45 Day Notice for 2002 M+C Rates
NOTE TO: Medicare+Choice Organizations and Other
Interested Parties
SUBJECT: Advance Notice of Methodological
Changes for Calendar Year (CY) 2002 Medicare+Choice (M+C) Payment
Rates
In accordance with Section 1853(b)(2) of the Social Security Act,
we are required to notify you of any proposed changes in the M+C
capitation rate methodology or risk adjustment methodology for CY
2002. Preliminary estimates of the various national per capita M+C
growth percentages and the methodology changes for CY 2002 are
attached.
Please note that this Notice does not include a description of
all provisions in the Medicare, Medicaid, and SCHIP Benefits
Improvement and Protection Act of 2000 (BIPA) that affect M+C
payments. This Notice discusses those BIPA provisions affecting
payments for 2002.
Comments or questions may be addressed to:
Ms. Anne Hornsby Health Care Financing Administration 7500
Security Boulevard C4-01-22 Baltimore, Maryland 21244
In order to receive consideration prior to the
March 1, 2001 announcement of M+C capitation rates,
comments must be received by January 31, 2001.
/ s / Mark E. Miller, Ph.D.. Deputy Director Center for
Health Plans and Providers
/ s / Solomon Mussey, A.S.A. Director Medicare and
Medicaid Cost Estimates Group Office of the Actuary
Attachments
Attachment 1
Preliminary Estimate of the National Per Capita Growth
Percentage for Calendar Year (CY) 2002
The Balanced Budget Act of 1997 (BBA) changed the payment
methodology for determining payments to Medicare+Choice (M+C)
organizations. This payment methodology is based in part on
increases in the national per capita M+C growth percentage as
defined in Section 1853(c)(6) of the Social Security Act (the Act).
In this notice, we provide preliminary estimates of (1) the national
per capita M+C growth percentages in CY 2002, and (2) the
increase in the floor payment rates in CY 2002. Each of these
estimates reflects the components required by the BBA: an underlying
trend change for CY 2002, a statutory adjustment of -0.3
percent (as required by section 1853(c)(6)(B) of the Act), and an
adjustment for changes in the estimates of prior years' growth
percentages.
The estimates shown in this attachment reflect the enactment of
P.L. 106-554, the Medicare, Medicaid, and SCHIP Benefits Improvement
and Protection Act of 2000 (BIPA). Two provisions of this law
significantly impacted the Medicare + Choice ratebook for 2001.
Section 601 of the BIPA establishes a new monthly minimum payment
amount in 2001 for months after February. The new minimum payment is
$525 for any payment area in a Metropolitan Statistical Area (MSA)
within the 50 States and the District of Columbia with a population
of more than 250,000; for any other area within the 50 States, it is
$475. For any area outside of the 50 States and the District of
Columbia, the minimum amounts cannot exceed 120 percent of the
minimum amounts for such areas as determined for 2000. Section 602
establishes the minimum percentage increase in monthly payment rates
to be 3 percent for 2001. This minimum percentage increase
applies for all months in 2001 except January and February.
The current estimate of the change in the national per capita M+C
growth percentage for aged enrollees in CY 2002 is 8.3 percent.
This percentage applies to the area-specific rates implicit in the
CY 2001 M+C rates announced on March 1, 2000. (If the
national per capita M+C growth percentage for CY 2002 were
determined based on the area-specific rates implicit in the
revised CY 2001 rates announced on
January 4, 2001, which reflect the impact of the BIPA
provisions, the total change would be 4.9 percent). The 8.3
percent estimate reflects an underlying trend change for
CY 2002 in per capita costs of 5.6 percent, an adjustment
of -0.3 percent (as required by Section 1853(c)(6)(B) of the
Act), and an adjustment for the fact that the current estimate of
prior years' cumulative aged M+C growth percentages (for
CYs 1998 through 2001) is 2.8 percent higher than the
estimates actually used in calculating the CY 2001 capitation
rate book that was published March 1, 2000 (as required by
Section 1853(c)(6)(C) of the Act). The adjustment for prior years'
estimates includes an increase of about 3.2 percent in CY 2001
for the impact of the enactment of P.L. 106-554.
