Medicare Program; Changes to the Medicare Advantage and the Medicare Prescription Drug Benefit Programs for Contract Year 2012 and Other Changes, 21432-21577 [2011-8274]
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Federal Register / Vol. 76, No. 73 / Friday, April 15, 2011 / Rules and Regulations
SUPPLEMENTARY INFORMATION:
DEPARTMENT OF HEALTH AND
HUMAN SERVICES
Table of Contents
Centers for Medicare & Medicaid
Services
42 CFR Parts 417, 422, and 423
[CMS–4144–F]
RIN 0938–AQ00
Medicare Program; Changes to the
Medicare Advantage and the Medicare
Prescription Drug Benefit Programs for
Contract Year 2012 and Other Changes
Centers for Medicare &
Medicaid Services (CMS), HHS.
ACTION: Final rule.
AGENCY:
This final rule makes
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 experience in
the administration of the Part C and Part
D programs. These latter revisions
clarify various program participation
requirements; make changes to
strengthen beneficiary protections;
strengthen our ability to identify strong
applicants for Part C and Part D program
participation and remove consistently
poor performers; and make other
clarifications and technical changes.
DATES: Effective Dates: These
regulations are effective on June 6, 2011,
unless otherwise specified in this final
rule. Amendments to 42 CFR 422.564,
422.624, and 422.626 published April 4,
2003 at 68 FR 16652 are effective June
6, 2011.
Applicability Date: In section II.A. of
the preamble of this final rule, we
provide a table (Table 1) which lists key
changes in this final rule that have an
applicability date other than the
effective 60 days after the date of
display of this final rule.
FOR FURTHER INFORMATION CONTACT:
Vanessa Duran, (410) 786–8697,
Christopher McClintick, (410) 786–
4682, and Sabrina Ahmed, (410) 786–
7499, General information.
Heather Rudo, (410) 786–7627 and
Christopher McClintick, (410) 786–
4682, Part C issues.
Deborah Larwood, (410) 786–9500,
Part D issues.
Kristy Nishimoto, (410) 786–8517,
Part C and Part D enrollment and
appeals issues.
Deondra Moseley, (410) 786–4577,
Part C payment issues.
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SUMMARY:
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I. Background
II. Provisions of the Final Regulations and
Analysis of and Responses to Public
Comments
A. Overview of the Final Changes and
Public Comments Received
1. Overview of the Final Changes
2. Public Comments Received on the
Proposed Rule
B. Changes to Implement the Provisions of
the Affordable Care Act
1. Cost Sharing for Specified Services at
Original Medicare Levels (§ 417.454 and
§ 422.100)
2. Simplification of Beneficiary Election
Periods (§ 422.62, § 422.68, § 423.38, and
§ 423.40)
3. Special Needs Plan (SNP) Provisions
(§ 422.2, § 422.4, § 422.101, § 422.107,
and § 422.152)
a. Adding a Definition of Fully Integrated
Dual Eligible SNP (§ 422.2)
b. Extending SNP Authority
c. Dual-Eligible SNP Contracts With State
Medicaid Agencies (§ 422.107)
d. Approval of Special Needs Plans by the
National Committee for Quality
Assurance (§§ 422.4, 422.101, and
422.152)
4. Section 1876 Cost Contractor
Competition Requirements (§ 417.402)
5. Making Senior Housing Facility
Demonstration Plans Permanent (§ 422.2
and § 422.53)
6. Authority to Deny Bids (§ 422.254,
§ 422.256, § 423.265, and § 423.272)
7. Determination of Part D Low-Income
Benchmark Premium (§ 423.780)
8. Voluntary De Minimis Policy for
Subsidy Eligible Individuals (§ 423.34
and § 423.780)
a. Reassigning LIS Individuals (§ 423.34)
b. Enrollment of LIS-Eligible Individuals
(§ 423.34)
c. Premium Subsidy (§ 423.780)
9. Increase In Part D Premiums Due to the
Income Related Monthly Adjustment
Amount (D–IRMAA) (§ 423.44,
§ 423.286, and § 423.293)
a. Rules Regarding Premiums (§ 423.286)
b. Collection of Monthly Beneficiary
Premium (§ 423.293)
c. Involuntary Disenrollment by CMS
(§ 423.44)
10. Elimination of Medicare Part D CostSharing for Individuals Receiving Home
and Community-Based Services
(§ 423.772 and § 423.782)
11. Appropriate Dispensing of Prescription
Drugs in Long-Term Care Facilities
Under PDPs and MA–PD Plans
(§ 423.154)
12. Complaint System for Medicare
Advantage Organizations and PDPs
(§ 422.504 and § 423.505)
13. Uniform Exceptions and Appeals
Process for Prescription Drug Plans and
MA–PD Plans (§ 423.128 and § 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 (§ 423.100
and § 423.464)
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15. Cost Sharing for Medicare-Covered
Preventive Services (§ 417.454 and
§ 422.100)
16. Elimination of the Stabilization Fund
(§ 422.458)
17. Improvements to Medication Therapy
Management Programs (§ 423.153)
18. Changes to Close the Part D Coverage
Gap (§ 423.104 and § 423.884)
19. Payments to Medicare Advantage
Organizations (§ 422.308)
a. Authority to Apply Frailty Adjustment
Under PACE Payment Rules for Certain
Specialized MA Plans for Special Needs
Individuals (§ 422.308)
b. Application of Coding Adjustment
(§ 422.308)
c. Improvements to Risk Adjustment for
Special Needs Individuals With Chronic
Health Conditions (§ 422.308)
20. Medicare Advantage Benchmark,
Quality Bonus Payments, and Rebate
(§ 422.252, § 422.258, and § 422.266)
a. Terminology (§ 422.252)
b. Calculation of Benchmarks (§ 422.258)
c. Increases to the Applicable Percentage
for Quality (§ 422.258(d))
d. Beneficiary Rebates (§ 422.266)
21. Quality Bonus Payment and Rebate
Retention Appeals (§ 422.260)
C. Clarify Various Program Participation
Requirements
1. Clarify Payment Rules for Non-Contract
Providers (§ 422.214)
2. Pharmacist Definition (§ 423.4)
3. Prohibition on Part C and Part 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 (§ 422.506, § 422.508, § 422.512,
§ 423.507, § 423.508, and § 423.510)
4. Timely Transfer of Data and Files When
CMS Terminates a Contract With a Part
D Sponsor (§ 423.509)
5. Review of Medical Necessity Decisions
by a Physician or Other Health Care
Professional and the Employment of a
Medical Director (§ 422.562, § 422.566,
§ 423.562, and § 423.566)
6. Compliance Officer Training (§ 422.503
and § 423.504)
7. Removing Quality Improvement Projects
and Chronic Care Improvement Programs
from CMS Deeming Process (§ 422.156)
8. Definitions of Employment-Based
Retiree Health Coverage and Group
Health Plan for MA Employer/UnionOnly Group Waiver Plans (§ 422.106)
D. Strengthening Beneficiary Protections
1. Agent and Broker Training Requirements
(§ 422.2274 and § 423.2274)
a. CMS-Approved or Endorsed Agent and
Broker Training and Testing (§ 422.2274
and § 423.2274)
b. Extending Annual Training
Requirements to All Agents and Brokers
(§ 422.2274 and § 423.2274)
2. Call Center and Internet Web site
Requirements (§ 422.111 and § 423.128)
a. Extension of Customer Call Center and
Internet Web site Requirements to MA
Organizations (§ 422.111)
b. Call Center Interpreter Requirements
(§ 422.111 and § 423.128)
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3. Require Plan Sponsors to Contact
Beneficiaries to Explain Enrollment by
an Unqualified Agent/Broker (§ 422.2272
and § 423.2272)
4. Customized Enrollee Data (§ 422.111 and
§ 423.128)
5. Extending the Mandatory Maximum
Out-of-Pocket (MOOP) Amount
Requirements to Regional PPOs
(§ 422.100 and § 422.101)
6. Prohibition on Use of Tiered Cost
Sharing by MA Organizations (§ 422.262)
7. Delivery of Adverse Coverage
Determinations (§ 423.568)
8. Extension of Grace Period for Good
Cause and Reinstatement (§ 422.74 and
§ 423.44)
9. Translated Marketing Materials
(§ 422.2264 and § 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 All MA Plan Types
(§ 422.112)
2. Maintaining a Fiscally Sound Operation
(§ 422.2, § 422.504, § 423.4, and
§ 423.505)
3. Release of Part C and Part D Payment
Data (§ 422.504, § 423.505, and
§ 423.884)
4. Required Use of Electronic Transaction
Standards for Multi-Ingredient Drug
Compounds; Payment for MultiIngredient Drug Compounds (§ 423.120)
5. Denial of Applications Submitted by
Part C and Part D Sponsors With Less
Than 14 Months Experience Operating
Their Medicare Contracts (§ 422.502 and
§ 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 (§ 422.4)
2. Cost Plan Enrollment Mechanisms
(§ 417.430)
3. Fast-track Appeals of Service
Terminations to Independent Review
Entities (IREs) (§ 422.626)
4. Part D Transition Requirements
(§ 423.120)
5. Revision to Limitation on Charges to
Enrollees for Emergency Department
Services (§ 422.113)
6. Clarify Language Related to Submission
of a Valid Application (§ 422.502 and
§ 423.503)
7. Modifying the Definition of Dispensing
Fees (§ 423.100)
III. Collection of Information Requirements
A. ICRs Regarding Cost Sharing for
Specified Services at Original Medicare
Levels (§ 417.454 and § 422.100)
B. ICRs Regarding SNP Provisions
(§ 422.101, § 422.107, and § 422.152)
1. Dual-Eligible SNP Contracts with State
Medicaid Agencies (§ 422.107)
2. ICRs Regarding NCQA Approval of SNPs
(§ 422.101 and § 422.152)
C. ICRs Regarding Voluntary De Minimis
Policy for Subsidy Eligible Individuals
(§ 423.34 and § 423.780)
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D. ICRs Regarding Increase In Part D
Premiums Due to the Income Related
Monthly Adjustment Amount (D–
IRMAA) (§ 423.44)
E. ICRs Regarding Elimination of Medicare
Part D Cost-Sharing for Individuals
Receiving Home and Community-Based
Services (§ 423.772 and § 423.782)
F. ICRs Regarding Appropriate Dispensing
of Prescription Drugs in Long-Term Care
Facilities Under PDPs and MA–PD plans
(§ 423.154) and Dispensing Fees
(§ 423.100)
G. ICRs Regarding Complaint System for
Medicare Advantage Organizations and
PDPs (§ 422.504 and § 423.505)
H. ICRs Regarding Uniform Exceptions and
Appeals Process for Prescription Drug
Plans and MA–PD Plans (§ 423.128 and
§ 423.562)
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
(§ 423.100 and § 423.464)
J. ICRs Regarding Improvements to
Medication Therapy Management
Programs (§ 423.153)
K. ICRs Regarding Changes to Close the
Part D Coverage Gap (§ 423.104 and
§ 423.884)
L. ICRs Regarding Medicare Advantage
Benchmark, Quality Bonus Payments,
and Rebate (§ 422.252, § 422.258 and
§ 422.266)
M. ICRs Regarding Quality Bonus Appeals
(§ 422.260)
N. ICRs Regarding Timely Transfer of Data
and Files When CMS Terminates a
Contract With a Part D Sponsor
(§ 423.509)
O. ICRs Regarding Agent and Broker
Training Requirements (§ 422.2274 and
§ 423.2274)
P. ICRs Regarding Call Center and Internet
Web site Requirements (§ 422.111 and
§ 423.128)
Q. ICRs Regarding Requiring Plan Sponsors
to Contact Beneficiaries to Explain
Enrollment by an Unqualified Agent/
Broker (§ 422.2272 and § 423.2272)
R. ICRs Regarding Customized Enrollee
Data (§ 422.111 and § 423.128)
S. ICRs Regarding Extending the
Mandatory Maximum Out-of-Pocket
(MOOP) Amount Requirements to
Regional PPOs (§ 422.100(f) and
§ 422.101(d))
T. ICRs Regarding Prohibition on Use of
Tiered Cost Sharing by MA
Organizations (§ 422.100 and § 422.262)
U. ICRs Regarding Translated Marketing
Materials (§ 422.2264 and § 423.2264)
V. ICRs Regarding Expanding Network
Adequacy Requirements to Additional
MA Plan Types (§ 422.112)
W. ICRs Regarding Maintaining a Fiscally
Sound Operation (§ 422.2, § 422.504,
§ 423.4, and § 423.505)
X. ICRs Regarding Release of Part C and
Part D Payment Data (Parts 422 and 423,
Subpart K)
Y. ICRs Regarding Revision to Limitation
on Charges to Enrollees for Emergency
Department Services (§ 422.113)
IV. Regulatory Impact Analysis
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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
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 or Competitive
Medical Plan
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
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Federal Register / Vol. 76, No. 73 / Friday, April 15, 2011 / Rules and Regulations
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
Program
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
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TMR Targeted Medication Review
TrOOP True Out-Of-Pocket
U&C Usual and Customary
USP U.S. Pharmacopoeia
I. Background
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
(known as Medicare+Choice under the
BBA). 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 Part D
regulations to continue to improve or
clarify existing policies and/or codify
current guidance for both programs. 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 Part 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). We also
clarified the MIPPA marketing
provisions in a November 2008 interim
final rule (73 FR 67407).
Proposed and final rules addressing
additional policy clarifications under
the Part C and Part D programs appeared
in the October 22, 2009 (74 FR 54634)
and April 15, 2010 Federal Register (75
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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 Part
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 Part 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 Part 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.
On November 22, 2010, a proposed
rule (hereinafter referred to as the
November 2010 proposed rule)
appeared in the Federal Register (75 FR
224), in which we proposed to continue
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
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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 Part
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 costsharing, assessing bids for meaningful
differences, and ensuring that costsharing structures in a plan are
transparent to beneficiaries and not
excessive. Some of the other provisions
for which we proposed 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;
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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, the proposed rule was
intended to strengthen the way we
administer the Part C and Part D
programs, and to aid beneficiaries in
making the best plan choices for their
health care needs.
II. Provisions of the Final Regulations
and Analysis of and Responses to
Public Comments
A. Overview of the Final Changes and
Public Comments Received
1. Overview of the Final Changes
In the sections that follow, we discuss
the changes made in the final rule to
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 have
structured the preamble narrative by
topic area rather than in subpart order.
Accordingly, we address the following
five specific goals:
• Implementing the provisions of the
ACA.
• Clarifying various program
participation requirements.
• Strengthening beneficiary
protections.
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• Strengthening our ability to
distinguish stronger applicants for Part
C and Part D program participation and
to remove consistently poor performers.
• Implementing other clarifications
and technical changes.
A number of the revisions and
clarifications in this final rule affect
both the MA and prescription drug
programs, and 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 are being
revised.
We note that these regulations are
effective 60 days after the date of
display of the final rule. Table 1 lists
key changes that have an applicability
date other than 60 days after the date of
display of this final rule. The
applicability dates are discussed in the
preamble for each of these items.
We are implementing several changes
to the regulations to reflect provisions in
the ACA which are already in effect.
Table 2 lists the key changes. While
these ACA provisions became effective
on the statutory effective date, the
regulations implementing these
provisions will be effective 60 days after
the date of display of the final rule.
BILLING CODE 4120–01–P
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2. Public Comments Received on the
Proposed Rule
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We received approximately 261
timely public comments on the
November 2010 proposed rule. These
public comments addressed issues on
multiple topics. Commenters included
health and drug plan organizations,
insurance industry trade groups,
pharmacy associations, pharmaceutical
benefit manager (PBM) organizations,
provider associations, representatives of
hospital and long term care institutions,
drug manufacturers, mental health and
disease specific advocacy groups,
beneficiary advocacy groups,
researchers, and others.
In this final rule, we address all
comments and concerns on the policies
included in the proposed rule. We also
reference comments that were outside
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the scope of the proposals set forth in
the proposed rule, in the comment and
response sections of this final rule.
We present a summary of the public
comments and our responses to them in
the applicable subject-matter sections of
this final rule.
Comment: A commenter stated that
CMS revised the date for the closing of
the comment period from January 21,
2011 to January 11, 2011 and requested
that CMS provide a rationale for
shortening the comment period for the
proposed rule.
Response: Our proposed rule was
placed on display at the Office of the
Federal Register and made available on
the CMS Web site on November 10,
2010. Section 1871(b)(1) of the Act
requires ‘‘notice’’ of the proposed rule,
and a period of 60 days for public
comment thereon. Because notice of the
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provisions of the proposed rule was
provided on November 10, 2010 the
comment period closed on January 11,
2011, which is 60 days after the date of
display of the proposed rule at the
Office of the Federal Register and on the
CMS Web site.
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
ACA that concern the Part C and Part D
programs 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.
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BILLING CODE 4120–01–C
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1. Cost Sharing for Specified Services at
Original Medicare Levels (§ 417.454 and
§ 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 service categories 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 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
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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 April 2010 final rule (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 proposed to amend
§ 422.100 by adding new paragraph (j).
In addition, under our authority in
section 1876(i)(3)(D) of the Act to
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impose ‘‘other terms and conditions’’
deemed ‘‘necessary and appropriate,’’ we
proposed to add new paragraph (e) in
§ 417.101 to extend the requirements in
section 3202 of the ACA to section 1876
cost contracts. In this rule we explain
that our proposed addition to § 417.101
was technically incorrect and have
corrected the regulation citation so that
our proposed addition is new paragraph
(e) to § 417.454 to extend the
requirements in section 3202 of the
ACA 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.
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
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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
do not apply to such services during
this period.
In our proposed additions to
§ 417.454 and § 422.100, we proposed to
incorporate these definitions for the two
service categories. We welcomed
comments on these proposed cost
sharing standards.
We also proposed to limit cost sharing
for home health services under MA
plans to that charged under Original
Medicare and noted 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 instead indicated that
we would rely 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 solicited public comment on our
proposal to limit cost sharing for home
health services to that charged for those
services under Original Medicare.
Comment: There were many
commenters who opposed our proposal
to limit cost sharing for home health
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services under MA and cost plans at
Original Medicare levels. The
commenters expressed concern that
limiting cost sharing for home health
decreases their flexibility in their plan
design and limits the plans’ tools to
ensure appropriate utilization of home
health care.
MedPAC strongly opposed our
proposal to limit home health cost
sharing to $0 for several reasons
including: Home health is a less welldefined benefit in Medicare and its
appropriate use is more difficult to
monitor and the proposed prohibition
on cost sharing for home health is
unduly restrictive. They also argued that
CMS’ proposal is based on weak
rationale. The comment included a
statement of MedPAC’s belief that cost
sharing should be one of the tools that
plans can use at their discretion as a
means of ensuring appropriate
utilization. The comment informed us
that MedPAC was currently considering
these kinds of issues as a part of their
deliberations on whether or not to
recommend that traditional FFS
Medicare should have cost sharing for
home health services, along with the
level of such cost sharing and the
circumstances in which the cost sharing
would apply.
Response: We find MedPAC’s
concerns about our proposal, in
addition to those expressed by many
other commenters to be persuasive and
believe we should not finalize, at this
time, our proposal to prohibit cost
sharing for in-network home health
services. MedPAC has recommended to
Congress that it should direct the
Secretary to establish a per episode
copayment for home health episodes of
care that are not preceded by a
hospitalization or post-acute care use.
We believe it is reasonable for us to take
time to perform additional analyses of
home health service utilization by
beneficiaries enrolled in MA plans.
Comment: We received several
comments that supported our proposal
to limit cost sharing for home health
services at Original Medicare levels.
Those commenters believe that it will
provide beneficiaries with a benefit
package that is transparent and easily
predictable for out-of-pocket expenses.
Response: We thank the commenters
for their support but, as previously
discussed at length, we believe that it
would be more appropriate not to
finalize our proposal. We will continue
to evaluate the effectiveness of our
current policies to protect beneficiaries
from unfair or discriminatory cost
sharing, confusing plan choices, and
unaffordable care before implementing
any additional policy change.
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Furthermore, under current policy only
plans that provide extra beneficiary
protection from high cost sharing by
adopting a voluntary MOOP are
permitted to charge cost sharing for
home health services. We will continue
to find the most appropriate balance
between protecting beneficiaries from
excessive out-of-pocket cost sharing and
ensuring the financial viability of the
MA program.
Comment: One commenter stated that
prohibiting cost sharing for home health
could lead to further pricing challenges
and another stated there are a number
of provisions in the ACA that limit a
plan’s ability to charge cost sharing for
specified services and that these
provisions are being implemented at the
same time that CMS is implementing
payment cuts and medical costs are
continuing to increase. The commenter
stated all plans would be in jeopardy of
financial insolvency if they are
prohibited from balancing costs,
benefits, and payment cuts.
Response: As stated in our proposed
rule, we estimated that the cost to the
Medicare program of our proposal
would not be significant. We also stated
that we did not expect a significant
financial impact on the relatively few
plans that charge cost sharing for home
health services. However, given our
decision not to move forward with this
proposal for other reasons, this issue is
moot.
Comment: We received one comment
that expressed concern that our
proposed codification section 3202 of
the ACA could be interpreted and
implemented in a manner so as to
mandate the cost sharing obligation to
be charged, rather than permitting plans
to set cost sharing levels at or below that
cost sharing limit amount.
Response: We thank the commenter
for sharing this concern. We thought we
were clear in our proposal that plans
would be able to set cost sharing levels
at or below those charged under
Original Medicare but will make every
effort to be clear and consistent in our
guidance related to these limits.
Comment: We received two comments
that requested that we add Durable
Medical Equipment (DME) to the list of
service categories for which cost sharing
may not exceed the levels required
under Original Medicare.
Response: We thank the commenters
for their suggestion and we will
consider proposing that addition in
future rulemaking.
Comment: We received several
comments that challenged CMS’
decision to allow plans to charge cost
sharing during the first 20 days of
skilled nursing care. One commenter
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stated that charging cost sharing in the
first part of the SNF stay makes sense
for the plans but does not make sense
for the beneficiaries. They stated that
they understand CMS’ actuarial
equivalency rationale and that the law
allows MA cost sharing for the services,
but believe CMS’ policy is contrary to
the intent of health care reform. Another
commenter stated that prohibiting cost
sharing for the first 20 days of skilled
nursing care would increase
transparency for beneficiaries and could
offer better opportunities for frail
beneficiaries.
Response: Prior to the ACA, we
allowed plans to charge cost sharing
during the first 20 days of skilled
nursing care so long as the plan’s SNF
benefit satisfied the actuarial
equivalence test. In subregulatory
guidance subsequent to enactment of
the ACA, we clarified that because there
is not cost sharing under Original
Medicare for the first 20 days of SNF
care, under section 1852(a)(1)(B)(v) of
the Act, the new restrictions in section
3202 of the ACA do not apply to such
services during this period and that we
would continue our policy to allow cost
sharing during the first 20 days of SNF
care. We do not believe that enrolled
beneficiaries are disadvantaged by this
policy for at least two reasons. First,
plans’ cost sharing for SNF care is
transparent to beneficiaries as it is
reflected in the Summary of Benefits
and the Medicare Plan Finder and
second, because of the beneficiary
protections from unexpected,
unmanageable out-of-pocket costs that
Medicare requires all MA plans to
provide.
CMS limits the cost sharing that may
be charged for SNF care so that it does
not exceed what the beneficiary would
pay under Original Medicare, including
the minimal cost sharing we allow
during the first 20 days in a covered
SNF stay. We believe that minimal cost
sharing is more than offset by other
savings and protections offered under
plans’ benefit packages. One very
important protection that all plans are
required to offer is the maximum out-ofpocket (MOOP) limit on enrolled
beneficiaries’ out-of-pocket costs for
covered in-network services. The
maximum amount an enrolled
beneficiary can be required to pay for
those services is $6,700. In addition,
most plans that charge cost sharing in
the first 20 days of SNF care, waive the
Original Medicare requirement for a 3day qualifying inpatient hospital stay
which saves beneficiaries enrolled in
those plans from having to pay the costs
for an inpatient stay.
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Comment: One commenter requested
that CMS establish an employer group
waiver excepting MA plans offered
through employer/union group health
plans from the proposed cost sharing
standards.
Response: We thank the commenter
for this suggestion but we believe that
employer group plans must be subject to
the same cost sharing as other MA plans
in order to provide the beneficiaries
enrolled in those plans the same
protections as beneficiaries enrolled in
other MA and cost plans.
Comment: Several commenters
supported our proposed codification of
section 3202 of the ACA to limit cost
sharing for chemotherapy
administration services, renal dialysis
services, skilled nursing care, and such
other services as the Secretary
determines appropriate to levels not to
exceed that charged under Original
Medicare and stated that it was
welcome news for beneficiaries. One
commenter specifically expressed
support for the extension of the cost
sharing limits to section 1876 cost
contracts. Some of the commenters also
requested that CMS provide greater
clarity that the limits on cost sharing
apply only to in-network services.
Response: We thank the commenters
for their support and in response to the
these comments we will revise our
proposed regulation text to clarify in
§ 422.100 that the cost sharing charged
for chemotherapy administration
services, renal dialysis services and
skilled nursing care provided innetwork may not exceed the amount of
cost sharing required for those services
under Original Medicare. Thus, in part,
the final regulation text will be revised
to read: ‘‘On an annual basis, CMS
would evaluate whether there are
service categories for which MA plans’
in-network cost sharing may not exceed
that required under Original Medicare
and specify in regulation which services
are subject to that cost sharing limit.’’
Comment: A few commenters
objected to our codification in the
proposed rule of our proposal to extend
the cost sharing limits of section 3202
of the ACA to section 1876 cost plans
because we proposed to set forth this
requirement in a new paragraph (g) to
§ 417.101, which otherwise does not
govern cost plans. The commenters
suggested that we instead add a new
paragraph to § 417.454, Charges to
Medicare enrollees. One commenter
also recommended that we change our
reference to ‘‘MA plans’’ in the proposed
regulation language to ‘‘HMO’’ or ‘‘CMP’’
to be consistent with the standard
terminology used in the regulations to
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refer to the section 1876 contracting
entity.
