Medicare Program; Proposed Changes to the Medicare Advantage and the Medicare Prescription Drug Benefit Programs for Contract Year 2012 and Other Proposed Changes, 71190-71292 [2010-28774]

Agencies

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

[Federal Register Volume 75, Number 224 (Monday, November 22, 2010)]
[Proposed Rules]
[Pages 71190-71292]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-28774]



[[Page 71189]]

-----------------------------------------------------------------------

Part II





Department of Health and Human Services





-----------------------------------------------------------------------



Centers for Medicare & Medicaid Services



-----------------------------------------------------------------------



42 CFR Parts 417, 422, and 423



Medicare Program; Proposed Changes to the Medicare Advantage and the 
Medicare Prescription Drug Benefit Programs for Contract Year 2012 and 
Other Proposed Changes; Proposed Rule

Federal Register / Vol. 75, No. 224 / Monday, November 22, 2010 / 
Proposed Rules

[[Page 71190]]


-----------------------------------------------------------------------

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 417, 422, and 423

[CMS-4144-P]
RIN 0938-AQ00


Medicare Program; Proposed Changes to the Medicare Advantage and 
the Medicare Prescription Drug Benefit Programs for Contract Year 2012 
and Other Proposed Changes

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

ACTION: Proposed rule.

-----------------------------------------------------------------------

SUMMARY: We are proposing revisions to the Medicare Advantage (MA) 
program (Part C) and Prescription Drug Benefit Program (Part D) to 
implement provisions specified in the Patient Protection and Affordable 
Care Act and the Health Care and Education Reconciliation Act of 2010 
(collectively referred to as the Affordable Care Act) (ACA) and make 
other changes to the regulations based on our continued experience in 
the administration of the Part C and D programs. These latter proposed 
revisions would clarify various program participation requirements; 
make changes to strengthen beneficiary protections; strengthen our 
ability to identify strong applicants for Parts C and D program 
participation and remove consistently poor performers; and make other 
clarifications and technical changes.

DATES: To be assured consideration, comments must be received at one of 
the addresses provided below, no later than 5 p.m. Eastern Standard 
Time (EST) on January 21, 2011.

ADDRESSES: In commenting, please refer to file code CMS-4144-P. Because 
of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission. You may submit comments in one of four 
ways (no duplicates, please):
    1. Electronically. You may submit electronic comments on specific 
issues in this regulation to https://www.cms.hhs.gov/eRulemaking. Click 
on the link ``Submit electronic comments on CMS regulations with an 
open comment period.'' (Attachments should be in Microsoft Word, 
WordPerfect, or Excel; however, we prefer Microsoft Word.)
    2. By regular mail. You may mail written comments (one original and 
two copies) to the following address only: Centers for Medicare & 
Medicaid Services, Department of Health and Human Services, Attention: 
CMS-4144-P, 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 (one 
original and two copies) to the following address only: Centers for 
Medicare & Medicaid Services, Department of Health and Human Services, 
Attention: CMS-4144-P, 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 (one original and two copies) before the 
close of the comment period to one of the following addresses. If you 
intend to deliver your comments to the Baltimore address, please call 
telephone number (410) 786-7195 in advance to schedule your arrival 
with one of our staff members. Room 445-G, Hubert H. Humphrey Building, 
200 Independence Avenue, SW., Washington, DC 20201; or 7500 Security 
Boulevard, Baltimore, MD 21244-1850.
    (Because access to the interior of the 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.)
    Comments mailed to the addresses indicated as appropriate for hand 
or courier delivery may be delayed and received after the comment 
period.
    Submission of comments on paperwork requirements. You may submit 
comments on this document's paperwork requirements by mailing your 
comments to the addresses provided at the end of the ``Collection of 
Information Requirements'' section in this document.
    For information on viewing public comments, see the beginning of 
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT:

Vanessa Duran, (410) 786-8697 and Sabrina Ahmed, (410) 786-7499, 
General information.
Christopher McClintick, (410) 786-4682, Part C issues.
Deborah Larwood, (410) 786-9500, Part D issues.
Kristy Nishimoto, (410) 786-8517, Part C and D enrollment and appeals 
issues.
Deondra Moseley, (410) 786-4577, Part C payment issues.

SUPPLEMENTARY INFORMATION: Submitting Comments: We welcome comments 
from the public on all issues set forth in this rule to assist us in 
fully considering issues and developing policies. You can assist us by 
referencing the file code CMS-4144-P.
    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 at https://www.cms.hhs.gov/eRulemaking. Click on the link ``Electronic Comments on 
CMS Regulations'' on that Web site to view public comments.
    Comments received timely will also be 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.

Table of Contents

I. Background
    A. Overview of the Medicare Prescription Drug, Improvement, and 
Modernization Act of 2003
    B. History and Overview
II. Provisions of the Proposed Regulation
    A. Overview of the Proposed Changes
    B. Changes To Implement the Provisions of the Affordable Care 
Act of 2010
    1. Cost Sharing for Specified Services at Original Medicare 
Levels (Sec.  417.101 and Sec.  422.100)
    2. Simplification of Beneficiary Election Periods (Sec.  422.62, 
Sec.  422.68, Sec.  423.38, and Sec.  423.40)
    3. Special Needs Plan (SNP) Provisions (Sec.  422.2, Sec.  
422.4, Sec.  422.101, Sec.  422.107, and Sec.  422.152)
    a. Adding a Definition of Fully Integrated Dual Eligible SNP 
(Sec.  422.2)
    b. Extending SNP Authority
    c. Dual-Eligible SNP Contracts With State Medicaid Agencies 
(Sec.  422.107)
    d. Approval of Special Needs Plans by the National Committee for 
Quality Assurance (Sec.  422.4, Sec.  422.101, and Sec.  422.152)
    4. Section 1876 Cost Contractor Competition Requirements (Sec.  
417.402)
    5. Making Senior Housing Facility Demonstration Plans Permanent 
(Sec.  422.2 and Sec.  422.53)
    6. Authority To Deny Bids (Sec.  422.254, Sec.  422.256, Sec.  
423.265, and Sec.  423.272)

[[Page 71191]]

