February 15

President Obama Outlines Second Term Agenda in State of the Union Address

On Tuesday, President Obama delivered his State of the Union address where he outlined his agenda for his second term. Obama called on Congress to avert the sequester set to begin on March 1, and laid out three proposals to alleviate Medicare spending:

1)     Reduce taxpayer subsidies to prescription drug companies (i.e. require drug companies to provide drug rebates for low-income Part D beneficiaries);

2)     Charge wealthy seniors more (i.e. means-test Medicare premiums); and

3)     Change the way health care is delivered (i.e. move away from fee-for-service models towards a delivery system that pays for quality and efficiency).

Obama also added that he is prepared to enact other Medicare reforms which save the same amount of money as reforms laid out in the Simpson-Bowles deficit reduction commission in 2010. For reference, the Simpson-Bowles plan included $483 billion in Medicare savings from 2013-2022.

February 15

Republican Senators Introduce Bill to Repeal IPAB

On Thursday, Senate Republican Deputy Whip John Cornyn (R-TX) and Senate Finance Committee Ranking Member Orrin Hatch (R-UT) reintroduced the Protecting Seniors’ Access to Medicare Act of 2013 (S. 351) repealing the Independent Payment Advisory Board (IPAB). IPAB is criticized by Republicans as an unelected board of 15 bureaucrats capable of making decisions which would lead to rationing in Medicare. The bill was introduced with 29 other Republican cosponsors.

Companion legislation, H.R. 351, was introduced by Congressmen Phil Roe (R-TN) and Allyson Schwartz (D-PA). As of Friday, the House bill has 123 cosponsors, including 9 Democrats.

February 15

CMS Releases MLR Requirements for Medicare Advantage and Part D

On Friday, the Centers for Medicare and Medicaid Services (CMS) released a proposed rule outlining medical loss ratio (MLR) requirements for Medicare Advantage (MA) and Medicare Part D plans under the Affordable Care Act (ACA). The ACA requires insurers to issue rebates to customers for each year that the plan sponsors do not meet a set financial target – the MLR- which measures the percentage of premiums spent on medical benefits as opposed to other costs such as profits or operating expenses.

Under the proposed rule, MA and Part D plan sponsors who do not meet the 85% MLR target for more than 3 consecutive years will face enrollment sanctions, while plan sponsors who do not meet the 85% MLR target for more than 5 years will face termination of their contracts.

Today, CMS also outlined the 2014 statutory updates to the annual parameters for Part D plans through an Advance Notice and Call Letter, and are outlined below. For the first time, CMS is calling for lower copayments and deductibles for Part D plans than in the previous year.

Part D Benefit Parameters



 Defined Standard Benefit



Initial Coverage Limit (Total drug costs after deductible before hitting coverage gap)



Out-of-Pocket Threshold  (Total amount beneficiary pays before hitting catastrophic phase)



Minimum Cost-sharing for Generic/Preferred Multi-Source Drugs in the Catastrophic Phase



Minimum Cost-sharing for Other Drugs in the Catastrophic Phase



Retiree Drug Subsidy (RDS)
Cost Threshold (Amount RDS sponsor must spend before claiming the RDS subsidy)



Cost Limit (Amount after which RDS sponsor claims no RDS subsidy)



These policies also continue to adjust for diagnostic coding differences between MA plans and Medicare fee-for-service (FFS) providers, through efforts such as applying a 4.91% adjustment for 2014 to MA plan payments, and refining risk adjustment to exclude conditions that are most commonly coded by MA plans.

Comments on the Advance Notice and draft Call Letter are due by March 1, 2013, and are available HERE. The final 2014 Rate Announcement and Call Letter will be published on Monday, April 1st.

Comments on the proposed rule are due 60 days after publication in the Federal Register, which is slated for February 22. The full text of the proposed rule is available HERE.

February 15

GAO Releases High Risk Programs List Update

On Thursday, the Government Accountability Office (GAO) released an update to its “High-Risk Series.” The report identified federally funded programs which GAO has designated as high risk- meaning they are particularly vulnerable to waste, fraud, and abuse, and are most in need of transformation. Medicare has been on GAO’s High Risk List since 1990 Medicaid was added to GAO’s High Risk List in 2003. These trends continued in this year’s report.

GAO’s February 2013 report on high risk programs is available HERE.

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