Medicare Learning Center

The Medicare Learning Center and MedicareHMO newsletter, brought to you by MCOL, have been developed to provide a resource for health care professionals for business information on Medicare health plans and related programs including Medicare Advantage and Part D Presecription Drug Plans.

The Medicare Learning Center offers the following resources:

  • Sign up to receive the complimentary MedicareHMO e-Newsletter
  • Browse our dictionary, with a searchable Glossary of common and obscure Medicare terminology
  • Reference our Fact Sheet, filled with key data and information
  • Review Lists compiled of relevant Medicare data and more, from healthsprocket
  • Check out  links to important web External Resources from around the web curated for professionals
  • Consult our library of Videos on selected Medicare business topics

 

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Medicare Learning Center MedicareHMO Newsletter

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Term Definition
Relative Value Unit Medicare uses a physician fee schedule to determine payments for physician services. The fee for each service depends on its relative value units (RVUs), which rank on a common scale the resources used to provide each service. These resources include the physician's work, the expenses of the physician's practice, and professional liability insurance. To determine the Medicare fee, a service's RVUs are multiplied by a dollar conversion factor.
Resource-Based Relative Value Scale A payment classification system for provider services that assigns unit values to various medical services based upon the training and skill required to perform the service, and then applies dollar amounts to each unit of service.
Risk Adjustment Data Validation (RADV) CMS conducts Medicare Advantage (MA) risk adjustment data validation activities for the purpose of ensuring the accuracy and integrity of risk adjustment data and MA risk adjusted payments. Risk adjustment data validation (RADV) is the process of verifying that diagnosis codes submitted for payment by an MA organization are supported by medical record documentation for an enrollee.
Senior Plan Refers to a given Medicare Supplement or Medicare + Choice plan
Service Area A health plan’s state approved geographic area to provide health care services for its members.
SNP See Special Need Plan
Social Health Maintenance Organization (SHMO) A special type of health plan that provides the full range of Medicare benefits offered by standard Medicare HMOs, plus other services that include the following: prescription drug and chronic care benefits, respite care, and short-term nursing home care; homemaker, personal care services, and medical transportation; eyeglasses, hearing aids, and dental benefits.
Special Need Plan The Special Need Plan (SNP) option allows a Medicare Advantage organization to offer benefit plans targeted to "special needs" populations and limit enrollment in those plans to only the special needs populations. Many existing Medicare Advantage organizations and Medicaid health plans have or are entering the market targeting dual (Medicare and Medicaid) eligible beneficiaries. Additionally, several organizations are targeting Medicare populations with special needs defined by the presence of particular chronic disease
Star Rating System CMS rates the relative quality of the private plans that are offered to beneficiaries through the Medicare Advantage program, on a one to five-star scale, with five stars representing the highest quality. The five-star quality scores for Medicare Advantage plans are derived from four sources: (1) CMS administrative data on plan quality and member satisfaction, (2) the Consumer Assessment of Healthcare Providers and Systems (CAHPS®), (3) the Healthcare Effectiveness Data and Information Set (HEDIS®), and (4) the Health Outcomes Survey (HOS). Under the Affordable Care Act, Under the Affordable Care Act, Medicare Advantage Plan payments are being adjusted based upon their Star Rating.
Value Based Insurance Design (VBID) Value Based Insurance Design involves designing benefit cost sharing requirements and coverage based on the ultimate evidence-based value of clinical services as opposed to strictly cost considerations. The objective is for the level of patient cost sharing to be a function of the value that the specific service provides to the specific patient. Under Value Based Insurance Design, cost sharing requirements would be delineated by specific types of recommended medications, procedures, treatment plans or even specific providers for specific conditions, as opposed to more traditional tiering of benefits solely based upon costs, such as generic vs. brand name drugs, or network vs. out of network providers.