    7. Determination of Part D Low-Income Benchmark Premium (Sec.  
423.780)
    8. Voluntary De Minimis Policy for Subsidy Eligible Individuals 
(Sec.  423.34 and Sec.  423.780)
    a. Reassigning LIS Individuals (Sec.  423.34)
    b. Enrollment of LIS-Eligible Individuals (Sec.  423.34)
    c. Premium Subsidy (Sec.  423.780)
    9. Increase in Part D Premiums Due to the Income Related Monthly 
Adjustment Amount (D--IRMAA) (Sec.  423.44, Sec.  423.286, and Sec.  
423.293)
    a. Rules Regarding Premiums (Sec.  423.286)
    b. Collection of Monthly Beneficiary Premium (Sec.  423.293)
    c. Involuntary Disenrollment by CMS (Sec.  423.44)
    10. Elimination of Medicare Part D Cost-Sharing for Individuals 
Receiving Home and Community-Based Services (Sec.  423.772 and Sec.  
423.782)
    11. Appropriate Dispensing of Prescription Drugs in Long-Term 
Care Facilities Under PDPs and MA-PD Plans (Sec.  423.154)
    12. Complaint System for Medicare Advantage Organizations and 
PDPs (Sec.  422.504 and Sec.  423.505)
    13. Uniform Exceptions and Appeals Process for Prescription Drug 
Plans and MA-PD Plans (Sec.  423.128 and Sec.  423.562)
    14. Including Costs Incurred by AIDS Drug Assistance Programs 
and the Indian Health Service Toward the Annual Part D Out-of-Pocket 
Threshold (Sec.  423.100 and Sec.  423.464)
    15. Cost Sharing for Medicare-Covered Preventive Services (Sec.  
417.101 and Sec.  422.100)
    16. Elimination of the Stabilization Fund (Sec.  422.458)
    17. Improvements to Medication Therapy Management Programs 
(Sec.  423.153)
    18. Changes To Close the Part D Coverage Gap (Sec.  423.104 and 
Sec.  423.884)
    19. Payments to Medicare Advantage Organizations (Sec.  422.308)
    a. Authority To Apply Frailty Adjustment Under PACE Payment 
Rules for Certain Specialized MA Plans for Special Needs Individuals 
(Sec.  422.308)
    b. Application of Coding Adjustment (Sec.  422.308)
    c. Improvements to Risk Adjustment for Special Needs Individuals 
With Chronic Health Conditions (Sec.  422.308)
    20. Medicare Advantage Benchmark, Quality Bonus Payments, and 
Rebate (Sec.  422.252, Sec.  422.258, and Sec.  422.266)
    a. Terminology (Sec.  422.252)
    b. Calculation of Benchmarks (Sec.  422.258)
    c. Increases to the Applicable Percentage for Quality (Sec.  
422.258(d))
    d. Beneficiary Rebates (Sec.  422.266)
    21. Quality Bonus Payment and Rebate Retention Appeals (Sec.  
422.260)
    C. Clarify Various Program Participation Requirements
    1. Clarify Payment Rules for Non-Contract Providers (Sec.  
422.214)
    2. Pharmacist Definition (Sec.  423.4)
    3. Prohibition on Part C and D Program Participation by 
Organizations Whose Owners, Directors, or Management Employees 
Served in a Similar Capacity With Another Organization That 
Terminated Its Medicare Contract Within the Previous 2 Years (Sec.  
422.506, Sec.  422.508, Sec.  422.512, Sec.  423.508, Sec.  423.507, 
and Sec.  423.510)
    4. Timely Transfer of Data and Files When CMS Terminates a 
Contract With a Part D Sponsor (Sec.  423.509)
    5. Review of Medical Necessity Decisions by a Physician or Other 
Health Care Professional and the Employment of a Medical Director 
(Sec.  422.562, Sec.  422.566, Sec.  423.562, and Sec.  423.566)
    6. Compliance Officer Training (Sec.  422.503 and Sec.  423.504)
    7. Removing Quality Improvement Projects and Chronic Care 
Improvement Programs From CMS Deeming Process (Sec.  422.156)
    8. Definitions of Employment-Based Retiree Health Coverage and 
Group Health Plan for MA Employer/Union-Only Group Waiver Plans 
(Sec.  422.106)
    D. Strengthening Beneficiary Protections
    1. Agent and Broker Training Requirements (Sec.  422.2274 and 
Sec.  423.2274)
    a. CMS-Approved or Endorsed Agent and Broker Training and 
Testing (Sec.  422.2274 and Sec.  423.2274)
    b. Extending Annual Training Requirements to All Agents and 
Brokers (Sec.  422.2274 and Sec.  423.2274)
    2. Call Center and Internet Web Site Requirements (Sec.  422.111 
and Sec.  423.128)
    a. Extension of Customer Call Center and Internet Web site 
Requirements to MA Organizations (Sec.  422.111)
    b. Call Center Interpreter Requirements (Sec.  422.111 and Sec.  
423.128)
    3. Require Plan Sponsors To Contact Beneficiaries To Explain 
Enrollment by an Unqualified Agent/Broker (Sec.  422.2272 and Sec.  
423.2272)
    4. Customized Enrollee Data (Sec.  422.111 and Sec.  423.128)
    5. Extending the Mandatory Maximum Out-of-Pocket (MOOP) Amount 
Requirements to Regional PPOs (Sec.  422.100 and Sec.  422.101)
    6. Prohibition on Use of Tiered Cost Sharing by MA Organizations 
(Sec.  422.262)
    7. Delivery of Adverse Coverage Determinations (Sec.  423.568)
    8. Extension of Grace Period for Good Cause and Reinstatement 
(Sec.  422.74 and Sec.  423.44)
    9. Translated Marketing Materials (Sec.  422.2264 and Sec.  
423.2264)
    E. Strengthening Our Ability To Distinguish for Approval 
Stronger Applicants for Part C and Part D Program Participation and 
To Remove Consistently Poor Performers
    1. Expand Network Adequacy Requirements to Additional MA Plan 
Types (Sec.  422.112)
    2. Maintaining a Fiscally Sound Operation (Sec.  422.2, Sec.  
422.504, Sec.  423.4, and Sec.  423.505)
    3. Release of Part C and Part D Payment Data
    4. Required Use of Electronic Transaction Standards for Multi-
Ingredient Drug Compounds; Payment for Multi-Ingredient Drug 
Compounds (Sec.  423.120)
    5. Denial of Applications Submitted by Part C and D Sponsors 
With Less Than 14 Months Experience Operating Their Medicare 
Contracts (Sec.  422.502 and Sec.  423.503)
    F. Other Clarifications and Technical Changes
    1. Clarification of the Expiration of the Authority To Waive the 
State Licensure Requirement for Provider-Sponsored Organizations 
(Sec.  422.4)
    2. Cost Plan Enrollment Mechanisms (Sec.  417.430)
    3. Fast-Track Appeals of Service Terminations to Independent 
Review Entities (IREs) (Sec.  422.626)
    4. Part D Transition Requirements (Sec.  423.120)
    5. Revision to Limitation on Charges to Enrollees for Emergency 
Department Services (Sec.  422.113)
    6. Clarify Language Related to Submission of a Valid Application 
(Sec.  422.502 and Sec.  423.503)
    7. Modifying the Definition of Dispensing Fees (Sec.  423.100)
III. Collection of Information Requirements
    A. ICRs Regarding Cost Sharing for Specified Services at 
Original Medicare Levels (Sec.  417.101 and Sec.  422.100)
    B. ICRs Regarding SNP Provisions (Sec.  422.101, Sec.  422.107, 
and Sec.  422.152)
    1. Dual-Eligible SNP Contracts With State Medicaid Agencies 
(Sec.  422.107)
    2. ICRs Regarding NCQA Approval of SNPs (Sec.  422.101 and Sec.  
422.152)
    C. ICRs Regarding Voluntary De Minimis Policy for Subsidy 
Eligible Individuals (Sec.  423.34 and Sec.  423.780)
    D. ICRs Regarding Increase in Part D Premiums Due to the Income 
Related Monthly Adjustment Amount (D--IRMAA) (Sec.  423.44)
    E. ICRs Regarding Elimination of Medicare Part D Cost Sharing 
for Individuals Receiving Home and Community-Based Services (Sec.  
423.772 and Sec.  423.782)
    F. ICRs Regarding Appropriate Dispensing of Prescription Drugs 
in Long-Term Care Facilities Under PDPs and MA-PD plans (Sec.  
423.154) and Dispensing Fees (Sec.  423.100)
    G. ICRs Regarding Complaint System for Medicare Advantage 
Organizations and PDPs (Sec.  422.504 and Sec.  423.505)
    H. ICRs Regarding Uniform Exceptions and Appeals Process for 
Prescription Drug Plans and MA-PD Plans (Sec.  423.128(b)(7)(i), 
Sec.  423.128(d), and Sec.  423.562(a)(3))
    I. ICRs Regarding Including Costs Incurred by AIDS Drug 
Assistance Programs and the Indian Health Service Toward the Annual 
Part D Out-of-Pocket Threshold (Sec.  423.100 and Sec.  423.464)
    J. ICRs Regarding Improvements to Medication Therapy Management 
Programs (Sec.  423.153(vii))
    K. ICRs Regarding Changes To Close the Part D Coverage Gap 
(Sec.  423.104 and Sec.  423.884)
    L. ICRs Regarding Medicare Advantage Benchmark, Quality Bonus 
Payments, and Rebate (Sec.  422.252, Sec.  422.258 and Sec.  
422.266)
    M. ICRs Regarding Quality Bonus Appeals (Sec.  422.260)
    N. ICRs Regarding Timely Transfer of Data and Files When CMS 
Terminates a