The table below shows the increases in the national per capita
growth percentages for the aged, disabled, ESRD, and the combined
aged + disabled.
The preliminary estimate of the floor for aged beneficiaries in
CY 2002 is $552.92 for any area in an MSA within the 50 States
and the District of Columbia with a population of more than 250,000,
and $500.26 for all other areas within the 50 States. In both cases
this represents a 5.3 percent increase over the respective
CY 2001 floors of $525 and $475. As with the estimate of the
national per capita M+C growth percentage, this estimate reflects an
underlying trend change for CY 2002 in per capita costs of
5.6 percent and an adjustment of -0.3 percent (as required
by Section 1853(c)(6)(B) of the Act). This estimate of the rate of
change for the floors does not include an adjustment for revised
estimates of prior years' aged M+C growth percentages due to the
provision in the BIPA mentioned above, which reestablishes the base
floor amounts in 2001.
The following tables summarize the estimates for the change in
national per capita M+C growth percentage and the floor
increase:
National Per Capita Growth Percentage
(for Blend)1
|
Aged |
Disabled |
ESRD |
Aged+Disabled |
2002 Trend Change |
5.6% |
5.8% |
2.0% |
5.6% |
BBA Adjustment |
-0.3% |
-0.3% |
-0.3% |
-0.3% |
2002 Trend plus BBA Adjustment |
5.3% |
5.5% |
1.7% |
5.3% |
Revision to CY 1998
Estimate |
1.9% |
2.6% |
-2.1% |
2.0% |
Revision to CY 1999
Estimate |
-0.9% |
0.2% |
-3.3% |
-0.8% |
Revision to CY 2000
Estimate |
-2.1% |
-2.5% |
-3.3% |
-2.2% |
Revision to CY 2001
Estimate2 |
4.0% |
5.1% |
3.8% |
4.2% |
Total Change |
8.3% |
11.2% |
-3.5% |
8.6% |
1 Applies to the area-specific rates implicit
in the M+C rates announced March 1, 2000.
2 For aged beneficiaries, the revision for 2001
includes 3.2 percent for the impact of the enactment of P.L.
106-554 and 0.8 percent for other revisions.
NOTE: The BBA adjustment is additive. The remaining
numbers are multiplicative. The numbers are also not exact, due to
rounding.
National Per Capita Growth Percentage (for Floor)
|
Aged |
Disabled |
ESRD |
Aged+Disabled |
2002 Trend Change |
5.6% |
5.8% |
2.0% |
5.6% |
BBA Adjustment |
-0.3% |
-0.3% |
-0.3% |
-0.3% |
Total Change1 |
5.3% |
5.5% |
1.7% |
5.3% |
1 For CY 2002, there are no adjustments to
prior years' estimates because Section 601 of the BIPA reestablishes
the floors.
NOTE: The BBA adjustment is additive.
These estimates are preliminary and could change before the final
rates are announced on March 1, 2001. Further details on the
derivation of the national per capita M+C growth percentage will
also be presented in the March 1 announcement.
Attachment 2
Changes in Methodology Since Calendar Year (CY) 2001 Rates
A. Risk Adjustment System
ICD-9 code modifications. There are no revisions
to the Principal Inpatient-Diagnostic Cost Group (PIP-DCG) risk
adjustment methodology for CY 2002. However, there are
additions and modifications to the ICD-9 diagnosis codes upon which
the PIP-DCG risk adjustment payment model will be based in
CY 2002. A new look-up table reflecting the new 2001 ICD-9
diagnosis codes (which were effective October 1, 2000) can
be found on the HCFA website at http://www.hcfa.gov/stats/hmorates/aapccpg.htm.
The lookup tables will be posted on the HCFA website on or before
January 15, 2001. Public use payment software for payment year 2002
will be available on the same website on or before
March 1, 2001.
