Guidance on Acceptable Cost-sharing

50.1 – Guidance on Acceptable Cost-sharing (Rev. 121, Issued: 04-22-16, Effective: 04-22-16, Implementation: 04-22-16) CMS, in its annual bid review of proposed plan packages, applies categories of cost- sharing standards as detailed below. MAOs should note that benefit design and cost- sharing amounts approved for a previous contract year are not automatically considered acceptable for the following contract year. A separate and distinct CMS review is conducted each contract year. Throughout this section, the term “cost-sharing” refers to co-payments, coinsurances and deductibles (42 CFR §422.2). The categories of cost-sharing standards include the following: Maximum Out-of-Pocket (MOOP) and Combined (Catastrophic) Limits on cost-sharing: To ensure that MAO cost-sharing does not discourage enrollment of higher cost individuals, and to provide for transparent plan benefit designs that permit beneficiaries to better predict their out-of-pocket costs, all local MA plans (employer and non- employer) – including HMOs, HMOPOS, local PPO (LPPO), Regional PPO (RPPO) and PFFS plans – are subject to a mandatory maximum out-of-pocket (MOOP) limit on enrollee cost-sharing for all Part A and Part B services. In addition, both RPPO and LPPO plans are required to have a combined limit on cost-sharing that is inclusive of Eligible? Category Examples of Items/Drugs Included in this Category Non-eligible Alternative medicines Homeopathic and alternative medicines including botanicals, herbals, probiotics and nutraceuticals Non-eligible Baby items Diapers, formula Non-eligible Contraceptives Birth control pills, spermacide, prophylactics Non-eligible Convenience and comfort Scales, fans, magnifying glasses, ear plugs, insoles, arch supports and gloves Non-eligible Cosmetics Mouthwashes, bad breath remedies, deodorants, lip soothers, grooming devices, skin moisturizers, teeth- whiteners Non-eligible Food product or supplements Sugar / salt supplements, energy bars, liquid energizers, protein bars, power drinks Non-eligible Replacement items, attachments, peripherals Hearing aid batteries, contact-lens containers, etc. when not factory packaged with the original item both in- and out-of-network cost-sharing for all Part A and Part B services. The MOOP dollar limits are set annually by CMS and include all cost-sharing (i.e., deductibles, coinsurance, and co-payments) for Part A and Part B services, although an MA plan may also include supplemental benefits as services subject to the MOOP. CMS also may annually establish a lower, voluntary MOOP limit. Plans that adopt the lower voluntary MOOP limit will have more flexibility in establishing cost-sharing amounts for Part A and Part B services than those that do not elect the voluntary MOOP. MAOs must track enrollee out-of-pocket costs and should notify enrollees when they reach, or are near, the plan’s MOOP limit. For any dual eligible enrollee, MA plans must count toward the MOOP limit only those amounts the individual enrollee is responsible for paying, net of any state responsibility or exemption from cost-sharing, and not the cost-sharing amounts for services the plan has established in its plan benefit package. Effectively, this means that, for dual eligible enrollees who are not responsible for paying the Medicare Part A and Part B cost-sharing, the MOOP limit will rarely, if ever, be reached. However, plans must still track out-of- pocket spending for these enrollees. During a contract year, when an enrollee switches to another plan of the same type (for example, from one HMO to another HMO) offered by the plan, his/her accumulated annual contribution toward the annual MOOP limit in the previous plan to date is to be counted towards his/her MOOP limit in the new MA plan. As applicable, this transfer of MOOP applies to both in-network and out-of-network MOOP. Additionally, MA plans may extend the transferability of the enrollee’s contribution toward his/her annual MOOP so that it applies to an enrollee’s transfer during the contract year to any MA plan type offered by the MAO. For example, if an enrollee makes a mid-year change to move from an HMO to a PPO offered by the same MAO, his/her current contribution toward the MOOP limit may follow the enrollee and be counted towards the MOOP limit in the PPO. This allows those enrollees who are eligible to make mid-year plan changes to freely select among the diverse MA plan options offered by an MAO. Per Member Per Month (PMPM) Actuarial Equivalent (AE) Cost-sharing Requirement: The actuarially estimated total MA cost-sharing for Part A and Part B services must not exceed cost-sharing for those services in original Medicare. In addition, CMS evaluates particular service categories; inpatient facility, SNF, DME, and Part B drugs, for actuarial equivalence. MA plans should refer to annually published guidance regarding the application of this requirement. Service Category Cost-sharing Standards: As provided under 42 CFR §422.100(f)(6), MA plan cost-sharing for Part A and Part B services specified by CMS must not exceed levels annually determined by CMS to be discriminatory. In addition, under section 1852(a)(1)(B)(iii) of the Act (as amended by the Affordable Care Act) the cost-sharing charged by MA plans for chemotherapy administration services, dialysis services, and skilled nursing services for which cost-sharing would apply under original Medicare may not exceed the cost-sharing for those services under Part A and Part B. Discriminatory Pattern Analysis: CMS may perform an additional general discriminatory pattern analysis of cost-sharing to ensure that discriminatory benefit designs are identified and corrected. Additional cost-sharing guidance: • MAOs may, in certain situations, use co-payments for services that have CMS cost- sharing standards based on original Medicare coinsurance levels. In those situations, the plan may charge a co-payment that is actuarially equivalent, based on the expected distribution of costs, to the coinsurance standard; • Plans may not use different co-payment amounts that are based on the cumulative number of visits (e.g., cost-sharing of $5 for visits 1 through 