Medicare Advantage/Special Needs Plans: Considerations for a Provider-Led Frontier August 2018

1. Medicare Advantage/Special Needs Plans: Considerations for a Provider-Led FrontierAugust 2018

2. Agenda • What is Medicare Advantage and Special Needs Plans? • Current environment: Trends & Policy • When Providers take the Lead?

3. What is medicare Advantage and a Special needs plan?

4. Types of Coverage

5. Medicare Advantage: Overview • Medicare Advantage (MA) is an alternative to original Medicare fee-for-service (FFS) offered by private health plan companies (like an HMO or PPO) approved by Medicare and governed by a contract • Sometimes called Part C or MA Plans • Cover Medicare Part A (hospital insurance) and Part B (medical insurance) services except for hospice care. Most plans also include prescription drug coverage (Part D) • Some MA plans offer additional supplemental benefits such as: care coordination, eyeglasses, dental, and wellness services • Private insurers are responsible for deciding rules, restrictions, and costs of their MA plans; they are prohibited from charging more for some services, including SNF

6. Types of MA Plans Preferred Provider Organization (PPO) Health Maintenance Organization (HMO) Private Fee-for-Service (PFFS) Special Needs Plans (SNP) HMO Point of Service Medical Savings Account (MSA) Programs of All-inclusive Care for the Elderly (PACE) 1876 Cost Plans

7. Special Needs Plans (SNPs) • A type of MA plan that provides focused and specialized health care for specific groups of people, like: • Dual eligibles SNP for those eligible for both Medicare and Medicaid • Institutional SNP for those requiring 90 days + of nursing home care • Chronic Care SNP for one of 15 chronic medical conditions (e.g., ESRD). 641 SNP plans nationally DSNPs = 412 ISNPs = 97 CSNPs = 132

8. How it Works -SNP Requirements Must comply with MA plan rules but some additional requirements apply Eligibility is limited to targeted population for each SNP Must include Part D prescription drug coverage Must have an evidence-based Model of Care (MOC) aligned with the National Committee for Quality Assurance (NCQA) standards and approved by CMS

9. How it Works - SNP Requirements • Quality: same quality improvement requirements as other MA plans but tailored to the special needs of individuals served by the SNP • SNPs must conduct both a Chronic Care Improvement Program (CCIP) and a Quality Improvement Project (QIP) targeting the special needs population that it has selected to serve • 4 additional quality measures: • Care management • Medication review • Functional status • Pain assessment

10. Medicare Advantage: Special Needs Plans

11. Institutional Special Needs Plan (ISNP) ISNP Eligibility Institutional Equivalent SNPs ISNPs may also enroll community-dwelling individuals who require an institutional level of care, prior to having at least 90 days of such care, if: A CMS-approved needs-assessment is conducted by an independent entity The results indicate the individual’s condition makes it likely that either the length of stay or the need for an institutional level-of-care will be at least 90 days • Restrict enrollment to Medicare Advantage (MA) eligible individuals who require or are anticipated to need 90 days or more of care and services provided in: • A long-term care (LTC) skilled nursing facility (SNF) • A LTC nursing facility (NF) • An intermediate care facility (ICF) for the developmentally disabled • An inpatient psychiatric facility • An assisted living facility (ALF)

12. DSNP: Dual-Eligible Beneficiaries • Population: Individuals who qualify for both Medicare and Medicaid; plans can limit enrollment to specific types of dual-eligibles • Services: Combines Medicare and Medicaid benefits • Medicare: Part A (Hospital), Part B (Doctor and some preventative), and Part D (Pharmacy) • Medicaid: provides additional medical coverage including doctor visits, nursing home care • Often includes Dental, Vision and Hearing, not included in Medicare Part A or Part B • Copays and cost sharing is either $0 or decreased and paid by Medicaid

13. Fully-Integrated Dual Eligible SNPs (FIDE SNPs) • FIDE SNPs must: • Provide dual eligibles access to Medicare and Medicaid benefits under a single plan with an aligned care management model and specialty provider network • Have a state contract to offer a capitated benefit package that includes acute, primary care and LTSS benefits, consistent with state policy • Employ CMS and state approved policies and procedures or integrate enrollment, member materials, communications, grievance and appeals, and quality improvement

14. FIDE SNP and Rates • FIDE SNPSs may be eligible for: • The PACE frailty factor payment adjustment reflects the cost of treating high concentrations of frail individuals if their risk scores indicate a “similar average level of frailty” as the PACE program