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Programs

Medicare Advantage (MA) is also known as Medicare Part C, and is an alternative for beneficiaries to Original fee-for-service Medicare. These MA beneficiaries must be enrolled in both Medicare Part A and Part B, and continue to pay Part B premium. Under the MA program, Medicare contracts with and pays private plans to provide benefits and cover services for applicable beneficiaries during annual open enrollments or upon becoming eligible. Open enrollment period currently runs from November 15 – December 31st. Medicare contracts with private plans under this MA or other prepaid categories:

  • Local HMOs
  • Local  PPOs
  • Private Fee-for-Service plans (PFFS) authorized in 1997, were not required to establish networks, will generally be required to do so but beginning in 2011
  • Special Needs Plans (SNPs), restricted to beneficiaries who are dually eligible for Medicare and Medicaid; live in long-term care institutions (or would otherwise require an institutional level of care); or (3) have certain chronic conditions.
  • Regional PPOs, established to provide rural beneficiaries greater access to MA, and cover entire statewide or multi-state regions.
  • Other types of private plans outside the regular MA program (e.g., cost plans, HCPP, PACE, medical savings accounts, demonstrations and pilots)

The Medicare Prescription Drug Program, also known as Medicare Part D, is available to beneficiaries enrolled in Medicare Part A or Part B, who choose to enroll in a Medicare prescription drug plan, either a stand-alone Part D plan or a Medicare Advantage plan with prescription drug coverage.  

Enrollment

Inforgraphic on Medicare Advantage Plan Enrollment

As of April 2015, there were 16,398,126 million enrollees in Medicare Advantage plans and another 953,465 in related prepaid programs for a total 17,351,591 prepaid enrollees, including 85.8% in Local HMOs and Local PPOs; 1.5% in PFFS plans; 7.1% in Regional PPOs and 5.6% in Other Programs including Cost, PACE, MSAs, and pilots. 88.1% of these MA beneficiaries had a MA prescription drug plan; 11.8% were Special Needs Plans enrollees; and 19.0% were Employer Plan enrollees. 1  Approximately 30% of Medicare Beneficiaries receive benefits through Medicare Advantage plans. 8

The top five states for Medicare Advantage enrollment as of April 2015, which account for 42% of total MA enrollment, are as follows: California – 2,275,768; Florida – 1,589,563; Texas – 1,125,946; New York – 1,231,700; and Pennsylvania – 1,012,306. There are sixteen states and territories with over a one-third penetration rate (compared to the national overall rate of 31.9%): Arizona       - 38.8%; California - 40.8%; Colorado - 37.3%; Florida - 40.3%; Hawaii - 46.2%; Minnesota - 54.0%; Nevada - 33.6%; New York - 37.1%; Ohio - 41.4%; Oregon - 44.4%; Pennsylvania - 40.3%; Puerto Rico - 74.9%; Rhode Island - 35.3%; Tennessee - 34.4%; Utah - 34.1%; Wisconsin - 37.9%; and Idaho - 32.9%. 2

As of April 2015, there were 23,967,558 enrollees in Medicare Prescription Drug Plan enrollees, including 19.6% that are Employer Plan enrollees. 1 The top five states for PDP enrollment, which account for 26.7% of total PDP enrollment, are as follows: California - 2,055,343; Florida - 1,407,630; Texas - 1,564,789; New York - 1,386,331; and Pennsylvania - 1,037,553. There are twenty states and territories with over a 50% penetration rate (compared to the national overall rate of 44.1%): Virgin Islands - 88.5% North Dakota - 66.6%; Vermont - 66.3%; Delaware - 65.5%; Iowa - 63.3%; South Dakota - 61.0%; Nebraska - 60.1%; Wyoming - 59.6%; New Jersey - 59.4%; Michigan - 58.4%; Kansas        57.8%; Mississippi - 57.4%; New Hampshire - 56.8%; Kentucky - 53.6%; Indiana - 52.6%; Maryland - 51.8%; Oklahoma - 51.2%; Illinois - 51.0%; Arkansas - 50.8%; and Connecticut - 50.8%. 3

Previously, there were 6.9 million MA enrollees in 1999, 5.6 million in 2005 and 13.1 million in 2012, with overall penetration rates of 18% in 1999, 13% in 2005 and 27% in 2012. 4

