 16 30, 2018

CMS mails the 2019 Medicare & You handbook to

Medicare beneficiaries.
D-SNPs that requested review for FIDE SNP
determination notified as to whether they meet required 
qualifications.
Deadline for Part D sponsors, cost-based, MA and MAPD organizations to request a plan correction to the plan 
benefit package (PBP) via HPMS.
Deadline for plans to provide the following documents to
current enrollees:
Standardized Annual Notice of Change/Evidence of
Coverage (ANOC/EOC) for all MA, MA-PD, PDP, and
cost-based plans (including those not offering Part D and
those that do offer Part D).
The multi-language insert should be sent with the
ANOC/EOC and the SB.

Standardized ANOC with the Summary of Benefits for DSNPs and MMPs that choose to separate the ANOC from
the EOC.
Abridged or comprehensive formularies
LIS rider
Pharmacy/Provider directories
The documents identified above are the only CY 2019
documents permitted to be sent prior to October 1, 2018.
Organizations may begin marketing their CY 2019 plan
benefits.
Note: Once an organization begins marketing CY 2019
plans, the organization must cease marketing CY 2018
plans to anyone other than beneficiaries who are eligible 
for valid enrollment (e.g. age-ins and special enrollment
periods (SEP)). Organizations may still provide CY 2018
materials upon request, conduct one-on-one sales
appointments, and process enrollment applications.




September 30,
2018





October 1, 2018



MMP




Second CY 2019 Medicare Plan Finder (MPF) Preview
and Out-of-Pocket Cost (OOPC) Preview in HPMS.

Late September,
2018

Cost



September 4-7,
2018

Late September,
2018

*Part
D


 MPF
only























 105
2018*Note: The dates listed under Part C include MA and MA-PD plans.
*Part
The dates listed under Part D also apply to MA and cost-based plans
C
offering a Part D benefit.
Tentative date for CY 2019 plan and drug benefit data to
October 1, 2018
be displayed on Medicare Plan Finder on Medicare.gov 
(not applicable to EGWPs).
The final personalized beneficiary non-renewal
notification letter must be received by PDP, MA plan,
MA-PD plan, MMP and cost-based plan enrollees.

October 2, 2018
PDPs, MA plans, MA-PD plans, MMPs and cost-based
organizations may not market to beneficiaries of nonrenewing plans until after October 2, 2018.
October 11,
Part C & D Star Ratings go live on medicare.gov on or

2018
around October 11, 2018.
October 15,
Part D sponsors must post prior authorization and step
2018
therapy criteria on their websites for CY 2019.
2019 Annual Election Period begins
October 15,
All organizations/sponsors must hold open enrollment

2018
(for EGWPs, see Chapter 2 of the Medicare Managed
Care Manual, Section 30.1).
Release of the online CY 2020 Notice of Intent to Apply
Mid October,
for a New Contract or a Contract Expansion (MA, MA- 
2018
PD, MMP, PDPs, and “800 series” EGWPs and Direct
Contract EGWPs).
Notices of Intent to Apply (NOIA) for CY 2020 due for
November 12,

MA and MA-PD plans, MMP, PDPs, and “800 series”
2018
EGWPs and Direct Contract EGWPs.
Early
First display of Plan Finder data for sponsors/MA

November,
organizations that submitted a plan correction request
2018
after bid approval.
Late November,
Part C & D display measures data are posted in HPMS for 
2018
plan preview.
December 1,
Cost-based plans must publish notice of non-renewal, as
2018
per §417.494 of Title 42 of the CFR.
December 7,

End of the Annual Election Period.
2018
Mid December,
Part C & D display measures data on cms.gov updated. 
2018
December 31,
Deadline for MMPs that separated the ANOC from the 
2018
EOC to provide the EOC to enrollees.
2019

January 1, 2019
Plan Benefit Period Begins.
January 1 –
Annual Medicare Advantage Open Enrollment Period

March 31, 2019
(MA OEP).
Release of CY 2020 MAO/MA
January 2019
PD/MMP/PDP/SAE/EGWP applications.

January, 2019
Industry training on CY 2020 applications.

February 2019
Applications due for CY 2020.

June 3, 2019

CY 2020 Deadline for bid and formulary submission.



*Part
D

Cost

MMP








































































Nonbid

related
items
only

 106
Enhancements to the 2019 Star Ratings and Future Measurement Concepts
CMS publishes the Part C and D Star Ratings each year to measure the quality of and reflect the
experiences of beneficiaries in Medicare Advantage (MA) and Prescription Drug Plans (PDPs or
Part D plans), assist beneficiaries in finding the best plan, and determine MA Quality Bonus
Payments. Further, the Star Ratings support the efforts of CMS to improve the level of
accountability for the care provided by physicians, hospitals, and other providers.
CMS regularly reviews the measures and the methodology (used to generate the ratings) to
incentivize plans and provide information that is a true reflection of plan performance and
enrollee experience. We remain cognizant of the unique challenges of serving traditionally
underserved subsets of the population. In addition to conducting our own research, CMS stays
abreast of the related research and listens carefully to concerns about the Star Ratings. CMS
works in collaboration with beneficiaries, stakeholders, measure developers, researchers, and
other HHS collaborators to improve the Star Ratings.
As a result, we propose the enhancements described below to the 2019 Star Ratings and solicit
comment in response to this draft Call Letter. In this document, we also describe possible
enhancements for the 2020 Star Ratings and other future measurement concepts. Except as noted
below, the methodology and measures used to calculate the ratings will remain the same as the
2018 Star Ratings.
For reference, the list of measures and a description of the methodology for the 2018 Star
Ratings are included in the Technical Notes available on the CMS webpage:
http://go.cms.gov/partcanddstarratings.
After the 2019 Call Letter is finalized, CMS’ current Part C & D Star Ratings contractor, RAND
Corporation, will establish a Technical Expert Panel (TEP) in 2018 comprised of representatives
across various stakeholder groups to obtain feedback on the Star Ratings framework, topic areas,
methodology, and operational measures. The TEP may also provide suggestions regarding the
data integrity review process and how the Star Ratings should relate to audits and enforcement
actions. RAND will analyze the suggestions from the TEP to provide feedback to CMS on
potential future enhancements.
Reminders for 2019 Star Ratings
CMS assigns stars for each numeric measure score by applying one of two methods: clustering
or relative distribution with significance testing. Each method is described in detail in the
Technical Notes. Relative distribution with significance testing is applied to determine valid star
cut points for Consumer Assessment of Healthcare Providers and Systems (CAHPS) measures.
Clustering is applied to other Star Ratings measures. The cut points to determine star
assignments for all measures and case-mix coefficients for the CAHPS survey and Health

 107
Outcomes Survey (HOS) will be updated for 2019 Star Ratings using the most current data
available.
As announced in previous years, we will review data quality across all measures, variation
among organizations and sponsors, and measures’ accuracy and validity before making a final
determination about inclusion of measures in the Star Ratings.
We provide various datasets and reports to plan sponsors throughout the year. Part C and D
sponsors should regularly review their underlying measure data that are the basis for the Part C
and D Star Ratings and immediately alert CMS if errors or anomalies are identified so any issues
can be resolved prior to the first plan preview period. For example, any necessary changes to the
Independent Review Entity (IRE) data must be made by June 30 of the following year in order
for the changes to be reflected in a contract’s Star Ratings data (e.g., changes to 2017 IRE data
must be made by June 30, 2018 for the 2019 Star Ratings).
New Measures for 2019 Star Ratings
 Statin Use in Persons with Diabetes (SUPD) (Part D). This Pharmacy Quality
Alliance (PQA) measure is the percentage of patients between 40 and 75 years old
who received at least two diabetes medication fills and also received a statin
medication during the measurement period. Beneficiaries in hospice according to the
Medicare Enrollment Database (EDB) are excluded from the denominator of the
SUPD measure for the entire year. Beneficiaries with end-stage renal disease (ESRD)
at any time in the measurement year are also excluded. For the 2017 measurement
year, CMS proposes to expand its data sources for identifying all Part D enrollees with
ESRD for exclusion from the measures to include ICD-10-CM codes found in both
Part A & B claims and Risk Adjustment Processing System (RAPS) RxHCCs to use
along with the EDB ESRD indicator that is currently used. We propose to add the
SUPD measure to the 2019 Star Ratings (based on 2017 data) with a weight of 1 for
the first year. In subsequent years, we propose a weight of 3 as an intermediate
outcome measure, as prescription fills are a proxy for patients taking their prescribed
medications, and adherence is necessary to reach clinical/therapeutic goals.


Statin Therapy for Patients with Cardiovascular Disease (Part C). This measure
was developed by the National Committee for Quality Assurance (NCQA) as part of
HEDIS and is currently included as a display measure. It focuses on the percentage of
males 21 to 75 years of age and females 40 to 75 years of age who were identified as
having clinical atherosclerotic cardiovascular disease and were dispensed at least one
high or moderate-intensity statin medication during the measurement year. NCQA
allows for the exclusion of certain conditions and symptoms that may indicate statin
intolerance (e.g., myalgia, myositis, myopathy, or rhabdomyolysis). Please refer to the
NCQA HEDIS 2018 Technical Specifications for Health Plans Volume 2 for measure

 108
construction and technical specifications. We propose to include this measure in the
2019 Star Ratings as a process measure with a weight of 1, as it is based on medical
records review if medications were prescribed.
Changes to Measures for 2019
 Improvement measures (Part C & D). The measures proposed to calculate the
2019 improvement measures are:
Part C
or D
C
C
C
C
C
C
C
C
C
C

Measure

C
C
C
C
C
C
C
C
C

Breast Cancer Screening
Colorectal Cancer Screening
Annual Flu Vaccine
Improving or Maintaining Physical Health
Improving or Maintaining Mental Health
Monitoring Physical Activity
Adult BMI Assessment
Special Needs Plan (SNP) Care Management
Care for Older Adults – Medication Review
Care for Older Adults – Functional Status
Assessment
Care for Older Adults – Pain Assessment
Osteoporosis Management in Women who had a
Fracture
Diabetes Care – Eye Exam
Diabetes Care – Kidney Disease Monitoring
Diabetes Care – Blood Sugar Controlled
Controlling Blood Pressure
Rheumatoid Arthritis Management
Improving Bladder Control
Medication Reconciliation Post-Discharge
Plan All-Cause Readmissions
Getting Needed Care

C

Getting Appointments and Care Quickly

C

Customer Service

C

Rating of Health Care Quality

C

Rating of Health Plan

C

Care Coordination

C

Complaints about the Health Plan

C

Members Choosing to Leave the Plan

C
C
C

Health Plan Quality Improvement
Plan Makes Timely Decisions about Appeals
Reviewing Appeals Decisions

C
C

Process Measure
Process Measure
Process Measure
Outcome Measure
Outcome Measure
Process Measure
Process Measure
Process Measure
Process Measure
Process Measure

1
1
1
3
3
1
1
1
1
1

Improvement
Measure
Yes
Yes
Yes
No
No
Yes
Yes
Yes
Yes
Yes

Process Measure
Process Measure

1
1

Yes
Yes

1
1
3
3
1
1
1
3
1.5

Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes

1.5

Yes

1.5

Yes

1.5

Yes

1.5

Yes

1.5

Yes

1.5

Yes

1.5

Yes

5
1.5
1.5

No
Yes
Yes

Measure Type

Process Measure
Process Measure
Intermediate Outcome Measure
Intermediate Outcome Measure
Process Measure
Process Measure
Process Measure
Outcome Measure
Patients’ Experience and Complaints
Measure
Patients’ Experience and Complaints
Measure
Patients’ Experience and Complaints
Measure
Patients’ Experience and Complaints
Measure
Patients’ Experience and Complaints
Measure
Patients’ Experience and Complaints
Measure
Patients’ Experience and Complaints
Measure
Patients’ Experience and Complaints
Measure
Improvement Measure
Measures Capturing Access
Measures Capturing Access

Weight

 109
Part C
Measure
or D
C
Call Center – Foreign Language Interpreter and
TTY Availability
C
Statin Therapy for Patients with Cardiovascular
Disease
D
Call Center – Foreign Language Interpreter and
TTY Availability
D
Appeals Auto–Forward
D
Appeals Upheld
D
Complaints about the Drug Plan
D

Members Choosing to Leave the Plan

D
D

Drug Plan Quality Improvement
Rating of Drug Plan

D

Getting Needed Prescription Drugs

D
D
D

MPF Price Accuracy
Medication Adherence for Diabetes Medications
Medication Adherence for Hypertension (RAS
antagonists)
Medication Adherence for Cholesterol (Statins)
MTM Program Completion Rate for CMR
Statin Use in Persons with Diabetes

D
D
D

1.5

Improvement
Measure
Yes

1

No

Measures Capturing Access

1.5

Yes

Measures Capturing Access
Measures Capturing Access
Patients’ Experience and Complaints
Measure
Patients’ Experience and Complaints
Measure
Improvement Measure
Patients’ Experience and Complaints
Measure
Patients’ Experience and Complaints
Measure
Process Measure
Intermediate Outcome Measure
Intermediate Outcome Measure

1.5
1.5
1.5

Yes
Yes
Yes

1.5

Yes

5
1.5

No
Yes

1.5

Yes

1
3
3

No
Yes
Yes

3
1
1

Yes
Yes
No

Measure Type
Measures Capturing Access
Process Measure

Intermediate Outcome Measure
Process Measure
Intermediate Outcome Measure

Weight



Medication Adherence (ADH) for Hypertension (RAS Antagonists), Medication
Adherence for Diabetes Medications (Part D). Beneficiaries with ESRD are
excluded from the measure per the PQA measure specifications. For the 2017
measurement year, CMS proposes to expand its data sources for identifying all Part D
enrollees with ESRD for exclusion from the measures to include ICD-10-CM codes
found in both Part A & B claims and Risk Adjustment Processing System (RAPS)
RxHCCs along with the EDB ESRD indicator (currently used).



Medication Adherence (ADH) for Hypertension (RAS Antagonists), Medication
Adherence for Diabetes Medications, and Medication Adherence for Cholesterol
(Statins) (Part D). The Proportion of Days Covered (PDC) is adjusted for inpatient
(IP) stays and hospice enrollment for MA-PDs and PDPs, and skilled nursing facility
(SNF) stays for PDPs. In applying the adjustment, first we identify the start and end
dates of relevant types of stays for beneficiaries included in the adherence measures.
The start date is currently the admission date, and the end date is one day before the
discharge date. The discharge date is not included in the PDC adjustment. The days of
the relevant stays that occur during the beneficiary’s measurement period are
removed from the numerator and denominator of the PDC calculation. In addition, we
shift the days’ supply from Part D prescription fills that overlap with the stay to
uncovered days after the end of the relevant stay, if applicable. This assumes the

 110
beneficiary receives the relevant medication from a different source during the stay
and “stockpiles” the Part D prescription fills for later use.
We found that in cases where the beneficiary has consecutive stays where the
admission date of the second stay is one day after the discharge date, one day would
not be removed from the PDC calculation. Therefore, we propose to concatenate
consecutive stays to create a single admission and discharge date for the PDC
adjustment.


MPF Price Accuracy (Part D). CMS is proposing enhancements to the MPF Price
Accuracy measure to better measure the reliability of a contract’s MPF advertised
prices. We propose the following changes (please see Appendix 1 for a more detailed
methodology):

1. Factor both how much and how often prescription drug event (PDE) prices exceeded the
prices reflected on the MPF by calculating a contract’s measure score as the mean of the
contract’s Price Accuracy and Claim Percentage scores, based on the below indexes:
o The Price Accuracy index compares point-of-sale PDE prices to plan-reported MPF
prices and determines the magnitude of differences found. Using each PDE’s date of
service, the price displayed on MPF is compared to the PDE price. The Price
Accuracy index is computed as:
(Total amount that PDE is higher than MPF + Total PDE cost) / (Total PDE cost).
o The Claim Percentage index measures the percentage of all PDEs that meet the
inclusion criteria with a total PDE cost higher than total MPF cost to determine the
frequency of differences found. The Claim Percentage index is computed as:
(Total number of claims where PDE is higher than MPF) / (Total number of claims)
o The best possible Price Accuracy index is 1 and the best possible Claim Percentage
index is 0. This indicates that a plan did not have PDE prices greater than MPF
prices.
o A contract’s measure score is computed as:


Price Accuracy Score = 100 – ((Price Accuracy Index - 1) x 100)



Claim Percentage Score = (1 – Claim Percentage Index) x 100



Measure Score = (0.5 x Price Accuracy Score) + (0.5 x Claim
Percentage Score)

2. Increase the claims included in the measure:
o Expand the days’ supply of claims included from 30 days to 28-34, 60-62, or 90-100
days.

 111
o Identify additional retail claims using the PDE-reported Pharmacy Service Type
code. Claims for pharmacies that are listed as retail in the MPF Pharmacy Cost file
and also have a pharmacy service type on the PDE of either Community/Retail or
Managed Care Organization (MCO) will be included.
3. Round a drug’s MPF cost to 2 decimal places for comparison to its PDE cost. The PDE
cost must exceed the PF cost by at least a cent ($0.01) in order to be counted towards
the accuracy score. A contract may submit an MPF unit cost up to 5 digits, where PDE
cost is always specified to 2 decimal places. Previously, a PDE cost which exceeded the
PF cost by $0.005 would be counted.
In this measure, a contract’s score is not lowered if PDEs are priced lower than MPF
displayed pricing. Only price increases are counted in the numerator for this measure.
The proposed enhancements are largely those which had been previously finalized in the
2018 Call Letter. The proposal to round a drug’s MPF cost will resolve the identified
measurement error that resulted in CMS not implementing these changes for 2018 Star
Ratings.12 Simulations of these changes using 2016 MPF and PDE data found MA-PD
and PDP performance to be similarly high, where the mean measure score is 91. The
bottom 10th percentile of MA-PDs scored 81, and PDPs scored 85. We will continue
providing contracts their preliminary as well as final MPF Price Accuracy reports,
which contain claim level information.
Additionally, in response to the industry’s requests for information about the broad
impact of these changes to future Star Ratings, we propose to first publish the modified
measure as a display measure for 2020 and 2021; we intend to then consider adding this
measure for the 2022 Star Ratings. Pending such a change, we propose to continue to
include the current MPF measure in the Star Ratings using the same methodology used
for the 2018 Star Ratings, until the modified measure is incorporated. It is important to
continue evaluation of sponsors’ pricing data used by beneficiaries. Also, removing this
measure from the Star Ratings until 2022 would potentially lower sponsors’ overall Star
Ratings given most contracts receive high ratings in this measure. We welcome
stakeholder feedback about these changes, and the timing of implementing them into the
display/Star Ratings measures.


12

Members Choosing to Leave the Plan (Part C & D). We propose to expand the
exclusions for this existing measure to include plan benefit package (PBP) service
area reductions (SARs) that result in the unavailability of PBPs that the enrollee is

Please see the HPMS memo released on August 9, 2017, “First Plan Preview of 2018 Star Ratings Data”
https://www.cms.gov/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovGenIn/Downloads/Preview2018-Star-Ratings-Data.pdf

 112
eligible to move to within the contract. The exclusions meeting the following specific
scenarios would be added:
o The area reduced is part of non-Special Need Plan (SNP) PBPs and the only PBPs
remaining in the contract that cover the area are SNP PBPs.
o The area reduced is part of a SNP PBP and there are no non-SNP PBPs or another
SNP PBP within the contract of the same SNP type that cover the area.
Removal of Measures from Star Ratings
Beneficiary Access and Performance Problems (BAPP) (Part C & D). The BAPP measure is
based on CMS’ sanctions, civil money penalties (CMP) as well as Compliance Activity Module
(CAM) data (this includes: notices of non-compliance, warning letters [with or without business
plan], and ad-hoc corrective action plans (CAP) and the CAP severity). After several
solicitations for public comment on the BAPP measure and considering comments from MA
plans, advocates, and other stakeholders,13 CMS proposed in the CY2018 Advance Notice/draft
Call Letter a number of revisions to the BAPP measure. In response to that proposal
commenters expressed overwhelming support to implement a revision to the measure decoupling
audits and enforcement actions from Star Ratings. The commenters cited reasons for
recommending such revisions that included: the differences in methodologies and goals, the
subjective nature of audits, and the absence of audit information for each plan each year.
Advocates, however, submitted strong concerns about the proposal, including decoupling the
BAPP measure from audit results. Based on the feedback, the strong support for a change to the
measure specification, and concerns for providing additional notice and time to prepare for the
significant changes, CMS decided to retain the current BAPP measure in the 2018 Star Ratings
and signaled, in the 2018 Call Letter, an intention for 2019 Star Ratings: to remove from the
BAPP measure all enforcement actions and reductions for plans under sanction due to audit
findings; to propose to retire the current BAPP measure; and to introduce a new measure for the
display page.
For the 2019 Star Ratings, CMS proposes to retire the current BAPP measure. We propose to
modify the BAPP measure to only include Compliance Activity Module (CAM) data. The
revised BAPP measure would be on the display page for the 2019 Star Ratings. We solicit
stakeholders’ input on the utility of this measure focused only on notices of non-compliance,
warning letters, and ad-hoc corrective action plans and their severity.

13

Please refer to the CY2018 Advance Notice and CY2018 Rate Announcement for a summary of the history
and comments received before the CY2018 Advance Notice proposal.

 113
Temporary Removal of Measure from Star Ratings
Reducing the Risk of Falling (Part C). This current measure, collected through the Medicare
HOS, assesses the percentage of beneficiaries who discussed falls, balance concerns, or
walking with their healthcare provider and received fall risk intervention(s) from the provider.
NCQA made two changes to this measure. First, NCQA changed the denominator of both
indicators to include all beneficiaries age 65 and older, as opposed to limiting the denominator
to those age 75 and older or age 65-74 with a balance problem, walking problem, or fall in the
past year. This action removes a potential bias toward sampling only patients who were treated
unsuccessfully. Second, NCQA updated the list of example interventions by removing the
phrase “Check your blood pressure lying down or standing”. This aligns the list of
interventions with current United States Preventive Services Task Force (USPSTF)
recommendations. This change required revising the underlying survey questions in HOS. The
revised questions will be first collected in 2018. As a result of this, there will be no data for
this measure for the 2019 Star Ratings. We propose to add it to the 2020 display page and
intend to add it for the 2021 Star Ratings.
Data Integrity
Data used for the Part C and D Star Ratings must be accurate and reliable. CMS’ longstanding
policy has been to reduce a contract’s measure rating to one star if we determine that a contract’s
measure data are incomplete, biased, or erroneous. As discussed in previous Call Letters, these
reductions may result if CMS identifies mishandling of data or inappropriate processing, or if
implementation of incorrect practices impacted specific measure(s). Examples would include,
but are not limited to: a contract’s failure to adhere to HEDIS, HOS, or CAHPS reporting
requirements; a contract’s failure to adhere to Plan Finder or PDE data requirements; a contract’s
errors in processing coverage determinations/exceptions or organization determinations;
compliance actions due to errors in operational areas that would directly impact the data reported
or processed for specific measures; or a contract’s failure to pass Part C and D Reporting
Requirements Data Validation related to organization/sponsor-reported data for specific
measures. CMS’ modifications to measure-specific ratings due to data integrity issues are
separate from any CMS compliance or enforcement actions related to a sponsor’s deficiencies.
This policy is necessary to avoid assigning falsely high stars, especially when deficiencies have
been identified that show CMS cannot objectively evaluate a sponsor’s performance in an area.
Sponsors should refer to specific guidance and technical instructions related to requirements in
each of these areas. For example, information about HEDIS measures and technical
specifications are posted on:
http://www.ncqa.org/HEDISQualityMeasurement/HEDISMeasures.aspx. Information about Data
Validation of Reporting Requirements data is posted on https://www.cms.gov/Medicare/
Prescription-Drug- Coverage/PrescriptionDrugCovContra/PartCDDataValidation.html.

 114
Given the financial and marketing incentives associated with higher performance in Star Ratings,
safeguards are needed to protect the Star Ratings from attempts to inflate performance or mask
deficiencies. CMS has taken several steps in the past years to protect the integrity of the data we
use to calculate Star Ratings; however, we continue to identify new vulnerabilities where
inaccurate or biased data could result from sponsors’ practices. Therefore, CMS will continue to
conduct reviews to identify incomplete or biased Star Ratings measure data.
The Part C and D Reporting Requirements measures (SNP Care Management (Part C) and
Medication Therapy Management (MTM) Program Completion Rate for Comprehensive
Medication Reviews (CMR) (Part D)) are calculated using data reported by plan sponsors and
validated via an independent data validation using CMS standards. Per the Star Ratings
Technical Notes, contracts that did not score at least 95% on data validation for these reporting
sections and/or were not compliant with data validation standards/sub-standards for at least one
of the data elements used to calculate the measures are not rated in this measure, and the
contract’s measure score is reduced to 1 star. We propose to define a contract as being noncompliant if it either receives a “No” or a 1, 2, or 3 on the 5-point Likert scale in the specific data
element’s data validation.
Proposed Scaled Reductions for Appeals IRE Data Completeness Issues
At present, there are four Star Ratings appeal measures that rely on data submitted to the IRE.
Two of the measures are Part C measures (Plan Makes Timely Decisions about Appeals and
Reviewing Appeals Decisions), and two are Part D measures (Appeals Auto-Forward and
Appeals Upheld). The completeness of the IRE data is critical to allow accurate measurement of
the appeals measures. All plans are responsible and held accountable for ensuring high quality
and complete data to maintain the validity and reliability of the measures.
For verification and validation of the Part C and D appeals measures, CMS has relied primarily
on the use of audit findings and targeted reviews. Contracts identified during an audit review to
have systematic issues with the completeness of the IRE data have had their appeals measures
reduced to one star. Plans and sponsors have expressed concern with the use of the audit findings
for the sole source of information because of the perceived inequity of the application of the
reductions that only audited contracts may face. Each year, a subset of contracts, not all
contracts, are audited. Further, if a reduction due to IRE data integrity was applied, it resulted in
a measure-level Star Rating of one star for the appeals measures.
In response to stakeholder concerns about both CMS’ prior practice of reducing measure ratings
to one star based on any finding of data inaccuracy, incompleteness, or bias, and the potential
inequity in application of the data integrity policy related to audit findings (because not all plans

 115
are audited every year), CMS initiated the Timeliness Monitoring Project (TMP) in CY 2017.14
All contracts submitted data during the first year of the project. The first submission for the TMP
was for the measurement year 2016 related to Part C organization determinations and
reconsiderations and Part D coverage determinations and redeterminations. The timeframe for
the submitted data was dependent on the enrollment size of the contract with smaller contracts
submitting data from a three-month period, medium-sized contracts submitting data from a twomonth period, and larger contracts submitting data from a one-month period.15 CMS reviewed
and examined the data from the first collection of TMP data, but did not use it in the
determination of appeals-related reductions for the 2018 Star Ratings.
CMS is proposing statistical criteria to reduce a contract's Star Rating for data that are not
complete or lack integrity using TMP data or audit. The reduction would be applied to the
measure-level Star Rating for the applicable appeals measures. We are cognizant that there are
varying degrees of data issues and as such, we have developed a methodology for reductions that
reflects the degree of the data accuracy issue for a contract instead of a one-size-fits-all approach.
The methodology would employ scaled reductions (one-star, two-star, three-star, or four-star
reduction) based on the degree of missing IRE data. Contracts with the highest IRE data quality
issues (i.e., largest percentage of missing or compromised data) would receive the largest
reductions, while contracts with a lower degree of missing IRE data would receive a smaller
reduction. The most severe reduction for IRE data completeness issues would be a four-star
reduction, thus resulting in a measure-level Star Ratings of one star for the associated appeals
measures. If a contract receives a reduction due to missing Part C IRE data, the reduction would
be applied to both of the contract’s Part C appeals measures. Likewise, if a contract receives a
reduction due to missing Part D IRE data, the reduction would be applied to both of the
contract’s Part D appeals measures. Further, we propose to use multiple data sources whenever
possible to determine whether the IRE data are complete and if not, the severity of the
missingness and/or data issues.
CMS’ proposed scaled reduction methodology would be a three-stage process using the TMP
data or audit for the means to determine: first, whether a contract may be subject to a potential
reduction for the Part C or Part D appeals measures; second, as the basis for the determination of

This project was discussed in the November 28, 2016 HPMS memo, “Industry-wide Appeals Timeliness
Monitoring” as well as the December 02, 2016 follow-up email. https://www.cms.gov/Medicare/PrescriptionDrug-Coverage/PrescriptionDrugCovGenIn/Downloads/Industry-wide-Timeliness-Monitoring.pdf
https://www.cms.gov/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovGenIn/Downloads/Industrywide-Appeals-Timeliness-Monitoring-Memo-November-28-2016.pdf.
15
Contracts with a mean annual enrollment of less than 50,000 are required to submit data for a three-month
time period. Contracts with a mean enrollment of at least 50,000 but, at most 250,000 are required to submit
data for a two-month time period. Contracts with a mean enrollment greater than 250,000 are required to
submit data for a one-month period.
14

 116
the estimated error rate; and finally, whether the estimated value is statistically greater than the
cut points for the scaled reductions of 1, 2, 3, or 4 stars.
Once the scaled reduction for a contract is identified using the methodology, the reduction would
be applied to the contract’s associated appeals measure-level Star Ratings. Since the minimum
measure-level Star Rating is one star, if the difference between the associated appeals measurelevel Star Rating (before the application of the reduction) and the identified scaled reduction is
less than one, the contract would receive a measure-level Star Rating of one star for the appeals
measure.
The error rate for the Part C and Part D appeals measures - using the TMP or audit data and the
projected number of cases not forwarded to the IRE for a 3-month period - would be used to
identify contracts that may be subject to an appeals-related IRE data completeness reduction. A
minimum error rate is proposed to establish a threshold for the identification of contracts that
may be subject to a reduction. The establishment of the threshold allows the focus of the
possible reductions on contracts with error rates that have the greatest potential to distort the
signal of the appeals measures. Since the timeframe for the TMP or audit data is dependent on
the enrollment size of the contract, with smaller contracts submitting data from a three-month
period, medium-sized contracts submitting data from a two-month period, and larger contracts
submitting data from a one-month period, the use of a projected number of cases allows a
consistent time period for the application of the criteria proposed.
The calculated error rate formula (Equation 1) for the Part C measures is proposed to be
determined by the quotient of number of cases not forwarded to the IRE and the total number of
cases that should have been forwarded to the IRE. The number of cases that should have been
forwarded to the IRE is the sum of the number of cases in the IRE during the TMP or audit data
collection period and the number of cases not forwarded to the IRE during the same period.
Number of cases not forwarded to the IRE

Part C Calculated Error Rate = Total number of cases that should have been forwarded to IRE

Equation (1)

The calculated error rate formula (Equation 2) for the Part D measures is proposed to be
determined by the quotient of the number of untimely cases not auto-forwarded to the IRE and
the total number of untimely cases.
Part D Calculated Error Rate =

Number of untimely cases not auto-forwarded to the IRE
Total number of untimely cases

Equation (2)

Given the different lengths of TMP or audit data collected and evaluated (based on contract size),
the number of non-forwarded cases in a three-month period per contract is projected. The
projected number of cases not forwarded to the IRE in a three-month period would be calculated
by multiplying the number of cases found not to be forwarded to the IRE based on the TMP or
audit data, by a constant determined by the associated time period. Contracts with mean annual

 117
enrollments greater than 250,000 that submitted data from one-month, would have a constant of
3.0. Contracts with mean enrollments between 50,000 and 250,000 that submitted data from a
two-month period, would have their number of cases found not to be forwarded to the IRE
(based on the TMP or audit data) multiplied by the constant 1.5. Small contracts with mean
enrollments less than 50,000 that submitted data for a three-month period would have their
number of cases found not to be forwarded to the IRE multiplied by the constant 1.0.
We propose that contracts would be subject to a possible reduction due to lack of data
completeness if both conditions are met:
1. The calculated error rate is 20% or more.
2. The projected number of cases not forwarded to the IRE is at least 10 in a 3-month
period.
The requirement for a minimum number of cases is needed to address statistical concerns with
precision and small numbers. If a contract meets only one of the conditions, the contract would
not be subject to reductions for IRE data completeness issues. If a contract would be subject to a
possible reduction based on the aforementioned conditions, a confidence interval estimate for the
true error rate for the contract would be calculated using a Score Interval (Wilson Score Interval)
at a confidence level of 95%. The midpoint of the score interval would be determined using
Equation 3.

