This week, our In Focus section comes from HMA Principal Eric Hammelman and Senior Consultant Narda Ipakchi. Today, Medicare beneficiaries with End-Stage Renal Disease (ESRD) are only eligible to enroll in Medicare Advantage (MA) plans if they select a MA Special Needs Plan (SNP) that specifically serves individuals with ESRD or develop ESRD while already enrolled in a MA plan. In 2018, approximately 121,000 MA enrollees (0.6 percent of the MA population) had diagnoses of ESRD, accounting for approximately 20 percent of the total Medicare ESRD population. The 21st Century Cures Act, which was passed in 2016, included a provision that alters the eligibility and enrollment options for Medicare beneficiaries with ESRD. Starting in 2021, Medicare beneficiaries with ESRD will be able to enroll in any MA plan in their area. The Centers for Medicare & Medicaid Services (CMS) estimates MA enrollment of individuals with ESRD will nearly double to 242,000 in 2024, or approximately 41 percent of the total Medicare ESRD population.
Total healthcare costs for individuals with ESRD are approximately 8.5 times higher than the average Medicare beneficiary, largely due to regular outpatient dialysis treatments as well as high rates of hospitalizations and emergency room visits. MA plans have expressed concerns that the payment mechanism CMS currently uses to account for costs of care for ESRD beneficiaries may not appropriately reflect the costs for these enrollees under MA.
The payment to MA plans for enrollees with ESRD is structured differently than that for other enrollees. Plans do not submit a bid with the estimated costs for ESRD enrollment. Instead, CMS calculates a state-level benchmark, as opposed to a county-level benchmark as used for other enrollees, that represents the average statewide fee-for-service (FFS) spending for beneficiaries with ESRD. Plans receive a risk adjusted payment based on the state-level benchmark for each enrollee. If an MA plan believes the average ESRD enrollee will cost more than the state-level benchmark, the plan must use rebate dollars or additional premiums to cover the additional costs. The statutorily-required maximum out-of-pocket (MOOP) on ESRD spending also results in higher plan liabilities than the costs borne by FFS.
In a white paper sponsored by the Anthem Public Policy Institute, Health Management Associates explored these issues to identify any possible modifications that either CMS or Congress could make to more closely align payment with costs.
In February, CMS issued MA guidance for plan year 2021, which includes proposed changes to increase MOOP thresholds to help ensure costs for enrollees with ESRD are taken into account. Notably, CMS has proposed to calculate the difference between non-ESRD Medicare FFS beneficiaries’ costs in CY 2021 and all Medicare FFS beneficiaries’ costs (including ESRD) and incorporate 40 percent of the difference in its calculations of MOOP limits. This would increase MOOP limits for all MA plan enrollees – not just those with ESRD. Rather than increase payments for MA plans to account for the anticipated higher costs of these enrollees, CMS has proposed to increase cost-sharing limits on Medicare Advantage enrollees.
In a proposed rule which includes policy and technical changes for plan year 2022 and later, CMS stated its intent to increase this percentage to 60 percent, 80 percent, and 100 percent for 2022, 2023, and 2024, respectively. Many stakeholders have expressed concerns that the proposed changes to out-of-pocket limits:
- Will not sufficiently reflect the anticipated increase in costs, and specifically, do not address concerns regarding use of a statewide average payment amount as opposed to a local average, and
- Create additional financial burden for all MA enrollees.
CMS also solicits comments on potential changes to network adequacy requirements for outpatient dialysis as plans have expressed anticipated difficulties in ensuring access for additional ESRD enrollees. These include: 1) removing outpatient dialysis from the list of facility types for which MA plans are required to meet minimum time and distance standards; and 2) granting exceptions to minimum time and distance standards when home dialysis is provided instead. These potential changes are intended to provide plans with increased flexibility as they develop provider networks to meet the needs of ESRD enrollees.
HMA has analyzed these changes, as well as other proposed requirements for MA plans as they prepare for plan year 2021 and later. The slide deck summarizing these changes can be accessed here.
The upcoming changes to MA eligibility and enrollment of individuals with ESRD creates significant uncertainty for plans and other stakeholders. As 2021 approaches, there are several questions that are relevant for understanding the implications of these changes:
- To what extent will ESRD beneficiaries enroll in MA plans, particularly if network adequacy standards are relaxed and MOOP thresholds are increased?
- Will increases in MOOP thresholds for all enrollees dissuade non-ESRD beneficiaries from enrolling in MA?
- Does the MA delivery system provide better care delivery than FFS Medicare for the ESRD population? What changes are needed to better serve this population?
 Proposed Regulation CMS-4190-P. Medicare and Medicaid Programs; Contract Year 2021 and 2022 Policy and Technical Changes to the Medicare Advantage Program, Medicare Prescription Drug Benefit Program, Medicaid Program, Medicare Cost Plan Program, and Programs of All-Inclusive Care for the Elderly
 HMA analysis of CMS Estimates. 2020 Medicare Advantage Final Rate Announcement, April 1, 2019.