2021 Medicare Advantage Advance Notice

posted by AHIP

on March 5, 2020

Executive Summary

On January 6, 2020 and February 5, 2020, the Centers for Medicare and Medicaid Services (CMS) released the contract year (CY) 2021 Advance Notice Parts I and II (Notice), respectively.

Shortly thereafter, CMS published two key memoranda:

  • Contract Year 2021 Part C Benefits Review and Evaluation
  • Contract Year 2021 Final Part D Bidding Instructions

America’s Health Insurance Plans (AHIP) has retained Wakely Consulting Group LLC. (Wakely) to provide a financial impact summary report of the information presented in the Notice as well as an analysis of the financial impact of ESRD beneficiaries being allowed to proactively enroll in MA plans beginning in 2021 and the proposed FFS normalization factors.

Key highlights of our analysis are:

  • The CY2021 fee-for-service (FFS) growth rate is significantly lower than expected as compared with previous CMS projections, including projections published just a few months ago in the CY2021 Early Preview.
  • Kidney acquisition costs, which CMS is proposing to exclude from Part C benchmark rates, may have been overestimated by CMS, will have highly variable impacts by county when carved out, and the overall impact of their removal was not reflected in the Net Payment Impact estimate from the February 5, 2020 CMS Advance Notice Part II Fact Sheet.
  • The state end-stage renal disease (ESRD) benchmark rates currently do not cover the costs of Medicare beneficiaries with ESRD on average, and many counties face severe underpayments. The allowance of ESRD beneficiaries to proactively enroll in Medicare Advantage Organizations (MAOs) will increase costs that will not be fully offset by the maximum out-of-pocket (MOOP) limit and Total Beneficiary Cost (TBC) changes proposed by CMS.
  • The Part C FFS normalization factor continues to trend upward, which reduces payment to plans. Wakely analysis of the Limited Data Set (LDS) shows a substantially lower overall trend than the CMS calculation, and mixed results when we attempted to validate some of the explanations cited by CMS for the increasing normalization trend. These results are concerning and indicate further study is warranted.

The sections below provide additional detail and discussion of these issues.