𝑀𝑖𝑑𝑝𝑜𝑖𝑛𝑡 = 𝐶𝑎𝑙𝑐𝑢𝑙𝑎𝑡𝑒𝑑 𝐸𝑟𝑟𝑜𝑟 𝑅𝑎𝑡𝑒 × (

𝑇𝑜𝑡𝑎𝑙 𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝐶𝑎𝑠𝑒𝑠
𝑇𝑜𝑡𝑎𝑙 𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝐶𝑎𝑠𝑒𝑠+ 𝑧 2

)+

1

(

𝑧2

2 𝑇𝑜𝑡𝑎𝑙 𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝐶𝑎𝑠𝑒𝑠+𝑧 2

)

Equation (3)

The z score that corresponds to a level of statistical significance of 0.05, commonly denoted as
𝑧𝛼⁄2 but for ease of presentation represented here as z. (The z value that will be used for the
purpose of the calculation of the interval is 1.959964.).
For the Part C appeals measures, the midpoint of the confidence interval would be calculated
using Equation 3 along with the calculated error rate from the TMP or audit data, which is
determined by Equation 1. The total number of cases in Equation 3 is the number of cases that
should have been in the IRE for the Part C TMP or audit data.
For the Part D appeals measures, the midpoint of the confidence interval would be calculated
using Equation 3 along with the calculated error rate from the TMP or audit data, which is
determined by Equation 2. The total number of cases in Equation 3 is the total number of
untimely cases for the Part D appeals measures.
Letting the calculated error rate be represented by 𝑝̂ and the total number of cases represented as
n, Equation 3 can be streamlined as follows (Equation 4):
𝑛

𝑀𝑖𝑑𝑝𝑜𝑖𝑛𝑡 = 𝑝̂ (𝑛+𝑧 2 ) +

1

𝑧2

(
)
2 𝑛+𝑧 2

Equation (4)

 118
The lower bound of the confidence interval estimate for the error rate is calculated using
Equation 5 below:
1

𝑛

1

𝑧2

𝐿𝑜𝑤𝑒𝑟 𝐵𝑜𝑢𝑛𝑑 = 𝑀𝑖𝑑𝑝𝑜𝑖𝑛𝑡 − 𝑧 × √𝑛+𝑧 2 [𝑝̂ (1 − 𝑝̂ ) (𝑛+𝑧 2 ) + 4 (𝑛+𝑧 2 )]

Equation (5)

For each contract subject to a possible reduction, the lower bound of the interval estimate of the
error rate would be compared to each of the thresholds in Table 1. If the contract’s calculated
lower bound is higher than the threshold, the contract would receive the reduction that
corresponds to the highest threshold that is less than the lower bound. In other words, the
contract’s lower bound is being employed to determine whether the contract’s error rate is
significantly greater than the thresholds of 20%, 40%, 60%, and 80% to determine the scaled
reduction. The proposed scaled reductions are in Table 1. The reductions due to IRE data
completeness issues would be applied after the calculation of the measure-level Star Rating for
the appeals measures. The reduction would apply to the Part C appeals measures or the Part D
appeals measures.
It is important to note that a contract’s lower bound could be statistically significantly higher
than more than one threshold. The reduction would be determined by the highest threshold that
the contract’s lower bound exceeds. For example, if the lower bound for a contract is
64.560000%, the contract’s estimated value is significantly greater than the thresholds of 20%,
40%, and 60% because the lower bound value 64.560000% is greater than each of these
thresholds. The lower bound for the contract’s confidence interval is not greater than 80%. The
contract would be subject to the reduction that corresponds to the 60% threshold which is 3
stars.
Table 1: Proposed Thresholds and Associated Reductions
Proposed Thresholds Using the Lower
Bound of Confidence Interval Estimate of
the Error Rate

Reduction for Incomplete IRE
Data (Stars)

20%

1

40%

2

60%

3

80%

4

 119
Table 2: Part C Appeals Examples

Contract Enrollment

A
B

10,000
75,000

Number of
Cases not
Sent to IRE
6
7

Number
Number of of Cases
Projected
Calculated
Cases
that
Number of
Error Rate
Forwarded should be Cases not
(%)
to IRE
in the IRE Forwarded
(n)
2
8
6
75.000000
1
8
10.5
87.500000

Contract A has a mean annual enrollment of 10,000. The contract submitted TMP data using a
three-month time period. The TMP data revealed that 6 cases were not forwarded to the IRE and
2 cases were sent to the IRE in the time period.
The contract’s calculated error rate is found by dividing the number of cases not forwarded to the
IRE by the total number of cases that should have been in the IRE. This results in a numerator of
6 and a denominator of 8 (2 cases in the IRE plus the 6 cases that were not forwarded to the IRE)
or a calculated error rate of 6/8 = 0.75000000 or 75%.
The number of cases not forwarded in the TMP time period of 3 months is 6. Since the contract’s
enrollment was under 50,000, the projected number of cases not forwarded is found by
multiplying the number of cases not forwarded by a factor of 1.0. In other words, if a contract
has an enrollment less than 50,000, the projected number of cases not submitted to the IRE is the
same as the number of cases not submitted to the IRE in the TMP data. For Contract A, the
projected number of cases not submitted to the IRE is 6.
The contract is not subject to a possible reduction because the projected number of cases not
forwarded in a 3-month period to the IRE is less than 10. The contract receives the calculated
measure-level Star Rating as detailed in the 2019 Star Ratings Technical Notes without a
reduction for IRE data completeness issues.
Contract B has a mean annual enrollment of 75,000. The contract submitted TMP data using a
two-month time period. The TMP data revealed that 7 cases were not forwarded to the IRE and 1
case was sent to the IRE in the time period.
The contract’s calculated error rate is found by dividing the number of cases not forwarded to the
IRE by the total number of cases that should have been sent to the IRE. This results in a
numerator of 7 and a denominator of 8 (1 case in the IRE plus the 7 cases that were not
forwarded to the IRE) or a calculated error rate of 7/8 = 0.87500000 or 87.5%.
The projected number of cases not forwarded to the IRE in a 3-month period for Contract B is
found by multiplying the number of cases not forwarded to the IRE in the TMP data (7) and the

 120
constant 1.5, since the contract had a mean annual enrollment between 50,000 and 250,000
beneficiaries. Thus, for Contract B, the projected number of cases not submitted to the IRE is 7
times the constant 1.5 or 10.5 cases.
Contract B is subject to possible reductions for IRE data completeness issues because the
calculated error rate is 20% or greater and the projected number of cases not submitted to the
IRE exceeds 10.
Next, the midpoint of the score interval is calculated using Equation 4 substituting the calculated
error rate of 0.87500000 (87.500000%) for 𝑝̂ , the total number of cases of 8 for n, and a z score
of 1.959964.
𝑀𝑖𝑑𝑝𝑜𝑖𝑛𝑡 = 𝑝̂ (

𝑛
1
𝑧2
)
+
(
)
𝑛 + 𝑧2
2 𝑛 + 𝑧2

8
1
(1.959964)2
𝑀𝑖𝑑𝑝𝑜𝑖𝑛𝑡 = (0.87500000) (
)
+
(
)
8 + (1.959964)2
2 8 + (1.959964)2
This results in a midpoint of 0.75334716 (75.334716%).
The lower bound of the confidence interval is determined using Equation 5. The values
substituted in the Equation 5 are consistent with the values used above.
1
𝑛
1
𝑧2
𝐿𝑜𝑤𝑒𝑟 𝐵𝑜𝑢𝑛𝑑 = 𝑀𝑖𝑑𝑝𝑜𝑖𝑛𝑡 − 𝑧 × √
[𝑝̂ (1 − 𝑝̂ ) (
)+ (
)]
𝑛 + 𝑧2
𝑛 + 𝑧2
4 𝑛 + 𝑧2

𝐿𝑜𝑤𝑒𝑟 𝐵𝑜𝑢𝑛𝑑 =

0.75334716

− 1.959964 × √

1
8
1
(1.959964)2
[0.87500000(1 − 0.87500000) (
)+ (
)]
8 + (1.959964)2
8 + (1.9599642
4 8 + (1.959964)2

Lower Bound = 0.75334716 − 0.22423535 = 0.52911182 (52.911182%).
The value of the lower bound of the confidence interval for the error rate is then compared to the
thresholds in Table 1. The thresholds associated with the scaled reductions are values of 20%,
40%, 60% and 80%. Since the lower bound (52.911182%) is greater than 40%, but less than
60%, the contract’s two Part C appeals measure would be reduced by 2 stars due to IRE data
completeness issues. The reduction would be applied after the measure-level Star Ratings are
calculated as detailed in the 2019 Technical Notes. The maximum measure-level Star Rating
Contract B could receive for the two Part C appeals measures is 3 stars. If the application of the

 121
2-star reduction to the associated Part C appeals measure-level stars results in a measure-level
Star Rating less than 1 star, the contract’s Part C appeals measure would be rated 1 star.
Table 3: Part D Appeals Example

Contract

Enrollment

Number of
Untimely
Cases Not
AutoForwarded

D

350,000

25

Number of
Untimely
Cases
28

Projected
Number of
Untimely
Cases Not
AutoForwarded
75

Calculated
Error Rate
(%)
89.285714

Contract D has a mean annual enrollment of 350,000. The contract submitted TMP data using a
one-month time period. The TMP data revealed that 25 untimely cases were not forwarded to the
IRE and 28 cases were untimely in the time period.
The contract’s calculated error rate is found by dividing the number of untimely cases not autoforwarded to the IRE by the total number of untimely cases. This results in a numerator of 25
and a denominator of 28 or a calculated error rate of 25/28 = 0.89285714 or 89.285714%.
The projected number of untimely cases not auto-forwarded to the IRE for Contract D is found
by multiplying the number of untimely cases not auto-forwarded to the IRE in the TMP data (25)
and the factor 3.0 since the contract had a mean annual enrollment greater than 250,000
beneficiaries. For Contract D, the projected number of untimely cases not auto-forwarded to the
IRE is 25 times the constant 3.0, which is 25 × 3.0 or 75 cases.
Contract D is subject to possible reductions for IRE data completeness issues because the
calculated error rate is 20% or greater and the projected number of untimely cases not forwarded
to the IRE exceeds 10.
Next, the midpoint of the score interval is calculated using Equation 4 substituting the calculated
error rate of 0.89285714 (89.285714%) for 𝑝̂ , the total number of untimely cases of 28 for n, and
a z score of 1.959964.
𝑀𝑖𝑑𝑝𝑜𝑖𝑛𝑡 = 𝑝̂ (

𝑛
1
𝑧2
)
+
(
)
𝑛 + 𝑧2
2 𝑛 + 𝑧2

28
1
(1.959964)2
𝑀𝑖𝑑𝑝𝑜𝑖𝑛𝑡 = (0.89285714) (
)
+
(
)
28 + (1.959964)2
2 28 + (1.959964)2
This results in a midpoint of 0.84546156 (84.546156%).

 122
The lower bound of the confidence interval is determined using Equation 5. The values
substituted in the Equation 5 are consistent with the values used above.
1
𝑛
1
𝑧2
(
)
𝐿𝑜𝑤𝑒𝑟 𝐵𝑜𝑢𝑛𝑑 = 𝑀𝑖𝑑𝑝𝑜𝑖𝑛𝑡 − 𝑧 × √
[𝑝̂ 1 − 𝑝̂ (
)+ (
)]
𝑛 + 𝑧2
𝑛 + 𝑧2
4 𝑛 + 𝑧2

𝐿𝑜𝑤𝑒𝑟 𝐵𝑜𝑢𝑛𝑑 = 0.845456156 − 1.959964 × √

1
28
1
(1.959964)2
[0.87500000(1 − 0.87500000) (
)+ (
)]
28 + (1.959964)2
28 + (1.9599642
4 28 + (1.959964)2

Lower Bound = 0.84546156 − 0.11742007 = 0.72804148
The value of the lower bound of the confidence interval for the error rate is then compared to the
thresholds in Table 1. The thresholds associated with the scaled reductions are 20%, 40%, 60%,
and 80%. Since the lower bound (72.804148%) is greater than 60%, but less than 80%, the
contract’s two Part D appeals measure would be reduced by 3 stars due to IRE data completeness
issues. The reduction would be applied after the measure-level Star Ratings are calculated as
detailed in the 2019 Technical Notes. The maximum measure-level Star Rating Contract D
could receive for the two Part D appeals measures is 2 stars. If the application of the 3-star
reduction to the associated Part D appeals measure-level stars results in a measure-level Star
Rating less than 1 star, the contract’s Part D appeals measure would be rated 1 star.
2019 Star Ratings Program and the Categorical Adjustment Index
CMS’ interim response to address the within-contract disparity in performance associated with
a contract’s percentages of beneficiaries with low income subsidy and dual eligible (LIS/DE)
and disability status revealed in our comprehensive research conducted over multiple years
culminated in the creation of the Categorical Adjustment Index (CAI). The CAI was first
implemented in the 2017 Star Ratings Program. The values and abridged details of the
methodology are provided in the annual Medicare Part C & D Star Rating Technical Notes
available on the CMS webpage at https://go.cms.gov/partcanddstarratings. Additional details of
the CAI methodology can be found in the CAI Methodology Supplement available at the same
link.
There continues to be additional work in the research community on both identifying the
impact of social risk factors on health outcomes and how to best address the impact on
clinical quality measurement such that comparisons across contracts yield accurate
representations of true differences in quality as opposed to reflections of changes in the
composition of beneficiaries in contracts. The final report of the findings of the two-year trial
period by National Quality Forum (NQF) that temporarily lifted the restriction and allowed
risk-adjustment of performance measures for socioeconomic status (SES) and other

 123
demographic factors was released in July 2017.16 NQF has recommended a three-year
initiative to further examine and consider social risk adjustment to allow evidence as to
whether a change in their longstanding policy prohibiting risk adjustment for SES and other
demographic factors should be revised.
We continue to engage the NCQA and PQA to review and determine if any measures are
sensitive to the composition of the enrollees in a plan and whether case-mix adjustment of
individual measures would be appropriate. The PQA examined their medication adherence
measures, which are currently used in the Star Ratings Program, for potential risk
adjustment17. Beginning in 2018, the PQA will include draft recommendations on risk
adjustment of the three medication adherence measures: Medication Adherence for Diabetes
Medications, Medication Adherence for Hypertension, and Medication Adherence for
Cholesterol. The draft recommendations are as follows:


All three adherence measures should be risk adjusted for sociodemographic status
(SDS) characteristics to adequately reflect differences in patient populations.



The measures should be adjusted for the following beneficiary-level SDS
characteristics: age, gender, dual eligibility/LIS status, and disability status.



The three adherence measures should be stratified by the beneficiary-level SDS
characteristics listed above to allow health plans to identify disparities and understand
how their patient population mix is affecting their measure rates.

The PQA has indicated that these draft recommendations will be included in the 2018 PQA
Measure Manual, and will be finalized in 2019 once PQA completes the NQF
measure endorsement maintenance of the three measures (NQF Endorsed # 0541). If
finalized, CMS will consider how to implement the PQA recommendations in the future for
these Star Ratings measures.
NCQA has also completed their examination of a subset of the HEDIS measures used in the
Star Ratings Program. NCQA has received approval from the Committee on Performance
Measurement (CPM) to implement stratified reporting of four of the measures used in the
Star Ratings Program: Breast Cancer Screening, Colorectal Cancer Screening,
Comprehensive Diabetes Care – Eye Exam Performed, and Plan All-Cause Readmissions.18
The measures would be stratified using the following subgroups: both LIS/DE and disabled,
not LIS/DE and not disabled; LIS/DE and not disabled; not LIS/DE and disabled; and other.

NQF’s Final Report can be assessed using the following link:
http://www.qualityforum.org/Publications/2017/07/Social_Risk_Trial_Final_Report.aspx
17
The PQA summary can be accessed at: SDS Risk Adjustment PQA PDC CMS Part D Stars
18
A summary of the NCQA analysis and recommendations can be accessed using the link that follows:
http://www.ncqa.org/hedis-quality-measurement/research/hedis-and-the-impact-act
16

 124
An overall (i.e., non-stratified) result would also be required to be reported for this measure.
The change to the specification would be applicable to the MA program reporting
requirements. At present, NCQA is designing the reporting requirements and anticipate the
change in its specification in the 2019 HEDIS Volume 2. CMS is considering how to best
incorporate the information provided by the stratified reporting in future years of the Star
Ratings.
The Office of the Assistant Secretary for Planning and Evaluation (ASPE), as required in the
Improving Medicare Post-Acute Care Transformation Act of 2014 (IMPACT Act,
P.L. 113-185), released the first in a two-part series of Reports to Congress (RTC) in
December 2016.19 In it, ASPE analyzed the effect of social risk factors on health outcomes of
Medicare beneficiaries. ASPE reviewed a number of CMS programs, including MA. CMS has
carefully reviewed the report and is considering the feasibility of the considerations presented
in ASPE’s RTC for MA contracts and sponsors, as well as the impact on the use of the ratings
for beneficiaries. ASPE’s second report is due in the fall of 2019. In the meantime, CMS
continues to be in dialogue with ASPE to discuss potential options for future MA Star Ratings.
CMS remains firmly committed to building the foundation for a long-term solution that
appropriately addresses the issue at hand and aligns with our policy goals. CMS remains
steadfast that any policy response must delineate the two distinct aspects of the issue - quality
and payment. The Star Ratings are a reflection of the quality of a contract and thus, the
response to address the LIS/DE/disabled effect revealed in our research must not distort the
meaning and value of the quality ratings. Further, the long-term solution must recognize the
unique challenges of serving vulnerable populations. While the measure stewards continue
their work, CMS will continue to consider all feasible options that exist for a long-term
response.
Since its inception, the application of the CAI has resulted in a modest movement of the Star
Ratings. In 2017, nineteen MA-PDs had their overall Star Rating increase a half-star after the
overall CAI was applied to their unadjusted overall Star Rating. Nine contracts had their
overall rating change from 3.5 to 4.0 stars after the overall CAI was applied. For MA-only
and MA-PDs, seven contracts increased a half-star after the Part C summary CAI was applied
to their unadjusted Part C summary rating. Sixteen MA-PDs contracts increased a half-star
after Part D CAI was applied to their unadjusted Part D summary rating. In 2017, the
movement for stand-alone PDPs was bidirectional. Nine PDPs decreased a half-star and three
increased a half-star after the PDP-specific CAI values were applied to their unadjusted Part D
summary rating.

ASPE’s first Report to Congress: Social Risk Factors and Performance under Medicare's Value-Based
Purchasing Programs can be accessed using the link that follows: https://aspe.hhs.gov/pdf-report/reportcongress-social-risk-factors-and-performance- under-medicares-value-based-purchasing-programs.
19

 125
For the 2018 Star Ratings, the impact of the CAI resulted in primarily positive movement of
the ratings. A total of eleven MA-PDs saw their overall Star Rating increase by a half-star
and one MA-PD’s overall rating decreased by a half-star after the overall CAI was applied to
their unadjusted overall Star Rating. Six contracts had their overall rating change from 3.5 to
4.0 after the CAI was applied. For MA-only and MA-PDs, eleven contracts increased a halfstar and 4 decreased a half-star after the Part C summary CAI values were applied. A total of
4 MA-PD contracts increased a half-star after the Part D MA-PD summary CAI was applied
to their unadjusted Part D summary rating. The movement for stand-alone PDPs was
directional only. Six PDPs decreased a half-star after the PDP-specific CAI values were
applied to their unadjusted Part D summary rating.
For the 2019 Star Ratings Program, CMS is proposing to continue the use of the interim
analytical adjustment, the CAI. The overall methodology would remain unchanged for 2019.
As stated in the CY 2017 Call Letter (CY 2017 Rate Announcement, Attachment VII,
pages 131-133), the CAI values will be updated annually and published in the final Call Letter.
The CAI values will be determined using the previous Star Ratings year’s measurement period,
which allows the release of the CAI values well in advance of the first Star Ratings preview
period. Thus, the 2019 CAI values are determined using data from the 2018 Star Ratings.
LIS/DE status for the categorization of the contracts for the 2019 Star Ratings will be based on
the Medicare enrollment data from CY 2017. The disability status of an enrollee will be
determined using information from the Social Security Administration (SSA) and Railroad
Retirement Board (RRB) record systems for CY 2017. Disability status is based on the original
reason for entitlement code (OREC).
For the 2019 Star Ratings Program, the analysis and criteria used to select measures for
adjustment were the same as those used for the 2017 Star Ratings Program. CMS updated its
analyses of the measures using the 2016 measurement period data and evaluated the
variability of within-contract differences in performance for a similar subset of Star Ratings
measures examined last year.20 A summary of the updated analysis conducted to select the
measures including the minimum, median, and maximum values for the within-contract
variation for the LIS/DE differences is posted at http://go.cms.gov/partcanddstarratings. The
decision criteria used to select measures for adjustment was (1) a median absolute difference

20

The 18 clinical quality measures that comprised the subset of the Star Ratings measures examined for the
2019 CAI included: adult BMI assessment, annual flu vaccine, breast cancer screening, colorectal cancer
screening, controlling blood pressure, diabetes care – blood sugar controlled, diabetes care – eye exam, diabetes
care – kidney disease monitoring, improving bladder control, medication reconciliation post-discharge, MTM
Program Completion Rate for CMR, osteoporosis management in women who had a fracture, plan all-cause
readmissions, monitoring physical activity, rheumatoid arthritis management, medication adherence for diabetes
medications, medication adherence for hypertension, medication adherence for cholesterol.

 126
between LIS/DE and non-LIS/DE beneficiaries of 5 percentage points or more and/or (2) the
LIS/DE subgroup performed better or worse than the non-LIS/DE subgroup in all contracts.
The measures selected for adjustment for the 2019 Star Ratings include six Part C measures and
two Part D measures. For MA (MA-only, MA-PD) and 1876 contracts, the Part C measures
selected for adjustment for the 2019 Star Ratings include: Annual Flu Vaccine, Breast Cancer
Screening, Diabetes Care – Blood Sugar Controlled, Medication Reconciliation Post-Discharge,
Osteoporosis Management in Women who had a Fracture, Plan All-Cause Readmissions21. For
MA-PDs and PDPs, the two Part D measures selected for adjustment for the 2019 Star Ratings
include: Part D Medication Adherence for Hypertension and MTM Program Completion Rate for
CMR.
2019 Categorical Adjustment Index (CAI) Values
MA contracts have up to three mutually exclusive and independent adjustments – one for the
overall Star Rating and one for each of the summary ratings (Part C and Part D). PDPs have
one adjustment for the Part D summary rating. Tables 4 – 15 provide the rating-specific
categories for classification of contracts based on the percentage of LIS/DE and disabled
beneficiaries along with the final adjustment categories.
Table 4 provides the range for the percentages that correspond to the LIS/DE categories
determined by dividing the distribution of MA contracts’ LIS/DE percentages into ten equalsized groups. Table 5 provides the range of the percentages that correspond to the disability
quintiles for the categorization of MA contracts for the CAI for the overall Star Rating.
The upper limit for each category is not included in that category, but rather the next higher
category. For example, if a contract’s percentage of LIS/DE beneficiaries is 9.486205%, the
contract’s LIS/DE initial category is L3. The exceptions for the upper limit exclusion for an
initial group are the tenth initial category for LIS/DE and the fifth quintile for disability.

21

Using the adjusted measure selection criteria, plan all-cause readmissions was selected for adjustment for the
2019 Star Ratings. The adjustment of the plan all-cause readmissions measure scores for LIS/DE and disabled
included case-mix weights that are part of the HEDIS measure specification and weighted effects coding to
account for the different numbers of LIS/DE and non-LIS/DE beneficiaries per contract as well as, the unequal
numbers of disabled and non-disabled beneficiaries in the data.

 127
Table 4: Categorization of MA Contracts into Initial LIS/DE Groups for the
Overall Rating
LIS/DE Initial Group
L1
L2
L3
L4
L5
L6
L7
L8
L9
L10

Percentage of Contract’s LIS/DE Beneficiaries
Beneficiaries
0.000000 to
less than 6.147316
6.147316 Beneficiaries
to less than 9.486205
9.486205 to less than 11.709700
11.709700 to less than 14.743797
14.743797 to less than 19.979137
19.979137 to less than 26.817676
26.817676 to less than 39.929156
39.929156 to less than 69.752170
69.752170 to less than 100.00000
100.000000

Table 5: Categorization of MA Contracts into Disability Quintiles for the
Overall Rating
Disability Quintile Percentage of Contract’s Disabled Beneficiaries
D1
D2
D3
D4
D5

0.000000 to less than 15.059848
15.059848 to less than 20.932235
20.932235 to less than 27.405248
27.405248 to less than 38.060705
38.060705 to less than or equal to 100.000000

 128
Table 6 provides the description of each of the final adjustment categories for the overall Star
Rating for MA contracts and the associated values of the CAI for each final adjustment
category.
Table 6: Final Adjustment Categories and CAI Values for the Overall Rating
Final
Adjustment
Category
A
B

C

D

E
F

LIS/DE Initial
Group

Disability Quintile

L1
L2 - L4
L5
L1
L6 - L7
L8 - L9
L5

D1 – D3
D1 - D4
D1 - D2
D4
D1 - D3
D1
D3 - D4

L6
L1 - L5
L10
L8
L7
L9 - L10

D4
D5
D1
D2 - D5
D4
D2

L6 - L7
L9 - L10
L9
L10

D5
D3 - D4
D5
D5

CAI Value
−0.041117
−0.011802

0.006484

0.041195

0.113869
0.142718

 129
Tables 7 and 8 provide the range of the percentages that correspond to the initial LIS/DE groups
and disability quintiles for the initial categories for the determination of the CAI values for the
Part C summary rating.
Table 7: Categorization of MA Contracts into Initial LIS/DE Groups for the Part C
Summary Rating
LIS/DE Initial Group
L1
L2
L3
L4
L5
L6
L7
L8
L9
L10

Percentage of Contract’s LIS/DE Beneficiaries
0.000000 to less than 5.992616
5.992616 to less than 8.988495
8.988495 to less than 11.438062
11.438062 to less than 14.634338
14.634338 to less than 19.378661
19.378661 to less than 26.317568
26.317568 to less than 39.614595
39.614595 to less than 69.705289
69.705289 to less than 100.00000
100.000000

Table 8: Categorization of MA Contracts into Disability Quintiles for the Part C
Summary Rating
Disability Quintile Percentage of Contract’s Disabled Beneficiaries
D1
D2
D3
D4
D5

0.000000 to less than 14.826108
14.826108 to less than 20.812509
20.812509 to less than 27.249755
27.249755 to less than 38.009950
38.009950 to less or equal to 100.000000

 130
Table 9 provides the description of each of the final adjustment categories for the Part C
summary rating and the associated value of the CAI for each final adjustment category.
Table 9: Final Adjustment Categories and CAI Values for the Part C Summary Rating
Final
Adjustment
Category
A

B

C
D
E

LIS/DE Initial
Group

Disability Quintile

L1 - L4
L1 - L2
L5 - L7
L8 - L9
L3 - L4
L1 - L2
L8 - L10
L10
L8
L9 - L10
L9
L10

D1 - D2
D3
D1 - D5
D1
D3 - D5
D4 - D5
D2 - D3
D1
D4 - D5
D4
D5
D5

CAI Value
−0.017642

0.006198

0.045454
0.076586
0.125909

Tables 10 and 11 provide the range of the percentages that correspond to the initial LIS/DE
groups and the disability quintiles for the initial categories for the determination of the
CAI values for the Part D summary rating for MA-PDs.
Table 10: Categorization of MA-PD Contracts into Initial LIS/DE Groups for the
Part D Summary Rating
LIS/DE Initial Group
L1
L2
L3
L4
L5
L6
L7
L8
L9
L10

Percentage of Contract’s LIS/DE Beneficiaries
0.000000 to less than 6.086006
6.086006 to less than 9.486205
9.486205 to less than 11.818672
11.818672 to less than 15.062762
15.062762 to less than 20.400000
20.400000 to less than 28.005752
28.005752 to less than 41.258946
41.258946 to less than 72.787572
72.787572 to less than 100.000000
100.00000

 131
Table 11: Categorization of MA-PD Contracts into Disability Quintiles for the Part D
Summary Rating
Disability Quintile Percentage of Contract’s Disabled
Beneficiaries
D1
0.000000 to less than 15.064161
D2
D3
D4
D5

15.064161 to less than 21.113304
21.113304 to less than 27.887822
27.887822 to less than 39.190317
39.190317 to less than 100.000000

Table 12 provides the description of each of the final adjustment categories for the Part D
summary rating for MA-PDs and the associated values of the CAI for each final adjustment
category.
Table 12: Final Adjustment Categories and CAI Values for the Part D Summary
Rating for MA-PDs
Final
Adjustment
Category
A
B
C

D
E

LIS/DE Initial
Group

Disability
Quintile

L1 - L3
L1
L4 - L8
L9
L2 - L3
L1 - L6
L7
L9 - L10
L10
L8
L7 - L9
L10

D1
D2 - D3
D1 - D3
D1 - D2
D2 - D3
D4 - D5
D4
D3 - D4
D1 - D2
D4
D5
D5

CAI Value
−0.031272
−0.007584
0.015478

0.086029
0.142243

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Tables 13 and 14 provide the range of the percentages that correspond to the LIS/DE and
disability quartiles for the initial categories for the determination of the CAI values for the Part
D summary rating for PDPs. Quartiles are used for both dimensions (LIS/DE and disability) due
to the limited number of PDPs as compared to MA contracts.
Table 13: Categorization of PDP Contracts into LIS/DE Quartiles for the Part D
Summary Rating
LIS/DE Quartile Percentage of Contract’s LIS/DE Beneficiaries
L1
0.000000 to less than 1.669196
L2
1.669196 to less than 4.001965
L3
4.001965 to less than 15.204859
L4
15.204859 to less than or equal to 100.000000
Table 14: Categorization of PDP Contracts into Disability Quartiles for the Part
D Summary Rating
LIS/DE Quartile Percentage of Contract’s LIS/DE Beneficiaries
D1
0.000000 to less than 7.415977
D2
7.415977 to less than 12.842575
D3
12.842575 to less than 19.147148
D4
19.147148 to less than or equal to 100.000000

Table 15 provides the description of each of the final adjustment categories for the Part D
summary rating for PDPs and the associated value of the CAI per final adjustment category.
Please note that the CAI values for the Part D summary rating for PDPs are different from the
CAI values for the Part D summary rating for MA contracts. Categories were chosen to enforce
monotonicity and to yield a minimum of 10 contracts per final adjustment category. There are
four final adjustment categories for PDPs for the Part D summary rating.
Table 15: Final Adjustment Categories and CAI Values for the Part D Summary Rating
for PDPs
Final
Adjustment
Category
A
B
C

LIS/DE Quartile

Disability Quartile

L1
L2 - L3
L1
L4

D1 - D3
D1 - D4
D4
D1 - D4

CAI Value
−0.243619
−0.119773
0.047909

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Additional Adjustment to Address Lack of an LIS Indicator for Enrollees in Puerto
Rico
Puerto Rico has a unique healthcare market with a large percentage of low-income individuals in
both Medicare and Medicaid and a complex legal history that affects its healthcare system in
many ways. Puerto Rican beneficiaries are not eligible for LIS.
For the 2017 Star Ratings an additional adjustment for contracts that solely serve the population
of beneficiaries in Puerto Rico (i.e., contracts with service areas entirely in Puerto Rico) to
address the lack of LIS was applied to make the application of the CAI equitable for contracts in
Puerto Rico. The additional adjustment resulted in a modified value for the percentage of
LIS/DE for contracts operating solely in Puerto Rico. The adjustment resulted in a modified
percentage of LIS/DE beneficiaries that was subsequently used to categorize contracts into the
final adjustment category for the CAI. The model developed for the 2019 Star Ratings LIS/DE
indicator will be available in Attachment O in the 2019 Medicare Part C & D Star Rating
Technical Notes. The details of the LIS/DE indicator methodology are available in the CAI
Methodology Supplement available at http://go.cms.gov/partcanddstarratings.
For the 2019 Star Ratings, CMS proposes to continue to employ the additional adjustment for
contracts operating solely in Puerto Rico (using the most recent data available at the time of
development of the model for the 2019 Star Ratings. The data sources include: the 1-year
American Community Survey (ACS) estimates for the percentage of people living below the
Federal Poverty Level (FPL); the ACS 5-year estimates for Puerto Rico and the 10 highestpoverty states of the percentage of people living below 150% of the FPL22; and the CY 2017
Medicare Enrollment data. CMS continues to explore alternative data sources for Puerto Rico to
provide both resource and income information for the determination of the additional adjustment.
CMS recognizes the additional challenge unique to Puerto Rico related to the medication
adherence measures used in the Star Ratings Program due to the lack of LIS. For the 2019 Star
Ratings, CMS proposes to continue to reduce the weights for the adherence measures to zero (0)
for the summary and overall rating calculations and maintain the weight of three (3) for the
adherence measures for the improvement measure calculations for contracts that solely serve the
population of beneficiaries in Puerto Rico.
Disaster Implications
Natural disasters such as hurricanes and wildfires can directly affect our Medicare beneficiaries
and providers, as well as the Parts C and D organizations that provide them with important
medical care and prescription drug coverage. These disasters may negatively affect the
22

The data to develop the model is limited to the 10 states, drawn from the 50 states plus the District of
Columbia, with the highest proportion of people living below the FPL as identified by the 1-year ACS
estimates.

 134
underlying operational and clinical systems that CMS relies on for accurate performance
measurement in the Star Ratings program. CMS is considering a variety of strategies to address
Star Ratings issues related to contracts impacted by extreme and uncontrollable circumstances.
We propose to adjust the 2019 and 2020 Star Ratings to take into account the effects of extreme
and uncontrollable circumstances that occurred during the performance period, such as the
disasters (Hurricanes Harvey, Irma, and Maria, and the wildfires in California) that occurred
during the 2017 performance period. CMS is also concerned that certain natural disasters and
emergencies that continue into early 2018 may interfere in plans’ ability to conduct surveys
needed for 2019 Star Ratings. Below we propose a policy to identify which contracts were
impacted as well as rules to adjust the Star Ratings measures.
Identification of Affected Contracts
We are proposing a policy to identify MA and Part D contracts affected by extreme and
uncontrollable circumstances that may impact their performance on Star Ratings measures and/or
may impact their ability to collect the necessary measure-level data. These “affected contracts”
would be the contracts eligible for the adjustments proposed below to take into account the
effects of the extreme and uncontrollable circumstances.
We propose that affected contracts would be:
(1) Contracts operating solely in Puerto Rico (i.e., serving only residents of Puerto Rico);
OR
(2) Contracts that meet all of these criteria:
a. The service area is within an “emergency area” during an “emergency period”
as defined in Section 1135(g) of the Act.
b. The service area is within a county, parish, U.S. territory or tribal area
designated in a major disaster declaration under the Stafford Act that served as
a condition precedent for the Secretary’s exercise of authority under Section
1135 of the Act.
c. At least one enrollee under the contract resides in a FEMA-designated
Individual Assistance area either at the time of the survey (for CAHPS and
HOS adjustments to survey responses) or at the time of the disaster (for all
other adjustments). For some adjustments, a certain percentage (25% or 60%)
of the enrollees under the contract must reside in a FEMA-designated
Individual Assistance area.
We propose that the policy should be tailored to the specific areas experiencing the extreme and
uncontrollable circumstance. Health and drug plans can serve enrollees across large geographic
areas, and thus they may not be impacted in the same manner as healthcare providers such as

 135
hospitals or medical centers located in specific physical locations. For purposes of this policy, a
narrower geographic scope than the full emergency area would ensure that the Star Ratings
adjustments are focused on the specific geographic areas that experienced the greatest adverse
effects from the extreme and uncontrollable circumstance and are not applied to areas sustaining
little or no adverse effects. We identify an area as having experienced extreme and
uncontrollable circumstances if it is within an “emergency area” and “emergency period” as
defined in section 1135(g) of the Act, and also is within a county, parish, U.S. territory or tribal
government designated in a major disaster declaration under the Stafford Act that served as a
condition precedent for the Secretary’s exercise of the 1135 waiver authority
(https://www.phe.gov/emergency/news/healthactions/section1135/Pages/default.aspx). Major
disaster area are identified and can be located on Federal Emergency Management Agency
(FEMA) Web site at https://www.fema.gov/disasters.
To further narrow the scope of this policy to ensure it is applied to those contracts most likely to
have experienced the greatest adverse effects, we propose to limit this policy to Individual
Assistance disaster declarations. Individual Assistance includes assistance to individuals and
households, crisis counseling, disaster case management, disaster unemployment assistance,
disaster legal services, and the disaster Supplemental Nutrition Assistance Program. We focus
on counties eligible for Individual Assistance as a result of a major disaster because most Star
Ratings measures are based on services provided directly to beneficiaries in their local area.
Therefore, adjustments to the Star Ratings are most appropriately targeted to areas where
beneficiaries were eligible for individual and household assistance as a result of the disaster.
To determine whether a contract was impacted (such as that it would be an “affected contract”
eligible for adjustments), we propose to compare the number of enrollees in the Individual
Assistance area at the time of the disaster compared to the number of enrollees outside the
Individual Assistance area. Using the Individual Assistance major disaster declaration as a
requirement for the extreme and uncontrollable event policy ensures that the policy would apply
only when the event is extreme, meriting the use of special adjustments to the Star Ratings, and
targeting the specific area affected by the extreme and uncontrollable circumstance.
The Hurricanes Harvey, Irma, and Maria, and the recent California wildfires would trigger the
extreme and uncontrollable circumstance policy as there were areas identified as “emergency
areas” for “emergency periods” under Section 1135(g) as a result of these natural disasters; there
were Stafford Act declarations of a major disaster applicable to them; the Secretary did exercise
authority under Section 1135 of the Act as a result of these disasters; and there are enrollees
residing in FEMA-designated Individual Assistance areas. During the measurement year for the
2019 Star Ratings, the effects of Hurricanes Harvey, Irma, and Maria, as well as the California
wildfires were significant for Medicare beneficiaries, as well as for the Parts C and D
organizations that provide important medical care and prescription drug coverage for them. We
propose to limit relief to these major disasters since they affected large regions of the United
States, leading to issues accessing medical care and prescription drug coverage. Further, plans

 136
complete many preventive screenings at the end of the calendar year so disasters in this period
may have an inordinate impact on 2019 Star Ratings. Finally, beneficiaries responding to CMS
surveys early in 2018 will be reflecting predominately on events in late 2017 so these disasters
may impact survey results.
We are also proposing that contracts operating solely in Puerto Rico (i.e., with service areas
limited to Puerto Rico) be treated as affected contracts without further analysis because of the
extent of damage in that area. Several areas remain without electricity in Puerto Rico and there
are reports of significant population movement as a result of Hurricane Maria that are unique in
scope to Puerto Rico compared to the other Individual Assistance areas designed by FEMA
during 2017. Those contracts meet the other proposed criteria. As noted below, we also propose
adjustments that are specific to contracts operating in Puerto Rico.
Contracts that do not meet the definition of an “affected contract” or the parameters discussed
below would not be eligible for any adjustments under this policy.
CAHPS Adjustments:
For CAHPS, CMS is proposing to take into account the effects of these disasters in the following
ways for affected contracts:
(1) For contracts that operate solely in Puerto Rico, we propose to make the 2018 survey
optional, given substantial ongoing issues contacting enrollees in Puerto Rico, the
continuing loss of electricity in several areas, etc. If a contract in Puerto Rico chooses not
to administer the 2018 survey, it would receive the contract’s 2018 CAHPS Star Ratings
for the 2019 Star Ratings. If a contract in Puerto Rico choses to administer the 2018
survey, it would receive the higher of the 2018 or 2019 Star Ratings (and corresponding
measure ratings) for each CAHPS survey measure (including the annual flu vaccine
measure). We are proposing this relief because of concerns that the adjustment to the
2018 survey results may not capture all possible impacts of the major disasters given the
possibility of unusual response patterns due to the scope of the disasters, and we do not
know what performance would have been observed in the absence of these disasters.
(2) For other affected contracts, the MA organization would be required to administer the
2018 CAHPS survey unless the contract requested and we approved an exception because
a substantial number of their enrollees have been displaced due to a FEMA-designated
disaster in 2017 and it would be practically impossible to contact the required sample for
the survey. Our proposed adjustment is two-fold: an adjustment for affected contracts
and an additional adjustment for affected contracts with more than 25% of enrollees
residing in FEMA-designated Individual Assistance areas.
The CAHPS scores for affected contracts would be adjusted to account for the impact of
the disaster. A CAHPS respondent would be considered to reside in a FEMA-designated

 137
disaster area if the respondent lives in a FEMA-designated Individual Assistance area at
the time of the survey. This adjustment for non-Puerto Rico contracts would pool across
contracts to develop separate estimates for each disaster. Unlike the usual procedures for
case-mix adjustment, the coefficients would be estimated in a difference-in-differences
manner (controlling for the previous year’s scores in the same contracts). In particular,
the estimated effect of a disaster would be the mean CAHPS score change from the
previous year in affected counties minus the mean CAHPS score change from the
previous year in unaffected counties, both estimated from only the contracts that have
sample in both the affected counties and unaffected counties. This approach distinguishes
changes that were specific to the affected areas from overall trends in CAHPS scores and
only adjusts for the change in CAHPS scores that is specific to the affected areas. We
propose to only adjust if the effects are in a consistent direction and adjustment is
advantageous to contracts.
We further propose that affected contracts with more than 25% of beneficiaries residing
in affected Individual Assistance areas at the time of the disaster would receive the higher
of the 2018 or the adjusted 2019 Star Ratings (and corresponding measure ratings) for
each CAHPS measure (including the annual flu vaccine measure). We chose the 25%
cutoff based on analysis of the distribution of the data for the percent of enrollees per
contract in the Individual Assistance areas at the time of the disasters. The 25% was
chosen based on the distribution since no contracts were near this cut off and it would
avoid including contracts with very few enrollees impacted. The measure-level scores
for contracts with very few enrollees impacted should not be adversely affected by these
disasters.
Further, contracts operating solely in Puerto Rico would be excluded from 2019 Star
Ratings cut point calculations for CAHPS measures. Cut points for contracts operating
solely in Puerto Rico would have their cut points calculated using only data collected in
2018.
HOS Adjustments:
For the HOS survey, we propose to follow similar procedures as CAHPS:
(1) For contracts solely operating in Puerto Rico, we propose to make the 2018 HOS survey
optional, given substantial ongoing issues contacting enrollees in Puerto Rico, the
continuing loss of electricity in several areas, etc. If a contract in Puerto Rico chooses
not to administer the 2018 HOS Cohort 21 Baseline and Cohort 19 Follow-up surveys,
we propose that it would receive the previous year’s Star Ratings (and corresponding
measure ratings) for HOS and HEDIS-HOS measures in the 2020 Star Ratings. If a
contract in Puerto Rico chooses to administer the 2018 HOS surveys, we propose to