Response: We thank the commenters
for their suggestions. Accordingly, in
this final rule, we will not include the
cost-sharing requirements in § 417.101,
but will instead add new paragraph (e)
to § 417.454 to require cost sharing
charged by section 1876 cost plans for
chemotherapy, renal dialysis and skilled
nursing care to be limited to that
charged under Original Medicare. We
also will remove reference to ‘‘MA
plans’’ in the new regulatory text
language and replace it with ‘‘HMO or
CMP.’’
We have considered all of the
comments on this proposal and will
finalize, as revised, the addition of a
new paragraph and (j) to § 422.100 to
implement section 3202 of the ACA
requiring that MA plans’ in-network
cost sharing charges for chemotherapy,
SNF care and dialysis will be no greater
than that charged under Original
Medicare, and a new paragraph (e) to
§ 417.454 to extend these protections to
section 1876 cost contracts. However,
we will not finalize our proposal to add
new paragraph (4) to § 417.454(e) or
new paragraph (4) to § 422.100(j) to
prohibit plans from charging cost
sharing for home health services.
2. Simplification of Beneficiary Election
Periods (§ 422.62, § 422.68, § 423.38,
and § 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
proposed to amend 0§ 422.62(a)(2) and
§ 423.38(b) to codify this change.
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, also
referred to as the Medicare Advantage
Disenrollment Period (MADP), replaces
the open enrollment period (OEP) that
previously occurred annually from
January 1st through March 31st. To
codify this provision, we proposed the
following changes:
• § 422.62(a) was amended to provide
for this new disenrollment opportunity
and clarify that the OEP ended after
2010;
• § 422.68(f) was amended to specify
the effective date for disenrollment
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requests submitted during the new 45day disenrollment period;
• § 423.38(d) was amended to allow
individuals who disenrolled from an
MA plan between January 1 through
February 14th to enroll in a standalone
PDP; and
• § 423.40(d) was amended to 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.
Comment: Commenters requested that
CMS conduct beneficiary education on
the new AEP timeframe.
Response: We are strongly committed
to using all available means for ensuring
that beneficiaries are made aware of the
new AEP timeframes. Thus, we expect
to conduct specific outreach and
education on this topic and highlight
the change in Medicare & You 2012
which will be mailed to all
beneficiaries.
Comment: Commenters recommended
that CMS adjust the timing of plan bids
and make other important information,
such as model notices, available earlier
for plan preparation of the AEP. In
addition, commenters requested that
plan marketing be allowed to start
earlier than October 1 for the AEP.
Response: We are considering the
timing of our processes and will be
making appropriate adjustments as we
prepare for a successful implementation
of the new AEP timeframe, but we do
not plan to change the bid submission
or plan marketing dates. The plan bid
submission date is set by statute and
remains the first week in June, leaving
only a narrow timeframe for review and
approval of bids and benefits and to
ensure that marketing materials align
with approved benefits. Accurate
marketing materials are key to enabling
beneficiaries to make appropriate
determinations regarding their health
care and prescription drug coverage.
Also, we do not believe it is appropriate
or necessary to allow plans to market
earlier than October 1 given that a
beneficiary may not enroll in a plan
until October 15th.
Comment: Commenters recommended
that CMS create an open enrollment
period that would allow beneficiaries to
enroll in Medigap products without
regard to health status or pre-existing
conditions. Another commenter
recommended that CMS clarify that
beneficiaries who disenroll from an MA
plan using the 45-day disenrollment
period do not have guaranteed issue
rights to prevent underwriting the plan
premium if they choose to purchase a
Medigap policy.
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Response: Section 1882 of the Act
does not provide for a Federal annual
open enrollment period for Medigap.
Further the commenter is correct that
using the MADP does not give the
beneficiary guaranteed issue rights
under Federal law to prevent healthbased underwriting of the Medigap
policy premium. In some cases, State
Medigap laws may offer additional
guaranteed issue rights to beneficiaries
who are affected by the MADP.
Comment: Some commenters
recommended that CMS establish a
special election period (SEP) for the first
year of the new AEP timeframe to allow
individuals to make plan elections
through December 31. Additionally, one
commenter suggesting allowing plan
sponsors to accept and process
enrollment requests received from
December 8 through December 31.
Response: Again, we will take a
number of steps to ensure that
beneficiaries are made aware of the new
AEP timeframes, and that they have the
tools they need to make informed
decisions during the new AEP
timeframe. We believe that through
planned outreach and education efforts
directly to beneficiaries and with
stakeholders and plans, beneficiaries
will have sufficient notification to make
their health plan elections by December
7. We believe that the establishment of
the suggested SEP would directly
conflict with the clear intent of the
statute.
Comment: A commenter
recommended that individuals using the
opportunity afforded by the MADP be
allowed to enroll in an MA plan offered
by the same parent organization instead
of defaulting to Original Medicare.
Another commenter recommended CMS
find a less expensive alternative to the
MADP such as reinstating the open
enrollment period or eliminating lockin.
Response: Again, the new 45-day
disenrollment period, as established in
the ACA, is clearly designed to permit
only moves from MA to Original
Medicare. Eliminating or broadening the
scope of this election period would
contradict the intent of the statute.
Similarly, ‘‘lock-in’’ is mandated by the
statute and cannot be eliminated by
CMS.
Comment: A commenter addressed
CMS’ plans to establish an SEP to allow
beneficiaries in an MA plan with less
than five stars to enroll in a plan with
five stars outside of the normal
enrollment periods. The commenter
recommended that, in regions where
there are no plans with five stars,
individuals be allowed to enroll in
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plans with 4.5 stars outside of the
normal enrollment periods.
Response: We appreciate the
suggestion; however the SEP for
individuals to enroll in 5-star plans is
outside the scope of this regulation. We
will consider this suggestion as we
finalize guidance concerning the scope
of the SEP associated with Plan Ratings
later this year. We appreciate the
comments that were submitted and will
be finalizing these proposals without
modification.
3. Special Needs Plan (SNP) Provisions
(§ 422.2, § 422.4, § 422.101, § 422.107,
and § 422.152)
In our proposed rule, we defined a
fully integrated dual eligible special
needs plan (SNP) as specified by the
ACA, and set forth proposed regulations
implementing changes made by the
ACA. These changes would extend the
authority to offer SNPs, extend
provisions permitting existing D–SNPs
that are not expanding their service
areas to continue operating without
contracts with State Medicaid agencies
through 2012, and establish a required
NCQA quality approval process for
SNPs.
a. Adding a Definition of Fully
Integrated Dual Eligible SNP (§ 422.2)
Section 3205 of the ACA revised
section 1853(a)(1)(B) of the Act to
provide authority to apply a frailty
payment under PACE payment rules for
certain individuals enrolled in fully
integrated dual eligible special needs
plans described in section 3205(b) of the
ACA. In order to implement this
provision, we proposed a definition of
fully integrated dual eligible special
needs plan to § 422.2 that will apply for
these purposes. Under our proposed
definition, the D–SNP must meet the
following criteria in order to be
considered a fully integrated dual
eligible special needs plan:
• Enroll special needs individuals
entitled to medical assistance under a
Medicaid State plan, as defined in
section 1859(b)(6)(B)(ii) of the Act and
§ 422.2.
• Provide dual eligible beneficiaries
access to Medicare and Medicaid
benefits under a single managed care
organization (MCO).
• Have 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.
• Coordinate the delivery of covered
Medicare and Medicaid health and longterm care services, using aligned care
management and specialty care network
methods for high-risk beneficiaries.
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• Employ policies and procedures
approved by CMS and the State to
coordinate or integrate member
materials, including enrollment,
communications, grievance and appeals,
and quality assurance.
In this final rule, we adopt our
proposed definition of a fully integrated
dual eligible special needs plan with
some modification. For reasons
discussed below, we have in this final
rule revised the definition by removing
the word ‘‘including’’ and have replaced
the word ‘‘assurance’’ with
‘‘improvement.’’
Comment: The majority of
commenters supported our proposed
definition of a fully integrated dual
eligible special needs plan. However,
three commenters raised concerns about
two potential ambiguities in the part of
the proposed definition which requires
that a fully integrated dual eligible
special needs plan ‘‘[e]mploy policies
and procedures approved by CMS and
the State to coordinate or integrate
member materials, including
enrollment, communications, grievance
and appeals, and quality assurance.’’
Specifically, these commenters
recommended that we eliminate the
word ‘‘including’’ after member
materials, because the functions that
follow the word ‘‘including’’ in the
proposed definition are not all related to
member materials. Further, these same
commenters suggested that we use the
terms ‘‘performance measurement’’ in
place of ‘‘quality assurance’’ in the
proposed definition, because, as
suggested by the commenters, the term
‘‘performance measurement’’ is more
consistent with current regulatory
language.
Response: We appreciate the
commenters’ support for the definition
we proposed for a fully integrated dual
eligible special needs plan. We agree
with the commenters that, as written,
the final prong of the proposed
definition is not sufficiently clear about
what policies and procedures must be
approved by CMS and the State to
ensure integration and coordination.
Accordingly, in response to these
comments, we have revised this part of
the proposed definition in § 422.2 of the
MA program regulations by eliminating
the word ‘‘including’’ after member
materials because, as the commenters
suggest, the functions that follow the
word ‘‘including’’ are not all related to
member materials. We believe this word
deletion makes this prong of the
definition more clear, and also more
accurately reflects our intention that a
fully integrated dual eligible special
needs plan coordinate or integrate
Medicaid and Medicare member
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materials, enrollment, communications,
grievance and appeals, and quality
improvement. In addition, we revised
this part of the proposed definition by
substituting the terms ‘‘quality
improvement’’ for ‘‘quality assurance’’
(or ‘‘performance measurement’’ as
suggested by three commenters).
‘‘Quality improvement’’ is most
consistent with existing MA
terminology. We believe the term
‘‘performance measurement’’ does not
sufficiently specify our intention to
ensure that this portion of the definition
requires coordinated or integrated
policies regarding quality. Further, the
use of the term ‘‘quality improvement’’
intentionally demonstrates our intention
that a fully integrated dual eligible
special needs plan integrate or
coordinate the full spectrum of
programs and tools utilized to ensure
quality.
Comment: Several commenters
suggested that we broadly or flexibly
interpret the definition of a fully
integrated dual eligible special needs
plan to allow for the broad variety of
dual eligible special needs plan
contracting arrangements in place in
different States. Additionally, one
commenter that submitted a comment
with this suggestion also requested that
under the third prong of the definition,
we allow for some combination of
specified primary, acute and long-term
care benefits and services because States
need flexibility to design the details of
their programs in response to their
stakeholders’ needs and concerns. In
contrast, another commenter urged us to
use caution when approving plans as
fully integrated dual eligible special
needs plans, and recommended that we
specify that any fully integrated dual
eligible special needs plan purporting to
offer long-term supports and services
must offer the full range available in a
given State.
Response: We believe that there is a
great deal of flexibility in our proposed
definition of a fully integrated dual
eligible special needs plan, as written in
the proposed rule and this final rule, to
account for the variability in State
integration efforts. For example, the
terms ‘‘consistent with State policy’’ in
the definition recognizes the variability
in the degree and extent to which
Medicaid services are covered from one
State to the next. Additionally, as
highlighted by another commenter, use
of the word ‘‘specified’’ in the definition
(‘‘coverage of specified primary, acute,
and long term care benefits and services,
consistent with State policy’’) also
acknowledges that States vary in the
degree to which Medicaid services are
covered by the State by only requiring
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the plan to cover those services
specified by the State Medicaid Agency.
Moreover, fully integrated dual eligible
special needs plans and States have the
flexibility to choose to contract to serve
certain subsets of the sState’s overall
dual eligible population, provided that
the MIPPA compliant State contract
between the State and the fully
integrated dual eligible special needs
plan supports this arrangement.
Therefore, in order to meet this
definition a plan will be required to
provide all covered Medicaid primary,
acute and long-term care services and
benefits to beneficiaries, and not some
combination thereof.
Comment: One commenter
recommended that we include in the
definition of a fully integrated dual
eligible special needs plan the reference
to PACE frailty levels from the statutory
definition of a fully integrated dual
eligible special needs plan found in
section 3205 of the ACA. This
commenter suggested that this reference
to PACE frailty levels should be
included in the definition of a fully
integrated dual eligible special needs
plan, as well as where it now appears
in § 422.308.
Response: While section 3205 of the
ACA provides us with the authority to
apply a frailty adjustment payment to a
fully integrated dual eligible special
needs plan with a similar average level
of frailty as the PACE program, the
statute does not limit our ability to use
the definition of a fully integrated dual
eligible special needs plan for only this
purpose. Therefore, we will not include
this requested reference in the final
definition so we are able use this
definition for other purposes in the
future.
Comment: One commenter asked us
to clarify what is meant by ‘‘aligned care
management and specialty care network
methods for high-risk beneficiaries,’’ and
also provided brief recommendations on
how to implement this requirement.
Further, the commenter recommended
that any clarification on the ‘‘aligned
care management’’ requirement specify
that a fully integrated dual eligible
special needs plan is responsible for
managing care that is covered by
Medicare or Medicaid in such a way
that the individual beneficiary gets full
access to all services covered by both
programs.
Response: Section 164(d) of the
Medicare Improvement for Patients and
Providers Act of 2008 (MIPPA) requires
that special needs plans ‘‘have in place
an evidenced-based model of care with
appropriate networks of providers and
specialists * * * and use[s] an
interdisciplinary team in the
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management of care.’’ The terms
‘‘aligned care management and specialty
care network methods for high-risk
beneficiaries’’ derive from this
requirement in MIPPA. In the
September 18, 2008 Federal Register,
we issued an interim final rule with
comment on this MIPPA provision. We
have received several comments on this
provision and will finalize the provision
later this year. As such, the final rule
will provide additional clarification on
what is required to ‘‘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’’ as required by
the definition for a fully integrated dual
eligible special needs plan.
Comment: One commenter asked us
to clarify the requirement that a plan
designated as a fully integrated dual
eligible special needs plan must provide
notices specific to the dual-eligible
population it is serving as opposed to
generic notices designed for non-dual
beneficiaries that do not correctly
identify their rights and obligations.
Response: We appreciate this concern
and currently require certain
communications be developed specific
to a beneficiary’s eligibility. For
example, we have created an Annual
Notice of Change/Evidence of Coverage
standard template specifically for dual
eligible special needs plans for use
starting with contract year 2012. The
template was developed through several
rounds of consumer testing and
listening sessions with SNP
representatives and consumer
advocates. Other CMS models may be
customized to meet the needs of dual
eligible members. Furthermore, fully
integrated and dual eligible special
needs plans are required to coordinate
and integrate member materials to
contain information specific to both the
Medicare and Medicaid benefits. We are
committed to ensuring beneficiaries
receive appropriate and helpful
marketing materials and will continue
to explore opportunities to improve
beneficiary experience in this regard.
Comment: One commenter
recommends that we approve and allow
both fully integrated dual eligible
special needs plans and non-fully
integrated dual eligible special needs
plans to operate so that a larger
population of duals may be served by
these plans.
Response: We agree with this
commenter’s recommendation. We will
continue to approve and allow both
fully integrated dual eligible special
needs plans and non-fully integrated
dual eligible special needs plan to
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operate so a larger population of duals
may be served by these plans.
Comment: One commenter seeks
clarification in the requirement that a
fully integrated dual eligible special
needs plan have a ‘‘capitated’’ contract
with the State Medicaid agency.
Response: In response to this
comment to clarify the meaning of the
term ‘‘capitated’’ in the third prong of
the definition, a capitated contract is a
contract that provides for a fixed
payment from the State Medicaid
Agency to the fully integrated dual
eligible special needs plan that does not
vary based on services provided in
exchange for the plan’s provision of the
covered Medicaid benefits to the
beneficiaries.
b. Extending SNP Authority
Based on section 3205(a) of the ACA,
which revised section 1859(f)(1) of the
Act, we proposed in our November 2010
proposed rule (75 FR 71198) 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 defined at § 422.2, with the
exception of dual eligible SNPs (D–
SNPs) that do not have a contract with
the State in which they operate in
contract year 2013, as described in
section II.B.3.c of this final rule.
This provision was effective upon
enactment of the ACA. However, we
proposed that the regulations
implementing this provision would be
effective 60 days after the publication of
this final rule.
After considering comments, we are
finalizing this provision without
modification.
Comment: Several commenters
believed that delaying the proposed
provision’s effective date until 60 days
after publication of the final rule was
unnecessary.
Response: We disagree with the
commenters’ claim that it is
unnecessary to delay implementation of
this provision until 60-days following
publication of this final rule. While
section 3205(a) of the ACA was effective
upon enactment, the regulations
codifying this provision can be effective
no earlier than 60 days following
publication of this final rule, as
provided under the Administrative
Procedure Act for economically
significant regulations.
Comment: One commenter suggested
that extending the SNP program for
longer than 1 year would provide SNPs
with more operational certainty.
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Response: Our proposed provision
extended all SNPs, with the exception
of D–SNPs that do not have a State
contract in the State in which they
operate, until contract year 2013,
consistent with the statutory language at
section 1859(f)(1) of the Act. We do not
have the statutory authority to extend
the SNP authority beyond the length of
time Congress specified in the ACA.
Therefore, we are finalizing this
provision without modification.
c. Dual-Eligible SNP Contracts With
State Medicaid Agencies (§ 422.107)
Section 164(c)(2) of MIPPA required
all new D–SNPs and all existing D–
SNPs that are seeking to expand their
service areas to have contracts with the
State Medicaid agencies in the States in
which they operate. The provision
allowed existing D–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 they met all other statutory
requirements. Section 3205 of the ACA,
which revised section 164(c)(2) of
MIPPA, extends the date that D–SNPs
not seeking to expand their service areas
can continue to operate without a State
contract to December 31, 2012. In order
to implement this provision, we
proposed to revise § 422.107(d)(ii) to
specify the new deadline.
This provision was effective upon
enactment of the ACA. However, we
proposed that the regulations
implementing this provision would be
effective 60 days after the publication of
the final rule.
Comment: Many commenters
supported this proposed provision.
However, the majority of the comments
we received on this provision centered
on the operational issues related to the
State contracting requirement. Several
commenters indicated that variation in
State contracting and procurement
processes has caused some D–SNPs to
experience delays in obtaining contracts
with State Medicaid agencies and they
requested that CMS give D–SNPs
additional flexibility to meet these
contracting deadlines. A few
commenters suggested that CMS
incentivize States to engage with D–
SNPs that are seeking to contract with
the State(s) in their service areas, while
another commenter proposed that CMS
hold plans harmless if States either
refuse to contract with them or require
them to meet contract requirements that
are beyond the minimum CMS-required
contract elements. Other commenters
recommended that CMS provide further
regulatory and operational guidance on
the State contracting process. Several
commenters expressed concern that
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States were receiving conflicting
information from CMS central and
regional offices (ROs), and asked CMS to
develop a model State contract for
dissemination to D–SNPs, States, and
the CMS ROs. Some commenters
recommended that CMS establish a
system of review and oversight of D–
SNP State contracts through rulemaking.
Response: The proposed rule neither
codified the D–SNP State contracting
requirement nor specified specific
contract requirements; it only amended
§ 422.107 to conform to the statutory
extension of the State contracting
deadline for existing, non-expanding D–
SNPs. Comments about operationalizing
the State contracting requirement were
not strictly within the scope of this rule.
We note that, although we are not
addressing these specific operational
concerns in this final rule, we intend to
provide additional operational guidance
on the D–SNP State contracting
requirements in future operational
guidance well in advance of the State
contracting deadline of December 31,
2012.
d. Approval of Special Needs Plans by
the National Committee for Quality
Assurance (§ 422.4, § 422.101, and
§ 422.152)
The ACA amended section 1859(f) of
the Act to require that all SNPs,
existing, new, and those wishing to
expand their service areas, be approved
by the National Committee for Quality
Assurance (NCQA) effective January 1,
2012 and subsequent years. Section
1859(f) of the Act further specified that
the NCQA approval process shall be
based on the standards established by
the Secretary.
In our November 2010 proposed rule
(75 FR 71199), we stated that both the
quality improvement (QI) program plan
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. We proposed that NCQA
review both the QI program plan
description and the MOC submitted
during the application process for all
SNPs using standards developed by
CMS. Specifically, we proposed to add
a new paragraph (iv) to § 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 quality QI
program plan and MOC to CMS for
NCQA evaluation and approval, per
CMS guidance. We also proposed to
codify the new requirement at
§ 422.101(f), which specifies MOC
requirements, by adding a new
paragraph (vi). Finally, we proposed to
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codify the new requirement by revising
§ 422.152(g), which specifies QI
program requirements.
In the proposed rule, we also clarified
that CMS would not participate in the
scoring and review of the MOC and QI
program plans. We also stated in our
proposed rule that we would release
specific instructions and guidance to
organizations, including the specific
criteria that NCQA would use to
evaluate the QI program plan
description and MOC, information
about technical assistance training that
would be available to the SNPs as they
prepared their QI program plan and
MOC submissions, as well as details on
the frequency of the SNP approval
process. We also expressed concern that
an annual approval process could be
burdensome for plans and solicited
comments on how to determine the
appropriate frequency for the SNP
approval process.
Based on the comments we received
on the proposed rule, we are modifying
§ 422.4(a)(iv), § 422.101(f), and
§ 422.152(g), as described below.
Comment: Several commenters
expressed concern with our proposed
SNP approval process and the
components that comprise that process.
Specifically, these commenters noted
that both the 2012 application cycle and
the 2011 SNP structure and process
measure submissions were due in
February 2011. The commenters
requested that CMS clarify any
relationship between the two processes.
Other commenters requested that CMS
link the SNP approval process to the
work NCQA currently performs around
QI, MOC and HEDIS® requirements.
Response: In our proposed rule, we
proposed that NCQA would review the
QI program plan and MOC submitted by
all SNPs during the application cycle
using standards developed by CMS. Our
basis for this proposal was that the
description of the plan’s QI program
plan and the MOC contained critical
elements representing the potential for a
SNP to provide integrated care for
Medicare enrollees. Some commenters
appear to have confused our proposed
requirements for the SNP approval
process with other quality requirements,
such as, the quality improvement
projects (QIPs), chronic care
improvement programs (CCIPs) and the
NCQA structure and process measures.
As a result of this confusion, the
majority of these comments did not
support using evaluation of either the QI
program plan or MOC as part of this
process. Other commenters
recommended that CMS ensure that
there is consistency between the
requirements for the SNP approval
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process and those of the other, unrelated
NCQA quality assessment process.
Response: We agree with commenters
that the QI program plan may not be the
most appropriate basis for approval of
SNPs. Therefore, we have modified our
original proposal by removing
evaluation of the QI program plan from
the NCQA SNP approval process
described in § 422.4(a)(iv), § 422.101(f),
and § 422.152(g). As a result, the SNP
approval process will be based only on
evaluation of the MOC, which will
allow the NCQA to focus purely on a
component of quality that is primarily
clinical in nature and is also unique to
SNPs. Removing evaluation of the QI
program plan from the SNP approval
process may also help reduce the
confusion and concern plans expressed
about alignment of the SNP approval
process with other QI assessment
measures and activities. All MA plans
will still be required to submit their QI
program plan; however, we will retain
responsibility for review and assessment
of this component as part of our larger
QI efforts.
Comment: Several commenters urged
CMS to ensure that there is consistency
between the QI program and MOC
documents submitted during the
application process and NCQA structure
and process measures submissions.
Response: The submission of
structure and process measures is an
ongoing annual QI assessment activity
for all SNPs. The SNP approval process
is a separate process for ensuring that
SNPs comprehend the unique
requirements of the SNP program and
are capable of implementing these
requirements. We believe commenters
may be confusing submission of
structure and process measures and the
SNP approval process given NCQA’s
involvement in both processes, even
though there is no relationship between
the two. Therefore, we clarify that there
is no relationship between the
documents required to be submitted
during the application process and the
information required for the structure
and process measures submissions.
Comment: Two commenters requested
that CMS address the relationship
between the requirements for D–SNPs to
contract with States, the SNP
application, and the new SNP approval
process. They further requested that
CMS clarify that if a D–SNP were
approved by NCQA for longer than one
year but lost its State contract, CMS
would not approve the D–SNP and
would terminate the plan.
Response: The D–SNP State
contracting requirement is separate from
the SNP approval and SNP application
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processes and is described elsewhere in
this final rule.
Comment: Several commenters
recommended that CMS consider
incorporating the SNP approval process
into the existing NCQA accreditation
process. One of the commenters
requested that CMS replace specific
Medicare requirements, such as QI
program requirements that may be part
of the NCQA accreditation process, in
lieu of more appropriate and relevant
MOC and SNP-specific measures.
Response: Section 1859(f) of the Act
specifies that the SNP approval process
‘‘shall be based on the standards
established by the Secretary.’’ While
CMS has broad discretion regarding the
development of the SNP approval
process, our goal is to develop a process
that is equitable for all SNPs. We do not
believe that substituting NCQA
accreditation for explicit SNP approval
is appropriate because accreditation is
voluntary, and not all plans are
accredited, nor is NCQA the only
accreditation organization recognized by
CMS. CMS also has agreements with
URAC (formerly the Utilization Review
Accreditation Committee) and the
Accreditation Association for
Ambulatory Healthcare (AAAHC) to be
deeming accreditation organizations.
Each accreditation organization defines
its fully accredited status level
differently.
Comment: Several commenters
supported our proposal to consider
implementing a multi-year approval
period for high scoring plans. These
commenters recommended a 3-to-5-year
approval cycle to limit the
administrative burden on plans that
demonstrate their ability to meet the
needs of special needs populations.
These commenters stated that
implementing an extended approval
cycle would also allow CMS the
opportunity to provide additional
oversight of low performing plans. Two
commenters recommended that CMS
structure the approval process in a
manner similar to that of the NCQA
structure and process measures review
cycle.
Response: We agree with the
commenters’ position that a multi-year
approval period would limit MA
organizations’ administrative burden.
To that end, we intend to implement a
multi-year approval process that will
allow plans that receive a higher score
on NCQA’s evaluation of their MOC to
be granted a longer approval period,
meaning they would not be required to
be reapproved for 1 or more years,
unlike plans that score at the lower end
of the scoring spectrum and which will
be granted a shorter approval period.