[[Page 71192]]

Contract With a Part D Sponsor (Sec.  423.509)
    O. ICRs Regarding Compliance Officer Training (Sec.  422.503 and 
Sec.  423.504)
    P. ICRs Regarding Agent and Broker Training Requirements (Sec.  
422.2274 and Sec.  423.2274)
    Q. ICRs Regarding Call Center and Internet Web Site Requirements 
(Sec.  422.111 and Sec.  423.128)
    R. ICRs Regarding Requiring Plan Sponsors To Contact 
Beneficiaries To Explain Enrollment by an Unqualified Agent/Broker 
(Sec.  422.2272 and Sec.  423.2272)
    S. ICRs Regarding Customized Enrollee Data (Sec.  422.111 and 
Sec.  423.128)
    T. ICRs Regarding Extending the Mandatory Maximum Out-of-Pocket 
(MOOP) Amount Requirements to Regional PPOs (Sec.  422.100(f) and 
Sec.  422.101(d))
    U. ICRs Regarding Prohibition on Use of Tiered Cost Sharing by 
MA Organizations (Sec.  422.100 and Sec.  422.262)
    V. ICRs Regarding Translated Marketing Materials (Sec.  422.2264 
and Sec.  423.2264)
    W. ICRs Regarding Expanding Network Adequacy Requirements to 
Additional MA Plan Types (Sec.  422.112)
    X. ICRs Regarding Maintaining a Fiscally Sound Operation (Sec.  
422.2, Sec.  422.504, Sec.  423.4, and Sec.  423.505)
    Y. ICRs Regarding Release of Part C and Part D Payment Data
    Z. ICRs Regarding Revision to Limitation on Charges to Enrollees 
for Emergency Department Services (Sec.  422.113)
IV. Response to Comments
V. Regulatory Impact Analysis
    A. Overall Impact
    B. Costs, Savings, and Anticipated Effects Associated With This 
Proposed Rule
    1. Cost Sharing for Specified Services at Original Medicare 
Levels (Sec.  417.101 and Sec.  422.100)
    2. Approval of Special Needs Plans (SNPs) by National Committee 
for Quality Assurance (NCQA) (Sec.  422.4, Sec.  422.101, and Sec.  
422.152)
    3. Determination of Part D Low-Income Benchmark Premium (Sec.  
423.780)
    4. Voluntary De Minimis Policy for Subsidy Eligible Individuals 
(Sec.  423.34 and Sec.  423.780)
    5. Increase in Part D Premiums Due to the Income-Related Monthly 
Adjustment Amount (D--IRMAA) (Sec.  423.44)
    6. Elimination of Medicare Part D Cost Sharing for Individuals 
Receiving Home and Community-Based Services (Sec.  423.772 and Sec.  
423.782)
    7. Appropriate Dispensing of Prescription Drugs in Long-Term 
Care Facilities Under PDPs and MA-PD Plans (Sec.  423.154) and 
Dispensing Fees (Sec.  423.100)
    8. Complaint System for Medicare Advantage Organizations and 
PDPs (Sec.  422.504 and Sec.  423.505)
    9. Uniform Exceptions and Appeals Process for Prescription Drug 
Plans and MA-PD Plans (Sec.  423.128 and Sec.  423.562)
    10. Including Costs Incurred by the AIDS Drug Assistance Program 
(ADAP) and the Indian Health Service (IHS) Toward the Annual Part D 
Out-of-Pocket Threshold (Sec.  423.100 and Sec.  423.464)
    11. Cost Sharing for Medicare Covered Preventive Services (Sec.  
417.101 and Sec.  422.100)
    12. Elimination of the Stabilization Fund (Sec.  422.458)
    13. Improvements to Medication Therapy Management Programs 
(Sec.  423.153)
    14. Changes To Close the Part D Coverage Gap (Sec.  423.104 and 
Sec.  423.884)
    15. Medicare Advantage Benchmark, Quality Bonus Payments, and 
Rebate and Application of Coding Adjustment (Sec.  422.252, Sec.  
422.258, Sec.  422.266, and Sec.  422.308)
    16. Quality Bonus Appeals (Sec.  422.260)
    17. Timely Transfer of Data and Files When CMS Terminates a 
Contract With a Part D Sponsor (Sec.  423.509)
    18. Review of Medical Necessity Decisions by a Physician or 
Other Health Care Professional and the Employment of a Medical 
Director (Sec.  422.562, Sec.  422.566, Sec.  423.562, and Sec.  
423.566)
    19. Compliance Officer Training (Sec.  422.503 and Sec.  
423.504)
    20. Agent and Broker Training Requirements (Sec.  422.2274 and 
Sec.  423.2274)
    21. Call Center Interpreter Requirements (Sec.  422.111 and 
Sec.  423.128)
    22. Customized Enrollee Data (Sec.  422.111 and Sec.  423.128)
    23. Extending the Mandatory Maximum Out-of-Pocket (MOOP) Amount 
Requirements to Regional PPOs (Sec.  422.100 and Sec.  422.101)
    24. Translated Marketing Materials (Sec.  422.2264 and Sec.  
423.2264)
    C. Expected Benefits
    1. Cost Sharing for Specified Services at Original Medicare 
Levels (Sec.  417.101 and 422.100)
    2. Determination of Part D Low-Income Benchmark Premium (Sec.  
423.780)
    3. Voluntary De Minimis Policy for Subsidy Eligible Individuals 
(Sec.  423.34 and Sec.  423.780)
    4. Increase in Part D Premiums Due to the Income Related Monthly 
Adjustment Amount (D--IRMAA) (Sec.  423.44)
    5. Elimination of Medicare Part D Cost Sharing for Individuals 
Receiving Home and Community-Based Services (Sec.  423.772 and Sec.  
423.782)
    6. Appropriate Dispensing of Prescription Drugs in Long-Term 
Care Facilities Under PDPs and MA-PD Plans (Sec.  423.154) and 
Dispensing Fees (Sec.  423.100)
    7. Complaint System for Medicare Advantage Organizations and 
PDPs (Sec.  422.504 and Sec.  423.505)
    8. Uniform Exceptions and Appeals Process for Prescription Drug 
Plans and MA-PD Plans (Sec.  423.128 and Sec.  423.562)
    9. Including Costs Incurred by the AIDS Drug Assistance Program 
(ADAP) and the Indian Health Services (IHS) Toward the Annual Part D 
Out-of-Pocket Threshold (Sec.  423.100 and Sec.  423.464)
    10. Cost Sharing for Medicare Covered Preventive Service (Sec.  
417.101 and Sec.  422.100)
    11. Elimination of the Stabilization Fund (Sec.  422.458)
    12. Improvements to Medication Therapy Management Programs 
(Sec.  423.153)
    13. Changes to Close the Part D Coverage Gap (Sec.  423.104 and 
Sec.  423.884)
    14. Medicare Advantage Benchmark, Quality Bonus Payments, and 
Rebate and Application of Coding Adjustment (Sec.  422.252, Sec.  
422.258 and Sec.  422.266, and Sec.  422.308)
    15. Quality Bonus Appeals (Sec.  422.260)
    16. Timely Transfer of Data and Files When CMS Terminates a 
Contract With a Part D Sponsor (Sec.  423.509)
    17. Review of Medical Necessity Decisions by a Physician or 
Other Health Care Professional and the Employment of a Medical 
Director (Sec.  422.562, Sec.  422.566, Sec.  423.562, and Sec.  
423.566)
    18. Compliance Officer Training (Sec.  422.503 and Sec.  
423.503)
    19. Agent and Broker Training Requirements (Sec.  422.2274 and 
Sec.  423.2274)
    20. Call Center Interpreter Requirements (Sec.  422.111 and 
Sec.  423.128)
    21. Customized Enrollee Data (Sec.  422.111 and Sec.  423.128)
    22. Extending the Mandatory Maximum Out-of-Pocket (MOOP) Amount 
Requirements to Regional PPOs (Sec.  422.100 and Sec.  422.101)
    23. Translated Marketing Materials (Sec.  422.2264 and Sec.  
423.2264)
    D. Alternatives Considered
    1. Cost Sharing for Specified Services at Original Medicare 
Levels (Sec.  417.101 and Sec.  422.100)
    2. Cost Sharing for Medicare Covered Preventive Services (Sec.  
417.101 and Sec.  422.100)
    3. Quality Bonus Appeals (Sec.  422.260)
    4. Timely Transfer of Data and Files When CMS Terminates a 
Contract With a Part D Sponsor (Sec.  423.509)
    5. Review of Medical Necessity Decisions by a Physician or Other 
Health Care Professional and the Employment of a Medical Director 
(Sec.  422.562, Sec.  422.566, Sec.  423.562, and Sec.  423.566)
    6. Compliance Officer Training (Sec.  422.503 and Sec.  423.504)
    7. Agent and Broker Training Requirements (Sec.  422.2274 and 
Sec.  423.2274)
    8. Call Center Interpreter Requirements (Sec.  422.111 and Sec.  
423.128)
    9. Customized Enrollee Data (Sec.  422.111 and Sec.  423.128)
    10. Extending the Mandatory Maximum Out-of-Pocket (MOOP) Amount 
Requirements to Regional PPOs (Sec.  422.100 and Sec.  422.101)
    11. Translated Marketing Materials (Sec.  422.2264 and Sec.  
423.2264)
    12. Increases to the Applicable Percentage for Quality (Sec.  
422.258(d))
    E. Accounting Statement

