Medicare Advantage
Despite political uncertainty and market volatility, managing federal Medicare programs continues to be a growth area for many payers. Medicare's managed care program, Medicare Advantage, has been profitable for insurers since Congress changed Medicare Advantage's payment formula in 2003. Consumers generally like Medicare Advantage plans because they typically offer low premiums — or in some case no premiums — as well as additional benefits and low deductibles and co-payments for members who visit in-network providers. Payers offer these attractive plans, with the knowledge that Medicare Advantage has become a political target. Many in Congress, as part of federal budget negotiations, are trying to scale back government payments to Medicare Advantage. Critics view the additional cost of Medicare Advantage — 12 percent more for each enrollee, on average, than Original Medicare — as an extravagance whose main beneficiaries are the insurers. With health insurance a pivotal issue in the Presidential campaign, the funding levels, operating requirements, and even the actuarial methods for determining fees are all subject to change on short notice.
Participation in government health programs brings along a substantial administrative burden. The level of regulatory scrutiny from federal regulators appears to have increased and includes the Centers for Medicare and Medicaid Services (CMS) relying more on data submitted by plans to focus its oversight efforts. Plans are also being asked more and more to certify and attest to the information they provide to CMS as well as report process and outcome data for subsequent review and analysis by CMS. Many payers are ill-equipped to manage relationships with government agencies and to implement stringent government operational requirements. New entrants first need to submit to the government an application and competitive bid — essentially a business plan describing their plan designs and implementation details. Creating this document and more significantly the proposed products and services is a formidable strategic and logistical challenge. Once accepted, payers need to learn to continuously monitor their plans' regulatory compliance and prepare for on-site visits from the Centers for Medicare and Medicaid Services (CMS). In addition, more and more plans have entered the Medicare Advantage market. As such plans face greater competition and from different types of competitors than in the past, particularly from private-fee-for-service (PFFS) plans, the fastest growing type of Medicare Advantage plan. In addition to performing activities to ensure regulatory compliance, plans must identify and implement operational improvements and refine its short and long term strategies for its Medicare products in order to remain competitive.
Medicare Prescription Drug Program (Part D)
Although payers can offer Medicare Advantage as standalone health plans, CMS requires at least one Medicare Advantage plan to be paired with a prescription drug plan. This requirement adds a level of complexity and risk that may dissuade some smaller payers from entering this potentially lucrative market. Plans can also offer stand-alone prescription drug plans to supplement Medicare beneficiaries in Original Medicare.
As with Medicare Advantage, applying for CMS approval to sell Part D plans requires payers to specify in detail their benefit structures, pharmacy network, how the business will be run, and how they will oversee their potential relationships with Pharmacy Benefits Managers (PBMs). Designing a prescription drug benefit is a complicated process of balancing actuarial and operational issues. Plans need to deliver benefits that are actuarially equivalent to those mandated by the government, while steering members toward medications that enable the plan to make a profit.
Payers able to maintain good relations with the government and stay compliant with CMS's stringent rules and regulations can make money by offering Part D plans. Payers' biggest risks are inadequate vendor oversight and failure to track transactions accurately or to submit them properly. Poor management in any of these areas can result in severe financial consequences in the form of sanctions, fines, and repayments.
How we can help you
The Medicare Advantage and Medicare Part D prescription drug programs present significant challenges for health plans familiar with and new to the Medicare market. PricewaterhouseCoopers' cross-functional teams bring together professionals with experience in both public and private sectors who understand the stringent and complex regulations that govern how you need to design and implement your Medicare Advantage and Part D plans. We can help you with benefit design and pricing, strategic planning, preparation of applications and competitive bids, sales and marketing analysis, plan implementation, network development, and medical management.
We help payers with:
- Assessing, designing, constructing and implementing Medicare Advantage and Part D processes to improve operational performance
- Evaluating compliance with Medicare Advantage and Part D regulatory requirements
- Designing short and long-term strategies for Medicare Advantage and Part D lines of business
Case study
Payer leverages outsourcing to expand its Medicare-related business*