15. Chronic Condition SNP (C-SNP) Medicare Advantage plan targeting benefits for persons with one or more of the following severe or disabling chronic conditions: • Chronic alcohol and other drug dependence • Autoimmune disorders • Cancer (excluding pre-cancer conditions) • Cardiovascular disorders • Chronic heart failure • Dementia • Diabetes mellitus • End-stage liver disease • End-Stage Renal Disease (ESRD) requiring any mode of dialysis • Severe hematologic disorders • HIV/AIDS • Chronic lung disorders • Chronic and disabling mental health conditions • Neurologic disorders • Stroke

16. How it Works – Applying to be a Plan • Annually MA and SNP plans submit a competitive bid to CMS • Applicants with a CMS approved MA-PD contract in place only need to complete the SNP portion of the MA application • MA premiums are set through the bidding process • Each county in the plan’s service area has a payment benchmark based on county-level payment rates, national growth rate in per capita Medicare spending and Hierarchical Condition Category (HCC) CC Risk Adjustment • Benchmarksset the bidding target and represent the maximum amount CMS pays. Enrollee premiums are higher when the plans bid above the target

17. How it Works – Applying to be a Plan (cont.) • Supplemental Benefits: • Plans that bid below target receive a portion of the difference or a “rebate”, which they must use to provide supplemental benefits • Higher quality plans (5-star rating system) receive more of the rebate and therefore are able to provide richer supplemental benefits

18. How it works – Payment • Fixed Monthly Payment Per Enrollee: CMS pays MA or SNP plan per member per month(PMPM) to cover Medicare Part A, B & D services • Risk adjusted Payment: based off Hierarchical Condition Categories (HCCs) that adjust for health expenditure risk; this is set annually • Assessment and documentation of enrollees’ needs are critical to maximize payment • Bonus payments: MA plans receive 5% bonus if their performance on 5-star quality rating system measures is 4 stars or higher • MA-PD plans rated on up to 48 unique quality and performance measures • 5-star plans can market year round not just during annual enrollment • Greater flexibility how care is delivered and what can be paid for (e.g., Can waive 3-day hospital stay to receive SNF care)

19. ISNP PMPM & Medical Loss Ratio • 85% must be spent on care • Payments for covered services • Capitated Per Member Per Month to SNF for preventive care, care management, etc. = new SNF revenue • 15% is used on administrative costs and profit for the plan

20. Current environment: Trends & Policy

23. Medicare Advantage Penetration Across States National Average expected to grow to 41% by 2027 Source: Congressional Budget Office, “Medicare – Congressional Budget Office’s January 2017 Baseline,” January 24, 2017. Available at: https://www.cbo.gov/sites/default/files/recurringdata/51302-2017-01-medicare.pdf.

24. Fully-Integrated Dual-Eligible SNPs (FIDE SNPs) • FIDE SNPs must: • Provide dual eligibles access to Medicare and Medicaid benefits under a single plan with an aligned care management model and specialty provider network • Have a state contract to offer a capitated benefit package that includes acute, primary care, and LTSS benefits, consistent with state policy • Employ CMS and state-approved policies and procedures or integrate enrollment, member materials, communications, grievance and appeals, and quality improvement

25. MA Enrollee Demographics Sources: AHIP Medicare Advantage Demographics Report, 2015, published June 2018

26. MA Enrollment Trends Source: “The Medicare Advantage Opportunity: How payers and providers can capitalize on this growing segment,” Cerner 48% of new MA plan beneficiaries are newly eligible for Medicare – younger, healthier 41% of Medicare enrollees are projected to be in MA plans by 2026 94% of MA Enrollees are satisfied with only 2% returning to Medicare FFS

27. National Observations • Significant growth in managed care in both Medicare and Medicaid • Other risk-based, alternative payment models are also increasingly impacting Medicare FFS beneficiaries as the Center for Medicare and Medicaid Innovation continues to roll out these models • Federal Policymakers appear committed to: • Moving away from FFS to Value-Based Payment • Expanding MA • Increasing expectations of providers to deliver value • Evidence that gainsharing is not occurring when acute or primary care control the dollars under these models

28. 2019 Key Policy Developments Special Needs Plans permanently reauthorized and new requirements to better integrate with LTSS and Behavioral Health MA plans supplemental benefits expanded to allow some Home and Community Based Services MA plans to be permitted to offer more targeted and flexible benefit offerings by health status or disease

29. New MA Supplemental Benefits • Beginning with CY2019 plans • CMS and Congress are changing what MA plans can offer as supplemental benefits – some HCBS • CMS reinterpreted “primarily health-related” for CY2019 • Congress via the Bipartisan Budget Act takes it further for CY2020