Participating Plans

As of April 2015, CMS had 529 Medicare Advantage plan contracts in place; 209 other prepaid plan contracts including 114 PACE agreements; and 76 Prescription Drug Program contracts. 1 Contracts can cover more than one plan for an organization. There are 1,945 MA plans available in 2015, compared to 2,014 in 2014, 2,074 in 2013, 1,974 in 2012, 2,011 in 2011 and 2,314 in 2010. For 2015, 65.6% of these plans were local HMOs, 23.9% were local PPOs, 3.5% were PFFS plans, 2.2% were Regional PPOs and 4.8% were Cost and other plans. 6

Of the 16,256,265 April 2015 enrollees in local HMO, PPO, PFFS and other prepaid plans excluding regional PPOs represented by 312 parent organizations, the top five parent organizations had 52.9% of total enrollment and are as follows: 5

  • UnitedHealth Group – 2,864,845
  • Humana – 2,683,054
  • Kaiser Foundation Health Plan – 1,301,209
  • Aetna –1,253,442
  • Cigna – 496,507

Of the 1,236,386 April 2015 Regional PPO enrollees represented by four contracting parent organizations, UnitedHealth Group, Inc. held the largest number of enrollees, with 47.3%.  5 As of April 2015, the top five Medicare Prescription Drug Plan contracts by enrollment represent 75.9% of total enrollment and are as follows: 5

  • UnitedHealth Group, Inc. – 5,119,963
  • CVS Caremark Corporation – 4,459,328
  • Humana Inc. – 4,296,565
  • Express Scripts Holding Company – 2,724,654
  • Cigna – 1,474,322

Kaiser Family Foundation found that for 2015 90 percent of beneficiaries will have access to an HMO and 80 percent will have access to a local PPO. Among beneficiaries in rural areas, 66 percent will have access to an HMO and 69 percent will have access to a local PPO. 6

PDP Benefits

Kaiser Family Foundation found that for 2015, 44% of MA-PDs will offer some prescription drug coverage in the Part D coverage gap; while 63% have a $0 coverage deductible, 13% have a deductible under $200 and 24% have a deductible exceeding $200.   6

Premiums

Kaiser Family Foundation found that in 2015, the average unweighted monthly premium for Medicare Advantage Prescription Drug plans (MA-PDs) will be $53 – a $3 increase over 2014. Monthly premiums for HMOS will average $38, up $3 from 2014.  6

Kaiser Family Foundation also found that 78% of all beneficiaries will have access to a zero-premium MA-PD in 2015, and that “since 2011, about half of all Medicare Advantage enrollees have been enrolled in a zero-premium MA-PD” 6

Regions

CMS has designed 26 MA Regions and 34 PDP Regions, which are used for risk-assignment, reporting and other various purposes. Of the 34 PDP regions, 25 consist of single states. Six regions consist of two states. Three regions encompass more than two states. Of the 26 MA regions, 11 consist of single states. Fourteen of the states that are their own regions for PDP purposes have been combined into seven two-state regions for MA purposes. Two of the PDP two-state regions have been combined into a four-state region. The remaining PDP two-state regions and other multi-state regions remain unchanged for MA purposes.7

Star Ratings

CMS now rates Medicare Advantage plans on a scale of one to five stars, according to the following scale:

  • 5 Stars - Excellent performance
  • 4 Stars - Above average performance
  • 3 Stars - Average performance
  • 2 Stars - Below average performance
  • 1 Star - Poor performance

The Star Ratings now impact an MA plan’s payments from CMS. Kaiser Family Foundation analysis for 2015 found 2% of MA contracts received 5 stars, 13% received 4.5 starts; 18% received 4 stars; 27% received 3.5 stars. 12% received 3 starts; 4% received 2 starts and 24% received no rating. 6

Payments to Plans

For 2016 Medicare Advantage Monthly Capitation Rates for Plans by County range from Northwest Arctic in Alaska ($1,309.32 5% Bonus / $ $1,243.85 0% Bonus) to Newton in Arkansas ($683.33 5% Bonus / $ 654.86 0% Bonus) [Excluding 102 counties located in the territories of PR, GU and VI with lower rates] 9