Regulations Text

Acronyms

ACA The Affordable Care Act of 2010 (which is the collective term 
for the Patient Protection and Affordable Care Act (Pub. L. 111-148) 
and the Health Care and Education Reconciliation Act (Pub. L. 111-
152))
AO Accrediting Organization
ADS Automatic Dispensing System

[[Page 71193]]

AEP Annual Enrollment Period
AHFS American Hospital Formulary Service
AHFS-DI American Hospital Formulary Service-Drug Information
AHRQ Agency for Health Care Research and Quality
ALJ Administrative Law Judge
ANOC Annual Notice of Change
BBA Balanced Budget Act of 1997 (Pub. L. 105-33)
BBRA [Medicare, Medicaid and State Child Health Insurance Program] 
Balanced Budget Refinement Act of 1999 (Pub. L. 106-113)
BIPA Medicare, Medicaid, and SCHIP Benefits Improvement Protection 
Act of 2000 (Pub. L. 106-554)
CAHPS Consumer Assessment Health Providers Survey
CAP Corrective Action Plan
CCIP Chronic Care Improvement Program
CCS Certified Coding Specialist
CHIP Children's Health Insurance Programs
CMP Civil Money Penalties
CMR Comprehensive Medical Review
CMS Centers for Medicare & Medicaid Services
CMS-HCC CMS Hierarchal Condition Category
CTM Complaints Tracking Module
COB Coordination of Benefits
CORF Comprehensive Outpatient Rehabilitation Facility
CPC Certified Professional Coder
CY Calendar Year
DOL U.S. Department of Labor
DRA Deficit Reduction Act of 2005 (Pub. L. 109-171)
DUM Drug Utilization Management
EGWP Employer Group/Union-Sponsored Waiver Plan
EOB Explanation of Benefits
EOC Evidence of Coverage
ESRD End-Stage Renal Disease
FACA Federal Advisory Committee Act
FDA Food and Drug Administration (HHS)
FEHBP Federal Employees Health Benefits Plan
FFS Fee-for-Service
FY Fiscal Year
GAO Government Accountability Office
HCPP Health Care Prepayment Plans
HEDIS HealthCare Effectiveness Data and Information Set
HHS [U.S. Department of] Health and Human Services
HIPAA Health Insurance Portability and Accountability Act of 1996 
(Pub. L. 104-191)
HMO Health Maintenance Organization
HOS Health Outcome Survey
HPMS Health Plan Management System
ICD-9-CM Internal Classification of Disease, 9th, Clinical 
Modification Guidelines
ICEP Initial Coverage Enrollment Period
ICL Initial Coverage Limit
ICR Information Collection Requirement
IRMAA Income-Related Monthly Adjustment Amount
IVC Initial Validation Contractor
LEP Late Enrollment Penalty
LIS Low Income Subsidy
LTC Long Term Care
MA Medicare Advantage
MAAA Member of the American Academy of Actuaries
MA-PD Medicare Advantage-Prescription Drug Plans
M+C Medicare +Choice Program
MOC Medicare Options Compare
MPDPF Medicare Prescription Drug Plan Finder
MIPPA Medicare Improvements for Patients and Providers Act of 2008
MMA Medicare Prescription Drug, Improvement, and Modernization Act 
of 2003 (Pub. L. 108-173)
MSA Metropolitan Statistical Area
MSAs Medical Savings Accounts
MSP Medicare Secondary Payer
MTM Medication Therapy Management
MTMP Medication Therapy Management Programs
NAIC National Association Insurance Commissioners
NCPDP National Council for Prescription Drug Programs
NCQA National Committee for Quality Assurance
NGC National Guideline Clearinghouse
NIH National Institutes of Health
NOMNC Notice of Medicare Non-Coverage
OEP Open Enrollment Period
OIG Office of Inspector General
OMB Office of Management and Budget
OPM Office of Personnel Management
OTC Over the Counter
PART C Medicare Advantage
PART D Medicare Prescription Drug Benefit Programs
PBM Pharmacy Benefit Manager
PDE Prescription Drug Event
PDP Prescription Drug Plan
PFFS Private Fee For Service Plan
POS Point of Service
PPO Preferred Provider Organization
PPS Prospective Payment System
P&T Pharmacy & Therapeutics
QIO Quality Improvement Organization
QRS Quality Review Study
PACE Programs of All Inclusive Care for the Elderly
RADV Risk Adjustment Data Validation
RAPS Risk Adjustment Payment System
RHIA Registered Health Information Administrator
RHIT Registered Health Information Technician
SEP Special Enrollment Periods
SHIP State Health Insurance Assistance Programs
SNF Skilled Nursing Facility
SNP Special Needs Plan
SPAP State Pharmaceutical Assistance Programs
SSA Social Security Administration
SSI Supplemental Security Income
TrOOP True Out-Of-Pocket
U&C Usual and Customary
USP U.S. Pharmacopoeia

SUPPLEMENTARY INFORMATION: 

