Medicare Program; Medicare Advantage and Prescription Drug Benefit Programs: Negotiated Pricing and Remaining Revisions, 1494-1549 [E9-148]

Agencies

• Centers for Medicare & Medicaid Services
• DEPARTMENT OF HEALTH AND HUMAN SERVICES

[Federal Register Volume 74, Number 7 (Monday, January 12, 2009)]
[Rules and Regulations]
[Pages 1494-1549]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-148]



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Part IV





Department of Health and Human Services





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Centers for Medicare & Medicaid Services



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42 CFR Parts 422 and 423



Medicare Program; Medicare Advantage and Prescription Drug Benefit 
Programs: Negotiated Pricing and Remaining Revisions; Final Rule; 
Medicare Program; Prescription Drug Benefit Program: Payments to 
Sponsors of Retiree Prescription Drug Plans; Proposed Rule

Federal Register / Vol. 74, No. 7 / Monday, January 12, 2009 / Rules 
and Regulations

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 422 and 423

[CMS-4131-FC;-RIN 0938-AP24]


Medicare Program; Medicare Advantage and Prescription Drug 
Benefit Programs: Negotiated Pricing and Remaining Revisions

AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.

ACTION: Final rule with comment period.

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SUMMARY: This rule contains final regulations governing the Medicare 
Advantage (MA) program (Part C) and prescription drug benefit program 
(Part D), and interim final regulations governing certain aspects of 
the Retiree Drug Subsidy (RDS) Program, and reflecting new statutory 
definitions relating to Special Needs Plans under Part C. The final 
regulations revising the Part C and Part D regulations include 
provisions regarding medical savings account (MSA) plans, cost-sharing 
for dual eligible enrollees in the MA program, the prescription drug 
payment and novation processes in the Part D program, and the 
enrollment and appeals processes for both programs. This final rule 
with comment period also responds to public comments on the May 16, 
2008 proposed rule and takes into account statutory revisions contained 
in the Medicare Improvements for Patients and Providers Act of 2008 
(MIPPA).

DATES: Effective Date: These regulations are effective on March 13, 
2009.
    Applicability Date: The revisions to the definition of ``negotiated 
prices'' in Sec.  423.100, with the exception of the revision to 
include a reference to ``other network dispensing provider,'' which is 
applicable on March 13, 2009, are applicable for contract year 2010. 
The revisions to the definitions of ``administrative costs,'' 
``allowable risk corridor costs,'' and ``gross covered prescription 
drug costs'' in Sec.  423.308 are also applicable for contract year 
2010.
    Comment Period: We will consider comments on the provisions 
concerning the new statutory definitions relating to special needs 
plans (see section II.A.1 of the preamble to this final rule with 
comment period) and those concerning negotiated prices and retained 
rebates under the Retiree Drug Subsidy (RDS) program (see section 
II.B.5.e. of the preamble to this final rule with comment period), 
provided that they are received at one of the addresses provided below 
no later than March 13, 2009.

ADDRESSES: In commenting, please refer to file code CMS-4131-FC. 
Because of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission.
    You may submit comments in one of four ways (please choose only one 
of the ways listed).
    1. Electronically. You may submit electronic comments on specific 
issues in this regulation to https://www.regulations.gov. Follow the 
instructions under the ``More Search Options'' tab.
    2. By regular mail. You may mail written comments to the following 
address ONLY:
    Centers for Medicare & Medicaid Services, Department of Health and 
Human Services, Attention: CMS-4131-FC, P.O. Box 8013, Baltimore, MD 
21244-8013.
    Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    3. By express or overnight mail. You may send written comments to 
the following address ONLY:
    Centers for Medicare & Medicaid Services, Department of Health and 
Human Services, Attention: CMS-4131-FC, Mail Stop C4-26-05, 7500 
Security Boulevard, Baltimore, MD 21244-1850.
    4. By hand or courier. If you prefer, you may deliver (by hand or 
courier) your written comments before the close of the comment period 
to either of the following addresses:
    a. Room 445-G, Hubert H. Humphrey Building, 200 Independence 
Avenue, SW., Washington, DC 20201;
    (Because access to the interior of the Hubert H. Humphrey (HHH) 
Building is not readily available to persons without Federal Government 
identification, commenters are encouraged to leave their comments in 
the CMS drop slots located in the main lobby of the building. A stamp-
in clock is available for persons wishing to retain a proof of filing 
by stamping in and retaining an extra copy of the comments being 
filed.)
    b. 7500 Security Boulevard, Baltimore, MD 21244-1850.
    If you intend to deliver your comments to the Baltimore address, 
please call telephone number (410) 786-7197 in advance to schedule your 
arrival with one of our staff members.
    Comments mailed to the addresses indicated as appropriate for hand 
or courier delivery may be delayed and received after the comment 
period.
    For information on viewing public comments, see the beginning of 
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT:
    Change of Ownership: Scott Nelson, 410-786-1038.
    Civil Money Penalties: Christine Reinhard, 410-786-2987.
    Definitions related to the Part D drug benefit, Subparts F and G: 
Deondra Moseley, 410-786-4577, or Meghan Elrington, 410-786-8675.
    Definitions related to the Part D drug benefit, Subpart R: David 
Mlawsky, 410-786-6851.
    Enrollment: Jeff Maready, 415-744-3523.
    Low-Income Cost-Sharing: Christine Hinds, 410-786-4578.
    Medicare Medical Savings Account Plans: Anne Manley, 410-786-1096.
    Payment: Frank Szeflinski, 303-844-7119.
    Reconsiderations: John Scott, 410-786-3636, or Kathryn McCann 
Smith, 410-786-7623.
    Special Needs Plans: LaVern Baty, 410-786-5480.

SUPPLEMENTARY INFORMATION:
    Inspection of Public Comments: All comments received before the 
close of the comment period are available for viewing by the public, 
including any personally identifiable or confidential business 
information that is included in a comment. We post all comments 
received before the close of the comment period on the following Web 
site as soon as possible after they have been received: https://
regulations.gov. Follow the search instructions on that Web site to 
view public comments.
    Comments received timely will be also available for public 
inspection as they are received, generally beginning approximately 3 
weeks after publication of a document, at the headquarters of the 
Centers for Medicare & Medicaid Services, 7500 Security Boulevard, 
Baltimore, Maryland 21244, Monday through Friday of each week from 8:30 
a.m. to 4 p.m. To schedule an appointment to view public comments, 
phone 1-800-743-3951.

