Medicare Advantage: 2023 Final Rule Focuses on Social Determinants of Health and Utilization Review

Finalizing most of the provisions of a proposed rule (Proposed Rule) issued in December 2022,¹ the Centers for Medicare & Medicaid Services (CMS) issued a massive rule (Final Rule)² amending regulations for Medicare Advantage (MA or Part C), Medicare Cost Plan, the Medicare Prescription Drug Benefit (Part D) programs, and Programs of All-Inclusive Care for the Elderly (PACE).  The changes may have significant impact on MA Organizations (MAOs), providers and suppliers of services to MAOs, and Medicare managed care beneficiaries.

The effective date for the Final Rule is June 5, 2023, with the provisions in the Final Rule applicable to coverage beginning January 1, 2024 (with several exceptions noted throughout the preamble).  Non-CMS commenters are already questioning how the effective date for policies identified as “clarifications” will be determined.  Readers should carefully review the preamble to the Final Rule (Preamble) as CMS has included significant contextual commentary in addressing the wide-ranging comments, which totaled nearly 1000.

In the Preamble, CMS stated that it intends to address remaining proposals from the Proposed Rule in subsequent rulemaking.  As summarized by CMS,³ the Final Rule’s major revisions impact the following focus areas:

• Parts C/D Quality Rating Systems;
• Health Equity in Part C;
• Utilization Management Requirements;
• Parts C/D Marketing;
• Behavioral Health in Part C;
• Enrollee notification requirements for Part C Contract Terminations;
• Limited income newly eligible transition (LI NET); and
• Expanding Eligibility for low-income Subsidies under Part D.

This article will focus on the Final Rule’s health equity and utilization management provisions.

Health Equity in Part C⁴: Social Determinants of Health and Health Equity

The Final Rule made four primary updates to the MA Health Equity elements.  These changes are consistent with CMS’ “Framework for Health Equity 2022-2032” issued in February 2023, aimed at addressing longstanding inequities in the U.S. health care system.

The purpose of these modifications is to support the non-medical aspects of health care, in particular, accessing care.  When underserved or otherwise missed populations are encouraged to access care, providers can catch and treat problems sooner, resulting in better overall outcomes and minimizing health disparities.

First, the Final Rule clarifies and extends the requirement to provide care in a culturally competent manner.  This subsection will be renamed “Ensuring Equitable Access to Medicare Advantage (MA) Services” and will be expanded from assisting “those with limited English proficiency or reading skills, and diverse cultural and ethnic background,”⁵ to affirmatively include the following populations:

1. with limited English proficiency or reading skills;
2. of ethnic, cultural, racial, or religious minorities;
3. with disabilities;
4. who identify as lesbian, gay, bisexual, or other diverse sexual orientations;
5. who identify as transgender, nonbinary, and other diverse gender identities, or people who were born intersex;
6. who live in rural areas and other areas with high levels of deprivation; and
7. otherwise adversely affected by persistent poverty or inequality.

The Final Rule explains that this list was always intended to capture “all enrollees,” even if they do not specifically fall into an enumerated category and the expanded examples will better signify CMS’ intent.

Second, MA organizations will be required to supplement their provider directories with the following information:

• Non-English languages spoken by each provider; and
• Provider/location accessibility for people with physical disabilities (including ASL).

CMS’ MA and Section 1876 Cost Plan Provider Directory Model, which describes best practices for provider directories, already encourage MAOs to include these two elements.  As such, the Final Rule codifies what were previously suggestions into actual regulatory requirements.  However, note that CMS did not finalize its proposal for MAOs to notate Medication for Opioid Use Disorder (MOUD) waivered providers in their provider directories.

Third, the Final Rule will require MA organizations to offer digital health education to enrollees with low digital health literacy.  With the rise in covered telehealth benefits, CMS hopes that this instruction will help reduce disparities in the use of telehealth.  In the Final Rule, CMS explained that the gaps in telehealth access negatively affect populations that already suffer from health disparities, and this is in part due to low digital health literacy.  This offering by MAOs is designed to minimize those gaps by helping teach enrollees how to access and utilize telehealth benefits.  MAOs will need to make information on their digital health education available to CMS upon request.