I. Background

A. Overview of the Medicare Prescription Drug, Improvement, and 
Modernization Act of 2003

    The Medicare Prescription Drug, Improvement, and Modernization Act 
of 2003 (MMA) (Pub. L. 108-173) established the Part D program and made 
significant revisions to Part C provisions governing the Medicare 
Advantage (MA) program. The MMA directed that important aspects of the 
Part D program be similar to, and coordinated with, regulations for the 
MA program. Generally, the provisions enacted in the MMA took effect 
January 1, 2006. The final rules implementing the MMA for the MA and 
Part D prescription drug programs appeared in the Federal Register on 
January 28, 2005 (70 FR 4588 through 4741 and 70 FR 4194 through 4585, 
respectively).
    As we have gained experience with the MA program and the 
prescription drug benefit program, we periodically have revised the 
Part C and D regulations to continue to improve or clarify existing 
policies and/or codify current guidance for both programs. For example, 
in December 2007, we published a final rule with comment on contract 
determinations involving Medicare Advantage (MA) organizations and 
Medicare Part D prescription drug plan sponsors (72 FR 68700). In April 
2008, we published a final rule to address policy and technical changes 
to the Part D program (73 FR 20486). In September 2008 and January 
2009, we finalized revisions to both the Medicare Advantage and 
Medicare prescription drug benefit programs (73 FR 54226 and 74 FR 
1494, respectively) to implement provisions in the Medicare Improvement 
for Patients and Providers Act (MIPPA) (Pub. L. 110-275), which 
contained provisions affecting both the Medicare Part C and D programs, 
and to make other policy changes and clarifications based on experience 
with both programs (73 FR 54208, 73 FR 54226, and 74 FR 2881). In April 
2010, we finalized new policies for both the MA and Part D prescription 
drug programs as part of our continuing efforts to protect 
beneficiaries from excessive out-of-pocket costs, ensure transparency 
in plan costs and benefits, and strengthen plan compliance with our 
requirements (75 FR 19678 through 19826).

B. History and Overview

    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)) which established the current MA 
program. As discussed above, the MMA, enacted on December 8, 2003, 
added a new ``Part D'' to the Medicare statute (sections 1860D-1 
through 42 of the Act) creating the Medicare Prescription Drug Benefit 
Program, and made significant changes to the M+C program.

[[Page 71194]]

    Also as noted previously, MIPPA, enacted on July 15, 2008, further 
amended provisions in Part C and D, including adding extensive new 
provisions governing marketing under both programs, which were 
implemented in a final rule that paralleled provisions in MIPPA that 
was published in the Federal Register on September 18, 2008 (73 FR 
54208), and in the same issue of the Federal Register (73 FR 54226) we 
published a separate interim final rule that addressed the other 
provisions of MIPPA affecting the MA and Part D programs. We also 
clarified the MIPPA marketing provisions in a November 2008 interim 
final rule (73 FR 67407) and issued a separate interim final rule in 
January 2009 to address MIPPA provisions related to Part D plan 
formularies (74 FR 2881).
    The proposed and final rules addressing additional policy 
clarifications under the Part C and D programs appeared in the October 
22, 2009 (74 FR 54634) and April 15, 2010 Federal Register (75 FR 19678 
through 19826), respectively. (These rules are hereinafter referred to 
as the October 2009 proposed rule and the April 2010 final rule, 
respectively.) As noted when issuing these rules, we believed that 
additional programmatic and operational changes were needed in order to 
further improve our oversight and management of the Part C and D 
programs, and to further improve a beneficiary's experience under MA or 
Part D plans.
    Indeed, one of the primary reasons set forth in support of issuing 
our April 2010 final rule was to address beneficiary concerns 
associated with the annual task of selecting a Part C or Part D plan 
from so many options. We noted that while it was clear that the 
Medicare Part C and D programs have been successful in providing 
additional health care options for beneficiaries, a significant number 
of beneficiaries have been confused by the array of choices provided 
and have found it difficult to make enrollment decisions that are best 
for them. Moreover, experience had shown that organizations submitting 
multiple bids under Part C and D had not consistently submitted benefit 
designs significantly different from each other, which we believed 
added to beneficiary confusion. For this reason, the April 2010 rule 
required that multiple plan submissions in the same area have 
significant differences from each other. Other changes set forth in the 
April 2010 final rule were aimed at strengthening existing beneficiary 
protections, improving payment rules and processes, enhancing our 
ability to pursue data collection for oversight and quality assessment, 
strengthening formulary policy, and finalizing a number of 
clarifications and technical corrections to existing policy.
    In this new proposed rule, we are continuing our process of 
implementing improvements in policy consistent with those included in 
the April 2010 final rule, while also implementing changes to the Part 
C and Part D programs made by recent legislative changes. The Patient 
Protection and Affordable Care Act (Pub. L. 111-148) was enacted on 
March 23, 2010, as passed by the Senate on December 24, 2009, and the 
House on March 21, 2010. The Health Care and Education Reconciliation 
Act (Pub. L. 111-152), which was enacted on March 30, 2010, modified a 
number of Medicare provisions in Pub. L. 111-148 and added several new 
provisions. The Patient Protection and Affordable Care Act (Pub. L. 
111-148) and the Health Care and Education Reconciliation Act (Pub. L. 
111-152) are collectively referred to as the Affordable Care Act (ACA). 
The ACA includes significant reforms to both the private health 
insurance industry and the Medicare and Medicaid programs. Provisions 
in the ACA concerning the Part C and D programs largely focus on 
beneficiary protections, MA payments, and simplification of MA and Part 
D program processes. These provisions affect the way we implement our 
policies concerning beneficiary cost-sharing, assessing bids for 
meaningful differences, and ensuring that cost-sharing structures in a 
plan are transparent to beneficiaries and not excessive. Some of the 
other provisions for which we are proposing revisions to the MA and 
Part D programs, based on the ACA and our experiences in administering 
the MA and Part D programs, concern MA and Part D marketing, including 
agent/broker training; payments to MA organizations based on quality 
ratings; standards for determining if organizations are fiscally sound; 
low income subsidy policy under the Part D program; payment rules for 
non-contract health care providers; extending current network adequacy 
standards to Medicare medical savings account (MSA) plans that employ a 
network of providers; establishing limits on out-of-pocket expenses for 
MA enrollees; and several revisions to the special needs plan 
requirements, including changes concerning SNP approvals and deeming. 
In general, our proposals are intended to strengthen the way we 
administer the Part C and D programs, and help beneficiaries make the 
best plan choices for their health care needs.

II. Provisions of the Proposed Regulations

A. Overview of Proposed Changes

    In the sections that follow, we discuss the proposed changes to the 
regulations in 42 CFR parts 417, 422, and 423 governing the MA and 
prescription drug benefit programs. To better frame the discussion of 
the specific regulatory provisions we are proposing, we have structured 
the preamble narrative by topic area rather than in subpart order. 
Accordingly, our proposals address the following five specific goals:
     Implementing the provisions of the ACA.
     Clarifying various program participation requirements.
     Strengthening beneficiary protections.
     Strengthening our ability to distinguish for approval 
stronger applicants for Parts C and D program participation and to 
remove consistently poor performers.
     Implementing other clarifications and technical changes.
    A number of the proposed revisions and clarifications affect both 
the MA and prescription drug programs, while some affect section 1876 
cost contracts. Within each section, we have provided a chart listing 
all subject areas containing provisions affecting the Part C, Part D, 
and section 1876 cost contract programs, and the associated regulatory 
citations that would be revised.
    We note that these regulations would be effective 60 days after the 
publication of the final rule that will finalize the proposed changes 
discussed in this proposed rule, except where otherwise noted in the 
preamble. Table 1 lists the proposed changes that have an effective 
date other than 60 days after the publication of the final rule. The 
proposed effective dates are discussed in the preamble for each of 
these items.
    We are proposing several changes to the regulations to reflect 
provisions in the ACA which either are already in effect, or have an 
effective date that will likely be earlier than 60 days after the 
publication of the final rule. Table 2 lists these proposed changes. 
While these ACA provisions are effective on the statutory effective 
date, we propose that the regulations implementing these provisions be 
effective 60 days after the publication of the final rule.
BILLING CODE 4120-01-P

[[Page 71195]]

[GRAPHIC] [TIFF OMITTED] TP22NO10.000


[[Page 71196]]