I. Background and Legislative History

    The Balanced Budget Act of 1997 (BBA) (Pub. L. 105-33) established 
a new ``Part C'' in the Medicare statute (sections 1851 through 1859 of 
the Social Security Act (the Act)) that established the Medicare+Choice 
(M+C) program. Under section 1851(a)(1) of the Act, every individual 
entitled to Medicare Part A and enrolled under Medicare Part B, except 
for most individuals with end-stage renal disease (ESRD), could elect 
to receive benefits either through the original Medicare program or an 
M+C plan, if one was offered where he or she lived.

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    The Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 
1999 (BBRA), (Pub. L. 106-111), amended the M+C provisions of the BBA. 
Further amendments were made to the M+C program by the Medicare, 
Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 
(BIPA) (Pub. L. 106-554), enacted December 21, 2000.
    Subsequently, the Medicare Prescription Drug, Improvement, and 
Modernization Act of 2003 (MMA) (Pub. L. 108-173) was enacted on 
December 8, 2003. This landmark legislation established the Medicare 
prescription drug benefit program (Part D) and made significant 
revisions to the provisions in Medicare Part C, governing what was 
renamed the Medicare Advantage (MA) program (formerly Medicare+Choice). 
The MMA directed that important aspects of the new Medicare 
prescription drug benefit program under Part D be similar to and 
coordinated with regulations for the MA program. The MMA also created a 
subsidy program involving payments to sponsors of Retiree Prescription 
Drug Programs, or the Retiree Drug Subsidy (RDS) Program. This program 
allows subsidy payments to sponsors of qualified retiree prescription 
drug plans for Part D drug costs for individuals who are eligible for, 
but not enrolled in, a Medicare Part D plan.
    The MMA also specified that implementation of the prescription drug 
benefit and revised MA program provisions take place by January 1, 
2006. Thus, we published final rules for the MA and Part D prescription 
drug programs in the Federal Register on January 28, 2005 (70 FR 4588 
through 4741 and 70 FR 4194 through 4585, respectively). (For further 
discussion of these revisions, see the respective final rules (70 FR 
4588 through 4741) and (70 FR 4194 through 4585).)
    Since the publication of these rules, we have gained a great deal 
of experience with all aspects of these programs. Based on this 
experience, as well as on recommendations from representatives of both 
the organizations that provide care and the Medicare beneficiaries that 
they serve, we determined that proposed changes to the existing Part C, 
Part D, and RDS regulations were warranted. We believed that these 
changes would help plans understand and comply with our policies for 
all three programs, and aid MA organizations and Part D and RDS plan 
sponsors in implementing their health care and prescription drug 
benefit plans in ways that will better serve the Medicare population.
    Thus, on May 16, 2008, we published a proposed rule (73 FR 28556) 
that would revise certain aspects of both the MA, Part D, and RDS 
programs. Many of these proposed revisions were designed to clarify 
existing policies or codify current guidance for these programs. 
Subsequent to the publication of that proposed rule, the Medicare 
Improvements for Patients and Providers Act (MIPPA) (Pub. L. 110-275) 
was enacted on July 15, 2008. MIPPA included a number of provisions 
that addressed the same requirements that we had addressed in the 
proposed rule. In some cases, the MIPPA provisions paralleled our 
proposed requirements and in other instances they complemented or 
superseded them. Thus, in order to implement both the new MIPPA 
provisions and those proposed in our May 2008 proposed rule, we have 
published a series of rules to set forth the appropriate regulatory 
changes.
    In the September 18, 2008 Federal Register (73 FR 54208), we 
published a final rule that finalized certain marketing provisions, 
effective October 1, 2008, that paralleled provisions in MIPPA. In the 
same issue of the Federal Register (73 FR 54226), we also published a 
separate interim final rule that addressed the other provisions of 
MIPPA impacting the MA and Part D programs.
    This final rule responds to comments on the May 16, 2008 proposed 
rule and generally finalizes provisions of that rule that were not 
addressed in either of the rules published on September 18, 2008. We 
received over 100 comments on the proposed rule. Commenters included 
managed care and prescription drug plans and their representatives, 
provider groups, and Medicare beneficiary advocates. The comments 
ranged from general support or opposition to the proposed provisions, 
to very specific questions or comments regarding a proposed change.
    Some of these comments have been addressed in the rules discussed 
above. All comments pertaining to the provisions set forth in this 
final rule are discussed below. We are providing brief summaries of 
each proposed provision, a summary of the public comments we received, 
and our responses to the comments.

II. Analysis of and Response to Public Comments

    In the sections that follow, we discuss the changes to the 
regulations in parts 422 and 423 governing the MA and prescription drug 
benefit programs that were proposed in our May 16, 2008 rule, and the 
comments we received on those provisions as well as conforming changes 
to the regulations to reflect two new statutory definitions affecting 
the MA program that were enacted in MIPPA. Several of the revisions and 
clarifications discussed below affect both the MA and prescription drug 
benefit programs.

A. Changes to Part 422--Medicare Advantage Program

1. Special Needs Plans
    The MMA first authorized special needs plans (SNP), a type of MA 
plan designed to exclusively, or disproportionately, enroll individuals 
with special needs. The three types of special needs individuals 
eligible for enrollment identified in the MMA include--(1) 
Institutionalized individuals (defined in 42 CFR 422.2 as an individual 
residing or expecting to reside for 90 days or longer in a long term 
care facility); (2) individuals entitled to medical assistance under a 
State plan under title XIX; and (3) other individuals with severe or 
disabling chronic conditions that would benefit from enrollment in a 
SNP.
    The number of SNPs approved as of January 2008, is 787. This figure 
includes 442 dual eligible SNPs, 256 chronic care SNPs, and 89 
institutional SNPs.
    a. Definitions: Institutional-Equivalent and Severe or Disabling 
Chronic Condition (Sec.  422.2)
    Section 164 of MIPPA contained two new statutory definitions that 
relate to eligibility for SNPs. Although these definitions were not 
included in our May 18 proposed rule, we are discussing these new 
definitions here in the context of the more general SNP-eligibility 
provisions, and incorporating these new definitions in interim final 
regulations as part of this rule.
    Although the statute governing SNPs has always referred to 
individuals eligible to enroll in SNPs based on institutional status or 
on having a severe or disabling chronic condition, the statute 
previously did not define these terms. We believe that discussing these 
new definitions in this rule will both aid the understanding of the new 
statutory requirements and complement the eligibility requirements from 
the proposed rule that we are publishing as final regulations in this 
rule. In addition, because we received public comment on the May 2008 
proposed rule closely related to eligibility for institutional-level 
and chronic care individuals, we believe that in order to fully respond 
to these comments it is important to discuss all of the provisions 
relating to chronic care and

