CMS Proposes Significant Changes to Medicare Advantage & Part D for 2021 and Beyond, Part 2: CMS Proposes to Codify Supplemental Benefit Rules and Update MLR

As a continuation of our series on the Contract Year 2021 and 2022 Policy and Technical Changes to the Medicare Advantage Program, Medicare Prescription Drug Benefit Program, Medicaid Program (the Proposed Rule) released by the Centers for Medicare & Medicaid Services (CMS) earlier this month, this blog focuses on CMS's codification of its recent guidance on supplemental benefits, including guidance on Special Supplemental Benefits for the Chronically Ill (SSBCI).   It also discusses CMS’s proposed changes to the medical loss ratio (MLR) to account for changes in supplemental benefits. 

CMS initially expanded the supplemental benefits that Medicare Advantage (MA) plans could offer for contract year 2019 and 2020 as a result of the Balance Budget Act of 2018 (BBA).  CMS implemented initial regulatory changes through the Contract Year 2019 Policy and Technical Changes to Medicare Advantage and Part D Program Final Rule released in April 2018.  CMS also provided subsequent guidance, including guidance on SSBCI, through the 2019 and 2020 Call Letters and a number of Health Plan Management System (HPMS) memos, including: Reinterpretation of “Primarily Health Related” for Supplemental Benefits and Implementing Supplemental Benefits for the Chronically Ill. 

Under CMS law and guidance, the changes to supplemental benefit rules include:

• Expanding the definition of “primarily health related;” and
• Permitting MA plans to provide additional supplemental benefits, known as SSBCI, to chronically ill enrollees. 

"Primarily Health Related"

Under the Proposed Rule, CMS is codifying the definition of “primarily health related” that it provided in subregulatory guidance, which covers “item or service used to diagnose, compensate for physical impairments, acts to ameliorate the functional/psychological impact of injuries or health conditions, or reduces avoidable emergency and healthcare utilization.”  This definition allows MA plans to provide supplemental benefits that may enhance beneficiaries’ quality of life.  Such benefits may include adult day health services, home-based palliative care, in-home support services, support for caregivers of enrollees, standalone memory fitness, expanded home and bathroom safety devices and modifications, wearable items such as compression garments and fitness trackers, over-the-counter items, and expanded transportation.  Supplemental benefits must be medically appropriate to be "primarily health related."

According to a Milliman report commissioned by Better Medicare Alliance, plans are already taking advantage of the expanded definition.  In 2020, 364 MA plans provided new supplemental benefits including adult day health services, home-based palliative care, in-home support services, support for caregivers, and therapeutic massages. 

Supplemental Benefits for Chronically Ill Enrollees

Beginning in 2020, the BBA and subsequent CMS guidance also allow MA plans to offer additional supplemental benefits to chronically ill members that do not need to be primarily health related.  Under the Proposed Rule, CMS proposes to define SSBCI as “supplemental benefit[s] that have, with respect to a chronically ill enrollee, a reasonable expectation of improving or maintaining the health or overall function of the enrollee.” 

Plans may only offer a SSBCI to a chronically ill enrollee.  Under CMS’s Proposed Rule, CMS is defining a chronically ill enrollee as an enrollee with one or more comorbid and medically complex chronic conditions that: (1) is life threatening or significantly limits the overall health or function of the enrollee; (2) has a high risk of hospitalization of other adverse health outcomes; and (3) requires intensive care coordination. CMS is allowing plans to identify enrollees who meet this definition in one of two ways:

• First, CMS will convene a panel of clinical advisors to establish and update a list of conditions that meet the definition of a severe or disabling chronic condition.  If an enrollee has a condition published on this list, CMS would consider that individual to be a chronically ill enrollee. 
• Second, CMS wants to provide flexibility for MA plans to develop supplemental benefits for their populations.  Therefore, if an enrollee has a condition not on the list discussed above, the plan can still characterize the enrollee as “chronically ill” if the condition meets the three requirements above. 

CMS is proposing to codify its guidance requiring plans to make information and documentation related to determining enrollee eligibility as a chronically ill enrollee available to CMS upon request.  Further, under the Proposed Rule, MA plans may only offer SSBCIs as mandatory benefits.  Also, if the SSBCI is not primarily health related, instead of incurring a non-zero direct medical cost (as is required for supplemental benefits), CMS is proposing that MA plans may instead incur a non-zero direct non-administrative cost.  Finally, upon approval by CMS, an MA plan may offer SSBCIs that are not uniform for all chronically ill enrollees in the plan.

Proposed Changes to MLR to Account for SSBCIs that Are Not “Primarily Health Related”

With these changes to the supplemental benefits, CMS is proposing to amend its MLR rules so that MA plans’ spending on these benefits could count towards MLR and be included in the numerator of the MLR calculation.  Under the Proposed Rule, CMS seeks to accomplish this by amending its definition of “incurred claims.” 

Currently, incurred claims are defined as “direct claims that the MA organization pays to providers (including under capitation contracts with physicians) for covered services…”  Many expanded supplemental benefits, and specifically SSBCIs, are not furnished by a provider, as the term is defined by regulation.  As such, CMS is proposing to amend the definition of incurred claims to remove the specification that they are direct claims that an MA organization pays to providers for covered services. CMS also propose to replace the phrase “direct claims,” which customarily refers to billing invoices providers submit to payers for reimbursement, with the general term “amounts.”  CMS believes these changes would avoid uncertainty as to whether the amount spent on supplemental benefits would fit into the numerator of the MLR calculation. 

Although CMS is primarily codifying existing sub-regulatory guidance under the Proposed Rule, plans have an opportunity to comment on such rules and potentially shape their finalization.  Comments are due April 6, 2020 by 5:00 pm EST.   

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