Medicare Advantage, Part D fines slow in 2015

The CMS jumped out of the gate in 2015 with a spate of fines for noncompliant Medicare Advantage and Part D plans, but that pace didn't hold up for the rest of the year.

In 2015, the CMS issued $4.72 million in civil monetary penalties to insurers that offer private Medicare and prescription drug plans, down from the $4.93 million in fines imposed in 2014. The CMS has used fines and the more serious enrollment sanctions in recent years to crack down on plans that don't follow Medicare's coverage rules.

The decreased quantity of fines doesn't mean the government is easing off the enforcement pedal. Several observers believe the previous penalties have forced insurers to improve their operations.

“It's not that CMS is letting up,” said Mark Joffe, an independent attorney based in Washington, D.C., who works with Medicare health plans. “My guess is CMS is finding that plans realize that these types of errors are taken very seriously and what you need are checks and double checks.”

When asked if plans were getting better at compliance or if oversight was tapering off, a CMS spokesman said: “We haven't completed all 2015 audits.”

Richard Lieberman, chief data officer at Mile High Health Analytics, said the lower penalty amount in 2015 likely means plans have taken CMS' enforcement message to heart. He also believes the CMS will continue to monitor several Medicare issues closely.

One primary issue is drug formularies. Most of the fines and enrollment sanctions dished out over the past two years have involved unclear or inaccurate prescription drug information. For example, seniors enrolled in Medicare Advantage and Part D may have been inappropriately denied their medications, mistakenly used an out-of-network pharmacy because it was marked as in-network or didn't have the resources to file a grievance. Drug access is vital for seniors, and the CMS has said it does not want private payers impeding that access.

“CMS gets infuriated when a member goes to a pharmacy counter and can't get their meds,” Lieberman said. “CMS is really going to come down hard on that.”

Aetna was penalized $1 million last year for inaccurate pharmacy network information, the largest fine of the year. Many plans farm out their drug functions to pharmacy benefit managers, and that means PBMs have also been failing. Joffe said he believes PBMs have been improving, although their progress is far from over.

The immediate financial punishments are still somewhat small. A five- or six-figure fine only represents a sliver of most insurers' business, but that money comes directly from their bottom line. More worrisome for insurers, observers argue, are so-called intermediate sanctions, which could ultimately lead to getting kicked out of Medicare. However, termination from the program is rare.

The CMS issued three suspensions in 2015, compared with five in 2014. The most recent came in November, when the CMS suspended the enrollment of poor seniors at St. Louis-based Alexian Brothers Community Services, an affiliate of Ascension Health.

Fines and sanctions also matter for plans that want to retain or expand their Medicare contracts. Every year, the CMS conducts reviews of Advantage and Part D plans. The agency awards negative points to insurers that receive warning letters about noncompliance, are fined, have enrollment suspended or fail in several types of other categories. For 2017, the CMS will weigh 11 different “performance categories.” Plans with a lot of negative points put their Medicare contracts in jeopardy.

“It basically is a guide to determine whether an organization can expand their business,” Joffe said. “These are exceedingly important from plans' perspectives.”

This year, the CMS has said it will ramp up auditing of network adequacy. Medicare Advantage enrollees across the country have complained that their doctors are no longer in-network after they had already signed up for the plan, and new members have said doctors aren't accepting new patients even though they are listed as in-network providers. Insurers are supposed to keep provider directories up to date, and noncompliance can now result in hefty fines.

“CMS is definitely going to be focused on it, and they'll be giving plans a lot of heartburn,” Lieberman said. “Whether they'll actually be penalizing plans this year, they probably don't have the data yet.”