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institutional care eligibility. Public comments related to 
institutional and chronic care SNP eligibility are addressed below.
(1) Institutional-Equivalent Individual
    Section 164 of MIPPA adds a new paragraph (2) to section 1859(f) of 
the Act related to eligibility requirements for institutional SNPs. 
Beginning on January 1, 2010, institutional SNPs that enroll a special 
needs individual who is living in the community but requires an 
institutional level of care (LOC) (i.e., an ``institutional-equivalent 
individual'') must meet two new eligibility requirements.
    First, the determination of institutional LOC must be made using a 
State assessment tool. States have extensive experience in making LOC 
determinations, as demonstrated by a recently published survey \1\ of 
State LOC assessment, which references several other investigative 
sources. The study describes varying State instruments and 
methodologies, and may be an important resource for institutional SNPs 
that are not already aware of existing State LOC assessment tools. In 
States and territories that have not designed a specific tool, SNPs 
must use the same LOC determination methodology employed in the 
respective State or territory in which the SNP is authorized to enroll 
eligible beneficiaries.
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    \1\ Henderickson, L. Kyzr-Sheeley, G. (2008). Determining 
Medicaid Nursing Home Eligibility: A Survey of State Level Care 
Assessment. Retrieved July 27, 2008 from https://www.hcbs.org/
moreInfo.php/nb/doc/2216/.
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    Second, the SNP must arrange to have the LOC assessment conducted 
by an entity other than the respective MA organization. We believe this 
entity must be both impartial and have the requisite professional 
knowledge to accurately identify institutional LOC criteria.
    As a result of MIPPA provisions concerning institutionalized care, 
we have revised our definitions section in Sec.  422.2 to incorporate 
the new statutory definition of ``institutional equivalent'' set forth 
in MIPPA.
(2) Severe or Disabling Chronic Condition
    Section 164 of MIPPA also adds a new clause to section 
1859(b)(6)(B)(iii) of the Act to clarify the eligibility requirements 
for chronic condition SNPs. Beginning on January 1, 2010, chronic 
condition SNPs that enroll a special needs individual who has a severe 
or disabling chronic condition must determine that the individual has 
one or more co-morbid and medically complex chronic condition(s) that 
are substantially disabling or life-threatening, has a high risk of 
hospitalization or other significant adverse health outcomes, and 
requires specialized delivery systems across domains of care. We have 
also updated our definitions in Sec.  422.2 to incorporate this new 
statutory definition of severe or disabling chronic condition.
    We note that the statute also directs the Secretary to convene a 
panel of clinical advisors to determine which chronic conditions meet 
this clarified definition. We will issue separate guidance describing 
the operational process the Secretary will use to comply with this 
directive.
b. Ensuring Special Needs Plans Serve Primarily Special Needs 
Individuals (Sec.  422.4)
    The MMA generally authorized SNPs that ``exclusively'' serve 
individuals with the above-described special needs. However, section 
231(d) of MMA provided the Secretary with the ``authority'' to 
designate MA plans as SNPs if the SNP only ``disproportionately 
serve[s] special needs individuals,'' while also serving non-special 
needs enrollees. Section 231(d) of the MMA provides that ``the 
Secretary may provide'' for such plans in regulations implementing the 
SNP provisions. In the final rule implementing this MMA provision, we 
exercised this discretion in Sec.  422.4(a)(iv)(B), providing that a 
SNP could be a plan that ``[e]nrolls a greater proportion of special 
needs individuals than occur nationally in the Medicare population * * 
*.'' 
    In the May 16, 2008 proposed rule, we proposed to amend Sec.  
422.4(a) to require that MA organizations offering ``disproportionate 
share'' SNPs ensure that at least 90 percent of new plan membership 
consist of individuals that fell into the appropriate special needs 
category for the plan in question, as defined in Sec.  422.2. Thus, no 
more than 10 percent of a plan's new enrollees could be non-special 
needs individuals. Based on the comments received on this proposal, and 
in light of the fact that section 164 of MIPPA eliminates the authority 
for disproportionate share SNPs effective January 1, 2010, we are 
revising the regulations to specify that all new SNP enrollees must be 
special needs individuals. In other words, we are declining to permit 
disproportionate share SNPs as permitted, at our discretion, under 
section 231(d) of MMA. As discussed below, we are amending Sec.  Sec.  
422.2 and 422.4 to reflect these changes.
    Comment: All commenters agreed that the current regulation 
permitting an MA plan to be designated a SNP if it enrolled special 
needs individuals in a higher proportion than they exist in the 
Medicare population diminishes the intended focus of special needs 
plans on providing care and services to special needs individuals. 
Commenters generally supported our proposal that at least 90 percent of 
new enrollees consist of individuals with the targeted condition or 
status. Many commenters, however, argued for a higher threshold. Some 
commenters suggested establishing a 95 percent threshold, as 
recommended by the Medicare Payment Advisory Commission (MedPAC). Still 
others suggested requiring that entire plan membership (100 percent) be 
in the targeted special needs group, or at least that all new enrollees 
fall into the targeted category of individuals. These commenters 
correctly noted that although section 231(d) of MMA allows plans to 
enroll a certain portion of members from the non-targeted population, 
there is no requirement that non-special needs individuals be permitted 
to join an SNP. Many commenters also indicated that having to monitor 
the proportion of plan membership that fell into the appropriate 
category would pose an administrative challenge, and was unnecessarily 
complex.
    Response: After considering all comments, and in light of the fact 
that disproportionate share SNPs will no longer be authorized as of 
January 1, 2010, we agree with the commenters who urged that SNPs 
should not be permitted to enroll individuals who do not meet the 
qualifying targeted conditions (dual eligibility for Medicare and 
Medicaid, institutional status, or severe or disabling chronic 
conditions). Thus, taking into consideration the MIPPA changes and the 
public comments described above, we are revising our proposal to 
prohibit the enrollment of nonqualifying members into all SNP plans. We 
believe that this change will emphasize the need for SNPs to focus on 
providing care and services to their targeted population.
    We recognize that this means that a spouse of an individual in a 
chronic care SNP generally will not be able to join the same plan 
(unless the spouse has the same condition), which has been presented in 
the past as a reason to permit some non-special need individuals to 
enroll in SNPs. Note that a plan may not disenroll a non-special needs 
individual who has already enrolled in the SNP consistent with the 
current disproportionate percentage methodology. Such individuals may