 138
assign it the higher of the current or previous year’s Star Ratings (and corresponding
measure ratings) for each HOS and HEDIS-HOS measure in the 2020 Star Ratings.
(2) For affected contracts, the MA organization would be required to administer the 2018
HOS surveys unless the contract requests and CMS approves an exception because a
substantial number of the contract enrollees have been displaced due to a FEMAdesignated disaster in 2017 (i.e., Hurricanes Harvey, Irma, Maria, or the California
wildfires) and it would be practically impossible to contact the required sample for the
survey.
The HOS scores for affected contracts would be adjusted to account for the impact of the
disaster. A HOS respondent would be considered to reside in a FEMA-designated
disaster area if the respondent lives in a FEMA-designated Individual Assistance area at
the time of the survey. The adjustment for non-Puerto Rico contracts would pool across
contracts to develop separate estimates for each disaster. Unlike the usual procedures for
case-mix adjustment, the coefficients would be estimated in a difference-in-differences
manner (controlling for the previous year’s scores in the same contracts). We propose to
only adjust if the effects are in a consistent direction and adjustment is advantageous to
contracts.
We further propose that affected contracts with more than 25% of beneficiaries residing in
affected Individual Assistance areas at the time of the disaster would receive the higher of the
current or previous year’s Star Rating for each HOS and HEDIS-HOS measure (and
corresponding measure rating) in the 2020 Star Ratings. We chose the 25% cutoff based on
analysis of the distribution of the data for the percent of enrollees per contract in the Individual
Assistance areas at the time of the disasters. Please see discussion above for more details.
Our proposal for cut points for non-CAHPS measures is addressed on page 48 below.
HEDIS Adjustments:
For HEDIS, contracts operating solely in Puerto Rico would have the option to report “NA” for
all HEDIS measures; all other affected contracts would be required to report HEDIS data to
CMS unless the MA organization of an affected contract requests and receives from CMS an
exception given the inability to obtain both administrative and medical record data. All contracts
in disaster areas can work with NCQA to request modifications to the samples for measures that
require medical record review. If a Puerto Rico contract reports an “NA” for any of the Star
Ratings measures, the contract would receive the 2018 Star Ratings for that measure. If a Puerto
Rico contract chooses to report any of the HEDIS measures, the contract would receive the
higher of the 2018 or 2019 Star Rating (and corresponding measure rating) for each HEDIS
measure reported. For affected contracts with more than 25% of beneficiaries in a FEMAdesignated Individual Assistance area at the time of the disaster, we would take the higher of the

 139
2018 or 2019 Star Ratings (and corresponding measure rating) for each HEDIS measure. Please
see discussion above for the selection of the 25% cutoff.
Other Star Ratings Measure Adjustments:
We propose that for all other measures for affected contracts with at least 25% of beneficiaries in
a FEMA-designated Individual Assistance area at the time of the disaster, we would take the
higher of the 2018 or 2019 measure Star Rating (and corresponding measure rating).
We propose to exclude from this adjustment policy the following measures: Part C Call Center –
Foreign Language Interpreter and TTY Availability; Part D Call Center – Foreign Language
Interpreter and TTY Availability; Part C Plan Makes Timely Decisions about Appeals; Part C
Reviewing Appeals Decisions; Part D Appeals Auto-Forward; and Part D Appeals Upheld. We
propose to exclude these specific measures from the proposed adjustments for affected contracts
because these measures and the underlying performance are completely in the plan’s control; we
believe therefore that there should be no impact from the declaration of a disaster on plan
performance in these areas.
Currently, contracts must have data for at least half of the attainment measures used to calculate
the Part C or Part D improvement measures to be eligible to receive a rating in each
improvement measure. For contracts that revert back to the 2018 Star Rating for a particular
measure, we propose that measure would be excluded in the measure count for the determination
of whether the contract has at least half of the measures needed to calculate the relevant
improvement measure for the 2019 and 2020 Star Ratings. That is, we would follow our usual
rule where to receive a Star Rating in the improvement measures a contract must have measure
scores for both years in at least half of the required measures used to calculate the Part C
improvement or Part D improvement measures.
Cut Points for Non-CAHPS Measures:
Currently, the Star Rating for each non-CAHPS measure is determined by applying a clustering
algorithm to all the measures’ numeric value scores from all contracts required to submit the
measure. The cut points are derived from this clustering algorithm. We propose to exclude from
this clustering algorithm the numeric values for affected contracts with 60% or more of their
enrollees in the FEMA-designated Individual Assistance area at the time of the disaster. We are
proposing that these contracts be excluded to ensure that any impact of the disaster on their
measure-level scores would not have an impact on the cut points for other contracts. However,
these cut points calculated for all other contracts would be used to assess these contracts’ 2019
measure Star Ratings (which would be compared to the contracts’ 2018 measure Star Ratings to
determine which is higher, and therefore used for the impacted contracts’ 2019 Star Ratings
calculations, per above).

 140
Similarly, we propose that affected contracts with 60% or more of their enrollees impacted
would also be excluded from the determination of the performance summary and variance
thresholds for the Reward Factor. However, these contracts would still be eligible for the Reward
Factor based on the mean and variance calculations of other contracts.
For the measures using the 25% cutoff for reverting to last year’s measure-level stars, if the
affected contract did better for that measure in the prior year, we chose that cutoff based on
analysis of the data. Contracts tend either to have very few enrollees impacted or most of their
enrollees impacted. If one out of four enrollees were impacted during the period of the year when
the disaster hit, there is a small chance that scores may have been impacted. If very few
enrollees in a contract lived in impacted areas during the disaster period, the measure-level
scores should not be impacted. The selection of the exclusion of numeric measures scores from
contracts with 60% or more enrollees impacted from the determination of the cut points was
chosen through an analysis of the distribution of the percent of enrollees impacted by contract
across all contracts impacted. The 60% was chosen since there was a break in the distribution.
Our approach in selecting 60% is conservative in case scores are impacted in contracts where a
clear majority or all of the enrollees are impacted. We welcome comments on these policies to
account for the potential impact on the 2019 Star Ratings from the widespread disasters in 2017.
2019 CMS Display Measures
Display measures on CMS.gov are not part of the Star Ratings. These may include measures
that are transitioned from inclusion in the Star Ratings, new measures that are being tested
before inclusion into the Star Ratings, or measures displayed solely for informational purposes.
Organizations and sponsors will have the opportunity to preview the data for their display
measures prior to release on CMS’ website. Data for measures moved to the display page
continue to be collected and monitored; poor scores on display measures may reveal underlying
compliance and performance issues that are subject to enforcement actions by CMS. All 2018
display measures will continue to be shown as display measures on CMS.gov in 2019 unless
noted below.
CMS will continue to provide advance notice regarding measures considered for implementation
as future Star Ratings measures. Other display measures may be provided as information only.
New 2019 Display Measure


Plan Makes Timely Decisions about Appeals (Part C). We are proposing for display a
new appeals measure which includes cases dismissed by the IRE because the plan has
subsequently approved coverage/payment (using 2017 data). Currently, we exclude all
cases dismissed/withdrawn by the IRE from this measure. However, plans’ performance
may be artificially improved as a result, especially if the dismissal were directly related to
the plans’ (untimely) approval. Inclusion of cases where the plan has subsequently

 141
approved for coverage/payment that are dismissed or withdrawn at the IRE level could
provide a more accurate assessment of plans’ timeliness in their Part C appeals processing.
We propose to include this modified measure on the 2019 and 2020 display pages; we
intend also to add this revised measure to the 2021 Star Ratings. At that time the current
“Plan Makes Timely Decisions about Appeals” measure would be retired.
Changes to Existing Display Measures


Hospitalizations for Potentially Preventable Complications (Part C). This measure is a
risk-adjusted measure that assesses the rate of hospitalization for complications of chronic
and acute ambulatory care-sensitive conditions. The measure is therefore an important
indicator of care coordination, where hospitalizations represent a failure to prevent a
serious complication. However, concerns raised by experts and stakeholders have led
NCQA to consider updating the specifications to include hospital stays that are considered
“observation stays” to improve completeness of the measure. That is, observation stays can
also represent a failure to prevent serious complications. Therefore we propose to retain
this measure as a 2019 display page measure. We will propose through rulemaking moving
it to Star Ratings with a weight of 1 for the 2022 Star Ratings. In subsequent years, we
intend to weight it 3 as an outcomes measure. Please refer to the NCQA HEDIS 2018
Technical Specifications for Health Plans Volume 2 for measure construction and technical
specifications, as well as to more recent communications from NCQA as to updates in
specifications.



High Risk Medication (Part D). The PQA High Risk Medication (HRM) measure
calculates the percentage of Medicare Part D beneficiaries 65 years and older who
received two or more prescription fills for the same HRM drug with a high risk of serious
side effects in the elderly. This measure would remain on the display page for 2019 (based
on 2017 data), and as noted in the 2018 Call Letter, we propose to use the updated PQA
HRM drug list for that display. We also propose to adopt a specification change made by
the PQA to measure specifications for the numerator (beneficiaries with at least two fills
of the same HRM drug on different dates of service) for the 2019 display measure.



Drug-Drug Interactions (DDI) (Part D). The PQA DDI measure is the percent of Part D
beneficiaries who received a prescription for a target medication during the measurement
period who were also dispensed a concurrent prescription for a contraindicated medication
with or subsequent to the initial prescription. As discussed in the 2018 Call Letter, the PQA
updated the DDI measure drug list. We propose to implement the revised list for the 2019
display measure using 2017 performance and PDE data.



Antipsychotic Use in Persons with Dementia (APD) (Part D). The PQA APD measure is
the percentage of Part D beneficiaries 65 years or older with dementia who received
prescription fills for antipsychotics without evidence of a psychotic disorder or related

 142
condition. For the 2017 measurement year, the APD measure includes an overall measure
rate and breakouts for community-only (COMM) residents and long-term nursing home
(LTNH) residents. We propose to display the rates for the two population breakouts on the
2019 display page (in addition to the overall APD rate currently displayed). We will assess
adding the APD measure to the Star Ratings in the future, which would be proposed through
rulemaking.


Use of Opioids from Multiple Providers and/or at High Dosage in Persons without
Cancer (Part D). PQA’s opioid measures examine multi-provider and/or high dosage
opioid use among individuals 18 years and older without cancer and not in hospice care.

The PQA’s Measure Update Panel and Quality Metrics Expert Panel approved nonsubstantial changes to the measures. First, each rate will have a separate title and the term
“morphine equivalent dose” will be changed to “morphine milligram equivalents.”
Measure 1: Use of Opioids at High Dosage in Persons without Cancer (OHD): The proportion
(XX out of 1,000) of individuals from the denominator receiving prescriptions for opioids with
a daily dosage greater than 120 mg morphine milligram equivalents (MME) for 90 consecutive
days or longer.
Measure 2: Use of Opioids from Multiple Providers in Persons without Cancer (OMP): The
proportion (XX out of 1,000) of individuals from the denominator receiving prescriptions for
opioids from four (4) or more prescribers AND four (4) or more pharmacies.
Measure 3: Use of Opioids at High Dosage and from Multiple Providers in Persons without
Cancer (OHDMP): The proportion (XX out of 1,000) of individuals from the denominator
receiving prescriptions for opioids with a daily dosage greater than 120 mg morphine
milligram equivalents (MME) for 90 consecutive days or longer, AND who received opioid
prescriptions from four (4) or more prescribers AND four (4) or more pharmacies.
Additional changes made by the PQA to these measures include:
1. The opioid treatment period for Measures 1 and 3 must be 90 days or more.
2. ICD-9 and ICD-10 codes will be changed to align with the American Medical
Association (AMA) Physician Consortium for Performance Improvement
(PCPI) cancer value set.
3. All buprenorphine products indicated for medication-assisted treatment
(MAT) will be excluded.
As mentioned in the 2018 Call Letter, we planned to implement these changes beginning with
the 2017 Patient Safety reports. In response to the 2018 Call Letter, several commenters felt that
Measure 3 mirrored the criteria used in the Overutilization Monitoring System (OMS), whereas
the other two measures did not. Therefore, based on that feedback, we propose to add only the
OHDMP measure to the 2019 Part D display page (using 2017 data). All three measures will
continue to be reported to Part D plan sponsors through the Patient Safety reports.

 143
In response to the 2018 Call Letter, some commenters suggested that the PQA lower the
threshold in the opioid measures to align with the March 2016 Centers for Disease Control and
Prevention (CDC) Guideline for Prescribing Opioids for Chronic Pain23 and the revised OMS
criteria thresholds. Due to the timing of their measure development and NQF endorsement
process, the PQA has not yet revised their measures. It is our understanding that the PQA will
discuss additional changes in 2018 along with a timeline for testing potential modifications. We
will monitor updates to the measure specifications made by the PQA and consider for adoption
after advance notice through a future Call Letter. CMS will re-assess including these measures in
the Star Ratings once the PQA updates their measures to better align with the CDC Guideline
and/or OMS.
Note, additional proposals to the Medicare Part D opioid overutilization policy are discussed
within the Improving Drug Utilization Review Controls in Medicare Part D section.


Transition Monitoring (Part D). Since 2015, CMS has produced two display measures
using the results from the Transition Monitoring Program Analysis (TMPA). We propose
to no longer display two separate contract-level measures, one for drugs within the classes
for clinical concern and one for all other drugs. Instead, the results would be consolidated
into one failure rate and display measure. This change aligns with the display measure for
the Formulary Administration Analysis (FAA). Previously, the data was displayed as a
percentage with one decimal place. In order to provide the most accurate results,
beginning with the 2019 display measure, the data will be displayed as a percentage with
two decimal places.



Formulary Administration Analysis measure (Part D). This display measure, added in
2018, uses the results of the FAA used by CMS to evaluate whether Part D sponsors are
appropriately adjudicating drug claims consistent with Part D requirements and sponsors’
CMS-approved benefits.
Previously the data for this measure was displayed as a percentage with one decimal
place. In order to provide the most accurate results, beginning with the 2019 display
measure, the data will be displayed as a percentage with two decimal places.



Timely Effectuation of Appeals (Part D). This measure is defined as the percent of
appeals requiring effectuation that the plan effectuated in a timely manner (timely is
defined as effectuation of the decision within one day for expedited appeals, and
effectuation of the decision within three days for standard appeals). If the IRE does not
receive a notice of effectuation before the report generation date, the IRE will count the
effectuation as non-timely. Currently, this measure includes all data applicable to the time
period being reported as of the date the report is generated by the IRE. Data may change
23

See https://www.cdc.gov/drugoverdose/prescribing/guideline.html.

 144
based on the report date. Discrepancies may also result if the IRE received the effectuation
notice late, even though the plan’s effectuation was timely. Reopenings of appeals may
extend into the following contract year which can impact effectuation data. In order to
allow for these factors, we propose to modify this measure to be defined as all appeals
received by the IRE in the defined timeframe. To account for reopenings and appeals that
straddle the contract year, all decisions from this time period will be included up to May
1st of the following contract year. For example, the CY 2019 display measure’s
timeframe would be IRE cases received from 1/1/18 – 12/31/18 with decisions made
before 5/1/19. Effectuations for appeals decided on or after May 1, 2019 that correspond
to an appeal received 1/1/18 – 12/31/18 will not be reflected in these data and the
timeliness of the reconsideration will be used. Additionally, we propose to exclude the
results of appeals that occur beyond Level 2 (i.e., Administrative Law Judge or Medicare
Appeals Council appeals) from this measure.
Display Measures being Retired


Enrollment Timeliness (Part C and D). The measure assesses the timeliness of
enrollment transactions using the number of plan generated enrollment transactions
submitted to CMS within 7 calendar days of the application date and the total number of
plan generated enrollment transactions submitted to CMS. Beginning in 2012, CMS has
been displaying and monitoring the values of enrollment timeliness. Overall, contracts are
receiving extremely high rates for this measure (96 percent on average). For the 2019 Star
Ratings, we propose to discontinue the display of the measure. We encourage contracts to
continue to track their enrollment timeliness.



Appropriate Monitoring of Patients Taking Long-term Medications and Asthma
Medication Ratio (Part C). NCQA removed the Medicare population from these
measures. Therefore, we propose to discontinue display of these measures in 2019.
Forecasting to 2020 and Beyond

The following describes potential changes to existing measures and potential new measures.
CMS will also monitor any additional measures developed by NCQA or PQA for potential
incorporation into the Star Ratings for 2020 or later. As we add new measures, CMS will
consider which measures are topped out or have little variation across contracts to transition
them to the display page.
As proposed in the Medicare Program; Contract Year 2019 Policy and Technical Changes to
the Medicare Advantage, Medicare Cost Plan, Medicare Fee-for-Service, the Medicare
Prescription Drug Benefit Programs, and the PACE Program (CMS-4182-P) proposed rule,
which was published in the Federal Register on November 28, 2017 (82 FR 56336), we intend
that changes to the measures for the 2021 Star Ratings and beyond would be governed by the
regulations ultimately finalized pursuant to that proposed rule. We proposed there that new

 145
measures or measures with substantial changes would be proposed through the Federal
Register rulemaking process for the 2021 Star Ratings or beyond (82 FR 56378) while the
Advance Notice/Call Letter process would continue to be used for the 2019 and 2020 Star
Ratings.
Potential Changes to Existing Measures


Controlling High Blood Pressure (Part C). Due to the release of new hypertension
treatment guidelines from the American College of Cardiology and American Heart
Association, NCQA is evaluating potential updates to the Controlling High Blood Pressure
measure for HEDIS 2019. Additionally, NCQA is exploring modifications to the
denominator criteria of the measure to improve feasibility and reduce burden, and potential
administrative approaches for meeting numerator criteria.



Plan All-Cause Readmissions (Part C). NCQA is exploring several revisions to the
HEDIS Plan All-Cause Readmissions measure based on feedback they have received
from the field and stakeholders. These revisions may impact the definition of the
denominator, numerator, and risk adjustment model for data collected in 2018. The
specific revisions they are exploring include: 1) Inclusion of observation stays in the
denominator and numerator; 2) revising the measure denominator to be the overall plan
population as opposed to index hospital admissions; and 3) adding death in the
measurement year as a possible factor in the risk adjustment model for this measure.
NCQA is also considering stratifying this measure to separate those individuals with high
frequency of index hospital stays. These changes are pending NCQA’s analyses. CMS is
also proposing to combine the rates for ages 18-64 and ages 65+ for the revised PCR
measure. The revised measure would use NCQA’s new recommendation of 150 as the
minimum denominator value for data to be used. The revised measure would be part of
the display page for 2019 and 2020 before moving to the 2021 Star Ratings with a weight
of 1 the first year and a weight of 3 thereafter. The current Plan All-Cause Readmissions
measure would remain in the Star Ratings through 2020.
NCQA is also considering a possible stratification of the Plan All-Cause Readmissions
measure to identify the percentage of hospital discharges that result in an unplanned
hospital readmission during or after a skilled nursing facility stay for MA contracts. As
noted below an alternate strategy would be to report readmissions from skilled nursing
facilities as a new measure. CMS welcomes feedback on the value of stratified rates as
well as the appropriateness of these revisions.



Initiation and Engagement in Alcohol or Drug Dependence (AOD) Treatment (Part
C). NCQA modified this measure to include data on the use of MAT in the denominator
and numerator components of the measure. This measure will continue to be included on
the display page.

 146
CMS would also welcome feedback to share with NCQA on the appropriateness of
adding certain specific behavioral health diagnostic codes to this measure. Potential
diagnostic codes might include self-harm, asphyxiation, overdose, and poisoning
conditions.


Telehealth and Remote Access Technologies (Part C). CMS solicited feedback on the
appropriateness of including telehealth and/or remote access technology encounters, as
allowed under the current statutory definition of Medicare-covered telehealth services
and/or as provided by the MAO as an MA supplemental benefit, as eligible encounters in
various Part C quality measures. For example, some HEDIS measures require a visit for the
denominator, numerator, or exclusion, and we sought comment on whether telehealth
and/or remote access technology encounters should be counted as eligible encounters for
the relevant portion of the measure, that is whether for counting as part of a measure, such
telehealth and/or remote access technology visits are equivalent to (reasonable replacements
for) in-person visits for relevant clinical areas. CMS would welcome feedback to share with
NCQA on feasibility of and strategies for addressing telehealth services especially
regarding the following measures that are reported by Medicare contracts:
o
o
o
o

Use of Spirometry Testing in the Assessment and Diagnosis of COPD
Adults’ Access to Preventive/Ambulatory Health Services
Controlling High Blood Pressure
Comprehensive Diabetes Care



Cross-Cutting Exclusions for Advanced Illness (Part C). NCQA is evaluating the
clinical appropriateness and feasibility of excluding individuals with advanced illness from
selected HEDIS measures. While HEDIS measures are designed to compare the quality of
care provided to general populations or disease-specific care provided to individuals with a
chronic condition, these measures may not be clinically appropriate for certain individuals
with advanced illness and may overlook the quality issues that are specific to these patients.
NCQA is therefore assessing the need for having exclusions for selected HEDIS measures
for patients with advanced illness where providing certain treatments and services may not
be appropriate. NCQA is exploring which specific illnesses and healthcare utilization may
warrant an exclusion, and to which measures the exclusion should be applied. If approved,
updates to HEDIS measures for any additional exclusions would be incorporated in HEDIS
2019.



Medication Adherence (ADH) for Cholesterol (Statins) (Part D). The PQA updated
this measure for 2018 to exclude beneficiaries with ESRD. We propose to apply this
exclusion to the 2020 Star Ratings (based on 2018 data), in the same manner that the
ESRD exclusion is currently applied to the Medication Adherence (ADH) for
Hypertension (RAS Antagonists), Medication Adherence for Diabetes Medications, and
Statin Use in Persons with Dementia measures.

 147


Medication Therapy Management (MTM) Program Completion Rate for
Comprehensive Medication Reviews (CMR) Measure (Part D). The PQA updated this
measure for 2018 to include a new denominator exception as follows:
For patients eligible for CMR with fewer than 61 days of continuous enrollment in the MTM
program:
o Exclude them from the denominator if they did not receive a CMR within this
timeframe.
o Include them in the denominator and the numerator if they received a CMR
within this timeframe.
For example, if the patient was enrolled in the MTM program and eligible for CMR on
November 2 of the measurement year, the patient would not be included in the denominator
if the CMR were not received as of December 31, because there would have been fewer than
61 days of continuous eligibility. If the patient received a CMR by December 31, the patient
would be included in the denominator and the numerator.
We plan to propose to apply this denominator exception to the 2020 Star Ratings (based on
2018 data).



Center for Medicare and Medicaid Innovation Model Tests. The MA Value-Based
Insurance Design (MA-VBID) model test is an opportunity for MAOs to offer supplemental
benefits or reduced cost sharing to enrollees with CMS-specified chronic conditions, focused
on the services that are of highest clinical value to them. The Part D Enhanced MTM model
tests whether providing Part D sponsors with additional payment incentives and regulatory
flexibilities will engender enhancements in the MTM program, leading to improved
therapeutic outcomes, while reducing net Medicare expenditures. We note that some
stakeholders have expressed concern regarding the potential for the improvements in quality
resulting from these tests to adversely influence the Star Ratings of contracts that are
ineligible to participate (or that include some PBPs ineligible to participate). CMS’ goal is to
not penalize participants or non-participants in either model.
For the MA-VBID Model test, CMS is considering the option of excluding VBIDparticipants’ data when calculating the cut points for relevant measures. CMS has
waived the MTM requirements under Section 1860D–4(c)(2) and 42 CFR 423.153(d)
and the Part D Reporting Requirements for MTM for Part D plans participating in the
Part D Enhanced MTM Model. However, Part D sponsors with plans participating in
this model must establish MTM programs in compliance with current requirements and
reporting data for the remaining plans under each Part D contract. Therefore, the MTM
Program CMR Completion Rates will be calculated using available plan-reported data
from the remaining plans under the Part D contract. CMS plans to analyze if this
approach significantly advantages or disadvantages Enhanced MTM model
participants and evaluate potential adjustments as necessary, including the

 148
establishment of different cut points for model participants or to case-mix adjust scores
for the purpose of determining cut points.
Potential New Measures for 2020 and Beyond


Transitions of Care (Part C). CMS appreciates feedback received about a new HEDIS
Transitions of Care measure with four indicators:
1. Notification of Inpatient Admission: Documentation of primary care practitioner
notification of inpatient admission on the day of admission or the following day.
2. Receipt of Discharge Information: Documentation of primary care practitioner receipt
of specific discharge information on the day of discharge or the following day.
3. Patient Engagement After Inpatient Discharge: Documentation of patient engagement
(e.g., office visits, visits to the home, or telehealth) provided by primary care
practitioner within 30 days after discharge.
4. Medication Reconciliation Post-Discharge (which is currently a HEDIS measure):
Documentation of medication reconciliation within 30 days of discharge.
The intent of the measure is to improve the quality of care transitions from an inpatient
setting to home. We plan to propose to include this measure with the four indicators on
the 2020 display measure for possible inclusion in the 2022 Star Ratings.



Follow-up after Emergency Department Visit for Patients with Multiple Chronic
Conditions (Part C). CMS is considering use of a new HEDIS measure assessing followup care provided after an emergency department visit for patients with multiple chronic
conditions. Patients with multiple chronic conditions are more likely to have complex care
needs and follow-up after an acute event, like an emergency department visit, can help to
prevent the development of more severe complications. The developer, NCQA, is
evaluating what timeframe (e.g., 7, 14, or 30 days post-ED visit) and what types of followup (e.g., face-to-face office visits, telephone or web interactions, or visits to the home) are
appropriate. We plan to propose to include this measure on the 2020 display page for
possible inclusion in the 2022 Star Ratings.



Care Coordination Measures (Part C). Effective care coordination, including care
transition, contributes to improved health outcomes
(http://www.qualityforum.org/200cNews_And_Resources/Press_Releases/2012/
NQF_Endorses_Care_Coordination_Measures.aspx). CMS believes that 5-star MA
contracts perform well on our Star Ratings measures because they understand how to
effectively coordinate care for their enrollees. Our assumption about plan care coordination
activities, however, is based largely on anecdotes and discussions with high performing
plans, as well as on data from CAHPS surveys, which reflect enrollees’ experiences with
the care they receive.

 149
CMS is working to expand efforts to better evaluate a plan’s success at effective care
coordination. We have identified potential new care coordination measures and are
currently testing them for possible future implementation. We will provide more details at a
later date.


Opioid Overuse (Part C). For HEDIS 2018, NCQA is collecting data on Use of Opioids
at High Doses and Use of Opioids from Multiple Providers. These measures are adapted
from the PQA’s opioid measures (discussed above). We welcome feedback from
stakeholders about the value of including these Part C measures on the display page, given
the similar Part D measures that constitute data for Patient Safety reports back to plans and
which may also be reported on the display page.
For HEDIS 2019, NCQA will be testing a new measure concept that addresses members
who were previously naïve to opioids who become long-term or “chronic” users. In
addition to understanding the feasibility and utility of reporting this measure concept at the
health plan level, testing of this concept will focus on exploring different definitions of
“opioid naïve” and “chronic use,” as well as identifying populations that warrant exclusion
from the measure. NCQA is also considering testing of a second measure concept that
addresses the concurrent prescription of opioids and central nervous system (CNS)
depressants. If this concept is pursued further, testing would focus on understanding the
feasibility and utility of the measure, identifying populations to be excluded, and defining
both the list of drugs included and the concurrent overlap period.
Since similar measures are being or have been developed as Part D measures, CMS is
interested in feedback not only on the measure concepts, but also whether and how MA
contracts have a unique role and responsibility, in contrast to stand-alone prescription drug
plans, regarding opioid use, misuse, abuse and/or dependency, none of which would be
captured by Part D measures. CMS would also be interested in feedback on the value of
these measure concepts and how to weigh that value in contrast to any burden from
measurement in this area.



Assessment of Care for People with Multiple High-Risk Chronic Conditions (Part C).
NCQA is considering a new measure concept that would adapt the current Care for Older
Adults measure by expanding the number of indicators and broadening the populations
covered by the set of measures. Care for Older Adults currently has four indicators and is
reported by MA Special Needs Plans (SNPs) only. The new measure, Assessment of Care
for People with Multiple High-Risk Chronic Conditions, would apply to all Medicare plans
and would target the population of people with two or more high-risk chronic conditions.
Using the same denominator introduced in the HEDIS 2018 first-year measure Follow-Up
After Emergency Department Visit for People with Multiple High-Risk Chronic Conditions,
the new measure would assess the percentage of members who had an expanded assessment
during the measurement year. The following components may be included in the measure:
physical function assessment, cognitive function assessment, pain assessment, fall risk

 150
assessment, goals of care discussion, and advance care planning. The measure concept is
currently undergoing testing to assess feasibility, alignment with current practice, and gaps
in care. CMS welcomes feedback about this expansion of the number of indicators and
broadening the product line beyond Medicare SNPs.


Depression Screening and Follow-Up for Adolescents and Adults (Part C). NCQA
developed a measure assessing the percentage of patients age 12 and older who were
screened for depression using a standardized assessment tool, such as the PHQ-9, and if
positive, received appropriate follow-up care within 30 days of the positive screen. This
measure is part of NCQA’s new effort to collect data using an Electronic Clinical Data
System (ECDS). Depending on the results during the first year of implementation, CMS
may consider this measure for the display page and Star Ratings in the future.



Unhealthy Alcohol Use Screening and Follow-Up (Part C). NCQA adapted the providerlevel NCQA measure, Unhealthy Alcohol Use: Screening & Brief Counseling (NQF 2152),
for health plan reporting. The intent of this measure is to increase the use of alcohol
screening and brief intervention, which is recommended by the USPSTF for adults 18 and
older. A number of health plans have been helping to test and evaluate performance for the
adapted measure and to gather information on feasibility of implementation at the healthplan level. This measure is part of NCQA’s new effort to collect data using an ECDS.
Depending on the results during the first year of implementation, CMS may consider this
measure for the display page and Star Ratings in the future.



Readmissions from Post-Acute Care (Part C). NCQA is pursuing opportunities to
measure acute facility readmissions during or following a skilled nursing facility (SNF)
stay for Medicare beneficiaries. Eleven percent of beneficiaries require skilled nursing
following an acute facility stay. A readmission event during or after a SNF stay may be the
result of inadequate provider communication during care transitions and poor discharge
planning. NCQA is exploring the development of a new measure or, as noted above, the
potential adaption of the Plan All-Cause Readmissions (PCR) measure to evaluate acute
facility readmissions among Medicare beneficiaries during or after a SNF stay. If approved,
the new measure or revisions to the current PCR measure would be included in HEDIS
2019. CMS welcomes feedback on the feasibility, utility, and burden of such a
modification/stratification or new measure.



Adult Immunization Measure (Part C). For HEDIS 2018, NCQA added the
Pneumococcal Vaccination Coverage for Older Adults measure to the ECDS reporting
domain. Measures in the HEDIS ECDS domain are calculated using electronic data from
administrative claims, electronic medical records, case management systems and registries.
For HEDIS 2019, NCQA will build off the pneumococcal measure and evaluate the
relevance, scientific soundness, and feasibility of a composite measure for HEDIS that

 151
assesses the receipt of routine adult vaccinations. The measure developer is focusing on four
specific vaccines: influenza vaccine; tetanus, diphtheria, and pertussis (Tdap) or tetanus and
diphtheria (Td) booster vaccine; herpes zoster vaccine; and pneumococcal vaccine. If
approved, the new measure would be included in HEDIS 2019. CMS would welcome
feedback on the feasibility, value of, and burden/reduction in burden of this change in data
source. Depending on results of implementation, CMS will determine the use of this new
composite measure for the display page and Star Ratings for the future.


Anxiety (Part C). NCQA is exploring the feasibility and acceptability of developing
quality measures assessing care for those with anxiety disorders for inclusion in HEDIS.
The approach is to conduct feasibility assessments and evidence reviews, which includes
the consideration of clinical practice guidelines, evidence-based treatment, and symptom
monitoring tools for all types of anxiety disorders. Recognizing the high prevalence of cooccurring anxiety and depression, NCQA is assessing the need for new anxiety quality
measures or amended depression quality measures. Any new anxiety quality measures or
changes for the depression measures would be included in HEDIS 2020 at the earliest. CMS
welcomes feedback about the value and burden of measuring anxiety and of amending
depression quality measures to address anxiety for inclusion in display and ratings measure
in the future.



Polypharmacy Measures (Part D). The PQA developed and endorsed three measures that
identify potentially harmful concurrent drug use or polypharmacy. CMS reviewed these
measures for potential inclusion in Patient Safety reporting, display page, or Star Ratings in
the future.
Polypharmacy: Use of Multiple Anticholinergic (ACH) Medications in Older Adults (PolyACH): This measure assesses the percentage of individuals 65 years and older with
concurrent24 use of two or more unique ACH medications. To be included in the
denominator, a beneficiary must have at least two fills of the same ACH medication with
unique dates of service during the treatment period. Any beneficiary with a hospice
indicator during the measurement year was excluded. Lower rates represent better
performance. We tested the PQA specifications using 2016 PDE data as of May 6, 2017.
We adjusted the measure for member-years and evaluated the number of contracts with
greater than 30 member-years in the denominator. There were 743 active Part D contracts in
2016 (671 MA-PDs, 67 PDPs, and 5 employer direct contracts).
Of the 743 active Part D contracts in 2016, eight contracts had no members eligible for the
Poly-ACH measure (N=735). There were 621 MA-PD and PDP contracts that had greater
than 30 member-years in the denominator, and about 16% of MA-PDs and 10% of PDP

24

The days of concurrent use is the sum of the number of days with overlapping days supply of the target
medications. Concurrent use is defined as overlapping days for 30 or more (cumulative) days for both
polypharmacy measures.

 152
contracts did not meet the greater than 30 member-year denominator criterion. The table
below provides the Part D contract distributions by contract type and member-year (M-Y)
criterion.
Table 16: Distribution of the Poly-ACH Measure Rates, Part D, 2016
Part D Contracts
Type
Group
Count
All
735
MA-PD All
667
PDP
All
63
MA-PD >30 M-Y
561
PDP
>30 M-Y
60

Min
0.0%
0.0%
0.0%
0.0%
5.0%

10%
4.3%
4.1%
5.8%
5.0%
5.8%

25%
6.0%
5.9%
6.6%
6.1%
6.6%

Percentiles
50%
75%
7.3% 10.1%
7.3% 10.3%
7.6%
9.4%
7.3%
9.9%
7.6%
9.3%

90%
13.9%
14.4%
11.3%
13.0%
11.1%

95%
17.5%
17.6%
12.2%
15.7%
12.1%

Max
51.3%
51.3%
20.0%
30.8%
12.7%

As the PQA measure manual notes, medication combinations in this measure are those for
which serious adverse effects have been reported among older adults. It is generally
accepted that a high burden of anticholinergic use is consistently associated with cognitive
impairment and increased risk of dementia in older adults. The rate distributions show
variability in use across both MA-PD and PDP contracts suggesting an opportunity for
improvement to reduce the use of multiple concurrent ACH medications within Part D
enrolled older adults. We propose to begin reporting the Poly-ACH measure in the Patient
Safety reports for the 2018 measurement year. We plan to add the measure to the display
page for 2021 (2019 data) and 2022 (2020 data). We will consider this measure for the 2023
Star Ratings (2021 data), which would be proposed through rulemaking.
Polypharmacy: Use of Multiple Central Nervous System (CNS)-Active Medications in
Older Adults (Poly-CNS): This measure assesses the percentage of individuals 65 years and
older with concurrent use of three or more unique CNS-active medications. To be included
in the denominator, a beneficiary must have at least two fills of the same CNS-active
medication with unique dates of service during the treatment period. Any beneficiary with a
hospice indicator during the measurement year was excluded. Lower rates represent better
performance.
We also tested the Poly-CNS PQA measure specifications using 2016 PDE data. We
adjusted the measure for member-years and evaluated the number of contracts with greater
than 30 member-years in the denominator. A total of 736 out of 743 Part D contracts in
2016 (668 MA-PDs, 63 PDPs, and 5 employer direct contracts) had a beneficiary who met
the eligibility requirements for the Poly-CNS measure. When the greater than 30 memberyear denominator criterion was applied, the total number of MA-PD and PDP contracts
decreased to 698. Over 5% of MA-PD contracts and 9% PDP contracts were excluded.
However, the distributions did not change, so those rates are not shown in the table below.

