The Emerging Market in Medicare Part D and Sponsor Compliance Strategies A Presentation to the...

The Emerging Market in Medicare Part D and Sponsor Compliance

Strategies

A Presentation to the Pharmaceutical Compliance Congress

November 8, 2005

John GormanPresident/CEO

Gorman Health Group, LLC2176 Wisconsin Avenue, NW

Washington, DC 20007(202) 364-8283

Fax: (202) 244-8324www.gormanhealthgroup.com

Today’s Agenda• The Emerging Market in Medicare Part D- Medicare Advantage: Local and Regional Outlook- Prescription Drug Plans (PDPs)- Employers and Retiree Groups

• Medicare Fraud, Waste and Abuse (FWA) Issues and Sanctions • Compliance and FWA Elements• Medicare Prescription Drug Integrity Contractors (MEDICs) and Their Role• Part D Plan Sponsor FWA Exposure• PBM Integrity• Subcontractor Oversight• Keys to Minimizing Exposure• Conclusions

New Medicare Part DBeneficiaries Will Have Several Coverage OptionsBeneficiaries Will Have Several Coverage Options

Must offer benefits equivalent to standard coverage to

receive subsidy

Medicare Options

Other Options

Prescription Drug-only Plan

(PDP)/ FFS Add-On

Medicare Advantage PPO Option

Medicare Advantage HMO Option

Qualified Employer Plan

Medicare Advantage PPO Option

Special Needs Plan (SNP)

Option

Must offer benefits

equivalent to standard coverage

Regional Options•Blended

benchmark•Stabilization

fund•Risk Corridors

Local (county-based)

Options

Must offer benefits

equivalent to standard

coverage on at least one plan in

portfolio

Limited Risk or Fallback Drug-

Only Plan

If insufficient number of PDPs or PPOs emerge

in the market

Medicare Risk Contracts1985 to 2005

October-05

050

100150200250300350400450500

1985

1987

1989

1990

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

1-O

ct

Source: CMS, October 2005. Note: 570 PDPs will launch on January 1, 2006.

SNPs

Convergence of Health Policy Factors Create Opportunities for SNPs

Medicaid Reform

Risk Adjustment

Part D Auto-Enroll

of Duals

Lock-In Exemptions

Regional PPO Sponsors and Revenue vs. CostRegion 1118.7%

Region 2107.7%

Region 3111.1%

Region 24108.6%

Region 22111.6%

Region 23119.6%

Region 18110.0%

Region 19116.0%

Region 16110.4%

Region 25139.9%

Region 26110.8%

Region 21117.9%

Region 17111.0%

Region 13112.4%

Region 8114.3%

Region 7119.9%

Region 14110.9%

Region 15111.9%

Region 12114.7%

Region 11110.3%

Region 6114.0%

Region 4106.2%

Region 5107.7%

Region 10111.7%

Region 9109.7%

Region 20117.7%

Source: GHG analysis adapted from CMS 2005 MA Payment Rates and 99% FFS Cost Files, January 2005.

WLP

HUM

UHC

UHC

UHC

SIE

NPA

AET

AET

BSC

HNT

HUM

HUMWLP

WLP

HUM

HUM

HUM

HUM

HUM

HUM

HUMHUM

HUM

HUM

HUM

Competitive Landscape for PDPs -- 2006

Medicare Employer EstimatedEligibles Duals Total MA Covered Non-Duals PDPs

1 ME, NH 431,000 83,000 1,102 90,510 256,388 162 CT, MA, RI, VT 1,808,000 377,000 241,554 379,680 809,766 173 NY 2,856,000 628,000 549,040 599,760 1,079,200 204 NJ 1,259,000 145,000 96,348 264,390 753,262 175 DE, DC, MD 914,000 110,000 92,290 191,940 519,770 186 PA, WV 2,532,000 296,000 528,657 531,720 1,175,623 197 VA 1,006,000 98,000 2,648 211,260 694,092 168 NC 1,292,000 235,000 68,432 271,320 717,248 169 SC 657,000 129,000 424 137,970 389,606 1810 GA 1,050,000 172,000 55,971 220,500 601,529 1811 FL 3,095,000 401,000 603,729 649,950 1,440,321 1812 AL, TN 1,702,000 338,000 154,055 357,420 852,525 1613 MI 1,519,000 197,000 21,407 318,990 981,603 1714 OH 1,794,000 152,000 237,331 376,740 1,027,929 1715 IN, KY 1,614,000 240,000 79,027 338,940 956,033 1616 WI 844,000 93,000 41,146 177,240 532,614 1717 IL 1,733,000 160,000 67,301 363,930 1,141,769 1618 MO 930,000 144,000 136,172 195,300 454,528 1519 AR 480,000 84,000 554 100,800 294,646 1520 MS 467,000 146,000 20 98,070 222,910 1521 LA 659,000 103,000 73,664 138,390 343,946 1622 TX 2,579,000 420,000 221,212 541,590 1,396,198 2023 OK 551,000 71,000 42,337 115,710 321,953 1624 KS 408,000 44,000 2,319 85,680 276,001 15