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Specific guidance regarding the
standards for multiyear approvals will
be provided in separate guidance such
as HPMS memoranda and annual call
letters.
Comment: One commenter supported
a multi-year approval cycle but
recommended that, rather than develop
new measures, CMS should use QI
measures that SNPs currently collect,
such as annual QI audit results.
Response: We are conducting a review
of the MOCs from a sample of the SNPs.
While data are not yet available from
these audits, we expect that the audits
will be completed by the end of
calendar year 2011. We will use these
data to revise and improve the MOC
requirements in the future, as well as to
refine the required evaluation criteria
for the SNP approval process over time.
We will also continue to research
additional and appropriate QI measures
to use as part of this process.
Comment: To avoid introducing
additional complexity into the
transition to NCQA approval of SNPs,
one commenter recommended that CMS
not introduce new criteria for evaluation
of SNPs at this time. This commenter
also recommended that, once our
approval standards are finalized, CMS
leave them intact for several years in
order to give NCQA and plans time to
assess operational impacts and to finetune their systems.
Response: We intend to continue
using criteria for evaluation of SNPs that
are familiar to plans. However, we will
continue researching the feasibility of
revising the criteria for future approval
cycles. We will communicate changes to
these criteria and provide opportunities
for public review and comment.
Comment: Several commenters
expressed concern that CMS is
proposing to delegate full authority of
the SNP approval process to NCQA.
These commenters did not favor giving
so much authority to a private entity
whose processes and activities are not
subject to public scrutiny. These
commenters recommended that CMS
periodically audit NCQA’s work to
ensure that the work it is tasked with
performing is serving the best interests
of the beneficiaries.
Response: Section 1859(f) of the Act
requires that NCQA approve SNPs based
on standards established by the
Secretary. We will maintain oversight of
this process via its contract with NCQA,
as well as by establishing appropriate
standards for NCQA approval, as
described elsewhere in this preamble.
Comment: One commenter requested
that CMS clarify that it will continue its
own review of SNP applications rather
than allow NCQA approvals of two
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documents to serve as deemed
compliance with all regulatory
requirements.
Response: We confirm that we will
retain responsibility of the MA and SNP
application review process, and the SNP
approval process is one component of
this process. We believe this commenter
may have confused the NCQA approval
process with the annual application
process, since both have the same
timeline.
Comment: Several commenters
recommended that CMS remove the
SNP approval process from the annual
SNP application timeframe.
Response: We disagree with these
commenters’ recommendation. While
we proposed to link the SNP approval
process to the MA application process,
the SNP approval process is only one
component of the overall process for
determining whether a SNP may operate
in contract year 2012. SNPs must still
complete other components of the SNP
proposal and other CMS requirements to
be fully operational in contract year
2012. We believe we are minimizing
MA organizations’ administrative
burden by linking the SNP approval
process to the annual application cycle.
Synchronizing the timelines for these
two processes will allow SNPs to follow
timelines and procedures with which
they are familiar and allow for SNP
approvals to be completed prior to the
bid submission deadline.
Comment: One commenter
recommended that CMS work with
SNPs to identify a list of SNP-specific
clinical and non-clinical QIP topics that
are relevant to target populations served
by SNPs, as well as a list of topics for
dual-eligible SNPs (D–SNPs) that could
be coordinated with State Medicaid
agencies so that they can meet both
Federal and State requirements.
Response: A major element in the
design of the QIPs and CCIPs continues
to be that they must address a target
population that is appropriate for that
plan. We intend to review the nonclinical and clinical QIPs and CCIPs that
MA organizations have submitted to
identify gaps in topics that plans should
be addressing. We intend to issue
further guidance on the submission of
QIPs and CCIPs, through HPMS
memoranda or the annual call letter
process.
Comment: Several commenters
requested the opportunity to review and
comment on the new QI program plan
and MOC instructional guidance.
Response: We are currently in the
process of conducting a review of MOCs
from a sample of SNPs. Information
received from the review will be used to
assist us in revising and improving the
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MOC. In addition, we intend to use the
information to modify and refine the
required evaluation criteria over time to
improve the QI program and the MOC.
Updates or changes to the QI program
plan and MOC instructional guidance
will be made available in advance for
public review and comment.
Comment: One commenter
recommended that the CMS Federal
Coordinated Health Care Office work
with NCQA and States to align MOC
and QI program requirements
established by CMS for the SNP
approval process for D–SNPs.
Response: We appreciate the
recommendation and note that we are
already working closely with the
Federal Coordinated Health Care Office
on a myriad of SNP issues.
Comment: One commenter believed it
was not clear when plans that are not
requesting a service area expansion
(SAE) would be evaluated. This
commenter also requested that CMS
clarify whether the January 1, 2012
effective date means that the approval
process begins in 2012 or that the
approvals must be completed for all
existing SNPs prior to January 1, 2012
(thus beginning in 2011).
Response: We approve potential
applicants for contract the year prior to
the date the contract becomes
operational. Therefore, any
requirements that must be in effect as of
January 1, 2012 will be addressed as
part of the 2012 SNP application cycle
for contract year 2012. The deadline for
submitting applications for
consideration during the 2012
application cycle was February 24,
2011.
4. Section 1876 Cost Contractor
Competition Requirements (§ 417.402)
In accordance with section 3206 of
the ACA, which revised section
1876(h)(5)(C) of the Act, we proposed in
our November 2010 proposed rule (FR
75 71199) 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)
would be non-renewed beginning in
2010.
In implementing the new contract
non-renewal date, we specified in our
November 2010 proposed rule that we
would evaluate enrollment of competing
MA coordinated care plans beginning in
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2012, send out non-renewal notices to
affected section 1876 cost contracts in
2013, and that affected section 1876 cost
contractors would first be unable to
offer a plan beginning contract year
2014. We proposed to codify the
statutory change in § 417.402(c).
We received no comments on this
provision and are finalizing the
provision as proposed.
5. Making Senior Housing Facility
Demonstration Plans Permanent (§ 422.2
and § 422.53)
Section 3208 of the ACA established
(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. In
implementing this provision of the
ACA, we proposed in our November
2010 proposed rule (75 FR 71199 and
71200) to amend the definitions at
§ 422.2 to include ‘‘senior housing
facility plan’’ as a new coordinated care
plan type. Our proposed definition of
the term was consistent with the
statutory requirements for such plans at
section 1859(g) of the Act: that such a
plan restrict enrollment to individuals
who reside in a continuing care
retirement community as defined in
§ 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 § 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 also noted that a senior
housing facility plan must otherwise
meet all requirements applicable to MA
organizations under this part.
In addition, we proposed to add a
new § 422.53 to subpart B of Part 422 to
address the eligibility and enrollment
policies applicable to senior housing
facility plans. We proposed specifying
at § 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 proposed
specifying at § 422.53(c) that an MA
senior housing facility plan must verify
the eligibility of each individual
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enrolling in its plan using a CMSapproved process. We proposed that the
regulations implementing this provision
would be effective 60 days after the
publication of the final rule.
We are finalizing our proposed
provisions regarding senior housing
facility plans without modification.
Comment: One commenter requested
that our regulations make clear that, if
a beneficiary who is enrolled in a senior
housing facility plan moves out of the
senior housing facility, he/she would be
eligible for a special election period
and, therefore, able to enroll in another
MA plan or PDP outside of the annual
election period.
Response: We agree with this
commenter that a special election
period should apply in this situation;
however, it is not necessary to codify a
new special election period for this
situation. Current guidance in Chapter 2
of the Medicare Managed Care Manual
https://www.cms.gov/MedicareMangCare
EligEnrol/Downloads/FINALMA
EnrollmentandDisenrollmentGuidance
UpdateforCY2011.pdf, entitled
‘‘Medicare Advantage Enrollment and
Disenrollment,’’ provides that an MA
enrollee is eligible for the SEP for
changes in residence if he/she moves
out of the plan’s service area. Since a
senior housing facility plan’s service
area is comprised of only the senior
housing facility, an enrollee who moves
out of the senior housing facility may
use this existing SEP to enroll in any
MA or Part D plan for which he/she is
eligible in his/her new place of
residence and is eligible for Medigap
guaranteed issue rights if he/she
disenrolls to Original Medicare.
6. Authority to Deny Bids (§ 422.254,
§ 422.256, § 423.265, and § 423.272)
Section 3209 of the ACA amends
section 1854(a)(5) of the Act by adding
subsection (C) (ii) to stipulate and
expressly provide 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 of the ACA
also extends this provision 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 final
rule, the regulations codifying this
provision will be effective 60 days after
the date of display of the final rule.
In the proposed rule, we stated that
we believe these amendments clarify the
Secretary’s authority to deny bids
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submitted by MA organizations and PDP
sponsors and provide support for our
current policies as specified in our final
rule, ‘‘Policy and Technical Changes to
the Medicare Advantage and the
Medicare Prescription Drug Benefit
Programs’’ (75 FR 19678 through 19826).
These policies include imposing limits
on cost sharing and denying bids
submitted by plans with sustained low
enrollment or bids for multiple plans
offered by the same MA organization or
PDP sponsors in a service area that are
not meaningfully different with respect
to benefits or costs. These policies were
further discussed in a memorandum
sent on April 16, 2010 via the Health
Plan Management System (HPMS) titled
‘‘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.’’
Because these policies have been
implemented so recently, we concluded
that it was premature to propose
additional regulatory restrictions
limiting MA organizations’ or PDP
sponsors’ flexibility in developing plan
bids until we are able to evaluate the
effectiveness and impact on the market
of those current policies. However, in
the preamble to the proposed rule, we
requested comments on the criteria
outlined in our April 16, 2010 guidance
issued via HPMS and whether we
should establish additional
requirements to limit plan offerings in a
service area and whether there are other
measures we should consider as part of
future rulemaking that may help us in
our efforts to protect beneficiaries and
promote the provision of high quality,
affordable health plans. We also invited
comments on whether we should adopt
other substantive criteria for exercising
our authority under 3209 of the ACA by
implementing caps or limits on the
number of plans offered in a region, or
on the number of sponsors participating
in the program. Finally, we solicited
comments on the best way to ensure fair
notice and equal treatment for all plan
bids in the absence of specific nonacceptance and denial policies. While
we indicated that we would not propose
additional specific regulatory criteria for
CY 2012, we noted that our decision
should not be interpreted as an
indication that we would not adopt
specific policies in future rulemaking.
We will consider the suggestions and
comments we received from the public
on the proposed rule to guide our future
policy.
We proposed to codify the
amendments made to sections
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1854(a)(5) and 1860D–11(d) of the Act
by adding paragraph (a)(5) to § 422.254,
revising § 422.256(a), adding paragraph
(b)(3) to § 423.265 and by adding
paragraph (b)(4) to § 423.272.
Comment: We received several
recommendations in response to our
request for comments on our current
meaningful differences policies.
Commenters recommended that CMS
issue clear and comprehensive guidance
containing the CMS criteria for
evaluating and accepting or denying MA
and Part D plan bids well in advance of
the bid deadline. Moreover, commenters
recommended that CMS provide
specific information to MA
organizations and Part D sponsors that
is sufficiently detailed to allow sponsors
the ability to replicate the
methodologies applied in the tools that
CMS uses in its bid evaluations. This
information should be sufficient for
plan actuaries to test their assumptions
against CMS assumptions prior to their
bid submission.
Response: We appreciate your
comments regarding our current
meaningful differences policies. We
have released, via the Final Rate
Announcement and Call Letter for CY
2012 released on April 4, 2011, a
detailed discussion of the methods and
tools that CMS intends to use to
evaluate bids and ensure beneficiaries
enjoy meaningful choices among MA
and Part D plans. Specifically, in the
final CY 2012 Call Letter, we announce
that we will make an out-of-pocket cost
(OOPC) model available that will allow
plans to calculate OOPC estimates for
each of their benefit offerings to prepare
for negotiations with us. Standalone
PDPs, MA, and MA–PD sponsors and
organizations are encouraged to run
their plan benefit structures through the
OOPC model to ensure meaningful
differences between their plan offerings
as required by CMS regulations (see
§ 423.272(b)(3)(i) and § 423.265(b)(2)).
Plans will be asked to complete this
analysis prior to submitting their bids
for the CY 2012.
A detailed discussion regarding the
thresholds that CMS will be using for
CY 2012 meaningful differences policies
are included in the Final Rate
Announcement and Call Letter for CY
2012.
Comment: We received several
comments regarding the bid evaluation
tools used by CMS and as specified in
the April 16, 2010 guidance.
Specifically, commenters indicated that
if the total beneficiary cost (TBC) metric
is used in future bidding cycles, CMS
will need to take into account planspecific variations such as plan
consolidation, new plan service areas,
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pairing of plans to meet target margins
and other payment policy issues such as
the lagged sustainable growth rate (SGR)
fix.
A few commenters indicated that
CMS did not provide sufficiently
detailed information as to how plan
benefits as part of the OOPC calculation
were projected and estimated for 2011.
A number of sponsors discovered
during bid negotiations that estimates
they had produced to guide their benefit
designs were significantly different than
CMS recommendations. Commenters
recommended CMS reevaluate use of
the tool to analyze plan bids and engage
in detailed discussion with MA and Part
D plan sponsors to identify alternatives.
One commenter believes the OOPC
tool, which is used by CMS to provide
out-of-pocket costs information through
the https://www.Medicare.gov Web site,
is inappropriate and the estimates
produced by the tool are not linked to
the projections of MA and Part D planspecific enrollee utilization of
healthcare services and the revenue
needed to fund them that are at the core
of plan bids. Instead, these estimates
reflect utilization under the Medicare
fee-for-service program for a sample of
beneficiaries that is somewhat out of
date.
Response: We appreciate the
commenters’ suggestions and critique of
our current bid evaluation tools. Based
on the comments we have received in
response to this rule and from the
industry following bid negotiations for
CY 2011, we have committed to
providing additional information
regarding the OOPC calculation and an
OOPC tool to address the industry’s
specific concerns and to support their
development of plan bids for CY 2012.
We have also provided additional
guidance and proposed policies for bid
review in the Final Rate Announcement
and Call Letter for CY 2012.
Comment: A few commenters
recommend that star quality ratings
either should, or should not, be used
when evaluating plan bids. One
commenter indicated that quality
ratings, such as low star ratings, should
be used as bid evaluation criteria since
lower star ratings would result in
decreased enrollment causing the plan
to eventually fail meeting our lowenrollment thresholds. Other
commenters support the use of star
ratings and recommended that CMS
only reassign beneficiaries to plans with
a star rating of four stars or higher
ensuring beneficiaries are offered plans
that have a track record of quality
service. One commenter indicated that
they support the use of the star rating
system; however, CMS would need to
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consider the different changes faced by
plans in geographic areas.
Response: We appreciate the
comments we received regarding the
potential use of quality ratings in
determining whether to deny or decline
bids under our new authority. While we
will not be codifying specific criteria
under this rule at this time, in the future
we may explore the use of our authority
to deny bids based on quality ratings,
such as the star ratings.
Comment: Several commenters
indicate that CMS should not impose
limits on the number of plans in a
service area, nor limit the number of
MA organizations or Part D sponsors
participating in the program, as this
would be inconsistent with the
competitive framework of the MA and
Part D programs. One commenter
indicated that limiting the number of
plans in a specific service area would
limit competition and potentially lead
to higher prices and program costs in
the long run. Another commenter
suggests that CMS defer further
consideration of initiatives to limit the
number of plans offered until the impact
of existing policies and statutory
program changes can be fully evaluated.
Response: We appreciate the
comments we received regarding
limiting the number of plans in a service
area and limiting the organizations that
participate in the program using the
new authority to not accept bids. We
will not be codifying such limits under
this rule. We will consider these
comments if we propose additional
rulemaking limiting plans in a service
area, or, limiting organizations
participating in the program.
Comment: One commenter requests
that we continue the waiver of our
meaningful differences policy for
employer group waiver plans (EGWPs).
Response: We announced in the Final
Rate Announcement and Call Letter for
CY 2012, released on April 4, 2011, that
this waiver will continue to apply to
EGWPs for CY 2012 and future contract
years.
Comment: Many commenters
indicated either their support for, or
opposition to, a premium increase
threshold when determining whether to
deny or decline bids under our new
authority. In particular, one commenter
indicated that CMS be permitted to
deny a bid if such premium increases or
benefit changes are unsubstantiated. An
exception to an unsubstantiated change
would be if actuarially the benefit
design requires that benefits be
decreased if premiums increased.
Another commenter indicated that
denying bids based upon changes to
premiums assumes all sponsors have
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gravitated to the same level of maturity
and that individual plan differences
should be accounted for when applying
a cap on premium increases.
Response: We appreciate the
comments we received regarding the use
of strict limits on premium increases or
benefit decreases when evaluating bids.
While we will not be codifying into
regulation strict limitations on premium
increases or benefit decreases as part of
this final rule, we will take these
comments into consideration as our
policies regarding our authority to deny
bids evolve.
Comment: One commenter urged that
CMS consider a plan’s proposed profit
margin in order to assure consistent and
fair treatment across health plans. This
commenter believed that plans with
higher profit margins have a greater
capacity to implement member cost
reductions requested by CMS, and plans
that have losses, or very small profit
margins, should be allowed to increase
their profit to allow for risk reserves.
Response: We appreciate the
recommendation provided by this
commenter. As our meaningful
differences policies and the impact of
such policies on plan bids evolve, we
will consider the possibility of
examining plan profit margins as part of
our bid evaluation criteria.
Comment: A few commenters
believed it was important for us to
develop an appeals process for plans
that face bid denials and that such
processes should allow for the timely
reconsideration of our decision.
Response: We will not be adopting
specific bid denial criteria or processes
in this final rule. We will continue to
work with plans prior to, and during,
the bidding process to ensure the
meaningful differences policies and bid
evaluation criteria, as set forth in our CY
2012 Final Rate Announcement and Call
Letter, take into account the individual
plan’s population, service area, and
level of maturity. We will ensure this
information is provided in a timely
manner so that plans will know,
prospectively, our expectations
regarding the plans that will be made
available to our Medicare population.
Comment: We received many
comments requesting that CMS disclose,
prior to bid development, all criteria
that will be used to review bids each
contract year. The commenters asserted
that without definitions of what CMS
identifies as ‘‘significant increases’’ in
cost sharing or ‘‘decreases in benefits’’
offered and all other criteria by which
plan bids will be evaluated and possibly
denied, MAOs and Part D sponsors
could be subject to inconsistent and
potentially unfair bid denials.
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Commenters overwhelmingly requested
that CMS make available in this final
rule, its annual Call Letter or other
appropriate published guidance, no
later than mid-April, the specific
standards plan bids will be required to
meet as well as, the tools and
methodologies that would be necessary
for plans to replicate CMS’ bid review
results. They asserted that if plans are
provided the appropriate tools and
information they will be able to develop
and submit initial plan bids that meet
all CMS requirements.
Response: We agree with commenters
that plan bids based on guidance we
provide prior to or during bid
development are more likely to satisfy
our requirements. The final CY 2012
Call Letter, released on April 4, 2011,
provides the tools and information
necessary for sponsors to develop and
submit complete initial bids that will
meet our requirements.
Comment: Some of the comments we
received requested that CMS not deny
bids based on increases in beneficiary
costs or on decreases in benefits offered
because plans may need to increase
costs or decrease benefit offerings to
cover the growing gap between costs for
providing services and revenue.
Commenters expressed concern that
continued application of the Total
Beneficiary Cost (TBC) review criterion
that CMS used for review of CY 2011
bids has the potential to undermine the
financial integrity of plan bids and to
adversely affect enrolled beneficiaries.
Some stated their beliefs that the
constraint on increases in plans’
revenue required to meet the TBC
measure is likely below a reasonable
cost trend and could result in negative
margins for some plan bids, putting
them in conflict with other CMS bid
guidance. Finally, commenters asserted
that CMS criteria that limit premium
and other beneficiary cost increases or
decreases in benefits offered are not
consistent with competitive bidding, the
fundamental principal that bids should
satisfy actuarial soundness requirements
that anticipated revenue is sufficient to
cover plan costs, or the requirement that
bids be certified by actuaries.
Response: We understand that MAOs
and Part D plan sponsors may be facing
a number of challenges as they develop
plan bids for CY 2012, including those
related to meeting our standards for
meaningfully different plan offerings,
out-of-pocket maximums and cost
sharing standards. We develop bid
requirements with input from our Office
of the Actuary (OACT), which takes into
consideration the potential impact of its
own guidance regarding negative
margins. Together, we have developed a
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TBC requirement that will not restrict a
plan’s ability to meet any additional bid
guidance (for example, OACT’s negative
margin requirement) and considers
environmental changes, as well as
changes in Medicare payment and their
impact on plan bids. In our final CY
2012 Call Letter, we describe the
methodology we will use to limit
significant increases in TBC to ensure
that plans offered for CY 2012 are
affordable and offer good value for
enrollees. As described previously, we
have provided a detailed discussion of
the methods and tools we intend to use
to evaluate plan bids in our CY 2012
Call Letter. We evaluate this guidance
annually, and make refinements as
necessary, taking into consideration
comments we receive from industry
following the end of bid review season.
For CY 2012, we also are providing
additional information about the OOPC
calculation and will make an OOPC
model available so that plans will be
able to calculate OOPC estimates for
their target benefit offerings in advance
of submitting their bids to CMS. We
believe that this increased transparency
will support plans in their work to
develop their benefit designs.
Comment: Many commenters
indicated that if CMS does maintain its
policy to approve only plan bids that do
not propose significant increases in
beneficiary costs or decreases in benefits
offered using the TBC measure then the
measure will need to take into account
the large effects of CMS payment
changes, plan-specific variations such as
plan consolidation, new plan service
areas, whether the plan is a SNP, pairing
of plans to meet target margin and other
payment policy issues. One commenter
urged that MAOs be able to adjust for
mistakes made in prior years’ bids, such
as to revise benefit amounts to curb
demonstrated adverse selection into the
plan.
Response: We thank the commenters
for their suggestions for enhancing the
development of the TBC criterion. We
have considered these issues and
worked with OACT to incorporate
several of these factors, to the extent
possible, into the TBC measure for CY
2012. However, we wish to point out
that CMS does not support the notion
that a plan should be able to adjust their
pricing year to year to account for
‘‘mistakes’’ in a prior year’s bid. Plans
are responsible for submitting bids that
reflect accurate and actuarially
reasonable bid projections and
assumptions for the coming year, which
should not include amounts attributable
to making up for errors in a past year.
Therefore, our TBC measure will not
account for errors in a plan’s previous
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year’s bid. To the extent practicable, we
will consider relevant and appropriate
factors and circumstances in order to
develop and publish in a timely manner
measures that we will use to evaluate
bids consistently across plans.
Comment: Commenters expressed
their concern that any single threshold
established by CMS for review of
significant increases in beneficiary costs
or decreases in benefits offered would
fail to address the many circumstances
that vary across plans such as,
geographic location, plan size, plan
experience, plan type, and their belief
that CMS must ensure that plans have
some ‘‘due process’’ rights related to the
upcoming contract year bid review. In
addition to receiving full and timely
disclosure of the criteria to be used for
evaluating plan bids, commenters
would like an opportunity to question,
or comment on, CMS’ methodologies
prior to their implementation, and
request assurance from CMS that bids
will be reviewed using only published
criteria. The commenters believe that
CMS owes them a meaningful
opportunity to challenge the application
of CMS’ criteria to their bids, using
actuarial analysis, and to modify a bid
that does not satisfy the criteria or
where CMS choose not to accept the
organization’s rationale for the bid. As
another example, commenters requested
that CMS permit bid approvals in cases
in which the plan can demonstrate
actuarial justification for decreases in
benefits offered and/or increases in
beneficiary costs that exceed CMS’
threshold.
Response: We thank the commenters
for sharing these concerns. As in past
years, our goal is to ensure that the MA
and Part D programs remain healthy and
that there are meaningful, high value
choices available to beneficiaries We
note that during CY 2011 bid reviews,
the vast majority of outlier plans came
into compliance with CMS guidance or
submitted acceptable justifications to
CMS for their plan bid. In an effort to
reduce confusion, and the need for
resubmissions, CMS is providing
comprehensive guidance and tools in
advance of the bid submission deadline
so that organizations can develop initial
submissions that meet all bid
requirements. Organizations had an
opportunity to comment on our
guidance and methodology through the
draft CY 2012 Call Letter and we
considered such comments in preparing
the final CY 2012 Call Letter, released
on April 4, 201l.
Comment: One commenter
recommended that CMS, as it
implements its authority deny bids,
continue to examine the impact of cost
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21451
sharing for specialty tier drugs in a
plan’s formulary which may reduce
patient access to needed medications.
Response: This comment is not
relevant to the discussion in the
proposed rule concerning our authority
to deny bids; rather, it is a comment on
CMS’ formulary review process. We
have in place a rigorous formulary
review process that ensures cost-sharing
imposed by plans on drugs found on
specialty tiers will not impede a
beneficiary’s access to medications.
7. Determination of Part D Low-Income
Benchmark Premium (§ 423.780)
The ACA amends the statute
governing the calculation of the LIS
benchmark premium amount (see
section 3302 of the ACA, as amended by
section 1102 of HCERA). As amended,
section 1860D–14(b)(3)(B)(iii) of the Act
requires us to calculate the LIS
benchmarks using MA–PD basic Part D
premiums before the application of Part
C rebates each year, beginning with
2011. We proposed to update the
regulations at § 423.780(b)(2)(ii)(C) to
incorporate this change. We also
proposed that the regulations
implementing this provision would be
effective 60 days after the publication of
the final rule.
Comment: We received several
comments in support of the proposed
change.
Response: We agree that LIS
benchmarks should be calculated using
basic Part D premiums before the
application of Part C rebates and we are
finalizing this provision without
modification.
8. Voluntary De Minimis Policy for
Subsidy Eligible Individuals (§ 423.34
and § 423.780)
Section 3303(a) of the ACA modifies
section 1860D–14(a) of the Act by
creating a new subsection (5) that
permits PDPs and MA–PD plans to
waive a de minimis monthly beneficiary
premium for low income subsidy (LIS)
eligible individuals who are enrolled in
the plan. The provision also prohibits
the Secretary from reassigning LIS
individuals enrolled in a plan with a
premium greater than the LIS
benchmark premium amount, so long as
the amount of the premium that exceeds
the LIS benchmark is de minimis and
the plan volunteers to waive that de
minimis amount.