 153
Table 17: Distribution of the Poly-CNS Measure Rates, Part D, 2016
Part D Contracts
Type
All
MA-PD
PDP

Count
736
668
63

Percentiles
Min 10% 25% 50% 75%
0.0% 4.8% 5.9% 7.7% 11.5%
0.0% 4.7% 5.9% 7.7% 11.7%
0.0% 5.4% 6.4% 7.8% 10.2%

90%
16.9%
17.0%
14.3%

95%
20.3%
20.7%
17.6%

Max
44.4%
44.4%
28.5%

According to the American Geriatrics Society, there is moderate evidence to avoid
concurrent use of three or more CNS agents in older adults due to an increased risk of falls
and possible fractures. Based on the analysis, variability exists across Part D contracts on
the use of multiple concurrent CNS medications. Again, CMS believes this measure
represents an opportunity to identify and reduce concurrent use of multiple CNS
medications and improve the health of Medicare Part D enrollees.
We propose to begin reporting the Poly-CNS measure in the Patient Safety reports for the
2018 measurement year. We plan to add the measure to the display page for 2021 (2019
data) and 2022 (2020 data). We will consider proposing this measure through rulemaking
for the 2023 Star Ratings (2021 data).
We also plan to re-evaluate the utility of reporting the HRM Patient Safety reports and
display measure since many of the same drugs are included in both the Poly-ACH and PolyCNS measures.
Concurrent25 Use of Opioids and Benzodiazepines: This measure assesses the percentage
of individuals 18 years and older with concurrent use of opioids and benzodiazepines.
We tested the measure specifications using 2016 PDE data. We adjusted the measure for
member-years and evaluated the number of contracts with greater than 30 member-years in
the denominator. A total of 680 Part D contracts met the eligibility requirements for the
Concurrent Use of Opioids and Benzodiazepine measure. The rate associated with the top 5%
of PDP contracts was 42.9% while MA-PD contracts had a higher rate of 51.4%.

25

Concurrent use is defined as an overlapping supply for an opioid and a benzodiazepine for 30 or more
cumulative days.

 154
Table 18: Distribution of the Concurrent Use of Opioids and Benzodiazepines Measure
Rates, Part D, 2016
Contracts
Type
Count
All
680
PDP
61
MA-PD
614

Min
4.1%
9.6%
4.1%

10%
13.2%
13.2%
13.2%

25%
16.5%
15.7%
16.5%

Percentiles
50%
75%
20.9% 25.3%
21.1% 25.6%
20.9% 25.2%

90%
30.1%
31.0%
30.1%

95%
33.7%
35.5%
33.7%

Max
51.4%
42.9%
51.4%

We propose to begin reporting the Concurrent Use of Opioids and Benzodiazepines
measure in the Patient Safety reports for the 2018 measurement year. We plan to add
the measure to the display page for 2021 (2019 data) and 2022 (2020 data). We will
consider this measure for the 2023 Star Ratings (2021 data) pending rulemaking.
However, we seek feedback if there are concerns with adding this measure for the
following reasons: (1) the Overutilization Monitoring System (OMS) identifies
potential opioid overutilizers who are also receiving a benzodiazepine, and (2) a
proportion of the concurrent opioid and benzodiazepines users will already be identified
within the Poly-CNS measure.
Note: see additional proposals within the Improving Drug Utilization Review Controls in
Medicare Part D section.


Additional PQA Medication Adherence Measures (Part D). We evaluated two additional
PQA endorsed medication adherence measures within the Medicare Part D population using
2016 PDE data. We adjusted the measure for member-years. There were 743 active Part D
contracts in 2016 (671 MA-PDs, 67 PDPs, and 5 employer direct contracts).
Adherence to Non-Warfarin Oral Anticoagulants (ADH- NWOA): This measure is defined
as the percentage of individuals 18 years and older who met the Proportion of Days Covered
(PDC) threshold of 80 percent during the measurement period. The PQA measure manual
states that adherence to all anticoagulants is important, and adherence to non-warfarin
anticoagulants may be more critical to monitor since there is not a surrogate lab value such
as the international normalized ratio (INR).
Individuals who filled at least two prescriptions for a NWOA on two unique dates of service
at least 180 days apart during the treatment period and who received greater than 60 days’
supply of the medication during the treatment period were included in the measure. The
prescriptions can be for the same or different medications. Higher rates signify better
performance.

 155
Table 19: Distribution of the ADH-NWOA Measure Rates, Part D, 2016
Contracts
Type
Count
All
714
MA-PD
647
PDP
62

Min
0.0%
0.0%
50.0%

10%
60.9%
60.6%
73.5%

25%
69.4%
68.6%
75.9%

Percentiles
50%
75%
76.9%
85.0%
76.4%
85.1%
79.4%
85.3%

90%
100.0%
100.0%
87.3%

95%
100.0%
100.0%
89.9%

Max
100.0%
100.0%
100.0%

The ADH-NWOA rates for all contracts ranged from 0.0% to 100% except for PDP contracts
where the minimum rate was 50.0%. Over 50% of the MA-PD and PDP contracts had rates
below 76% and 79%, respectively. Many of the low and high rates were associated with
contracts with low denominator member-years. Overall, 462 or 37% of MA-PD and PDP
contracts had 30 or fewer member-years in the denominator.
Adherence to Non-Infused Disease Modifying Agents Used to Treat Multiple Sclerosis
(ADH-MS): This measure assesses the percentage of individuals 18 years and older who met
the Proportion of Days Covered (PDC) threshold of 80% during the measurement period.
The denominator includes patients who filled at least two prescriptions for non-infused
disease modifying agents for the treatment of multiple sclerosis on two unique dates and who
received at least 56 days’ supply of the medication during the treatment period. The
prescriptions can be for the same or different medications. Higher rates signify better
performance.
Of the 743 Part D contracts, 144 or 19% contracts had no members eligible for the ADH-MS
measure in 2016. The table below reports the Part D contract rate distribution by contract
type.
Table 20: Distribution of ADH-MS Measure Rates, Part D, 2016
Contracts
Types Count
All
599
MA-PD
535
PDP
59

min
0.0%
0.0%
0.0%

10%
56.0%
51.0%
68.4%

25%
68.5%
67.9%
72.5%

Percentile
50%
75%
76.2% 85.2%
76.0% 85.5%
76.6% 80.5%

90%
100.0%
100.0%
100.0%

95%
100.0%
100.0%
100.0%

Max
100.0%
100.0%
100.0%

The minimum and maximum rates for all contracts and contract types was 0.0% to 100%. Over
half of the contracts had rates below 76% and the top 10% of contracts had rates at 100%.
Similar to the ADH-NWOA rates, many of the high and low contract rates were associated with
low denominator member-years (512 or 69% of MA-PD and PDP contracts had 30 or fewer
member-years in the denominator).
Although we found some variability between the contract rates for both the ADH-NWOA and
ADH-MS measures, many contracts had low member-year denominators. The low prevalence of

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multiple sclerosis in many Part D contracts resulted in 19% of contracts having no members
eligible for the ADH-MS measure and over 25% of contracts having a 100% adherence rate.
Although the prevalence of NWOA use is much higher and only 4% of contracts had no
members eligible for ADH-NWOA measure, many contracts had small denominators (less than
30 member-years). A total of 512 (69%) and 276 (37%) of MA-PD and PDP contracts had 30 or
fewer member-years in the denominator for the ADH-MS and ADH-NWOA measures,
respectively. Low denominators can affect the utility of a measure to assess contract
performance. Currently, four adherence measures are already included in the Patient Safety
reports (three are included in Star Ratings), so we are not considering adding these adherence
measures to the Patient Safety reports, the display page, or Star Ratings at this time. However,
given the high cost of these medications and the importance of adherence for achieving positive
outcomes, we may consider including these measures within the quarterly outlier reports to Part
D contracts through the Patient Safety Analysis Website in the future, along with the beneficiarylevel data so contracts can focus adherence improvement efforts for these members.
Measurement and Methodological Enhancements
CMS is committed to continuing to improve the Part C and D Star Ratings by identifying new
measures and methodological enhancements. Feedback or recommendations can help CMS’
continuing analyses, as well as our collaboration with measurement development entities such
as NCQA and PQA. We will continue to analyze existing ratings measures to determine if
measure scores are “topped out” or showing high performance across all contracts. In making
decisions to transition such measures to the display page, CMS does not have a strict formula.
Although some measures may show uniform high performance across contracts with little
variation between them, we want to balance how critical the measures are to improving patient
care, the importance of not creating incentives for a decline in performance after the measures
transition out of the Star Ratings, and the availability of alternative related measures. If plans
have only recently achieved uniformly high performance, for example, or if no other measures
capture a key focus in Star Ratings, a "topped out" measure may be retained in Star Ratings.


CMS and measure developers are exploring additional measurement concepts for future
work, such as functional status, and use of non-pharmacological or non-opioid pain
management interventions, which will require use of non-claims data. CMS is interested in
stakeholder feedback about how these “upstream” concepts can inform measurement of
quality of care and how measurement of these concepts might help CMS assess MA
contracts’ role in and capacity to affect the quality of care. We are also interested in
stakeholder feedback on how these concepts can be measured without adding undue burden
on plans or providers. However, given the importance of addressing the opioid epidemic, we
will consider adding measurement or reporting burden if less burdensome options are not
available.

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

Effective processing of Part C organization determinations and reconsiderations and Part D
coverage determination and redeterminations by sponsors are critical areas of the MA and
Part D program. CMS requirements for these processes provide key beneficiary protections
for access to healthcare and prescription drugs. We have included appeals measures in the
Star Ratings since 2007 because they are such important indicators of beneficiary access.
We continue to be interested in developing new or enhanced measures of beneficiary
access, especially with the industry-wide collection of data from sponsoring organizations
as described earlier. In addition to the current measures of sponsoring organizations’
timeliness and reliable decision-making, we remain interested in potentially evaluating
sponsoring organizations’ compliance with effectuating appeals and provider outreach
requirements, as well as appropriate clinical-decision making and notification to
beneficiaries.
Incomplete and Inaccurate Bid Submissions
Incomplete Submissions

Under Sections 1854(a)(1)(A) and 1860D-11(b) of the Social Security Act, initial bid
submissions for all MA, MA-PD, and PDPs are due the first Monday in June and shall be in a
form and manner specified by the Secretary. Therefore, for CY 2019, the bid submission
deadline is June 4, 2018 at 11:59 PM Pacific Daylight Time.
The following components are required, if applicable, to constitute a complete bid submission:
 Plan Benefit Package (PBP),
 Bid Pricing Tool (BPT) (if applicable),
 Service Area Verification (SAV),
 Plan Crosswalk (if applicable),
 Cost Sharing Justification (if applicable, as described in the “Part C Cost Sharing
Standards” section of this Call Letter),
 Formulary Submission (if offering a Part D plan with a formulary),
 Formulary Crosswalk (if offering a Part D plan with a formulary); and
 Substantiation (supporting documentation for bid pricing tool).
All MA, MA-PD, PDP, and cost-based plans are responsible for confirming that complete and
accurate bids are submitted by the June deadline. Employer Group Waiver Plans are subject to
the submission requirements that have not been waived. Consistent with past years, CMS
reminds organizations that all required components of an organization’s bid must be submitted
by the deadline in order for the bid to be considered complete. If any of the required components
are not successfully submitted by the deadline, the bid submission will be considered incomplete
and not accepted by CMS absent extraordinary circumstances. This policy is consistent with
previous years (for example, please refer to the memo “Release of Contract Year (CY) 2018 Bid
Upload Functionality in HPMS,” dated May 5, 2017).

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The Health Plan Management System (HPMS) Bid Upload functionality, which is made
available to organizations in May, allows organizations to submit each required bid component
well in advance of the deadline. The Bid Upload functionality includes reporting tools that track
those components that were successfully submitted and those that are still outstanding.
Organizations should take advantage of these resources and make certain that all components of
their bid are submitted successfully and accurately by the submission deadline.
All organizations are expected to contact the HPMS Help Desk at hpms@cms.hhs.gov about any
technical upload or validation errors well in advance of the bid submission deadline. All
organizations should make sure that appropriate personnel are available both before and after the
bid submission deadline to address any ongoing bid upload and/or validation issues that might
prevent the bid from proceeding to desk review.
Inaccurate Submissions
CMS reminds organizations that it will only approve a Part D bid under 42 C.F.R. §423.272(b) if
the organization offering the plan’s bid complies with all applicable Part D requirements,
including those related to the provision of qualified prescription drug coverage and actuarial
determinations. In addition, all Part C bids under §422.254(a)(3) must be complete, timely, and
accurate or CMS has the authority to impose sanctions or may choose not to renew the contract
(see also §§422.256 and 423.265). Bids that contain inaccurate information and/or fail to meet
established thresholds may, among other things, result in an unnecessary diversion of CMS and
organizations’ and sponsors’ time and call into question an organization’s or a sponsor’s ability
and intention to fully comply with Part C and D requirements. Examples of bids containing
information that is clearly inaccurate under Part D requirements and established thresholds are:
 An MA-PD bid that does not offer required prescription drug coverage throughout its
service area as required under §423.104(f)(2) (see also section 20.4.4 of Chapter 5 of
the Prescription Drug Benefit Manual),
 A PDP bid for a non-defined standard plan that does not meet the Part D Benefit
Parameters set forth in the applicable law and defined benefit thresholds specified in
the CY 2019 Call Letter, or
 A Part D bid that includes an incorrect PBP-to-formulary crosswalk.
CMS will issue a compliance notice or request for a corrective action plan to organizations and
sponsors that submit clearly inaccurate bids on June 4, 2018 or otherwise violate bidding
procedures. Actions triggering such compliance action could include, but are not limited to, the
resubmission of bids prior to CMS authorization for bid modification, failure to meet Part C and
D requirements, or failure to meet established thresholds. In addition, organizations and
sponsors that submit inaccurate bids may not be allowed to revise their bids to correct
inaccuracies, and the bids may be denied. Organizations and sponsors should engage in sufficient
due diligence to make certain their bids are accurate before submission.

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Plan Corrections
As required by 42 C.F.R. §§422.254, 423.265(c)(3) and 423.505(k)(4), completion of the final
actuarial certification serves as documentation that the final bid, as uploaded, has been verified
and is complete and accurate at the time of submission. A request by an organization or sponsor
for a plan correction indicates the presence of inaccuracies and/or the incompleteness of a bid
and calls into question an organization’s or sponsor’s ability to submit correct bids and the
validity of the final actuarial certification and bid attestation. A plan correction provides plans
with the opportunity to change information in the PBP and must be supported by the BPT. Typos
or minor data input errors that do not affect benefits do not need to be submitted as a plan
correction. MA organizations are encouraged to conduct a quality review prior to bid
submission, and are permitted to make necessary changes during the bid review process to align
information in the PBP with the submitted BPT.
After bids are approved, CMS will not reopen the submission gates to correct errors identified by
the organization or sponsor until the plan correction window in September. The plan correction
window will be open from early September to late September 2018 and the specific dates will be
announced in future guidance. The only changes to the PBP that are allowed during the plan
correction period are those that modify the PBP data to align with the BPT. No changes to the
BPT are permitted during the plan correction period.
In advance of the bid submission deadline, CMS will provide organizations and sponsors the
guidance and tools necessary for a complete and accurate bid submission. These tools will
include a Medicare Plan Finder (MPF) summary table report that will be released in HPMS in
May. Organizations and sponsors can upload their bid multiple times in HPMS prior to bid
submission and can use the HPMS bid reports to verify the accuracy of the submitted bids.
Organizations and sponsors are encouraged to use this time prior to the submission deadline to
verify their bid will not require a plan correction. Organizations and sponsors submitting plan
corrections will receive a compliance action and will be suppressed in MPF until the first MPF
update in November. In addition, CMS may issue more severe compliance actions such as
warning letters and requests for corrective action plans to organizations and sponsors that have
demonstrated a consistent pattern of bid submission errors over multiple contract years and/or
previously received a compliance notice relating to a plan correction for CY 2018.
Validation Audits
CMS conducts program audits of Medicare Advantage Organizations (MAOs), Prescription
Drug Plans (PDPs), and Medicare-Medicaid Plans (MMPs), here collectively referred to as
“sponsoring organizations,” that participate in these programs. These program audits measure a
sponsoring organization’s compliance with the terms of its contract with CMS, in particular the
requirements associated with access to medical services, drugs, and other beneficiary protections

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required by Medicare. CMS requires sponsoring organizations who have been audited and found
to have deficiencies to undergo a validation audit to ensure correction.
Since 2016, pursuant to 42 CFR §§422.503(d)(2)(iv) and 423.504(d)(2)(iv), CMS has required
that when an audit demonstrates that a sponsoring organization has failed to comply with
program requirements, the sponsoring organization must hire an independent auditor to conduct
a validation audit to demonstrate correction of conditions cited during the initial audit. CMS’s
current guidance titled “Program Audit Validation Close-Out” is available on CMS’s Part C and
Part D Compliance and Audits webpage, in the “Program Audits” section at the following link:
https://www.cms.gov/Medicare/Compliance-and-Audits/Part-C-and-Part-D-Compliance-andAudits/ProgramAudits.html.
On July 18, 2017, CMS hosted a listening session to solicit industry input on ways in which the
program audit validation process could be improved. Sponsors and independent auditing firms
provided valuable feedback during that session and via email in the weeks following the event.
Based the feedback, CMS is considering several process improvements and enhancements to the
program audit validation process that are intended to promote consistency and decrease burden
on Sponsors.
We welcome comments on the process changes summarized below. Any modifications to the
validation audit process will be summarized in the final 2019 Call Letter and reflected in the
Program Audit Validation Close-Out guidance available on the Compliance and Audits webpage.
Threshold for Requiring an Independent Validation Audit
CMS currently requires sponsoring organizations that have more than five program audit
conditions in their final audit report to hire an independent auditing firm to conduct a validation
audit. CMS conducts the validation audits of sponsoring organizations that fall below this
threshold. We are seeking comments on whether this threshold should be increased or
decreased, or limited to conditions that may cause adverse impacts to beneficiaries. Our
proposal described below aims to exclude a category of conditions from consideration in the
threshold because they do not directly and adversely impact beneficiaries.
During the validation listening session, sponsoring organizations requested flexibility regarding
the threshold for requiring an independent audit, asserting that there were challenges with hiring
an independent auditing firm when only a limited number of conditions required validation. In
response to this comment, we propose to modify the threshold used to determine when a
sponsoring organization must hire an independent auditing firm. Specifically, CMS intends to
exclude Compliance Program Effectiveness (CPE) conditions from the threshold calculation.
The identification of CPE conditions in a program audit indicate weakness(es) in a sponsoring
organization’s compliance program and its ability to prevent, detect and correct Medicare Parts C
or D program non- compliance and fraud, waste and abuse (FWA) in a timely and well-

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documented manner. As such, CPE conditions require a customized audit approach that
specifically tests correction of the issue but usually requires a lower level of effort from auditors
to determine if the non-compliance has been corrected. For this reason, we believe that it is
appropriate to exclude these conditions from the threshold calculation. Sponsoring organizations
with more than five non-CPE conditions cited in their final audit report will be required to hire
an independent auditing firm. CMS will conduct the validation audits of sponsoring
organizations that fall below this proposed threshold. As a result, we estimate that the number of
sponsoring organizations that will be required to hire an independent auditing firm will decrease
by approximately three percent.
We also clarify that although we intend to exclude CPE conditions from the threshold calculation
used in determining whether a sponsoring organization would be required to hire an independent
auditing firm, the requirement to validate correction of CPE conditions would not be eliminated.
Once a sponsoring organization meets or exceeds the threshold, thus requiring an independent
audit, all conditions, including CPE conditions, identified during the program audit must be
validated by the independent auditor. Likewise, if the sponsoring organization audit results are
below the threshold, CMS will conduct the validation of all conditions, including CPE.
Conflict of Interest Limitations on Independent Auditing Firms
Currently, when an independent validation audit is required, the sponsoring organization must
ensure that the independent auditing firm is free of any conflicts of interest. Examples of
conflicts of interest include consultants who provide management consulting to the sponsoring
organization, assist the sponsoring organizations with audit-related operations, and/or assist with
the correction of the sponsoring organization’s audit conditions. However, consultants used by
the sponsoring organization to conduct “mock audits”, “pre-assessments” or prior independent
audits, or those who have never provided consult or assistance with the correction of audit
findings for the sponsoring organization are not considered to have a conflict of interest.
During the validation listening session, sponsoring organizations requested that CMS permit the
use of the same auditing firm used for their annual external Compliance Program Effectiveness
(CPE) audit for conducting the validation audit. We want to clarify that sponsoring
organizations are not precluded from selecting the same independent auditing firm that is used
for their annual external CPE audit, as long as the firm has not provided consulting services or
assistance with the correction of audit findings. Sponsoring organizations with specific
questions as to whether a potential conflict of interest exists should contact their CMS validation
lead for individual guidance.
As outlined below, CMS also would begin to collect information from independent auditing
firms in the validation work plan that will be helpful in assessing potential conflicts of interest.

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Required use of CMS Validation Audit Work Plan Template
As outlined in CMS’s current guidance, essential elements must be included in validation audit
work plans and reports but the format and design are left to the discretion of the independent
auditing firm.
Under the current process, CMS meets with the sponsoring organization and validation auditor
after reviewing the validation work plan to request clarification and discuss any required
modifications. Because independent validation audits were new in 2016, and given the
individualized nature of each audit, CMS found these discussions valuable in defining sampling
methods and universe periods and ensuring overall consistency across validation audits.
During the validation listening session, sponsoring organizations indicated that bids from
independent auditing firms varied. Other commenters asserted that the reason for the price
variance was that some independent auditing firms employ a minimum of two auditors per audit
program area and include registered clinicians, but other firms do not. Several commenters
expressed support for a standardized audit work plan template to promote consistency and
efficiency.
Based on CMS’s experience in reviewing validation audit work plans and industry input, we
intend to create a validation work plan template that sponsoring organizations undergoing
independent validation audits in 2019 would be required to submit. In accordance with the
Paperwork Reduction Act of 1995 (the PRA), we intend to include the draft template in an
upcoming Federal Register proposed information collection.
The template would include sections to capture the following information:


A summary of the independent auditing firm’s prior experience with Medicare Part C and
Part D auditing, including examples of the experience.



A summary of any Medicare-related work previously performed for the sponsoring
organization by the independent auditing firm. This information is useful to CMS in
assessing potential conflicts of interest.



A listing of all staff (including credentials) that will complete the audit. CMS intends to
clarify which sections of the audit require registered clinicians (physician, RN, pharmacist).
A minimum of two auditors per program area would be required in order to satisfy the
requirement that a complete and full independent review be performed.



Expectations for the timeframe of universe periods. In general, the universe periods
specified in the program audit protocols (i.e., Part D Formulary and Benefit Administration
(FA), Part D Coverage Determinations, Appeals, and Grievances (CDAG), Part C
Organization Determinations, Appeals, and Grievances (ODAG), Service Authorization
Requests, Appeals and Grievances (SARAG)) will be maintained in the validation audit,

 163
consistent with the initial audit. The universe periods for Special Needs Plans - Model of
Care (SNP-MOC) and Medicare-Medicaid Plan Care Coordination and Quality
Improvement Program Effectiveness (CCQIPE) would vary based on the applicable
condition. For example, when assessing compliance with the annual Health Risk
Assessment (HRA) requirement, samples would be selected only from the identified clean
period by assessing whether only those members that were due for the HRA during the
clean period received them timely. Similarly, the universe period for Compliance Program
Effectiveness (CPE) would also vary based on condition; however, the review should
examine operations in the timeframe after CPE conditions were remediated.


Expectations for sampling cases for both universe integrity testing and to evaluate case
compliance related to a specific condition; these expectations would be used to ensure the
reliability of the independent audit findings. Consistent with CMS’s program audit
protocols, CMS would expect to see a minimum of 5 sampled cases to verify the accuracy
and completeness of each CDAG, ODAG, and SARAG universe submitted for the audit.
CMS would expect to see a minimum of 10 sample cases to test the compliance outcome of
a sampled case selected to test remediation of a specific condition. CMS does not require
case sampling to test compliance for outcomes related to timeliness and Independent
Review Entity (IRE) forwarding because all cases in the applicable universes must be
evaluated for compliance. In addition, CMS will identify in the work plan when “targeted”
sampling is required, and the targeted criteria that should be applied.



A requirement to attach the independent auditing firm’s proposed audit report template.
The validation report template should include, at a minimum, the auditing firm’s
identifying information, the validation audit’s objective, scope, methodology, and summary
of results. In addition, to ensure the independent auditor can attest to performing a
complete and independent review, the report should include details of any new findings
(i.e., those not included in the program audit report). For additional detail, please refer to
CMS’s current guidance document “Program Audit Validation Close-Out” that is located
on the webpage referenced above. The report template must be submitted with the work
plan template, for review and approval by CMS prior to submission of the final report.

We believe that a CMS specified standardized work plan template will facilitate consistency
across all validation audits and may also help to standardize the cost of an independent audit and
improve inter-rater reliability across independent auditors.
Timeframe to Complete Validation Audits
Currently, sponsoring organizations have 150 calendar days from the date that all of their
program audit Corrective Action Plans (CAPs) are accepted by CMS to complete a validation
audit and submit the independent audit report to CMS for review.

 164
During the validation listening session, commenters suggested that the current timeframe does
not allow sufficient time to first remediate issues, then accumulate a sufficient “clean period” to
use as the basis for validation testing. Other commenters stated that smaller sponsoring
organizations, with fewer cases from which to draw, find it hard to complete meaningful
validation testing in the allotted timeframe. Based on 2016 validation audit experience, CMS
agrees with the commenters and intends to extend the timeframe by 30 days. Sponsoring
organizations would have 180 days from the date that CMS accepts their program audit CAPs to
undergo a validation audit and submit the independent audit report to CMS for review.
Submitting Independent Audit Report to CMS
Following the validation listening session, we were asked to clarify the process for submitting
validation audit reports to CMS. CMS currently requires the sponsoring organization to submit
its independent auditing firm’s validation audit report to CMS along with any additional
information they would like CMS to consider.
We clarify that the sponsoring organization would continue to submit its independent auditing
firm’s validation report to CMS but would also be required to copy the independent auditor on
the submission. The report should be submitted to CMS as received from the independent
auditing firm (i.e., without modification by the sponsoring organization). CMS encourages
sponsoring organizations to submit additional documentation addressing any concerns with, or
rebuttals to, the auditor’s report.
Plan Finder Civil Money Penalty (CMP) Icon or Other Type of Notice
While CMS currently makes Civil Money Penalty (CMP) information public, via the CMS
website, beneficiaries typically do not go to this location when evaluating plans for
enrollment. In an effort to remain transparent with enrollees when sponsoring organizations
receive a CMP for violations of program requirements, starting with the 2019 Annual Election
Period (AEP), CMS intends to display an icon or other type of notice on Plan Finder for
sponsoring organizations that have received a CMP. CMS expects that the icon or notice would
provide current enrollees and prospective enrollees with general information about a CMP, and
may link to the CMP letter on the CMS website for that particular sponsoring organization. This
would be consistent with how CMS currently displays a sanction icon on Plan Finder for
sponsoring organizations that have been subject to intermediate sanctions (CMP icon, however,
will not block enrollments into the plan). This action is consistent with CMS’s obligation under
section 1851(d) of the Act to provide information to enable beneficiaries to make an informed
enrollment decision and the requirements at 42 C.F.R. §§ 422.111(g) and 423.128(f), which
allow CMS to require the disclosure of a sponsoring organization’s performance and contract
compliance deficiencies to current and/or potential enrollees.

 165
CMS proposes to begin displaying the CMP icon (or other type of notice) on Plan Finder for the
2019 AEP for any sponsoring organization that receives a CMP in 2018 (or receives a CMP for a
2017 Program Audit). Beginning in 2019, CMS proposes that regular updates would occur
throughout the year.
Enforcement Actions for Provider Directories
In the 2017 Call Letter, CMS provided guidance on the future of provider directory requirements
and best practices. CMS stated that inaccurate provider directories can impede access to care
and bring into question the adequacy and validity of the Medicare Advantage Organization’s
(MAO’s) network as a whole. In addition, CMS notified the industry that monitoring activities
around provider directories could result in compliance and enforcement actions if noncompliance is detected. Since then, CMS has received several inquiries as to when CMS would
impose enforcement actions for provider directory violations.
As in all instances of non-compliance, Civil Money Penalties (CMPs) and other enforcement
actions may be imposed against MAOs that have received a compliance notice or notices for
violations that have gone uncorrected. Also, CMS has the discretion to take enforcement actions
when egregious instances of non-compliance are discovered. If CMPs are imposed for provider
directory errors, penalty amounts would initially be calculated on a per determination basis.
Audit of the Sponsoring Organization’s Compliance Program Effectiveness
Pursuant to 42 C.F.R. §§ 422.503(b)(4)(vi)(F), 423.504(b)(4)(vi)(F), sponsoring organizations
are required annually to audit the effectiveness of their compliance program and share results
with their governing body. These audits require extensive sponsoring organization resources and
entail conducting a review of processes and outcomes, discussions with employees and first-tier,
downstream and related entities (FDRs), and preparing documentation and demonstrating
compliance with program requirements. CMS performs program audits of 30-40 sponsoring
organizations every year, and these audits include a review of compliance program effectiveness.
This includes assessing whether they are compliant with establishing and maintaining
compliance programs which include measures to prevent, detect, and correct Parts C or D
program noncompliance and fraud, waste and abuse. When selected for a CMS program audit,
sponsoring organizations are still required to perform an internal annual compliance program
effectiveness (CPE) audit… CMS has received multiple inquiries from stakeholders expressing
the burden on sponsoring organizations when they have to perform their own internal CPE audit
while also being responsive to a CMS program audit in the same year. Many sponsoring
organizations have adopted our CMS audit protocols to perform their own internal audits, which
results in a duplication of effort. The industry has inquired if sponsoring organizations may
consider a CMS program audit as satisfying the annual audit of their compliance program.

 166
CMS is considering allowing sponsoring organizations that have undergone a program audit to
treat the program audit as meeting the annual compliance program audit requirement in 42
C.F.R. §§ 422.503(b)(4)(vi)(F), 423.504(b)(4)(vi)(F) for one year from the date of the CMS
program audit. CMS is seeking comment on this. The one year time frame would allow
sponsoring organizations to complete their CMS CPE program audit process and remediation
before a new CPE audit is initiated by the sponsor to evaluate compliance performance. CMS
also requests comments on how this will impact burden for sponsoring organizations undergoing
a program audit. CMS believes that it will reduce burden on sponsoring organizations already
undergoing a CMS program audit and will eliminate the duplication of effort. Additionally, we
believe it will allow time to implement appropriate corrective actions in response to the CMS
audit and monitor implementation of those corrective actions to ensure that they are effective. It
should be noted that nothing in this proposal would eliminate the more significant requirements
in 42 C.F.R. §§ 422.503(b)(4)(vi)(F) and 423.504(b)(4)(vi)(F), which require sponsoring
organizations to conduct internal auditing and monitoring of their operations as well as the
operations of their FDRs to ensure compliance with Medicare program requirements.
Innovations in Health Plan Design
The CMS Innovation Center is responsible for developing and testing new payment and service
delivery models intended to lower costs while preserving or enhancing quality of care for
Medicare, Medicaid, and CHIP beneficiaries. In the 2016 Call Letter, CMS indicated its
intention to partner with private payers to test innovations in health plan design for CMS
beneficiaries.
In response to these efforts, the Medicare Advantage Value-Based Insurance Design (MAVBID) and the Part D Enhanced Medication Therapy Management (MTM) model tests began
operations on January 1, 2017. Each of these model tests is described below.
Potential means of adjustment to account for the impact of these models on Star Ratings are
discussed above under the section, Enhancements to the 2019 Star Ratings and Future
Measurement Concepts.
Medicare Advantage Value-Based Insurance Design Model Test
The MA-VBID model test is an opportunity for MAOs to offer supplemental benefits or reduced
cost sharing to enrollees with CMS approved chronic conditions, focused on the services that are
of highest clinical value to them. Only those MAOs expressly authorized by CMS to participate
in the model may do so, and only within PBPs accepted into the model test. The model is testing
whether the additional flexibility provided to MAOs to develop and offer interventions can
improve health outcomes and lower expenditures for Medicare Advantage enrollees.
In CY 2018, CMS is testing the model in Alabama, Arizona, Indiana, Iowa, Massachusetts,
Michigan, Oregon, Pennsylvania, Tennessee, and Texas. Beginning in CY 2019, CMS will also

 167
test the MA-VBID model in California, Colorado, Florida, Georgia, Hawaii, Maine, Minnesota,
Montana, New Jersey, New Mexico, North Carolina, North Dakota, South Dakota, Virginia, and
West Virginia.
CMS has authorized thirteen MAOs from ten parent organizations in Indiana, Massachusetts,
Michigan, and Pennsylvania to participate in the model test in CY 2018, and released a Request
for Applications for CY 2019 participation. The Request for Application process will be timed to
allow applicants to choose to participate in the VBID model or in the Medicare Advantage
uniform flexibility.
For more information, including a description of other changes to the model test’s design for CY
2019, please visit: https://innovation.cms.gov/initiatives/vbid/.
Part D Enhanced MTM Model
The Part D Enhanced MTM model tests whether providing Part D sponsors with additional
payment incentives and regulatory flexibilities will engender enhancements in the MTM
program, leading to improved therapeutic outcomes, while reducing net Medicare expenditures.
The model is an opportunity for stand-alone basic Part D plans to right-size their investments in
MTM services, identify and implement innovative strategies to optimize medication use,
improve coordination of care between plans and providers, and strengthen system linkages.
Six Part D Sponsors encompassing 22 PBPs are participating in CMS’s Part D Enhanced MTM
model for 2018. These plans will offer MTM programs subject to the terms and conditions of the
model test in the selected regions. All other Part D plans, including any ineligible plans offered
by the PDP sponsors of participating plans, will remain subject to the current regulatory
requirements for MTM programs. For more information, please visit:
https://innovation.cms.gov/initiatives/enhancedmtm/.
New Medicare Card Project (formerly the Social Security Number Removal Initiative,
SSNRI)
The Medicare Access and CHIP Reauthorization Act (MACRA) of 2015 (PL 114-10 s.501)
included a mandate to remove the current Health Insurance Claim number (HICN) from
Medicare cards by April 2019. This is a reminder that, beginning in April 2018, the current
Social Security Number based HICN will be replaced with a new Medicare number, the
Medicare Beneficiary Identifier (MBI). MBIs will be assigned to all Medicare recipients, and
new Medicare cards will be mailed to beneficiaries beginning in April 2018.
During the transition period, (April 1, 2018 to December 31, 2019), Medicare plans can use
either the HICN or the MBI to exchange data with CMS. CMS will continue to disseminate
information related to this change to Medicare health and drug plans as it becomes available.
More information can be found at (https://www.cms.gov/Medicare/New-MedicareCard/index.html). Questions can be sent to NewMedicareCardSSNRemoval@cms.hhs.gov.

 168
Section II – Part C
Special Needs Plan (SNP) Legislative Sunset Provision
Special Needs Plans (SNPs) were first authorized by Congress in 2003 for a certain period of
years. The program has been extended several times through Congressional action since that
time. Most recently, section 206 of the Medicare Access and CHIP Reauthorization Act of 2015
(MACRA) extended the SNP program through December 31, 2018. At this time, the SNP
program has not been reauthorized by Congress for contract year (CY) 2019. CMS will continue
to accept applications for SNPs, Models of Care (MOCs), and other SNP-related material for
new and renewing SNPs, based on a belief that Congress will likely act in 2018 to extend the
SNP program, and to be prepared in that event for SNPs to be offered without interruption.
Please note, although CMS will accept bids and may sign contracts in anticipation of action by
Congress this year, CMS does not have the authority to allow SNP offerings in CY 2019 absent
Congressional action this year to reauthorize SNPs for CY 2019. If Congress does not extend
the SNP program, any contracts for CY2019 SNPs will be void. We will provide updates to the
industry as needed throughout the year.
Overview of CY 2019 Benefits and Bid Review
Portions of this guidance apply to cost-based plans and MA plans (including EGWPs, DualEligible Special Needs Plans (D-SNPs), Chronic Care Special Needs Plans (C-SNPs), and
Institutional Special Needs Plans (I-SNPs)).
Medicare-Medicaid Plans in a capitated model under the Medicare-Medicaid Financial
Alignment Initiative are not subject to the review criteria summarized in the table below and
benefit review guidance for these plans will be provided separately.
CMS makes all of the necessary tools and information available to MAOs in advance of the bid
submission deadline, and therefore expects all MAOs to submit their best, accurate, and
complete bid(s) on or before the Monday, June 4, 2018 deadline. Any organization whose bid
fails the Part C Service Category Cost Sharing, PMPM Actuarial Equivalent Cost Sharing,
Meaningful Difference (if applicable, see below), Total Beneficiary Cost (TBC), and/or Optional
Supplemental Benefit requirements at any time prior to final approval will receive a compliance
notice, even if the organization is allowed to correct the deficiency. The severity of compliance
notice may depend on the type and/or severity of error(s).
The following table displays key MA bid review criteria and identifies the criteria that are used
to review the bids of the various plan types identified in the column headings.