Encounter data submission deadlines. Inpatient
encounters with discharge dates of July 1, 2000 through
June 30, 2001 that are received at HCFA by
September 30, 2001 will be incorporated into the risk
factor that is used for making payments to M+C organizations (M+COs)
during CY 2002. M+COs should submit these encounters no later
than September 7, 2001 to ensure that there is sufficient
time to complete the processing of these data.
If M+COs receive inpatient encounters after
September 7, 2001, they may submit the late encounter data
to HCFA, and the data will be processed under the reconciliation
process set forth in Operational Policy Letter 2000.126. The
deadline for submission of all late inpatient encounter data with
discharge dates of July 1, 2000 through
June 30, 2001 is September 30, 2002. No
encounters from this period will be accepted by HCFA after
September 30, 2002. (Note that the June 30 deadline
for late submission of inpatient encounter data in Operational
Policy Letter 2000.126 has been extended to September 30.)
After the payment year is completed, HCFA will recalculate risk
factors for 2002 for individuals for whom late encounters have been
submitted. Then we will determine any payment adjustments that are
required. This reconciliation will be undertaken during 2003 and
will be a one-time reconciliation for payment year 2002.
B. Risk adjustment transition
Section 603 of the BIPA amends Section 1853(a)(3)(C) of the Act
(amended by Section 511 of the Balanced Budget Refinement Act
(BBRA)) by specifying that for CY 2002 the risk adjustment
method will be used to adjust 10 percent of the rate. (The BBRA
provided that for 2002 the risk adjustment method would be used to
adjust "not more than 20 percent" of the rate.) Under the BIPA,
therefore, HCFA will continue to apply the transition percentages
applied in CYs 2000 and 2001: 90 percent demographic
method and 10 percent risk-adjustment method.
Payment amounts for each enrollee are separately determined using
the demographic method and the PIP-DCG risk adjustment method. These
separate payment amounts are then blended according to the
percentages for the transition year, which under the BIPA are 90/10
for CYs 2001 through 2003.
C. Extra payment in recognition of the costs of successful
outpatient congestive heart failure care
This section discusses the extra payment provisions announced in
Operational Policy Letter 2000.129, which are effective
January 1, 2002. This Notice does not address Section 607
of the BIPA on full implementation of risk adjustment for congestive
heart failure (CHF), since this provision is effective only for
CY 2001. Information on full implementation of risk adjustment
for CHF in 2001 can be found on the HCFA website at http://www.hcfa.gov/medicare/cy2001.htm.
CHF extra payment initiative. The Health Care
Financing Administration will make extra payments to Medicare+Choice
organizations (M+COs) in recognition of the costs of successful
outpatient congestive heart failure care. This extra payment will be
made in CY 2002 to M+COs that qualify on the basis of attaining
threshold levels on both of two quality indicators, described below.
Consistent with the risk adjustment payment methodology, extra
payment will only be made for those enrollees in an M+CO who are
identified in HCFA's records as having had the required principal
inpatient discharge diagnosis of CHF and who are enrolled in the
M+CO at the beginning of each payment month in 2002.
More detailed information on the CHF extra payment is contained
in OPL 2000.129. Note that if an enrollee with a CHF hospitalization
disenrolls from an M+CO that qualified for extra payment and then
enrolls in an M+CO that does not qualify for extra payment, the new
M+CO would not receive the extra payment for that enrollee.
Payment for Qualifying M+COs. HCFA takes two
reporting years into account when assessing whether an M+CO
qualifies for an extra payment in 2002: July 1, 1999 to
June 30, 2000; and July 1, 2000 to
June 30, 2001. M+COs are paid for a qualifying CHF
diagnosis under several scenarios, listed below. Scenario (1)
describes the "normal" payment HCFA makes under the PIP-DCG
methodology for a principal inpatient diagnosis of CHF during the
reporting year. Scenarios 2 and 3 describe special conditions under
which M+COs may qualify for the CHF extra payment.
(1) In 2002, M+COs with enrollees hospitalized with a greater
than one-day stay for a principal diagnosis of CHF between
July 1, 2000 and June 30, 2001 will receive the
regular PIP-DCG-16 amount, at the phased-in level of 10 percent
under the risk adjustment payment methodology.
