MANAGED CARE

CHAPTER 7 LECTURE NOTES Part 1

MEDICARE (A “Non-Commercial” Market)

MEDICARE A. Background

1. Began in 1965 as healthcare entitlement program for the elderly, End Stage Renal Disease (ESRD), and some disabilities.

2. Benefits were historically offered via 2 Parts: Part A (hospitalizations) and Part B (outpatient services). Part A is mandatory for all beneficiaries eligible for Medicare; but Part B is voluntary and requires monthly premiums. Neither Parts A nor B provides coverage of prescription drugs or preventive services.

3. Overseen by CMS and typically administered by fiscal intermediaries, such as Blue Cross, to process Medicare claims.

4. In 1985, Medicare allowed MCOs to offer services. 5. In 1997, the Balanced Budget Act (BBA) expanded

benefits and options for Medicare managed care (now goes by the term Medicare+Choice or Part C). Beneficiaries are not mandated into the program—they are able to choose whether or not to participate.

To be eligible for Part C, beneficiaries had to already have Medicare Parts A and B

Medicare+Choice has phase-in periods, lock-in provisions, limited prescription drug coverage, and preventive services.

6. In 2003, the Medicare Modernization Act (MMA) was passed. This Act made it necessary to choose an HMO in order to cut costs to the federal government budget. Also implemented Part D (Drug benefit)—a voluntary

benefit where deductibles, coinsurance, and catastrophic coverage is provided. There is a period of time within the pharmacy/drug benefit where the beneficiary reaches the maximum amount of the benefit (approx. $2900) and must pay 100% of their costs. This period is known as the Donut Hole (a coverage gap).

Part D is voluntary for regular Medicare beneficiaries; but dual eligible (beneficiaries entitled to both Medicare and Medicaid) are automatically enrolled in the program.

B. Types of Medicare Advantage (MA) Plans

The MMA of 2003 defines 3 categories of MA plans that private payers can offer to Medicare Beneficiaries: Coordinated care plans, Private fee-for-service (PFFS) plans, and Medical Savings Account (MSA) plans. 1. Coordinated care plans – Different types of health plans (e.g.

HMOs, POS, PPOs, and SNPs) that use a network of providers to deliver the benefits that are approved by Medicare. Can be used for dual eligible beneficiaries.  Preferred Provider Organizations (PPOs) – are

coordinated care plans that must be licensed by the state. It is the state that determines whether the PPO can enter into a contract with the federal Center for Medicare and Medicaid Services, to assume risk for the wide range of Medicare services. Must meet the Medicare Advantage (MA) requirements

 HMOs and Point of service (POS) plans – Similar to HMOs in the commercial market. HMOs may offer this benefit to allow enrollees to receive services delivered by extra-network providers. These covered services are subject to higher deductibles and copayments. POS plans are also subject to additional monitoring by the Center for Medicare and Medicaid Services.

 Special Needs Plans (SNPs) – “Snips”- Are coordinated care plans (typically HMOs) that limits enrollment to people with chronic disease (e.g. diabetes, heart disease, and kidney failure).

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There are 3 types of SNPs: A. D-SNPs B. I-SNPs C. C-SNPs

2. Private fee-for-service (PFFS) plans – very rare for Medicare+Choice plans. Beneficiary can use any Medicare provider who agrees to deliver the services.

3. Medical Savings Account (MSA) Plans- Similar to the commercial market’s CDHPs. Not very successful plans in the Medicare market.

C. Payment of Medicare Advantage Plans – CMS’s method of payment is complicated and difficult to understand. The formulas for reimbursement are constantly being changed by CMS. There are 2 components to the payment formula:Basic Method and the Quality Bonus (QBP) program.

Basic Payment of MA Plans: Payments made to MA plans are based on multiple factors that account for specific characteristics of the MA’s plans enrollees (e.g. age, gender, residence, prior health condition, etc.)

Quality Bonus (QBP) program (aka: Medicare “Stars” Program): A plan’s rating is summarized by the number of stars it receives with 5 stars being the highest rating. Only plans that receive 4 or more stars are eligible to receive any bonus payment, which is added to the plan’s overall payment rate from CMS.

 Overall Quality MA Program Requirements – Similar to standards similarly used NCQA and includes HEDIS, and includes: QIPs, QM Programs, Chronic Care Improvement Programs (CCIPs), Disease Management (DM) programs, etc.)-having ongoing quality assessment and performance improvement on health outcomes, peer review for quality assurance, standardized measures, and use of additional information-gathering tools. (via their health information system).

 CMS requires annual submission of the QIP and CCIP.

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D. MA External Review and Reporting Requirements Coordinated care plans are subject to external review by quality improvement organizations (QIOs) under contract to CMS to also review hospital quality of care in the FFS Medicare program.

QIOs review complaints by MA enrollees about quality of care in an MA plan and process beneficiary requests for review of hospital discharge decisions.

QIOs also play a significant role in member/enrollee appeals of benefits denials. 1. Member appeals – this process resembles the commercial

market’s process but have QIOs involved in the review of appeals of coverage denials. If the QIO upholds the denial, a MA member can have another review performed by an administrative law judge. The Appeals process includes an internal review (of the disputed decision), an external review (if requested) by an entity under contract with CMS, and an administrative law judge review.

2. Eligibility and Enrollment Newly eligible Medicare beneficiaries may enroll in an MA plan as soon as they become eligible-as long as they sign up with for Medicare Parts A and B. most newly eligible Medicare beneficiaries who are Medicaid (aka: dual eligible) may also enroll. Newly eligible beneficiaries who do not choose an MA plan are deemed to have chosen the traditional FFS Medicare option. The only Medicare beneficiary who is not entitled to enroll in a MA plan (under the law) are those who have end stage renal disease (ESRD)-whether aged, disabled, or entitled to Medicare solely because of their disease. However, if the enrollee acquires ESRD after enrollment, the enrollee would not be disenrolled from the MA plan.

All MA plans hold an annual open enrollment period that takes place from October through December of every year. During Open Enrollment, beneficiaries may elect

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new coverage, change, switch MA plans, or return to traditional FFS Medicare.

Once the open enrollment period ends, enrollees are “locked in” to whatever coverage they chose-for the remainder of the year (with some exceptions).

Special election period also applies to the MA plan enrollment process. Special Election periods are related to certain events such as change of residence, losing employer/union health coverage, new eligibility to Medicaid, etc.

3. Sales and marketing – Medicare+Choice MCOs must sell their products to individual Medicare beneficiaries. Marketing and Sales of MA plans must not only meet state requirements; but also federal requirements as well. The CMS has some rules for the MCO, such as no discrimination, adequate information, and all marketing materials must be approved by CMS before use. Any MA plans that engages in prohibited activities are subject to fines, sanctions, and/or suspensions.

E. Corporate compliance – activities are directed toward insuring organizations conform to legal and regulatory requirements, and preventing and detecting illegal behaviors. The Office of the Inspector General (OIG) created guidelines that a Medicare+Choice must follow, that focus on evidence of compliance.

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The A, B, C’s and D’s of Medicare

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