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remain in their plans unless and until they choose to disenroll. Note 
that they would not be permitted to re-enroll in another SNP unless 
they had a qualifying condition. We are revising Sec.  Sec.  422.2 and 
422.4 to reflect these changes.
    Comment: One commenter requested that the 90 percent 
disproportionate percentage requirement be measured on an aggregate 
basis for a given calendar year, rather than on a monthly or day-to-day 
basis.
    Response: Since we are eliminating use of any disproportionate 
percentage methodology in the future, this issue has become moot.
    Comment: Several commenters were confused by the wording of the 
proposed regulations and asked that CMS clarify whether the proposed 90 
percent rule applied only to new members, or applied to the overall 
membership in the plan. Given the current proportions of special needs 
individuals in many SNPs, they noted that establishing an overall 
target of 90 percent would effectively require that all new enrollees 
be members of the appropriate category in any event.
    Response: We recognize that the wording of the proposed 
requirements left some room for confusion as to the precise intent of 
the provisions in question. Our proposal would only have applied to new 
enrollees, so regardless of how many current members were special needs 
individuals, 10 percent of new enrollees could have been non-special 
needs individuals under our proposal. However, as explained above, the 
final regulations clearly specify that the 100 percent requirement 
applies only to new members.
c. Ensuring Eligibility To Elect an MA Plan for Special Needs 
Individuals (Sec.  422.52)
    We proposed in Sec.  422.52 that MA organizations be required to 
establish a process approved by CMS to verify that potential SNP 
enrollees meet the SNP's eligibility requirements. While this issue is 
addressed, to some degree, in our manual guidance (section 20.11 of 
Chapter 2 of the Medicare Managed Care Manual), we believe that it is 
important to set forth in regulations our explicit authority to 
establish verification requirements. The proposed regulations were also 
intended to ensure that plans were aware of, and met, their obligations 
to verify an applicant's eligibility prior to enrolling individuals in 
a SNP. As discussed below, we are adopting these changes in final 
regulations as proposed and, as noted above, we are in interim final 
regulations codifying the related MIPPA eligibility requirements 
concerning institutional-level and chronic care SNP. We are also making 
a conforming change to Sec.  422.52(f) by deleting the currently 
existing paragraph, which refers to SNPs serving disproportionately 
special needs individuals.
    Comment: Commenters did not object to our proposal to establish in 
regulations that SNPs must use a CMS-approved process to verify SNP 
eligibility. However, several commenters requested that we revise 
either the proposed regulations or manual guidance to specify that SNPs 
have 60 days to verify enrollment for individuals with special needs. 
Alternatively, the commenters suggested that CMS take into 
consideration the amount of time for verifying enrollment status when 
monitoring plan compliance with the SNP provisions. Another commenter 
recommended that CMS maintain the previous requirements (established in 
our May 31, 2007 HPMS memo) for time frames and sources for 
verification of Chronic Care SNP enrollment qualifications. The 
commenter suggested that the 30-day timeframe now established in the 
manual is impractical, and they further recommended that sources other 
than providers be allowed for verification of chronic care SNP 
enrollees' eligibility for the SNP.
    Response: We are strongly committed to ensuring that SNPs carry out 
proper verification of all eligibility criteria, consistent with the 
requirements discussed above concerning SNP enrollment requirements. 
Thus, we are adopting the proposed requirement that SNPs follow a CMS-
approved verification process. Note that although we are not setting 
out specific verification requirements in the regulations, manual 
current guidance already requires that prompt verification take place 
(generally either before enrollment or no later than the end of the 
first month of enrollment). We continue to believe that prompt 
verification is necessary to prevent large numbers of subsequent, 
unnecessary disenrollments from SNPs of individuals who never should 
have been enrolled.
    As noted in the May 2008 proposed rule (73 FR 28559), we have given 
plans a number of options for meeting the verification requirements, 
including post-enrollment confirmation under certain circumstances 
(such as when a pre-enrollment qualification assessment tool is used, 
as opposed to direct contact with a provider). In addition, to assist 
SNP plans in obtaining timely verification from appropriate medical 
professional personnel, we have made clear in subregulatory guidance 
(Chapter 2, Section 20-11, Medicare Advantage Manual) that for the 
purposes of verification of chronic care SNP eligibility, verification 
may be obtained through a provider or provider's office. This includes 
any licensed health care professional in a position to validate and 
verify the beneficiary's medical history and status, such as nurse 
practitioners or pharmacists. However, we are concerned that the use of 
organizational data alone, such as claims or medical records, may not 
always be sufficient to confirm SNP eligibility. Thus, we intend to 
continue to evaluate the issue of when and how data may be 
appropriately used to verify SNP eligibility and we are willing to 
consider reasonable alternative proposals presented by plans to verify 
eligibility. Still, given that the underlying intent of chronic care 
SNPs is to provide care services to a population with a need for 
carefully managed services, we do not believe it is unreasonable to 
expect early contact with a suitable health care professional.
    Comment: A commenter suggested that CMS include language addressing 
pre-enrollment qualification assessment tools and post-enrollment 
confirmation of eligibility procedures as aspects of the SNP 
eligibility verification process for all SNPs, not just chronic care 
SNPs.
    Response: We do not believe that such changes are warranted or 
necessary for non-chronic care SNPs, given the other available sources 
of eligibility verification. As discussed in our recent interim final 
rule (73 FR 54228), in accordance with the recent MIPPA legislation, 
dual-eligible SNPs and institutional SNPs must have arrangements with 
the appropriate entities to verify Medicaid eligibility or 
institutional status in an ongoing and routine manner.
    Comment: A commenter described our suggestion in the preamble of 
the proposed rule that dual-eligible SNPs be required to enter into an 
agreement with state agencies as ``impractical.'' The commenter further 
suggested that CMS establish a process similar to that used under the 
Part D low-income subsidy status for determining dual eligibility 
status for Part C dual-eligible SNP plans, or as an alternative 
establish a best available evidence policy for dual-eligible SNP plans. 
Thus, rather than the SNP plan being responsible for obtaining Medicaid 
eligibility information, the commenter requested that CMS furnish the 
eligibility information to dual-eligible SNP plans.
    Response: The establishment of successful partnerships and 
processes to