B. Changes to Implement the Provisions of the Affordable Care Act

    The ACA includes significant reforms of both the private health 
insurance industry and the Medicare and Medicaid programs. Provisions 
in the Act concern the Part C and D programs and largely focus on 
beneficiary protections, MA payments, and simplification of MA and Part 
D program processes. The changes based on provisions in the ACA are 
detailed in Table 3.
BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TP22NO10.001


[[Page 71197]]


[GRAPHIC] [TIFF OMITTED] TP22NO10.002

BILLING CODE 4120-01-C
1. Cost Sharing for Specified Services at Original Medicare Levels 
(Sec.  417.101 and Sec.  422.100)
    Section 3202 of the ACA amended section 1852 of the Act to 
establish new standards for MA plans' cost sharing. Specifically, 
section 1852(a)(1)(B) of the Act was amended by the addition of a new 
clause (iii) that limits cost sharing under MA plans so that it cannot 
exceed the cost sharing imposed under Original Medicare for specific 
services identified in a new clause (iv). New section 1852(a)(1)(B)(iv) 
of the Act lists the three services for which cost sharing in MA plans 
may not exceed that required in Original Medicare (chemotherapy 
administration services, renal dialysis services, skilled nursing care) 
and at section 1852(a)(1)(B)(iv)(IV) of the Act specifies that this 
limit on cost sharing also applies to such other services that the 
Secretary determines appropriate, including services that the Secretary 
determines require a high level of predictability and transparency for 
beneficiaries. The limits on cost sharing in clause (iii) are ``subject 
to'' an exception in clause (v) which provides that, ``[i]n the case of 
services described in clause (iv) for which there is no cost sharing 
required under Parts A and B, cost sharing may be required for those 
services'' under the clause (i) standard in place prior to the 
amendments made by section 3202 of the ACA. This section requires that 
overall cost sharing for Medicare Part A and B services be actuarially 
equivalent to that imposed under Original Medicare. As noted in the 
final rule that appeared in the April 15, 2010 Federal Register (75 FR 
19712) and clarified in our April 16, 2010 policy guidance, the 
provisions of section 3202 of the ACA apply to MA plans offered in CY 
2011. To codify these provisions, we are proposing to amend Sec.  
422.100 by adding a new paragraph (g). In addition, under our authority 
in section 1876(i)(3)(D) of the Act to impose ``other terms and 
conditions'' deemed ``necessary and appropriate,'' we are proposing in 
a proposed new paragraph (g) in Sec.  417.100 that the requirements in 
section 3202 of the ACA be extended by regulation to section 1876 cost 
contracts. We believe that this extension is necessary in order to 
ensure that all Medicare beneficiaries have the benefit of the cost 
sharing protections enacted in the ACA, regardless of whether they 
receive their Part A and B benefits through Original Medicare, an MA 
plan, or under a section 1876 cost contract.
    We believe that the measures to protect beneficiaries from high 
out-of-pocket costs in section 3202 of the ACA complement the steps we 
already have taken in our April 2010 final rule to protect 
beneficiaries from health plans with high out-of-pocket costs, 
discriminatory cost sharing and benefit designs that interfere with 
beneficiaries' access to affordable high quality health care, and 
create confusion that is attributable to having too many MA plan 
choices in an area that are not ``meaningfully different.'' In fact, 
for CY 2011, MA organizations already were expected to comply with new 
standards for cost sharing and to submit meaningfully different plans 
in order to reduce beneficiary confusion, and were strongly encouraged 
to provide Medicare-covered preventive services without cost sharing. 
Organizations also were expected to limit the number of plans offered 
in a service area by identifying for non-renewal plans with sustained 
low enrollment.
    In our April 16, 2010 guidance issued via the Health Plan 
Management System (HPMS) (``Benefits Policy and Operations Guidance 
Regarding Bid Submissions; Duplicative and Low Enrollment Plans; Cost 
Sharing Standards; General Benefits Policy Issues; and Plan Benefits 
Package (PBP) Reminders for Contract Year (CY) 2011''), we included 
clarifying information related to implementation of the required cost 
sharing for chemotherapy administration services, renal dialysis 
services, and skilled nursing care for CY 2011 and we defined 
chemotherapy administration services to include chemotherapy drugs, 
radiation therapy services and other related chemotherapeutic agents, 
as well as administration, and skilled nursing care to mean skilled 
nursing facility services. We also clarified that, since there is no 
cost sharing under Original Medicare for the first 20 days of skilled 
nursing services, under section 1852(a)(1)(B)(v) of the Act, the new 
restrictions in section 3202 of the ACA

[[Page 71198]]