Section 3303(b) of the ACA modifies
section 1860D–1(b)(1) of the Act by
inserting new language in subparagraph
(C) and adding a new subparagraph (D)
that permits the Secretary to include
PDPs and MA–PD plans that waive the
de minimis amount in the auto-
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enrollment process that we use to enroll
those LIS-Eligible individuals who fail
to enroll in a Part D plan. If these plans
are included in the process, and more
than one such plan exists within the
respective PDP region, the statute
requires that enrollees be randomly
assigned among all such plans in the
PDP region. We proposed to amend
§ 423.34 and § 423.780(f) to codify the
new statutory requirements. The
statutory provision is effective January
1, 2011; however, as indicated in
section II.A. of this final rule, the
regulations implementing these
provisions are effective 60 days after the
date of display of this final rule.
a. Reassigning LIS Individuals (§ 423.34)
Section 423.34(c) specifies that CMS
may reassign certain LIS-eligible
individuals if CMS determines that
further enrollment is warranted. We
have used this authority to reassign LISeligible individuals annually when a
PDP’s monthly beneficiary premium
amount will exceed the low income
benchmark, as calculated in
§ 423.780(b)(2). As noted previously, the
ACA prohibits the Secretary from
reassigning a plan’s LIS eligible
enrollees based on the fact that the
plan’s monthly beneficiary premium
exceeds the LIS benchmark premium
amount, so long as the amount of
premium that exceeds the LIS
benchmark is de minimis and the plan
volunteers to waive that de minimis
amount. Thus, plans that would
otherwise have lost enrollees because of
a de minimis monthly beneficiary
premium can retain such membership.
We proposed to amend § 423.34(c)
regarding reassignment of LIS
beneficiaries to reflect section 1860D–
14(a)(5) of the Act.
Comment: All commenters supported
our proposal to amend section
§ 423.34(c) to reflect newly added
section 1860–14(a)(5) of the Act. These
commenters noted that the primary
benefits of such a de minimis policy are
to minimize the need for reassignments,
and the associated disruptions of an
individual’s continuity of care. One
commenter recommended that we
provide additional language in
§ 423.34(c)(1) to describe the
circumstances under which
reassignment occurs and the individuals
affected by reassignment, in order to
provide meaningful context for the
exception described in § 423.34(c)(2).
Response: We agree with commenters
that the de minimis policy supports the
desirable goal of minimizing disruptions
of an individual’s continuity of care
potentially associated with
reassignment, while simultaneously
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ensuring a zero-premium Part D benefit
to certain LIS-eligible individuals
unlikely to have the financial means to
pay the de minimis amount. Also, we
appreciate the suggestion that additional
context be added in § 423.34(c)(1) to
describe the circumstances under which
reassignment occurs and the individuals
affected by reassignment. However, we
believe that it is more appropriate to
provide the level of detail the
commenters request through
subregulatory guidance. Therefore, we
are finalizing our proposal to amend
§ 423.34(c) without modification. We
will update Chapter 3 of the Medicare
Prescription Drug Benefit Manual,
(‘‘Eligibility, Enrollment, and
Disenrollment’’—available at the
following link: https://www.cms.gov/
MedicarePresDrugEligEnrol) to provide
the additional context requested by
commenters.
b. Enrollment of LIS-Eligible Individuals
(§ 423.34)
Section 423.34(d) specifies that CMS
will automatically enroll LIS-eligible
individuals who fail to enroll in a PDP.
The pool of PDPs into which we autoenroll these individuals includes those
plans with monthly beneficiary
premiums for LIS-eligible individuals
that do not exceed the low income
benchmark as calculated in
§ 423.780(b)(2). We proposed to amend
§ 423.34(d) regarding auto-enrollment of
LIS-eligible individuals to be consistent
with section 1860D–1(b)(1) of the Act,
as modified by section 3303(b) of the
ACA, which expands the Secretary’s
discretionary authority to include PDPs
or MA–PD plans that voluntarily waive
the de minimis amount in the pool of
Part D plans qualified to receive autoenrollees and reassignees, if the
Secretary determines that such
inclusion is warranted.
Comment: The majority of
commenters supported our proposal to
amend § 423.34(d) to be consistent with
section 1860D–1(b)(1) of the Act, as
modified by section 3303(b) of the ACA.
However, a few commenters urged that
CMS not codify such discretionary
authority with respect to including MA–
PD plans that voluntarily waive the de
minimis amount in the pool of qualified
plans to receive auto-enrollees and
reassignees. Among the reasons they
cited for not including the provisions
concerning MA–PD plans in the
regulations were that: (1) Random autoenrollment and reassignment of such
beneficiaries into MA–PD plans could
have deleterious consequences on an
individual’s access to his or her Part A
and Part B benefits; and (2) the public
policy goal of eliminating premium
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cost-sharing for such LIS-eligible
beneficiaries would not be
accomplished for those individuals
enrolled into an MA–PD plan with a
Part D beneficiary premium within the
de minimis amount but a Part C
beneficiary premium of an amount for
which the LIS recipient would incur
liability.
Response: We agree with the concerns
raised by these commenters, particularly
with respect to the potential disruption
of an individual’s access to his or her
Part A and Part B benefits (for example,
by imposing network restrictions) by
including MA–PD plans that voluntarily
waive the de minimis amount in the
pool of Part D plans qualified to receive
auto-enrollees and reassignees. Since
the inception of the auto-enrollment and
reassignment processes, this concern
has served as an underlying basis for
inclusion of only PDPs in the pool of
Part D plans that receive auto-enrollees
and reassignees. We also agree that autoenrollment and reassignment of such
LIS-eligible individuals into MA–PD
plans, in some cases, would fall short of
our public policy goal of ensuring zero
premium cost-sharing for these
beneficiaries to access their Part D
benefit.
For the reasons stated previously, we
are amending § 423.34(d) to codify the
Secretary’s authority only with respect
to including PDPs that voluntarily
waive the de minimis amount in the
pool of plans qualified to receive autoenrollees and reassignees. At this time,
we do not intend to exercise such
authority to auto-enroll or reassign LISeligible beneficiaries into PDPs that
voluntarily waive the de minimis,
except under limited instances, such as
to allow beneficiaries to remain within
the same parent organization or to
ensure that LIS-eligible beneficiaries in
all PDP regions have access to a plan
with zero beneficiary premium liability.
However, the regulations will retain the
flexibility to permit future
reassignments to PDPs above the LIS
benchmark that waive the de minimis
amount, should the Secretary determine
such reassignments to be warranted.
Comment: One commenter suggested
that CMS examine the impact on
enrollment stability if the Agency were
to apply the de minimis policy to partial
premium subsidy recipients.
Response: The underlying goal of the
de minimis policy is to minimize
unexpected disruptions of care that may
result from reassignment. The proposed
application of the de minimis policy to
full-benefit subsidy beneficiaries
supports this policy goal, as we do not
reassign partial premium subsidy
recipients enrolled in a Part D plan with
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a beneficiary premium amount that
exceeds the LIS benchmark amount.
Since partial premium subsidy
recipients pay a partial premium, they
are more likely to be accustomed to
proactively selecting a plan with a
premium amount within their financial
means to avoid disruption of care.
Finally, application of the de minimis
policy to partial premium subsidy
recipients would partially undermine
the downward pressure on Part D bids
by decreasing the incentive for plans to
bid lower in order to retain such
beneficiaries. Therefore, we are making
no modifications to our de minimis
proposal with respect to its application
to only full-benefit subsidy recipients.
Comment: One commenter urged
CMS to permit plan sponsors to reassign
LIS beneficiaries enrolled in its
‘‘enhanced plan’’ into the plan sponsor’s
‘‘basic plan.’’ The commenter noted that
such a change would minimize
disruption of care as the beneficiary
would remain within the same parent
organization, which typically has the
same formularies and many similar
benefits and services across plans. The
commenter further noted that such a
policy would prevent potential future
terminations of members due to nonpayment of premium, since their
premium in the new plan should be
much less than in the enhanced plan.
Response: In accordance with our
long-standing public policy of honoring
a beneficiary’s plan choice by excluding
from the reassignment process those
beneficiaries who have proactively
enrolled in a plan, we will continue our
like-minded policy that prohibits plans
from passively and selectively
reassigning LIS-eligible beneficiaries
who have proactively enrolled in the
sponsor’s enhanced plan. In the rare
instance of plan consolidations, such
reassignments may be permitted at our
discretion, as they would not dishonor
the beneficiary’s plan choice, since the
chosen plan no longer exists under such
circumstances. Such situations would
generally involve the elimination of the
enhanced plan for all enrollees, and
thus would not result in the selective
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reassignment of LIS-eligible
beneficiaries.
c. Premium Subsidy (§ 423.780)
We also proposed to amend
§ 423.780(f) to reflect section 1860D–
14(a)(5) of the Act, permitting a Part D
plan to waive a de minimis amount that
is above the monthly beneficiary
premium defined in
§ 423.780(b)(2)(ii)(A) or (B) for full
subsidy individuals as defined in
§ 423.780(a) or § 423.780(d)(1), provided
waiving the de minimis amount results
in a monthly beneficiary premium that
is equal to the established low income
benchmark as defined in § 423.780(b)(2).
In addition, because section 1860D–
14(a)(5) of the Act refers to waivers of
de minimis premium that exceeds the
low-income benchmark, which accounts
only for the basic benefit, we limit the
waiver of the de minimis amount to the
premium applicable to the basic benefit.
Comment: We received one comment
strongly encouraging CMS to increase
the de minimis amount beyond $2.00 for
full-benefit dual-eligible beneficiaries
enrolled in special needs plans to help
meet the needs of this more vulnerable
population.
Response: We determine the de
minimis amount based on the outcome
of the plan bidding process. We
consider the impacts of setting the de
minimis amount at varying levels each
year, including the impact on the
number of zero premium plans and the
number of reassignments. At this time,
however, we do not believe that it is
necessary to apply different de minimis
amounts for various plan types, because
we believe that a uniform de minimis
amount ensures that impacted
beneficiaries are treated equitably in
terms of their premium assistance
regardless of plan type. Thus, we plan
to continue establishing a uniform de
minimis amount applicable to all plan
types each year.
Comment: Some commenters
recommended that CMS release the LIS
benchmarks and the de minimis amount
earlier than August to allow adequate
time for Part D sponsors to modify
systems and member communications
given the statutory change to the AEP.
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Response: While we appreciate
concerns about providing sufficient time
for Part D sponsors to modify their
systems and member communications,
we cannot determine the regional LIS
benchmarks until August when the Part
D bids have been received and
reviewed. In order for Part D sponsors
to modify systems and member
communications, they would need both
the regional LIS benchmarks and the de
minimis amount. Additionally, we
release the de minimis amount in
August to ensure that it does not
influence bid submissions
inappropriately. Therefore, we will not
be modifying the release date of the
regional LIS benchmarks or de minimis
amount and are finalizing our proposal
without modification.
9. Increase In Part D Premiums Due to
the Income Related Monthly
Adjustment Amount (D—IRMAA)
(§ 423.44, § 423.286, and § 423.293)
Section 3308 of the ACA amended
section 1860D–13(a) of the Act by
establishing an income related monthly
adjustment amount (hereafter referred to
as Part D—IRMAA) that is added to the
monthly Part D premium for individuals
whose modified adjusted gross income
exceeds the same income threshold
amounts established under section
1839(i) of the Act with respect to the
Medicare Part B income related monthly
adjustment amount (Part B—IRMAA).
In CY 2007, the income ranges set
forth in section 1839(i) of the Act
required that individual and joint tax
filers enrolled in Part B whose modified
adjusted gross income exceeded $80,000
and $160,000, respectively, would be
assessed the Part B—IRMAA on a
sliding scale. As specified in section
1839(i)(5) of the Act, since the
implementation of the Part B—IRMAA,
each dollar amount within the income
threshold tiers has been adjusted
annually based on the Consumer Price
Index. As a result of the annual
adjustment, for calendar year 2010, the
income threshold amounts were
increased to reflect the four income
threshold amount tiers shown below:
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We note that section 3402 of the ACA
freezes the income thresholds at the
above 2010 levels through 2019.
In accordance with section 3308 of
the ACA, effective January 1, 2011, any
individual enrolled in the Medicare
prescription drug program whose
modified adjusted gross income exceeds
the same income threshold amount tiers
established under Part B will have an
income related increase to his/her Part
D monthly premium. Section 3308 of
the ACA provides that the Part D—
IRMAA will be calculated using the Part
D national base beneficiary premium
and the premium percentages in the
above chart as follows: BBP × [(P
percent ¥25.5 percent)/25.5 percent].
The BBP is the base beneficiary
premium and P is the applicable
premium percentage (35 percent, 50
percent, 65 percent, or 80 percent). The
premium percentage used in the
calculation will depend on the level of
the Part D enrollee’s modified adjusted
gross income.
Section 3308 of the ACA requires
CMS to provide the Social Security
Administration (SSA) with the national
base beneficiary premium amount used
to calculate the Part D—IRMAA no later
than September 15 of every year,
beginning in 2010. Beginning in 2010,
we must also provide SSA, no later than
October 15 of each year, with: (1) The
modified adjusted gross income
threshold ranges; (2) the applicable
percentages established for Part D—
IRMAA in accordance with section
1839(i) of the Act; (3) the corresponding
monthly adjustment amounts; and (4)
any other information SSA deems
necessary to carry out the Part D—
IRMAA. With respect to the final item,
we previously provided SSA with an
initial list of all individuals enrolled in
the Part D program.
In accordance with section 3308 of
the ACA and the interim final rule with
request for comments entitled
‘‘Regulations Regarding Income-Related
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Monthly Adjustment Amounts to
Medicare Beneficiaries’ Prescription
Drug Coverage Premiums’’ (75 FR
75884), SSA used this initial list of Part
D enrollees to request beneficiaryspecific tax payer information from the
Internal Revenue Service in order to
determine: (1) Which Part D enrollees
exceed the income threshold amounts
established under section 1839(i) of the
Act; and (2) the income related monthly
adjustment amount that these enrollees
must pay. This exchange of information
between CMS and SSA occurred in 2010
so that individuals identified were
billed the correct Part D—IRMAA
beginning January 1, 2011. Following
this initial data exchange with SSA,
CMS will routinely provide SSA with
the names of all individuals newly
enrolling in the Part D program so that
SSA can repeat the process of
identifying individuals who must pay
the Part D—IRMAA and the specific
income-related amount. We will also
routinely provide the names of
individuals who have disenrolled from
the Part D program so that such
individuals will no longer be assessed
the Part D—IRMAA. In cases where an
individual disagrees with a
determination that he/she is subject to
the Part D—IRMAA, such individual
may appeal as provided in the SSA
regulations under 20 CFR part 418.
Section 3308 of the ACA also
stipulates that the Part D—IRMAA must
be withheld from benefit payments in
accordance with section 1840 of the Act.
Therefore, in cases where an individual
is receiving benefit payments from SSA,
the Railroad Retirement Board (RRB), or
the Office of Personnel Management
(OPM), the Part D—IRMAA must be
withheld from such benefit payments.
However, if the benefit payment is
insufficient to allow the Part D—IRMAA
withholding, or an individual is not
receiving benefit payments as described
in section 1840 of the Act, section 3308
of the ACA requires SSA to enter into
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agreements with CMS, RRB, and OPM,
as necessary, in order to allow the Part
D—IRMAA to be collected directly from
these beneficiaries.
To implement section 3308 of the
ACA, we proposed to revise § 423.286
(rules regarding premiums), § 423.293
(collection of monthly beneficiary
premium), and § 423.44 (involuntary
disenrollment by PDP).
a. Rules Regarding Premiums
(§ 423.286)
Currently, § 423.286(a) provides that
the monthly beneficiary premium for a
Part D plan in a PDP region is the same
for all Part D-eligible individuals
enrolled in the plan with the exception
of employer group waivers, the
assessment of the Part D late enrollment
penalty, or an enrollee receiving lowincome assistance. We proposed to
revise the following:
• Section 423.286(a) to include the
assessment of the income related
monthly adjustment amount as another
exception to the requirement for a
uniform monthly beneficiary premium
for a Part D plan in a PDP region;
• Section 423.286(d)(4) to define the
increase for the income related monthly
adjustment amount for Part D;
• Section 423.286(d)(4)(i) to specify
that SSA would determine the
individuals that are subject to the Part
D—IRMAA and the amount of the
adjustment;
• Section 423.286(d)(4)(ii) to provide
the formula used to calculate the
monthly adjustment amount; and
• Section 423.286(d)(4) to provide
appeals rights to individuals who
disagree with SSA’s determination that
they are subject to the Part D—IRMAA
or the threshold amount of the
adjustment they must pay.
Comment: Commenters wanted to
know if there was any plan
responsibility in tracking or collecting
the Part D—IRMAA. One commenter
believed the Part D—IRMAA would
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cause beneficiary confusion and that
plans would have little recourse to
address beneficiary concerns. A few
commenters requested that CMS
provide information to plans, including
copies of communications released to
the IRMAA population and individuals’
Part D—IRMAA billing information,
potentially through the Medicare
Advantage Prescription Drug (MARx)
System via a transaction reply response
(TRR). This information would enable
plans to address both general and
specific beneficiary concerns and
provide proactive communications to
improve the beneficiary experience.
Lastly, a commenter encouraged CMS to
provide plans with guidance regarding
how plans’ customer service agents can
best handle beneficiary inquiries
regarding income related adjustments to
their premium.
Response: Part D plan sponsors do not
have responsibility for tracking or
collecting the Part D—IRMAA. Section
3308 of the ACA clearly states that the
additional amount is to be withheld
from a beneficiary’s Social Security
benefit check. In cases where the benefit
check is not sufficient to allow the
withholding, the beneficiary will be
directly billed the amount by CMS.
However, as discussed below, Part D
plan sponsors will be responsible for
providing beneficiaries with the
disenrollment notice after we notify
plans that the beneficiary’s Part D
coverage has been terminated for failure
to pay his/her Part D—IRMAA.
On December 10, 2010, we released to
Part D plan sponsors a memorandum
entitled, ‘‘Part D—Income Related
Monthly Adjustment Amount—
Frequently Asked Questions &
Answers,’’ which included plainlanguage, beneficiary-friendly questions
and answers specifically addressing
inquiries plans may receive from
beneficiaries. These FAQs include
information such as how the Part D—
IRMAA is collected, the responsible
entity for determining who should be
assessed the amount, as well as the
appropriate government agency a
beneficiary should contact with
additional questions.
We have provided clear instructions
to plans regarding the appropriate
referral agency for specific questions
regarding an individual’s Part D—
IRMAA determination and billing. We
will continue to work with Part D plan
sponsors to determine what specific
additional guidance they need in
answering beneficiary inquiries related
to the Part D—IRMAA.
Comment: A commenter asserted that
there will be an increase in premiumrelated complaints submitted to 1–800–
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MEDICARE due to the Part D—IRMAA
noting that plans are unable to influence
or control members’ experiences related
to the premium increase and should not
be penalized for these complaints. The
commenter requested that CMS exclude
complaints specific to the Part D—
IRMAA premiums in plan quality
metrics.
Response: While there may be an
increase in the number of beneficiary
complaints related to the Part D—
IRMAA, we believe our developed
scripts and FAQs will address most
concerns. We agree beneficiary
complaints related to these types of
issues should not be part of Medicare
Part D plan sponsors’ quality metrics.
Comment: Commenters requested that
we clarify how a Part D sponsor would
operationalize the Part D—IRMAA and
whether the Part D—IRMAA affects the
Part D bid or the base beneficiary
premium.
Response: Currently, Part D sponsors
are not expected to implement any
operational changes with regards to the
collection of the Part D—IRMAA.
Unlike the normal Part D plan
premiums, applicable beneficiaries will
not pay the Part D—IRMAA to Part D
sponsors. Instead, as noted previously,
the Part D—IRMAA will be collected by
the Federal government via a
withholding from beneficiaries’ SSA,
RRB, or OPM benefit payments or
collected by us directly. As stated
previously, though, Part D plan
sponsors will be responsible for
providing beneficiaries with the
disenrollment notice if we involuntarily
disenroll an individual for failure to pay
his/her Part D—IRMAA, just as they
would for any other disenrollment
action initiated via a CMS transaction
file, such as those disenrollments that
result from choosing another plan.
Consistent with section 1860D–
15(a)(1) of the Act, we will not apply
Part D—IRMAA to the base beneficiary
premium used to calculate the Part D
direct subsidy payments. In addition, no
other Part D—IRMAA related
adjustments will be made to the Part D
payments received by Part D sponsors.
As a result, the Part D—IRMAA is
expected to have no impact on the Part
D bids or Federal payments received by
Part D sponsors.
Comment: One commenter conveyed
that it did not support the imposition of
the Part D—IRMAA because of the
‘‘potentially adverse effect’’ of this
provision, referencing our estimate that
approximately 220,000 beneficiaries
may disenroll from the Part D program
as a result of the Part D—IRMAA (see 75
FR 71256). Another commenter
suggested that CMS monitor the impact
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of this policy on enrollment in Part D
plans and the potential for adverse
selection. More specifically, this
commenter was concerned that the most
healthy, affluent seniors may elect to
delay enrollment in a Part D plan as it
may be financially advantageous to pay
the late enrollment penalty for delaying
enrollment rather than paying the Part
D—IRMAA for many years when
expected drug expenditures are
minimal. Despite one of the
commenters’ dislike for this statutory
requirement, the commenter applauded
CMS for developing timely regulations
to implement this new requirement.
Response: We have no discretionary
authority to waive the Part D—IRMAA,
which is clearly required by the ACA.
We are dedicated to ensuring a timely
and thorough implementation and
appreciate acknowledgement of our
efforts to develop regulations to
implement this new requirement. We
will monitor all aspects of Part D—
IRMAA implementation, including the
impact of this policy has on future Part
D disenrollments and enrollments.
Comment: One commenter asserted
that the introduction of the IRMAA for
Part B and Part D premiums through
Social Security deductions is not
understood by many beneficiaries.
Consequently, the commenter
encouraged consideration of some
notification from SSA or CMS of each
individual’s premiums under each Part
prior to the upcoming year.
Response: Each year, SSA will
determine who will be assessed an
IRMAA in both the Part B and Part D
programs. In November, SSA will send
the beneficiary an annual letter that
indicates the amount of any IRMAA the
individual may owe. Further, CMS and
SSA developed beneficiary-friendly
publications and FAQs to assist
beneficiaries and our partners with
understanding this new requirement.
We believe that more outreach and
education will assist beneficiaries in
understanding the IRMAA and which
government Agency (CMS or SSA)
should be contacted with further
questions. Plans may refer beneficiaries
to SSA with questions regarding the
content of their annual letter from SSA
regarding the IRMAA.
We would also like to note that in the
preamble of the proposed rule we
inadvertently referenced the wrong
citation in describing our proposal to
add provisions regarding a beneficiary’s
right to file an appeal of SSA’s Part D—
IRMAA determination. We referenced
§ 423.286(d)(4)(iii) and (iv), but should
have referred to § 423.286(d)(4)(i) which
is where these provisions were
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proposed and where they are being
finalized in this rule.
b. Collection of Monthly Beneficiary
Premium (§ 423.293)
We proposed establishing a new
§ 423.293(d)(1) to describe how the Part
D—IRMAA would be collected. First,
we addressed the process for collecting
the Part D—IRMAA from SSA, RRB, or
OPM benefit payments. In cases where
SSA determines that a Part D enrollee
must pay a Part D—IRMAA, such
amount must be paid through
withholding from the enrollee’s Social
Security benefit payments, or benefit
payments by the RRB or OPM in the
manner that the Part B premium is
withheld. Additionally, we proposed at
§ 423.293(d)(2) that in cases where
premium withholding is not possible
because the monthly benefit check is
insufficient to allow the withholding, or
the enrollee is not receiving any
monthly benefit payment, the
individual must be directly billed for
the Part D—IRMAA through an
electronic funds transfer mechanism
(such as automatic charges of an
account at a financial institution or a
credit or debit card account) or
according to other means that we may
specify.
Section 3308 of the ACA provides that
the Part D—IRMAA is an increase to the
monthly beneficiary premium for
certain individuals. Section
1851(g)(B)(i) of the Act, as incorporated
by section 1860D–1(b)(5) of the Act,
establishes that a beneficiary may be
terminated for failing to pay his/her Part
D premiums. At § 423.293(d)(3), we
proposed that CMS will terminate Part
D coverage for any individual who fails
to pay the income related monthly
adjustment amount in accordance with
proposed § 423.44 (see discussion
below).
Comment: Several commenters
conveyed that they understood that
implementation of the Part D—IRMAA
requires coordination among CMS, Part
D plan sponsors, and SSA, with SSA
having primary responsibility for an
individual’s IRMAA determination.
They suggested that the final regulations
address the need for the timely
exchange of beneficiary information and
any updates in order to facilitate
coordination amongst these entities. As
an example, commenters contended that
in cases where a higher income
beneficiary is no longer enrolled in a
Part D plan, the Part D sponsor should
send this information immediately to
CMS and SSA so that the Part D—
IRMAA is no longer deducted from the
beneficiary’s benefit check or billed to
the beneficiary.
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Response: We appreciate the
recommendation that CMS and SSA
maintain close and timely coordination
related to Part D enrollment and the Part
D—IRMAA. As noted in the proposed
rule ‘‘* * * CMS will routinely provide
SSA with the names of all individuals
newly enrolling in the Part D program
* * * and will also routinely provide
the names of individuals who have
disenrolled from the Part D program so
that such individuals will no longer be
assessed the Part D—IRMAA.’’
Furthermore, as stated in § 423.36 and
in our guidance, Part D plan sponsors
must submit the disenrollment
transactions to CMS within 7 calendar
days of receipt of the beneficiary’s
completed disenrollment request in
order to ensure the correct effective
date. (See Chapter 3, § 50.4.1 ‘‘Voluntary
Disenrollments’’ of the Medicare
Prescription Drug Benefit Manual
published August 17, 2010). We believe
that through this existing process, all
involved entities will receive timely
notification to address changes to either
Part D enrollment or Part D—IRMAA.