 169
Table 21: Plan Types and Applicable Bid Review Criteria

Bid Review Criteria

Applies to NonEmployer Plans
(Excluding Dual
Eligible SNPs)

Applies to NonEmployer Dual
Eligible SNPs

Yes

Yes

No

No

Yes

No

No

No

Yes

No

No

No

Yes

Yes

No

Yes

Yes

Yes

No

Yes

Yes

Yes

Yes1

Yes

Yes

Yes

No

No

Applies to Applies to
1876 Cost Employer
Plans
Plans

Low Enrollment
42 C.F.R. §422.506(b)(1)(iv)
and (b)(2)

Meaningful Difference
(if applicable)
42 C.F.R. § 422.254(a)(4)
and §422.256(b)(4)

Total Beneficiary Cost
section 1854(a)(5)(C)(ii) of
the Act
42 C.F.R. § 422.254

Maximum Out-ofPocket (MOOP) Limits
42 C.F.R. §422.100(f)(4) and
(5) and §422.101(d)(2) and
(3)

PMPM Actuarial
Equivalent Cost Sharing
42 C.F.R. § 422.254(b)(4)

Service Category Cost
Sharing
42 C.F.R. §§417.454(e),
422.100(f) and 422.100(j)

Part C Optional
Supplemental Benefits

42 C.F.R. §422.100(f)
Section 1876 Cost Plans and MA plans may not charge enrollees higher cost sharing than is charged under Original
Medicare for chemotherapy administration, skilled nursing care and renal dialysis services (42 C.F.R. §§417.454(e)
and 422.100(j)).
1

CMS has interpreted and applied the regulatory standards for service category cost sharing
standards and amounts, PMPM Actuarial Equivalence factors, and Total Beneficiary Cost (TBC)
requirements for CY 2019 and has provided guidance on these requirements in each applicable
section below. Consistent with last year, MAOs also must address other requirements in their
bids, such as the medical loss ratio and health insurance providers’ fee, and are expected to do so

 170
independently of our requirements for benefits or bid review. Therefore, CMS is not making
specific adjustments or allowances for these changes in the benefits review requirements.
Plans with Low Enrollment
At the end of March, CMS will send affected MAOs a list of non-SNP plans that have fewer than
500 enrollees or of SNP plans that have fewer than 100 enrollees and that have been in existence
for three or more years [as of March 2018 (three annual election periods)]. The notification
represents CMS’s decision not to renew these plans under 42 C.F.R. §422.506(b)(1)(iv) and
(b)(2). Plans with low enrollment located in service areas that do not have a sufficient number of
competing options of the same plan type (such that the low enrollment plan still represents a
viable plan option for beneficiaries), as determined by CMS, will not receive this notification.
Please note that 42 C.F.R. §422.514 is a minimum enrollment requirement that is applied at the
contract level as part of the MA application process and is independent of this plan-level
requirement.
Through return e-mail, MAOs must either (1) confirm each of the low enrollment plans
identified by CMS will be eliminated or consolidated with another of the organization’s plans for
CY 2019, or (2) provide a justification for renewal. If CMS does not find a unique or compelling
reason the low enrollment plan is a viable plan option for beneficiaries, CMS will instruct the
organization to eliminate or consolidate the plan. Instructions and the timeframe for submitting
justifications will be included with the list of low enrollment plans sent to the MAO. These
requirements do not apply to Section 1876 cost plans, employer plans, or MA Medical Savings
Account (MSA) plans.
CMS recognizes there may be certain factors, such as the specific populations served and
geographic location of the plan that led to a plan’s low enrollment. SNPs, for example, may
legitimately have low enrollments because they focus on a subset of enrollees with certain
medical conditions. CMS will consider this information when evaluating whether specific plans
should be non-renewed based on insufficient enrollment. MAOs should follow CMS
renewal/non-renewal guidance (see HPMS memo: Information about Renewal Options for 2019,
to be issued in early April 2018 and/or section 50 of Chapter 16B) to determine whether a low
enrollment plan may be consolidated with another plan(s). CMS will continue to evaluate and
implement low enrollment requirements on an annual basis.
Meaningful Difference (Substantially Duplicative Plan Offerings)
Pursuant to 42 C.F.R. §422.254(a)(4) and §422.256(b)(4), MAOs offering more than one plan in
a given service area must ensure the plans are substantially different so that beneficiaries can
easily identify the differences between those plans in order to determine which plan provides the
highest value at the lowest cost to address their needs. CMS proposed to eliminate the
meaningful difference requirement beginning in CY 2019 as part of the Medicare Program;
Contract Year 2019 Policy and Technical Changes to the Medicare Advantage, Medicare Cost

 171
Plan, Medicare Fee-for-Service, the Medicare Prescription Drug Benefit Programs, and the
PACE Program (CMS-4182-P) proposed rule, which was published in the Federal Register on
November 28, 2017 (82 FR 56336) and is reviewing comments regarding this proposal. CMS
will provide instructions in the final rule and the CY 2019 Final Call Letter or a HPMS
memorandum regarding the meaningful difference requirement for CY 2019.
Total Beneficiary Cost (TBC)
CMS will exercise its authority under section 1854(a)(5)(C)(ii) of the Act to deny MAO bids, on
a case-by-case basis, if it determines the bid proposes too significant an increase in cost sharing
or decrease in benefits from one plan year to the next through the use of the TBC standard. A
plan’s TBC is the sum of the plan-specific Part B premium, plan premium, and estimated
beneficiary out-of-pocket costs. The methodology for developing the CY 2019 out-of-pocket
costs (OOPC) model is consistent with last year’s methodology. For more information, please
reference the HPMS memorandum dated December 21, 2017 titled “Medicare Plan Finder
(MPF) Plan Version of Out-of-Pocket Cost (OOPC) Model for CY 2019.” Customary updates
for utilization data, as well as PBP and formulary data used for CY 2019 bid submissions, are
also included in the 2019 model.
The change in TBC from one year to the next captures the combined financial impact of
premium changes and benefit design changes (i.e., cost sharing changes) on plan enrollees; an
increase in TBC is indicative of a reduction in benefits. By limiting excessive increases in the
TBC from one year to the next, CMS is able to make sure enrollees who continue enrollment in
the same plan are not exposed to significant cost increases. As in past years, CMS will evaluate
TBC for non-employer plans (excluding D-SNPs). MA plans offering Part C uniformity
flexibility (discussed later in this section) and/or participating in the Value-Based Insurance
Design (VBID) model test will be subject to the TBC evaluation for CY 2019; however, benefits
and cost sharing reductions (entered in Section B-19 of the PBP) that are offered as part of Part C
uniformity flexibility or the VBID model test will be excluded from the TBC calculation. This
approach allows CMS to readily evaluate changes in cost sharing and benefits that are provided
to all enrollees in a plan.
Under 42 C.F.R. §422.254, CMS reserves the right to further examine and request changes to a
plan bid even if a plan’s TBC is within the required amount. This approach not only protects
enrollees from significant increases in cost sharing or decreases in benefits, but also confirms
enrollees have access to viable and sustainable MA plan offerings.
CMS will continue to incorporate the technical and payment adjustments described below and
expect organizations to address other factors, such as coding intensity changes, risk adjustment
model changes, and payment of the health insurance providers fee independently of our TBC
requirement. As such, plans are expected to anticipate and manage changes in payment and other
factors to minimize changes in benefit and cost sharing over time. CMS also reminds MAOs that

 172
the Office of the Actuary extends flexibility on margin requirements so MAOs can satisfy the
TBC requirement.
In mid-April 2018, as in past years, CMS will provide plan specific CY 2019 TBC values and
incorporate the following adjustments in the TBC calculation to account for changes from one
year to the next:


Technical Adjustments: (1) annual changes in OOPC model software and (2) maximum
Part B premium buy-down amount change in the bid pricing tool (TBD for CY 2019).



Payment Adjustments: (1) county benchmark, and (2) quality bonus payment and/or
rebate percentages.

CMS is proposing to increase the TBC change threshold, for most plans, from $34.00 PMPM to
$36.00 PMPM in CY 2019 to provide flexibility in addressing medical and pharmacy inflation
and benefit design and formulary changes. Therefore, a plan experiencing a net increase in
adjustments must have an effective TBC change amount below the $36.00 PMPM threshold to
avoid denial of the bid under section 1854(a)(5)(C)(ii). Conversely, a plan experiencing a net
decrease in adjustments may have an effective TBC change amount above the $36.00 PMPM
threshold. In an effort to support plans that received increased quality compensation and
experience large payment adjustments, along with holding plans accountable for lower quality,
CMS will apply the TBC evaluation as follows. CMS requests comment on whether the $36.00
PMPM threshold should be higher or lower for CY 2019.
For CY 2019, the TBC change evaluation will be treated differently for the following specific
situations:








Plans with an increase in quality bonus payment and/or rebate percentage, and an overall
payment adjustment amount greater than $36.00 PMPM will have a TBC change threshold
of $0.00 PMPM (i.e., −1 times the TBC change limit of $36 PMPM) plus applicable
technical adjustments.
Plans with a decrease in quality bonus payments and/or rebate percentage, and an overall
payment adjustment amount less than -$36.00 PMPM will have a TBC change threshold
of $72.00 PMPM (i.e., 2 times TBC change limit of $36.00 PMPM) plus applicable
technical adjustments. That is, plans are not be allowed to make changes that result in
greater than $72.00 worth of decreased benefits or increased premiums.
Plans with a star rating below 3.0 and an overall payment adjustment amount less than
−$36.00 PMPM will have a TBC change threshold of $72.00 PMPM (i.e., 2 times TBC
change limit of $36.00) plus applicable technical adjustments.
Plans not accounted for in the three specific situations above are evaluated at the $36
PMPM limit, similar to CY 2018.

 173
Consistent with last year, CMS will maintain the CY 2018 TBC evaluation for Special Needs
Plans for End Stage Renal Disease (ESRD) but reflect the increase in the overall TBC change
threshold:


ESRD SNPs with an increase in the overall payment adjustment amount greater than
$36.00 PMPM will have a TBC change threshold of $0.00 PMPM (i.e., −1 times the TBC
change limit of $36 PMPM) plus applicable technical adjustments.



ESRD SNPs with a decrease in the overall payment adjustment amount less than -$36.00
PMPM will have a TBC change threshold of $72.00 PMPM (i.e., 2 times TBC change
limit of $36.00 PMPM) plus applicable technical adjustments. That is, plans are not
allowed to make changes that result in greater than $72.00 worth of decreased benefits or
increased premiums.

If CMS provides an opportunity to correct CY 2019 TBC issues following the submission
deadline, the MAO cannot change its formulary (e.g., adding drugs etc.) as a means to satisfy
this requirement. The formulary review process has multiple stages and making changes that are
unrelated to CMS identified formulary review concerns negatively affects the formulary and bid
review process. For example, portions of the annual formulary review process are based on
outlier analyses. If an MAO were permitted to make substantial formulary changes after the
initial reviews, these analyses could be adversely impacted. In addition, significant formulary
changes will necessitate additional CMS review, outside of the normal review stages, and may
jeopardize the approval of a sponsor’s formulary and could affect approval of its contract.
Detailed TBC information and examples will be provided in mid-April 2018 via the HPMS
Memorandum titled “CY 2019 MA Bid Review and Operations Guidance.”
CMS will maintain the TBC evaluation used during CY 2018 for consolidating or crosswalking
plans. CMS will include the operational details of this process in the annual HPMS Memo titled
“CY 2019 Medicare Advantage Bid Review and Operations Guidance,” issued in mid-April.
CMS is considering the elimination of the current TBC evaluation in future years, subject to
statutory and regulatory limitations or changes. CMS requests comment on this matter and
suggestions on other approaches to determine whether plan bids propose too significant an
increase in cost sharing or decrease in benefits from one plan year to the next; we interpret the
statutory provision as one granting authority for us to deny bids on these grounds to protect
beneficiaries from significant increases in cost or decreases in benefits. Our goal is to improve
innovation, available benefit offerings, and provide beneficiaries with affordable plans that are
tailored for their unique healthcare needs and financial situation.

 174
Maximum Out-of-Pocket (MOOP) Limits
As codified at 42 CFR §422.100(f)(4) and (5) and §422.101(d)(2) and (3), all MA plans,
including employer group plans and SNPs, must establish limits on enrollee out-of-pocket
spending that do not exceed the annual maximum amounts set by CMS. Although the MOOP
requirement is for Parts A and B services, an MAO can include supplemental benefits as services
that are subject to the MOOP. MA plans may establish as their MOOP any amount within the
ranges shown in the table.
Table 22 below displays the CY 2019 mandatory and voluntary MOOP amounts and the
combined (catastrophic) MOOP amount limits applicable to Local PPOs and Regional PPOs. A
plan’s adoption of a MOOP limit that qualifies as a voluntary MOOP ($0 - $3,400) results in
greater flexibility for individual service category cost sharing. The possible ranges of the MOOP
amount within each plan type are displayed in order to illustrate that MOOP limits may be lower
than the CMS-established maximum amounts and what MOOP amounts qualify as mandatory
and voluntary MOOP limits. As clarified in previous Call Letters, the in-network MOOP amount
dictates the combined MOOP range for PPOs (i.e., PPOs are not permitted to offer a combined
MOOP amount within the mandatory range, while having an in-network MOOP amount within
the voluntary range).
Table 22: CY 2019 Voluntary and Mandatory MOOP Range Amounts by Plan Type
Plan Type
HMO
HMO POS
Local PPO
Regional PPO
PFFS (full
network)
PFFS (partial
network)
PFFS (nonnetwork)

Voluntary
$0 - $3,400
$0 - $3,400 In-network
$0 - $3,400 In-network and
$0 -$5,100 Combined
$0 - $3,400 In-network and
$0 - $5,100 Combined

Mandatory
$3,401 - $6,700
$3,401 - $6,700 In-network
$3,401 - $6,700 In-network and
$3,401 - $10,000 Combined
$3,401 - $6,700 In-network and
$3,401 - $10,000 Combined

$0 - $3,400 Combined

$3,401 - $6,700 Combined

$0 - $3,400 Combined

$3,401 - $6,700 Combined

$0 - $3,400

$3,401 - $6,700

As explained in the CY 2012 Call Letter, MOOP limits are currently based on a beneficiary-level
distribution of Parts A and B cost sharing for individuals enrolled in Original Medicare. Actual
data for Parts A and B services are based on claims from the National Claims History files. The
Office of the Actuary conducts an annual analysis to help CMS determine the proposed MOOP
amounts by projecting cost sharing using trend factors, such as enrollment changes and
enrollment shifts between MA and Original Medicare. The mandatory MOOP amount represents

 175
approximately the 95th percentile of projected beneficiary out-of-pocket spending. Stated
differently, five percent of Original Medicare beneficiaries are expected to incur approximately
$6,700 or more in Parts A and B deductibles, copayments and coinsurance. The voluntary
MOOP amount of $3,400 represents approximately the 85th percentile of projected Original
Medicare out-of-pocket costs.
Since the MOOP requirement was finalized in 42 C.F.R. § 422.100(f)(4) and (5), a strict
application of the 95th and 85th percentile would have resulted in MOOP limits fluctuating from
year-to-year. CMS has exercised discretion to maintain stable MOOP limits from year-to-year,
if the beneficiary-level distribution of Parts A and B cost sharing for individuals enrolled in
Original Medicare is approximately equal to the appropriate percentile. This approach avoids
enrollee confusion, allows plans to provide stable benefit packages, and does not discourage the
adoption of the lower voluntary MOOP amount if the limit increases one year and then decreases
the next.
Although most dual-eligible enrollees are not responsible for paying cost sharing, certain DSNPs (Medicare Non-Zero Dollar Cost Sharing Plans) enroll dual-eligible enrollees who do pay
cost sharing. Also, any dual-eligible enrollee exempted from cost sharing who loses his/her
Medicaid eligibility may be responsible for cost sharing for the period they have lost Medicaid
coverage, and remain enrolled in the D-SNP. This also applies to Zero Dollar Cost Sharing
Plans that apply cost sharing in their Medicare Part A and B benefit package but enroll only
dual-eligible individuals who are exempt from cost sharing.
D-SNPs have the flexibility to establish $0 as the MOOP limit, thereby guaranteeing there is no
cost sharing for plan enrollees, including those who are liable for Medicare cost sharing.
Otherwise, if the D-SNP does apply cost sharing for Medicare Part A and B covered benefits,
then it must track enrollees’ out-of-pocket spending, and it is up to the plan to develop the
process and vehicle for doing so.
Per Member Per Month (PMPM) Actuarial Equivalent (AE) Cost Sharing Limits
Total MA cost sharing for Part A and B services must not exceed cost sharing for those services
in Original Medicare on an actuarially equivalent basis and must not be discriminatory. In order
to ensure that cost sharing is consistent with both 42 C.F.R. § 422.254(b)(4) and §422.100(f)(2),
CMS will evaluate actuarial equivalent cost sharing limits separately in the following service
categories for CY 2019: Inpatient, Skilled Nursing Facility (SNF), Durable Medical Equipment
(DME), and Part B drugs. Please note that factors for Inpatient in Column 4 of the table below
(Part B Adjustment Factor to Incorporate Part B Cost Sharing) have been updated for CY 2019.
Whether in the aggregate, or on a service-specific basis, excess cost sharing is identified by
comparing two values found in Worksheet 4 of the BPT. Specifically, a plan’s PMPM cost
sharing for Medicare covered services (BPT Worksheet 4, Section IIA, column l) is compared to

 176
Original Medicare Actuarially Equivalent Cost Sharing (BPT Worksheet 4, Section IIA, column
n). For Inpatient services, the AE Original Medicare cost sharing values, unlike plan cost
sharing values, do not include Part B cost sharing; therefore, an adjustment factor is applied to
these AE Original Medicare values to incorporate Part B cost sharing and to make the
comparison valid.
Once the comparison amounts have been determined, excess cost sharing can be identified.
Excess cost sharing is the difference (if positive) between the plan cost sharing amount (column
#1) and the comparison amount (column #5). The table below uses illustrative values to
demonstrate the mechanics of this determination.
Table 23: Illustrative Comparison of Service-Level Actuarial Equivalent Costs to Identify
Excessive Cost Sharing
#1
PMPM
Plan
Cost
Sharing

BPT
Benefit
(Parts
Category A&B)
(BPT
Col. l)
Inpatient
SNF
DME
Part B-Rx

$33.49
$10.83
$3.00
$0.06

#2

#3

#4
#5
Part B
Original Original Adjustment
Comparison
Medicare Medicare Factor to
Allowed AE Cost Incorporate Amount
sharing
Part B Cost
Sharing
(Based on
FFS data)
(BPT
(BPT Col.
(#3 × #4)
Col. m)
n) 1
$331.06
$58.19
$11.37
$1.42

$25.30
$9.89
$2.65
$0.33

1.395
1.066
1
1

$35.30
$10.54
$2.65
$0.33

#6

#7

Excess
Cost
Sharing
Pass/Fail
(#1 − #5,
min of
$0)
$0.00
$0.29
$0.35
$0.00

Pass
Fail
Fail
Pass

1

PMPM values in column 3 for Inpatient and Skilled Nursing Facility only reflect Part A fee-for-service actuarial equivalent cost
sharing for that service category.

NOTE: Beginning in CY 2017, CMS waived the requirement for MA employer plans to submit a
Bid Pricing Tool (BPT), which affects our ability to evaluate the PMPM Actuarial Equivalent
Cost Sharing discussed in this section. MA employer plans continue to be subject to all unwaived
MA regulatory requirements regardless of whether they are affirmatively evaluated as part of bid
review or in connection with other oversight.
Part C Cost Sharing Standards
For CY 2019, CMS will continue the current policy of affording MA plans greater flexibility in
establishing Parts A and B cost sharing by adopting a lower, voluntary MOOP limit than is
available to plans that adopt the higher, mandatory MOOP limit. Table 24 below summarizes
the standards and cost sharing amounts by MOOP type (e.g., mandatory or voluntary) for MA

 177
plans that we will not consider discriminatory or in violation of other applicable standards. CY
2019 bids must reflect enrollee cost sharing for in-network services no greater than the amounts
displayed below. These standards will be applied only to in-network Parts A and B services
unless otherwise indicated in the table. All standards and cost sharing are inclusive of applicable
service category deductibles, copayments and coinsurance, but do not include plan level
deductibles. Inpatient and Skilled Nursing Facility (Days 21 through 100) standards have been
updated to reflect estimated changes in Original Medicare cost for CY 2019. Per our authority at
42 C.F.R. §422.113(b)(2)(v), the Emergency Care/Post Stabilization Care limit for plans has
been increased for CY 2019 to better align cost sharing with actual costs and as an incentive to
use primary and specialty care services for routine care and avoid using the emergency room for
non-emergent routine services. The voluntary MOOP amount increased from $100 to $120,
while the mandatory MOOP amount increased from $80 to $90. CMS expects having different
limits based on the plan’s MOOP amount will encourage organizations to offer benefit packages
with a lower voluntary MOOP amount, while maintaining beneficiary protection.

 178
Table 24: CY 2019 In-Network Service Category Cost Sharing Requirements
Cost Sharing Limits
Service Category

PBP Section B
data entry field

Voluntary
MOOP

Mandatory
MOOP

Inpatient Hospital – Acute - 60 days

1a

N/A

$4,314

Inpatient Hospital – Acute - 10 days

1a

$2,552

$2,042

Inpatient Hospital – Acute - 6 days

1a

$2,325

$1,860

Inpatient Hospital Psychiatric - 60 days

1b

$2,737

$2,190

Inpatient Hospital Psychiatric - 15 days

1b

$2,075

$1,660

Skilled Nursing Facility – First 20 Days1,2

2

$20/day

$0/day

Skilled Nursing Facility – Days 21 through 1001,2

2

$172/day

$172/day

Emergency Care/Post Stabilization Care3

4a

$120

$90

Urgently Needed Services3

4b

$65

$65

Partial Hospitalization

5

$55/day

$55/day

Home Health

6a

20% or $35

$0

Primary Care Physician

7a

$35

$35

Chiropractic Care

7b

$20

$20

Occupational Therapy

7c

$40

$40

Physician Specialist

7d

$50

$50

Psychiatric and Mental Health Specialty Services

7e and 7h

$40

$40

Physical Therapy and Speech-language Pathology

7i

$40

$40

Therapeutic Radiological Services

8b

20% or $60

20% or $60

DME-Equipment

11a

N/A

20%

DME-Prosthetics

11b

N/A

20%

DME-Medical Supplies

11b

N/A

20%

DME-Diabetes Monitoring Supplies

11c

N/A

20% or $10

DME-Diabetic Shoes or Inserts

11c

N/A

20% or $10

Dialysis Services1

12

20% or $30

20% or $30

Part B Drugs-Chemotherapy1,4

15

20% or $75

20% or $75

Part B Drugs-Other

15

20% or $50

20% or $50

 179
1

MA plans and 1876 Cost Plans may not charge enrollees higher cost sharing than is charged under Original
Medicare for chemotherapy administration including chemotherapy drugs and radiation therapy integral to the
treatment regimen, skilled nursing care, and renal dialysis services (42 CFR §§417.454(e) and 422.100(j)).
2

MA plans that establish a voluntary MOOP may have cost sharing for the first 20 days of a SNF stay. The per-day
cost sharing for days 21 through 100 must not be greater than the Original Medicare SNF amount. Total cost sharing
for the overall SNF benefit must be no higher than the actuarially equivalent cost sharing in Original Medicare,
pursuant to §1852(a)(1)(B).
3

Emergency Care and Urgently Needed Care benefits are not subject to plan level deductible amount and/or out-ofnetwork providers. The dollar amount included in the table represents the maximum cost sharing permitted per visit
(copayment or coinsurance).
4

Part B Drugs - Chemotherapy cost sharing displayed is for services provided on an outpatient basis and includes
administration services.

MAOs have the option to charge either coinsurance or a copayment for most service category
benefits. For example, based on the cost sharing requirements indicated above for Part B Drugs
– Chemotherapy, a plan can choose to either assign up to a 20% coinsurance or $75 copayment
to that particular benefit. MA plans may not charge enrollees higher cost sharing than is charged
under Original Medicare for chemotherapy administration including chemotherapy drugs and
radiation therapy integral to the treatment regimen, skilled nursing care, and renal dialysis
services (42 CFR §422.100(j)). Although CMS has not established a specific service category
cost sharing limit for all possible services, CMS has a longstanding interpretation of the antidiscrimination provisions that payment of less than 50% of the contracted (or Medicare
allowable) rate and use of cost sharing for services that exceeds 50% of the total MA plan
financial liability for the benefit discriminates against enrollees who need those services. If a
plan uses a copayment method of cost sharing, then the copayment for an in-network Original
Medicare service category cannot exceed 50% of the average contracted rate of that service
(Medicare Managed Care Manual, Chapter 4, Section 50.1). For example, cardiac and pulmonary
rehabilitation services are areas of concern that CMS continues to monitor and requires MA
organizations provide justification for cost sharing above the following amounts for CY 2019:
cardiac rehabilitation services ($50), intensive cardiac rehabilitation services ($100), and
pulmonary rehabilitation services ($30). CMS has determined that the cited amounts are nondiscriminatory.
Copayments are expected to reflect specific benefits identified within the PBP service category
or a reasonable group of benefits or services provided. Some PBP service categories may
identify specific benefits for which a unique copayment would apply (e.g., category 3 includes
specific benefits for cardiac rehabilitation, intensive cardiac rehabilitation and pulmonary
rehabilitation services), while other categories include a variety of services with different levels
of costs which may reasonably have a range of copayments based on groups of similar services
(e.g., category 8b includes outpatient diagnostic radiological services). It is expected that
organizations typically have much lower cost sharing for enrollees than our requirements due to
effective managed care principles, effective negotiations between organizations and providers,
and competition.

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MAOs with benefit designs using a coinsurance or copayment amount for which CMS does not
have an established threshold for non-discriminatory cost-sharing (e.g., coinsurance for inpatient
or copayment for durable medical equipment) must submit documentation with their initial bid
that clearly demonstrates how the coinsurance or copayment amount satisfies the regulatory
requirements, as interpreted and implemented here, for each applicable plan. This documentation
may include information for multiple plans and must be identified separately from other
supporting documentation submitted as part of the BPT. The documentation must be submitted
for each plan through the supporting documentation upload section titled "Cost-Sharing
Justification" in HPMS. The upload will be available to all MA plan types (both employer and
individual market), but not for stand-alone PDPs. The link for uploading cost sharing
justification files will be located at Plan Bids > Bid Submission > CY 2019 > Upload > CostSharing Justification.
CMS annually evaluates available Medicare data and other information to apply MA
requirements in accordance with applicable law. Organizations are afforded the flexibility to
design their benefits as they see fit so long as they satisfy Medicare coverage requirements.
For CY 2020 CMS is considering changes to its policies related to service category cost sharing
limits. For example, inpatient limits are based on Original Medicare cost data and other limits
are based on at least 50% of the total MA plan financial liability for the benefit. CMS is
soliciting comments on whether CMS’s interpretation of the cost sharing limits is impacting
plans’ ability to offer more flexible benefit designs that would provide beneficiaries with
valuable plan options. Our goal is to encourage plans’ to be innnovative and offer high value,
affordable plan options tailored to beneficiaries’ specific healthcare and financial needs.
Part C Optional Supplemental Benefits
As part of our evaluation whether the bid and benefits are not discriminatory against enrollees
with specific (or high cost) health needs, CMS will continue to review non-employer bid
submissions to verify enrollees electing optional supplemental benefits are receiving reasonable
value. CMS will continue to consider a plan to be non-discriminatory when the total value of all
optional supplemental benefits offered to non-employer plans under each contract meets the
following thresholds: (a) the enrollment-weighted contract-level projected gain/loss margin, as
measured by a percent of premium, is no greater than 15% and (b) the sum of the enrollmentweighted contract-level projected gain/loss margin and non-benefit expenses, as measured by a
percent of premium, is no greater than 30%.
CMS understands some supplemental benefits are based on a multi-year basis, but the plan bids
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Employer Group Waiver Plans
Beginning in CY 2017, CMS waived the requirement for MA employer plans to submit a MA or
Part D Bid Pricing Tool (BPT), but employer plans must complete and submit the MA portion of
the Plan Benefit Package (PBP) in accordance with CMS requirements. Organizations should
make a good faith effort in projecting CY 2019 member months for each plan and place the
amount in Section A-2 of the PBP. The following question must be completed for all MA and
1876 Cost Plan organizations: “Indicate CY 2019 total projected member months for this plan.”
Tiered Cost Sharing of Medical Benefits
MAOs may choose to tier cost sharing of medical benefits to encourage enrollees to seek care
from providers the plan has identified based on efficiency and quality data as described in
Chapter 4, §50.1 of the MMCM. The tiered cost sharing of medical benefits must be applied so
all plan enrollees are charged the same cost sharing amount for any specific provider and all
providers are available and accessible to all enrollees in the plan. CMS reminds organizations
they may not exclude any members from being eligible to access tiered providers.
For CY 2019, CMS does not expect MAOs to submit a proposal summarizing their intent to tier
cost sharing of medical benefits prior to bid submission. MAOs are expected to indicate they are
tiering medical benefits and the applicable service categories in Section A-6 of the PBP. MAOs
must use minimum/maximum data entry and notes fields to describe tiering in each applicable
section of the PBP.
Tiered cost sharing of medical benefits must satisfy the following standards:


The plan fully discloses tiered cost sharing amounts and requirements to enrollees and
plan providers;



The services at each tier of cost sharing are available to all enrollees;



Enrollees may not be limited to obtaining services from providers/suppliers assigned
to a particular tier;



All enrollees are charged the same amount for the same service provided by the
same provider; and

 Deductibles, MOOP, and out-of-network benefits are not to be tiered.
The following examples of “differential cost sharing” are allowable, and not considered to be
tiering of medical benefits:
 Facility settings for furnishing some services, such as diagnostic imaging services; and


In-network versus out-of-network services.

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Outpatient Observation Services
The outpatient hospital services category in the PBP (B9a) includes a variety of services such as
observation, outpatient palliative care, and outpatient surgical services (i.e., outpatient surgical
services not provided in an Ambulatory Surgical Center as defined by Original Medicare).
Observation care is a highly utilized, well-defined set of specific, clinically appropriate services,
which include ongoing short-term treatment, assessment, and reassessment to support plan of
care decisions such as, whether a patient needs to be admitted as inpatient or may be discharged
from the hospital. In an effort to make the cost sharing for observation services more
transparent, CMS will distinguish the cost sharing for observation services from other outpatient
hospital services by modifying PBP category B9a to include separate cost sharing data entries.
Coverage of Supervised Exercise Therapy (SET) for Symptomatic Peripheral Artery
Disease (PAD)
CMS has determined that the National Coverage Determination (NCD) requiring coverage of
supervised exercise therapy (SET) for symptomatic peripheral artery disease (PAD) is
considered a significant cost under 42 C.F.R. § 422.109(a)(2). As a result, for CY 2018 only,
original fee-for-service Medicare will pay for reasonable and necessary items and services
obtained by beneficiaries enrolled in MA plans. (See HPMS email, Subject titled “MAO
Coverage of Supervised Exercise Therapy (SET) for Symptomatic Peripheral Artery Disease
(PAD)” sent on August, 12, 2017). For CY 2019, MAOs should account for these items and
services in their bids as a basic benefit, and should not include these Medicare-covered items and
services as supplemental benefits.
Health Related Supplemental Benefits
CMS currently defines a supplemental health care benefit in the Medicare Managed Care Manual
(section 30.1) as an item or service (1) not covered by Original Medicare, (2) that is primarily
health related, and (3) for which the MA plan must incur a non-zero direct medical cost. An item
or service that meets all three conditions may be proposed as a supplemental benefit in an MA
plan’s bid and submitted plan benefit package. The final determination of benefit status is made
by CMS during the annual benefit package review.
An item or service is primarily health related if the primary purpose of the item or service is to
prevent, cure, or diminish an illness or injury. CMS has not previously allowed an item or
service to be eligible as a supplemental benefit if the primary purpose is daily maintenance.
However, medical and health care research has demonstrated the value of certain items and
services that can diminish the impact of injuries or health conditions and reduce avoidable
emergency and health care utilization. For example, fall prevention devices can be an effective
means to assist enrollees at high risk of fall and protect against the likelihood of additional injury
resulting from a fall; CMS believes provision of a fall prevention device – and similar items and

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services that diminish the impact of injuries/health conditions and reduce avoidable utilization could be provided as a supplemental benefit for a defined period of time and in certain situations.
CMS intends to expand the scope of the primarily health related supplemental benefit standard.
Section 1852(a)(3) permits the offering of “healthcare benefits” as supplemental benefits but
does not define the term. We therefore have authority to interpret the term more broadly than we
have in the past, to permit MA plans to offer additional benefits as “supplemental benefits” so
long as they are healthcare benefits. Under our new interpretation, in order for a service or item
to be “primarily health related,” it must diagnose, prevent, or treat an illness or injury,
compensate for physical impairments, act to ameliorate the functional/psychological impact of
injuries or health conditions, or reduce avoidable emergency and healthcare utilization. Any
supplemental health benefit proposed by an MA organization must be reasonably and rationally
encompassed by this standard. This will allow MA plans more flexibility in offering
supplemental benefits that can enhance beneficiaries’ quality of life and improve health
outcomes.
The primary purpose of an item or service will be determined by national typical usages of most
people using the item or service and by community patterns of care. To be considered healthcare
benefits, supplemental benefits must focus directly on an enrollee’s healthcare needs.
Supplemental benefits under this broader interpretation must be medically appropriate and
ordered by a licensed provider as part of a care plan if not directly provided by one;
supplemental benefits do not include items or services solely to induce enrollment. Prior to bid
submissions, CMS will issue detailed guidance for MAOs on this issue as they consider
upcoming plan offerings. This guidance will be based on previous stakeholder feedback and
comments in response to the draft Call Letter.
Enhanced Disease Management (EDM) for Dual Eligible Special Needs Plans (D-SNPs)
and Institutional Special Needs Plans (I-SNPs)
Over the past several years, CMS has sought to improve care coordination and enhance the
experience of care for beneficiaries, particularly those that are a part of the SNP population. We
believe that specialized, targeted care through enhanced disease management programs is one
way to achieve this goal. Beginning CY 2019, D-SNPs and I-SNPs may offer the EDM
supplemental benefit that is currently available to Non-SNP MA plans.
As discussed in section 30.1 of the Medicare Managed Care Manual, services in a supplemental
EDM benefit would include qualified case managers with specialized knowledge about the target
disease(s)/condition(s), educational activities that are focused on the target
disease(s)/condition(s), and routine monitoring applicable to the target disease(s)/condition(s).
The benefit may be proposed as a supplemental benefit in an MA plan’s bid and submitted plan
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The EDM supplemental benefit will not be made available to Chronic Condition SNPs (C-SNPs)
as it is not necessary. C-SNPs must already have comprehensive targeted disease management
elements (beyond the EDM supplemental benefit requirements) in order to receive the special CSNP designation and marketing and enrollment accommodations.
Medicare Advantage (MA) Uniformity Flexibility
CMS has determined that providing access to services (or specific cost sharing and/or
deductibles for services or items) that is tied to health status or disease state in a manner that
ensures that similarly situated individuals are treated uniformly is consistent with the uniformity
requirement in the MA regulations at §422.100(d). We have determined that the statutory
provisions at sections 1852(d)(1) and 1854(c) and the regulation at § 422.100(d) mean that we
have the authority to permit MA organizations the ability to reduce cost sharing for certain
covered benefits, offer specific tailored supplemental benefits, and offer lower deductibles for
enrollees that meet specific medical criteria, provided that similarly situated enrollees (that is, all
enrollees who meet the identified criteria) are treated the same and enjoy the same access to
these targeted benefits. Targeted supplemental benefits can be offered through a benefit package
that ensures equal treatment of enrollees with the same clinical conditions for whom such
services and benefits are useful consistent with section 1852’s equal access and antidiscrimination provisions, and is priced at a uniform premium consistent with the requirement
for uniform bids and premiums in section 1854(c) of the Act. CMS believes this flexibility will
help MA plans better manage healthcare services for particularly vulnerable enrollees.
Such flexibility is not without limits, however, as section 1852(b)(1)(A) prohibits an MA plan
from denying, limiting, or conditioning the coverage or provision of a service or benefit based on
health-status related factors. MA regulations (e.g., §§422.100(f)(2) and 422.110(a)) reiterate and
implement this non-discrimination requirement. In interpreting these obligations to protect
against discrimination, CMS has historically indicated that the purpose of the requirements is to
protect high-acuity beneficiaries from adverse treatment on the basis of their higher cost health
conditions. (79 FR 29843; 76 FR 21432; and 74 FR 54634.) As MA plans consider
implementation of flexibility in the uniformity requirement, they must be mindful of ensuring
compliance with non-discrimination responsibilities and obligations. CMS will be concerned
about potential discrimination if an MA plan is targeting cost sharing reductions and additional
supplemental benefits for a large number of disease conditions, while excluding other conditions,
particularly higher-cost conditions. We will review benefit designs to make sure that the overall
impact is non-discriminatory and that higher acuity, higher cost enrollees are not being excluded
from these targeted benefits in favor of healthier populations.
Under this proposal, for example, an MA plan could identify enrollees diagnosed with specific
diseases, such as diabetes, chronic heart failure, and COPD, as medically vulnerable and in need
of additional services. In identifying eligible enrollees, the MA plan must use medical criteria
that are objective and measurable, and the enrollee must be diagnosed by a plan provider. If an
MA plan wants to propose a targeted supplemental benefit offering but has questions as to

