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September 7, 2010

Revisions to the Medicare Advantage Program

Proposed Rule

Score: 18 / 60

RULE SUMMARY

The rule proposes revisions to the Medicare Advantage (MA) program (Part C) and prescription drug benefit program (Part D) based on continued experience in the administration of the Part C and D programs. The proposed revisions clarify various program participation requirements; specify changes to strengthen beneficiary protections; ensure that plan offerings to beneficiaries include meaningful differences; improve plan payment rules and processes; and implement new policy such as a Part D formulary policy.

METHODOLOGY

There are twelve criteria within our evaluation within three broad categories: Openness, Analysis and Use. For each criterion, the evaluators assign a score ranging from 0 (no useful content) to 5 (comprehensive analysis with potential best practices). Thus, each analysis has the opportunity to earn between 0 and 60 points.

Criterion	Score
Openness
1. How easily were the RIA , the proposed rule, and any supplementary materials found online? The link to proposed rule containing the RIA is five clicks from the home page. Click on "regulations" (intuitive). The rest is unintuitive: click on "other regulations," expand the "detail" list, click on "CMS regulations," and then click on "quarterly provider updates–regulations" and select the update list from the period covering the date of the regulation. It can also be found on regulations.gov using the RIN.	4/5
2. How verifiable are the data used in the analysis? It is not clear how the estimates were made. Numerous statements that "experience with the program has shown" something without further elaboration or discussion of data. Many inputs used in cost calculations are just asserted. Wage rates are vaguely sourced to "Labor Department data."	1/5
3. How verifiable are the models and assumptions used in the analysis? The reader has to take most of the results on faith. The preamble cites one study for the Kaiser Foundation and another presented at a health research meeting in support of the claim that there are too many different plans and some have no meaningful differences. Monetized savings are simply asserted, with no explanation of how they were calculated.	2/5
4. Was the analysis comprehensible to an informed layperson? Both the preamble and the specific RIA section have a large number of program-specific acronyms that will be unfamiliar to non-specialists. The text is fairly turgid. Since the RIA simply presents benefit figures with no explanation, it is impossible to understand how HHS reached these results. Explanation of cost calculations is clearer.	2/5
Analysis
5. How well does the analysis identify the desired outcomes and demonstrate that the regulation will achieve them?	1/5
Does the analysis clearly identify ultimate outcomes that affect citizens’ quality of life? The preamble lists eight goals which are all activity- or process-oriented. The overall goal seems to be to get Medicare beneficiaries who choose Medicare Advantage and/or prescription drug coverage into plans that offer the best services at the lowest cost by improving the choices and information available to them and removing "poor performers" from the program.	2/5
Does the analysis identify how these outcomes are to be measured? The only measure of benefits presented is anticipated cost savings. This does not really measure the big picture benefits that are supposed to accrue to beneficiaries.	1/5
Does the analysis provide a coherent and testable theory showing how the regulation will produce the desired outcomes? For compliance-oriented goals, the RIA asserts that requiring such-and-such will lead to improved compliance or information. Neither the preamble nor the RIA spends much time outlining a theory of how the proposed changes will affect the big-picture goal of getting recipients a better mix of real choices.	1/5
Does the analysis present credible empirical support for the theory? Changes are assumed to produce the claimed effects with little or no suporting evidence.	1/5
Does the analysis adequately assess uncertainty about the outcomes? There is no acknowledgement of uncertainty.	0/5
6. How well does the analysis identify and demonstrate the existence of a market failure or other systemic problem the regulation is supposed to solve?	1/5
Does the analysis identify a market failure or other systemic problem? The preamble briefly argues that Medicare recipients do not always choose the optimal plan because there are too many choices of plans, some plans may not differ significantly, and they have trouble comparing plans. These might be either information problems or information processing problems.	2/5
Does the analysis outline a coherent and testable theory that explains why the problem (associated with the outcome above) is systemic rather than anecdotal? No reasoning is presented; this is just asserted.	1/5
Does the analysis present credible empirical support for the theory? Two studies are cited, but not discussed in great enough detail to show their specific empirical findings. The need for improvement is simply asserted.	2/5