do not apply to such services during this period.
    In our proposed addition to Sec.  422.100 and Sec.  417.101, we 
would incorporate these definitions for the two service categories. We 
welcome comments on these proposed cost sharing standards.
    We also are proposing to limit cost sharing for home health 
services under MA plans to that charged under Original Medicare. We 
note that, although we can generally rely on our authority at 
1852(a)(1)(B)(iv)(IV) of the Act to apply Original Medicare cost 
sharing limits to other services that the Secretary determines 
appropriate, because there is no cost sharing under Original Medicare 
for home health services, as in the case of the first 20 days of 
skilled nursing facility services, the exception in clause (v) of 
section 1852(a)(1)(B) of the Act would apply, and the limit on cost 
sharing under section 1852(a)(1)(B)(iii) of the Act would not apply. 
Thus, in proposing to apply Original Medicare cost sharing amounts to 
home health services or any other service with zero cost sharing, we 
would rely instead on our authority in section 1856(b)(1) of the Act to 
establish MA standards by regulation, and in section 1857(e)(1) of the 
Act to impose additional ``terms and conditions'' found ``necessary and 
appropriate'' to require that cost sharing for these services under MA 
plans conform to that under Original Medicare, meaning that no cost 
sharing could be imposed for these services.
    We believe that even with the additional restriction on cost 
sharing for home health services, MA organizations will continue to 
have adequate flexibility to design plan benefits that are responsive 
to beneficiary needs and preferences while providing access to high 
quality and affordable health care. We are soliciting public comment on 
our proposal to limit cost sharing for home health services to that 
charged for those services under Original Medicare.
2. Simplification of Beneficiary Election Periods (Sec.  422.62, Sec.  
422.68, Sec.  423.38, and Sec.  423.40)
    Section 3204 of the ACA modified section 1851(e)(3)(B) of the Act 
such that, beginning with plan year 2012, the annual coordinated 
election period (AEP) under Parts C and D will be held from October 15 
to December 7. We propose to amend Sec.  422.62(a)(2) and Sec.  
423.38(b) to codify this change, which will be effective October 15, 
2011 for elections effective January 1, 2012.
    Section 3204 of the ACA also revised section 1851(e)(2)(C) of the 
Act to establish, beginning in 2011, a 45-day period at the beginning 
of the year (January 1 through February 14) that allows beneficiaries 
enrolled in MA plans the opportunity to disenroll and join Original 
Medicare, with the option to enroll in a Medicare prescription drug 
plan. This 45-day period replaces the MA open enrollment period that 
previously occurred annually from January 1 to March 31, and eliminates 
the requirements in section 1851(e)(2)(c)(iii) of the previous open 
enrollment provision that required that Part D status be maintained 
when an election is made (under the previous rule, an individual 
disenrolling from an MA-PD plan to Original Medicare was required to 
enroll in a Part D plan, where it is optional under the new provision). 
We propose to amend Sec.  422.62(a) to provide for this new 
disenrollment opportunity, and modify Sec.  423.38(d) to allow for 
enrollment into a standalone PDP.
    We also would amend Sec.  422.62(a) to clarify that the open 
enrollment opportunities for those beneficiaries who are newly eligible 
for MA would continue only through the end of 2010. Additionally, we 
would modify Sec.  422.68(f) to specify the effective date for 
disenrollment requests submitted during the new 45-day disenrollment 
period. Finally, in Sec.  423.40(d), we would specify the enrollment 
effective dates for individuals who enroll in a standalone Medicare 
prescription drug plan after disenrolling from MA during the 45-day 
period. These changes would be effective January 1, 2011.
    As indicated in section II.A. of this proposed rule, we propose 
that the regulations implementing these provisions be effective 60 days 
after the publication of the final rule.
3. Special Needs Plan (SNP) Provisions (Sec.  422.2, Sec.  422.4, Sec.  
422.101, Sec.  422.107, and Sec.  422.152)
    This section proposes a definition of a fully integrated dual-
eligible special needs plan (SNP) for purposes of section 
3205(b)(iv)(II) of the ACA, and regulations implementing changes made 
by the ACA which extend the SNP program, extend provisions permitting 
existing DE-SNPs that were not seeking to expand their service areas to 
continue operating through 2012, and establish a required NCQA approval 
process for SNPs.
a. Adding a Definition of Fully Integrated Dual Eligible SNP (Sec.  
422.2)
    Section 3205 of the ACA revised section 1853(a)(1)(B) of the Act 
provides authority to apply a frailty payment under PACE payment rules 
for certain individuals under fully integrated dual-eligible special 
needs plans described in section 3205(b)(iv)(II) of the ACA. We are 
adding a definition of fully integrated dual-eligible SNPs to Sec.  
422.2 that would apply for these purposes. Under this definition, a 
plan--
     Is a SNP enrolling special needs individuals entitled to 
medical assistance under a State plan under Medicaid, as defined under 
section 1859(b)(6)(B)(ii) of the Act and Sec.  422.2;
     Provides dually-eligible beneficiaries access to Medicare 
and Medicaid benefits under a single managed care organization (MCO);
     Has a capitated contract with a state Medicaid agency that 
includes coverage of specified primary, acute and, long-term care 
benefits and services, consistent with State policy;
     Coordinates the delivery of covered Medicare and Medicaid 
health and long-term care services, using aligned care management and 
specialty care network methods for high-risk beneficiaries; and
     Employs policies and procedures approved by CMS and the 
State to coordinate or integrate member materials, including 
enrollment, communications, grievance and appeals, and quality 
assurance.
b. Extending SNP Authority
    Section 3205 of the ACA revised section 1859(f)(1) of the Act to 
extend the authority for SNPs to restrict enrollment to special needs 
individuals, thereby permitting SNPs to continue to limit enrollment to 
special needs individuals through the 2013 contract year. This 
extension applies to all SNP categories, with the exception of dual 
eligible SNPs that do not have a contract with the State in which they 
operate as described in section II.B.1.c. of this proposed rule. This 
provision is effective upon enactment of the ACA. However, as indicated 
in section II.A. of this proposed rule, we propose that the regulations 
implementing this provision be effective 60 days after the publication 
of the final rule.
c. Dual-Eligible SNP Contracts With State Medicaid Agencies (Sec.  
422.107)
    Section 164 of MIPPA provided that all new dual-eligible SNPs (DE 
SNPs) must have contracts with the State Medicaid Agencies in the 
States in which the SNP plans operate. The provision also allowed 
existing DE SNPs that were not seeking to expand their service areas to 
continue to operate without a State contract through the 2010 contract 
year as long as all other MIPPA established requirements were met. This 
authority was codified at Sec.  422.107. Section 3205 of the ACA 
extended this provision for existing DE SNPs through December 31, 2012 
such

[[Page 71199]]

that all new DE SNPs must have contracts with State Medicaid agencies, 
while all renewing DE SNPs that do not have contracts with State 
Medicaid agencies and are not seeking to expand their service areas may 
continue to offer DE SNPs through the 2012 contract. For contract year 
2013, all DE SNPs--new and renewing--must have contracts with State 
Medicaid agencies. Accordingly, we propose revising Sec.  
422.107(d)(ii) to codify this provision. This provision is effective 
upon enactment of the ACA. However, as indicated in section II.A. of 
this proposed rule, we propose that the regulations implementing this 
provision be effective 60 days after the publication of the final rule.
d. Approval of Special Needs Plans by the National Committee for 
Quality Assurance (Sec.  422.4, Sec.  422.101, and Sec.  422.152)
    The ACA amended section 1859(f) of the Act to require that SNPs be 
approved by the National Committee for Quality Assurance (NCQA) 
effective January 1, 2012 and subsequent years. Under this section, the 
NCQA approval process shall be based on the standards established by 
the Secretary.
    The NCQA SNP approval process should provide a foundation for 
selecting Medicare Advantage organizations that comprehend the unique 
requirements of the SNP program and are capable of implementing these 
requirements. Both the overall quality improvement (QI) program 
description and the model of care (MOC) are critical clinical elements 
that represent the potential for the SNP to provide integrated care for 
Medicare enrollees.
    New SNPs or SNPs that are expanding their service areas are already 
required to submit a QI Program Plan and a MOC as part of the 
application process. For 2012, we will also require existing SNPs to 
submit their QI Program and MOC during the same application timeframe. 
NCQA will review the QI program and the MOC elements during the 
application process using the standards that are currently being 
developed by CMS. NCQA would assume responsibility for the review and 
scoring of the overall QI program plan and the MOC based on the 
standards developed by CMS. While we will coordinate with NCQA in 
developing these standards, CMS will not participate in the scoring and 
review of the MOC and QI program plans.
    Shortly, we will release specific instructions and guidance to 
organizations about how to submit their QI program and MOCs. This 
guidance will include the specific criteria that NCQA will use to 
evaluate the QI program and the MOC. Also included in the guidance will 
be information about technical assistance that will be available to the 
SNPs as they prepare their QI Program and MOC submissions as well as 
details on the frequency of the SNP approval process. We are concerned 
that an annual approval process could be burdensome for plans. 
Therefore, we are considering an approval cycle that would occur 
between 1 to 5 years. This approval cycle would be designed so that the 
plans that have a higher score on the initial approval of their QI 
program and MOC would be granted a longer period before being required 
to be re-approved. While plans that scored at the lower end of the 
acceptable spectrum would be granted a shorter period before the next 
approval was required. We are also considering using other quality 
improvement measures to help determine the length of time a plan may 
have before reapproval. For example, plans that score well during their 
annual quality improvement audits may be eligible for extensions to the 
time period for the approval process. We would like to use the public 
comment period to help to determine the appropriate frequency for the 
SNP approval process.
    We are conducting a review of the MOCs from a sample of the SNPs. 
Data are not yet available from these audits. However, it is 
anticipated that the audits will be completed by the end of the 
calendar year. Information received from the audits will be used to 
assist CMS in revising and improving the MOC. In addition, we intend to 
use this information to modify and refine the required evaluation 
criteria over time to improve the QI program and the MOC.
    Accordingly, we propose adding a new paragraph (iv) to Sec.  
422.4(a) to require MA plans wishing to offer a SNP, whether new or 
current, to be approved by NCQA, effective January 1, 2012, by 
submitting their overall quality QI program and MOC to CMS for NCQA 
evaluation and approval, per CMS guidance. We also propose codifying 
the new requirement at Sec.  422.101(f), which specifies MOC 
requirements, by adding a new paragraph (vi). Finally we propose 
codifying the new requirement by revising Sec.  422.152(g), which 
specifies QI program requirements.
4. Section 1876 Cost Contractor Competition Requirements (Sec.  
417.402)
    Section 3206 of the ACA revised section 1876(h)(5)(C) of the Act to 
extend implementation of the section 1876 cost contract competition 
provisions until January 1, 2013. Previously, MIPPA had specified that 
section 1876 cost contractors operating in service areas or portions of 
service areas with two or more local or two or more regional Medicare 
coordinated care plans meeting minimum enrollment requirements (5,000 
enrollees for urban areas and 1,500 enrollees for non urban areas) be 
non-renewed beginning in 2010. In addition, MIPPA specified that MA 
plan enrollment be assessed over a full contract year.
    As a result of the ACA revision, we will evaluate enrollment of 
competing MA coordinated care plans beginning 2012, and affected 
section 1876 cost contractors will receive non-renewal notices 
beginning 2013. Beginning in 2014, section 1876 cost contractors will 
no longer be able to offer health care services in affected service 
areas. We propose to revise Sec.  417.402(c) to specify the statutory 
change in the implementation date of the section 1876 cost plan 
competition requirements from 2010 to 2013.
    This provision is effective upon enactment of the ACA. However, as 
indicated in section II.A. of this proposed rule, we propose that the 
regulations implementing this provision be effective 60 days after the 
publication of the final rule.
5. Making Senior Housing Facility Demonstration Plans Permanent (Sec.  
422.2 and Sec.  422.53)
    Section 3208 of the ACA establishes (at section 1859(g) of the Act) 
that as of January 1, 2010, senior housing facility plans participating 
as of December 31, 2009 ``in a demonstration project established by the 
Secretary under which such a plan was offered for not less than 1 
year'' may continue participation as Medicare Advantage senior housing 
facility plans. MA senior housing facility plans must:
     Limit enrollment to residents of continuing care 
retirement communities as defined in section 1852(l)(4)(B) and codified 
at Sec.  422.133(b)(2)--that is, an arrangement under which housing and 
health-related services are provided (or arranged) through an 
organization for the enrollee under an agreement that is effective for 
the life of the enrollee or for a specified period;
     Provide primary care services onsite and have a ratio of 
accessible physicians to beneficiaries that the Secretary determines is 
adequate; and
     Provide transportation services for beneficiaries to 
specialty providers outside of the facility.
    We propose to amend the definitions section at Sec.  422.2 to 
include ``senior