25

IA, MN, MT, NE, ND, SD, WY 1,929,000 242,000 143,324 405,090 1,138,586 18

26 NM 271,000 35,000 42,351 56,910 136,739 1727 CO 531,000 60,000 139,580 111,510 219,910 1728 AZ 800,000 82,000 209,918 168,000 340,082 1829 NV 303,000 20,000 85,726 63,630 133,644 1730 OR, WA 1,380,000 165,000 322,063 289,800 603,137 2031 ID, UT 433,000 31,000 47,539 90,930 263,531 1832 CA 4,334,000 932,000 1,420,867 910,140 1,070,993 1833 HI 186,000 24,000 28,163 39,060 94,777 1234 AK 53,000 12,000 0 11,130 29,870 11

StatesRegion

Source: CMS,Lehman Brothers and GHG Estimates, 10/05

Impact of Dual Assignments on PDPs

Source: Lehman Brothers and GHG Analysis, September 2005.

Plans with Average Average Estimated Potential Avg. Auto-Assign MarketShare Membership PMPM Monthly Revenue

1 ME, NH 83,000 12 8.3% 6,917 $130.17 $10,804,1102 CT, MA, RI, VT 377,000 9 11.1% 41,889 $124.35 $62,506,6003 NY 628,000 11 9.1% 57,091 $123.91 $84,889,6154 NJ 145,000 10 10.0% 14,500 $125.45 $21,828,3005 DE, DC, MD 110,000 14 7.1% 7,857 $127.54 $12,025,2006 PA, WV 296,000 14 7.1% 21,143 $126.67 $32,137,9897 VA 98,000 14 7.1% 7,000 $128.50 $10,794,0008 NC 235,000 11 9.1% 21,364 $130.38 $33,424,6919 SC 129,000 14 7.1% 9,214 $128.96 $14,259,29110 GA 172,000 13 7.7% 13,231 $127.23 $20,200,20911 FL 401,000 6 16.7% 66,833 $123.15 $98,766,30012 AL, TN 338,000 8 12.5% 42,250 $126.41 $64,089,87013 MI 197,000 13 7.7% 15,154 $127.30 $23,149,01514 OH 152,000 9 11.1% 16,889 $124.77 $25,286,72015 IN, KY 240,000 12 8.3% 20,000 $129.77 $31,144,80016 WI 93,000 13 7.7% 7,154 $125.35 $10,760,81517 IL 160,000 12 8.3% 13,333 $125.68 $20,108,80018 MO 144,000 9 11.1% 16,000 $125.45 $24,086,40019 AR 84,000 12 8.3% 7,000 $129.53 $10,880,52020 MS 146,000 11 9.1% 13,273 $130.47 $20,780,31321 LA 103,000 10 10.0% 10,300 $128.22 $15,847,99222 TX 420,000 14 7.1% 30,000 $125.76 $45,273,60023 OK 71,000 10 10.0% 7,100 $129.21 $11,008,69224 KS 44,000 10 10.0% 4,400 $127.52 $6,733,056