Fourth, the Final Rule amends requirements for the MAO’S Quality Improvement (QI) Programs.  Specifically, MAOs will now be required to incorporate at least one activity into their QI Programs that is specifically targeted at reducing health disparities for its enrollees.  This change is intended to expand the ways in which MAOs can address gaps in health care beyond the limited requirements already included in the QI Program regulations.  For example, CMS suggested the examples:  “improving communication, developing and using linguistically and culturally appropriate materials (to distribute to enrollees or use in communicating with enrollees), hiring bilingual staff, community outreach, or similar activities.”⁶

Utilization Management Requirements

As justification for the Final Rule’s identified guardrails, CMS noted that it had received feedback that utilization management in MA plans, especially prior authorization, could sometimes create a barrier to patients accessing medically necessary care.⁷ CMS further referenced recent Office of Inspector General (OIG) findings critical of MA plans’ current prior authorization practices and recommending that CMS take specific actions to address OIG’s concern that inappropriate denials might prevent or delay beneficiaries from receiving medically necessary care.  The Final Rule provides “minimum standards for an acceptable benefit design … in addition to establishing important [beneficiary] protections. . . .”⁸

In the Preamble, CMS observed that as originally stated in the June 2020 Final Rule, MAOs must cover all Part A and B benefits (excluding hospice services and the cost of kidney acquisitions) on the same conditions that items and services are furnished in Traditional Medicare.⁹ In the Final Rule, CMS concludes that this basic tenet means that limits or conditions on payment and coverage in the Traditional Medicare program—such as who may deliver a service and in what setting a service may be provided, the criteria adopted in relevant National Coverage Determinations (NCDs) and Local Coverage Determinations (LCDs), and other substantive conditions—apply to set the scope of basic benefits as defined in 42 C.F.R § 422.100(c).  Flexibility for MA plans to furnish and cover services without meeting all the conditions of coverage in Traditional Medicare (basic benefits) is limited to and in the form of the provision of supplemental benefits.

Basic Benefits:  Application of Coverage Criteria.  CMS notes that “[s]imilar to MACs in Traditional Medicare, we expect MA organizations to make medical necessity decisions based on NCDs, LCDs, and other applicable coverage criteria… to determine if an item or services is reasonable, necessary, and coverable under Medicare Part A or Part B.¹⁰ The MA plan may still apply utilization management practices, but must limit the coverage criteria used to deny coverage for an item or service so as to make accessible the basic benefits.

Three Day Stays.¹¹ In addition to the basic benefits of Traditional Medicare, the Final Rule notes that MAOs may be subject to some additional coverage requirements (or opportunities).  As an example of the application of coverage criteria that applies to MA plans but not to Traditional Medicare, CMS references the existing rule at section 422.101(c), which states that MA organizations may elect to furnish, as part of their Medicare covered benefits, coverage of post hospital skilled nursing facility (SNF) care in the absence of a prior qualifying hospital stay as a special rule that deviates from the coverage criteria articulated in Traditional Medicare.  This rule provides MA plans the flexibility to cover these stays as a basic benefit, not a supplemental benefit.  This rule continues to apply (although now renumbered as § 422.101(c)(2)).

Two Midnight Rule Benchmark Applies.  CMS confirmed the applicability of 42 C.F.R. § 412.3 (coverage criteria for inpatient admissions), while acknowledging that it is a payment rule for Traditional Medicare.¹² “[I]t is irrelevant whether Traditional Medicare considers the criteria part of a coverage rule or a payment rule, as both address the scope item and services for which benefits are available to Medicare beneficiaries under Parts A and B.”¹³ In this section, CMS distinguishes the two midnight benchmark (42 C.F.R. § 412.3(d)), which specifies when inpatient admissions will be considered covered by CMS.  The benchmark applies to MA plans, but the two midnight presumption (which is in essence an audit approach where Medicare contractors do not look behind the orders of the treating physician that inpatient care is medically necessary and reasonable if the two midnight benchmark applies), does not apply to MA plans.