Comment: One commenter asserted
that they foresaw enrollment ‘‘glitches’’
similar to those of LIS-eligible
beneficiaries who were inadvertently
dropped from one plan but not correctly
auto-enrolled in the next. This
commenter further stated that,
undoubtedly, some high-income
beneficiaries would face disenrollment
because of miscommunications that
result because prescription drug plan
premiums are paid to their chosen plan
and the Part D—IRMAA is paid to CMS.
Based on this assertion, the commenter
encouraged CMS to develop an
expeditious, straight-forward process for
resolving such problems and to
publicize that process on Medicare.gov.
Response: We appreciate the
commenter’s concern about possible
problems or beneficiary confusion
regarding payments for the Part D—
IRMAA to the Federal government and
plan premiums. The vast majority of
individuals required to pay the Part D—
IRMAA will have the IRMAA amount
deducted from their monthly benefit
check, which will eliminate the
possibility of involuntary disenrollment
for failure to pay the Part D—IRMAA.
For those individuals who will be billed
by CMS directly, we will notify them
via monthly billing notices. Further, we
have developed FAQs for use by plans,
partners, and 1–800–MEDICARE to
educate beneficiaries on the proper
means to make payments for their Part
D—IRMAA. However, we will consider
outlining the process for Part D—
IRMAA payment and possible
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disenrollment on Medicare.gov to assist
in beneficiary understanding.
c. Involuntary Disenrollment by CMS
(§ 423.44)
Section 3308 of the ACA provides that
the Part D—IRMAA increases the
monthly beneficiary premium for
individuals who are subject to the
assessment. Therefore, we proposed to
apply provisions similar to the existing
Part D premium rules to terminate Part
D coverage (provided for by Section
1860D–13(c) of the Act) for any
individual who fails to pay the Part D—
IRMAA. Specifically, we proposed the
following:
• Section 423.44(e)(1) provides that
CMS will disenroll individuals who do
not pay their Part D—IRMAA.
• Section 423.44(e)(2) provides
individuals a 3-month grace period to
pay outstanding Part D—IRMAA
amounts before they are involuntarily
disenrolled.
• Section 423.44(e)(3) provides an
opportunity for a disenrolled
beneficiary to establish ‘‘good cause’’ for
failure to pay their Part D—IRMAA and
have their plan enrollment reinstated if
Part D—IRMAA arrearages are paid.
• Section 423.44(e)(4) requires PDPs,
after notification by CMS, to notify
enrollees of the termination of their
enrollment in the Part D plan in a form
and manner determined by CMS.
• Section 423.44(e)(5) establishes that
the effective date of disenrollment is the
first day following the initial grace
period.
• Finally, we proposed modifying the
title of § 423.44 from ‘‘Involuntary
Disenrollment by the PDP’’ to
‘‘Involuntary Disenrollment from Part D
Coverage.’’
Comment: We received several
comments on the length of the proposed
grace period applicable to Part D—
IRMAA premiums. While several
commenters commended CMS for
proposing a longer grace period to pay
the Part D—IRMAA, other commenters
suggested that CMS synchronize the 3month grace period for payment of the
Part D—IRMAA with the plans’
minimum 2-month grace period already
established by CMS regulations and
guidance. Commenters asserted that
having different grace periods could
cause potential conflict and confusion if
the enrollee failed to pay both the Part
D premium and the Part D—IRMAA and
was provided a grace period by both the
PDP and CMS, but on differing
timelines (for example, a 2-month grace
period under the PDP and a 3-month
grace period under CMS).
Commenters also requested that we
take into consideration the potential
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overlap, conflicts, and/or confusion that
could occur for beneficiaries receiving
notices for non-payment of their plan
premium and non-payment of the Part
D—IRMAA and any conflicting grace
periods. The commenter requested that
CMS revise the approach to better
coordinate the timing of the plan
beneficiary disenrollment notices with
the plan and the Part D—IRMAA grace
periods and that we should do our best
to prevent the potential problems.
Another commenter asked us to clarify
that a Part D beneficiary could be
disenrolled from a Part D plan for
failure to pay the plan premium after
the plan’s two-month grace period
regardless of whether the enrollee has
paid their Part D—IRMAA or has not
exhausted the 3-month grace period for
the D—IRMAA.
In addition, one commenter
recommended that CMS delay
implementation of the grace period
specific to the Part D—IRMAA in light
of the other CMS provisions that require
process and system changes. According
to this commenter, CMS should
consider this recommendation since the
Part D—IRMAA affects only a small
percentage of the total Part D
population.
Response: Under the Original
Medicare program, beneficiaries
assessed the Part B–IRMAA are afforded
an initial 3-month grace period to pay
their Part B premiums before they are
terminated. As individuals may be
subject to both the Part B and the Part
D—IRMAA, we believe that the grace
period for both programs should be
consistent.
With respect to synchronizing the Part
D—IRMAA with plan premium grace
periods, our regulations at
§ 423.44(d)(1)(iii) stipulate that plans
choosing to implement a policy of
involuntary disenrollment for failure to
pay the Part D plan premium must
provide a minimum 2-month grace
period. A Part D plan sponsor with an
established 2-month minimum grace
period may disenroll a beneficiary for
failing to pay the plan’s premium, if
such grace period ends prior to the 3month grace period allotted for payment
of the Part D—IRMAA. Current
guidance (Medicare Prescription Drug
Benefit Manual, Chapter 3, § 50.3.1)
allows plans to implement a longer
grace period or forgo involuntary
disenrollments for failure to pay
premiums entirely. Therefore, plans
already have the ability to modify their
respective grace periods and are
encouraged to do so if they believe the
existence of two different grace periods
will create conflict or confusion.
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As noted previously, the vast majority
of individuals subject to the Part D—
IRMAA are paying the income-based
amount through a deduction from their
Social Security checks, and thus the
grace period associated specifically with
payment of the Part D—IRMAA is not a
factor. However, to the extent that
individuals fail to pay only the Part D—
IRMAA, we believe it is appropriate to
use the same procedures and time
frames that apply to the Part B–IRMAA.
Note that individuals who fail to pay the
Part D premium that is owed to a plan
may be disenrolled by the plan after the
expiration of the 2-month grace period,
regardless of the payment status of their
Part D—IRMAA.
If a plan chooses to retain a grace
period that is shorter than the one
specific to the Part D—IRMAA, once the
beneficiary is disenrolled from the plan,
the assessment of the Part D—IRMAA
will cease. Therefore, the beneficiary
will receive the disenrollment notice as
a result of not paying the plan’s
premium and there will be no need to
issue the involuntary notice for failing
to pay the Part D—IRMAA. For
example, if the beneficiary fails to pay
the plan premium within the plan’s
grace period but the grace period
specific to the Part D—IRMAA has not
lapsed, the Part D plan sponsor will, in
accordance with CMS rules, send us a
plan transaction to disenroll the
beneficiary. Following confirmation
from us that the disenrollment
transaction has been accepted, the Part
D plan sponsor must send the
beneficiary the disenrollment notice no
later than 3 business days following the
last day of the grace period. (See
Chapter 3, Section 50.3.1 of the
Medicare Prescription Drug Benefit
Manual.) Once the beneficiary has been
disenrolled from the plan, the
withholding and/or billing of the Part
D—IRMAA will cease. Lastly, in those
cases where the Part D—IRMAA and the
plan premium grace periods are
different, but end on the same date, the
beneficiary will receive two
disenrollment notifications—Notice of
Failure to Pay Plan Premiums and the
Notification of Involuntary
Disenrollment by the Centers for
Medicare and Medicaid Services for
Failure to Pay the Part D—IRMAA since
the former conveys information about
requesting the plan to reconsider its
decision and the latter provides
information about requesting a ‘‘good
cause’’ determination.
For these reasons, we are finalizing
the regulatory provisions as proposed.
However, we will carefully consider
these comments and potential system
impacts as it develops its program
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instructions to plans regarding the
procedures for disenrolling beneficiaries
who fail to pay their Part D—IRMAA
and the timing of when plans will
convey the notice. In addition, we will
closely monitor the disenrollment
process and make adjustments to the
process to ensure optimum coordination
between the timing of the grace period
and the issuance of the beneficiary
disenrollment notice.
Comment: One commenter
recommended that CMS make attempts
to collect the Part D—IRMAA before
terminating the enrollee, and
encourages CMS to publish, with
opportunity for public comment, the
proposed process for doing so.
Response: As explained previously,
for individuals that do not have their
Part D—IRMAA deducted from their
Social Security checks, we are following
the same process we use in collecting
the Part B–IRMAA. This process
involves repeated monthly statements
(initial bill, second notice and a
delinquent notice) to the beneficiary to
solicit the payment and to notify the
individual of the potential
consequences of failure to make a
payment prior to disenrollment at the
end of the initial 3-month grace period.
In addition, if payment is not made, the
beneficiary will have an additional 3
months to establish ‘‘good cause’’ for
failure to pay their Part D—IRMAA and
remit payment for any arrearages to be
reinstated into their Part D plan. We
believe this process provides sufficient
notification to the beneficiary and
opportunity to pay their Part D—IRMAA
prior to disenrollment for failure to pay.
Comment: Several commenters
expressed concern with the proposed
requirement that plans issue the
disenrollment notice to enrollees
involuntarily disenrolled for failure to
pay their Part D—IRMAA. Commenters
believed that CMS was in the best
position to send these notices in a
timely manner since we, not the plan,
are aware of the member’s Part D—
IRMAA amount and any possible
arrearages. Commenters were concerned
that if plans served as an intermediary
in this process, they would inevitably be
contacted with complaints or subject to
grievances. It was suggested that a CMSgenerated notice would reduce the
burden on plans and would more
clearly communicate to enrollees that
CMS should be contacted regarding
questions on the Part D—IRMAA.
Response: As described previously,
individuals who are subject to
disenrollment based on their failure to
pay the Part D—IRMAA will have first
received a series of monthly billing
statements from CMS informing them of
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their obligation to pay the Part D—
IRMAA, and the consequences of their
failure to do so. If and when
disenrollments do become necessary,
we believe affected individuals should
be afforded the same notices that other
individuals would receive from their
plans. Thus, we disagree that plans
should not be responsible for sending a
disenrollment notice. Such notices are
part of a plan’s daily business
operations. This process is consistent
with existing requirements for
disenrollment of a beneficiary who is no
longer eligible to remain in a Medicare
prescription drug plan due to loss of
Medicare Part A and/or B. In this
situation, we involuntarily disenroll the
beneficiary, and the beneficiary’s Part D
plan sponsor is required to provide the
individual with the Disenrollment Due
to Loss of Medicare Part A and/or Part
B Notice (See Chapter 3, Section 50.2.2
of the Medicare Prescription Drug
Benefit Manual).
We recognize that Part D plan
sponsors may receive questions from
their members regarding the
disenrollment. As such, the notification
used by Part D plan sponsors will
explicitly state that the disenrollment is
being effectuated by the plan at CMS’
direction. This notice further instructs
the beneficiary to contact us, not the
plan, about questions pertaining to the
notice. As noted previously, the
December 10, 2010 CMS memorandum
mentioned previously provides plans
with language they can use in
responding to members’ Part D—IRMAA
inquiries. We will continually develop
and release information to Part D plan
sponsors, partners, and beneficiaries via
the CMS information channels (1–800–
MEDICARE, https://www.medicare.gov)
that will assist beneficiaries with
questions about their Part D—IRMAA
and direct them to the appropriate
entity for assistance. Thus, we will
retain the proposed provision that Part
D plan sponsors will provide a
beneficiary with the notice when he/she
is disenrolled for failing to pay the Part
D—IRMAA.
Comment: A commenter contended
that it was not clear from our proposal
if CMS intended to tell Part D plan
sponsors to disenroll the non-paying
member before or after the end of the
grace period. The commenter concluded
that if timing for notification is the
latter, this could result in a retroactive
disenrollment from the plan, with
possible complications in terms of bills
for non-covered services and
medications retroactive to the effective
date of the disenrollment.
Response: We recognize this concern
and will keep this issue in mind as we
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develop operational guidance on the
disenrollment process.
Comment: Two commenters disagreed
with the proposed policy of an
additional 3-month grace period for
individuals to establish ‘‘good cause’’
after the disenrollment date, allowing
for no disruption in coverage if
reinstated. Another commenter
suggested that plans be informed if a
disenrolled member requests a ‘‘good
cause’’ determination for failure to pay
their Part D—IRMAA.
Response: We believe that
beneficiaries should be afforded the
opportunity to establish ‘‘good cause’’
for not paying the Part D—IRMAA
amount and the ability to be reinstated
in their Part D coverage without
interruption. We appreciate the
comment regarding plan notification of
requests for good cause and will take
this into consideration as we develop
the process for good cause’’
determinations. (See section II.C.8 of
this preamble for a further discussion of
this issue.)
Comment: A few commenters
expressed concern about what would
happen to individuals involuntarily
disenrolled from their plan for failure to
pay their Part D—IRMAA. Some
commenters requested that we clarify
that a disenrollment for failure to pay
the Part D—IRMAA would result in a
loss of health coverage if the individual
is enrolled in an MA plan, cost plan, or
employer group health plan with
prescription drug coverage. Another
commenter asked whether a beneficiary
who is disenrolled for failure to pay the
Part D—IRMAA would be subject to the
Part D late enrollment penalty (LEP)
upon reenrollment in a Part D plan. In
addition, commenters made the
following suggestions:
• Establish a special enrollment
period (SEP) for disenrolled individuals
to re-enroll into another MA-only (or a
cost plan).
• Allow for passive enrollment into
an MA-only plan within the same
organization if an individual is
disenrolled from their MA–PD plan for
failure to pay Part D—IRMAA.
• Grant employer group waiver plans
a waiver from the disenrollment
process.
Response: An individual in an MA–
PD who fails to pay the Part D—IRMAA
within the 3-month grace period will be
disenrolled to Original Medicare.
Because this policy ensures that
beneficiaries will not lose health care
coverage, we believe an SEP is
unwarranted and unnecessary.
Furthermore, a beneficiary’s Part D
coverage may be reinstated without
interruption if within 3 months after
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disenrollment, the enrollee
demonstrates ‘‘good cause’’ for failure to
pay the Part D—IRMAA and pays all
Part D—IRMAA and plan premium
arrearages. The SEP policy at
§ 423.38(c)(8)(ii) permits CMS to
address exceptional enrollment cases for
individuals on a case-by-case basis. To
the extent that individuals believe they
have exceptional situations that warrant
consideration to enroll in a MA-only (or
other plan that does not offer Part D
coverage), they should call 1–800–
MEDICARE and ask to be put in touch
with a CMS regional caseworker. In
addition, the policies for the Part D LEP
remain unchanged by the
implementation of Part D—IRMAA. An
individual who is disenrolled for failure
to pay the Part D—IRMAA may be
subject to the Part D LEP if he or she
goes without creditable prescription
drug coverage for 63 days or more. If an
individual would like to restart
prescription drug coverage, he or she
would have to pay any arrearages and
make an election during a valid
enrollment period.
Individuals in employer group waiver
plans and employer group health plans
will also be disenrolled for failure to
pay Part D—IRMAA. Employer groups
that want to assure that their members
retain coverage are not prohibited from
informing their retirees that they will be
reimbursed by their employer group for
any Part D—IRMAA they are required to
pay.
We appreciate the comments on our
proposals and, for the reasons contained
in the discussion previously, are
finalizing these provisions as proposed.
We have, however, made technical
revisions to § 423.286(d)(4)
and§ 423.293(d) to incorporate
references to the new SSA regulations
regarding the Part D IRMAA, which
were published after the issuance of our
proposed rule.
10. Elimination of Medicare Part D CostSharing for Individuals Receiving Home
and Community-Based Services
(§ 423.772 and § 423.782)
The MMA, as reflected in § 423.782,
established that full-benefit dual eligible
institutionalized individuals have no
cost-sharing for covered Part D drugs
under their PDP or MA–PD plan.
Section 3309 of the ACA eliminates
cost-sharing for full-benefit dual eligible
individuals who are receiving home and
community-based services (HCBS)
under a home and community-based
waiver authorized for a State under
section 1115 or subsection (c) or (d) of
section 1915 of the Act, or under a State
Plan Amendment under section 1915(i)
of the Act, or if such services are
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provided through enrollment in a
Medicaid managed care organization
with a contract under section 1903(m)
or 1932 of the Act. These services are
targeted to frail, elderly individuals
who, without the delivery in their home
of services such as personal care
services, would be at risk of
institutionalization. We proposed to
amend § 423.772 to establish the
definition of ‘‘individual receiving home
and community-based services’’ and
§ 423.782(a)(2)(ii) to reflect that these
individuals will have no cost-sharing.
The Best Available Evidence (BAE)
policy set forth in § 423.800—which
requires plans to charge a lower
copayment if certain evidence is
provided—is written broadly enough
that it will apply to this new copayment
category; therefore, we proposed to
make no regulatory changes to
§ 423.800. We proposed to update our
guidance to plans to provide additional
detail on how the BAE rules apply to
this population.
Section 3309 of the ACA provides the
Secretary with discretion regarding the
effective date of this provision, with the
stipulation that it shall be effective no
earlier than January 1, 2012. We
proposed that this provision would take
effect on January 1, 2012, because we
believed it was important to provide
this benefit at the earliest possible date
to an estimated 600,000 beneficiaries a
year.
Comment: Commenters supported our
proposal to amend § 423.772 to establish
the definition of an ‘‘individual
receiving home and community-based
services’’ and § 423.782(a)(2)(ii) to
reflect that these individuals will have
no cost-sharing. One commenter urged
the inclusion of individuals residing in
assisted living facilities in the definition
of an ‘‘individual receiving home and
community-based services’’ in
§ 423.772.
Response: The commenter that urged
the inclusion of individuals residing in
assisted living facilities in the definition
of an ‘‘individual receiving home and
community-based services’’ raises an
important distinction warranting the
following clarification in our guidance
to plans and States. Individuals residing
in an assisted living facility will be
included in the definition of an
‘‘individual receiving home and
community-based services’’ only to the
extent that they satisfy the inclusion
criteria set forth in section 3309 of the
ACA. Specifically, the assisted living
facility resident must be a full-benefit
dual eligible individual receiving HCBS
under a home and community-based
waiver authorized for a State under
section 1115 or subsection (c) or (d) of
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section 1915 of the Act, or under a State
Plan Amendment under section 1915(i)
of the Act, or if such services are
provided through enrollment in a
Medicaid managed care organization
with a contract under section 1903(m)
or 1932 of the Act.
We appreciate the strong support we
received from commenters for our
proposal to amend § 423.772 to establish
the definition of an ‘‘individual
receiving home and community-based
services’’ and § 423.782(a)(2)(ii) to
reflect that these individuals will have
no cost-sharing. We are finalizing these
regulations as proposed.
Comment: Many commenters urged
us to provide explicit guidance on the
types of BAE that would be deemed
acceptable to establish HCBS status,
along with clear reporting requirements
for plans receiving such evidence to
report it to us. Several of these
commenters recommended that we
categorize these individuals on the
Transaction Reply Report (TRR) as lowincome subsidy level 3
(institutionalized—$0 cost share), as
opposed to developing a new lowincome subsidy level for the HCBS
status. One commenter requested
guidance on whether the PDE value will
be unique for these individuals.
Response: We agree with commenters
that successful implementation of this
provision will require us to update its
guidance to plans to provide additional
detail on how BAE rules apply to this
population. In such guidance, we intend
to address key concerns raised by
commenters, including at a minimum
how such beneficiaries will appear on
the TRR, their low-income subsidy
level, and the correct PDE value to be
reported.
Comment: Several commenters urged
CMS to provide explicit guidance to
State Medicaid Agencies regarding the
new zero copayment group, and develop
data transfer protocols to ensure that
States accurately identify HCBS eligible
individuals and transmit such data to
CMS in a timely fashion.
Response: We look forward to
partnering closely with States to
facilitate the identification of all such
HCBS eligible individuals and to ensure
timely and accurate transmission of the
necessary data to CMS. We will provide
customized guidance to states to ensure
that they have a clear understanding of
this new category of individuals
qualified for the zero copayment status.
We will require State Medicaid
Agencies to submit data at least monthly
identifying these individuals by
leveraging the existing data exchange
currently used by States to identify their
dual eligible individuals to CMS. We
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will add a new value for the existing
institutional status field, which will
prompt CMS to set a zero copayment
liability for full-benefit dual eligible
beneficiaries who qualify for HCBS zero
cost-sharing, as set forth under section
3309 of the ACA.
Comment: One commenter
recommended that CMS provide model
notifications to Part D plans to send to
affected beneficiaries to ensure that
such beneficiaries are provided maximal
opportunities to understand their new
zero copayment Part D status. Another
commenter suggested that CMS develop
a form for Medicaid Managed Care plans
to provide to beneficiaries, attesting to
their use of HCBS services.
Response: We thank the commenters
for these suggestions. We will determine
later in 2011 whether the existing Part
D model notifications that provide such
beneficiaries with their copayment
status are adequate or whether a new
Part D model notice customized to this
population might be beneficial. We will
also consider the latter suggested notice
as we update our BAE guidance to plans
to ensure the most efficient procedures
for accurately identifying this
population.
Comment: Two commenters noted
that individuals who receive HCBS
under a home and community-based
waiver under section 1115 and State
plan participants under section 1915 of
the Act generally receive letters
informing them that they have qualified.
These commenters described such
letters as varying significantly among
States and programs, and urged that
CMS work with plans to help them
identify such letters to serve as BAE.
Response: We will work with States to
identify the most common forms of such
letters provided to participants, and we
intend to share best practices with plans
to more effectively identify full-benefit
subsidy eligible individuals who qualify
for zero cost-sharing under this HCBS
provision.
Comment: One commenter urged
CMS to clarify that an effective date of
January 1, 2012, for the HBCS provision
does not permit retroactive application
of the zero cost-sharing benefit to extend
prior to January 1, 2012,
notwithstanding that the effective date
of LIS eligibility in many cases is
retroactive and extends prior to January
1, 2012.
Response: In accordance with section
3309 of the ACA, the Secretary’s
discretionary authority to establish the
effective date of the HCBS provision is
limited by the stipulation that the
effective date shall be no earlier than
January 1, 2012. This effective date does
not allow for retroactive application of
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the zero cost-sharing benefit to extend
prior to January 1, 2012, even for
beneficiaries whose effective date of LIS
eligibility extends prior to January 1,
2012. We appreciate the commenter
bringing to our attention the need for
such clarification and we will provide
such clarification in our guidance to
plans.
Comment: A commenter urged that
CMS require Part D sponsors to
appropriately reimburse long term care
(LTC) pharmacies for the additional
value that those pharmacies must
provide to beneficiaries receiving
pharmacy services in assisted living
facilities, such as special unit dose
medication packaging, medication
delivery, and medication reviews by
pharmacists.
Response: Any such reimbursements
are a matter of negotiation between the
plan sponsor and the LTC pharmacy.
Comment: Two commenters
recommended that CMS adopt the same
procedural approach for determining
the deeming period for HCBS eligibility
that CMS uses for individuals who
qualify for the full-benefit subsidy based
on Medicaid enrollment. Specifically, if
an individual appears on State files as
eligible for HCBS at any point during
the year, that individual would qualify
for the HCBS zero cost-sharing for the
remainder of the year. If an individual
shows as eligible in the month of July
or any later month in the year, the HCBS
zero cost-sharing would continue
through the next plan year.
Response: We thank the commenters
for raising this issue, as it warrants the
following noteworthy clarification in
our guidance to plans and States. To
ensure procedural consistency and
operational efficiency, we will apply the
same procedural approach for
determining the deeming period for
HCBS eligibility that we apply for
individuals who qualify for the full
benefit subsidy based on Medicaid
enrollment, as set forth under
§ 423.773(c)(2), to the extent that an
individual’s HCBS deemed period does
not exceed the individual’s full-benefit
dual deemed period. Specifically, if an
individual is deemed eligible for HCBS
zero cost-sharing at any point during the
year, that individual will qualify for
HCBS zero cost-sharing for the
remainder of the year. If an individual
is deemed eligible for HCBS zero costsharing in the month of July or any later
month in the year, the individual’s
HCBS zero cost-sharing will continue
through the next plan year so long as the
individual was also deemed in the
month of July or any later month in the
year for the full-benefit subsidy based
on Medicaid enrollment. In other words,
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an individual’s ongoing HCBS deemed
status is dependent on concurrent
deemed full-benefit dual eligibility. We
believe that this policy will promote
effective administration of the HCBS
cost-sharing benefit and decrease the
administrative burden on CMS and
State Medicaid Agencies, as well as on
HCBS eligible individuals. We note that
it also is consistent with how we
determine the deeming period for
institutionalized full benefit dual
eligible individuals.
We appreciate the comments that
were submitted on these provisions and
will be finalizing these proposals.
11. Appropriate Dispensing of
Prescription Drugs in Long-Term Care
Facilities Under PDPs and MA–PD
Plans (§ 423.154)
In our proposed rule, we proposed to
implement section 3310 of the ACA by
adding a new regulation at § 423.154 to
govern how plan sponsors (all
organizations and sponsors offering Part
D including stand-alone Part D plans,
MA organizations, EGWP contracts, and
PACE plans) direct network pharmacy
dispensing of covered Part D drugs in
LTC facilities. Under § 423.154 (a)(1)(i)
of the proposed rule, we require all
sponsors to contract with network
pharmacies servicing LTC facilities, as
defined in § 423.100, to dispense brand
medications, as defined in § 423.4, to
enrollees in such facilities in no greater
than 7-day increments at a time. In an
effort to target the drugs resulting in the
most financial waste and to lessen the
burden for facilities transitioning from
30-day supplies to 7-day-or-less
supplies, we proposed initially limiting
the requirement for 7-day-or-less
dispensing to brand drugs as defined in
§ 423.4. We noted in the proposed rule
that as a result of consultation with
industry representatives, a transitional
approach would ease the initial burden
on nursing and pharmacist staff by
reducing the number of products for
which a pharmacy would have to
transition from dispensing one 30-day
supply per month to dispensing at least
four 7-day supplies per month. We also
acknowledged that we are not aware of
any objective data that demonstrate the
cost effectiveness of full versus partial
implementation, but welcomed
comments from the public presenting
such data and also solicited comments
on how soon the industry can transition
to include generic drugs in the 7-day-orless requirement.
