CMS Releases Final Call Letter for 2018 Changes

Written by Jessica Adkins

April 4, 2017

According to the final call letter announcement published yesterday by the Centers for Medicare and Medicaid Services (CMS), it expects its payments to Medicare Advantage plan issuers to increase an average of .45% over 2017 levels in 2018.

The planned change in the per-enrollee subsidy is up from an increase of .25% included in a draft program proposal for 2018 posted in February, according to a 2018 call letter summary sheet. According to CMS, 2018 enrollees are expected to be somewhat older and sick than 2017 enrollees, giving those enrollees higher average diagnostic intensity codes. The combination of the underlying subsidy level increase and the increasing power of the diagnostic codes should increase overall 2018 per-enrollee revenue an average of 2.95%, said CMS.

Seema Verma, President Trump’s newly confirmed CMS administrator, said in a statement accompanying the call letter announcement that Medicare program managers want to strengthen the Medicare Advantage and Medicare drug plan programs by “supporting flexibility and efficiency.”

Marilyn Tavenner, the president of America’s Health Insurance Plans, who previously was the CMS administrator, said in a statement from AHIP that CMS had made some adjustments in policies.

The chart below indicates the expected impact of the proposed policy changes on plan payments relative to last year.

Year-to-Year Percentage Change in Payment

Impact 2018
Advance Notice
2018 Rate
Effective Growth Rate 2.8% 2.7%
Rebasing/Re-pricing N/A 0.3%
Change in Star Ratings -0.4% -0.4%
MA coding intensity adjustment -0.25% -0.25%
Normalization -1.9% -1.9%
Expected Average Change in Revenue 0.25% 0.45%
Coding trend 2.5% 2.5%
Expected Average Change in Revenue
with Coding trend
2.75% 2.95%

“We believe more must be done to ensure beneficiaries are supported in achieving their best health,” Tavenner said. “We look forward to working with the agency to reduce unnecessary regulatory burdens, enhance program flexibility and innovation, and promote delivery system reform and patient engagement.”

In the call letter, CMS also outlined the Standard Benefit Plan changes from 2017 to 2018 for Medicare Part D Prescription Drug Plans. The “standard benefit plan” is the minimum allowable plan to be offered:

  • Initial Deductible: increased by $5 to $405 in 2018
  • Initial Coverage Limit: increase to $3,750 in 2018
  • Out-of-Pocket Threshold: increase to $5,000 in 2018
  • Coverage Gap (donut hole): begins once you reach your plan’s initial coverage limit ($3,750) and ends when you spend a total of $5,000 in 2018
  • Enrollees will receive a 65% discount on the total cost of their brand-name drugs purchased while in the “donut hole.” The 50% discount paid by the brand-name drug manufacturer will apply to getting out of the donut hole. However, the additional 15% paid by your plan will not count towards the TrOOP. For example: If your client reaches the donut hole and purchases a brand-name medication with a retail cost of $100, he/she will pay $35 for the medication, and receive $85 credit towards meeting their 2018 total out-of-pocket spending limit. Enrollees will pay a maximum of 44% co-pay on generic drugs while purchased in the coverage gap (a 56% discount). For example, when your client reaches the 2018 Donut Hole, and his/her generic medication has a retail cost of $100, he/she will pay $44. The $44 spent will count towards their TrOOP.
  • Minimum cost-sharing in the Catastrophic Coverage Portion of the Benefit**: increase to greater of 5% or $3.35 for generic or preferred drug that is a multi-source drug and the greater of 5% or $8.35 for all other drugs in 2018
  • Maximum co-payments below the out-of-pocket threshold for certain Low-Income Full Subsidy Eligible Enrollees: increase to $3.35 for generic or preferred drug that is a multi-source drug and $8.35 for all other drugs in 2018

Stay tuned to Agent Pipeline for more up to date coverage on CMS releases for the 2018 plan year. For more information, contact you Regional Sales Director to learn more. Questions? Give us a call at 800-962-4693.

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