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whether or not it is allowable, CMS will establish a special mailbox following issuance of the
Final Call Letter.
Medicare Advantage (MA) Segmented Service Area Options
CMS reviewed section 1854(h) of the Social Security Act (the Act) and MA regulations
governing plan segments and has determined that it has the authority to allow MA plans to vary
supplemental benefits, in addition to premium and cost sharing, by segment, as long as the
benefits, premium, and cost sharing are uniform within each segment of an MA plan’s service
area. CMS is revising its interpretation of the regulations to allow MA plan segments to vary by
supplemental benefits, premium, and cost sharing, consistent with the MA regulatory
requirements defining segments at §422.262(c)(2). Segments are defined in the MA regulations
at §422.262(c)(2). MA plans can segment Part C benefits however if an MA plan offers Part D it
must offer the Part D benefit uniformly within the plans service area including any segments the
MA plan may have.
Medicare Diabetes Prevention Program (MDPP) Services Clarification
In the CY 2017 Physician Fee Schedule (PFS), we finalized the nationwide expansion of the
MDPP model and defined the parameters of MDPP services. The model was further defined in
the CY 2018 PFS final rule. The MDPP expanded model is effective April 1, 2018. The services
provided under this expanded model function as Medicare Part B covered services.
MDPP services consist of structured health behavior change sessions that are furnished under the
MDPP expanded model with the goal of preventing diabetes among Medicare beneficiaries with
prediabetes, and that follow a CDC-approved curriculum. The goal of the MDPP expanded
model is to prevent the onset of type 2 diabetes in individuals with an indication of prediabetes.
Like preventive benefits and under §422.100(k), eligible Medicare beneficiaries must be covered
at zero cost sharing, if in-network. We want to ensure that MA plans are aware that while they
must cover MDPP services in accordance with the MDPP regulations, they may also offer
additional MDPP-like services as a supplemental benefit. For example, although MDPP
services cannot be provided only remotely or in a 100% virtual format under current regulations
as a basic benefit under Part B, an MA plan may offer similar services in a virtual format as a
supplemental benefit through the Remote Access Technology supplemental benefit. The similar
supplemental benefit does not count as the Part B covered service, but may still be offered by the
plan.
Special Needs Plan (SNP)-Specific Networks Research and Development
In the CY 2018 Final Call Letter, CMS announced plans to move forward on developing SNPspecific network adequacy evaluations. CMS believes that the current network adequacy criteria
and exception request process account for the unique healthcare needs and delivery patterns for
Medicare Advantage (MA) beneficiaries enrolled in SNPs, including chronic condition SNPs (C-

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SNPs), dual eligible SNPs (D-SNPs), and institutional SNPs (I-SNPs). We continue to examine
the need for SNP-specific network adequacy evaluations and welcome continued stakeholder
feedback.
Rewards and Incentives for Completion of a Health Risk Assessment (HRA)
Regulations at §422.134 allow MA plans to create Rewards and Incentives (RI) Programs that
provide rewards and incentives to enrollees for participation in activities that focus on promoting
improved health, preventing injuries and illness, and promoting efficient use of healthcare
resources. Under §422.112(b)(4)(i), all MA plans musts make a best effort to conduct an initial
assessment of each enrollee’s healthcare needs within 90 days of the effective date of enrollment.
Finally, regulations at §422.101(f)(1)(i) require all SNPs to perform a comprehensive initial
HRA within the first 90 days of enrollment and conduct reassessments annually thereafter.
Completion of a federally mandated survey, though arguably a health-related activity, may not
be included in an RI Program because of the potential for biased responses due to the influence
of rewards and incentives. CMS has previously included HRAs in this exclusion because of
§§422.112 and 422.101. However, CMS also believes a completed HRA is vital to proper care
management, improved health, and promotes the efficient use of healthcare resources – so much
so that, beginning in CY 2014, CMS included SNPs’ HRA timeliness and completion rates as
factors in the Star Ratings methodology. CMS now also recognizes that HRA tools must be
designed to objectively assess and analyze the medical, functional, cognitive, psychosocial and
mental health needs of each beneficiary, and therefore do not consist of material that is
susceptible to bias like other enrollee satisfaction and outcome surveys.
Therefore, beginning CY 2019, MA plans may include the completion of an HRA as a permitted
health-related activity in an RI Program. An RI Program is not a benefit but it must be included
in the bid as a non-benefit expense. See section 100 of Chapter 4 of the Medicare Managed Care
Manual for more information about rewards and incentives.
Cost Plan Transition to MA under MACRA
CMS wants to remind cost plan entities that they must complete the transition to MA by contract
year 2019 in order to deem their cost enrollees into an affiliated MA plan offered by the
organization under the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) cost
transition requirements. In connection with the transition of cost to MA, MACRA also delayed
the implementation of the cost plan competition requirements through contract year 2018.
MACRA specifies notification, enrollment, and benefit requirements that transitioning cost
plans must follow in order to be eligible for deeming enrollees, which are generally codified as
amendments to section 1876(h) of the Act. In addition, the transitioning cost plan (if it is to
receive the deemed enrollment instead of an existing affiliated MA plan) must meet all
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Any plan wishing to deem enrollees from its cost plan to one of its MA plans under the MACRA
provisions must notify CMS of that intention via the HPMS crosswalk process. This may be
completed as early as May of 2018 for enrollments in 2019, the final contract year for deeming
enrollment from a non-renewing cost plan to an affiliated MA plan. All crosswalks must be
completed by the time the bid is due, unless a plan qualifies to submit a crosswalk during the
exceptions window. Plans are responsible for following all contracting, enrollment, and other
transition guidance released by CMS.
CMS has released guidance on the requirements of the cost plan transition which is available at
the following link: https://www.cms.gov/Medicare/Health-Plans/MedicareCostPlans/index.html
Cost Plan Competition Requirements
CMS wants to remind MAOs that the cost plan competition requirements will first be effective in
2019, that is, cost plans affected by these requirements will first be unable to offer a cost plan in
a service area or portion of a service area in contract year 2019. Under amendments to section
1876(h)(5)(C) of the Act, implementation of the cost plan competition requirements was delayed
until the end of contract year 2018 by MACRA.
CMS will non-renew any portion of a cost plan’s service area if there are at least two competing
MA local or two MA regional coordinated care plans with a minimum of 5,000 enrollees (urban
areas) or 1,500 enrollees (non-urban areas) for the entire year prior to the non-renewal. We used
2017 enrollment data to determine the cost plans subject to non-renewal pursuant to section
1876(h)(5)(C). CMS provided the results of the competition analysis to each cost contract in
December, 2017.
Improving Beneficiary Communications and Reducing Burden for Integrated D-SNPs
CMS continues to seek opportunities to maximize the potential for D-SNPs to align benefits and
improve coordination for Medicare-Medicaid enrollees. In previous Call Letter cycles, we
sought stakeholder input on a variety of opportunities for greater integration and coordination.
Based on that feedback, CMS has identified certain priority areas for further integration for
interested states and plans. We have begun to work on some of these priorities – including with
regard to oversight, integrated model materials, non-renewals, and models of care – with certain
states and welcome the opportunity to expand this work and to partner with additional states in
which there are integrated D-SNP products available to Medicare-Medicaid enrollees.
We have identified the following specific areas in which administrative alignment for integrated
D-SNPs is currently feasible within existing statutory, regulatory, and operational constraints:


Oversight: Improving CMS-state communication and information sharing as permitted
by applicable law to improve oversight and administration of D-SNP contracts.

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

Integrated model materials: Collaborating with states to develop a set of model
materials with integrated benefit information for use by integrated D-SNPs. In response
to previous stakeholder comments on this topic we have prioritized the following
materials:
o Summary of Benefits. The Summary of Benefits (SB) is a brief summary of plan
benefits and cost-sharing which, as described in sections 30.6, 100.1, and 100.2.2 of
the Medicare Marketing Guidelines (MMG) (interpreting §422.111), must be posted
on MA plan websites by September 30 each year, provided with any enrollment
form, and available upon request to members. Starting with the CY 2017 cycle,
integrated D-SNPs have had flexibility to display integrated Medicare and Medicaid
benefits, as applicable, in their SBs.26 CMS worked with Minnesota to develop
model SB language for integrated D-SNPs to use there in CY 2018 and, based on
that work, is working with Massachusetts to develop similar model language for
integrated D-SNPs to use in that state for CY 2019.
o Annual Notice of Change (ANOC)/Evidence of Coverage (EOC). Plans must send
an ANOC summarizing changes to plan benefits for the upcoming contract year to
current enrollees for receipt by September 30 each year under §422.111. In addition,
plans must provide – at the time of enrollment and annually thereafter – an EOC
containing detailed plan and benefits information.. Starting with the CY 2018 cycle,
the standardized ANOC and EOC models for D-SNPs include new opportunities for
integrating Medicare and Medicaid benefit descriptions similar to those available in
the SB guidance.
o Provider and Pharmacy Directory. Plans must make network provider and
pharmacy information available at the time of enrollment and annually thereafter (by
posting on the plan website by September 30 and making hard copies available).
Based on our work with Medicare-Medicaid Plans and with D-SNPs in the
Minnesota Demonstration to Align Administrative Functions for Improvements in
Beneficiary Experience, we believe that inclusion of all available providers –
including those offering services only covered through Medicaid – in one document
will facilitate beneficiary understanding of both their Medicare and Medicaid
provider choices and streamline health plan processes. For the last several contract
years, CMS has worked with Minnesota to develop model language, based on MMP
templates that would allow health plans to integrate this information into one
document for use in that state that satisfies both Medicare and Medicaid regulatory

26

Guidance for CY 2017 was issued in the April 15, 2016 HPMS memo, “Summary of Benefits Guidance for
Contract Year 2017.” Guidance for CY 2018 was included in Appendix 4 of the Medicare Marketing
Guidelines, issued July 20, 2017.

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requirements. Based on that work, we are working with Massachusetts to develop
similar model language for integrated D-SNPs to use in that state for CY 2019.
o Formulary. Plans must make a formulary available at the time of enrollment and
annually thereafter (by posting on the plan website by September 30 and making
hard copies available). Similar to directories, we believe integration of Part D and
Medicaid-covered prescription and over-the-counter drug/product information in one
document is beneficial to both plan enrollees and to health plans. As with the SB
and directory, CMS has some experience developing model materials for integrated
D-SNPs in Minnesota and is working with Massachusetts to develop integrated
formulary model language for integrated D-SNPs to use in that state for CY 2019.


D-SNP Non-Renewals: Coordinating state and CMS communications and processes for
D-SNP non-renewals, including working with states and plans to develop state-specific
integrated non-renewal notices that include information about changes in the delivery of
Medicaid benefits that will accompany the non-renewal of an integrated D-SNP.



Model of Care: Providing technical assistance to states on the implementation of more
robust D-SNP model of care (MOC) submissions that incorporate information about the
integration of Medicare and Medicaid Managed Long Term Services and Supports
(MLTSS). States interested in requiring their contracted D-SNPs to include additional
information in their Model of Care (MOC) submissions about the provision of MLTSS
and their integration with the medical and prescription drug benefits the plans provide
under their Medicare contract may do so via their State Medicaid Agency contracts
(which are required for all D-SNPs under 42 CFR §422.107). CMS offers interested
states with integrated D-SNPs the opportunity to work with such contracted D-SNPs to
include additional information in MOC submissions and to review the integrated MOC
submissions concurrent with the review of the plans’ MOCs by the National Committee
for Quality Assurance pursuant to 42 CFR §422.152(g).
We have successfully implemented an integrated MOC submission and review process
with MMPs under the Financial Alignment Initiative, as well as with the D-SNPs
participating in the Minnesota Demonstration to Align Administrative Functions for
Improvements in Beneficiary Experience since 2014. As part of that effort, Minnesota
has required plans to add information to their MOC submissions about how the training
for care coordinators incorporates the state’s MLTSS requirements; how the state
MLTSS assessment and level of care tools are coordinated with the Health Risk
Assessment process; and how the Individualized Care Plan (ICP) integrates Medicare and
Medicaid services, including MLTSS, addresses the process for coordinating medical and
social services identified in the ICP, and addresses state-required MLTSS care plan
elements. Minnesota also requires that the MOC include information about Medicare and
Medicaid services, including MLTSS, are communicated from the MLTSS care

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coordinator to primary care or home health providers; how clinical practice guidelines are
appropriate for and tailored to differences in frailty levels, including for members
receiving MLTSS; and the measures the D-SNP uses that are tailored to the frail elderly,
including those receiving MLTSS, and how these measures account for differences in
care delivery models.
We emphasize that any collaboration between CMS and states in this area will maintain
the integrity of the CMS MOC requirements and of NCQA’s review of MOCs under
42 CFR §422.152(g).
CMS is interested in working with additional states to pursue similar efforts via
additional requirements in the State Medicaid Agency Contracts and in providing
technical assistance to such states. We welcome comments about the opportunities
identified above, as well as any others. We are particularly interested in hearing from
states interested in working with CMS to develop comprehensive administrative
alignment work plans that include some or all of the options identified above.
We remind states that we are happy to discuss these and other opportunities to promote
integration and better beneficiary experiences. We are also available to work with states
on issues related to the required contracting between states and D-SNPs. Interested state
Medicaid officials should contact the Medicare-Medicaid Coordination Office at:
mmcocapsmodel@cms.hhs.gov.
Parts A and B Cost-sharing for Individuals Enrolled in the Qualified Medicare
Beneficiary (QMB) Program
In the 2016 Call Letter, CMS reminded plans of their obligations under 42 CFR
§422.504(g)(1)(iii) to educate network providers about QMB billing rules and to maintain
procedures that ensure network providers do not discriminate against enrollees based on their
payment status, e.g., QMB.27 During summer 2016, CMS engaged in strategic conversations
with MA organizations to discover their technical assistance needs and learn about concrete
strategies to promote compliance. During this process and in follow-up, MA organizations have
asked for CMS help to identify the QMB status of enrollees and to recommend promising
practices regarding QMB billing.
The QMB Program is a Medicaid benefit that pays Medicare premiums and cost sharing for
certain low-income Medicare beneficiaries. Federal law prohibits Medicare providers from
collecting Medicare Part A and Part B coinsurance, copayments, and deductibles from those
enrolled in the QMB Program, including those enrolled in Medicare Advantage and other Part C
plans. Timely access to enrollees’ QMB status is critical to inform, monitor, and promote
27

See Calendar Year (CY) 2017 Medicare Advantage Capitation Rates and Medicare Advantage and Part D
Payment Policies and Final Call Letter; Medicare Managed Care Manual, Ch. 4, Section 10.5.2.

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provider compliance with these requirements. In June 2017, CMS informed plans about CMS
sources of QMB information, including the Medicare Advantage Medicaid Status Data File,
which provides the most current information about monthly dual status, including QMB, and
corresponding dual status codes.28 As a reminder, for Medicare-Medicaid Plans (MMPs) in the
capitated model of the Financial Alignment Initiative and for Program of All-Inclusive Care for
the Elderly (PACE) organizations, coinsurance, copays, and deductibles are zero for all Medicare
Parts A/B services.
To reinforce billing requirements, simplify compliance, and prevent instances of improper
billing, CMS encourages plans to affirmatively inform providers about enrollee QMB status and
exemption from cost-sharing liability. Plans can provide real-time QMB status information and
indicators through online provider portals and phone query mechanisms and clearly indicate the
QMB patient owes $0 directly on the Explanations of Payment document that they send to
providers and on member identification cards. MMPs should make clear that all enrollees –
regardless of whether they have QMB status or not – have zero Medicare Parts A/B coinsurance,
copayments, and deductibles. In addition, plans can highlight that for any providers who are
enrolled in Medicare, Medicare’s HETS eligibility query system will identify those who are
QMB.
CMS also encourages plans to educate providers about the QMB billing requirements for
Medicare Parts A/B deductibles and coinsurance. Potential strategies include holding recurring
trainings, conducting targeted education to providers that improperly bill members, and adding
language to provider-focused websites, provider newsletters, and/or provider manuals.
Plans may want to leverage CMS information for providers and plans on CMS’s QMB webpage
at https://www.cms.gov/Medicare-Medicaid-Coordination/Medicare-and-MedicaidCoordination/Medicare-Medicaid-Coordination-Office/QMB.html
Moreover, starting in March 2017, the Complaints Tracking Module (CTM) began
distinguishing QMB complaints from other complaints. When appropriate, CMS encourages
plans to use this source of information, alongside grievance and plan call center data, to identify
further opportunities to strengthen provider education activities, improve internal call center
messaging, and reduce future CTM complaints regarding QMB billing.
Encounter Data Listening Forums, Monitoring and Compliance Activities
Under 42 C.F.R. § 422.310, MA organizations are required to submit encounter data records for
each item and service provided to an MA plan enrollee. The Medicare Advantage Encounter
Data System (EDS) was implemented to receive encounter data beginning in 2012 and has
collected over 3 billion encounter data records to date. PACE organizations are also required to
submit encounter data.
28

See HPMS memo, “Qualified Medicare Beneficiary Program Enrollee Status Resources” June 21, 2017.

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In order to assist organizations in meeting requirements for submitting complete and accurate
data, CMS conducts a range of activities aimed at providing feedback and technical assistance to,
and soliciting input from, stakeholders. These efforts include distribution of quarterly report
cards, site visits with submitters, one-to-one communication with plans, and monthly user group
calls which provide updates, training, and an open-mic question and answer period.
Listening Forums. CMS has also initiated a series of listening forums with MA organizations,
and MA organizations have expressed appreciation for the opportunity to participate in these
forums. CMS has viewed them as successful and has gained important insight into submitters’
experiences with the submission of encounter data. In light of the positive feedback received in
response to these listening forums, CMS expects to continue holding listening forums in 2018
and will again be reaching out to plans to participate.
The listening forums have helped to highlight areas in the submission process where both plans
and CMS can make improvements. A priority for CMS continues to be to ensure the
completeness and accuracy of submissions and to seek feedback from stakeholders. CMS
presented an approach to monitoring and compliance of encounter data in the 2018 Call Letter.
CMS’s framework for monitoring and compliance activity was categorized into three
performance areas:


Operational Performance: Refers to submitters’ performance related to encounter data
submission requirements such as certification to submit, non-submission, and frequency of
submission.



Completeness Performance: Refers to both the overall volume of encounter data records
(e.g., whether encounter data records are being submitted for all services rendered) as well as
to the completeness of data within an encounter data record (e.g., whether key fields are
populated as expected).



Accuracy Performance: Refers to the reasonableness of ED patterns. Measures addressing the
reasonableness of specific data elements or reasonable patterns in submitted data would be
considered under the area of accuracy (e.g., reasonable patterns of HCPCs and diagnosis
codes).

Stakeholder feedback indicated support of this activity to ensure the completeness and accuracy
of encounter data, but also suggested that CMS adopt an incremental approach and continue to
seek out stakeholder feedback on monitoring and compliance.
CMS issued an HPMS memo entitled “CMS Monitoring and Compliance of Encounter Data,
Performance Metrics and Thresholds – For Comment” on November 1, 2017 and requested
feedback from stakeholders. CMS will review comments and finalize the performance and
monitoring metrics and thresholds in an HPMS memo that will be distributed in early 2018.

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Transparency & Timeliness with Prior Authorization Processes
CMS is aware of stakeholder concerns about the burdens imposed by coverage restrictions such
as prior authorizations (PA) in the Part C program.
MAOs receive a capitated payment from CMS and are accountable for furnishing all medically
necessary Part A and B services through a network of contracted providers. They are permitted
to manage the delivery of benefits within their provider networks using utilization management
tools such as prior authorization (PA).
CMS would like to remind MAOs that they should be transparent and provide adequate notice of
any coverage restrictions, such as PA requirements, to providers and enrollees. Plans should
specify the existence of any coverage restrictions, including what information is needed when
submitting a PA request, in the plan’s Evidence of Coverage (EOC), their contracts with
providers and additional provider communications/materials (e.g., provider manuals). Where an
enrollee or provider is attempting to satisfy a PA requirement and the plan requires or has a PA
request form, the plan should make PA request forms available and easily accessible.
MAOs should ensure they are delivering timely decisions on PA requests. CMS reminds MAOs
that requests for PA for a service (whether by an enrollee directly or by a provider on behalf of
an enrollee) are requests for a pre-service organization determination. Therefore, these requests
are subject to applicable pre-service organization determination adjudication timeframes and
notice requirements under the MA regulations. See 42 CFR §§422.568 and 422.572.

Section III – Part D
Formulary Submissions
CY 2019 Formulary Submission Window
The CY 2019 HPMS formulary submission window will open this year on May 14, 2018 and
close at 11:59 PM PDT on June 4, 2018. CMS must be in receipt of a successfully submitted and
validated formulary submission by the deadline of June 4, 2018 in order for the formulary to be
considered for review. The Part D formulary is part of the plan’s complete bid and therefore a
failure to submit and link a formulary to each plan that uses a formulary by the June 4 deadline
will result in denial of that bid submission.
CY 2019 Formulary Reference File
CMS publishes the Formulary Reference File (FRF) which is utilized by Part D sponsors for the
purpose of submitting Part D formulary files into HPMS. The FRF is not intended to be a
comprehensive list of Part D drugs – the presence on or absence from the FRF does not indicate
whether a particular drug is eligible for Part D coverage. However, we do recognize that the FRF
has expanded and now includes several drugs for which utilization under Part D would be
extremely rare. We also understand that the inclusion of some of these drugs within the Medicare

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Plan Finder may lead to beneficiary confusion when the drug is more commonly covered under
Medicare Part B, for example. To that end, CMS is analyzing the Part D utilization of current
FRF drugs and will be removing drugs from the FRF based on these results. We again emphasize
that the removal from the FRF does not mean that the drug is not eligible for Part D coverage.
The deletion of such drugs would be based on very infrequent utilization under Part D due to
their indication, dosage and administration, and usual administration setting. For example, an
intravenous antihypertensive with very little or no Part D utilization, that is only indicated for the
short-term treatment of hypertension when the oral route is not feasible, potentially would be
deleted from the FRF.
CMS will release a draft FRF that reflects these changes in February of 2018, and will provide
Part D sponsors and other stakeholders the opportunity to comment on the FRF changes. A
subsequent CY 2019 Formulary Reference File (FRF) will be published in March 2018. The
March FRF release will be used in the production of the Out-of-Pocket Cost (OOPC) model tool,
scheduled to be released in April 2018, in order to assist plan sponsors in preparing their bid
submissions. Sponsors should note that the OOPC model released in April will not be modified
to incorporate any subsequent FRF updates, as described below.
CMS will update the 2019 FRF in mid to late May, prior to the June 4 formulary submission
deadline. Since the OOPC model incorporates Medicare Current Beneficiary Survey (MCBS)
data from 2012 and 2013, new Part D drugs cannot be included in the OOPC model since they
would not have appeared in the survey. Further, given the limited timeframe between the May
release of the 2019 FRF and the June 4 deadline, CMS is unable to accommodate an updated
version of the 2019 OOPC model to incorporate the new generics that may be added to the May
FRF. Therefore, CMS cautions plan sponsors that any newly added drugs on the May release of
the 2019 FRF will not be included in the 2019 OOPC model.
CMS will offer a summer formulary update window and will publish an update to the FRF in
advance of the window. The summer formulary update window will allow for the following
formulary changes: 1) the addition of drugs that are new to the summer release of the FRF, and
2) the submission of negative changes on brand drugs, only if an equivalent generic or
therapeutically similar drug is added to the summer FRF and corresponding formulary file within
the same category and class, at the same tier or lower, and with no more restrictive utilization
management than what was applied to the existing brand. Thus, plan sponsors need to carefully
consider any newly added drugs to the May release of the 2019 FRF when they submit their
formularies by the June 4 deadline since these additional restrictions will be imposed on the
summer formulary update window.
In 2017, for the 2018 plan year, the update window was held from July 27 to July 31. Since the
summer update window is the final opportunity for plan sponsors to remove drugs from their
formularies prior to the start of the plan year, CMS intends to move this window later into the
summer, with the goal being the inclusion of newly approved brands and generics that occur in

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July and into August. We recognize, however, that Part D sponsors must finalize their formulary
submissions for CY 2019 with enough time to meet printing deadlines. We thus seek stakeholder
comment regarding the optimal submission window that balances the opportunity for additional
formulary substitution versus the need to finalize formulary documents for printing.
Part D sponsors are reminded that they may enhance their formularies at any time, including
prior to the start of the plan year, regardless of whether the new drugs have been added yet to the
FRF. Such enhancements may entail adding Part D drugs (with or without utilization
management restrictions), reducing beneficiary cost-sharing, or removing utilization
management edits. These enhancements must be included in the Part D sponsor’s marketing
materials and must be submitted during the next available HPMS formulary submission window.
Under the current formulary submission process, HPMS formulary files are not updated between
the aforementioned summer update window and the first HPMS submission window during the
plan year. Since the HPMS formulary files feed into the Medicare Plan Finder (MPF), MPF
formulary information will not reflect any enhancements the Part D sponsor has made to its
formulary files after the summer update. In an effort to provide more up-to-date information
within the MPF, CMS will add an enhancement-only window that will occur in late fall.
Likewise, we also intend to add a January 2019 formulary update window.
Changes for CY 2019 Formulary Submissions
For the CY 2019 plan year, CMS is proposing changes to the following formulary-related files:
Additional Demonstration Drug (ADD) File
The Additional Demonstration Drug (ADD) file is a supplemental formulary file submitted by
Medicare-Medicaid Plans, which contains all non-Part D drugs required by the State. In an effort
to streamline the submission process for Part D sponsors offering a Medicare-Medicaid Plan,
CMS will make the ADD Validation File available via HPMS in advance of the ADD File
submission deadline.
Non-Extended Day Supply (NDS) File
The Non-Extended Day Supply (NDS) file is a supplemental file for formularies that offer partial
extended day supply coverage for at least one tier. Based on feedback from Part D sponsors, we
understand that the maintenance of this supplemental file has been operationally challenging.
Current systems logic has prohibited sponsors from having the flexibility to make some positive
enhancements that would otherwise be allowed. Further, CMS’s review of the CY 2017 NDC
files have not identified any discriminatory activities or causes for concerns. We have concluded
the burden of maintaining this supplemental file outweighs any benefit, as such, CMS is
eliminating this supplemental file for CY 2019. Part D Sponsors will continue to identify in the

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plan benefit package (PBP) if there are any drugs for which the plan imposes a limit of a one
month supply, if the drugs are included on a tier that is otherwise available at an extended day
supply.
Over-the-Counter (OTC) Validation File
Part D sponsors wishing to offer over-the-counter drug products (OTCs) as part of step therapy
or as a utilization management strategy are required to submit an OTC supplemental file. The
current file format is National Drug Codes (NDCs) submitted by Part D sponsors. The submitted
files are validated against an internal CMS file that contains a universe of OTC NDCs that CMS
believes could be offered as part of the sponsor’s step therapy or utilization management
strategy, consistent with the Chapter 7 of the Medicare Prescription Drug Benefit Manual. NDCs
not contained within the CMS validation file are rejected, which necessitates a subsequent
submission of a revised file by the Part D sponsor. In an effort to reduce the burden on Part D
sponsors to create and submit these files, and to streamline the CMS review of the OTC
submissions, CMS is proposing to provide plans with an OTC reference file for CY 2019 that
uses a proxy code (e.g., RXCUI) to represent each unique drug ingredient, strength, route, and
dosage form, but the file will not contain every possible branded OTC. Providing the file of
acceptable OTCs, via proxy code, in advance to plan sponsors will enable them to prepare their
files based on known CMS acceptable OTCs, significantly reduce the size of the OTC files, and
simplify the submission and review process. For example, the current OTC validation file
contains nearly 100 rows representing various products for ranitidine 75 mg oral tablets. These
would be condensed to one row for CY 2019. We will provide Part D sponsors an opportunity to
review a draft OTC reference file well in advance of the supplemental file submission deadline.
Expanding the Part D OTC Program
The definition of a Part D drug does not include over-the-counter drug products (OTCs).
Therefore, Part D sponsors cannot cover OTCs under their basic prescription drug benefit or as a
supplemental benefit under enhanced alternative coverage. However, given that OTCs may offer
a significantly less expensive alternative to prescription medications, CMS allows Part D
sponsors the option to provide OTCs as a utilization management strategy within their
administrative cost structure, with the expectation that the use of the OTC medication will offset
the use of a more costly Part D drug.
For those sponsors who elect to do so, OTCs offered through a Part D utilization management
strategy are a component of the Part D plan premium and result in OTCs provided to the enrollee
without any direct cost-sharing at the point-of-sale. The OTCs must be available for the full
duration of the contract year and cannot be limited to certain benefit phases. Under this policy,
OTCs do not have the same beneficiary protections, such as coverage determinations or
temporary fills, required to ensure appropriate access to Part D drugs.

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Currently, no standalone PDPs and only a very few MA-PDs offer OTCs under existing Part D
policies, but there has been plan interest to broaden what could be provided. Consequently, CMS
is contemplating allowing additional flexibilities for Part D plan sponsors to offer access to
OTCs. For example, CMS could consider allowing sponsors to include additional OTC products
such as dietary supplements and cough medicines, without the requirement that the OTC product
offset the use of a Part D drug.
We recognize that any such expansion of the current policy could potentially increase program
costs. Plan sponsors should note that the beneficiary inducement laws still apply. We are thus
soliciting feedback from stakeholders on Part D OTC enhancements that could be considered for
future policy. This feedback could include information on how well the current program is
working, the deficiencies of the current program, what additional flexibilities would be helpful,
and what the impact would be on spending, particulary premiums, as a result.
Medication Therapy Management (MTM) Annual Cost Threshold
Targeted beneficiaries for a Part D plan’s MTM program, in general, are enrollees who meet all
of the following criteria: have multiple chronic diseases, are taking multiple Part D drugs, and
are likely to incur annual Part D drug costs that meet or exceed a certain threshold. Per 42 C.F.R.
§ 423.153(d), for 2012 and subsequent years, the annual cost threshold for targeting beneficiaries
is specified as costs for covered Part D drugs in an amount greater than or equal to $3,000
increased by the annual percentage increase (API) in Part D drug expenditures, specified in 42
C.F.R. § 423.104(d)(5)(iv). The 2018 MTM program annual cost threshold is $3,967. The 2019
MTM program annual cost threshold will be the 2018 annual cost threshold adjusted based on
the API and will be finalized in the 2019 Call Letter.
Part D Benefit Parameters for Non-Defined Standard Plans
Each year, we set forth certain benefit parameters, which are based on updated data analysis, and
therefore, are subject to change from year to year. Specifically, pursuant to §423.272(b)(3)(i),
CMS will only approve a bid submitted by a Part D sponsor if its plan benefit package (other
than defined standard) or plan cost structure is substantially different from those of other plan
offerings by the sponsor in the service area with respect to key characteristics such as premiums,
cost-sharing, formulary structure, or benefits offered; and, pursuant to 42 C.F.R.
§423.104(d)(2)(iii), tiered cost-sharing for non-defined standard benefit designs may not exceed
levels annually determined by CMS to be discriminatory. The benefit parameters for CY 2019
are set forth in Table 25 below.
CMS has included a proposal in the CMS-4182-P; Medicare Program; Contract Year 2019
Policy and Technical Changes to the Medicare Advantage and the Medicare Prescription Drug
Benefit Programs NPRM, published November 28, 2017, to eliminate the PDP enhanced
alternative (EA) to EA meaningful difference requirement, while maintaining the requirement
that enhanced plans be meaningfully different from the basic plan offered by a plan sponsor in a

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service area. We also announced our intent to reexamine how we define the meaningful
difference between basic and enhanced plans, and sought stakeholder input. For CY 2019, we
intend to follow the same methodology that was utilized to determine the CY 2017 and CY 2018
basic to enhanced meaningful difference threshold. We propose a minimum monthly costsharing out-of-pocket-costs (OOPC) difference between basic to enhanced PDP offerings of $22.
This value is based on the 50th percentile of the November CY 2018 Bid data run through the
updated CY 2018 OOPC MPF model that incorporates CY 2018 Formulary Data, 2012/13
MCBS Data, and FDA Application Type for applicable/non-applicable determinations related to
coverage gap cost-sharing estimates. Specific guidance related to the EA to EA PDP meaningful
difference will be included as part of the Final Rule.
For purposes of determining whether coverage gap cost-sharing thresholds specified in Table 25
have been met, we will continue to rely on the FDA Application Type to identify formulary
drugs as applicable or non-applicable. The maximum coinsurance of 50% applies to tiers that
contain only applicable drugs. If only non-applicable drugs or a combination of both nonapplicable and applicable drugs are on a tier, then the maximum coinsurance of 17% applies. We
remind sponsors that when cost-sharing reductions beyond the standard benefit are offered
through a supplemental Part D benefit, the plan liability is applied to applicable drugs for
applicable beneficiaries before the manufacturer discount.
Benefit Review
We will continue to scrutinize the expected cost-sharing amounts incurred by beneficiaries under
coinsurance tiers in order to more consistently compare copay and coinsurance cost-sharing
impacts. If a sponsor submits coinsurance values (instead of copayment values) for its nonspecialty tiers that are greater than the standard benefit of 25%, we will compare the average
expected cost-sharing amounts submitted by sponsors in the PBP to the established copay
thresholds, as noted in Table 25 below, to determine whether the coinsurance values are
discriminatory. Similarly, we will evaluate the drug composition of copay tiers in order to assess
whether the formulary and benefit structure is providing a meaningful benefit.
Tier Composition
We expect Drug Tier Labels to be representative of the drugs that make up that tier. Sponsors
will continue to have the option of selecting a non-preferred brand tier or non-preferred drug tier,
but not both. CMS will continue to evaluate the brand/generic composition of the non-preferred
brand tier as part of the bid review process. In recent years, we have communicated concerns
based on an outlier analysis. Based on an analysis of CY 2018 formulary and benefits data, we
propose a maximum threshold of 25% generic composition for the non-preferred brand tier for
CY 2019. This threshold is based on the mean generic composition, submitted at the plan level,
of the non-preferred brand tier for CY 2018. Since Part D sponsors have the option to choose
between the non-preferred brand and non-preferred drug tier labels, the inclusion of a significant

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number of generic drugs on a tier that is labeled as brand is unnecessary and may lead to
confusion. While we continue to believe a coinsurance structure is the preferable cost-sharing
structure for the non-preferred drug tier, CMS will continue to afford Part D sponsors the
flexibility to determine the cost-sharing structure that is most appropriate for their benefit design,
with the goal of maintaining transparency and a meaningful benefit offering for enrollees in a
plan with non-preferred drug tiers that also balances a sponsor’s ability to mix brand and generic
drugs within the tier. We intend to conduct outlier tests for those Part D sponsors who choose a
copay structure for the non-preferred drug tier. In order to demonstrate that the cost-sharing
structure chosen provides a value for beneficiaries, we expect sponsors to evaluate and be
prepared to provide written justification upon request. We expect the justification to include
detailed information about the generic drugs on the non-preferred drug tier, such as expected
utilization, the formulary alternatives represented on lower tiers, and any tier placement strategy
with respect to utilization management. Sponsors may be asked to make modifications to their
benefit structure or formulary tiering if the submitted justification is not accepted.
Improving Access to Part D Vaccines
According to the Center for Disease Control and Prevention’s (CDC) Surveillance of
Vaccination Coverage among Adult Populations — United States, 2015, vaccination rates
remain low for tetanus and diphtheria with acellular pertussis (Tdap)29. While the Healthy People
2020 herpes zoster target vaccination rate has been achieved, approximately 70% of adults for
whom the vaccine is recommended remain unprotected. In an effort to improve access to these
and other Part D vaccines, we encourage Part D sponsors to either offer a $0 vaccine tier, or to
place vaccines on a formulary tier with low cost-sharing.
Table 25: Benefit Parameters for CY 2019 Threshold Values
CY 2019 Threshold Values
Minimum Meaningful Differences (PDP Cost-Sharing OOPC)1
Enhanced Alternative Plan vs. Basic Plan

$22

Maximum Copay: Pre-ICL and Additional Cost-Sharing
Reductions in the Gap (3 or more tiers)

S 2,3

Preferred Generic Tier
Generic Tier

<$20 4
$20

Williams WW, Lu P, O’Halloran A, et al. Surveillance of Vaccination Coverage among Adult Populations —
United States, 2015. MMWR Surveill Summ 2017;66(No. SS-11):1–28. DOI:
http://dx.doi.org/10.15585/mmwr.ss6611a1
29

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CY 2019 Threshold Values
Preferred Brand/Brand Tier

$47

Non-Preferred Drug Tier

$100

Non-Preferred Brand Tier

$100

Injectable Tier

$100

Select Care/Diabetic Tiers5

$11

Vaccine Tier

$0

Maximum Coinsurance: Pre-ICL (3 or more tiers)

S 2,3

Preferred Generic Tier

25%

Generic Tier

25%

Preferred Brand/Brand Tier

25%

Non-Preferred Drug Tier

50%

Non-Preferred Brand Tier

50%

Injectable Tier

33%

Select Care/Diabetic Tiers5

15%

Vaccine Tier

0%

Maximum Coinsurance: Additional Cost-Sharing Reductions in
the Gap for Applicable Beneficiaries (all tier designs)

S6

Preferred Generic Tier

17%

Generic Tier

17%

Preferred Brand/Brand Tier

50%

Non-Preferred Drug Tier

50%

Non-Preferred Brand Tier

50%

Injectable Tier

50%

Select Care/Diabetic Tiers5

50%

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CY 2019 Threshold Values
Vaccine Tier

0%

Minimum Specialty Tier Eligibility
1-month supply at in-network retail pharmacy

$670

1

The Enhanced Alternative Plan to Basic Plan meaningful difference minimum threshold is based on the 50th
percentile of the November CY 2018 Bid Data run through the CY 2018 OOPC MPF model which incorporates
CY 2018 Formulary Data, 2012/13 MCBS Data, and FDA Application Type for applicable/non-applicable
determinations related to coverage gap cost-sharing estimates. This threshold excludes plans that were waived
of the meaningful difference requirements due to the transition period afforded during consolidation. For each
parent organization, any cost-sharing OOPC comparison between a basic plan and EA plan in the same region
must meet the minimum Enhanced Alternative Plan vs. Basic Plan threshold.
2

These thresholds are based on the 95th percentile of the CY 2018 Bid Data. As in previous years, we will also
set similar thresholds for plans with atypical tiering structures, such as a two tier formulary.
“S” in the above chart refers to “standard retail cost-sharing” at a network pharmacy. Standard retail costsharing (S) is cost-sharing other than preferred retail cost-sharing offered at a network pharmacy.
3

4

A separate maximum cost-share threshold for the Preferred Generic Tier has not been established. Costsharing for the Preferred Generic Tier need only be lower than that for the cost-sharing of the Generic Tier.
Equivalent cost-sharing for the Preferred Generic and Generic tiers will not be accepted, except in the case
when a sponsor buys down the cost-sharing to $0 for both generic tiers.
5

The Select Care Drug and Select Diabetic Drug Tiers must provide a meaningful benefit offering with low or
$0 beneficiary cost-sharing for drugs targeting specific conditions (e.g., $0 tier for drugs related to diabetes
and/or smoking cessation). We continue to expect cost-sharing for the Vaccine tier, or Select Care/Select
Diabetes tiers that contain vaccines, to be $0.
6

Additional gap cost-sharing reductions for applicable beneficiaries are communicated in the PBP at the tier
level and sponsors may elect to provide this gap benefit for all drugs on a tier (full tier coverage) or a subset of
drugs on a tier (partial tier coverage). If the additional gap cost-sharing reduction benefit for a brand labeled tier
applies to only non-applicable (i.e., generic) drugs or both generic and applicable drugs on that tier, then the
generic drug beneficiary coinsurance maximum of 17% applies. Injectable, Specialty, Select Care and Select
Diabetic Drug labeled tiers for which additional gap coverage is offered, if any, will be analyzed in the same
manner as brand labeled tiers with respect to beneficiary coinsurance maximums. Note, the beneficiary
coinsurance maximums for the coverage gap reflect the plan liability, but exclude the 50% manufacturer
discount for applicable drugs.