25IA, MN, MT, NE, ND, SD, WY 242,000 11 9.1% 22,000 $127.19 $33,578,160

26 NM 35,000 8 12.5% 4,375 $120.03 $6,301,57527 CO 60,000 10 10.0% 6,000 $123.00 $8,856,00028 AZ 82,000 7 14.3% 11,714 $118.70 $16,685,82929 NV 20,000 12 8.3% 1,667 $117.54 $2,350,80030 OR, WA 165,000 12 8.3% 13,750 $124.68 $20,572,20031 ID, UT 31,000 8 12.5% 3,875 $127.70 $5,938,05032 CA 932,000 7 14.3% 133,143 $117.33 $187,459,81733 HI 24,000 7 14.3% 3,429 $121.52 $4,999,68034 AK 12,000 5 20.0% 2,400 $128.74 $3,707,712

Region States Duals

PDPs to Watch

Applicant Partner ScopeAetna Aetna PM All 34 regions

Medco NA All 34 regions

HealthNet NA 6 regions

WellPoint WellPoint PM All 34 regions

Universal American Financial Corp.

PharmaCare 32 regions

United Healthcare Walgreens HI All 34 regions (AARP endorsement)

Sierra NA 8 regions

WellCare Walgreens HI All 34 regions

Heartland Alliance (6 BCBS plans)

Prime Therapeutics Upper Midwest Region

CIGNA/NationsHealth CIGNA PM All 34 regions

PacifiCare Prescription Solutions All 34 regions

Humana Argus 31 regions

Coventry Rite Aid All 34 regions

Source: company reports

Part D Final Benchmarks for 2006

Actual

(8/9/05)

Expected

(3/2005)

Difference

Base monthly beneficiary premium

$32.20 $37.37 -14%

Average Part D Benchmark (PMPM)

$94.08 $109.18 -14%

Summary

• The minimum number of plans participating in any of the regions is 11 (Region 34, Alaska).• The maximum amount of plans participating is 20

plans (NY, TX, OR/WA).• In 37 states 100% of Medicare eligibles will have

access to a PPO plan.• The number of auto-assigned beneficiaries per

organization in a given region will range from as low as 2,000 to the 6 plans in Alaska to as high as 133,000 individuals in the 7 plans in California.

Part D Projections: 2006

•GHG expects in 2006:• $112B in revenues generated for private

plans (up from $51B in 2005) – 38% ($42B) through PDPs• 900,000 new beneficiaries in MA

products (5.8M in 2005)• 14.3M in PDPs (including duals and low-

income)• Therefore, over 21M beneficiaries in some

form of managed care in 2006

Strategies Employers Are Likely to Pursue in 2006

Retiree Health Benefits: Two Choices for Employers

• For 2006, Expect Most Employers to Choose RDS but some may prefer Part D• Actuarial Equivalence - employer plan may not qualify

for the RDS• Part D offers higher subsidies, especially for employers

with low utilization • Tax status - governmental entities or nonprofits do not

realize the tax benefits of RDS• Retirees already in MA plans • LIS – may be better off in Part D• Administrative – Part D plans handle administration and

financial risk

Retiree Health Benefits: Two Choices for Employers

• For 2007 and Beyond, expect a shift to Part D • Market will be known• Financial benefits of Part D will be clearer • Time to submit Part D applications• Fewer employers will qualify for the RDS, e.g.

percent of plans meeting cap

Employer Options for Retiree Drug Coverage

EmployerProvidingRetiree

Coverage

Continue as PrimaryPayer for Retirees(assumes Rx coverage

equivalent to/better than PartD currently provided)

Subsidy

Migrate Retireesto Medicare

Part D

Endorse

Wrap/Stand-Alone

Wrap/Integrate

SponsorAnnual Decision onNext Year’s Benefit

StatusQuo

Modify

Impacts of Retiree Drug Coverage Options

Employers Retirees

RDS Administrative Simplicity

Compliance Risk

No change

Part D Subsidies could be higher than RDS

Low income retirees could benefit

Part D-Endorse Medicare primary – employer contribution small

Choice

May be less coverage

Part D–Stand alone wrap

COB issues

Different providers and formularies

Same coverage – may need to pay out of pocket and seek reimbursement

Part D–Integrated Wrap

One stop shopping

Part D plan assumes risk

New plan for drug coverage

Part D–Direct contract

Eliminate middleman

Financial and compliance risk

Seamless

Impact of Likely Employer Strategies -- 2006

• 77% of retirees likely to be in plans that continue drug benefit coverage and accept the 28% subsidy• 6% of retirees likely to be in plans that supplement

Medicare drug coverage• 4% of retirees likely to be in plans that discontinue

drug coverage• 13% of retirees in plans that do not yet know their

strategy or had a different strategy

Source: Kaiser/Hewitt Survey, December 2004.