Inpatient Only (IPO) List Applies to MA.  Section 422.101(b)(2) is revised to state the applicability of the IPO.  CMS notes that when there are conditions associated with a basic benefit, including the prescriber setting for the service, the MA plan must meet those conditions in order for it to be considered a basic benefit.  The same service in an alternate setting would be considered a supplemental benefit.¹⁴

Drug Therapy.  With a long discussion of the differences in coverage of drugs vs. other covered items and services, CMS explained why it did not propose to revise current regulations regarding Part B step therapy.¹⁵

When Can MAOs Apply Internal Coverage Criteria of Their Own?  When coverage criteria is not fully established for an item or service, the MA plan may create internal coverage criteria that are based on current evidence in widely used treatment guidelines or clinical literature that is made publicly available.  Section 422.101(b)(6)(i) is revised to clarify that coverage criteria are not fully established when additional, unspecified criteria are needed to interpret or supplement general provisions in order to determine medical necessity consistently; NCDs or LCDs include flexibility that explicitly allows for coverage in circumstances beyond the specific indications that are listed in the NCD or LCD; or there is an absence of any applicable Medicare statutes, regulations, NCDs or LCDs setting forth coverage criteria.

What Does Internal Coverage Criteria Require? MAOs must give public explanations of their criteria, including what the criteria is; what the criteria is based on; and how individualized determinations of medical necessity take into account the information and considerations specified in Section 422.101(c) (1).  Denials based on internal criteria must include the criteria applied in the denial notice.  In response to a query involving reliance on InterQual and MCG, CMS indicated that use of these tools, in isolation, without compliance with the requirements of sections 422.101(b) and (c) and 422.566(d), would be prohibited.  However, the MAO could use products like those identified if they complied with section 422.101(b) and (c).  Reliance on algorithms or software that do not account for an individual’s circumstances would not be permitted.  A denial must be reviewed by a physician or other appropriate health care professional with expertise in the field of medicine or health care that is appropriate.

Appropriate Use of Prior Authorization.¹⁶ CMS confirms its view that “prior authorization is an acceptable utilization management tool under the MA statutory provisions” [citations omitted and with some exclusions]. The agency rejected a suggestion from a commenter that it require MA plans to make prior authorization criteria publicly available.  The proposed regulation at section 422.138 was finalized with minor modifications to clarify the text.

Continuity of Care.¹⁷ The Final Rule includes new continuity of care requirements to be added to Section 422.122(b)(8), applicable to basic benefits only (not supplemental benefits, as clarified in a response to a commentor question).  MA coordinated care plans will be required to have, as part of their arrangements with contracted providers, policies that when enrollees are undergoing an active course of treatment, approved prior authorizations must be valid for the duration of the entire approved course of treatment (as long as the course of treatment is medically necessary to avoid disruptions in care, in accordance with factors including applicable coverage criteria).  “Course of treatment” was proposed to be defined as a prescribed order or ordered course of treatment for a specific individual, with a specific condition, as outlined and decided upon ahead of time, with the patient and the provider.  CMS also proposed a minimum 90-day transition period when an individual has enrolled in an MA coordinated care plan after starting a course of treatment (even if the service was commenced with an out-of-network provider).  This 90-day period was mirrored on the Part D transition periods to increase consistency between the two programs.

Conclusion

The Final Rule includes several provisions that may address recent concerns that certain operational approaches by MAOs have inappropriately delayed or limited beneficiary access to medically necessary and reasonable care.  The Final Rule may result in increased costs and reduced flexibility for MA plans as to how they meet the requirements to provide the basic benefits available under Traditional Medicare.  The Final Rule may also result in increased satisfaction among Medicare beneficiaries, at a time when MA enrollments continue to rise.

Copyright 2023, American Health Law Association, Washington, DC. Reprint permission granted.