April 15, 2014

CMS Issues Medicare Advantage and Part D Final Call Letter for 2015

Holland & Knight Alert
Jeffrey W. Mittleman | Melissa A. Wong


  • The Medicare Advantage and Part D Final Call Letter announces requirements for the 2015 contract year, including changes to Part C and Part D star ratings and how CMS will evaluate Part D plan structures submitted for the upcoming contract year. Effective Dec. 31, 2014, CMS will terminate Medicare Advantage and Part D plans that scored a Part C or Part D summary star rating of less than three stars in each of the 2013, 2014 and 2015 star rating periods.
  • CMS now requires at least 90 days notice when Medicare Advantage organizations plan "significant" changes to their provider networks.

On April 7, 2014, the Centers for Medicare and Medicaid Services (CMS) released its Medicare Part C and Part D Final Call Letter. The Final Call Letter includes information that CMS encourages Medicare Advantage (MA) organizations and Part D sponsors to consider while preparing bid submissions for the upcoming 2015 contract year.

Given industry and patient advocacy group reactions to CMS's Proposed Rule issued earlier this year, the 2015 Final Call Letter merits greater scrutiny than in years past. In an April 3, 2014 letter from the U.S. House Committee on Energy and Commerce, the committee specifically warned CMS that it would be "unacceptable" to move forward with proposed policy changes announced in the Jan. 10, 2014 Proposed Rule, "including directly or indirectly codifying such changes as part of the 2015 call letter."

In the 2015 Final Call Letter, CMS declined to finalize certain proposals that were included in the 2015 Draft Call Letter, including a proposed policy to require that enhanced alternative Part D plans provide additional cost-sharing reductions in the coverage gap for all formulary brand and generic drugs. CMS also confirmed that it would not proceed with its proposed plan to require that Part D sponsors offer preferred cost-sharing terms and conditions to any willing pharmacy, instead of limiting preferred cost-sharing arrangements to their preferred network pharmacies.

The Final Call Letter does implement, however, the following changes of note for the next contract year.

Changes to 2015 Part C and Part D Star Ratings

CMS assigns most MA and Part D plans an annual Part C and/or Part D star rating of one to five stars based on metrics that evaluate patient clinical outcomes, customer experience, beneficiary access, and process requirements. Star ratings are displayed in the Medicare Plan Finder to provide potential beneficiaries the opportunity to assess the quality and performance of the MA and Part D plans offered. In this year's Final Call Letter, CMS introduces a new Part C star rating measure based on the number of eligible Special Needs Plan (SNP) enrollees who received a health risk assessment during the measurement year. CMS also eliminates a Part C star rating measure based on glaucoma testing. In addition, CMS announced modifications to several existing star rating measures, including measures that evaluate breast cancer screening and flu vaccine rates, high-risk medication dispensing, diabetes medication adherence, and beneficiary access and performance problems. Finally, starting with the 2016 star ratings, CMS will begin to assess low-enrollment Part C and Part D plans of 500-999 beneficiaries that were previously excluded from star rating evaluations.

Termination of MA and Part D Plans with Consistent Pattern of Low Star Ratings

Effective Dec. 31, 2014, CMS will terminate MA and Part D plans that scored a Part C or Part D summary star rating of less than three stars in each of the 2013, 2014 and 2015 star rating periods. MA organizations and Part D sponsors are advised to assess their risks of contract termination prior to the 2015 contract year, and to consider electing to non-renew their plans to avoid termination by CMS. Alternatively, MA organizations and Part D sponsors may want to explore options to transfer beneficiaries in poor-performing plans into other plans rated at three stars or higher.

MA Provider Contract Termination

In a shift from CMS's traditional policy of non-interference in MA organizations' network provider contracting, beginning next year, CMS will require MA organizations to notify CMS when "significant" provider network changes are planned. The MA organization is responsible for identifying changes that they deem "significant." However, CMS expects MA organizations to take a "conservative approach" in determining whether a network change is significant, and will take appropriate compliance action if an MA organization fails to notify CMS of provider network changes that CMS ultimately considers significant.

MA organizations will now be required to notify CMS at least 90 days prior to a network change for any significant provider termination without cause. CMS will then determine whether the planned change requires additional action on the part of the MA organization in order for the provider network to continue to meet Medicare standards. CMS encourages MA organizations to adopt best practices for beneficiary notification in advance of without cause provider terminations, recommending that MA organizations allocate more than the required 30 days to provide beneficiaries prior notice to allow enough time for beneficiaries to select and transition to new providers. As a best practice, CMS also suggests that MA organizations provide more than 60 days prior notice to providers whose contracts are being terminated, in order to allow for the provider's right to fully appeal a termination before beneficiary notification of an anticipated change.

CMS Approval of Basic and Enhanced Alternative Plan Structures

CMS announced that it would no longer approve Part D sponsors' proposed changes from a basic prescription drug plan (PDP) benefit to an enhanced benefit. This announcement addresses CMS's concerns about beneficiary disruption and the fact that, in previous years, Part D sponsors were unable to demonstrate that the proposed enhanced benefits would provide equal or better benefits to their beneficiaries.

In addition, CMS noted that it does not intend to approve bids under which a sponsor proposes to non-renew its current basic plan in a PDP region, and then offer a new basic plan during the next plan year. CMS hopes to minimize beneficiary disruption in these scenarios as well, and avoid the need for beneficiaries to disenroll and reenroll as a result of plan changes from year-to-year.

We will continue to monitor MA and Part D regulatory developments – especially as CMS prepares to release the final version of its Jan. 10, 2014 Proposed Rule.


To ensure compliance with Treasury Regulations (31 CFR Part 10, §10.35), we inform you that any tax advice contained in this correspondence was not intended or written by us to be used, and cannot be used by you or anyone else, for the purpose of avoiding penalties imposed by the Internal Revenue Code.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem. Moreover, the laws of each jurisdiction are different and are constantly changing. If you have specific questions regarding a particular fact situation, we urge you to consult competent legal counsel.

Related Insights