Privatization of the Drug Market

PrivateHealth

Insurance48%

ConsumerOut-of-Pocket

30%

Medicaid,Other Public

22%

ConsumerOut-of-Pocket

18%

PrivateHealth

Insurance70%

Medicaid,Other Public

12%

Total U.S. Drug Spending

Before Medicare Drug Benefit After Medicare Drug Benefit

Sources: CMS, National Health Spending, 2002; and CBO, Issues in Designing a PrescriptionDrug Benefit for Medicare, Oct, 2002.

Compliance Strategies for Part D Sponsors

Government Oversight Structures

• CMS – Part C & D Monitoring Programs- 2-3 year on-site, regularly - scheduled audit cycle, depending on risk

assessment for MA plans (3 years for PD plan)- Focused/targeted desk and on-site audits, depending on risk

assessment• MEDICS Monitor and evaluate data and trends to identify potential

fraud, abuse, and waste in the Medicare Part D Program.- Receive reports from contractors and beneficiaries - Develop and refer cases to the appropriate Law Enforcement (LE)

Agency or to CMS for administrative action as necessary• Inspector General

- Civil Money penalties- Exclusion

• Department of Justice- Civil and Criminal Prosecution

Medicare Part D Compliance Plan Required Elements

7 Required Elements of a Part D Compliance Program• Written policies, procedures and standards of conduct regarding

compliance with all applicable Federal and State standards• Compliance Officer and Committee accountable to senior management• Effective training programs for employees, contractors, agents and

directors • Effective lines of communication• Enforcement through well-publicized disciplinary guidelines• Effective internal monitoring and auditing• Prompt response to detected offenses (e.g. payment or delivery of

drugs) and development of corrective action initiatives (e.g. repayment of overpayments and disciplinary actions)

Comprehensive Fraud and Abuse Program

• Detect, correct, and prevent fraud, waste, and abuse• Voluntary self-reporting of potential fraud or misconduct• Separate plan or integrate with the other 7 compliance plan elements

Medicare Compliance and FWA Risks

• Standard Part C Compliance Tests that will Apply to Part D Sponsors: • Fails to provide medically necessary services, if

adverse effect• Imposes excess charges on enrollees • Discourages enrollment due to health status• Misrepresents or Falsifies information • Employs or contracts with excluded individuals and

entities• Substantially fails to carry out the contract, inefficient

administration of the contract, or no longer substantially meets the contract requirements


• Administrative Sanctions- Contract Termination- Intermediate Sanctions (Suspension of enrollment and payment)

• Exclusion from all Federal Programs

• Civil Monetary Penalties- $25,000 for each failure to provide medically necessary services,

health screening or falsification of information to the Secretary- $25,000 for each determination of failure to carry out the contract

if adverse effect


• Criminal Penalties (felony conviction and up to 5 year imprisonment)• Knowing and willful false statement or misrepresentation of fact in

application for benefit or payment under a federal health care program

• Knowing and willful kickback, bribe or rebate to inappropriately secure federal funds

•

• False Claims (Whistleblowers) Act• Signature acknowledging that information is being submitted for

purposes of obtaining Federal funds triggers the FCA• FCA prohibits false or fraudulent claims• Treble damages and up to $11,000 per claim• Whistleblowers receive up to 30% of the recovery• Liability extends to those who submit the false claim and those who

“cause” the submission of the false claim• Intent to defraud is not required – mistake or negligence with

system wide effects sufficient

MEDIC Part D - Data Analysis

• Utilization Management •Medication Adherence and Persistence • Quality Assurance • Performance Measures • Coverage Determination • Long Term Care (LTC) - Pharmacy Access • Complaint Tracking

CMS Data Collection – Management Information Integrated Repository

• Performance Assessment• Data mining and standard reports will be used to

inform CMS of Plan’s performance under Part D

• Standard Required Reports• PDE data (claims data)• Eligibility data• Complaint data (CTM)• Plan-reported data (HPMS)• Plan-finder data

MEDICS Role In CMS Compliance and FWA Review & Audit – CMS’ Defense against the “Mississippi River of Dollars”