Does the analysis adequately assess uncertainty about the existence or size of the problem? There is no acknowledgement of uncertainty.	0/5
7. How well does the analysis assess the effectiveness of alternative approaches?	1/5
Does the analysis enumerate other alternatives to address the problem? For many major regulatory changes, HHS considered one other option—either no action or some small variation on the regulatory approach, such as adding contract termination reasons to an existing list rather than eliminating the list because it does not cover all reasons.	2/5
Is the range of alternatives considered narrow (e.g., some exemptions to a regulation) or broad (e.g., performance-based regulation vs. command and control, market mechanisms, nonbinding guidance, information disclosure, addressing any government failures that caused the original problem)? Alternatives considered are small tweaks on the basic regulatory approach.	1/5
Does the analysis evaluate how alternative approaches would affect the amount of the outcome achieved? Alternatives are rejected with a few sentences of perfunctory discussion.	1/5
Does the analysis adequately address the baseline? That is, what the state of the world is likely to be in the absence of federal intervention not just now but in the future? The baseline is not well explained—completely unknown for the benefits (cost savings). Presumably it is current conditions?	1/5
8. How well does the analysis assess costs and benefits?	1/5
Does the analysis identify and quantify incremental costs of all alternatives considered? The analysis calculates increases in compliance costs for the alternatives chosen, but little else.	1/5
Does the analysis identify all expenditures likely to arise as a result of the regulation? The RIA reports estimated administrative cost increases due to compliance costs.	2/5
Does the analysis identify how the regulation would likely affect the prices of goods and services? The RIA calculates that the cost per enrollee will be less than $10 per year.	3/5
Does the analysis examine costs that stem from changes in human behavior as consumers and producers respond to the regulation? The analysis does not consider whether plans or enrollees will alter their behavior in ways that create additional costs.	1/5
If costs are uncertain, does the analysis present a range of estimates and/or perform a sensitivity analysis? There is no acknowledgement of uncertainty.	0/5
Does the analysis identify the alternative that maximizes net benefits? The only costs and benefits calculated are for the chosen alternatives. Net benefits can not be calculated unless the big picture benefits are measured much more broadly.	0/5
Does the analysis identify the cost-effectiveness of each alternative considered? This is not assessed, and the very incomplete calculation of benefits makes this impossible.	0/5
Does the analysis identify all parties who would bear costs and assess the incidence of costs? The analysis states that the costs will be borne by the federal government and enrollees but does not break the cost down between these two. HHS expects that the new regulatory requirements will lead to higher bid prices from providers, and so the costs will ultimately be paid by the federal government and enrollees.	3/5
Does the analysis identify all parties who would receive benefits and assess the incidence of benefits? The RIA claims there are some cost savings. It is not clear if these all accrue to the federal government or partially to enrollees. There is no discussion of the incidence of any other outcomes.	1/5
Use
9. Does the proposed rule or the RIA present evidence that the agency used the analysis? The reader really cannot tell how the decisions were made. The RIA appears to have been done after the decisions were made, not as an input into the decisions.	1/5
10. Did the agency maximize net benefits or explain why it chose another alternative? The RIA calculates a net fiscal effect, but non-monetary benefits to enrollees asserted in the preamble were never calculated. Thus, there is no calculation of net benefits. Net fiscal effect is calculated only for the chosen alternative, not for any other alternative.	1/5
11. Does the proposed rule establish measures and goals that can be used to track the regulation's results in the future? HHS asks for comment on research that could be conducted to assess the program in the future, such as randomized assignment of low-income patients to plans. It establishes no goals or measures. The expected cost savings could perhaps be tracked if one could control for other factors.	2/5
12. Did the agency indicate what data it will use to assess the regulation's performance in the future and establish provisions for doing so? HHS collects a great deal of data and proposes to collect more. It suggests many ways the data could be used but never proposes to use the data to evaluate the effects of the proposed regulation.	1/5

Total	18 / 60

Additional details

Agency: Department of Health and Human Services
Regulatory Identification Number: 0938-AP77
Agency Name: Department of Health and Human Services
Rule Publication Date: 10/22/2009
Comment Closing Date: 12/08/2009