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How 21st Century Cures May Impact Health Plans in 2017

Cara Kelly | Dec 15, 2016

The final signing of the 21st Century Cures Act is the culmination of three years of efforts by lawmakers in the House and Senate to expedite developing and making available new treatment options. Tune in as experts discuss the potential impacts on the healthcare industry.


My name is Cara Kelly, and I am a Vice President in Avalere’s Policy Practice. Today we are going to specific provisions of the 21st Century Cures Act, which was signed into law by President Obama on December 13th. The final signing of the Act is the culmination of nearly three years of efforts by lawmakers in the House and Senate, which saw several iterations of the legislation. Cures is intended to accelerate the discovery, development, and delivery of drugs and medical devices. While the primary focus of the law is expediting the development and availability of new medicines and treatment options, Cures contains a number of provisions that impact health plans.

First, the law allows beneficiaries with end-stage renal disease to enroll in MA beginning in 2021. Today, beneficiaries with ESRD can enroll in MA under limited circumstances, meaning that most beneficiaries are covered by the fee-for-service program. The law removes standard kidney acquisition costs from MA benchmarks and bids, and instead covers these costs through fee-for-service. While plans may welcome the opportunity to enroll beneficiaries with ESRD, it will be important to ensure that the risk adjustment model appropriately reflects the relative risk and cost of this beneficiary population.

CMS continues to refine the MA risk adjustment model overall, and Cures includes a number of revisions to the model. Consistent with the recent focus on the impact of dual eligible enrollment on Star Ratings and the risk adjustment model, the law requires the agency to adjust for dual eligible status. In addition, CMS may update the model to include additional years of diagnostic data and must adjust beneficiary risk scores based on a beneficiary’s total number of conditions. Finally, the law directs the Secretary to evaluate the impact of adding other factors to risk model, including but not limited to factors related to mental health and substance abuse disorders and chronic kidney disease, and to evaluate whether additional changes are necessary to ensure appropriate payment rates for beneficiaries with ESRD.

The accuracy of the risk adjustment model is critical to plans that participate in MA, and Avalere can assist health plans in modeling the impact of changes to the model to on member risk scores and payments.

The last policy I will touch on in the MA space is the temporary moratorium on contract terminations. CMS presently has the authority to terminate contracts that consistently fail to achieve at least a 3 star rating.

 The agency exercised this authority for the first time earlier this year. In recognition of the ongoing policy work related to dual eligible and the impact of dual enrollment on plans’ Star Ratings, Cures delays this authority through plan year 2018. Star Ratings – and specifically achieving a performance bonus – enable MA plans to offer competitive benefits and cost sharing to beneficiaries, and Avalere can help health plan customers monitor and incorporate CMS guidance, track performance, and close gaps.

Shifting focus to the commercial market, I’ll highlight a final provision in the Cures text that may impact plans that offer coverage to small employers. Small employers will be able to contribute to the cost of individual market coverage for workers and their families on a tax-preferred basis through certain health reimbursement arrangements. This provision may allow some small employers that do not presently offer employee coverage to contribute to health benefits, but may also redirect potential membership from the small group market. For clients interested in understanding how sources of coverage may shift – including as a result of future policy proposals – Avalere maintains a proprietary all-payer enrollment model that predicts sources of coverage.

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