Under § 423.154(a)(1)(ii) of the
proposed rule, we require Part D
sponsors to permit the use of uniform
dispensing techniques defined by each
of the LTC facilities being serviced. We
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proposed to define uniform techniques
to mean that dispensing methodologies
will be uniform with respect to the type
of packaging used to dispense Part D
drugs within a LTC facility, but may
vary by the quantity of medication
(days’ supply) dispensed at a time. We
explained that it is the LTC facilities
that are in the best position to identify
uniform dispensing techniques to be
used throughout their LTC facility.
Therefore, we proposed that Part D
sponsors must permit their contracted
pharmacies to implement the uniform
dispensing techniques selected by each
LTC facility, and may not require the
use of a different packaging system or
technology than that selected by the
facility through its contracted LTC
pharmacy.
We noted in the proposed rule that we
do not expect pharmacy delivery
schedules to change as a result of the 7day-or-less dispensing requirement
since deliveries are generally made
daily to accommodate new admissions
and first doses. We do recognize,
however, that there may be changes in
the way some pharmacies make
deliveries. We stated in the preamble of
the proposed rule that, subject to State
restrictions, pharmacies, and LTC
facilities may agree to use a common
carrier for some deliveries to LTC
facilities. We would not consider a
contractual agreement for a pharmacy to
deliver a portion of Part D drugs to Part
D enrollees residing in LTC facilities via
common carrier as causing the
pharmacy to be considered a mail order
pharmacy. We solicited comments on
our interpretation.
We proposed to exclude from the
requirements of § 423.154(a), those
drugs that are difficult to dispense in a
7-day-or-less supply and those drugs
that are dispensed for acute illnesses.
We expressed our belief that requiring
these types of drugs to be dispensed in
7-day-or-less increments could result in
safety or efficacy concerns or could have
the counterproductive effect of
increasing drug waste. For medications
that we proposed to exclude from the
requirement, we encouraged use of
smaller size containers, when available,
to reduce the potential for waste. We
proposed to codify these exclusions at
§ 423.154(b) and solicited comments on
the types of dosage forms and drugs that
should be excluded from the
requirements under § 423.154(a).
We explained that we considered
‘‘return for credit and reuse’’ as a
possible solution to reduce waste in
LTC facilities. Although ‘‘return for
credit and reuse’’ is not prohibited by
CMS, we recognized limitations to this
approach since ‘‘return for credit and
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reuse’’ is not permitted in all states,
often excludes lower cost generic drugs,
is frequently limited to a subset of drugs
in unused or specially approved
packaging, does not address issues
regarding diversion, and is subject to
Drug Enforcement Agency (DEA)
limitations with respect to controlled
substances. Upon consideration of these
facts, we decided that ‘‘return for credit
and reuse’’ would not be the optimal
solution to address the issue of unused
drugs in LTC facilities under Part D.
Although we did not propose ‘‘return
for credit and reuse’’ as an alternative to
7-day-or-less dispensing, we understand
that it may be a supplement to reduce
the minimal pharmaceutical waste
associated with 7-day-or-less
dispensing, particularly in
circumstances where a Part D drug can
be safely returned to stock for reuse. We
proposed to explicitly allow ‘‘return for
credit and reuse’’ in LTC pharmacies,
when ‘‘return for credit and reuse’’ is
permitted under the State law and is
explicitly allowed under the contract
between the Part D sponsor and the
pharmacy. In addition, when permitted
or required contractually, we noted that
pharmacy dispensing fees paid to
pharmacies may take into account
restocking fees consistent with the
modification to dispensing fees under
§ 423.100, ‘‘Dispensing Fees’’ discussed
in section II. F. of this final rule (Other
Clarifications and Technical Changes).
We explained in our proposed rule
that only when data has been
systematically collected will the extent
of waste of Part D drugs be quantifiable
on other than an anecdotal basis.
Therefore, we proposed to add a
provision at § 423.154(f) to require that
Part D sponsors include terms in their
LTC pharmacy contracts that require
any unused drugs originally dispensed
to the Part D sponsor’s enrollees to be
returned to the pharmacy (not
necessarily for reuse) and reported to
the sponsor. Such contracts would also
address contractual obligations for
disposal in accordance with Federal and
State regulations. We solicited
comments on whether there are DEA or
state technical issues that may be
barriers to the implementation of this
provision.
We noted that options for billing to
accommodate 7-day-or-less dispensing
are being discussed in a National
Council for Prescription Drug Programs
(NCPDP) workgroup, and unless the
industry voluntarily adopts a single
billing standard, we believe that Part D
sponsors should generally allow
pharmacies to use be currently accepted
transactions to minimize burden in
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transitioning to more frequent
dispensing of smaller amounts.
Pursuant to our authority under
section 1860D–12(b)(3)(D) of the Act,
which incorporates by reference section
1857(e)(1) of the Act, we proposed a
new requirement under § 423.154(a)(2)
in which Part D sponsors must collect
and report to CMS the dispensing
methodology used for each dispensing
event described by § 423.154(a)(1)(i) and
(ii) and on the nature and quantity of
unused drugs returned to the pharmacy.
This data collection would be done in
an effort to help us estimate the relative
efficiencies of dispensing methodologies
and determine the residual waste to
estimate additional savings.
We stated in the proposed rule that
this provision would likely lead to a
change in copayment methodology. We
noted that we anticipate the
implementation of particular copayment
methodologies will be dependent on the
billing and dispensing methodologies
used, and as a result, we acknowledged
that copayment methodologies within
the same plan may vary depending on
the LTC facility where the beneficiary
resides. Copayment may be collected at
the first dispensing event in a month,
the last dispensing event in a month, or
prorated based on the number of days a
Part D drug was dispensed in a month.
However, due to the relatively small
copayments for low-income subsidy
(LIS) beneficiaries, copayments for LIS
beneficiaries should be billed with the
first or last dispensing event of the
month.
Under § 423.154(c) of the proposed
rule, we would waive the requirements
under paragraph (a) for pharmacies
when they dispense brand Part D drugs
to Part D enrollees residing in
intermediate care facilities for the
mentally retarded (ICFMR) and
institutes for mental disease (IMDs) due
to specific problems with medication
delivery and dispensing to closed (and
often locked) facilities. We explained
that waiving the requirements in this
instance would be consistent with the
statute when done on a uniform basis
(that is, all similarly situated LTC
facilities) and when there is a
demonstration that applying the
dispensing requirements to pharmacies
servicing enrollees residing in that type
of LTC facility would not serve to
reduce waste. We solicited comments
on whether other types of facilities
(such as LTC facilities utilizing Indian
Health Service (IHS) facilities to provide
Part D drugs or utilizing Tribal facilities
providing pharmacy services for the IHS
under Pub. L. 93–638 compacts or
contracts) should also be waived from
the requirement and on the specific
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21461
reasons as to why those facilities should
be waived from the requirement. In
addition, we solicited specific
comments on the waiver criteria for LTC
pharmacies.
Under § 423.154(d) of the proposed
rule and pursuant to section 3310 of the
ACA, the requirements of this section
would be effective January 1, 2012.
However, under § 423.154(e) of the
proposed rule, we proposed to allow an
independent community pharmacy
(such as, not a closed door pharmacy
dedicated to servicing LTC facilities
only) that is the primary provider of the
Part D drugs to a small LTC facility (less
than 80 beds) located in a rural
community (as defined by the Bureau of
the Census) to dispense no more than a
14-day supply through December 31,
2012, assuming that the pharmacy is not
already dispensing a 7-day supply to
any patient population in the LTC
facility. We explained that we expected
that Part D sponsors contracting with
these pharmacies would find solutions
to their significant challenges and work
toward full compliance with
§ 423.154(a) during this extension.
Under the proposed rule, these
pharmacies would be required to come
into full compliance with § 423.154(a)
by January 1, 2013. We solicited
comments on this matter.
Based on the preceding, we proposed
revising § 423.150 by renumbering
paragraphs (b) through (g) as paragraphs
(c) through (h) and adding a new
paragraph (b) to address appropriate
dispensing of covered Part D drugs to
enrollees in LTC facilities. We proposed
adding new requirements, as discussed
previously, at § 423.154 to require Part
D sponsors to ensure that all pharmacies
servicing LTC facilities dispense no
more than a 7-day supply of brand
medications and use uniform
dispensing methodologies as defined by
each of the LTC facilities being serviced.
In addition, under § 423.154(a)(2), we
proposed requiring Part D sponsors to
collect and report, as CMS specifies, the
dispensing methodology used for each
dispensing event described by
paragraphs (a)(1)(i) and (ii) of § 423.154.
We proposed identifying exceptions to
this requirement at § 423.154(b)(1) and
(2) relative to specific drugs and waivers
of this requirement for specific
pharmacies under § 423.154(c).
Pursuant to section 3310 of the ACA, we
proposed an effective date of January 1,
2012 for these requirements at
§ 423.154(d), with a limited extension
through December 31, 2012 for
pharmacies meeting the requirements
under § 423.154(e). We also proposed
that Part D sponsors require any unused
Part D drugs originally dispensed to
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their enrollees to be returned to the
pharmacy and reported to the sponsor
and address whether ‘‘return for credit
and reuse’’ is permitted under their
contracts with pharmacies servicing
LTC facilities at § 423.154(f).
Comment: We received several
comments regarding the term ‘‘waste.’’
Commenters requested that we clarify
the term. Some commenters
recommended that we not use the term
‘‘waste’’ but rather ‘‘unused drugs’’
because the ‘‘waste’’ description in the
proposed rule does not harmonize with
definitions of waste in other State and
Federal regulations applicable to
unused pharmaceuticals.
Response: We agree with the
commenters that the use of the term
‘‘waste’’ may cause confusion because
‘‘waste’’ as discussed in the proposed
rule may not be consistent with other
agencies’ definitions. Further, we
believe that in using the term ‘‘waste’’ in
section 3310 of the ACA, Congress
intended to refer to unused drugs.
Therefore, in this final rule we will use
the term ‘‘unused drugs’’ instead of
‘‘waste.’’
Comment: A few commenters
requested that we allow for 14-day-orless dispensing instead of 7-day-or-less
dispensing. Commenters stated that a
14-day dispensing cycle would balance
CMS’s goal of reducing drug waste with
the administrative, technological, and
financial burdens placed on Part D
sponsors, pharmacies, and beneficiaries.
Commenters urged CMS to consider
implementing a 14-day-or-less
dispensing cycle because it is a more
reasonable and realistic goal that will
minimize the burden on pharmacies,
beneficiaries, and plans. Some
commenters stated that the statute does
not mandate 7-day dispensing and that
the dispensing techniques may (but
need not) include weekly dispensing.
Response: We initially proposed
limiting these techniques to 7-days-orless methodologies. We continue to
believe that 7-day-or-less dispensing
more effectively minimizes the volume
of unused drugs and the resulting
financial waste paid for under the Part
D program. However, the majority of
comments we received in response to
our request for information on the
impact of our proposed provision
suggested that costs might increase
significantly. While this point of view
conflicts with other opinions we heard
during the consultation period with the
industry, we did not receive detailed
comments that supported more
moderate cost increases. We also
received little additional information
during the comment period on the
amount of unused drugs in LTC
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facilities paid for under the Part D
program, and none that could be
considered as thorough, unbiased, or
authoritative. As a result, the
information we have to work with in
projecting potential savings reflects
widely divergent estimates. The
variation in savings estimates range
from as low as approximately 3 percent
to as high as 17 percent for 7-day
supplies, and as high as 20 to 25 percent
for automated dose dispensing. Given
the divergence in estimates and the
uncertainty in the rate of conversion to
the more efficient methodologies, we
have elected to be conservative in
estimating savings and costs in order to
finalize a policy we estimate will result
in savings. Therefore, we are finalizing
the requirement to dispense in 14-dayor-less increments. Nothing about this
change, however, precludes facilities
and pharmacies from selecting 7-day-orless methodologies or Part D sponsors
from incentivizing the adoption of more
efficient dispensing techniques.
We agree with the commenters that
the statute does not mandate 7-day-orless dispensing. Section 3310 of ACA,
which is implemented by § 423.154,
states ‘‘[t]he Secretary shall require PDP
sponsors of prescription drug plans to
utilize specific uniform dispensing
techniques, as determined by the
Secretary, in consultation with relevant
stakeholders, * * * such as weekly,
daily, or automated dose dispensing
* * *’’ Because the dispensing
frequencies are illustrative examples (as
indicated by the use of the phrase ‘‘such
as’’), we interpret this language as an
indicator of Congress’ preference to give
the Secretary flexibility in determining
the dispensing increments based on
information received from the relevant
stakeholders. Based on comments, we
believe that 14-day-or-less dispensing is
a more prudent approach to initially
implementing section 3310 of ACA. A
14-day-or-less dispensing requirement
will place less of a burden on
pharmacies and LTC facilities than a 7day-or-less dispensing requirement
while allowing CMS to collect data to
determine the impact of 14-day-or-less
dispensing on unused drugs in LTC
facilities.
For purposes of scoring this final rule,
we project that the current aggregate
level of dispensing fees will double.
Obviously, the negotiations between
LTC pharmacies and Part D sponsors or
PBMs that would determine any
changes in dispensing fees have not yet
taken place and the actual level of
dispensing fees is not knowable.
Historically, we believe dispensing fees
on LTC claims have been relatively low
and not directly related to pharmacy
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costs, reflecting the economies of scale
and dominant competitive strategy of
long-term care pharmacies in a highly
concentrated industry and the
negotiating leverage of large PBMs.
Therefore, pharmacy costs have not
been recovered solely through
dispensing fees, but also through other
revenue sources, such as mark-up of
negotiated prices for drug sales over
acquisition costs and receipt of rebates
from drug manufacturers. Since these
other revenue sources are expected to
remain, it is not at all clear that
negotiated dispensing fees must or will
increase directly in proportion to the
number of dispensing events per month
as some, but not all, commenters assert.
Although the way we are finalizing this
rule will result in only minimal
additional costs (for example, only one
additional dispensing event per month
with 14-day dispensing and a
substantial reduction in burden
associated with the reporting
requirements as compared to the
proposed rule), we believe that there
will be some upward pressure on
dispensing fees to incentivize the use of
more efficient and cost effective systems
in some pharmacies. Therefore, in order
to be as conservative as possible in
projecting cost increases, we have
assumed a doubling of the current
aggregate level of dispensing fees.
The comments that follow refer to the
7-day-or-less dispensing requirement
reflecting our requirement in the
proposed rule. We believe that the
comments also apply to 14-day-or-less
dispensing, as it is a shorter dispensing
increment than traditional 30-day
dispensing used in LTC facilities today.
Although all of the comments apply to
14-day-or-less dispensing, we believe
that some of the burden and costs
described in the comments are
decreased as a result of less frequent
dispensing events per month associated
with 14-day-dispensing versus 7-daydispensing.
Comment: We received few comments
related to concerns about patient care.
Some commenters believe that that the
confusion resulting from two different
dispensing methodologies will lead to
medication errors and patient safety
issues. Another commenter was
concerned about delays in treatment, in
particular related to protected class
drugs, resulting from, for example,
delivery delays due to bad weather.
Another commenter recommended that
we implement 7-day-or-less dispensing
only when the requirement is not likely
to interfere with patient care.
Response: Based on our conversations
with the industry, we know that most
facilities have experience utilizing
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multiple dispensing methodologies
today. For example, most pharmacies
dispense using one technique for their
Part D patients and another for their Part
A patients. We understand that many
pharmacies already dispense in lessthan-30-day increments for their Part A
patients because it is more efficient for
the LTC facilities to do so. This is
because the LTC facilities must pay for
Part A drugs out of their per diem
payments. These LTC facilities already
require their LTC pharmacists to employ
7- or 14-day dispensing methodologies
to limit exposure to unnecessary costs
associated with unused drugs when
they are the payor. Thus, it is clear that
LTC facilities and their contracted
pharmacies have been able to manage
dispensing to patients using multiple
dispensing methodologies.
Consequently, we do not see any
evidence that multiple dispensing
methodologies per se in a LTC facility
necessarily results in medication errors,
and we received no comment that
provided any specific information to
support this assertion.
In fact, we believe that the original 7day-or-less dispensing requirement, and
to a somewhat lesser extent, the new 14day-or-less dispensing requirement,
incentivizes the use of the most effective
and efficient dispensing technologies,
such as automated dose dispensing,
which we believe based on
conversations with LTC facility and
pharmacy staff who have implemented
such systems, will actually result in
fewer medication errors. We learned
from multiple industry representatives
that automated dose dispensing systems
reduce medication errors by ensuring
the accuracy of the medication
dispensed to the patient by eliminating
many manual steps involved in
removing doses from multiple blister
packs and collecting them in paper cups
prior to the medication pass. In
addition, these systems free up nursing
time allowing nursing staff to focus
more on patient care.
We believe that facilities and
pharmacies evaluating the optimal
systems to employ in meeting the
required change from 30-day dispensing
will seriously consider all alternatives,
and many will find that the confluence
of improvements in dispensing
equipment technology and
developments in health information
technology standards, combined with
changes in dispensing fees represent an
excellent opportunity to upgrade their
dispensing systems to the most efficient
methodologies to further both costeffective operations and competitive
advantage.
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As stated in the proposed rule, we
have learned from many industry
representatives that delivery schedules
will not be expected to change
significantly to accommodate 14-day-orless dispensing. We received a few
comments on the proposed rule
asserting that there might be delays in
therapy as a result of changes to
delivery schedules to accommodate
shorter dispensing increments.
However, no commenters provided
details that contradict what we heard
from most industry representatives
during consultation. In most LTC
facilities deliveries are already made on
a daily basis to accommodate new
admissions and first doses. We did not
receive any comments with
substantiating detail that lead us to
believe delivery schedules will have to
significantly change as a result of this
requirement. Nor do we believe that bad
weather will impact deliveries to any
greater extent than it does today. We
did, however, state in the proposed rule
that the way in which some deliveries
are made may have to change. We stated
that, when allowed by State law,
common carriers may be used to make
some deliveries from the pharmacy to
the LTC facility. So in rare
circumstances when a delivery cannot
be made by the pharmacy, deliveries by
common carrier may supplement the
delivery schedule. In summary, the
comments we received did not persuade
us that the information we received
during our pre-rulemaking consultation
with the industry was incorrect or
insufficient, and for this reason, we
continue to believe that the parties are
capable of handling various dispensing
methodologies and frequent deliveries,
and thus the 14-day-or-less dispensing
requirement will not interfere with
patient care.
Comment: Several commenters
supported the proposal that a pharmacy
should not be considered a mail order
pharmacy because the pharmacy
delivers some of the drugs using a
common carrier.
Response: We received only
supportive comments on this issue, and
we intend to issue guidance in manual
chapters to document this policy.
Comment: We received a couple of
comments regarding the identification
of brand name versus generic drugs. A
commenter questioned whether the
brand name status would be based on
the NDA/ANDA status.
Response: As indicated in the
proposed rule, ‘‘brand name drug’’ is
defined at § 423.4. ‘‘Brand name drug’’
means a drug for which an application
is approved under section 505(c) of the
Federal Food, Drug, and Cosmetic Act
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(21 U.S.C. 355(c)), including an
application referred to in section
505(b)(2) of the Federal Food, Drug and
Cosmetic Act (21 U.S.C. 355(b)(2)).
Thus, the definition specifically refers
to a drug approved under an NDA. In
response to this comment, however, and
to avoid confusion, we are making a
technical change to the regulation to
refer to ‘‘brand name drug’’ instead of
‘‘brand name medication.’’
Comment: We received many
comments in support of our proposal to
limit the 7-day-or-less dispensing
requirement to brand name drugs only
to minimize any transition issues.
Commenters agreed that the majority of
the financial waste is associated with
brand name drugs. Commenters also
stated that limiting the requirement to
brand name drugs was a practical
approach. We also received a smaller
number of comments from certain
pharmacies and from environmental
groups that did not support our
proposal to limit the requirements to
brand name drugs. Environmental
groups urged us to include generics in
the requirement because generic drugs
account for majority of the unused drugs
(in terms of quantity).
Response: We proposed to limit the
requirement to brand name drugs
because, after consultation with the
industry, we were persuaded by its
arguments that by targeting brand name
drugs, we would target a majority of the
financial waste but minimize the initial
burden on LTC facilities and
pharmacies converting from a 30-day
dispensing increment to a shorter
dispensing increment. Once we are able
to collect data on unused drugs and
negotiated prices in the Part D market,
we will be in a better position to
evaluate the implications of extending
the requirement to generics. As we
stated in our proposed rule, however,
nothing in the requirement prevents
LTC facilities and pharmacies from
extending the practice to generic drugs,
and we encourage Part D sponsors to
facilitate that practice. Given that
pharmacies and facilities have that
flexibility, we continue to believe that
imposing this requirement initially only
for brand name drugs is the appropriate
policy.
We agree with the environmental
groups that extending the requirement
to generic drugs would result in fewer
unused drugs. However, we must weigh
the effect of our proposal against the
costs to the Part D program that may
arise and the burden on LTC pharmacies
and facilities. As such, we believe that
the phased-in approach—which focuses
first on reducing the amount of unused
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drugs in terms of monetary waste—is
appropriate.
Comment: Some commenters
requested that we conduct a pilot
program or conduct studies prior to
implementing the 7-day-or-less
dispensing requirement. We received
some comments recommending that we
limit the 7-day-or-less requirement to
the most expensive brand name drugs
and add drugs to the requirement after
studying the impact of the 7-day-or-less
requirement. Some commenters urged
us to conduct studies prior to extending
the 7-day-dispensng requirement
beyond brand name drugs and, in
particular, measure the increase in
dispensing fees relative to the average
cost of generic drugs not wasted, to
determine whether the requirement
should be extended beyond brand-name
drugs.
Response: We disagree with the
commenters that believe studies or
pilots must be conducted prior to any
14-day-or-less requirements. First,
section 3310 of the ACA does not
contemplate that we conduct a study
prior to implementing the provision.
Second, we do not believe a pilot
program is necessary. Shorter
dispensing cycles have already been
successfully implemented in many LTC
facilities and thus, are not a new
approach that warrants a pilot program.
Moreover, as noted previously, we
already are proceeding with
implementation on an incremental basis
by applying the requirement only to
brand name drugs and taking other steps
to facilitate information gathering. In
this way, we already are further
mitigating any burden associated with
this transition by initially focusing on
only a portion (20 percent of the drugs
dispensed) of drugs dispensed. As
discussed elsewhere in this final rule,
we will be requiring pharmacies to
report dispensing methodologies and
report unused drugs to Part D sponsors.
Our reporting requirements will provide
us with data we can use to evaluate the
implications of extending the
requirement to generic drugs. Finally,
we decline to limit the 14-day-or-less
dispensing requirement to the most
expensive brand name drugs. Pharmacy
reimbursement varies from pharmacy to
pharmacy and plan to plan, and
therefore the most expensive brand
name drugs similarly may vary. We do
not believe it would be useful or
prudent for us to attempt to identify and
maintain a list of such drugs,
particularly given that we are prohibited
from interfering with price negotiations.
Comment: We received a number of
comments in support of our
acknowledgment that it is not possible
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or practical for CMS or Part D sponsors
to identify the uniform dispensing
techniques that must be used in all
pharmacies. We also received comments
asking us to clarify ‘‘dispensing
methodology.’’ Commenters wanted us
to clarify whether ‘‘dispensing
methodology’’ refers to only the
technique used or also the number of
days. We received one comment that
CMS should require all plan sponsors
utilize ‘‘7-day’’ dispensing rather than
‘‘7-day-or-less’’ dispensing. The
commenter argues: (1) ‘‘7-day-or-less’’
dispensing is neither uniform nor
specific as mandated by the statute; (2)
less than 7-days will increase
dispensing fee-related costs; and (3) it is
impractical because each LTC facility
and LTC pharmacy would have to
ascertain the requirements imposed by
each resident’s plan and then manage
those requirements.
Response: For the purposes of this
provision, the term ‘‘dispensing
methodology’’ refers to both the
packaging system (for example, single or
multidose packing systems such as
punch cards, envelopes, or strip
packaging) and the dispensing
increment (such as 14-day, 7-day, ‘‘2–2–
3’’ day, ‘‘4–3’’ day, daily, or automated
dose dispensing). ‘‘Uniform dispensing
techniques’’ refers to the dispensing
methodology or methodologies used in
a particular LTC facility. As stated in
the proposed rule, the days’ supply
dispensed to enrollees may vary
depending on the drug. Under this
provision, it is the LTC facilities that
select the dispensing methodology or
methodologies used in the LTC facility,
obviously in concert with their
contracted LTC pharmacy. We disagree
with the commenter that our
requirements are neither uniform nor
specific. We also disagree with the
commenter’s third point and believe it
indicates a misunderstanding of our
proposal. The dispensing methodology
(or methodologies) will be uniform with
respect to each LTC facility, and these
uniform requirements will apply to all
Part D sponsors and pharmacies
dispensing to enrollees in that facility.
Thus, a LTC facility may choose to have
one dispensing methodology for brand
name Part D drugs, and another for
generic Part D drugs, and a third for
drugs dispensed to non-Part D enrollees.
As long as the facility, not the Part D
sponsor, chooses the methodologies,
such methodologies will be uniform
throughout that facility. Conversations
with the industry lead us to believe that
the facilities will elect to standardize
around the 14-day-or-less dispensing
methodologies because these
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methodologies will minimize wasterelated costs across the board. Further,
the LTC facility will identify the
specific type (or types) of packaging to
be used to dispense Part D drugs within
the LTC facility. Although the days’
supply dispensed at a time may vary (up
to 14 days’ worth), we believe the 14day maximum is sufficiently uniform,
particularly given that LTC facilities
may vary widely in terms of their
resources, physical plant, and enrollee
population. Given these disparities, we
continue to believe that it is the LTC
facilities that are in the best position to
identify the uniform dispensing
technique or techniques to be used
throughout the facility. That is, we look
to the facility to define the technique or
combination of techniques that meet the
facilities’ business needs in concert with
their contracted LTC pharmacies and
require that the Part D sponsors defer to
that decision rather than impose their
own requirements. Therefore, the LTC
facility will not need to ascertain Part D
sponsors’ requirements for the LTC
facility’s residents—indeed, our
requirement is precisely the opposite.