30. List of Newly Qualifying Supplemental Benefits • Adult Day Services • Assistance with activities of daily living (ADLs)/Instrumental ADLs (IADLs) provided outside the home • Education to support performance of ADLs/IADLs • Physical maintenance/rehabilitation activities • Social Services to ameliorate impact functional/psychological impact of injuries or health conditions, reduce emergency room use • Recreational and social activities or meals – as long as purpose is primarily health related and provided by licensed/qualified staff • Home-based palliative care (life expectancy > 6 months)

31. List of Newly Qualifying Supplemental Benefits (cont.) In-home support services for short periods of ADL/IADL assistance needed due to medical condition or disability Pain management (medically-approved, non-opioid) Memory fitness benefit Home & Bath Safety device & modifications Transportation to help with health needs

32. When Providers Lead the Plan

33. Why now? Changing Payment Environment • Major payers are moving from FFS to paying for value – quality + lower cost • Value-based payment program 2% Medicare FFS • New SNF Prospective Payment System(PPS) – Patient Driven Payment Model • SNF Quality Reporting Program penalty = 2% • Risk-based models are being tested: Bundled Payment, Accountable Care Organizations • Rising MA penetration and Medicaid Managed Care LTSS adoption • Government and employers seeking greater predictability on costs • Providers now subject to multiple payers with multiple ways of doing things

34. Why now? • Changing care delivery patterns • Disrupting the amount and type of care and services provided • Derive savings from Post Acute Care (PAC) delivery changes and substitutions of care • Reduced hospitalizations = fewer Skilled Nursing Facility stays • Shorter SNF Lengths of Stay • Rise of preferred provider networks, often exclude smaller/single site organizations • Patient determines payer and model, PAC/LTSS provider has little control over terms • Accountable Care Organization and Bundled Payment attribution, managed care enrollment • Pain with little or no gain: PAC and LTSS providers generating savings but not receiving a share • Managed care, Comprehensive Care for Joint Replacement (CJR) and Bundled Payment Care Improvement-Advanced (BPCI-A) bundles, and ACOs

35. Who is getting in? Providers LeadingAge State Affiliates Partners

36. Considerations: Risks and Investments • You need to become a health insurer • Upfront investment ~ $2M + reserves • Obtaining enrollees • About 500 to breakeven; 1000+ to generate revenue • Timing in MN – 2019 transition from MA cost plans to MA risk plans • Building a provider network • The competition - other plans and systems - and impacts on other business revenue • The capital call • Choosing the right partner(s)

37. Barriers to entry and success • Culture Change: New business model, requires new way of thinking • Your staff • Other provider partners: hospitals, physicians, etc. • The people you serve • Funds to start up and support a plan • Future funds when medical expenses exceed projections • Must have a care model and longitudinal care management

38. Benefits to Provider-Owned MA plan Prospective vs. Retrospective payment: you get the money/budget to care for people upfront and then must manage; don’t have to wait for CMS to calculate whether you are over/under a target. You get to choose your partners – provider network Your good deeds are rewarded: work to improve quality, reduce length of stay and readmissions is financially rewarded Knowledge of resident enrollees’ needs and trusted relationship Full view of utilization patterns and costs via claims data Preemption:once enrolled in a SNP, the individual is no longer eligible to be attributed to a Medicare ACOs, bundled payment, or similar CMS value-based payment demo or pilot, etc. Additional flexibilities:choose your benefit design, 3-day hospital stay waivers to allow to treat in place

39. Managed Care Models

41. Brown Univ. Study: MA vs. FFS on Hips • Evaluated outcomes for MA and FFS beneficiaries with hip procedures between 1/1/2011 – 12/31/2015 • Findings: • SNF Length of Stay (LOS) was 5.1 days shorter under MA • MA beneficiaries had an avg. 463 fewer therapy minutes • Considerations • Minor difference in the readmission rate • Did not look at impact on average cost per beneficiary • Did not track home health utilization when SNF LOS was shorter • MA plans had a care manager assigned to the beneficiary and who was actively engaged in the discharge planning process • FFS beneficiaries had a greater rate of cognitive impairments • Results not generalizable Source: http://journals.plos.org/plosmedicine/article/file?id=10.1371/journal.pmed.1002592&type=printable : PLOS Medicine, June 26, 2018

42. PPHP Experience • PPHP ISNP - SNF patients’ actual medical costs drop to approximately 73% of the premium • Medicare in the LTC patient has been totally unmanaged until now • SNFs are in great position to reduce hospital costs –the main driver of the cost of patient care

43. AllyAlign Reported Outcomes • 40% - 80% enrollment penetration • Majority of Model of Care plan submissions received 100% score from NCQA • Results: • Members receive average of 2.8 NP visits per month • Hospitalizations decrease in year 1 of new plans by 30% • Preliminary star ratings show 4 and 5 star rating across 44 of 46 eligible metrics

44. AllyAlign Results 2016 2017