• IDIQ Contract (Indefinite Delivery – Indefinite Quantity Solicitation)

• Of the 21 “Examples” of General Fraud, Waste and Abuse in the MEDIC Statement of Work, 15 were targeted toward PBM or pharmacy related issues and business practices – 6 were Beneficiary fraud issues

- PBMs and Part D Sponsors will be at risk for the acts of their downstream pharmacy contractors for false claim submission

• Of the 12 Examples of potential Financial Fraud, all 12 will impact PBMs

- Effective cost allocation systems critical for administrative services- Rebate contracts will be under scrutiny

General Fraud and Abuse Issues

• Misrepresenting the enrollment, encounter, or prescription drug event data• Improper reporting of prescriptions dispensed to maximize

payments.• Billing for services not furnished and/or drugs not provided. • Billing that appears to be a deliberate application for duplicate

payment• Soliciting, offering, or receiving a kickback, bribe, or rebate • Billing based on “gang visits”• Billing non-covered prescriptions as covered items • Billing under Part A or Part B, and also under Part D

General Fraud and Abuse Issues (Continued)

• Dispensing without a prescription• Billing for recycled prescription drugs• Submitting false Medicare claims• Receiving duplicative co-pays or premiums from beneficiaries• Billing for brand when generics are dispensed • Altering scripts or data to obtain a higher payment amount • Misrepresentations of dates, descriptions of prescriptions or

services


• 8 MEDICs selected:• NDCHealth• Delmarva Foundation for Medical Care• Electronic Data Systems (EDS)• IntegriGuard• Livanta• Maximus Federal Services• Perot Systems Government Services• Science Applications International Corporation (SAIC)


• MEDICs’ Responsibilities include:• Review Part D and RDS plan compliance data to detect fraud• Review bids and FWA components of compliance plans• Coordinate with law officials• Conduct investigations, including audits of PDPs and sub-

contractors• MEDICs will annually audit at least 1/3 of PDP and MA plans• Risk Based Audit Strategy – conduct more investigation and

analysis with unusual billing patterns


• MEDICs Responsibilities (cont’d)• Review improper enrollment and eligibility• Review improper marketing and distribution• Audit RDS sponsors, including RDS eligibility and claims review• Conduct Part D, MA and RDS complaint investigations

MEDIC Audit Target Drivers

• Near Term:- Beneficiary Complaint Data (e.g. sales misrepresentation)- Past PBM issues identified in legal proceedings will be

focus of audit- Areas where there are questions of transparency- Eligibility and Claims Data audits for Retiree Drug

Subsidy

• Longer Term:- PDE data and comparisons with other Medicare

Claims Data- Whistleblowers- Routine on-site audit reviews (P & T, FWA

implementation etc.)

MEDIC Audit Target Drivers

• The “Good News” on MEDICS- All New to Medicare Part D- First Timers or with Some Experience- Data will take time to gather But get it right from

the start

General Keys To Avoiding the Inspector General

• Listen to the “Noise” surrounding Part D- Identify potential CMS or Congressional “hot button” issues and address

them – e.g. Beneficiaries can find appropriate education materials

• Avoid Misinterpretation of Part D Requirements – Ever watchful for changing CMS regulation or guidance

• Pay attention to past industry criticisms, jibes and legal proceedings and develop policies and oversight in the areas of concern

• Assess and audit current business and operational practices at a granular level to identify areas of exposure or lack of controls- Require process by process policy review and standards and FWA

monitoring requirements

• Ensure documentation of procedures and process descriptions

• Ensure diligence in systems configuration auditing to catch errors prior to submission

Further Keys To Avoiding the Inspector General

• Implement granular financial auditing, process controls, monitoring

• Use central tracking system for all internal FWA control reporting

• Establish routine monitoring and audits of operations- Review appropriate staffing for internal auditors- Review staffing, scope and frequency of pharmacy audit

• Monitor Enrollee grievance and appeals activity - “Enrollees who don’t get things” trigger problems- Early Warning System

• Develop corrective action plans

• Establish processes for self-reporting of potential FWA- Encourage / Incent Internal FWA issue identification & referrals- Make the FWA department well known

• Thorough training at all levels

Part D Compliance & FWA Exposure - Overview

• 5 Critical Areas for a Part D Plan Sponsor- Part D Specific Requirements – Audits in areas such as TrOOP,