However, we agree with the
commenter that dispensing fees will
likely increase with 14-day-or-less
dispensing. Although we are prohibited
from intervening between negotiations
between Part D plans and pharmacies,
we do expect that dispensing fees will
increase with the increased number of
dispensing events in a billing cycle up
to a point. Consistent with feedback
from the LTC industry and comments
on the proposed rule, we believe that
drugs dispensed in shorter dispensing
increments will result in fewer unused
drugs. We also believe that appropriate
dispensing fees that differentiate among
the various dispensing methodologies
could incentivize more rapid adoption
of the most cost-effective technologies
and effectively align facility, plan
sponsor, and public interest in
minimizing costs associated with
unused drugs.
Comment: Several commenters
asserted that leaving uniform dispensing
techniques to the discretion of the LTC
facility would lead to undue expense
upon pharmacies. One commenter
stated that the proposal would lead to
more concentration in the LTC
pharmacy business which would
potentially increase costs.
Response: We believe this comment is
based on a misunderstanding of what is
meant by ‘‘uniform.’’ The commenter
may believe that we intended to impose
a requirement for a single dispensing
methodology throughout each LTC
facility and that such regimentation
would present a barrier to entry in the
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market to pharmacies that specialize in
innovative systems. Decreased
competition could be expected to result
in higher prices. However, as explained
previously, we define ‘‘uniform’’ by the
dispensing methodologies chosen by the
facility because the facility will choose
the set of dispensing methodologies that
best suits its needs and effectively
minimize costs. We expect pharmacies
will work with the LTC facilities they
contract with to determine the 14-dayor-less dispensing methodology or
methodologies that will work best for
the LTC facility, taking into account not
only physical plant and labor
considerations, but also the overall cost
effectiveness and waste reduction
potential. Again, we have no intent to
limit the range of methodologies
selected by the LTC facilities to meet the
facilities’ needs; rather we mean to
prohibit Part D sponsors requirements
from imposing different requirements
than those selected by the facility.
Comment: We received comments
stating that CMS should be indifferent
to dispensing, shipping and other
operational methods employed by a
pharmacy as long the billing for the
medication is not in excess of 7-days of
usage.
Response: We disagree. Section 3310
of the Act directs us to impose
requirements aimed at reducing the
amount of unused drugs in LTC
facilities. For that reason, we do not
believe it is enough for us to merely
limit billing to no greater than 14-day
increments. If we were to focus only on
billing, nothing would preclude a
pharmacy from dispensing a full 30-day
supply of drugs and bill for all of them
in 14-day increments regardless of
whether they had been used. Such a
practice would not prevent the
accumulation of unused drugs in LTC
facilities and certainly would not reduce
financial waste associated with unused
drugs. Thus, the commenter’s suggested
approach would, in our view, run
counter to the purpose of the statute.
Comment: Some commenters
supported CMS’ decision not to require
the use of automated dose dispensing.
The commenters agreed that such
systems are not practical for all
facilities. We also received many
comments that generally supported the
use of automated dose dispensing
systems. Commenters believe that these
systems are the most efficient and cost
effective way to reduce the volume of
unused drugs and increase patient
safety. We received comments that CMS
should promote the rapid adoption of
this technology by ensuring appropriate
dispensing fees, providing incentive
programs similar to the electronic
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prescribing incentive program, and
establishing a Federal program that
makes capital more readily available to
LTC pharmacies and facilities that are
investing in technologies aimed at
reducing waste.
Response: We agree that automated
dose dispensing systems appear to be
the most efficient and effective way to
reduce waste. However, as stated in the
proposed rule, we recognize there are
significant limitations to the rapid
industry-wide adoption of automated
dose dispensing systems, including
capital acquisition costs, state pharmacy
board restrictions, lack of final
automated medical record to pharmacy
system interface standards, and
inventory considerations. Additionally,
automated dose dispensing may not be
considered practical by some LTC
facilities due to physical size and plant
limitations. However, given our
proposed changes to the definition of
‘‘dispensing fee’’ in § 423.100 and the
prohibition on our ability to interfere
with negotiations between pharmacies
and Part D sponsors, we do not believe
it is necessary or appropriate for us to
provide financial incentives or support
of the type the commenters suggest.
With respect to incentive programs, we
understand the value of the incentive
programs; however, we do not believe
that the implementation of section 3310
of ACA is predicated on those programs.
Comment: We received comments in
support of our proposal to limit the 7day-or-less dispensing requirement to
LTC facilities as defined in § 423.100.
This definition excludes assisted living
facilities. We also received several
comments requesting that we extend the
requirements to include assisted living
facilities. One commenter stated that
including assisted living facilities in the
requirements would reduce the
pharmacy burden of having to manage
multiple dispensing systems. Another
commenter suggested that including
assisted living facilities in the
requirements would be the only way to
ensure the Part D sponsors would
reimburse pharmacies for services
provided.
Response: We decline to revise the
regulation to include assisted living
facilities. Section 3310 of the ACA refers
to LTC facilities, which we believe
indicates Congress’s intent that the
requirements apply to LTC facilities as
defined in our regulations that predate
the ACA. Therefore, terms and
conditions pertaining to services to
residents in assisted living facilities,
including any differential in dispensing
fees is a matter of negotiation between
the parties. Moreover, we are aware that
the medication packaging requirements
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needed for beneficiaries residing in
assisted living facilities may be different
from the medication packaging needs of
beneficiaries residing in LTC facilities
due to the different levels of
independence of the residents of the
facilities. Therefore, extending the
requirements to assisted living facilities
may not reduce the burden associated
with multiple systems. However,
nothing in the provision precludes
pharmacies from extending 14-day-orless dispensing to assisted living
facilities if the assisted living facilities
and pharmacies decide that is the best
option for their operations. Pharmacies
and facilities believing that it is a
burden to manage multiple dispensing
systems may want to consider extending
14-day-or-less dispensing to assisted
living facilities. Pharmacies choosing to
extend 14-day-or-less dispensing to
assisted living facilities are free to
negotiate dispensing fees to reflect that
service. However, dispensing fees for
those services remain a matter of
contract negotiations between the
pharmacy and the Part D sponsor.
Comment: We received support for
our proposal that the requirements
would apply to all pharmacies,
including closed-door LTC pharmacies,
retail pharmacies, and mail order
pharmacies that dispense to Part D
enrollees residing in LTC facilities. We
received a couple of comments
requesting that we limit the
requirements to those pharmacies
contracted to the LTC pharmacy
network, in part, because most retail
and mail order pharmacies have no
means to identify enrollees residing in
LTC facilities.
Response: We disagree that the
requirements should be limited to
pharmacies dedicated to dispensing
medications to patients residing in LTC
facilities because we do not believe
section 3310 of the ACA is intended to
apply only to those pharmacies. We
further believe that to accomplish that
the purpose of section 3310 of the ACA,
which is to reduce the amount of
unused drugs in LTC facilities, it is
necessary for all pharmacies that
dispense Part D drugs to enrollees in
LTC facilities to dispense brand name
drugs in no greater than 14-day
increments. We note that Part D
sponsors receive a long-term care
institutionalized resident report twice a
year from CMS. This report provides
information to Part D sponsors on which
of their enrollees are institutionalized,
as well as the names and addresses of
the particular LTC facilities in which
those beneficiaries reside. Therefore,
Part D sponsors’ pharmacies providing
services to LTC facilities do have a way
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to identify enrollees residing in LTC
facilities. Moreover, sponsors generally
become aware of their enrollees’
institutionalized status much sooner
when they get a claim from the LTC
pharmacy including the ‘‘place of
service’’ code. Upon receipt of that
claim, the Part D sponsor is required to
contract with that LTC pharmacy. Part
D sponsors manage the care of their
enrollees, not merely process claims for
prescription drugs. Part D sponsors’ LTC
pharmacies must be capable of meeting
certain performance and service criteria,
as specified under 50.5.2 of Chapter 5 of
the Medicare Prescription Drug Benefit
Manual. These performance criteria
must be incorporated into an addendum
to a Part D sponsor’s standard network
contract for those pharmacies that
would like to be designated as a
network long-term care pharmacy. In
order to comply with these criteria,
sponsors must be able to identify
beneficiaries residing in LTC facilities.
For these reasons, we believe sponsors
will have sufficient information to
determine to which enrollees these
dispensing requirements apply and can
therefore appropriately monitor
pharmacy compliance with these
requirements.
Comment: We received many
comments requesting that we extend the
7-day-or-less dispensing requirement to
pharmacies other than those that
dispense to LTC facilities. Many
commenters requested that we
investigate the potential to reduce the
volume of unused drugs in other noninstitutionalized settings including
retail pharmacy and mail order
pharmacy.
Response: We appreciate these
comments and will consider them as
appropriate for future rulemaking;
however, we decline to extend these
requirements at this time—our proposal
was intended to implement section 3310
of the ACA, which is specific to
reducing unused Part D drugs in LTC
facilities. However, we again reiterate
that pharmacies, facilities and Part D
sponsors are free to implement
measures intended to reduce the
amount of unused drugs dispensed, and
we believe our revised definition of
‘‘dispensing fees’’ in § 423.100 makes it
clear that costs associated with such
measures can appropriately be included
in pharmacy dispensing fees.
Comment: Many commenters
supported our proposal to exclude
certain drugs from the 7-day-or-less
dispensing requirement. In addition to
the list of excluded drugs suggested in
the proposed rule, some organizations
specifically recommended that we
exclude all antibiotics, insulin and
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diabetic supplies, all controlled
substances, contraceptives, liquids,
patches, limited distribution drugs, kits,
Boniva monthly, vaginal rings, Prephase
and Prempro, steroid bursts, weekly
medications, Fosamax, powdered
medications, total parenteral nutrition
(TPNs), and compounded medications.
Many commenters requested that we
exclude liquids from the 7-day-or-less
requirement for practical and patientsafety-related reasons. Some
commenters thought it may be difficult
to interpret and operationalize the
‘‘drugs difficult to dispense in supply
increments of 7-day-or-less’’ exclusion.
We also received comments requesting
that we clarify the definition of ‘‘acute
illness.’’ Finally, many commenters
requested that CMS should maintain a
list of excluded drugs to promote
consistency across the industry.
Response: We agree with the
commenters who believe the ‘‘drugs
difficult to dispense’’ standard may be
difficult to interpret and operationalize
and, as a result, we are modifying this
standard. We will require 14-day-or-less
dispensing specifically for solid oral
doses of brand name drugs. We also will
eliminate the reference to ‘‘acute
illnesses’’ and ‘‘drugs difficult to
dispense.’’ Based on the comments, we
will specifically exclude antibiotics and
drugs that must be dispensed in their
original container as indicated in the
Food and Drug Administration
Prescribing Information and drugs that
are customarily dispensed in their
original packaging to assist patients
with compliance (for example, oral
contraceptives). We believe that with
this simplification of the rule, a list of
Part D drugs by NDC is not necessary;
therefore, we decline to maintain such
a list.
We disagree with commenters that
requested that we exclude controlled
drugs. As stated in the proposed rule,
the Drug Enforcement Agency rules do
not preclude dispensing controlled
drugs in 14-day-or-less increments.
Further, we believe that 14-day-or-less
dispensing of controlled drugs will
result in less unused controlled drugs in
the LTC facilities, and therefore, will be
less of a disposal burden on LTC
facilities or a diversion risk. But unlike
antibiotics and drugs that must be
dispensed in their original packaging,
we do not find a similar basis for
excluding controlled substances from
the dispensing requirements (unless
they are excluded for another reason)
because there is no clinical or patient
safety reason to do so.
Comment: We received some
comments requesting an exemption
from the dispensing requirement in
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cases where a prescriber determines that
it is medically necessary for the enrollee
to receive more than a 7-day supply at
a time and in cases where patients are
stabilized on a medication. One
commenter stated that some drugs and
biologicals may require a longer time
period in order to gauge tolerance or
efficacy, and in those circumstances a
partial fill may not be medically
appropriate.
Response: We disagree with these
comments. First, we believe an
exclusion from the dispensing
requirements for ‘‘medical necessity’’ is
unnecessary. As we stated in the
proposed rule, the dispensing
requirements have no bearing on the
quantity prescribed. A prescriber is free
to prescribe any quantity of medication
that he or she believes is medically
appropriate for the patient. Our
requirements merely would govern the
increment in which such medication is
dispensed to the facility at a time.
Further, we are not persuaded that there
should be an exception for patients who
are stabilized on a medication—we
believe it would be more burdensome
for pharmacies, Part D sponsors, and
LTC facilities to apply beneficiaryspecific, drug-specific dispensing
requirements without any benefit in the
form of reduced financial waste
associated with unused drugs. In fact,
such an approach could both increase
the amount of unused drugs and
increase costs. Moreover, while we
agree that some drugs and biologicals
require a longer time to gauge tolerance
or efficacy, we disagree that the answer
is to exempt these drugs from the
dispensing requirements. To the
contrary, it makes more sense to
dispense those drugs in 14-day-or-less
increments. If the patient does not
tolerate the drug or the drug is
ineffective and has to be discontinued,
fewer unused drugs will result when a
14-or-less day’s supply, as opposed to a
30-day supply, is discontinued.
Comment: Some commenters agreed
that return and reuse was not an optimal
method to reduce the amount of unused
drugs in LTC facilities. Others
commented that we should allow either
return and reuse or a 7-day-or-less
dispensing requirement, but not both.
Others commented that we should
prohibit ‘‘return for credit and reuse’’ for
Part D drugs that are subject to the 7day-or-less dispensing requirement.
Some commenters requested that we
exempt from the requirement those
pharmacies that already utilize lowwaste practices or ‘‘return for credit and
reuse’’.
Response: As stated in the proposed
rule, we considered ‘‘return for credit
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and reuse’’ as a way to reduce waste in
LTC facilities. We explained that there
are limitations to this approach,
especially that fact that not all states
allow ‘‘return for credit and reuse,’’ and
reuse of controlled substances is limited
by the DEA. Because of these
limitations, we believe financial waste
will be more effectively reduced by
preventing the accumulation of unused
drugs in the first place rather than
addressing handling of unused drugs
after they have accumulated in the LTC
facilities. That said, we do not prohibit
the ‘‘return for credit and reuse’’ of
drugs, and under this provision require
Part D sponsors’ pharmacy contracts to
explicitly address whether return and
reuse is authorized where permitted by
State law. As stated in the proposed
rule, we recognize that ‘‘return for credit
and reuse’’ can be effective in certain
situations (for example, where there is
an onsite pharmacy at the LTC facility);
however, we believe that ‘‘return for
credit and reuse,’’ where allowed by
State law, should be used in
conjunction with 14-day-or-less
dispensing to further reduce the volume
of unused drugs over and above that of
14-day-or-less dispensing. We decline to
provide an exception from the
requirements for those pharmacies
already practicing techniques that limit
the volume of unused Part D drugs. Part
D sponsors’ pharmacies that already
utilize 14-day-or-less dispensing will be
compliant with the requirements.
Therefore, pharmacies utilizing ‘‘other
low waste practices’’ will not be exempt
from the 14-day-or-less dispensing
requirements.
Comment: A few organizations
commented that the dispensing
methodology would not be apparent
from the claim making it difficult to
comply with the proposed reporting
requirement that the Part D sponsor
collect and report information on the
dispensing methodology used for each
dispensing event. We also received
comments requesting that we not apply
the reporting requirement absent
compelling justification of how we will
use the information to evaluate
efficiencies. Some commenters
questioned our authority to collect data
on dispensing methodologies and
unused Part D drugs. We received a
comment that the National Council for
Prescription Drug Programs (NCPDP)
has developed codes for dispensing
methodology that are compatible with
the HIPAA billing transactions and that
will facilitate CMS’s and Part D
sponsors’ ability to track the dispensing.
Response: We will collect the data
from sponsors through Part D reporting
requirements. Under section 1860D–
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12(b)(3)(D) of the Act, which
incorporates section 1857(e)(1) of the
Act, we are authorized to require Part D
sponsors to provide such information as
we find necessary or appropriate. We
are concurrently issuing further
guidance on this reporting requirement
in a revision to the Part D Reporting
Requirements (currently approved
under OMB Control No. 0938–0992). We
intend to use this data to determine the
extent to which the dispensing
requirements reduce the amount of
unused drugs and determine the cost
effectiveness of expanding the
requirement beyond brand name drugs.
We note that billing transactions are
handled through regulatory processes
associated with HIPAA transactions. We
appreciate the comment from NCPDP
that they have developed codes for
dispensing methodologies that will
facilitate CMS’s and Part D sponsors’
ability to track the dispensing using
information available on version D.0
claim transactions.
Comment: Some commenters
supported our proposal to have unused
drugs returned to the pharmacy and also
supported data collection of the
quantity and types of drugs that go
unused in LTC facilities. We also
received several comments from
organizations requesting that CMS delay
the requirement that unused drugs be
returned to the pharmacy and reported
to the Part D sponsor until such time
when NCPDP has developed an
electronic transaction to capture the
nature and quantity of unused drugs.
Commenters stated that manual
reporting of unused drugs would create
a burden on the pharmacy and sponsor
and require additional staffing to
accommodate the increased workload.
Some organizations recommended that
we require all solid oral doses (brand
and generic drugs) to be dispensed in
7-day-or-less increments and eliminate
the ‘‘return and report’’ requirement at
least until an NCPDP transaction is
developed. Some commenters wanted
us to clarify the ‘‘return and report’’
provision. Commenters requested that
we clarify whether the provision applies
to Part D drugs dispensed prior to the
implementation date of the requirement
and whether drugs to which the
requirements do not apply were exempt
from the ‘‘return and report’’
requirement. Many commenters
believed that the Controlled Substance
Act, hazardous waste laws, and State
laws would be a barrier to LTC facilities
returning unused drugs to pharmacies.
One commenter requested that we add
an option for the LTC facilities to report
the unused drugs. Another commented
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that since Part D sponsors do not
directly contract with LTC facilities, the
Part D sponsors will not have the
authority to require LTC facilities to
return unused medications to LTC
pharmacies. Some commenters stated
that there may be more effective ways to
gather data than to require all unused
drugs be returned to the pharmacies.
Response: As a result of comments,
we better understand the existing State
and Federal requirements on LTC
facilities to manage waste. In response
to the comments, we will eliminate the
requirement that unused drugs be
transferred to the pharmacy and instead
retain only the requirement that Part D
sponsors collect information from the
network LTC pharmacies to determine
the amount of unused brand and generic
drugs, as defined in § 423.4. We
understand that pharmacies routinely
receive a date of discontinuation or
other information that can be used to
calculate such a date (for example, the
start date of the new ‘‘substitute’’
prescription may be used as the
discontinuation date of the previous
prescription) from the LTC facility
whenever a medication is discontinued
for any reason. Therefore, we believe
pharmacies have the data in their own
systems to calculate the difference
between the quantity dispensed and the
quantity consumed, which can be used
to calculate the amount of unused
medication and which plan sponsors
can audit and validate reported
amounts. We are revising the PRA
package for the Part D Reporting
Requirements (currently approved
under OMB Control No. 0938–0992) to
reflect this approach and will be able to
confirm our understanding in the next
comment period for the Reporting
Requirements.
However, for pharmacies that
voluntarily adopt 7-day-or-less
dispensing for all solid oral doses (that
is, both brand name drugs and generic
drugs), we will waive the requirement
that Part D sponsors report on the
unused drugs. All other pharmacies
must report on the amount of unused
brand and generic drugs as of
implementation of this provision,
January 1, 2013. We continue to believe
that reporting is essential in order to
acquire data from which to evaluate the
potential savings from extending the
dispensing requirement to generic
drugs. Only when data has been
systematically collected will the extent
of the volume of unused Part D drugs be
quantifiable. However, we will
eliminate the reporting requirement for
those pharmacies that immediately
adopt 7-day-or-less dispensing for both
brand name and generic drugs given
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that doing so will almost eliminate
unused drugs.
Comment: We received a comment
requesting that CMS prohibit plan
sponsors from seeking credits for
unused drugs that are returned to LTC
pharmacies but not reused. We also
received a comment requesting that
CMS ensure that the final regulations
expressly state that beneficiaries are to
share in any refund resulting from the
return in proportion to the amount of
the total cost for the returned drugs
covered by their cost sharing
contribution.
Response: We believe that the
commenter is concerned that sponsors
will demand credit for unused drugs
associated with the reporting
requirement. We stress that this is not
the requirement under the rule and
expect that sponsors will pay
pharmacies for drugs dispensed under
this rule, subject to any contractual
provisions in the contract between the
Part D sponsor and LTC pharmacy.
Whether or not Part D plans receive
credits and the affect on beneficiaries
will be determined by the contract
between the sponsor and the pharmacy
and the terms of the benefit package.
With respect to return and reuse, that is
a practice governed by State law and the
provisions of the contract between the
Part D sponsor and the pharmacy. We
do not believe it is necessary or
desirable for CMS to preempt State laws
on this issue. For these reasons, we
decline to adopt the commenters’
suggestions. If a pharmacy processes
unused drugs and redispenses the
drugs, then the pharmacy must abide
with any conditions in its contract with
the Part D sponsor regarding providing
credit and the Part D sponsor must
adjust the prescription drug event data
and TrOOP accordingly for the original
dispensing event.
Comment: We received comments
that Part D sponsors should generally
allow pharmacies to use currently
accepted transactions unless the
industry voluntarily adopts a single
billing standard. Others recommended
that we implement a specific billing
standard. Some commenters
recommended that we implement ‘‘postconsumption billing’’ as a standard
billing methodology because there
would be minimal need for drug
returns, claim reversal, and TrOOP and
drug spend adjustments. Some also
stated that a post-consumption-billing
method would reduce the potential for
fraud.
Response: We defer to the appropriate
industry standard-setting organizations
and the HIPAA-mandated rulemaking
process to determine billing standards
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and for this reason, decline to amend
our regulations for this purpose at this
time.
Comment: We received several
comments concerned about copayment
methodologies. Some commenters
recommended that the copayment
method not be linked to the dispensing
methodology. Several commenters
expressed concern over charging
beneficiaries additional copays. Many
recommended that the beneficiary only
be charged one copayment per month.
Other commenters believed that the
beneficiaries’ copayments should be
prorated based on the number of days a
Part D drug was dispensed in a month.
Response: As stated in the proposed
rule, we expect that copayments will be
billed on the first dispensing event of
the month, the last dispensing event of
the month, or prorated with each
dispensing event. We leave the decision
of which copayment collection
methodology to use up to the parties
involved in these transactions; however,
in response to these comments, we will
add a provision to the regulation to
clarify our interest that regardless of the
number of incremental dispensing
events, the total cost sharing for a Part
D drug to which the 14-day-or-less
dispensing requirements apply shall be
no greater than the total cost sharing
that would be imposed for such Part D
drug if the 14-day-or-less requirements
did not apply. This requirement applies
for all beneficiaries including lowincome subsidy eligible beneficiaries.
(We note that, for CY 2013, we are
considering collection of daily
copayment information in the PBP tool,
and that such information would
facilitate copayment proration.)
Comment: Some organizations
expressed concern over ‘‘refill too soon’’
edits and utilization management
requirements that may be placed on
drugs dispensed in 7-day-or-less
supplies. A majority of the organizations
that commented on ‘‘refill too soon’’
edits requested that we issue guidance
to Part D sponsors requiring them to
turn off the ‘‘refill too soon’’ edit. These
organizations were concerned that ‘‘refill
too soon’’ edits on drugs dispensed in 7day-or-less supplies would result in an
increase in missed doses due to
medication unavailability. Some
commenters recommended that Part D
sponsors would need to allow for all
medications to receive a one-time prior
authorization. We also received a
comment recommending that prior
authorization and step edits be
eliminated for drugs dispensed in 7-dayor-less increments and arguing that the
rationale behind these utilization
management edits is to reduce costs and
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therefore, they would not be necessary
under 7-day-or-less dispensing.
Response: We agree that customary
‘‘refill too soon’’ edits for traditional 30days supplies will be inappropriate for
14-day-or-less supplies and could result
in access issues. We do not agree that
PA and step-therapy should be
eliminated as they allow savings
through use of less costly alternatives
with potentially equivalent therapeutic
value. We expect that the industry will
modify utilization management edits,
including refill too soon edits to prevent
discriminatory practices that could
result in Part D drug access issues.
Comment: We received comments
that there may be penalties associated
with billing Medicaid for quantities less
than a 30-day supply. We also received
comments that even the minimal
Medicaid co-payment on a prescription
becomes a financial burden on such
patients if the states are allowed to
impose the copayment obligations
currently in effect on each 7-day fill.
Response: By statute, Medicaid
cannot be billed for Part D drug claims.
Therefore, this comment is beyond the
scope of the rule because our final rule
with respect to dispensing to LTC
residents applies only to Medicare Part
D.
Comment: We received many
comments that did not support our
proposal to grant a limited extension to
independent community pharmacies
servicing small LTC facilities in rural
communities. Many commenters believe
that it would be difficult to determine
which pharmacies meet our proposed
extension criteria. Some commenters
requested that CMS keep a list of
pharmacies that qualify for the
extension to eliminate any confusion
regarding those pharmacies that qualify
for the extension.
Response: As discussed further below,
we intend to delay the effective date of
the dispensing and reporting
requirements set forth in § 423.154 until
January 1, 2013. For this reason, an
extension for pharmacies servicing
small LTC facilities in rural
communities is no longer necessary.
Instead, the delay in the implementation
date will allow all pharmacies and LTC
facilities time to evaluate dispensing
methodologies and allow them to make
a decision regarding the most effective
and efficient systems for their facilities.
We are amending the final regulation to
eliminate the extension for certain
pharmacies.