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share information about dual status with State Medicaid agencies is a 
key aspect of the SNP's ability to provide specialized services to this 
population, ensure beneficiary understanding of both programs' 
benefits, and provide meaningful coordination between the Medicare and 
Medicaid programs. Furthermore, section 164 of MIPPA requires dual 
eligible SNPs to have a contract with a State Medicaid Agency effective 
as of January 1, 2010, to provide benefits (or arrange for benefits to 
be provided) that an individual is entitled to receive under the 
Medicaid program.
    With respect to the commenter's suggestion that we establish a 
process similar to our current Part D ``Best Available Evidence'' 
policy to allow plans to provide evidence of dual-eligibility status, 
we decline to establish such a process at this time. We believe that 
beneficiaries and SNPs would be better served by an arrangement with 
States to exchange eligibility information on a regular basis. Such 
arrangements could be incorporated into the contracts between SNPs and 
the appropriate State Medicaid Agency that will now be required as of 
January 1, 2010.
d. Model of Care (Sec.  422.101(f))
    In order to ensure that SNPs were providing care targeted to such 
special needs beneficiaries, under our authority in section 1856(b)(1) 
of the Act to establish standards by regulation, we proposed that SNPs 
develop a model of care specific to the special needs population they 
are serving. In order to more clearly establish and clarify delivery of 
care standards for SNPs and to codify standards which we have included 
in other CMS guidance and instructions (the 2008 and 2009 Call Letters, 
``Special Needs Plan Solicitation'' \2\), we proposed to add new 
paragraph (f) to Sec.  422.101. This proposed paragraph specified that 
SNPs have networks with clinical expertise specific to the special 
needs population of the plan; use performance measures to evaluate 
models of care; and be able to coordinate and deliver care targeted to 
the frail/disabled, and those near the end of life based on appropriate 
protocols. Section 164 of the MIPPA subsequently added care management 
requirements for all SNPs as directed in section 1859(f)(5) of the Act 
(42 U.S.C. 1395w-28(f)). The new mandate required dual-eligible, 
institutional, and chronic condition SNPs to implement an evidence-
based model of care having two explicit components. The first component 
was an appropriate network of providers and specialists to meet the 
specialized needs of the SNP target population. The second component 
was a battery of case management services that includes-- (1) A 
comprehensive initial health risk assessment and annual reassessments; 
(2) an individualized plan of care having goals and measurable 
outcomes; and (3) an interdisciplinary team to manage care. This law 
laid a statutory foundation for much of our proposed regulatory 
standards for the model of care. Therefore, we address the comments we 
received on our proposals from both a statutory and regulatory basis.
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    \2\ The solicitation may be found at https://www.cms.hhs.gov/
SpecialNeedsPlans.
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    Comment: The overwhelming majority of commenters expressed support 
for a required SNP model of care. However, many argued that the 
proposed language was too weak to permit genuine oversight of SNPs or 
assure adequate protection for vulnerable beneficiaries. They urged us 
to require a more prescriptive model of care similar to the PACE 
program or state integrated care waiver demonstration projects. Among 
their recommendations were that we require that model of care include 
elements such as: Care coordination through an individualized care 
plan; at least one network physician with network hospital privileges 
and one network provider with access to diagnostics and ancillary 
health services; transition coverage across care settings, providers, 
and services to ensure continuity of care; a comprehensive risk 
assessment on which to base the individualized care plan; public 
reporting of performance data as evidence that remuneration pays for 
services actually delivered; a complaint/grievance process used in 
monitoring activities; SNP staff trained on the respective state 
Medicaid program; and mandatory publishing of the SNP model of care in 
marketing materials. One of these commenters specifically advocated 
that pharmacists be an integral member of a SNP provider network, but 
was countermanded by another commenter that who opposed prescribing the 
provider network composition. Finally, one commenter suggested that we 
require all MA organizations, not just SNPs, to serve enrollees that 
are frail/disabled or near the end of life.
    Response: Over the past 2 years, we collected and reviewed models 
of care from existing SNPs. We also reviewed models of care such as 
medical home models and chronic care models published in healthcare 
books, peer-reviewed journals, and advocacy group and industry reports. 
Based on our extensive review of models of care for vulnerable 
populations, we agree with the majority of commenters who indicated 
that a required SNP model of care that contains certain minimal 
elements is necessary to provide regulatory oversight and effective 
monitoring of SNPs. MIPPA demonstrated further support that care 
management required an organizational structure represented by the 
model of care. Specifically, MIPPA required SNPs to conduct initial and 
annual comprehensive health risk assessments, develop and implement an 
individualized plan of care, and implement an interdisciplinary care 
team for each beneficiary. We believe that combination of MIPPA's 
statutory elements and our regulatory prescription for the SNP model of 
care establishes the standardized architecture for effective care 
management, yet gives plans the flexibility to design the unique 
services and benefits that enable them to meet the identified needs of 
their target population. To illustrate this balance between the model 
of care architecture and its plan-specific components, we present the 
following examples. All SNPs must have an interdisciplinary team to 
coordinate the delivery of services and benefits; however, one SNP may 
choose to contract with an interdisciplinary team to deliver care in 
community health clinics and another SNP may hire its team to deliver 
care in the home setting. Under our final regulations, all SNPs must 
coordinate the delivery of services and benefits through integrated 
systems of communication among plan personnel, providers, and 
beneficiaries; however, one SNP may coordinate care through a 
telephonic connection among all stakeholders and a second SNP may 
coordinate care through an electronic system using Web-based records 
and electronic mail accessed exclusively by the plan, network 
providers, and beneficiaries. All SNPs must coordinate the delivery of 
specialized benefits and services that meet the needs of their most 
vulnerable beneficiaries; however, dual-eligible SNPs may need to 
provide state-identified services while an institutional SNP may need 
to facilitate hospice care for its beneficiaries near the end of life. 
These examples demonstrate the variety of ways SNPs currently implement 
their systems of care. We will continue to study SNP models of care and 
issue guidance through our Call Letters and informational memoranda to 
facilitate improvement in the SNP model of care framework.

[[Page 1499]]