(2) Under the extra payment provision for 2002, qualifying M+COs
with an enrollee hospitalized with a qualifying CHF diagnosis
between July 1, 1999 and June 30, 2000 who did
not have a hospital stay during the July 1, 2000 to
June 30, 2001 period will receive an extra payment for the
CHF hospitalization incurred during the first reporting year
(July 1, 1999 to June 30, 2000), at the
phased-in level of 10 percent under the risk adjustment payment
methodology.
(3) Under the extra payment provision for 2002, qualifying M+COs
with an enrollee hospitalized with a qualifying CHF diagnosis
between July 1, 1999 and June 30, 2000 who also
had a discharge for another diagnosis during the period
July 1, 2000 to June 30, 2001 will receive the
greater of the two possible payments. Two examples
are provided below:
(a) If an enrollee had a qualifying discharge for CHF between
July 1, 1999 and June 30, 2000 and also had a
discharge during the period July 1, 2000 to
June 30, 2001 that fell into PIP-DCG 8 or higher
(which would also include a diagnosis of CHF), the M+CO will receive
payment for the qualifying diagnosis incurred during the second
reporting year (July 1, 2000 to June 30, 2001),
because that payment would be greater than the payment for the CHF
diagnosis that occurred during the July 1, 1999 and
June 30, 2000 period.
(b) If an enrollee had a qualifying discharge for CHF between
July 1, 1999 and June 30, 2000 and also had a
discharge during the period July 1, 2000 to
June 30, 2001 that fell into PIP-DCG 7 or below, the
M+CO will receive payment for the CHF diagnosis incurred during the
first reporting year (July 1, 1999 to
June 30, 2000), because that payment would be greater than
the payment for the diagnosis that occurred during the
July 1, 2000 to June 30, 2001 period.
The extra payments made to qualifying M+COs for CHF discharges
between July 1, 1999 and June 30, 2000 will be
based on approximately one-third of the full PIP-DCG-16 amount,
subject to the risk adjustment transition schedule. Given the
payment blend of 90 percent demographic payment and 10 percent risk
adjusted payment for 2002, the additional payments to qualifying
M+COs would be based approximately on the following
formula: 0.33 (representing one third of PIP-DCG 16
amount) X 2.438 (representing the PIP-DCG-16 risk factor) X 0.10
(representing the payment blend in 2002) of the risk adjusted county
rate.
Section A of Attachment 2 (above) addresses the deadlines for
receipt of inpatient encounter data between July 1, 2000
and June 30, 2001. Note that extra payments for CHF in
2002 are based on inpatient discharges from the prior year.
Encounters for CHF discharges from July 1, 1999 to
June 30, 2000 that are submitted after
September 30, 2001 will be incorporated into a
reconciliation conducted during 2003 for payments made to M+COs in
2002. See OPL 2000.126 for further information on reconciliation for
risk adjustment.
Quality indicators for extra payment. HCFA
indicated in Operational Policy Letter 2000.129 that we would
publish the threshold levels for both quality indicators in this
Notice. Therefore, the two quality indicators and thresholds follow.
M+COs must meet or exceed the threshold level on both quality
indicators to qualify for the extra payment.
Quality Indicator 1: Proportion of M+CO enrollees with a
greater than one-day stay for a principal inpatient discharge
diagnosis of congestive heart failure, and who have evaluation of
left ventricular function as of October 1 of the reporting year.
Threshold for extra payment: 75%
Quality Indicator 2: Proportion of M+CO enrollees with a
greater than one-day stay for a principal inpatient discharge
diagnosis of congestive heart failure, and who have left ventricular
systolic dysfunction (LVSD) and, as of October 1 of reporting
year:
- Are prescribed angiotensin converting enzyme inhibitors
(ACEI); or
- Have a documented reason for not being on ACEI.
Threshold for extra payment: 80%
Audits. As stated in Operational Policy Letter
2000.129, HCFA will select a sample of M+COs in 2002 for auditing of
the submitted data. Consistent with procedures developed for the
risk adjustment payment methodology, these audits will confirm that
the principal inpatient discharge diagnosis reported by the M+CO is
supported by the medical record. The audits will also verify that
M+COs met the quality indicator thresholds. If the review of the
medical record or other supporting documentation fails to confirm
the principal inpatient discharge diagnosis of CHF or attainment of
both quality indicators, then HCFA will recover all associated
payments from the M+CO.