Kaiser Family Foundation describes MA payments as follows: “ Since 2006, Medicare has paid plans under a bidding process....The ACA of 2010 revised the methodology for paying plans and reduced the benchmarks...Reductions in benchmarks will be phased-in over 2 to 6 years between 2012 and 2016.  By 2017, when the new benchmarks are fully phased-in, the benchmarks will range from 95% of traditional Medicare costs in the top quartile of counties with relatively high per capita Medicare costs (e.g., Miami-Dade), to 115% of traditional Medicare costs in the bottom quartile of counties with relatively low Medicare costs (e.g., Boise).The ACA specified that plans with higher quality ratings would receive bonus payments added to their benchmarks, beginning in 2012.  The ACA also reduced rebates for all plans, but allowed plans with higher quality ratings to keep a larger share of the rebate than plans with lower quality ratings.  A CMS demonstration was implemented in 2012 that superseded bonuses specified by the ACA, raised the size of the bonus payments, and increased the number of plans that would receive bonus payments, providing an additional $8 billion in bonuses between 2012 and 2014.” 8

Utilization

The following utilization rates apply to Medicare HMOs under the Medicare Advantage program as published in the Sanofi-Aventis 2014-2015 Public Payer Digest: 9

  • Hospital Inpatient Days Per 1,000 Per Member: 1,727.1
  • Average Inpatient Length of Stay:  6.3
  • Physician Encounters Per Member Per Year:  10.4
  • Emergency Department Visits Per Member Per Year: 0.45
  • Prescriptions Per Member Per Year  29.4

Notes

1 Medicare Advantage, Cost, PACE, Demo, and Prescription Drug Plan Contract Report - Monthly Summary Report (Data as of April 2015), CMS

2 MA State/County Penetration Report- April 2015 CMS

3 PDP State/County Penetration Report- April 2015, CMS

4 Medicare Advantage Fact Sheet, Kaiser Family Foundation, November 2012, http://kff.org/medicare/fact-sheet/medicare-advantage-fact-sheet/

5 Medicare Advantage, Cost, PACE, Demo, and Prescription Drug Plan Organizations - Monthly Report by Contract - April 2015, CMS

6 Medicare Advantage 2015 Data Spotlight, Kaiser Family Foundation, http://kff.org/medicare/issue-brief/medicare-advantage-2015-data-spotlight-overview-of-plan-changes/

7 What are the CMS Medicare Part D prescription drug plan regions? Q1Medicare.com http://www.q1medicare.com/q1group/FAQ.php?category_id=1&faq_id=360

8 Medicare Advantage Fact Sheet, Kaiser Family Foundation, May 2014  http://kff.org/medicare/fact-sheet/medicare-advantage-fact-sheet

9 Medicare Advantage Monthly Capitation Rates for 2016 for All Plans Except PACE Plans, CMS

10 Public Payer Digest, 2014–2015, Managed Care Digest Series, Sanofi-Aventis https://www.managedcaredigest.com/pdf/PublicPayer.pdf


EvolveSPM
CMS MA-PD Enrollment Data, includes MA-PD enrollments by month, by county
http://evolvespm.com/pages/CMS_Medicare_market_report.htm

AARP
Insurance & Medicare Resources
http://www.aarp.org/health/medicare-insurance/


CMS
Medicare Main Page
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CMS
Research, Statistics, Data & Systems
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CMSGov Twitter
Official Twitter account for CMS
http://twitter.com/cmsgov


The Commonwealth Fund
Medicare Portal
http://www.commonwealthfund.org/Topics/Medicare.aspx


Data.Medicare.Gov
Medicare.Gov interactive data access
http://data.medicare.gov/


FamiliesUSA
Medicare Portal
http://familiesusa.org/issues/medicare/


Gorman Health Group
Industry Resources
http://www.gormanhealthgroup.com/industry-resources


Kaiser Family Foundation
Medicare: Medicare Advantage / Private Plans
http://www.kff.org/medicare/choice.cfm


Kaiser Family Foundation
Medicare: Part D / Prescription Drugs
http://www.kff.org/medicare/rxdrugs.cfm


The Medicare Blog
CMS Medicare Blog for Consumers
http://blog.medicare.gov/


Medicare.gov
Database Downloads
http://www.medicare.gov/download/downloaddb.asp


Social Security Adminsitration - Actuarial Publications
Status of the Social Security and Medicare Programs
http://www.ssa.gov/oact/trsum/index.html