    Comment: One commenter noted that our proposed language required 
the model of care to deliver services to targeted enrollees as well as 
those who are frail/disabled or near the end of life. The entity 
clarified that SNPs do not ``deliver'' care, but provide access to care 
practitioners.
    Response: We acknowledge the distinction that most SNPs are not 
healthcare providers, but are entities that coordinate care through 
provider networks. We believe that our references to delivering care 
can reasonably be read as referring to delivering services through such 
networks.
    Comment: Several commenters supported a requirement for the use of 
evidence-based or nationally recognized clinical protocols in the 
delivery of care to special needs beneficiaries. One commenter argued 
that, if we were to prescribe specific disease management protocols for 
SNPs in the future, we should do so through published regulations that 
would permit the medical community to comment. A second commenter urged 
us to clarify ``protocols'' to include process as well as clinical 
protocols because nationally recognized protocols do not exist for all 
clinical conditions.
    Response: We agree that SNPs must coordinate and deliver care with 
healthcare professionals that use protocols, whether clinical or 
administrative in nature, which are evidence-based or, where possible, 
derived from nationally recognized guidelines. We refer beneficiaries, 
plans, and providers to the Agency for Healthcare Research and Quality 
(https://www.ahrq.gov/) which provides public access to both an 
extensive repository of evidence-based protocols through its National 
Guidelines Clearinghouse, as well as discussions regarding ongoing 
research on clinical practice. If we propose future regulation related 
to the use of clinical or administrative protocols, we will elicit 
appropriate public comments from all stakeholders. Presently, we expect 
SNPs to have personnel (employed, contracted, or non-contracted) 
prepared to discuss their implemented protocols at monitoring visits or 
other oversight activities. Because we have not prescribed the use of 
specific protocols, the comment that we should do so through rulemaking 
does not apply.
    Comment: A few commenters proposed that we work with recognized 
standards organizations to develop better ways to monitor SNPs and 
inform the public about plan performance. However, one commenter 
cautioned that, in developing SNP-specific measures, we must address 
the broad range of special care needs and the limitations of available 
data sources.
    Response: We have contracted with the National Committee for 
Quality Assurance (NCQA) to develop, collect, analyze, and report on 
SNP-specific performance measures at the plan benefits package (PBP) 
level. We will continue to work with NCQA and other quality measurement 
experts such as the Geriatric Measurement Advisory Panel to explore 
valid and reliable ways to measure and improve SNP performance. As we 
identify new directions in quality measurement for vulnerable 
populations, we will elicit public, professional, and beneficiary 
comment to inform our regulatory and informational guidance to SNPs.
e. Special Needs Plans and Other MA Plans With Dual Eligibles: 
Responsibility for Cost-Sharing (Sec.  422.504(g)(1))
    In order to protect beneficiaries and ensure that providers do not 
bill for cost-sharing that is not the beneficiary's responsibility, we 
proposed to amend Sec.  422.504(g)(1)(i) and (g)(1)(ii) to require that 
all MA organizations, including SNPs, with enrollees who are eligible 
for both Medicare and Medicaid specify in their contracts with 
providers that enrollees would not be held liable for Medicare Parts A 
and B cost sharing when the State is liable for the cost-sharing. Plans 
may not impose cost-sharing that exceeds the amount of cost-sharing 
that would be permitted with respect to the individual under title XIX 
if the individual were not in such plan. We also proposed therefore, 
that contracts with providers state that the provider will do this by 
either accepting the MA plan payment in full (Sec.  
422.504(g)(1)(iii)(A)) or by billing the appropriate State source (for 
example, Medicaid) (Sec.  422.504(g)(1)(iii)(B)). Additionally, we 
proposed that all MA organizations with enrollees eligible for both 
Medicare and Medicaid must inform providers of the Medicare and 
Medicaid benefits and rules for enrollees eligible for Medicare and 
Medicaid (Sec.  422.504(g)(1)(iii)). Section 165 of MIPPA only required 
that full benefit dual-eligible individuals and qualified Medicare 
beneficiaries in SNPs for dual-eligibles not be held liable for 
Medicare Parts A and B cost-sharing. Our proposal included all MA plans 
that have dual eligibles enrolled in their plan.
    The above proposals have been superseded in part by section 165 of 
MIPPA, ``Limitation on Out-of-Pocket Costs for Dual Eligibles and 
Qualified Medicare Beneficiaries Enrolled in a Specialized Medicare 
Advantage Plan for Special Needs Individuals,'' which establishes that 
for full benefit-dual-eligible individuals or qualified Medicare 
beneficiaries enrolled in a special needs plan, an MA organization may 
not impose cost-sharing that exceeds the amount of cost-sharing that 
would be permitted if the individual were under title XIX and were not 
enrolled in a special needs plan. The effective date of this provision 
is January 1, 2010.
    After considering comments discussed below, we are finalizing our 
proposal to impose the requirement that MIPPA imposed in the case of 
dual-eligible SNPs on duals in all MA plans, and on all dual Medicaid 
eligibility categories for which a State provides a zero cost-share. 
Consistent with the MIPPA requirements that apply to dual-eligible 
SNPs, we are specifying in the regulations that these provisions are 
effective on January 1, 2010.
    Comment: Several commenters supported CMS' effort to protect dual 
eligible individuals from being charged for cost sharing under Medicare 
Parts A and B when the state is responsible. However, many requested 
that CMS either allow MA plans to send a notification to the providers 
of this change or to allow MA organizations to amend contracts at the 
end of the contract term, in 2 years, or whenever the contracts are 
renegotiated. Some commenters requested that CMS establish a process 
for Medicare Advantage Organizations to work with CMS to develop and 
disseminate this information. Other commenters stated that CMS should 
go further by requiring all MA plans to provide to all of their 
physicians and other providers with specific information about when 
dual eligibles are not liable for cost-sharing and include the matrix 
CMS developed on cost-sharing and the dual eligibility types.
    Several commenters also stated that CMS should go further by 
requiring plans to have a designated contact person who is 
knowledgeable about the Medicaid programs who can answer cost sharing 
questions for providers and that plans should be required to refund any 
cost-sharing that has been inappropriately charged to dual eligible 
individuals. One commenter recommended that CMS require this of dual-
eligible SNPs only and not all plans that serve dual eligible 
individuals.
    Response: We do not believe it would sufficiently protect dual-
eligible enrollees to simply require notice to providers. We also do 
not believe that these protections should be delayed for up to 2 years, 
particularly when MIPPA

[[Page 1500]]

imposes them in the case of enrollees in dual eligible SNPs effective 
January 1, 2010. However, we do not believe that it is necessary to 
require that SNPs necessarily designate a specific person to address 
dual-eligible issues. We believe that MA organizations should have 
flexibility in complying with these requirements. As noted above, we 
disagree with the commenter who believed that these requirements should 
only apply to dual SNPs as the MIPPA requirement did, because we 
believe that all dual eligibles need these protections.
2. MA Medical Savings Accounts (MSA) Transparency (Sec.  422.103(e))
    Consistent with the best practices of health savings accounts 
(HSAs) and other high-deductible health plans, we proposed in a new 
Sec.  422.103(e) to require that all medical savings account (MSA) 
plans provide enrollees with information on the cost and quality of 
services and provide information to CMS on how they would provide this 
information to enrollees.\3\
---------------------------------------------------------------------------

    \3\ HSAs are health insurance plans with a high deductible and a 
savings account for the under 65 population and are administered by 
the U.S. Department of the Treasury. Medicare MSAs are a type of 
medical savings account, also with a high deductible and a savings 
account, designed for the Medicare population and are administered 
by the U.S. Department of Health and Human Services, Centers for 
Medicare & Medicaid Services. HSAs and MSAs are governed by 
different statutes, and while these health insurance products are 
similar in many ways, there are also important differences between 
them. For further information on HSAs, go to https://www.ustreas.gov/
offices/public-affairs/hsa/.
---------------------------------------------------------------------------