Specialty Tiers
Per 42 C.F.R. §423.578 (a)(7), a Part D sponsor may exempt a formulary tier in which it places
very high cost and unique items from its tiering exception process. In order for a Part D drug to
be placed on this specialty tier, the sponsor-negotiated price must exceed an established dollarper-month threshold. Similar to past years, an analysis was performed utilizing CY 2017

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prescription drug event (PDE) data to identify monthly fills that exceed the current specialty tier
threshold of $670. This analysis showed that just around 1% of 30 day-equivalent fills exceeded
$670 and as a result, CMS will maintain the $670 threshold for CY 2019. We will continue to
monitor this trend in future years to determine if specialty tier threshold increases are necessary.
Low Enrollment Plans (Stand-alone PDPs only)
CMS has the authority under 42 CFR §423.507(b)(1)(iii) to non-renew Part D plans (at the benefit
package level) that do not have a sufficient number of enrollees to establish that they are viable
plan options. CMS evaluates plan enrollment at the PDP region level. Consistent with the
methodology outlined in the CY 2012 Call Letter, plans are deemed as low enrollment plans if
both of the following are true: 1) the plan enrollment is below 1,000 and 2) the plan is in the
lowest quintile of enrollment within the specific PDP region. Prior to taking additional action on a
low enrollment plan, CMS considers relevant factors such as: (1) whether the plan is a basic plan
that is satisfying requirements set forth at 42 CFR § 423.104(f)(2), and the organization’s
enhanced plan does not have low enrollment in the same region; (2) whether the plan was a new
plan and if it has been in existence for three or more years; (3) whether the plan is offered
nationally; (4) the total number of plan offerings in the applicable region; and (5) if the plan’s
premium currently falls at or below the low income benchmark premium amount. When a plan is
deemed to have low enrollment, the Part D sponsor will be provided the opportunity to provide a
strategic plan that describes how enrollment will be increased for the upcoming plan year.
Alternatively, the sponsor will have the option to consolidate or non-renew the plan. However,
CMS proposes that if the plan is identified as a low enrollment plan for two consecutive years
using the above criteria, CMS can exercise its authority to non-renew the plan. By April 2018, we
will notify affected low enrollment plans with less than 1,000 enrollees of available options for
consolidation/withdrawal options.
Improving Drug Utilization Review Controls in Medicare Part D
Part D Opioid Overutilization Policy
Opioid medications (“opioids”) have serious risks such as addiction, overdose, and death. In
response to the growing national opioid epidemic, CMS’s Medicare Part D opioid overutilization
policy has evolved incrementally to address prescription opioid overuse in Medicare Part D from
a medication safety perspective while preserving beneficiary access to medically necessary drug
regimens. Currently, in addition to improved formulary management, we expect sponsors to:
1. Retrospectively perform enhanced drug utilization review (DUR) to identify potential
opioid overutilizers and provide appropriate case management aimed at coordinated
care.
2. Prospectively manage drug utilization by implementing real-time safety alerts at the
time of dispensing as a preventive step to ensure prescribers are aware that potentially

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high risk levels of prescription opioids will be dispensed to their patients (concurrent
DUR).
In the CY 2013 Call Letter and supplemental guidance, CMS described the enhanced DUR
policy that focuses on cases that have the highest risk of adverse events.30 Part D sponsors should
identify potential opioid overutilizers and conduct retrospective reviews and case management.
This approach can help identify beneficiaries at risk of adverse events due to prescription
opioids. These efforts do not include beneficiaries with cancer or in hospice. Under our current
policy, if sponsors cannot establish medical necessity due to unresponsive prescriber(s), or if
misuse is verified with prescribers, with the prescribers’ agreement, sponsors may implement a
beneficiary-specific claim edit at all network pharmacies that will result in the rejection of claims
or quantities in excess of the opioid dosing deemed medically necessary.
To facilitate compliance with this policy, CMS developed the Overutilization Management
System (OMS) in July 2013. This system identifies those beneficiaries we consider at significant
risk (high levels of opioids with potential coordination of care issues due to obtaining opioids
from multiple prescribers and pharmacies). CMS expects plans to report back to us their results
of implementing the review and case management policies through the OMS. Over time, CMS
has modified the OMS opioid overutilization criteria based on stakeholder feedback and on the
CDC Guideline for Prescribing Opioids for Chronic Pain.31 With regard to the latter, the OMS
criteria incorporate a 90 morphine milligram equivalent (MME) threshold cited in the CDC
Guideline, which was developed by experts as the level that prescribers should generally avoid
reaching with their patients. CMS considers plan and provider burden along with beneficiary
impact in developing the OMS criteria. We have also continued to modify OMS in other ways as
relevant information and guidelines have become available. For example, in October 2016, we
added a flag to OMS indicating potential opioid overutilizers who have also been prescribed a
benzodiazepine, which is known to increase risk of overdose when taken together.
Although these efforts have reduced very high risk overutilization of prescription opioids in the
Part D program, given the urgency and scope of the national opioid epidemic32, we will propose
new strategies to more effectively address this issue in Part D. Most notably, these efforts will
better manage chronic overuse among beneficiaries who are taking high levels of prescription
opioids (e.g., beneficiaries with 90 MME or more without multiple prescribers and pharmacies

30

An excerpt from the Final 2013 Call Letter, the supplemental guidance and additional information about the
OMS are available on the CMS webpage, Improving Drug Utilization Controls in Part D
(https://www.cms.gov/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovContra/RxUtilization.html).
31
See https://www.cdc.gov/drugoverdose/prescribing/guideline.html.
32
See White House website https://www.whitehouse.gov/presidential-actions/presidential-memorandum-headsexecutive-departments-agencies/ and https://www.whitehouse.gov/briefings-statements/president-donald-jtrump-taking-action-drug-addiction-opioid-crisis/; and HHS website https://www.hhs.gov/about/news/
2017/10/26/hhs-acting-secretary-declares-public-health-emergency-address-national-opioid-crisis.html.

 204
who may not be addressed through the OMS) as well as opioid naïve patients. The proposals
include:


Enhancing the OMS by adding additional flags for high risk beneficiaries who use
“potentiator” drugs (such as gabapentin and pregabalin) in combination with prescription
opioids. OMS already flags concurrent benzodiazepine use.



Implementing revisions to the PQA opioid quality measures used by CMS, and
consideration of a new PQA measure, Concurrent Use of Opioids and Benzodiazepines.
[See the Enhancements to the 2019 Star Ratings and Future Measurement Concepts
section of the draft 2019 Call Letter]



Expecting all sponsors to implement hard formulary-level cumulative opioid safety edits
at point-of-sale (POS) at the pharmacy (which can only be overridden by the sponsor) at
a dosage level of 90 MME per day33, with a 7 days supply allowance.



Implementing a days supply limit for initial fills of prescription opioids (e.g., 7 days) for
the treatment of acute pain with or without a daily dose maximum (e.g., 50 MME per
day).



Expecting all sponsors to implement soft POS safety edits (which can be overridden by a
pharmacist) based on duplicative therapy of multiple long-acting opioids, and request
feedback on concurrent prescription opioid and benzodiazepine soft edits.

We welcome feedback on this important topic. All Part D sponsors are expected to have a
documented, written strategy for addressing overutilization of prescription opioids given the
public health crisis.
Retrospective DUR
Comprehensive Addiction and Recovery Act of 2016 and the Overutilization Monitoring
System (OMS)
Section 704 of the Comprehensive Addiction and Recovery Act of 2016 (CARA) (Pub. L. 114198) includes provisions that permit Part D sponsors to establish drug management programs for
at-risk beneficiaries under which Part D sponsors may limit such beneficiaries’ access to
coverage for frequently abused drugs to certain prescribers and pharmacies.
In a recently published proposed rule (82 FR 56336), CMS included provisions to implement
Section 704 for plan year 2019. As part of these provisions, we also proposed to codify the

Please note that CMS will use the term “MME” going forward instead of morphine equivalent dose (MED),
which CMS has used to date. CMS used the term MED in a manner that was equivalent to MME. We will
update CMS documents that currently refer to MED as soon as practicable.
33

 205
current Part D retrospective opioid overutilization policy and OMS reporting. We will consider
the comments we received that were submitted in response to the notice of proposed rulemaking.
We plan to publish a final rule with sufficient time for Part D sponsors to consider it in preparing
their 2019 bid proposals.
OMS Metrics
The Opioid Daily Dose metric was added to the quarterly OMS reports in 2016 for informational
purposes:


120 MME Opioid Daily Dose rate: # opioid days > 120 MME/1000 Opioid utilization
days during the last 12 months.
Since the January 2016 OMS report, we have observed a 10% decrease in the Opioid Daily Dose
rate across all Part D contracts, from 122.4 to 109.7 per 1,000 opioid utilization days.
Beginning with the 2018 OMS reports, we propose to change the Opioid Daily Dose
measurement period from 12 months to 6 months to align with the revised OMS criteria
measurement period. In addition, we propose to report a second Opioid Daily Dose rate with a
90 MME threshold to further align with the revised 2018 OMS criteria. Therefore, in the April
2018 OMS reports, CMS will report:


90 MME Opioid Daily Dose rate: # opioid days > 90 MME/1000 Opioid utilization days
during the last 6 months.



120 MME Opioid Daily Dose rate: # opioid days > 120 MME/1000 Opioid utilization
days during the last 6 months.
We propose to discontinue reporting the 120 MME Opioid Daily Dose rate in the 2019 OMS
reports.
Opioid Potentiator Drugs
As previously mentioned, we added a concurrent benzodiazepine-opioid flag to OMS to alert
Part D sponsors that concurrent use may be an issue that should be addressed during case
management. In October 2016, when CMS began reporting the concurrent use of
benzodiazepines among potential opioid overutilizers to Part D sponsors through OMS, we
found that 64% of potential opioid overutilizers had a claim(s) for a benzodiazepine. A year
later the percent dropped to 62%. Although the trend is going in the right direction, we find that
the continued high use of benzodiazepines within this high risk population to be of concern and
will continue to flag this use.
We have been working with the Office of the Inspector General (OIG) to identify other nonopioid potentiator34 drugs that may pose safety risks when misused with opioids. Gabapentin, a
34

A drug potentiator is defined as a chemical, herb, or other drug that is used to increase the effects of a
substance and consequently, increasing both the substance and the potentiators abuse potential.

 206
gapapentinoid, has been identified as an independent risk factor for opioid-related deaths and is
reportedly misused due to the euphoria associated with use at high doses.35,36 The increasing use
of gabapentin for off-label indications, despite the lack of evidence from clinical trials, has been
documented in the literature.37,38 One such off label indication is non-specific chronic lower
back pain, which is on the rise.39 As the focus on opioid use is intensifying, clinicians and
patients may be looking for alternatives for their pain treatment.40 Currently, gabapentin is
FDA-approved for the treatment of postherpetic neuralgia in adults and the treatment of partial
onset seizures.
From 2015 to 2017, the rate of gabapentin users increased by 14% from 93 to 108 users per
1,000 Medicare Part enrollees based on 6-month measurement periods. Higher gabapentin use
was observed among opioid users. From January to June 2017, there were 308 gabapentin users
per 1,000 Part D chronic opioid users41, and 452 gabapentin users per 1,000 OMS potential
opioid overutilizers.42 From January - June 2015 to January - June 2017, we observed a change
in the percent of gabapentin users receiving very high (> 2,400 mg) doses among opioid users
and chronic opioid users of 7.5% and 8.5%, respectively. CMS is concerned that the increase in
gabapentin use and higher doses among opioid users may place beneficiaries at a higher risk for
adverse events. These safety concerns extend to pregabalin, which is also a gapapentinoid.
We propose to add a concurrent opioid-gabapentin/pregabalin flag to OMS. We are requesting
feedback from stakeholders about what their experience has been with the potential overuse of
gabapentin and pregabalin with opioids, whether this additional flag would be useful for Part D
sponsors, and how the case management approach could help with gabapentin/pregabalinopioid misuse and also with other potentiators. Furthermore, we seek comment on other
potentiator drugs that should be added to the OMS and the utility of adding such drugs that may
increase the risk for overdose when used with opioids. As with concurrent benzodiazepine and
opioid use, we expect that when sponsors perform case management, they would include the
Gomes T, Juurlink DN, Antoniou T, Mamdani MM, Paterson JM, van den Brink W. “Gabapentin, opioids,
and the risk of opioid-related death: A population-based nested case–control study.” PLoS Med 14(10):
e1002396.
36
Evoy KE, Morrison MD, Saklad SR. Abuse and misuse of pregabalin and gabapentin. Drugs 2017;77:403-26.
37
Mack, A. “Examination of the Evidence for Off-Label Use of Gabapentin” J Manag Care Spec Pharm, 2003
Nov;9(6):559-568.
38
Fukada, Christine et al. “Prescribing Gabapentin off Label: Perspectives from Psychiatry, Pain and Neurology
Specialists.” Canadian Pharmacists Journal : CPJ 145.6 (2012): 280–284.e1. PMC. Web. 17 Nov. 2017.
39
Shanthanna, Harsha et al. “Benefits and Safety of Gabapentinoids in Chronic Low Back Pain: A Systematic
Review and Meta-Analysis of Randomized Controlled Trials.” Ed. Alexander C. Tsai. PLoS Medicine 14.8
(2017): e1002369. PMC. Web. 3 Nov. 2017.
40
Goodman, CW, Brett, AS. “Gabapentin and Pregabalin for Pain — Is Increased Prescribing a Cause for
Concern?” DOI: 10.1056/NEJMp1704633.
41
Opioid users are beneficiaries with at least one opioid claim; chronic opioid users are beneficiaries with an
opioid episode of 90 days or more.
42
Based on analysis using the revised 2018 OMS criteria (e.g., beneficiaries with average MME > = 90 mg, 4 or
more prescribers and pharmacies, or 6 or more prescribers).
35

 207
use of other drugs (e.g., gabapentin and pregabalin) that can potentiate the risk of overdose
within the case management.
Patient Safety Reporting
CMS also uses quality measures developed by the PQA to track trends in opioid overuse across
the Medicare Part D program. The Enhancements to the 2019 Star Ratings and Future
Measurement Concepts section of the draft 2019 Call Letter discusses the implementation of
changes to the PQA-endorsed opioid overutilization measures in the Patient Safety reports and
proposals for the display page, and consideration of a new PQA measure, Concurrent Use of
Opioids and Benzodiazepines.
Since 2016, sponsors have received monthly Patient Safety reports based on the PQA opioid
measures. We communicate with plans about their performance on these quality measures,
including sharing information about specific beneficiaries identified, and plan sponsors with the
lowest rating on each measure should report actions they will take to improve performance.
Sponsors may use the reports to supplement their DUR programs to address overutilization of
opioids across a population broader than OMS. CMS expects sponsors to routinely monitor these
data to compare their performance to overall averages and assess their progress in reducing the
number of beneficiaries using high doses of opioids, with or without multiple providers and
pharmacies.
Concurrent DUR
Part D sponsors commonly implement safety edits to prevent the unsafe dosing of drugs at the
time of dispensing as part of their concurrent DUR requirements for all Part D drugs, such as
drug-drug interactions, therapeutic duplication, or an incorrect drug dosage (e.g., doses above the
FDA-approved maximum dosing). We wish to strengthen this aspect of the current Part D opioid
overutilization policy, as follows. We note that PACE organizations are expected to comply with
these policies unless they do not adjudicate claims at POS.
Cumulative Morphine Milligram Equivalent Daily Dose (MME) Safety Edits for High,
Chronic Prescription Opioid Users
Sponsors are currently expected to implement either soft and/or hard formulary-level safety edits
for opioids based on a cumulative MME at POS to prevent potentially unsafe opioid dosing, as
outlined and finalized in the 2017 and 2018 Call Letters. Plans may set any soft cumulative
opioid claim edit MME threshold at or above 90 mg per day and any hard cumulative opioid
claim edit at or above 200 mg per day.
These POS edits provide real-time information to help ensure providers are aware that
potentially high risk levels of opioids will be dispensed to their patients, and to promote care
coordination. Specifically, the POS edits are triggered at the pharmacy when a patient’s total

 208
opioid dose across all of their adjudicated prescriptions reaches a certain MME level per day.
The pharmacist receives an alert and then action must be taken before the prescription can be
covered. We also encourage pharmacists to review the patient’s records in their State’s
Prescription Drug Monitoring Program (PDMP) system (See Medicare Learning Network
(MLN) Matters® Article SE1250: Prescription Drug Monitoring Programs: A Resource to Help
Address Prescription Drug Abuse and Diversion: https://www.cms.gov/outreach-andeducation/medicare-learning-network-mln/mlnmattersarticles/downloads/se1250.pdf).
As shown in Table 26, in 2017, the first year that sponsors were expected to have either a soft
and/or hard edit, 51% of contracts (320 contracts) utilized a hard edit. In 2018, 50% of contracts
(341 contracts) implemented a hard edit.
Table 26: Counts of Part D contracts with soft and/or hard MME edits

Contract

Contracts with Hard
Edit only

Contracts with Soft
Edit only

Contracts with both
Hard and Soft edits

Total
contracts

Year

Number

Number

Number

Percent

Number

2018
2017

160
172

26.6%
23.5%

681
630

Percent
23.5%
27.3%

340
310

Percent
49.9%
49.2%

181
148

Most contracts have implemented soft edits at 90 MME and hard edits at 200 MME, which are
the “floor” of CMS’s guidance. Of those contracts with hard edits, 76% in 2017 and 67% in 2018
set a threshold at the minimum recommended MME of 200 mg. Furthermore, 95% of contracts
with a soft edit set an MME threshold from 90 – 120 MME in 2017 and 2018. In 2018, the
proportion of contracts with 90 MME thresholds increased from 3% in 2017 to 40% in 2018.
Table 27: Counts of Part D contracts with soft edits by MME level
Contract
Year
2018
2017

90

100

120

200-300

>300

209
(40%)
16
(3%)

119
(23%)
92
(20%)

166
(32%)
326
(71%)

26
(5%)
2
(0%)

1
(0%)
22
(5%)

Total
contracts
with soft
edits
521
458

 209
Table 28: Counts of Part D contracts with hard edits by MME level
Contract
Year
2018
2017

200

>200-300

360

>360

227
(67%)
244
(76%)

49
(14%)
10
(3%)

61
(18%)
50
(16%)

4
(1%)
16
(5%)

Total
contracts
with hard
edits
341
320

In 2017, we provided additional guidance to sponsors regarding appropriate use of these edits.43
As we stated in the memo, through review of complaints received via the CMS Complaint
Tracking Module (CTM) during the first months of 2017, discussions with Part D sponsors, and
receipt of questions from other stakeholders, we believed that some sponsors implemented these
edits beyond their intended use as a safety edit. For example, the edits are not intended as a
means to implement a prescribing limit or apply additional clinical criteria for the use of opioids,
but instead to give physicians important additional information about their patients’ opioid use.
Since that time, we have observed few complaints per month in the CTM related to these edits.
Given the public health emergency and the fact that half of sponsors are already implementing
hard MME edits, sponsors can and should do more to address chronic, high prescription opioid
overuse. Therefore, we propose that all sponsors should implement a hard edit in 2019 that is
triggered when a beneficiary’s cumulative daily MME reaches or exceeds 90 mg (meaning the
MME threshold should only be set at 90 MME). This value aligns with the CDC Guideline,
which recommends to generally avoid increasing the daily dosage of opioids to 90 MME.
Sponsors should not include multiple prescriber or multiple pharmacy criteria in these edits so
that all beneficiaries using 90 MME per day or more regardless of the number of providers are
identified. Sponsors should continue to apply specifications to account for known exceptions,
such as hospice care; cancer diagnoses; reasonable overlapping dispensing dates for prescription
refills44 or new prescription orders for continuing fills; and high-dose opioid usage previously
determined to be medically necessary such as through coverage determinations, prior
authorization, case management, or appeals processes. It is also very important that sponsors
43

HPMS memo, July 7, 2017, Additional Guidance on CY 2017 Formulary-Level Cumulative Morphine
Equivalent Dose (MED) Opioid Point-of-Sale (POS) Edit.
44

Prescription opioids are controlled substances under the Controlled Substances Act (CSA) and are assigned
to Schedule II through V. Schedules are assigned based on the abuse potential and the severity of the
psychological or physical dependence of the prescription opioid. A complete list of the schedules is published
annually in Title 21 Code of Federal Regulations (C.F.R.) §§ 1308.11 through 1308.15. Schedule II opioids
require a new prescription for each fill while prescriptions for schedule III through V do not and therefore, can
include refills.

 210
implement these edits in a way that beneficiaries’ access to medication-assisted treatment
(MAT), such as buprenorphine, is not impacted. Sponsors should not include buprenorphine
products in this edit.45
To balance beneficiary access to medically necessary drug regimens and reduce the potential for
any unintended consequences for patients already on higher doses of opioids such as withdrawal
symptoms, we propose that sponsors should implement these edits in 2019 to allow beneficiaries
to receive a 7 days supply of the prescription that triggered the hard edit as written. This would
provide a short term supply to patients to allow time to pursue coverage through the exceptions
process. However, if the exception request is approved, the patient may need to obtain a new
prescription from their prescriber for amounts beyond the 7 days supply. Alternatively, the
patient could elect not to receive the partial 7 days supply fill (e.g., they are not out of the
medication) and go through the exceptions process. In that case, if approved, the original
prescription could be filled. Also, in the case of opioid prescriptions that trigger the 90 MME
hard edit where the packaging is only available in a days supply greater than 7 days, we would
not expect any supply to be provided. The beneficiary would need to obtain an approved
exception in order to get the medication. Nonetheless, we are not aware of any State laws or
labeling that would prohibit prescription opioids from being dispensed in a smaller quantity.
We additionally propose to only allow the 7 days supply once. That is, if the beneficiary attempts
to fill a prescription for another opioid that triggers the MME hard edit, another 7 days supply
would not be allowed. We request comment on this concept and stakeholder feedback on its
operational feasibility. Should we finalize a policy whereby the 7 days supply is only available
once after the 90 MME hard edit is triggered during a specific time period, if a patient presents at
the pharmacy with multiple opioid prescriptions on the same day, if only one 7 days supply was
allowed, the pharmacist would help assess the immediate needs of the patient to help determine
which prescription should be filled for a 7 days supply. We further seek comment on when and
how to best communicate to beneficiaries that the one-time 7 days supply would not be available
for future prescriptions should the MME level remain at 90 mg or higher.
To estimate the number of beneficiaries who may be impacted by a cumulative MME edit at 90
MME per day, we analyzed 2016 PDE data across all Part D sponsors. In 2016, almost 1.6
million beneficiaries (3.8% of Part D enrollees) met or exceeded 90 MME for at least one day46,
excluding those with cancer, in hospice care, or with overlapping dispensing dates for timely

45

All formulations of buprenorphine, including those for pain, have been removed from the most recent CDC
MME conversion factor file. https://www.cdc.gov/drugoverdose/datafiles/CDC_Oral_Morphine_Milligram_Equivalents_Sept_2017.xlsx
46
The estimate is based on the MME daily dose calculated per opioid prescription. The daily dose is assigned to
the prescription’s covered days and calculated from the dispensing date and the days supply, and summed per
day across all overlapping opioid fills. Methodology differs from the OMS average MME calculated from all
opioid prescriptions dispensed during the measurement period.

 211
continued fills for the same opioid (e.g., false positives). We seek feedback on whether all
sponsors have the capacity to implement hard edits at 90 MME as well as the 7 days allowance
proposal for 2019. We also request comment on other solutions to address prescription opioid
overuse while balancing access to medically necessary drug regimens and reducing the potential
for unintended consequences.
Furthermore, we reiterate that when the MME edit is triggered and cannot be resolved at the
pharmacy, consistent with Section 40.3.1 of Chapter 18 of the Medicare Prescription Drug
Benefit Manual, the sponsor is required to notify their network pharmacy to distribute a written
copy of the standardized CMS pharmacy notice to the enrollee (“Medicare Prescription Drug
Coverage and Your Rights”, CMS-10147, OMB Approval No. 0938-0975). This notice instructs
enrollees on how to contact their plan and explains their right to obtain a coverage determination
from their plan, including information about the exceptions process.
Sponsors are reminded that an enrollee, the enrollee’s representative, or the enrollee’s prescriber
has the right to request a coverage determination for a drug or drugs subject to the MME edit,
including the right to request an expedited coverage determination. The timeframe for expedited
coverage determination requests applies when the prescriber indicates, or the plan decides, that
applying the standard timeframe may seriously jeopardize the enrollee’s life, health, or ability to
regain maximum function. We generally expect coverage determination requests seeking
exceptions to the MME edit to meet the criteria for expedited review, which means the plan
sponsor must issue a decision within 24 hours of receipt of the prescriber’s supporting statement
(attestation).
Consistent with current guidance, if the only issue in dispute is the MME, CMS expects the Part
D sponsor to only rely on prescriber attestation that the higher MME is medically necessary to
approve dosing that is higher than the hard edit when a coverage determination is requested. The
authorization of the higher MME level should be considered an approved exception and be valid
through the remainder of the plan year. The exception should apply to the cumulative MME level
for the beneficiary, not just one specific drug, or one prescriber. In order to minimize
unnecessary disruptions in therapy, Part D sponsors should consult with the prescriber(s) to
determine whether dose escalation for the beneficiary is imminent, and authorize an increased
MME accordingly. The sponsor should also remove the edit if it is determined that the
beneficiary meets their established criteria for known exceptions (such as cancer or hospice).
As outlined in 42 CFR § 423.120(b)(7), a Part D sponsor that uses a formulary under its qualified
prescription drug coverage must establish policies and procedures to educate and inform health
care providers and enrollees concerning its formulary. Accordingly, CMS expects sponsors’
network pharmacies and customer service representatives to be adequately trained with regard to
these edits to ensure affected beneficiaries are given timely and appropriate information and
instruction. It is important that these edits be implemented in a manner that minimizes disruption
to beneficiaries. It is integral that sponsors have the ability to efficiently process associated

 212
exceptions and appeals, including expedited requests. CMS expects sponsors to ensure that their
staff are trained to appropriately identify enrollee requests for a coverage determination,
including verbal requests made by enrollees affected by hard MME edits. Plans are not permitted
to instruct an enrollee who is requesting coverage that only their prescriber can initiate the
request.
Part D sponsors will continue to submit information on their cumulative MME safety edits using
a template through HPMS. We will monitor implementation of these edits including complaints
data. In addition, Part D sponsors report implementation outcomes of their MME POS edits, such
as number of claims rejected due to edits, number of beneficiaries impacted, and number of
rejected claims overridden or processed through the Part D reporting requirements. CMS will
analyze these data once reported and validated. The first data collection will be in February 2018
for 2017 reporting requirements data and validated data by September 2018.47
Days Supply Limits for Opioid Naïve Patients
The sixth recommendation of the CDC Guideline states that opioids prescribed for acute pain
should be limited to three days or fewer, and that seven days are rarely necessary. Clinical
evidence cited by the CDC review found that opioid use for acute pain is associated with longterm opioid use, and that a greater amount of early opioid exposure is associated with greater risk
for long-term use. Because the amount of opioid prescribed can often be in excess of the amount
needed to treat an acute event, leftover supplies of opioids can become the source for misuse and
diversion.48 Limiting the initial amount of prescription opioids dispensed may reduce the risk
that patients develop an affinity for these drugs and transition to chronic use or misuse.49
Currently, at least sixteen States have or plan to add by statute or agency rule days supply (e.g., 5
or 7 days) and/or daily dose limits on the initial amount of opioids that clinicians can prescribe
for ‘acute’ pain.50 In addition, several large prescription benefit plans are implementing similar
restrictions within their commercial, health plan, employer, and Medicaid clients.51,52
In addition to the strategies described above to help better manage high, chronic prescription
opioid use, CMS intends to establish a days supply limitation policy for opioid naïve patients in
this year’s final 2019 Call Letter that balances reducing the harm posed by opioids with an

47

See Part D reporting requirements: https://www.cms.gov/Medicare/Prescription-DrugCoverage/PrescriptionDrugCovContra/RxContracting_ReportingOversight.html
48
Centers for Disease Control and Prevention (CDC). Adult use of prescription opioid pain medications—
Utah, 2008. MMWR Morb Mortal Wkly Rep. 2010;59(6):153-157.
49
Bateman, BT, Choudhry, NK. Limiting the Duration of Opioid Prescriptions: Balancing Excessive
Prescribing and the Effective Treatment of Pain. JAMA Intern Med. 2016;176(5):583-584.
doi:10.1001/jamainternmed.2016.0544
50
http://www.astho.org/StatePublicHealth/A-Look-at-State-Legislation-Limiting-Opioid-Prescriptions/2-23-17/
51
https://cvshealth.com/thought-leadership/fighting-opioid-abuse-our-pbms-approach
52
http://drugtopics.modernmedicine.com/drug-topics/news/express-scripts-limits-opioid-prescriptions

 213
individual’s need for access to appropriate pain relief. Ultimately, we seek to align our policy
with other Government programs. For example, the FDA is seeking stakeholder input (82 FR
58572) on how the FDA might, under its Risk Evaluation and Mitigation Strategy (REMS)
authority, improve the safe use of opioid analgesics by curbing overprescribing to decrease the
occurrence of new addictions and limit misuse and abuse of opioid analgesics.
We expect all Part D sponsors to implement a hard safety edit for initial opioid prescription fills
that exceed 7 days for the treatment of acute pain. CMS understands that implementing such
restrictions may create important challenges. Any restrictions should not compromise
appropriate pain treatment or result in an excessive burden on clinicians and their patients. We
request feedback from stakeholders, especially Part D sponsors, providers, and PBMs, on the
implementation of a days supply limitation at 7 days or if an alternative days supply limit would
be more appropriate (such as 3 days or 5 days), including their experience with such limitations
or the basis for their recommendations. We also solicit comment on whether a days supply limit
with or without a daily dose maximum (e.g., 50 MME per day) would be more effective. In
particular, we request information on both inclusions and exceptions for specific clinical
situations (i.e., whether and to what extent a supply limit could be based on specific indications
or other criteria) and other parameters and what safeguards should be in place to protect
appropriate beneficiary access.
Opioid Duplicative Therapy Safety Edits
Both the use of long-acting (LA) opioids and the number of opioid prescriptions are associated
with a higher risk of mortality.53,54 Clinically, there is little support for maintaining a patient on
multiple different opioids and such use creates other health care issues. First, the use of multiple
opioids that compete for similar pain receptors may provide little improvement in analgesia
while increasing the risk of adverse events. In addition, prescriptions for multiple opioids
(whether LA or short-acting (SA)) and/or multiple strengths increases the supply of opioids
available for diversion and abuse, as well as the opportunity for self-medication and dose
escalation.55 Therefore, additional DUR controls at the POS like a soft edit may help reduce
excess opioid supplies and reduce adverse events.
Beneficiaries who receive multiple LA and/or multiple SA opioids may lack coordinated care
and be at higher risk of opioid overdose. Some plans and PBMs already implement therapeutic
duplication edits that check for opioid prescriptions whose days supply overlap before a certain
percent has expired or overlap for a minimum number of days. If the prescription overlap criteria
53

Ray WA, Chung CP, Murray KT, Hall K, Stein CM. Prescription of Long-Acting Opioids and Mortality in
Patients with Chronic Noncancer Pain. JAMA. 2016 Jun 14;315(22):2415-23.
54
Baumlatt JA, Wiedeman C, Dunn JR, Schaffner W, et al. High-risk use by patients prescribed opioids for
pain and its role in overdose deaths. JAMA Intern Med. 2014 May; 174(5):796-801.
55
Manchikanti, L. Helm II, S, Fellows, B. Janata, J.W. Pampati,V., Grider, J.S. Boswell, M.V. Opioid
Epidemic in the United States. Pain Physician 2012; 15:ES9-ES38

 214
are met, the plan sends an alert to a pharmacy at POS. However, many of these edits are message
only and may not cause a pharmacist to check a patient profile or his/her State’s PDMP.
As a result of these concerns, CMS designed an analysis to investigate duplicate opioid use in
Medicare Part D. In this context, we defined “duplicate” or “multiple” as more than one LA or
more than one SA opioid prescription with overlapping days supply. This does not, however,
mean a combination of LA and SA opioids with each other. Duplicate LA use was defined as a
second prescription for an LA that occurred before 75% of a prior LA opioid’s days supply
expires. We defined duplicative therapy as fills for different LA opioids unique at the generic
entity, dosage form, and strength. For example, methadone 10mg and methadone 5mg tablets
would trigger the opioid duplicative edit. We used 2016 prescription drug event (PDE) claims for
LA opioids to generate beneficiary counts. For purposes of this analysis, LA opioids are
defined56 as oral /buccal formulations that can be taken every 8 hours or greater, or are
transdermal.
In 2016, 12.9 million out of 43.6 million Part D enrollees had at least one claim for an opioid.57
The results of the analysis are outlined in Table 29 below. We found that over 1.3 million
enrollees used LA opioids.
Table 29: Annual Count and Rate of Unique Beneficiaries with Duplicative LA Opioid Use,
2016
Criterion
number
Criterion 1
Criterion 2

Criterion 3

Criterion 4

Criterion
LA opioid usage
Duplicate LA use: Criterion #1 and at least
1 fill of an LA opioid before 75% of prior
claim's days supply expired
Duplicative therapy: Criterion #2 and
different LA opioids at the generic entity,
dosage form, and strength
Multiple providers: Criterion #3 with
different prescribers

Number Part D
Enrollees Meeting
Criterion
1,305,469

Percent of LA
Opioid Users
100%

253,056

19.4%

203,828

15.6%

66,360

5.1%

Of the beneficiaries who used LA opioids in 2016, over 250,000 (or almost 20% of LA opioid
users) had at least one fill of an LA opioid before 75% of prior claims’ days supply expired
(criteria #2). Next, we identified how many of these beneficiaries had duplicative LA opioid

56

Opioid Analgesics, Long-acting USP class from USP Medicare Model Guidelines v7.0
Reported in 2018 Call Letter available at: https://www.cms.gov/Medicare/Health-Plans/
MedicareAdvtgSpecRateStats/Downloads/Announcement2018.pdf. Hospice and cancer patients were excluded
from opioid user counts.
57

 215
therapy, meaning fills for different LA opioids at the generic entity, dosage form, and strength
(criteria #3). This yielded over 200,000 beneficiaries (15.6%). Lastly, we recognize that multiple
LA opioid prescriptions of different strengths can be clinically appropriate so we examined the
impact of requiring different opioid prescribers (criteria #4). Of those beneficiaries with
duplicative LA opioid therapy, over 66,000 (5.1%) were from different prescribers.
Some additional key findings from the analysis included: (1) more than half of MA-PD contracts
and more than 70% of PDP contracts had greater than 100 beneficiaries with duplicative LA
opioid therapy (criteria #3), and (2) adding different prescribers to the overlapping criteria
(criteria #4) decreased the number of contracts with greater than 100 beneficiaries identified to
less than 10% of MA-PD contracts and less than 40% of PDP contracts.
Based on these findings, we expect all Part D plan sponsors to implement a soft POS edit for
duplicative LA opioid therapy beginning in 2019, with or without a multiple prescriber criterion.
When such an edit is triggered for concurrent use of opioids and buprenorphine, the soft edit
should only reject the opioid prescription following the buprenorphine claim and should not
impede access to buprenorphine for MAT. It is very important that a sponsor should only
implement this edit if it has the technical ability to not reject buprenorphine claims.
Ultimately, such safety edits may proactively address potentially unsafe cumulative opioid
regimens at the time of dispensing to promote care coordination, and before beneficiaries are
identified by the OMS. We also recognize that multiple opioid POS edits could potentially
generate a combination of messages and soft or hard rejects that may cause confusion. Therefore,
we recommend that contracts create a hierarchy for the opioid POS edit messaging in an effort to
reduce confusion.
We are requesting feedback from stakeholders, especially Part D sponsors and PBMs, on the
proposed expectation that sponsors to implement a soft duplicative LA opioid therapy POS edit
(e.g., current experience in implementing such edits or concerns with the complexity or
capacity to be able to implement for 2019) and recommendations on the most effective edit
specifications (e.g., the specifications used in CMS’s analysis or other specifications). We also
seek feedback on how best to manage multiple opioid POS edits that a single prescription may
trigger, for instance, a duplicative therapy and cumulative MME POS edit. In addition, we
request feedback on extending the specifications in the future to include SA opioids and
defining duplicative therapy as previously described for LA opioids (i.e., generic entity, dosage
form, strength and/or differing prescribers) or another unique drug classification scheme (e.g.,
removing strength). We will delay specifying the parameters for the duplicate SA opioid POS
edit until additional testing can be completed and we have a better idea of the feasibility and
operational considerations for such edits.