Copay application, COB, PDE data, formulary changes, etc.- PBM Integrity – Major PBMs are high profile candidates for

FWA audits in areas like pricing, rebates, benefit adjudication, etc.- Subcontractor Oversight and FWA Issues – Retail pharmacies,

LTC pharmacies (Part A/D), enrollment contractor etc.- Beneficiary-Prescriber FWA Identification and Management –

Identifying and managing these issues- Sales Misrepresentation and Fraud- a new issue for PDP

Sponsors and a common CMS target and reason for sanction based on complaints

Part D Compliance & FWA Exposure - Overview

• For Each 5 Critical Areas, Part D Plan Sponsors should develop:• Tracking and Reporting mechanisms to report to CMS and

the MEDICS• Audit and Monitoring Strategies with designated Resources- On-Site or Desk Audit- Conducted by the Part D plan sponsor, the PBM, or Audit

organization• Corrective Action strategies• Training • Self-reporting of suspected FWA

Part D Specific Requirements - FWA Touch Points

• Enrollment Accuracy – LIS, Duals, Late Penalty, Proper Effective Dates

• Beneficiary Billing Accuracy• Direct bill vs. SSA• Proper Refunds to Beneficiaries, Charities• Premiums, cost sharing and accounting

• Reconciliations• General Administrative Cost Allocations• Specific program cost allocations, e.g. MTMP

Part D Specific Requirements - FWA Touch Points (Continued)

• Formulary development and beneficiary notification of formulary changes

• Generic vs. Brand

• Appeals and Grievances• Monitoring, Feedback Loops and Disciplinary

Programs

• COB data collection, working with the COB Facilitator


• TrOOP accumulation• Includes only eligible cost sharing, e.g. includes

beneficiary payments and excludes group health plan payments• Properly includes all 6 payment fields:- Patient Pay Amount- Other TrOOP- Low Income Cost Sharing Subsidy Amount (LICS)- Covered D Plan Paid Amount (CPP)- Non-covered Plan Paid Amount, (NPP)- Patient Liability Reduction due to Other Payer

Amount (PLRO)


• PDE (Prescription Drug Event) data accuracy• 100% claims data necessary to calculate risk

adjustment, LICS, reinsurance, and risk corridor payments• Proper reflection of costs to be included or excluded

in each of the 4 payment calculations, e.g.- Only Part D drugs covered under the specific plan- Risk corridor calculations must exclude

administrative costs, patient pay amounts, induced utilization, rebates, reinsurance subsidy- Reinsurance calculations must reflect full TrOOP

accounting- All calculations must properly account for all

rebates, discounts, and other price concessions

PBM Integrity FWA Touch Points

• Pharmacy Contracting, Term Application and Disclosure

• Proper Benefit Set Up And Adjudication at POS

• Eligibility Accuracy and benefit plan assignment

• Drug Pricing – AWP, MAC etc.

• Claims Edit & Processing Accuracy (e.g. Part A, B and excluded drugs)

PBM Integrity FWA Touch Points (Continued)

• Mail Order Prescription Fills

• Rebate Accounting and Pass – Through Member level detail and transparency

• E-Prescribing

Subcontractor Oversight

• Retail Pharmacy• Monitor dispensing activity of specifically identified

retail pharmacies• Retail audit by PBM or Audit organization to identify

outlier pharmacies • Desk audit on all outlier claims to determine:- Appropriateness of RX dispensed- Correct quantity and strength of medication- Correct administration of benefit design and trend

management programs- Instances of potential fraud and abuse

• On Site audit of pharmacies that continue outlier dispensing performance


• Retail Pharmacy (continued)• Automated reporting editing systems can include the

following triggers:- Dispensing volume of high profile medications (e.g.

controlled substances, medications targeted for re-sale or addicted medications)- Significant number or percent of U & C claims- Multiple instances of reversed or altered claims- Multiple pharmacy overrides to excluded or Prior

Authorized medications- Excessive units per day dispensing- High dollar medications


• Retail Pharmacy (continued)• Individual Pharmacist Audit - Based on conclusions

from the on-site audit, more focused audits of individual pharmacists may be warranted to review:- Potential cases of trafficking- Potential cases of fraud and abuse

