October 04, 2019

Increasing the Advantage of Medicare Advantage: Decoding President Trump’s Medicare Executive Order

On October 3, President Donald Trump signed an executive order (EO) focused on the Medicare program, titled, “Executive Order on Protecting and Improving Medicare for Our Nation’s Seniors.” The EO offers expected political text on the importance of Medicare and the perils of “Medicare for All” proposals. Beyond the obligatory rhetorical flourishes — the original title of the EO was reportedly “Protecting Medicare From Socialist Destruction” — the EO is very substantive in laying out the Trump administration’s vision for improving the Medicare program as it currently exists. It addresses several areas of Medicare policy related to improving the original Medicare delivery system for both participating beneficiaries and providers and contains a series of new directives that appear designed to further the advantages of Medicare Advantage (MA).

MA is the private plan option within the Medicare program offered to the nation’s 60 million beneficiaries with original Medicare. The program has grown rapidly in the last decade – from 11 to 22 million – because MA plans frequently offer more benefits and more favorable cost-sharing than is possible in original Medicare. Over the last three years, the Trump administration has implemented several policies that have further increased MA’s value proposition.

New Flexibilities and Member Engagement Opportunities for MA Program

The new order directs the U.S. Department of Health and Human Services (DHHS) – and thereby the Centers for Medicare & Medicaid Services (CMS), which administers Medicare – to amend the MA program in another critical way. MA organizations have long argued that certain CMS policies disadvantage MA. For example, Medicare fee-for-service (FFS) operations have a default enrollment path that puts new beneficiaries into original Medicare while MA organizations must locate, educate and convince individual enrollees to opt into MA. Under this EO, CMS must ensure original FFS Medicare, to the extent permitted by law, is not “advantaged or promoted over” MA. EO Sec. 3(a)(iii).

Could this new EO mean we will see a MA payment model out of CMS’ Innovation Center that auto-enrolls beneficiaries into certain MA plans? MA plan sponsors and program stakeholders should stay tuned.

Other provisions of the EO will widen the benefits gap that already exists between MA plans and original Medicare. For example, the EO gives DHHS one year to propose regulations which will:

  • Loosen restrictions on MA benefits and plan designs, including telehealth services. EO Sec. 3(a)(i).
  • Examine and implement policies that encourage the growth of Medicare Medical Savings Accounts, or MSA plans (a consumer-driven product type within MA that was created in 1997 but has not yet gained significant footing the Medicare market). EO Sec. 3(a)(i).
  • Implement a demonstration to allow MA organization to “share” funds and rebates with members when the plan successfully manages their care. EO Sec. 3(a)(ii).
  • Allow telehealth providers to count in the methodology for determining a MA plan’s network adequacy (a policy that CMS is already testing via a demonstration). EO Sec. 4(b).
  • Modify the current Value-Based Insurance Design (VBID) demonstration to “remove any disincentives” for MA plans to cover new technologies and items that could save money and improve the quality of care. EO Sec. 6(b).

Original Medicare Facing a Revamp

Beyond MA, there are important elements of the EO focused on original Medicare. The order:

  • Requires DHHS to report on approaches to modify FFS reimbursement practices to resemble those of MA plans, “encourage more robust price competition” and “inject market pricing into Medicare FFS reimbursement.”
  • Calls for DHHS to recommend approaches for transitioning original Medicare to “true market-based pricing” that might include shared savings with providers and competitive bidding. EO Sec. 3(b) and 9(b).
  • Allows CMS to consider a broad quality rating system for FFS providers, similar to the MA Star Ratings System.

These approaches are already in use in portions of the original Medicare program but the EO appears to envision broad implementation of these approaches. Relatedly, the EO directs DHHS to examine implementing so-called site neutral payments, a controversial policy that CMS has previously attempted to implement only to suffer reversal in court. EO Sec. 7.

In addition, the EO mandates that DHHS propose regulations or subregulatory strategies by 2021 to curtail fraud, waste and abuse in Medicare. EO Sec. 9(a).

Finally, the EO directs DHHS and the U.S. Social Security Administration (SSA) to propose changes to make it easier for beneficiaries and providers to opt out of Medicare. This includes proposing changes within 180 days of the order to Medicare enrollment rules that would allow people who decline Medicare Part A to retain their Social Security benefits and, within one year, take actions to make it easier for providers to engage in so-called private contracting with Medicare beneficiaries. EO Sec. 11.

As with all executive orders, this one directs DHHS (and other agencies) to perform certain work and issue regulations and subregulatory guidance. The real impact of the EO, therefore, must be measured by the forthcoming issuances from CMS and other agencies. With the Trump administration soon entering its final year, the calendar will work against full implementation of this EO, particularly if Democrats capture the White House or both houses of Congress in the 2020 election – in which case, Congress could seek to reverse late-issued regulations via the Congressional Review Act (CRA). Nonetheless, the EO is a strong statement of the Trump administration’s vision and work plan for transforming Medicare.

For more information about the EO or its potential impact on MA plans, the MA VBID demonstration, or accountable care organization (ACO) models, contact the authors.

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