Medicare Reform Advisor, March 22, 2005

March 22, '05 Vol. 2, No. 11 Weekly news and analysis

SUBSCRIBE
to Medicare Reform Advisor

© 2005 HCPro, Inc.

Epogen ASP down as CMS releases Q2 pricing updates
The average sales price maximum allowable payment limit for the commonly used drug Epogen will decrease in the second quarter, according to new Medicare data. The non-ESRD use of the drug (Epoetin alpha, code Q0136) will have a new limit of $9.806 per 1000 units, down from $10.600 in the first quarter. Many drugs will experience slight increases: a 1 CC injection of Gamma Globulin (code J1460) went up almost two-tenths of a point from its first quarter limit; 300 mg of Lincomycin (code J2010) will have a $3.495 payment limit, up from $3.485 in the first three months of 2005; and the Omalizumab injection (code J2357) increased nearly three-tenths of a point from $15.316 to $15.688. For the complete data, click here and then scroll down to the Excel spreadsheets at the bottom of the page. Click on the April 2005 ASP pricing files for all listings.

The average sales price changes were announced as part of the second quarter updates to the outpatient payment system. Medicare announced policy changes on Friday. All changes, set to take effect April 1, are outlined in Transmittal 508 (change request number 3756) on the CMS Web site. The update includes new codes and payment limits. See this week's Drug Payment Reform for some highlights.

Back to top

CMS revises limits in outpatient quarterly update
The following are highlights of next month's outpatient prospective payment system updates:

Back to top

Keep abreast of compliance standards, gaps in contracting under MMA

CMS has developed a comprehensive set of compliance standards that Part D sponsors will be required to address and maintain that includes fraud and abuse, privacy and confidentiality, cost control, and quality improvement measures.

This also includes contracting, Sheryl Vacca, the West Coast practice leader and a director in the life sciences and health care regulatory practice at Deloitte said during an FDA News audioconference on challenges facing drugmakers under Medicare Part D. "We know that manufacturers and pharmacy benefit managers (PBM) need to review their contracting strategies and operations and systems," she said.

Conduct a risk assessment of the contracting area to determine whether controls are adequate. "This is one area where we know there can be gaps," Vacca said. "It does seem industrywide to be an area that tends to not have as much attention, perhaps, as it needs to be in regard to putting controls in place." she said. Before implementing any new initiatives, identify "what is there, where you can mitigate risk, and what needs to be developed to make sure your controls are in place," said Vacca.

As a consequence of the "competitive cornerstone" of the Medicare Part D program, increased rebating has appeared, as well as increased visibility of the rebate agreements, Vacca said. "This is a critical area in regard to this regulation-something to pay very close attention to." "CMS basically will be able to see the process behind the pricing, and [it] may ask for justification . . . if [it believes] that the costs are too high," Vacca said. In the past, the PBM plan sponsors were responsible for deciding whether to perform claims/rebate audits.

In the MMA, CMS provided itself access to audit particular plans. "The controls are in place around these areas," Vacca said. "Sponsors now need to perform ongoing oversight reviews of their own"-and then CMS and the Health and Human Services' Office of the Inspector General (OIG) will have access to this information as a contractual condition.

Individual sponsors may also perform their own review and identify weaknesses, which from a compliance perspective could become an additional risk from the OIG perspective, she said.

The reimbursement from paid claims now must address the retroactive eligibility provisions as well, Vacca said. What's more, sponsors will have to identify individuals and then reconcile their cases-going as far as adjudicating them at the point of sale.

Reconciling claims at the point of sale could create a compliance risk in the contractual obligation-because a beneficiary can retroactively decide to become Part D eligible (or participate in a Part D plan), VACCA said. "That will create problems in rebates as well as in the contractual requirements," she said.

Report from Correspondent Jan Simmons.

Back to top

ESRD demonstration offers 1.6% payment hike
The Department of Health and Human Services is required under Medicare's reform law to develop a fully case-mix adjusted payment system for End-Stage Renal Disease (ESRD) services, and to conduct a three-year demonstration project of the case-mix adjusted payment system starting January 1, 2006. Up to 500 ESRD facilities may participate in the demonstration, and the department secretary is required to increase payment amounts to those facilities by 1.6%. An advisory board will oversee the demonstration. Details to come.

Back to top

Medicare Advantage plans look to SNPs for special populations

Special needs plans (SNP) were Congress' way of saying through the Medicare modernization act (MMA) "that even with some very serious constraints, [it] is going to provide some new opportunities to target particular populations," said Patricia Smith, director of the Centers for Medicare & Medicaid Services' (CMS) Medicare Advantage (MA) Group and acting director of its Division of Special Programs in the Center for Beneficiary Choices.

Smith, who spoke during an America's Health Insurance Plans' (AHIP) MMA workshop on March 8 in Washington, DC, said that CMS has already approved 31 SNPs that will take effect this year, which include 24 dual-eligible beneficiary plans and seven institutional plans. Another 50 applications also came in by the March 1 deadline and are awaiting review. The application deadline for 2006 is March 23, 2005?.

Under provisional legislation of the MMA, MA organizations may limit their enrollment in SNPs to three categories of beneficiaries: those who are currently dual-eligible (with Medicare and Medicaid coverage), those institutionalized (residing 90 days or more in a long-term care facility), and those with chronic or disabling conditions. MA organizations also may establish SNPs that enroll a "disproportionate percentage" of beneficiaries in one of the three categories, which CMS defines as a greater percentage of the target population that occurs nationally in the Medicare population, said Danielle Moon, director of CMS' Division of Enrollment and Eligibility Policy, Medicare Enrollment and Appeals Group.

Determining the effect on the dual-benefit populations has been challenging, Moon said. Initially, when CMS drafted a guidance, "we were concerned about allowing the [MA] organizations to target segments in the dual population"-specifically those who have received all of the Medicaid benefits offered by their state versus those who are in Medicare savings programs and receive some assistance with their Medicare costs.

But in examining the final rule and the suggestions that came in, "we decided to allow organizations to target to each of those two different categories as appropriate," Moon said. "We found that a lot of [MA] organizations that have been working with different states needed to do that in order to make their program viable."

Those plans designated as SNPs must offer prescription drug coverage starting on Januanry 1, 2006. For individuals already in a SNP, they can remain in the plan under the 2005-2006 transition rules without having to make an elective decision to switch plans. (Moon said CMS will soon issue guidance on this issue.)

But a key exception to this-which is important for SNPs-is that the dual eligible beneficiaries will be part of a separate process. Full-benefit dual eligibles who are currently in an MA plan will remain with that organization in 2006; if their MA plan offers prescription drug benefits now, "they'll transition just like everybody else," Moon said.

If dual eligibles are in an MA plan that doesn't offer drug coverage, the MA organization will be able to put them into another of its plans that offers prescription drug coverage. "We would want those beneficiaries to stay with their particular MA organization, but we want them to have drug coverage... at the lowest premium within that organization," Moon said.

Full-benefit dual beneficiaries will lose their Medicaid drug coverage on January 1 because, as Mood said, "we will no longer give states federal matching dollars to combine that coverage." CMS will automatically enroll dual eligibles who are not currently in MA plans into available prescription drug plans.

Back to top

Bryan Cote
Executive Editor
860-232-6367
E-mail address: bcote@hcpro.com