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Concurrent Use of Opioids and Benzodiazepines
In the Enhancements to the 2019 Star Ratings and Future Measurement Concepts section of this
draft 2019 Call Letter, CMS requests feedback on the Concurrent Use of Opioids and
Benzodiazepines measure.
In 2016, the FDA added a boxed warning to prescription opioid analgesics, opioid-containing
cough products, and benzodiazepines with information about the serious risks associated with
using these medications concurrently.58 Sponsors can reduce the concurrent use of opioids and
benzodiazepines, as well as other potentially problematic concurrent medication use at POS.
Prospective drug use review can identify and evaluate the appropriateness of concurrent use
prior to dispensing. We propose that Part D sponsors implement a concurrent opioid and
benzodiazepine soft POS safety edit. We are requesting feedback from stakeholders, especially
Part D sponsors and PBMs, on their experience with concurrent or duplicative soft POS edits
including an opioid and benzodiazepine and other drug combinations.
Access to Medication-Assisted Treatment
While CMS continues to work closely with Part D sponsors and other stakeholders to help
combat inappropriate opioid utilization, it is imperative to also ensure that Medicare
beneficiaries have appropriate access to medication-assisted treatment (MAT). As noted in
previous Call Letter guidance, CMS will closely scrutinize formulary and benefit submissions
with respect to formulary inclusion, utilization management criteria, and cost-sharing of Part D
drugs indicated for MAT. Benefit designs that would substantially discourage enrollment by
beneficiaries who need these therapies will not be approved. We continue to expect Part D
sponsors to include products in preferred formulary tiers, and to avoid placing generic drugs
indicated for MAT in brand tiers. As noted in previous Call Letter guidance, PA criteria that
duplicates those requirements already set forth in the FDA Risk Evaluation and Mitigation
Strategies and Drug Addiction Treatment Act of 2000 for applicable MAT products will not be
approved.
On September 20, 2017, FDA announced that they recently had strengthened labeling
requirements for buprenorphine MAT products to emphasize that treatment may be required
indefinitely, as long as the use contributes to the intended treatment goals
(https://www.fda.gov/NewsEvents/Newsroom/PressAnnouncements/ucm576752.htm).
Consistent with FDA’s position, CMS will not approve PA criteria that requires a beneficiary to
need an authorization any more frequently than once during a plan year. Further, when a sponsor
has authorized MAT for a beneficiary in the prior plan year, we expect that the sponsor would
carry that authorization through to the next plan year.

58

https://www.fda.gov/NewsEvents/Newsroom/PressAnnouncements/ucm518697.htm

 217
Coordination of Benefits (COB) User Fee
CMS is authorized to impose user fees on Part D sponsors for the transmittal of information
necessary for benefit coordination between sponsors and other entities providing prescription
drug coverage. We review and update this user fee annually to reflect the costs associated with
COB activities for the specific year. The 2019 COB user fee will be collected at a monthly rate
of $0.XX for the first 9 months of the coverage year (for an annual rate of $0.0XX per enrollee
per month) for a total user fee of $x.xx per enrollee per year. Part D sponsors should account for
this COB user fee when developing their 2019 bids.
In contract year 2019, we will use the COB user fees for activities including:







Part D Transaction Facilitator operation and maintenance;
The Benefit Coordination and Recovery Center (BCRC) operation and maintenance;
Drug data processing system management, which is used to collect prescription drug
event (PDE) data for Part D payment purposes and to produce invoices for the coverage
gap discount program;
Medicare Advantage and Prescription Drug (MARx) system management of COB data;
and
Review of Workers’ Compensation settlement set-aside

LIS Enrollee Cost-sharing for Out-of-Network Part D Drugs
Current regulations require that Part D enrollees will be afforded adequate access to covered Part
D drugs dispensed at out-of-network (OON) when those enrollees cannot reasonably be expected
to obtain covered Part D drugs at a network pharmacy, and when such access is not routine. This
includes situations in which Part D enrollees are provided covered Part D drugs dispensed by an
OON institution-based pharmacy while they are patients in an emergency department, providerbased clinic, outpatient surgery, or other outpatient setting, and as a result cannot get their
prescriptions filled at a network pharmacy. Part D enrollees must pay (or be billed) the
institution-based pharmacy’s usual and customary price at the point-of-sale, submit a paper claim
to the Part D sponsor, and wait for reimbursement from the sponsor.
Beneficiary advocates have raised concerns about the disproportionate financial impact of paper
claim-based reimbursement for low income beneficiaries receiving outpatient services in
hospitals. We remind Part D sponsors that they cannot bill enrollees receiving LIS for any
differential between the plan’s negotiated price for a drug and the pharmacy’s U&C cost – that
is, LIS enrollees must be reimbursed the entire amount of the claim minus their applicable LIS
cost-sharing amount.
We also remind Part D sponsors of their obligation to process direct member reimbursements
(DMRs) from all enrollees timely. Delays in DMRs can have serious adverse consequences on
enrollees, especially for those with limited financial resources. DMRs are coverage

 218
determinations as provided under § 423.566(b). For reimbursement requests, Part D sponsors
must issue a decision and reimbursement, if applicable, no later than 14 days from receipt of the
request for the coverage determination (both the decision and the actual check, if
applicable). The timeframe for plan and IRE appeals (levels 1 and 2) are 7 days for a decision
(and up to 30 days to make payment).
Timely Updates to LIS Status Based on Best Available Evidence
Part D sponsors are obligated to use best available evidence when determining the cost-sharing
levels for Part-D covered prescriptions. When situations arise that result in incorrect LIS costsharing data at the point-of-sale, Part D sponsors must comply with the “Best Available
Evidence” (BAE) policy (see 42 CFR 423.800(d), Section 70.5 of Chapter 13 of the Medicare
Prescription Drug Benefit Manual). This policy requires sponsors to update their systems to
reflect the appropriate cost-sharing subsidy for Part D eligible individuals who are full or partial
benefit Medicare/Medicaid dual eligible individuals, or receiving SSI-only, when presented with
evidence that cost-sharing levels in their systems are incorrect. Sponsors should also ensure that
key staff have needed resources to apply the policy quickly, as well as transmit any updates to
CMS so we can update the status in our records on a timely basis.
Using the Best Available Information when making B vs D Coverage Determinations for
Immunosuppressants and Inhalation Durable Medical Equipment (DME) Supply Drugs
A) Immunosuppressants Used to Prevent Transplant Rejection
Part D sponsors are responsible for determining whether immunosuppressants that are being used
to prevent transplant rejections are coverable under Part D because immunosuppressants that are
used for Medicare covered transplants are covered under Part B. To make these determinations,
sponsors generally have relied on either information from the prescriber or, in the case of renal
transplants, information in MARx that confirms that Medicare covered the transplant (i.e. paid
for in whole or in part).59 However, as a result of CMS Program Integrity audits, we have learned
that information obtained directly from prescribers often times is not reliable or conflicts with
CMS information that is provided later.
In order to streamline the coverage determination process and establish CMS as the single source
for transplant information, CMS is proposing new guidance on how Part D sponsors should
determine whether a drug is a Part B drug and when to revise its findings if the information from
CMS changes. Though it is well established that Part D plans may not pay for drugs that would
otherwise be paid under Part B, this proposal establishes CMS’ expectations around how Part D
plans perform due diligence to ensure that this does not occur. In all cases Part D sponsors

59

MARx currently provides information on renal transplants only.

 219
should document the basis for their determinations to cover immunosuppressants and make such
documentation available upon audit.

1. No Prior Part D Claims History for Immunosuppressants
a) The plan has received information from CMS (e.g. via MARx) indicating that Medicare
covered the enrollee’s transplant or, in the case of a Medicare Advantage enrollee, the MA Plan
has medical claims history of a covered transplant regardless of previously received information
from a prescriber on whether or not the transplant was covered by Medicare.
In this situation, plans are expected to rely on the CMS information (or in the case of an
MA plan, its own medical claims history) and cannot cover immunosuppressants under
Part D even if information is also provided by the prescriber that indicates that the
transplant was not Medicare covered.
b) The plan has NOT received information from CMS (via MARx or otherwise) indicating that
Medicare covered the transplant for the enrollee; in the case of a Medicare Advantage enrollee,
the MA Plan does not have medical claims showing a history of a covered transplant; and the
plan has not previously received information from a prescriber that the transplant was covered by
Medicare.
In this situation, CMS expects plans to default to covering the immunosuppressants
under Part D and no longer expects plans to reach out to prescribers to inquire about
Medicare coverage of the transplant. Such outreach is burdensome for plans and
prescribers, and has been shown to be unreliable for accurately determining if Medicare
covered a transplant. Nevertheless, the plan should approach this coverage decision
using the best available information; if the plan has previously reached out to the
prescriber and received information indicating that the that the transplant was covered
by Medicare (in full or in part), the Part D plan may not cover immunosuprressants
under D.
2. Prior Part D Claims History AND MARx currently indicates that Medicare covered the
transplant:
A plan might have covered the drugs under Part D previously because either:


MARx information was updated after the Part D sponsor relied on prior information
from the prescriber that the transplant was NOT covered/ paid by Medicare; or



The Part D sponsor had relied solely on information from the prescriber that the
transplant was NOT covered/paid by Medicare without regard to MARx.

Under either scenario, the Part D sponsor must now rely on the MARx information going
forward and notify the enrollee that the plan can no longer cover the
immunosuppressant(s) because it is covered under Medicare Part B. No changes need to
be made to prior Part D claims.

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3. Prior Part D Claims History , no MARx indicator or MA plan medical claims history of a
covered transplant BUT the Part D sponsor receives information from CMS that the
transplant was covered by Medicare (e.g. Part D sponsor receives the information from
CMS as part of a CMS Program Integrity audit or otherwise).
Under this scenario, the Part D sponsor must now rely on the CMS information going
forward and provide notice to the enrollee that the plan will no longer cover the
immunosuppressant(s) under Part D because it is covered under Medicare Part B. No
changes need to be made to prior Part D claims.
B) Inhalation Durable Medical Equipment (DME) Supply Drugs
Previous guidance documents indicate that inhalation drugs administered in a long term
care setting where the stay is not covered under Medicare Part A can be covered under
Part D. We are now clarifying how Part D plans can determine that a beneficiary is
residing in a long term care facility.
Medicare Part B covers certain inhalation drugs, such as Albuterol and Levalbuterol
nebulizer solutions, as supplies under the DME benefit. The DME benefit, however, is
not available to beneficiaries residing in long-term care facilities (i.e. Nursing Facilities
and Intermediate Care Facilities for Individuals with Intellectual Disabilities).
Consequently, if the beneficiary is not on a Part A stay in one of these facilities, these
inhalation drugs can be covered under Medicare Part D. While Part D sponsors generally
have relied on the prescriber’s statement that the beneficiary resides in long-term care
facility to authorize Part D coverage, since 2013 CMS has required sponsors to report the
patient residence code on prescription drug events (PDEs). We expect that patient
residence codes submitted to CMS are accurate and because they represent a recent
dispensing event; the residence codes offer a more timely view of patient’s location than
previous information communicated by the prescriber. Therefore, CMS permits Part D
sponsors to rely on a patient residence code of “3” or “9” on a pharmacy claim for
determining when such inhalation drugs may be covered under Part D. Moreover, we
expect that sponsors will only pay claims for these products when the pharmacy claim
includes these specified patient residence codes regardless of any prior coverage
determination based upon a prescriber statement indicating that the beneficiary resides in
a long-term care facility (i.e. the prescriber statement and patient residence code must be
aligned).
Part D Mail-Order Refill Consent Policy– Solicitation for Comments
In the 2014 Call Letter, we stated that Part D sponsors should require their network retail and
mail-order pharmacies to obtain patient consent to deliver a new or refill prescription prior to
each delivery in an attempt to decrease the waste and unnecessary costs associated with
unneeded or unwanted prescriptions. Subsequently, we modified this policy to permit exceptions,

 221
subject to certain conditions, that allow Employer Group Waiver Plan (EGWP) mail-order autoship programs that do not obtain patient consent prior to delivery for both new prescriptions and
refills. We also modified the policy for all Part D plans with respect to automatic shipments of
new prescription orders received directly from the prescriber, regardless of whether prior patient
consent was received.
Consequently, since January 1, 2014, Part D sponsors of non-EGWP plans have obtained consent
from beneficiaries prior to shipping refills of mail-order prescriptions. We have received requests
to further modify or eliminate this policy. Some stakeholders suggest that the current policy
creates an unnecessary burden and interferes with improving medication adherence via automatic
refill shipments. However, we remain concerned that auto shipments of refills not specifically
requested by beneficiaries increase shipments of unnecessary or unwanted prescription refills,
leading to increased waste and potentially inappropriate drug therapy when a discontinued
medication is shipped.
We are therefore interested in any information and data associated with mail-order auto-ship
programs (other than those detailing on-time refills, medication possession ratio, or proportion of
days covered) that indicate actual improved adherence by patients resulting from automatic (not
patient-initiated) refills. We also are interested in any information or data that rebuts concerns
that such programs increase waste (to include unwanted or unneeded medications that go unused,
as well as additional cost to the beneficiary or Part D program).
Finally, we are specifically interested in receiving feedback on possible modifications to the
current policy if we determine that a change is warranted. For example:


Replacing affirmative prior consent for refills with a refill shipping reminder, prior to
shipping, which provides sufficient time for a beneficiary to cancel an order.



Eliminating affirmative prior consent for refills but expecting plans to implement a full
refund policy for any refills auto shipped that a beneficiary reports or returns as unneeded
or otherwise unwanted. We welcome feedback on possible approaches to confirm
medications reported as unwanted were partially or fully unused.



Modifying the current condition of annual beneficiary confirmation to continue automatic
deliveries to be more frequent, such as bi-annual.



Modifying the current condition of annual beneficiary confirmation to continue automatic
deliveries but with an opt-in on a per drug basis.

 222
Section IV – Medicare-Medicaid Plans
Medicare-Medicaid Plan Annual Requirements and Timeline for CY 2019
Contract Year (CY) 2019 will be the sixth contract year since the implementation of the first
capitated model under the Medicare-Medicaid Financial Alignment Initiative. Since that time,
CMS – in collaboration with our state partners – has implemented eleven capitated model
demonstrations in ten states. While most initial implementation challenges and many
opportunities have been addressed, we will continue to build on the strong partnerships both
CMS and the states have developed with participating Medicare-Medicaid Plans (MMPs) to
provide high-quality, seamless and integrated care to individuals dually eligible for Medicare and
Medicaid in CY 2019 and beyond.
Prior to each contract year, CMS provides information about the Medicare requirements and
timeframes for renewal of MMP contracts. This section of the Call Letter reminds MMPs of
those requirements and their timeframes. We will also provide guidance shortly after the
issuance of the CY 2019 Final Call Letter about the applicability of the provisions in other
sections of the Call Letter to MMPs.
As is the case for other Medicare Advantage (MA) and Part D plans, MMPs must submit a
formulary, medication therapy management (MTM) program, and plan benefit package (PBP)
each contract year, and annual submission timelines for MMPs are aligned with the standard MA
and Part D schedule.
In addition to the requirements for MA and Part D plans, MMPs must also submit:


On an annual basis, information to ensure the plan has a network adequate to provide
enrollees with timely and reliable access to providers and pharmacies for Medicare
drug and medical benefits based on requirements in the Medicare Parts C and D
programs. In addition, states will evaluate networks for Medicaid service providers,
including long-term supports and services.



The Additional Demonstration Drug (ADD) file to supplement the Part D formulary
submission.

Table 30 below catalogues previously released guidance for MMPs or guidance that may be of
particular interest to MMPs. CMS will release updated or new guidance as necessary; where
more recent guidance exists or is released for topics that appear in previously released
documents, MMPs should use the most recent document.

 223
Table 30: Previously Released MMP Guidance
Topic

Link to document

MMP Enrollment and
Disenrollment Guidance

https://www.cms.gov/Medicare-Medicaid-Coordination/Medicareand-Medicaid-Coordination/Medicare-Medicaid-CoordinationOffice/FinancialAlignmentInitiative/Downloads/MMPEnrollmentMa
nual090216.pdf

Additional State-specific
Enrollment Guidance

https://www.cms.gov/Medicare-Medicaid-Coordination/Medicareand-Medicaid-Coordination/Medicare-Medicaid-CoordinationOffice/FinancialAlignmentInitiative/InformationandGuidanceforPlans
.html

State-specific Marketing
Guidance

https://www.cms.gov/Medicare-Medicaid-Coordination/Medicareand-Medicaid-Coordination/Medicare-Medicaid-CoordinationOffice/FinancialAlignmentInitiative/InformationandGuidanceforPlans
.html

Waiver of Part D LIS
Cost-Sharing Amounts

https://www.cms.gov/Medicare-Medicaid-Coordination/Medicareand-Medicaid-Coordination/Medicare-Medicaid-CoordinationOffice/Downloads/Part_D_Cost_Sharing_Guidance.pdf

Network Adequacy Determinations and Provider Directory Best Practices
The Medicare medical provider and facility portion of MMPs’ network information will be due
to CMS on the third Tuesday in September 2018. This submission will ensure that each MMP
continues to maintain a network of providers that is sufficient in number, variety, and geographic
distribution to meet the needs of the enrollees in its service area. MMPs may assess the
Medicare portion of their networks at any time using the organization initiated upload
functionality in the HPMS Network Management Module (NMM). The current reference file, as
referenced in the three-way contracts, that provides the MMP standards is available at:
https://www.cms.gov/Medicare-Medicaid-Coordination/Medicare-and-Medicaid-Coordination/
Medicare-Medicaid-Coordination-Office/FinancialAlignmentInitiative/
InformationandGuidanceforPlans.html as well as on the reference page within the NMM. CMS
will release additional guidance on the submission process, including how MMPs will be able to
submit exception requests, in the summer of 2018.
CMS remains committed to working with MMPs to improve their directories to ensure that
enrollees and prospective enrollees have the information they need to make informed decisions
about their healthcare choices. CMS interviewed a sample of Medicare-Medicaid enrollees in

 224
two states in March and April 2017 to get their feedback on MMP directories. CMS also
completed its monitoring study of CY 2017 MMP provider and pharmacy directories and hosted
a webinar for all MMPs in June 2017 to focus on best practices and lessons learned, recognize
areas where MMPs have made improvements since the CY 2016 monitoring study, and discuss
how to address remaining gaps. Resources from the webinar and the Frequently Asked Questions
(FAQ) document released in July 2017 are available under the General Marketing Guidance
heading at: https://www.cms.gov/Medicare-Medicaid-Coordination/Medicare-and-MedicaidCoordination/Medicare-Medicaid-Coordination-Office/FinancialAlignmentInitiative/
InformationandGuidanceforPlans.html. CMS will continue to provide assistance in this area and
collaborate with states and MMPs to make additional improvements to MMP directories in CY
2019.
Formulary and Supplemental Drug Files
Each contract year, MMPs must submit and be approved to offer a demonstration-specific,
integrated formulary that meets both Medicare Part D and Medicaid requirements. The required
submissions for the integrated formulary are: (1) an updated base Part D formulary and
supplemental Part D formulary files, as applicable, consistent with CY 2019 Part D formulary
guidance; and (2) an updated Additional Demonstration Drug (ADD) file containing non-Part D
drugs. Base formularies are due no later than June 4, 2018. Supplemental formulary files are
due in HPMS on June 8, 2018 at 11:59 a.m. EDT.
MMPs must also submit an ADD file that includes non-Part D drugs. Non-Part D drugs include
drugs in Medicare Part D excluded categories, over-the-counter drugs, and other products
required by the state to be included on the integrated formulary. CMS will work with states to
provide ADD file guidance to MMPs by May 2018. State guidance should include a list of the
drugs the MMPs are required to include on the ADD file (by NDC and/or UPC). It is at the
states’ discretion whether to require MMPs to include one proxy NDC or multiple NDCs on the
ADD file for each covered product.
As follow-up to feedback received on the CY 2018 Draft Call Letter, CMS is also working on
options to facilitate more direct access of the ADD validation file for MMPs starting for CY
2019. In an effort to streamline the submission process, CMS is proposing to make the ADD
validation file available via HPMS in advance of the ADD File submission deadline. We are also
continuing to evaluate whether additional efficiencies are possible with respect to the timing of
the file’s completion.
State reviewers are solely responsible for reviewing and approving the ADD file. CMS will
approve all other submitted formulary files. Reviews will begin immediately after the
submission deadlines and will continue until all deficiencies have been resolved.
In the draft Call Letter, we clarified that mid-year ADD file change submissions – that is,
changes to the ADD file after the contract year has begun – are at the discretion of each state.

 225
CMS will work with states to open HPMS gates for ad hoc and/or regular ADD file
resubmissions as necessary. We further clarify that an MMP requesting a mid-year ADD file
update can contact either the state or CMS by sending an email to
mmcocapmodel@cms.hhs.gov. CMS coordinates with each state to consider the request and
open ADD file gates for mid-year changes as necessary.
Plan Benefit Package (PBP)
MMPs’ plan benefit packages (PBPs) are reviewed annually to ensure that MMPs accurately
describe the coverage details and cost-sharing for all Medicare, Medicaid, and demonstrationspecific benefits. CMS will launch the HPMS PBP module on April 6, 2018, and we expect to
provide further guidance at that time on MMP-specific updates to the PBP software for CY 2019.
In addition, CMS will release an online training module on the CY 2019 PBP software for plans
on April 6, 2018.
MMPs must submit their integrated PBPs to CMS no later than June 4, 2018 (11:59 p.m. PDT).
Non-timely submission of a PBP is considered a plan notice of non-renewal. In addition, to the
PBP, MMPs are required to submit the following as part of a complete bid submission:


Service Area Verification



Plan Crosswalk (NOTE: This is only for renewing contracts in CY 2019)



Formulary Crosswalk

CMS will work with states to issue PBP guidance that clearly defines the state-required Medicaid
benefits and supplemental demonstration benefits by the time the PBP module is launched in
April 2018. The PBP review is conducted jointly between CMS and states to ensure the data
entry is consistent with minimum coverage and cost-sharing requirements under Medicaid,
Medicare Parts A, B, and D, and each state’s demonstration.
MMPs are provided some degree of flexibility with respect to PBP revisions after the time of
final PBP approval. This flexibility is necessary to accommodate certain mid-year changes
unique to MMPs, including but not limited to mid-year legislative changes to Medicaid benefits,
as well as the timing of payment rate finalization.
CMS applies the following criteria to MMP requests to change or correct PBPs:


PBP revisions to add or remove plan-offered supplemental benefits between the time of
the release of the National Average Monthly Bid Amount in early August and sign-off of
PBPs in HPMS in late August 2018 are permissible. This timeframe allows plans to
accommodate any approved benefit changes in their required documents (including the
Annual Notice of Change, Evidence of Coverage/Member Handbook, and Summary of
Benefits) during the Annual Election Period.

 226


Rate-related PBP corrections are permissible during the Center for Medicare’s annual
correction window in September 2018 (see the calendar in this Call Letter for more
information), but only for purposes of adding supplemental benefits to PBPs. MMPs that
elect to correct their PBPs must work with their contract management team on an
appropriate member communication strategy (e.g., issuance of corrected or revised
information for materials that have already been mailed to members; corrections or
updates of hard copy and online versions of other materials for prospective
members). We clarify that there will be no compliance penalty for a PBP correction
provided an MMP meets these conditions.



PBP corrections unrelated to rates and supplemental benefits that are requested during the
Center for Medicare’s annual correction window in September 2018 (see the calendar in
this Call Letter for more information) will be considered changes due to plan error. As
such, these PBP corrections (or any resultant corrections to MMPs’ Annual Notice of
Change and/or Evidence of Coverage/Member Handbook, which must be submitted in
HPMS through the errata submission process in the Marketing Module) may be subject to
compliance action, regardless of whether they are positive or negative changes.



Any PBP corrections after the Center for Medicare’s annual correction window in
September 2018 will be considered on a case-by-case basis. In cases where a PBP
correction is due to a midyear legislative change to Medicaid benefits (or a benefit
change made in a three-way contract amendment) and an MMP’s previously approved
PBP submission included a more generous supplemental benefit than the new Medicaid
or demonstration benefit, the MMP will be required to continue to provide the more
generous supplemental benefit for the remainder of the contract year. PBP corrections
(or any resultant corrections to MMPs’ Annual Notice of Change and/or Evidence of
Coverage/Member Handbook, which must be submitted in HPMS through the errata
submission process in the Marketing Module) due to plan error maybe subject to
compliance action, regardless of whether they are positive or negative changes.

 227
Appendix 1: Methodology for Plan Finder (PF) Composite Price Accuracy Display
Measure
CMS’s drug pricing performance measure evaluates the accuracy of prices displayed on
Medicare Plan Finder (PF) for beneficiaries’ comparison of plan options. The accuracy score is
calculated by comparing the PF price to the PDE price and determining the magnitude and
frequency of differences found when the latter exceeds the former. This document summarizes
the methods currently used to construct each contract’s accuracy index.
Contract Selection
This measure relies in part on the submission of pricing data to PF. Therefore, only contracts
with at least one plan meeting all of the following criteria are included in the analysis:


Not a PACE plan



Not an employer plan



Part D plan



Plan not terminated during the contract year

Only contracts with at least 30 claims throughout the year are included in the accuracy measure.
This ensures that the sample size of PDEs is large enough to produce a reliable accuracy score.
PF Composite Price Accuracy Score
To calculate the PF Composite Price Accuracy Score, the point-of-sale cost (ingredient costs plus
dispensing fee) reported on each PDE claim is compared to the cost resulting from using the unit
price reported on Plan Finder.60 This comparison includes only PDEs for which a PF cost can be
assigned. In particular, a PDE must meet seven conditions to be included in the analysis:
1. The NPI number for the pharmacy on the PDE claim must appear in the pharmacy cost
file as either a retail only pharmacy or a retail and limited access only pharmacy,
regardless of pharmacy service type reported on PDE. Claims for pharmacies that are
listed as retail in the pharmacy cost file and also have a pharmacy service type on the
PDE of either Community/Retail or Managed Care Organization (MCO) are included as
well. NCPDP numbers are mapped to their corresponding NPI numbers. The
corcorresponding reference NDC must appear under the relevant price ID for the
pharmacy in the pricing file.61
60

Plan Finder unit costs are reported by plan, drug, days of supply, and pharmacy. The plan, drug, days of supply,
and pharmacy from the PDE are used to assign the corresponding Plan Finder unit cost posted on medicare.gov
on the date of the PDE.
61
Plan Finder prices are reported at the reference NDC level. A reference NDC is a representative NDC of
drugs with the same brand name, generic name, strength, and dosage form. To map NDCs on PDEs to a

 228
2. The reference NDC must be on the plan’s formulary.
3. Because the retail unit cost reported on Plan Finder is intended to apply to a 1, 2, or 3month supply of a drug, only claims with a Days Supply of 28-34, 60-62, or 90-93 are
included.62 Claims reporting a different day supply value are excluded.
4. PDEs for dates of service during which the plan was suppressed from Plan Finder or
where the relevant pharmacy or drug was not reported in Plan Finder are not included
since no Plan Finder cost can be assigned.63
5. PDEs for compound drugs or non-covered drugs are not included.
6. The PDE must occur in Quarter 1 through 3 of the year. Quarter 4 PDEs are not included
because PF prices are not updated during this last quarter.
The PF Composite Price Accuracy Measure factors in both how much and how often PDE prices
exceeded the prices reflected on the PF. The contract’s PF Composite Price Accuracy score is
the average of the Price Accuracy Score, which measures the difference between PDE total cost
and PF total cost 64, and the Claim Percentage Score, which measures the share of claims where
PDE prices are less than or equal to PF prices.
Once PF unit ingredient costs are assigned, the PF ingredient cost is calculated by multiplying
the unit costs reported on PF by the quantity listed on the PDE. The PDE cost (TC) is the sum of
the PDE ingredient cost paid and the PDE dispensing fee. Likewise, the PF TC is the sum of the
PF ingredient cost and the PF dispensing fee that corresponds to the same pharmacy, plan, and
days of supply as that observed in the PDE. Each claim is then given a score based on the
difference between the PDE TC and the PF TC. If the PDE TC is lower than the PF TC, the
claim receives a score equal to zero. In other words, contracts are not penalized when point-ofsale costs are lower than the advertised costs. However, if the PDE TC is higher than the PF TC,
then the claim receives a score equal to the difference between the PDE TC and the PF TC.65,66
reference NDC, we use First Data Bank (FDB) and Medi-Span to create an expanded list of NDCs for each
reference NDC, consisting of NDCs with the same brand name, generic name, strength, and dosage form as the
reference NDC. This expanded NDC list allows us to map PDE NDCs to PF reference NDCs.
62
If a plan’s bid indicates a 1, 2, or 3 month retail days supply amount outside of the 28-34, 60-62, or 90-93
windows, then additional days supply values may be included in the accuracy measure for the plan. For
example, a plan that submits a 3 month retail supply of 100 days in their bid will have claims with a days supply
of 90-100 included in their accuracy measure calculation.
63
Because sanctioned plans typically are not suppressed on MPF and display data to the plan’s current enrollees
only, non-suppressed sanctioned plans will have their data during the sanction counted towards the measure.
64
PF total costs are rounded to the nearest cent. For example, if the PF total cost is $10.237, then it is rounded
to $10.24. PF unit costs are not rounded.
65
To account for potential rounding errors, this analysis requires that the PDE cost exceed the rounded PF cost
by at least a cent ($0.01) in order to be counted towards the accuracy score. For example, if the PDE cost is
$10.25 and the rounded PF cost is $10.24, the 1-cent difference would be counted towards plan’s accuracy
score. However, if the rounded PF cost is higher than $10.24, the difference would not be considered
problematic, and it would not count towards the plan’s accuracy score.
66
The PF data includes floor pricing. For plan-pharmacy drugs with a floor price, if the PF price is lower than
the floor price, the PDE price will be compared against the floor price.

 229
The contract level PF Price Accuracy Index is the sum of the claim level scores and PDE TC
across all PDEs that meet the inclusion criteria, divided by the PDE TC for those same claims.
The PF Claim Percentage Index is the percent of all PDEs that meet the inclusion criteria with a
PDE TC higher than the PF TC. Note that the best possible PF Price Accuracy Index is 1, and
the best possible PF Claim Percentage Index is 0. This occurs when the PF TC is never lower
than the PDE TC. The formulas below illustrates the calculation of the contract level PF Price
Accuracy Index and PF Claim Percentage Index:

∑ max(TCiPDE - TCiPF , 0) + ∑i TCiPDE
Price Accuracy Index = ( i
)
∑i TCiPDE
where
TCiPDE is the ingredient cost plus dispensing fee reported in PDEi, and
TCiPF is the ingredient cost plus dispensing fee calculated from PF data, based on the
PDEi reported NDC, days of supply, and pharmacy, then rounded to the nearest cent.

∑ ClaimsiPDE>PF
Claim Percentage Index = ( i
)
∑i ClaimsiTotal
where
ClaimsiPDE>PF is the total number of claims where the PDE price is greater than the
rounded PF price
ClaimsiTotal is the total number of claims
We use the following formulas to convert the Claim Percentage Index and Price Accuracy Index
into the PF Composite Price Accuracy score:
Claim Percentage Score = (1 - Claim Percentage Index) × 100
Price Accuracy Score = 100 - [(Price Accuracy Index - 1) × 100]
PF Composite Price Accuracy Score = (0.5 × Claim Percentage Score )
+ (0.5 × Price Accuracy Score)

 230
The score is rounded to the nearest whole number.

Example of PF Composite Price Accuracy Score Calculation
Example of PF CTable M-1 shows an example of the PF Composite Price Accuracy Score
calculation. This contract has 4 claims, for 4 different NDCs and 4 different pharmacies. This is
an abbreviated example for illustrative purposes only; in the actual accuracy index, a contract
must have 30 claims to be evaluated. From each of the 4 claims, the PDE ingredient cost,
dispensing fee, and quantity dispensed are obtained. Additionally, the plan ID, days of supply,
date of service, and pharmacy number are collected from each PDE to identify the PF data that
had been submitted by the contract and posted on Medicare.gov on the PDE dates of service.
The NDC on the claim is first assigned the appropriate reference NDC, based on the brand name,
generic name, strength and dosage form. Using the reference NDC, the following PF data are
obtained: brand/generic dispensing fee (as assigned by the pharmacy cost file) and unit cost (as
assigned by the Price File corresponding to that pharmacy and days of supply on the date of
service). The PDE cost is the sum of the PDE ingredient cost and dispensing fee. The PF cost is
computed as the quantity dispensed from PDE multiplied by the PF unit cost plus the PF
brand/generic dispensing fee (brand or generic status is assigned based on the NDC), and then
rounded to the nearest cent. The last column shows the amount by which the PDE cost is higher
than the rounded PF cost. When the PDE cost is less than the rounded PF cost, this value is zero.
The Price Accuracy Index is the sum of the last column plus the sum of PDE costs divided by the
sum of PDE cost. The Claim Percentage Index is the number of rows where the last column is
greater than zero divided by the total number of rows.

 231
Table M-1: Example of PF Composite Price Accuracy Score Calculation
PDE Data
Pharmacy
Number

Plan Finder Data

Calculated Values

A

111

1/8/2016

3.82

2.00

60

60

1/4/16-1/17/16

0.014

2.25

2.75

Brand or
Generic
Status
B

B

222

1/24/2016

0.98

2.00

30

60

1/18/16-1/31/16

0.83

1.75

2.50

G

2.98

27.40

0

C

333

2/11/2016

10.48

1.50

24

28

2/1/16-2/14/16

0.483

2.50

2.50

B

11.98

14.09

0

D

444

2/21/2016

47.00

1.50

90

30

2/15/16-2/28/16

0.48

1.50

2.25

G

48.50

45.45

3.05

Totals

69.28

NDC

DOS

Ingredient
Cost

Dispensing
Fee

Quantity
Dispensed

Days’
Supply

Dispensing Fee

Biweekly
Posting Period

Unit
Cost

Brand

Generic

Total Cost
PDE

PF

5.82

3.09

Price Accuracy Index
Claim Percentage Index
PF Price Accuracy Score

Amount
that
PDE > PF
2.73

5.78
1.08343
0.5
71