The Centers for Medicare & Medicaid Services (CMS) uses the Hierarchical Condition Category (CMS-HCC) medicare risk adjustment model to determine monthly capitation fees for Medicare Advantage (MA) plans. For the prescription drug program or Part D, the prescription drug hierarchical condition category or RxHCC risk adjustment model is used to calculate beneficiary risk scores to help ensure payments reflect the plans’ expected drug costs for their enrolled population.
CMS uses demographic information from administrative data and diagnoses from fee-for-service (FFS) claims and MA encounter data to formulate severity and cost for the RxHCC model. Prescription Drug Encounter (PDE) data are used to predict plan spending in a future year. The model includes costs for which the plan is financially liable, excluding reinsurance and low-income subsidies or payments from the beneficiary. It excludes enhanced benefits provided above and beyond the standard benefit structure. The Inflation Reduction Act (IRA) of 2022 redesigned the benefit phases and reallocated cost sharing among beneficiaries, manufacturers, Medicare and drug plans; understanding the significant changes to actuarially project costs for 2025 becomes imperative.
Gross liabilities for drug plans are expected to increase beginning with the Initial Coverage phase (ICL). In the ICL of the defined standard design, drug plans are liable for 65% payment (75% in CY 2024), manufacturers 10% and beneficiaries 25%. The coverage gap will be eliminated in 2025, and manufacturers’ discounts will begin in ICL. In the catastrophic phase, beneficiaries have zero liability, drug plans are 60% (20% in CY 2024), manufacturers are 20%, and Medicare is 20%.
CMS proposes calibrating the RxHCC model for CY 2025 on 2021 diagnoses and 2022 expenditure data from PDE records. The model will use diagnoses of all beneficiaries who were in FFS or MA-PD or MA only for all 12 months in the base year 2021 and were enrolled in a stand-alone prescription drug plan (PDP) or an MA-PD for at least one month in the prediction year 2022. [1]
CMS also proposes updates to the normalization methodology to reflect differences between MA-PD plan and plan (PDP) risk score trends.
June 3, 2024, is the deadline for submitting bids for Parts C and D. CMS released a list of CY 2025 Final Part D Bidding Instructions (see below) on February 1, 2024, to help drug plan sponsors prepare for their Part D bids. Given the magnitude of changes to Part D, the bidding instructions should be handy. [2]
- The CY 2025 HPMS formulary submission window will be open between May 13, 2024, and 11:59 p.m. PDT on June 3, 2024.
- The CY 2025 HPMS Medication Therapy Management Program (MTMP) submission window will open on May 22, 2024 and close at 11:59 p.m. PDT on June 5, 2024. CMS proposed various changes to MTMP, which appeared in the December 27, 2022 issue of the Federal Register. Until the final regulation addressing these proposals becomes effective, CMS will continue to apply policies related to the MTMP requirements in the same manner as CY 2024.
- The Non-Defined Standard cost-sharing thresholds remain unchanged for CY 2025.
- Part D sponsors may exclude high-cost drugs on the Specialty Tier from tiering exception requests. To place drugs on the Specialty Tier, the drug ingredient cost has to be $950 or more for a 30-day supply, the same as for CY 2024.
- Sponsors should submit opioid safety edits in the HPMS module between August 13, 2024, and 5:00 p.m. EDT on August 20, 2024. CMS will provide instructions for submitting CY 2025 opioid POS safety edits in July 2024.
- CMS proposed various changes to Drug Management Program (DMP) requirements published in the November 15, 2023 issue of the Federal Register. Until the final regulation addressing these proposals becomes effective, CMS will continue to apply policies related to the DMP requirements in the same manner as CY 2024.
- Coordination of Benefits (COB) user fee of $0.70 per enrollee per year will be collected in CY 2025. Part D sponsors should account for this COB user fee when developing their 2025 bids.
- Last but not least is the implementation of the Medicare Prescription Payment Plan (MPPP) for Part D enrollees to spread out their out-of-pocket (OOP) Part D prescription drug costs in monthly instalments throughout the plan year instead of paying OOP costs in full at the point-of-sale (POS). There are multiple requirements to operationalize MPPP; for instance, communication of the program to enrollees, applying a statutory formula to calculate the maximum permissible monthly payment and coordination with the retail pharmacies to notify enrollees who are likely to benefit from participation in the MPPP. CMS published guidance memoranda for the MPPP on July 17, 2023, August 21, 2023, and February 15, 2024. [3] Drug plan sponsors are well advised to plan for January 1, 2025, when the statutory requirement takes effect. [4]
June 2024 is going to be a busy month. If your plan staff feels overwhelmed by the Methodological Changes for Calendar Year (CY) 2025 for Medicare Advantage (MA) Capitation Rates and Part C and Part D Payment Policies published on January 31, 2024, give us a call at 480-850-2235. Inovaare has Subject Matter Experts who can provide consulting services to help plan sponsors navigate the proposed changes and prioritize the implementation so you can stay compliant.
Author
Yvonne Tso,
PharmD, MBA, Senior Vice President,
Integritas Medicare
[1] Advance Notice of Methodological Changes for Calendar Year (CY) 2025 for Medicare Advantage (MA) Capitation Rates and Part C and Part D Payment Policies, January 31, 2024.
[2] Contract Year (CY) 2025 Final Part D Bidding Instructions, February 1, 2024
[3] Technical Memorandum on the Calculation of the Maximum Monthly Cap on Cost-Sharing Payments Under Prescription Drug Plans, July 17, 2023, Maximum Monthly Cap on Cost-Sharing Payments Under Prescription Drug Plans: Draft Part One Guidance on Select Topics, Implementation of Section 1860D-2 of the Social Security Act for 2025, and Solicitation of Comments August 21, 2023, Medicare Prescription Payment Plan: Draft Part Two Guidance on Select Topics, Implementation of Section 1860D-2 of the Social Security Act for 2025, and Solicitation of Comments February 15, 2024
[4] Medicare Prescription Payment Plan: Draft Part Two Guidance on Select Topics, Implementation of Section 1860D-2 of the Social Security Act for 2025, and Solicitation of Comments, February 15, 2024.