D. Expansion of the time frame for offering the New Entry
bonus
Section 608 of the BIPA extends by one year the BBRA time period
that delineates an "unserved" payment area. Under the BBRA, the
first M+C organization that offers a plan in a previously unserved
payment area during the period beginning January 1, 2000
and ending December 31, 2001 is eligible for bonus
payments (as described in Operational Policy Letter 2000.117). The
BBRA defines a previously unserved payment area as:
- A payment area in which an M+C plan has not been offered since
1997; or
- A payment area in which an M+C plan (or plans) had been
offered since 1997, but in which every M+C organization offering
an M+C plan in that payment area since then has notified HCFA (no
later than October 13, 1999) that it would no longer
offer M+C plans in that payment area as of
January 1, 2000.
Under the BIPA, a payment area is considered as "previously
unserved" if every M+C organization offering an M+C plan in that
payment area since 1997 notified HCFA no later than
October 3, 2000 that it will no longer offer M+C plans in
that payment area as of January 1, 2001.
Under the BIPA provision, an M+C organization that enters a
previously unserved payment area on, for example, March 1, 2001 will
receive 5 percent bonus payments until February 2002 and
3 percent bonus payments until February 2003.
Finally, the BIPA amendment applies as if it were included in the
enactment of the BBRA. See OPL 2000.117 for additional information
on the New Entry Bonus.
E. Revision of payment rates for ESRD patients enrolled in M+C
plans
Section 605 of the BIPA provides that by June 21, 2001
the Secretary will publish for public comment a description of the
adjustments to be applied to CY 2002 payment rates for M+C
enrollees determined to have end-stage renal disease (ESRD).
F. Treatment of Certain Demonstrations
There are currently several demonstration projects that involve
the provision of care to special populations, such as the frail
elderly. Such projects offer enhanced benefit packages and include
other unique features designed to meet the special needs of these
populations. These projects are currently paid based on adjustments
to M+C capitation rates that are specific to each demonstration
model. They include Evercare, the Social Health Maintenance
Organization (SHMO) demonstration, the Program of All-inclusive Care
for the Elderly (PACE) demonstration, the Minnesota Senior Care
project, and the Wisconsin Partnership demonstration.
We are continuing to analyze refinements to the risk adjustment
methodology for these demonstration projects. To support these
analyses, we have been collecting hospital inpatient encounter data
and are beginning to collect physician and hospital outpatient
encounter data from these projects. We have also been collecting
functional status information via the Health Outcomes Survey. In
addition, we are developing a special survey instrument to collect
information that could be used in the development of a hybrid risk
adjustment approach for frail populations. However, the ongoing
analyses to support risk adjustment for these projects will not be
completed in time to apply any refinements in CY 2002.
The Evercare demonstration is currently scheduled to end
December 31, 2001. Pending a decision on the extension of
waivers for the Evercare demonstration, we intend to maintain the
current payment approach for Evercare.
The BIPA extended the SHMO demonstration until 30 months after
the Secretary submits a report to Congress that includes a plan to
transition SHMO as an option under Medicare+Choice. The report has
not yet been submitted. We will maintain the current SHMO payment in
2002.
PACE demonstrations in 2002 will include the current non-profit
organizations and new for-profit entities. The current PACE sites
are scheduled to transition to program status by
November 24, 2002. The present PACE payment approach will
apply to both current and new PACE demonstration sites in 2002.
We will also maintain the present payment approaches for
organizations participating in the Minnesota Senior Care and
Wisconsin Partnership demonstrations in 2002.
Treatment of the PACE program. We are still
investigating refinements to the risk adjustment approach that
account for the frailty of the PACE population. Therefore, PACE
providers will be exempt from M+C risk adjustment during 2002. The
present PACE demonstration payment approach will be used for the
PACE program.
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