• Retail Pharmacy audits also may include review of:- Disclosure of low cost generic- Non-submission of “zero-balance claims”- COB Audits – Duplicate Billing


• LTC Pharmacies- Example: Determining whether LTC pharmacy filed

claims should be part of a Part A Skilled Nursing Benefit- Proper destruction or return of drugs

• Enrollment and Premium Billing Subcontractors- Developing appropriate metrics and audit protocols

• Insurance Subsidiaries- Enforcing integrity downstream- Re-insurance costs if provided by subsidiaries- Subsidiary service pricing and cost allocations

Beneficiary and Prescriber FWA

• New populations and schemes may require enhanced system edits

- Addressing Issues common within the Medicaid population

• Development of Beneficiary and Prescriber Fraud, Monitoring, Investigation and Referral Unit

- Divining whether Grandma Smith or her nephew Billy is responsible for the rash of inhaler purchases- Physician submission of claim for same drug

dispensed at retail pharmacy or by infusion provider


• Physician Auditing:• Identified from review of automated or ad hoc PBM Rx

Utilization and Prescriber Utilization Reports• Focused on identification of:- High volume prescribing of specific high dollar or abuse

type of medications- Volume based tracking (number of claims, total drug

spend, targeted drugs)- Review of controlled substance prescribing patterns- Cross check of patients to eliminate critically ill patients

• Summary reports to PBM or Part D plan sponsor for further review


• Beneficiary Auditing:• Identified from automated PBM Reports or desk/on-

site audits• Focused review of individual patient RX utilization

focusing on:- Zip code analysis of where RX’s are picked up- Potential for “Grey Market” – second hand selling of

drugs with or without the beneficiaries knowledge- Multiple pharmacy utilization for the same RX- Multiple physician visits to generate same RX

Retiree Drug Subsidy FWA

• Employer or Union Plan Sponsors are accountable for accuracy and completeness of all information submitted to CMS• Application includes attestation that plan sponsor is submitting a

“claim” to the government• May delegate major data submission to CMS to subcontractors, but

still accountable• Oversight of subcontractors, including PBMs, is critical• While Attestations are sufficient for payment, ultimately all data must

be tracked to the individual retiree level by employer benefit option• Timeline – Final reconciliation 15 months after the end of the plan

year• Prevention of errors and omissions essential through monitoring

and audits

Retiree Drug Subsidy FWA

• CMS and OIG have announced that RDS audits will be a priority• MEDICs tasked to review- Actuarial Equivalence – documentation to support

attestation that Plan Sponsor coverage is equivalent to Part D- Accuracy of RDS Payments – review actual claims and

rebate data to support RDS payment requests- Creditable Coverage Disclosures – review to assure

consistent with Medicare requirements• OIG: 2005 OIG workplan includes audits of CMS controls

and 2006 audits will focus on AE, payments and CC notices

Retiree Drug Subsidy FWA Touch Points

• Actuarial Equivalence Attestations• Supporting documentation for the gross and net tests• Benefit combination assumptions for net test• Assumptions on integrated medical and drug premiums

• Subsidy Claims and Rebate Data• Controls and monitoring to assure that only claims for eligible costs

are submitted, e.g. no Part B or excluded drugs• Controls and monitoring to assure that complete and accurate

rebate data is submitted• Controls to assure no administrative costs are submitted

Retiree Drug Subsidy FWA Touch Points

• Retiree Lists• Controls and monitoring to assure that only validated retirees and

dependents are submitted• Cross checks with CMS eligibility data

• Creditable Coverage Notifications• Controls to assure that active workers and retirees get notices• Documentation to support claims that coverage is creditable for

each benefit option• Controls to assure that notices for non-creditable coverage were

issued

What Does the Future Hold?