5, and $10 for visits 6 and greater); • Any foundation or organization that is owned and operated by an MA plan cannot pay cost-sharing for MA plan enrollees; • Deductibles: While high deductibles are required for MSA plans, CMS will closely scrutinize high deductibles in other plan types; • Use of Coinsurance vs. Co-payments: CMS will, in its annual review of plan cost- sharing, monitor both co-payment amounts and coinsurance percentages. Although MAOs have the flexibility to establish cost-sharing amounts as co-payments or coinsurance, MAOs should keep in mind, when designing their cost-sharing, that enrollees generally find co-payment amounts more predictable and less confusing than coinsurance; • The 50% cap on original Medicare services: In order for an original Medicare in- network or out-of-network item or service category to be considered a plan benefit, plans may not pay less than 50% of the contracted (or Medicare allowable) rate and cost-sharing for services cannot exceed 50% of the total MA plan financial liability for the benefit. Consequently: o If a plan uses a coinsurance method of cost-sharing, then the coinsurance for an in-network or out-of-network service category cannot exceed 50%; o If a plan uses a copay method of cost-sharing, then the copay for an out-of- network original Medicare service category cannot exceed 50% of the average Medicare rate in that area; o If a plan uses a copay method of cost-sharing, then the copay for an in- network original Medicare service category cannot exceed 50% of the average contracted rate of that service. For example, if the plan’s service area consists of two counties with equal frequency of utilization with contracted rates for a particular service of $90 and $110 in the two counties, then the plan may uniformly charge no more than a $50 copay for that service category; and o The 50% cap is in addition to any other caps. Thus, for those service categories subject to fee-for-service cost-sharing limits (e.g. 20% coinsurance) the plan may not charge more than the fee-for-service cost-sharing limit; • Stratified co-payments for DME and/or Part B Drugs: MA plans may use a stratified co-payment arrangement for DME and/or Part B drugs provided that the copayment is non-discriminatory and follows all Medicare rules. Below is one example of stratified copayment which would be acceptable to CMS because it is not discriminatory and does not violate other Medicare rules. In the table below note that: (1) for each strata, the co-payment amount is no greater than the CMS coinsurance requirement for the lower limit of the strata, and (2) the number of co-payment strata does not exceed four. The following example complies with CMS standards. Cost Range For service Co-payment $0 - $199 $0 $200 - $499 $40 $500 - $999 $100 $1000 and above $200 • Tiered cost-sharing of medical benefits: The following guidance applies to benefit package designs that include tiered cost-sharing of medical benefits. MA plans may choose to tier the cost-sharing for contracted providers as an incentive to encourage enrollees to seek care from providers the plan identifies based on efficiency and quality data. The tiered cost-sharing must satisfy the following standards: o The plan fully discloses tiered cost-sharing amounts and requirements to enrollees and plan providers; o The services at each tier of cost-sharing are available to all enrollees; o Enrollees may not be limited to obtaining services from providers/suppliers assigned to a particular tier; and o All enrollees are charged the same amount for the same service provided by the same provider. Thus, an MA plan may offer access to two or more physician groups to which different levels of cost-sharing apply, but it may not require that an enrollee receive all needed care during the contract year from a particular provider group. Restricting enrollee choice by requiring that all services be furnished by a specific group within the network has the effect of creating multiple MA plans within one MA plan and, therefore, conflicts with the uniformity of premium and cost-sharing requirement (see 42 CFR §422.100(d)(2)). The following scenarios are examples of ‘differential cost-sharing’ rather than tiering of medical benefits and are allowed when the variation in cost-sharing is based on: o Facility settings for furnishing some services, such as diagnostic imaging services; and o In-network versus out-of-network services, as explained in sections 110.2, 110.3 and 110.6 below, and in the POS subsection of section 30.3 above. However, while MA plans may have ‘differential cost-sharing’ based on facility settings, they should include the enrollee’s entire cost sharing responsibility in a single copay. This is consistent with Medicare Advantage disclosure requirements at 42 CFR §422.111(b)(2) which require that MA plans clearly and accurately disclose benefits and cost sharing. Accordingly, in situations where there is a difference in cost sharing based on place of service, those fees should be combined (bundled) into the cost sharing amount for that particular place of service and clearly reflected as a total copayment in appropriate materials distributed to beneficiaries. • Dialysis Services: Cost-sharing for dialysis services may not exceed the cost-sharing imposed in original Medicare. The cost-sharing for out-of-network (OON) and out of service area, medically-necessary dialysis services may not exceed the in-network cost-sharing. The cost-sharing charged by MA plans for dialysis services furnished in the service area, but OON, may be higher than the in-network cost-sharing charged by the plan for the services. This guidance is summarized in Table VI. Table VI: Summary of Dialysis Cost-sharing. Cost-sharing for dialysis In-network Out-of-network In service area May be higher than the in- network, in service area cost- sharing Out of service area Must be the same as in- network, in service area cost- sharing Must be the same as in- network, in service area cost- sharing Post-Stabilization Services: The cost-sharing amount for post-stabilization services must be the same or lower for out-of-network providers as for in-network plan providers.