    Comment: We received a number of public comments on the proposed 
cost and quality transparency requirements for Medicare MSA plans. 
Several commented on the developing and pioneering nature of reporting 
on cost and quality of health care information. Some comments simply 
expressed general support for the proposal. One comment from a state 
government human services department expressed general support for this 
proposal. One comment from a pharmacy association expressed support for 
providing consumers with cost and quality information.
    Three comments were from health insurance plans with experience 
with Medicare MSAs, which also expressed support for this proposal, but 
requested flexibility for plans in development of cost and quality 
transparency information. One organization argued against separate 
standards for Internet vs. other forms of communication to allow 
flexibility in how information is communicated. Another comment from a 
health plan not currently participating as an Medicare MSA indicated 
its concern for the burden on health plans of transparency, and thought 
we intended to require that information be sent to all enrollees.
    Two comments from major physician organizations requested that 
providers and other stakeholders have input into the reporting of cost 
and quality reporting measures. The physician organizations 
specifically reference guidelines from the Consumer-Purchaser 
Disclosure Project's ``Patient Charter for Physician Performance 
Measurement, Reporting and Tiering Programs.''
    A number of consumer groups, including organizations representing 
the disabled, requested that cost and quality information be linked so 
that consumers can readily see where they meet, and so that consumers 
are not steered solely by price considerations. Consumer groups were 
also interested in information being posted on the out-of-pocket costs 
for enrollees in MSA plans, as well as on information for enrollees on 
how accounts operate and on any account fees or interest rates.
    Response: Public comments indicate support for the proposal, and 
also indicate interest in making information useful for enrollees and 
equitable to health care providers on whom the information is reported. 
We acknowledge these comments of general support. We also understand 
comments requesting that stakeholders and consumers be allowed input 
and their interest in making the information fully useful to consumers.
    As indicated in the proposed rule in the discussion of calculation 
of burden on health plans, we are expecting plans to provide the same 
level of information on cost and quality of services that they provide 
to commercial enrollees and to provide whatever information is 
available. Therefore, we are anticipating that the burden level would 
not be undue on health plans. We hope that consumers will also provide 
input because they are the parties intended to use the information, and 
so we expect that consumer demand will shape the design of reporting 
standards over time. Therefore, we agree with the comment that plans 
should have flexibility in design of transparency standards. We are not 
specifying standards for Internet or for other forms of communication 
at this time. It also makes sense for physicians and other providers 
and any interested stakeholders to provide input directly to plans or 
to CMS.
    We do not want to specify further requirements at this time for 
transparency and want primarily to allow plans to work with enrollees 
to develop that information. Note that the statutory exemption from 
quality improvement programs for MSAs at section 1852(e) of the Act was 
recently eliminated by section 163 of MIPPA. MSA and PFFS plans must 
participate in quality improvement programs beginning in 2010. This new 
quality improvement requirement implemented in regulations at Sec.  
422.152(a), will work in conjunction with transparency efforts and 
enable transmission of information directly to enrollees of these 
health care plans.

B. Changes to Part 423--Medicare Prescription Drug Benefit Program

1. Passive Election for Full Benefit Dual Eligible Individuals Who Are 
Qualifying Covered Retirees (Sec.  423.34)
    We proposed to revise Sec.  423.34(d) to establish an exception to 
our normal auto-enrollment procedures for full benefit dual eligible 
individuals who we know to be enrolled in a qualifying employer group 
plan. Rather than auto-enrolling these individuals into a PDP (no 
individuals are auto-enrolled into MA-PD), we proposed that such 
individuals would be deemed to decline Part D coverage if, following a 
notice of their options, they do not indicate that they wish to receive 
it. As discussed below, this final rule adopts the proposed regulatory 
changes to Sec.  423.34(d) in their entirety.
    Comment: All commenters supported the policy where full benefit 
dual-eligible individuals (eligible for both Medicare and Medicaid), 
who are also qualifying covered retirees, would not be automatically 
enrolled in a Medicare Part D plan by CMS. Although commenters 
expressed no objections to the proposed regulatory changes, several 
commenters objected to a statement in the preamble to the proposed 
regulation (73 FR 28562) indicating that if a full benefit dual 
eligible individual with qualifying retiree coverage decided to enroll 
in a Part D plan at a later time, that enrollment could be made 
effective retroactively to the date of the dual eligibility. The 
commenters asserted that retroactive Part D coverage would 
inappropriately shift the liability for past drug spending to a Part D 
plan. Other commenters supported the option of retroactive coverage.
    Response: Consistent with our proposal, this final rule establishes 
that full benefit dual eligible individuals with qualified retiree 
coverage will not be automatically enrolled in a Medicare Part D plan. 
(That is, we will not auto-enroll individuals for whom we have approved 
a group health plan sponsor to receive the Retiree Drug Subsidy (RDS)

[[Page 1501]]

