Earlier this week, the Centers for Medicare and Medicaid Services (CMS) released a memo to Part D plan sponsors with some additional information about submission of calendar year (CY) 2020 Part D plan bids. The bid submission deadline is June 3, 2019 and many stakeholders had been asking whether the recent rebate proposal would be finalized before this deadline and how that might impact bids. As expected, the memo confirms that the rebate proposal will not be finalized be the bid submission deadline.
This is the second memo CMS has released relating to Part D bids. In April, CMS provided guidance to plans, saying that all bid submissions should be consistent with Anti-Kickback Statute law and regulations in effect at the deadline. Essentially, plans would submit bids based on the current rebating system, not based on the administration’s February 2019 rebate proposal.
At that same time, CMS announced a two-year, voluntary demonstration that would “test an efficient transition” to the new rebating system should the proposal be finalized. This demonstration would modify Part D risk corridors, narrowing them to 0.5 percent. Plan sponsors would have to cover 0.5 percent of the cost of underestimating premiums and then Medicare would cover 95% of cost beyond that amount. Participants who opt to enroll in the demonstration would have to participate in both years. The memo released this week includes answers to a number of questions CMS said it has received from stakeholders; many of these instruct plans to submit bids consistent with regulations current to the submission deadline.
While the rebate proposal will not be finalized before the submission deadline, the administration is still likely to eventually release a final rule adopting the new rebate structure. Administration officials have repeatedly touted the proposal as an effort towards transparency and a way to put downward pressure on the list prices of drugs. This policy change is also a major component of the administration’s stated priority to lower drug costs and out-of-pocket expenses for beneficiaries. According to the administration’s recently released regulatory agenda, the rebate rule is scheduled for release in November 2019 while the International Pricing Index is supposed to be proposed in August 2019.
HHS may choose to finalize the proposal after the June 3rd bid submission deadline and still have the rebate change go into effect in CY 2020. This means the demonstration project will be in effect for CY 2020 and 2021. Since premiums are likely to go up in response to the change in rebates, this demonstration will minimize the impact felt by beneficiaries since the government will be subsidizing more premium costs over the two-year demonstration. Plans will be incentivized to come in lower on their plan bids since the government will be covering a large portion of underestimated premium costs. With an election cycle quickly approaching, the administration seems to be looking to minimize push-back from beneficiaries who will be heading to the voting booth shortly after their proposal would take effect.