[[Page 71200]]

housing facility plan'' as a new coordinated care plan type. Our 
proposed definition of the term senior housing facility plan would be 
consistent with the statutory requirements for such plans at section 
1859(g) of the Act--that is, that such plan restrict enrollment to 
individuals who reside in a continuing care retirement community as 
defined in Sec.  422.133(b)(2); provide primary care services onsite 
and have a ratio of accessible physicians to beneficiaries that we 
determine is adequate consistent with prevailing patterns of community 
health care as provided under Sec.  422.112(a)(10); provide 
transportation services for beneficiaries to specialty providers 
outside of the facility; and was participating as of December 31, 2009 
in a demonstration established by us for not less than 1 year. We note 
that a senior housing facility plan must otherwise meet all 
requirements applicable to MA organizations under this part.
    In addition, we propose to add a new Sec.  422.53 to subpart B of 
Part 422 to address the eligibility and enrollment policies applicable 
to senior housing facility plans. We propose specifying at Sec.  422.53 
that MA senior housing facility plans must restrict enrollment in these 
plans to residents of continuing care retirement communities, and that 
individuals enrolled in such plans must meet all other MA eligibility 
requirements in order to be eligible to enroll. In addition, we propose 
specifying at Sec.  422.53(c) that an MA senior housing facility plan 
must verify the eligibility of each individual enrolling in its plan 
using a CMS approved process. As indicated in section II.A. of this 
proposed rule, we propose that the regulations implementing this 
provision be effective 60 days after the publication of the final rule.
6. Authority To Deny Bids (Sec.  422.254, Sec.  422.256, Sec.  423.265, 
and Sec.  423.272)
    Section 3209 of the ACA amends section 1854(a)(5) of the Act by 
adding subsections (C)(i) and (ii) to provide that nothing in section 
1854 of the Act shall be construed as requiring the Secretary to accept 
any or every bid submitted by an MA organization, and expressly 
provides that the Secretary may deny a bid submitted by an MA 
organization for an MA plan if it proposes significant increases in 
cost sharing or decreases in benefits offered under the plan. Section 
3209 also extends these provisions to apply to the review of bids from 
Part D sponsors by amending section 1860D-11(d) of the Act to add a new 
paragraph (3). This statutory authority applies to bids submitted for 
contract years beginning on or after January 1, 2011. However, as 
indicated in section II.A. of this proposed rule, we propose that the 
regulations implementing this provision be effective 60 days after the 
publication of the final rule.
    We believe that these amendments clarify the Secretary's authority 
to deny bids submitted by MA organizations and PDP sponsors and provide 
support for our current policies intended to encourage plans that are 
high quality, meaningfully different from each other, and 
nondiscriminatory with respect to cost sharing. In our final rule 
entitled ``Policy and Technical Changes to the Medicare Advantage and 
the Medicare Prescription Drug Benefit Programs'' (75 FR 19678), we 
established authority to impose limits on cost sharing and to deny bids 
submitted by plans with sustained low enrollment, and for plans not 
meaningfully different from other plans offered by the same MA 
organization or PDP sponsor in a service area. We provided further 
guidance related to these policies via the Health Plan Management 
System (HPMS) on April 16, 2010 (``Benefits Policy and Operations 
Guidance Regarding Bid Submissions; Duplicative and Low Enrollment 
Plans; Cost Sharing Standards; General Benefits Policy Issues; and Plan 
Benefits Package (PBP) Reminders for Contract Year (CY) 2011''and 
``2011 Part D Plan Benefit Package (PBP) Submission and Review 
Instructions'').
    Using our authority under sections 1857(c)(2)(B) and 1860D-
12(b)(3)(D) of the Act, we codified requirements in Sec.  
422.506(b)(1)(iv) and Sec.  423.507(b)(1)(iii) for Part C and Part D, 
respectively, to non-renew a health plan or prescription drug plan (at 
the benefit-package level) if the plan does not have sufficient number 
of enrollees to establish that it is a viable independent plan option. 
Consistent with that authority, we scrutinized low-enrollment plans 
during the bid review period this year and encouraged sponsors to 
withdraw or consolidate low-enrollment plans prior to submitting bids 
for CY 2011. We revised Sec.  422.256(b)(4)(i) and Sec.  
423.272(b)(3)(i) to stipulate that we would only approve a bid 
submitted by a MA organization or Part D sponsor if its benefit package 
or plan cost structure is substantially different from those of other 
plan offerings by the organization or sponsor in the service area with 
respect to key characteristics such as premiums, cost-sharing, 
formulary structure, or benefits offered. Related changes to Sec.  
422.254(a)(4) and Sec.  423.265(b)(2) provide that MA organizations and 
Part D sponsors may submit multiple bids in the same area only if the 
offerings are substantially different from each other. In the above-
mentioned April 16, 2010 guidance for PDP sponsors, for the CY 2011 
plan year, we defined meaningful differences between health plans as a 
$20 per member per month difference (PMPM) in cost sharing and for PDPs 
as a $22 PMPM difference in cost sharing (not including premiums) as 
reflected in the out-of-pocket cost (OOPC) data.
    We further indicated that we do not believe sponsors can 
demonstrate meaningful differences based on expected out-of-pocket 
costs between two stand-alone basic Part D benefit designs and maintain 
both statutory actuarial equivalence requirements and fulfill the 
requirement (in Sec.  423.153(b)) to maintain cost-effective drug 
utilization review programs. Therefore, we indicated that PDP sponsors 
should submit only one basic offering (where basic offering includes 
defined standard, actuarial equivalent or basic alternative drug 
benefit types) for a stand-alone prescription drug plan in a service 
area. We also are increasing our scrutiny of the expected cost sharing 
amounts incurred by beneficiaries under coinsurance tiers, in order to 
more consistently com