described in 42 CFR Part 423, Subpart R for the period of time the 
automatic enrollment in Part D would otherwise cover.) Instead, we will 
send these individuals a notice informing them that they will be deemed 
to have declined such enrollment unless they take an affirmative action 
to choose a plan or opt for auto-enrollment. They may choose to enroll 
in a Medicare Part D plan at any time, as long as they retain that dual 
status, but we will not automatically enroll them in a Part D plan.
    In general, we believe that dual eligible individuals who decide to 
enroll in a Medicare Part D plan at a later time should do so on a 
prospective basis, like most other enrollment elections. These 
individuals have made an election initially to not enroll in a Medicare 
Part D plan and instead to remain in their current employer plan. Thus, 
there is no ``coverage gap'' involved, which obviates the usual premise 
for retroactive Medicare coverage for dual eligibles. We agree with 
commenters that retroactive coverage under Medicare Part D could lead 
to an inappropriate shift of beneficiary drug expenditures to the 
Medicare program. However, as currently occurs under both the MA and 
Part D programs, we acknowledge that special circumstances may arise 
which would justify a retroactive enrollment into Medicare Part D. We 
will issue clarifying guidance on the appropriateness for retroactive 
coverage and consider those requests on a case-by-case basis.
    Comment: Several commenters requested that other individuals who 
are automatically enrolled into a Medicare Part D plan, such as 
individuals eligible for one of the Medicare Savings Programs, also be 
exempted from automatic enrollment when they have qualified retiree 
coverage.
    Response: Other individuals with qualified retiree coverage, such 
as non-dual eligible individuals who are also eligible for low-income 
subsidy assistance under the Medicare Savings Programs, are already 
excluded from automatic enrollment under Medicare Part D.
    Comment: Several commenters suggested that the regulations specify 
that the notice individuals receive advise them to discuss the impact 
of Medicare Part D coverage with their group health plan administrator 
or personnel office. They also suggested that we share the model 
beneficiary notice with beneficiary representatives for their review.
    Response: We do not believe it is necessary or appropriate to 
specify in the regulations the exact content of the notice that will be 
sent to the affected individuals, such as where individuals should turn 
to receive information to help them make a decision. However, in the 
notice that we send to beneficiaries, we will specify that individuals 
should discuss their drug benefits with the appropriate retiree staff 
who handle their coverage and benefits. We will be pleased to share the 
model beneficiary notice in draft with beneficiary representatives to 
obtain their input and guidance.
    Comment: Several commenters requested we revise the regulations to 
specify that the notice will be provided to the individual or their 
representatives to the extent that we are aware that the individual has 
someone acting on his/her behalf. They expressed concern that some of 
the affected individuals may lack the capacity to understand the notice 
and the action to be taken.
    Response: We are not modifying the regulations to include this 
suggested change, because we have no way to collect and retain address 
information for an individual authorized to act on behalf of a 
beneficiary, or verify that someone asserting such status is in fact so 
authorized.
    Comment: Several commenters requested that CMS extend the process 
for non-automatic enrollment into Medicare Part D to full benefit dual 
eligible individuals with non-qualifying retiree coverage in addition 
to those individuals with qualifying retiree coverage.
    Response: Currently, we receive information only for individuals 
who have qualifying retiree prescription drug coverage, and for whom we 
have approved a group health sponsor to receive the RDS. The 
information we receive, among other data, specifies that the 
individual's retiree drug coverage is at least equal to the actuarial 
value of the Medicare Part D defined standard prescription drug 
coverage, and records are maintained for audit purposes (Sec.  
423.884). We do not have similar information for non-qualifying retiree 
prescription drug coverage, and thus would be unable to extend the non-
automatic enrollment process to cover those situations. To accomplish 
the request would require soliciting information on the other coverage, 
verifying its authenticity, and entering it into the database which 
includes creditable coverage information. Should this information 
become readily available, we would consider this proposal. However, we 
note that we would not be certain, in the case of other retiree 
coverage, whether the coverage had a value to beneficiaries at least as 
good as that they would get if defaulted to a Part D plan. This would 
also be a factor for us to consider.
    Comment: Several commenters requested that CMS establish a special 
enrollment period for retroactive disenrollment from Medicare Part D 
plans for any beneficiary who was auto-enrolled in a plan that 
conflicted with a retiree plan.
    Response: Our current Medicare Prescription Drug Plan guidance 
permits full benefit dual eligible individuals to opt out of Medicare 
Part D coverage at any time. If the beneficiary makes the request prior 
to the effective date of auto-enrollment, then the enrollment is 
cancelled and the individual is considered not enrolled. If the 
effective date of the auto-enrollment is retroactive, the beneficiary 
may request a retroactive cancellation as long as the request is made 
by the 15th of the month after the month in which auto-enrollment 
occurred. If the request occurs after those dates, then the 
disenrollment would be effective with the last day of the month in 
which the request is made. With the retroactive cancellations, we 
caution individuals or their representatives to be careful to ensure 
individuals do not have a gap in prescription drug coverage, given that 
we have no authority to require that employer plans accept re-
enrollments from former members of such plans. We also caution that 
such a disenrollment would not necessarily retroactively restore 
eligibility under an employer plan if that eligibility is lost as the 
result of an enrollment in a Part D plan.
2. Part D Late Enrollment Penalty (Sec.  423.46)
    Under section 1860D-13(b) of the Act, a Part D late enrollment 
penalty (LEP) generally applies when a Medicare beneficiary has a 
continuous period of 63 days or longer without creditable prescription 
drug coverage subsequent to the beneficiary's initial enrollment 
period. This requirement is codified in regulations at Sec.  423.46. 
Although Sec.  423.46 describes which individuals are subject to a 
penalty, it does not specify the role of the Part D plan in the LEP 
determination process. We have subsequently outlined plan 
responsibilities in our existing guidance (Chapters 4 and 18 Sec.  
80.7.1, of the Medicare Prescription Drug Benefit Manual), and in our 
May 16, 2008 proposed rule we proposed to clarify the general 
responsibilities of Part D plans in the regulations.
    First, we proposed to clarify under Sec.  423.46(b) that Part D 
plans must obtain information on prior creditable coverage from all 
enrolled or enrolling

[[Page 1502]]

beneficiaries. Under this process, plans must first query CMS systems 
for previous plan enrollment information, which is a standard part of 
the beneficiary enrollment process. When there is a qualifying gap in 
creditable coverage, however, the process for obtaining creditable 
coverage information must also include plan interaction with the 
beneficiary. This is due in large part to the limited information 
available in CMS' systems about forms of creditable coverage other than 
Part D coverage or coverage through an employer group under the retiree 
drug subsidy (RDS). Therefore, it is critical that plans obtain 
historical creditable coverage information from the beneficiary in 
order to determine the number of uncovered months, if any, and retain 
any information collected concerning that determination (as specified 
under proposed Sec.  423.46(d)).
    The related requirement that we proposed under Sec.  423.46(b) is 
that plans must then report creditable coverage information in a manner 
specified by CMS. Specifically, plans would report the number of 
uncovered months to CMS, which would then calculate the penalty and 
report the penalty back to the plan. The plan would then notify the 
beneficiary of the determination of the LEP amount and of their ability 
to request a reconsideration of this determination.
    We also proposed under Sec.  423.46(c) that, consistent with 
section 1860(D)-13(b) of the Act, individuals who are determined to 
have a late enrollment penalty have the opportunity to ask for a 
reconsideration of this determination. (Note that existing Sec.  
423.56(g) briefly references the ability to ``apply to CMS'' when an 
individual believes that he or she was not adequately informed that his 
or her prescription drug coverage was not creditable, and we would 
cross-reference that section here.) We believe that the statute clearly 
intends that individuals have an opportunity to provide CMS with 
additional information related to prior prescription drug coverage in 
support of a request for reconsideration of a late enrollment penalty 
determination. While the statute expressly provides for this 
opportunity only with respect to an argument that proper notice was not 
given concerning whether existing coverage was creditable, we believe 
that the same rationale could apply to other arguments that the penalty 
should not apply (for example, an argument that the individual had 
prior creditable prescription drug coverage that the enrollee believes 
may not have been considered).
    Finally, we proposed to specify that a beneficiary would not have 
the right to further administrative review of the reconsideration 
decision of CMS, or the independent review entity acting under CMS' 
authority. However, we would, have the discretion to reopen, review, 
and revise such a decision.
    Comment: Several commenters support the regulatory changes 
proposed; several other commenters, however, raised concerns about the 
role of Medicare Part D plan sponsors in the creditable coverage period 
determination process associated with the Part D LEP. Two of these 
commenters stated that having plans obtain and validate the required 
information could create inconsistencies in acceptable documentation, 
possible errors in reports to the government, and additional burden to 
plans. These two respondents suggested that CMS be responsible for the 
creditable coverage period determination, and one of them stated that 
the reporting process should be the same as the one for the Medicare 
Part B premium surcharge. Additionally, one of these commenters also 
suggested that, at the very least, and until such time as CMS is able 
to conduct this verification process without plan involvement, CMS 
sh