Part D: Key Implementation Dates

DATE IMPLEMENTATION ACTIVITY

August 2005 SSA begins sending decisions to those who applied for low-income subsidies; continue to accept applications

September 14, 2005

CMS approves bids for PDPs and MA-PDs and formularies

September 15, 2005

PDP and MA-PD contracts signed

September 15 – October 15, 2005

CMS completes auto-enrollment of dual-eligibles in PDP basic plans

September 16 –November 15, 2005

Medigap issuers send written disclosures to policyholders with drug coverage informing them of their options

October 1, 2005 Approved Part D plans begin marketing

October 1, 2005 Deadline for transfer of Medicare appeals from SSA to DHHS

October 13, 2005 CMS begins distributing information to beneficiaries comparing available Part D coverage via the Medicare & You handbook mailing, 1-800-MEDICARE, and Plan Comparison web-tool and Medicare Personal Plan Finder www.Medicare.gov

October 15, 2005 Deadline for Secretary to notify states of their annual per capita drug payment amounts (“Clawback”) for 2006

http://www.medicare.gov/

Part D: Key Implementation Dates

DATE IMPLEMENTATION ACTIVITY

October 27 –November 10, 2005

CMS mails auto-enrollment information to dual eligibles

November 15, 2005 – May 15, 2006

Coordinated election period for 2006 Part D enrollment for all beneficiaries

Medicare Part A/ B beneficiaries eligible to enroll in Medicare Part D plan of their choice

November 15, 2005 –May 15, 2006

States and entities offering drug coverage provide written disclosure to Part D eligible individuals regarding actuarial equivalence

December 31, 2005 Last Day of Medicaid drug coverage for full benefit dual eligibles

December 31, 2005 Medicare drug discount card program ends for Part D enrollees (May 15, 2006 for all others)

January 1, 2006 - Part D coverage begins for all beneficiaries enrolled in a plan- Dual eligibles' auto-enrollment takes effect- Low-income subsidies for Part D coverage begin- Medigap insurers prohibited from selling new policies with drug coverage

The Politics of the MMA

• 2005 budget reconciliation will likely include $12B in Medicare savings:• Elimination of Stabilization Fund for Regional PPOs.• Codify budget neutrality policy for risk adjustment

• Outstanding MedPAC recommendation to reduce MA county benchmarks to 100% FFS, but no consensus on Hill to advance.• Program appears stable for foreseeable future.

• Impact of Medicaid reform:• Greater flexibility to states• Emphasis on Aged/Blind/Disabled into managed care.• Underscores positioning for SNPs – “one-stop

shopping”

2007 Strategic Considerations

• Part D sponsors will be facing contraction of aggregate reinsurance• Part D sponsors will be ratcheting-up control

mechanisms • Step therapy, prior authorization, quantity limits,

strict formularies • Will evidence-based practices dictate preferred drugs

or tier placement in a therapeutic class?

Immunizing for FWA

Conduct Operations GAP Analysis • Part D and RDS Operations Analysis• Compliance Program Review and Assessment

Review PBM Operations for FWA Exposure • Monitoring and audit mechanisms and staffing• Performance metrics – Internal and External Reports• Policies and procedures assessment and review• Systems tests• Contract requirements• Management Oversight

Immunizing for FWA

• Ongoing FWA Program Development • Business Process Workflow Documentation• Policy and Procedure Development• Internal Audit Procedures and Policies• Subcontractor oversight program development• Data Analysis to detect beneficiary, prescriber,

pharmacy FWA • Staff and Subcontractor training • System logic review for benefit adjudication• Sales program FWA monitoring program

development

New Marketplace

• Expanded role of private plans – growing influence of PBMs, and of Medicare regulators on them.• Increased information for plans, patients – and government.• Eventual price (rebate) transparency• comparative drug information• increased emphasis on medical evidence and outcomes

• Growing pressure on price and performance.• PDP competition and premium pressures• pay-for-performance for providers• cost-effectiveness for drugs• Expanding out of pocket costs for beneficiaries

• Increased competition• Dozens of PDPs – all majors will play• increased incentives for generic substitution

The Challenges

• Moving purchasers toward “value-based purchasing” • Better data on outcomes and quality• Pay for performance -- quality indicators• Integrating disease management and MTMP• Plan influence on provider decision-making

• Proving the market works• Helping the PDPs and MA-PDs survive • Encouraging accelerated movement toward integrated health

plans• Minimizing government intervention, reference-based

pricing/price controls, PDP failure• Helping CMS become a successful purchaser (rather than a

regulator)

How to Reach UsHow to Reach Us

Gorman Health Group, LLC

(202) 364-8283

[email protected]

The Emerging Market in Medicare Part D and Sponsor Compliance Strategies A Presentation to the...

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