Comment: We received many
comments in support of our proposal to
waive the dispensing requirements
when pharmacies are dispensing to Part
D enrollees residing in intermediate care
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facilities for the mentally retarded (ICF/
MRs) and Institutes for Mental Diseases
(IMDs). We also received comments that
supported waiving the requirements
when pharmacies dispense to similar
facilities that meet and demonstrate the
same criteria outlined in the proposed
rule. We received specific requests to
waive I/T/U pharmacies and Indian
Health Service or tribal facilities from
the requirement. We also received a
request to waive this requirement for
pharmacies when dispensing to PACE
programs. Other commenters opposed
any waivers. These commenters argued
that the lack of data on unused Part D
drugs in these facilities justifies the
opposition to the waiver.
Response: We were persuaded by the
comments that under certain
circumstances, waivers should be
granted. The requirements under
§ 423.154(a) will not apply to I/T/U
pharmacies defined in § 423.100. We
understand that the I/T/U system is
understaffed. As a result, unlike in most
LTC pharmacies, which have dedicated
clinical pharmacy staff, pharmacists in
the I/T/U system are often called upon
to perform multiple non-dispensing
tasks including providing patient care
that would otherwise be provided by a
physician. These pharmacists make
medication deliveries to LTC facilities
only on days when they provide
consultant services. In addition, some of
these pharmacists provide translation
services and/or provide information in a
culturally appropriate manner and
protocol for the Indian population they
serve. Further stressing the system,
these pharmacies are called upon to
support very remote health stations that
are often accessible, in some cases, only
on foot, by horseback, airplane, or via
helicopter. The majority of the clinics
and health stations serviced by I/T/U
pharmacists are in remote areas where
deliveries cannot be made on a daily
basis. For these reasons, we believe that
requiring the 14-day-or-less requirement
is not feasible for I/T/U pharmacies and
could increase rather than decrease
costs associated with 30-day dispensing.
The 14-day-or-less dispensing
requirements will generally not apply to
PACE organizations because PACE
programs provide community-based
care. When PACE enrollees are in SNFs,
we would expect that pharmacies
servicing those facilities adhere to the
14-day-or-less dispensing requirement.
Therefore, we are waiving these
requirements for I/T/U pharmacies, but
not for pharmacies when they serve
PACE programs.
Comment: We received some
comments requesting the CMS maintain
a list of facilities for which the
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dispensing requirements have been
waived along with the NCPDP patient
resident code so that pharmacies could
inform the Part D sponsors that the
pharmacy is dispensing to an enrollee
residing in a facility that has been
waived.
Response: We will consider whether
this is a practice that CMS should
maintain. However, we currently
believe Part D sponsors can adequately
identify ICF/MRs, IMDs, and I/T/U
pharmacies as these entities generally
contract with and bill Part D sponsors
directly.
Comment: We received many
comments from organizations
recommending that we delay the
implementation of the requirements
described under § 423.154. Many
commenters requested a 1-year delay,
but some commenters requested a 2-year
delay. Most commenters argued that an
implementation date of January 1, 2012
would not give sufficient time to
renegotiate contracts between the Part D
sponsors and the pharmacies or make
necessary systems and operational
modifications to comply with the
requirements. Some commenters argued
that maintaining the January 1, 2012
implementation date would lead to
inaccurate bids for the 2012 contract
year, since planning for systems changes
and renegotiation of appropriate
dispensing fees incorporating related
costs would be expected to extend
beyond the CMS bid submission
deadline. One commenter indicated that
without a delay to permit appropriate
negotiation of pharmacy reimbursement,
pharmacies would likely just convert
existing 30-day punch card systems to
7-day punch card systems rather than
make capital investment in more
efficient and cost-effective methods for
complying with the dispensing
requirement. Commenters stated that
conversely, the delay until at least
January 1, 2013 would ensure that
nursing facilities have sufficient time to
evaluate dispensing system options
(such as automated dose dispensing
systems) with their contracted
pharmacies and make clear capital
investment decisions. A commenter
expressed concern that without the
delay, hasty business decisions made
under pressure could put an otherwise
stable pharmacy business at
unnecessary risk for failure, particularly
given that these decisions would
involve capital investments that cannot
easily be reversed. This commenter
believes that as a result, there could be
a decrease in the number of pharmacies
that are able to serve LTC facilities.
Commenters also expressed concern
that the proposed implementation date
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of January 1, 2012 might put a strain on
the supply of appropriate dispensing
equipment. Several commenters stated
that failure to delay the implementation
date would likely result in rushed
transitions to 7-day-or-less dispensing
that might jeopardize patient safety (for
example, because of inadequate staff
training time). Commenters stated that
given that the LTC facilities will dictate
the uniform dispensing techniques to be
used in their facilities, pharmacies may
need to work with the facilities one at
a time, which will require additional
time and resources.
Response: We are persuaded by the
comments that a 1-year delay in the
implementation of these requirements is
appropriate. Therefore, we are revising
§ 423.154 to specify that it will take
effect January 1, 2013.
This delay will give LTC facilities and
pharmacies more time to evaluate
dispensing methodologies and make
decisions regarding the most effective
and efficient systems. In particular, we
are persuaded by the comments that
indicate that more pharmacies will
convert to the more efficient dispensing
systems if given more time to make
arrangements for those systems. We also
believe, based on the comments, that if
the affected parties have more time to
make measured and fully considered
decisions about capital investments in
dispensing technologies, they will be
more likely to immediately extend
shorter cycle dispensing to both brand
and generic drugs in order to maximize
the return upon their investment. We
believe that these decisions will
increase program savings in the long run
and lead to greater savings than if,
because of an earlier implementation
date, the parties did the minimum
necessary and merely made minor
adjustments to their current systems to
meet the requirements.
We also are persuaded by the
comments suggesting that the delay will
give Part D sponsors sufficient time to
negotiate contractual changes and
finalize dispensing fees with LTC
pharmacies in advance of the 2013 bid
deadline, thereby allowing Part D
sponsors to submit accurate bids. We
would be concerned that bids that could
not accurately account for yet-to-be
renegotiated dispensing fees would
increase program costs in other ways
and could potentially offset savings
resulting from implementing the
requirement for 2012, potentially
defeating the purpose of section 3310 of
the ACA.
We further are persuaded that, given
that we do not have concrete data about
the amount of savings that could be
achieved, and consistent with our
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incremental approach to the dispensing
requirement, a 1-year delay will reduce
the burden on Part D plans, pharmacies
and LTC facilities by permitting a more
orderly transition to the new dispensing
requirement. In addition, the delay will
more closely align the reporting
requirement for unused drugs with the
availability of an electronic
informational reporting transaction that
could be used for this purpose, which
we believe will further reduce the
burden of data collection on pharmacies
and Part D sponsors. Finally, we are
persuaded that that a delay will give
pharmacies and LTC facilities more time
to transition to different workflows, new
systems and operational requirements,
and conduct appropriate staff training.
We believe this will mitigate any
potential start up issues, such as
medication errors, and thus will
increase patient safety.
As a result of comments, in our final
rule, we modify § 423.154(a)(1)(i) to
dispense solid oral brand name drugs,
as defined in § 423.4, to enrollees in
LTC facilities in no greater than 14-day
increments at a time. We modify
§ 423.154(a)(2) to collect and report
information, in a form and manner
specified by CMS, on the dispensing
methodology used for each dispensing
event described by paragraph (a)(1) of
this section and on the quantity of
unused brand and generic drugs, as
defined in § 423.4. Reporting on unused
brand and generic drugs is waived for
Part D sponsors’ when their pharmacies
dispense both brand and generic drugs,
as defined in § 423.4, in no greater than
7-day increments. We modify
§ 423.154(b) to exclude from the
requirements under paragraph (a) of this
section: (1) Solid oral doses of
antibiotics; and (2) solid oral doses that
are dispensed in their original container
as indicated in the Food and Drug
Administration Prescribing Information
or are customarily dispensed in their
original packaging to assist patients
with compliance (for example, oral
contraceptives). We modify § 423.154(c)
to include a waiver for I/T/U
pharmacies. We modify § 423.154(d) to
change the effective date from January 1,
2012 to January 1, 2013. We modify
§ 423.154(e) by eliminating the
extension for certain pharmacies and
adding a requirement that regardless of
the number of incremental dispensing
events, the total cost sharing for a Part
D drug to which the dispensing
requirements under this paragraph (a)
apply must be no greater than the total
cost sharing that would be imposed for
such Part D drug if the requirements
under paragraph (a) of this section did
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not apply. Finally, we modify
§ 423.154(f) by eliminating paragraph
(f)(1) and combining paragraph (f)(2)
with the introductory clause of
paragraph (f).
12. Complaint System for Medicare
Advantage Organizations and PDPs
(§ 422.504 and § 423.505)
In our November 2010 proposed rule,
we proposed to implement a new
requirement under the authority of
section 3311 of the ACA to require MA
organizations and Part D sponsors to
respond to complaints. Specifically, we
proposed to require that MA
organizations and Part D sponsors use
our existing Health Plan Management
System (HPMS) Complaints Tracking
Module (CTM) to document the closure
of complaints and provide a detailed
complaint resolution summary when
the complaint is resolved. That is, we
proposed to require an MA organization
or Part D sponsor to provide an
explanation of the way in which the
complaint was closed, rather than
simply providing the words ‘‘complaint
closed’’ in the CTM.
In our proposed rule, we proposed
applying these requirements to both MA
organizations and Part D sponsors
ensure beneficiary access to medical
services and drugs under the MA and
Part D programs. We also indicated that
we were considering adding a drop
down checklist to CTM for MA
organizations, and Part D sponsors to
use as the documentation method when
closing complaints, as opposed to
requiring free text descriptions of
complaint closure, and we invited
comments on this approach.
As provided under section 3311 of
ACA, we developed a model electronic
complaint form on the Medicare.gov
Internet Web site and on the Internet
Web site of the Medicare Beneficiary
Ombudsman. We proposed that plans be
required to prominently display the
CMS-developed complaint form on their
Web site and directly link to the CMS
Medicare.gov Web site and the Web site
of the Medicare Ombudsman. As we
explained in the proposed rule, when
we completed our development of the
model electronic complaint form was
made available on the internet Web sites
as in December 2010.
In our proposed rule, we stated the
new requirement for plans to
prominently display the electronic
model on their Web sites would be
effective January 1, 2012 and indicated
that following the issuance of this final
rule, we would be developing guidance
to instruct MA organizations and Part D
sponsors on how to comply with this
new requirement.
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Comment: We received a significant
number of comments regarding our
proposed requirement in
§ 422.405(a)(15)(i) and
§ 423.405(b)(22)(i) regarding the
addition of a drop down checklist in
CTM that would provide clear and
consistent closure categories. Many
commenters supported this proposed
new requirement. Two commenters
recommended that, in addition to the
drop down menu, we include a text box
for plans that desired to add comments
about the resolution of complaints.
These commenters believed that this
modification would improve specificity
of the responses. A few commenters
requested that we define the term
complaint in order that a complaint
might be clearly distinguished from a
grievance or an appeal.
Response: We appreciate the support
expressed by the commenters. The
purpose of the CTM system is to record
and track complaints we receive from
beneficiaries, provider, and others
regarding Medicare health plans and
prescription drug plans. While our
current instructions to MA
organizations and PDP sponsors
indicate that when a complaint is
resolved the plan should concisely
summarize the complaint closure in
CTM, we have found that many
sponsors failed to do so. Rather, they
have merely entered, ‘‘Complaint
Closed’’ without any explanation of the
action taken. After reviewing many
complaint entries, we also discovered
that ‘‘complaint closed’’ has often been
used inappropriately. For example, it
has been used when the sponsor has
been unable to reach the beneficiary by
phone, which alone does not constitute
a reasonable basis for closing a
complaint.
We agree with the commenters that a
text box in addition to the drop-down
menu in the CTM would be helpful for
capturing information on the MA
organization’s or PDP sponsor’s
resolution of a complaint. Therefore, we
are adding a text box to the complaint
form. We will clarify in instructions that
CMS and plan users must select at least
one item in the drop down box or use
the text box in CTM to resolve a
complaint. Thus, the system will not
permit the complaint to be resolved if at
least one of the available options is not
selected.
Regarding the commenters’ request
that we define a complaint, we note that
the Frequently Asked Questions section
of CTM describes the difference
between a complaint and grievance. It
states that grievances are received
directly by the plan from beneficiaries
and that plans are required to report
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grievances to CMS per the Part D
reporting requirements. CTM
complaints, however, are received by
CMS (through 1–800–Medicare call
centers, phone calls to the CMS regional
office, etc.) and are entered into CTM for
resolution by either the plan or CMS.
We require that plans track grievances
separately from CTM complaints.
Comment: Many commenters
supported our proposed requirements
that MA organizations and PDP
sponsors address and resolve all
complaints in the CMS complaint
tracking system and link to the
electronic complaint form on the
Medicare.gov and Internet Web site of
the Medicare Ombudsman from each
sponsor’s main Web page. However, a
few commenters expressed opposition
to the requirement to link to the
electronic complaint form, stating that a
direct link on the plan’s Web site could
potentially discourage use of other plan
resources available for issue resolution
and confuse beneficiaries. One
commenter suggested that, by imposing
this requirement, we would create an
additional administrative expense that
would add little to enhance either the
complaint resolution process or
beneficiary satisfaction. Another
commenter requested the opportunity to
review and comment on the new
electronic complaint form prior to its
implementation.
Response: We appreciate the support
commenters expressed for these
requirements. Congress has directed the
Secretary to annually report the number
and types of complaints reported in
CTM, any geographic variations that
exist in the complaints, the timeliness of
CMS’ and the plan’s responses, and the
resolution of such complaints. Given the
importance that Congress has placed on
complaints and their resolution, it is
important that we have reliable and
complete data not only prepare our
annual report to Congress, but also to
monitor complaint resolution for
oversight purposes.
We do not agree with those who
claimed that having a direct link on the
plan’s Web site to the Medicare.gov Web
site and the Web site of the Medicare
Ombudsman would discourage use of
plan resources for resolving issues,
confuse beneficiaries or create
additional administrative costs. It has
been our experience that beneficiaries
go directly to their MA organization or
PDP sponsor with issues of concern,
including complaints, prior to
contacting CMS for assistance. We have
no cause to believe that requiring
sponsors to directly link to the
Medicare.gov Web site and the Web site
of the Medicare Ombudsman would
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alter the beneficiaries’ practice of
seeking to resolve their issues by first
contacting their plan. We also do not
believe that requiring a link from the
sponsor’s Web site to the Medicare Web
sites will add significant administrative
costs. Since the proposed requirement is
similar to existing requirements
regarding a plan’s Web site, we expect
that any costs related to this
requirement are currently reflected in
the organization’s bid.
We appreciate the commenter’s
interest in commenting on the new
electronic complaint form prior to its
implementation, but as we noted
previously, we have already posted the
model electronic complaint form which
is available at https://
www.medicare.gov/
MedicareComplaintForm/home.aspx.
For the reasons discussed previously,
we are finalizing these requirements as
proposed with an effective date of
January 1, 2012 for the requirement that
MA organizations and Part D plans
create a link from their main Web page
to the CMS-developed electronic
complaint form on the https://
www.Medicare.gov Web site.
13. Uniform Exceptions and Appeals
Process for Prescription Drug Plans and
MA–PD Plans (§ 423.128 and § 423.562)
Section 3312 of the ACA amends
section 1860D–4(b)(3) of the Act by
adding a new section (H) that requires,
effective January 1, 2012, each PDP
sponsor to use a single, uniform
exceptions and appeals process
(including, to the extent the Secretary
determines feasible, a single uniform
model form for use under such process)
with respect to the determination of
prescription drug coverage for an
enrollee under the plan; and to provide
instant access to such processes through
a toll-free telephone number and an
Internet Web site.
In accordance with the new section
1860D–4(b)(3)(H) of the Act, we
proposed in the November 2010
proposed regulation to revise the
regulation at § 423.562(a) to require Part
D plans to use a single, uniform
exceptions and appeals process that
includes procedures for accepting oral
and written requests for coverage
determinations and redeterminations. In
addition, we proposed to revise the
regulation at § 423.128 paragraphs (b)(7)
and (d) to identify specific mechanisms
that plan sponsors must have in place
in order to meet the uniform appeals
requirements of section 1860D–
4(b)(3)(H) of the Act. Most notably, at
§ 423.128(b)(7), we proposed adding
paragraph (i) to require that plan
sponsors make available a standard form
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to request a coverage determination and
a standard form to request a
redetermination, to the extent such
standard request forms have been
approved for use by CMS. (Note that in
the context of appeals, the term
‘‘standard form’’ or ‘‘standardized form’’
is generally used to refer to a form that
would be the only permissible vehicle
for requesting a coverage determination
or redetermination.)
Section 3312 of the ACA also requires
plan sponsors to provide instant access
to the coverage determination and
appeals process through an internet
Web site. Consistent with the
requirement, we also proposed to add
paragraph (ii) to § 423.128(b)(7), which
would require sponsors to provide
immediate access to the coverage
determination and redetermination
processes via an Internet Web site. We
requested comments and ideas
regarding how this should work and any
issues that needed to be addressed
before operationalizing this
requirement. Section 3312 of the ACA
also specifies that plan sponsors must
establish a toll-free telephone line that
provides instant access to the coverage
determination and appeals processes.
Because plan sponsors are currently
required to offer a toll-free customer call
center as part of the provision of
information requirement at § 423.128(d),
we proposed to revise § 423.128(d)(1) to
include a requirement that sponsors
provide enrollees with access to the
coverage determination and
redetermination processes through their
toll-free customer call center.
To codify the proposals that plans
make available standard forms for
requesting coverage determinations and
redeterminations (to the extent that
standard request forms have been
approved for use by CMS), and establish
a toll-free telephone number and Web
site for accepting requests for coverage
determinations and redeterminations,
we proposed to amend § 423.562 by
adding a new paragraph (a)(1)(ii) which
cross-references the requirements in
§ 423.128 paragraphs (b)(7) and
(d)(1)(iii), and redesignating paragraphs
(a)(1)(ii) and (a)(1)(iii) as paragraphs
(a)(1)(iii) and (a)(1)(iv), respectively.
Finally, we proposed that Part D
sponsors modify their electronic
response transactions to pharmacies so
that they can transmit codes instructing
the pharmacy to provide a standardized
point-of-sale (POS) notice to enrollees
when a prescription cannot be filled.
Specifically, we proposed at
§ 423.128(b)(7)(iii) to require that Part D
sponsors modify their systems so that
the plan sponsors are capable of
transmitting codes to their in-network
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pharmacies and that the pharmacy will
be notified to populate or provide a
notice that can be printed by the
pharmacist at the point of sale. We
indicated that we would develop a
model notice to ensure that messaging at
the pharmacy is consistent with and in
accordance with CMS rules. Consistent
with this proposal, we also proposed to
revise § 423.562(a)(3) by deleting the
reference to posting the pharmacy
notice and instead requiring the sponsor
to arrange with its network pharmacies
to distribute notices instructing
enrollees how to contact their plans to
obtain a coverage determination or
request an exception if they disagree
with the information provided by the
pharmacist. We proposed that the
pharmacy notice be provided in writing,
consistent with the standards
established in § 423.128(b)(7)(iii), and
include instructions explaining how
enrollees can request a coverage
determination by calling their plan
sponsor’s toll free customer service line
or accessing their plan sponsor’s Web
site.
Comment: We received a large
number of comments on the merits of
requiring the use of a standard form for
requesting Part D exceptions and
appeals. Several commenters expressed
the belief that standard forms are not
feasible, noting that a single form cannot
accommodate the wide variations that
exist among plan formulary and
utilization management requirements,
and would therefore hinder access to
the exceptions and appeals processes.
Some commenters stated that,
particularly for biotech or other
specialty drugs, drug-specific forms
improve access to coverage because they
give enrollees and prescribers clearer
information on the specific plan
requirements for coverage. Other
commenters asserted that a single form
would simplify the processes for
enrollees, prescribers and plans.
Response: We have carefully
considered all the comments we
received on this issue, both in the
context of the overarching statutory
requirement that Part D plans use a
‘‘single, uniform exceptions and appeals
process’’ as well as keeping in mind the
requirements and procedures that are
already in place with respect to requests
for coverage determinations and
appeals. (Note that, as set forth in detail
in the existing regulations at § 423.578,
the term ‘‘exception’’ refers to certain
types of coverage determinations, such
as a request for a non-formulary drug,
that require an oral or written
supporting statement from a prescribing
physician or other prescriber.)
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Our current regulations permit either
written or oral requests for a coverage
determination (§ 423.568), with the
exception of requests for payment,
which must be made in writing unless
the sponsor has a voluntary policy of
accepting oral payment requests.
Standard redetermination requests
generally are made in writing, under
§ 423.582; plans may also accept oral
requests for standard redeterminations
but are not required to do so. Plans must
accept oral requests for expedited
redeterminations (§ 423.584). Currently,
we have developed model forms for
requesting a coverage determination—
one for beneficiaries and one for
prescribers—but there are no
comparable model forms for requesting
redeterminations. It is also important to
note that our existing subregulatory
guidance specifies that any written
request from an enrollee or prescriber is
acceptable, and that plans may not
require an enrollee or prescriber to make
a written request on a specific form (see
Section 40 of Chapter 18 of the
Prescription Drug Benefit Manual, Part
D Enrollee Grievances, Coverage
Determinations and Appeals). We
believe that the requirement that plans
accept any written request builds
significant enrollee protection into the
coverage determination and appeals
processes, and requiring the use of a
‘‘standard’’ form may inadvertently
create barriers for enrollees accessing
these processes. Thus, introducing a
requirement that a standard form be
used could actually conflict with the
underlying statutory intent of the new
provisions which are meant to enhance
enrollee access to the exceptions and
appeals processes.
Therefore, we are modifying the
proposed regulatory language at
§ 423.128(b)(7)(i) by replacing the
proposed reference to a ‘‘standard’’ form
with the statutory language referencing
use of a ‘‘uniform model form.’’ In
support of this requirement, we will
work with plans, prescribers, and
beneficiary advocates to revise the
existing model coverage determination
request form, including combining the
existing enrollee and prescriber request
forms into a single model form. We will
also develop a separate model
redetermination request form for use by
enrollees and their prescribers and
representatives. Plans will be required
to make these model forms available to
their enrollees via their websites, and to
include the model redetermination
request form with any coverage
determination denial notice, consistent
with the requirement under
§ 423.568(g)(4) that denial notices
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comply with notice requirements
established by CMS.
The introduction of uniform model
forms is not intended to interfere with
the current requirements regarding
acceptance of oral or written requests,
nor does it preclude plans from
developing and making available drugspecific coverage determination request
forms to supplement the model forms to
the extent such forms can enhance
access to the exceptions and appeals
process. Given that plan formularies,
utilization management tools and step
therapy requirements can vary widely,
we believe that not allowing plans to
continue making drug-specific forms
available or precluding enrollees from
making coverage determination requests
through other written vehicles, may
actually delay decision-making and/or
result in additional unfavorable
decisions based on a lack of adequate
documentation. Thus, although we
acknowledge that making multiple
forms available for use may cause some
confusion for enrollees, we believe that
continuing to permit such variation is in
the best interests of Medicare
beneficiaries. Plans must comply with
the appropriate marketing procedures
for approval of forms, including CMSapproved model forms.
Comment: A few commenters noted
that adopting a single form for both
coverage determinations and
redeterminations could lead to
confusion and erroneous or unnecessary
submissions from enrollees and
prescribers because of the oftendifferent rationales and necessary
supporting documentation for these
processes. This in turn would increase
the burden on both enrollees and
prescribers and cause delays in
accessing prescription drugs.
Response: We agree with the
commenters, and as stated previously,
intend to develop separate model forms
for coverage determinations and
redeterminations.
Comment: We received a number of
comments with recommendations that
CMS work closely with stakeholders in
developing standard forms. Some
commenters also supported consumer
testing and/or piloting standard forms
before full implementation.
Response: We thank the commenters
for their suggestions. As noted
previously, rather than require a
standard form, we intend to revise the
existing model coverage determination
form and develop a new model
redetermination form. Stakeholders will
have an opportunity to comment on
draft versions of these forms via the
same process used to solicit stakeholder
input on changes to manual guidance.
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Comment: Several commenters urged
CMS to require that all plan sponsors
make standard forms available in
multiple languages and make them
widely available in plan materials and
on plan Web sites.
Response: The regulations in Subpart
V of Part 423, and related subregulatory
guidance, establish CMS’ marketing
rules with respect to translated
materials. Model coverage
determination and redetermination
notices are considered post-enrollment
marketing materials, and therefore must
be translated in accordance with CMS
marketing requirements, consistent with
the related discussion above.
Comment: Although several
commenters were supportive of the
proposal related to providing instant
access to the coverage determination
and appeals process via an internet Web
site, many commenters raised concerns
about the administrative and
technological burdens and costs
associated with the development of a
Web-based interface that would allow
enrollees to access the coverage
determination and appeals processes.
Several commenters thought that the
benefit to enrollees will be minimal
compared with the additional costs and
operational complexities. These
commenters also claimed that plans will
not be able to fully realize potential
cost-savings in using such a system if
they are also required to maintain
processes for accepting requests via
telephone and mail. CMS also received
comments suggesting a pilot program,
greater stakeholder input, delayed
implementation, and making acceptance
of electronic requests optional.
Almost all commenters, whether they
opposed or supported the proposal,
raised questions about systems
specifications and functionality,
including whether plan systems for
accepting electronic requests must: (1)
Accept electronic attachments such as
clinical documentation, prescriber
supporting statements, enrollee receipts
for out-of-pocket expenses, and
Appointment of Representative (AOR)
forms or, alternatively, be equipped to
generate a bar code or other receipt to
allow for the separate submission of
supporting documents via fax; (2)
generate an auto-reply acknowledging
receipt of the request; (3) have a user
authentication feature; and (4) include
mandatory fields or other specifications
(for example, font type/size).
Response: As noted in the proposed
rule, section 3312 of the ACA states that
Part D plan sponsors shall provide
instant access to the coverage
determination (including exceptions)
and appeals processes through an
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Internet Web site. In the proposed rule,
we solicited comments on the viability
of a Web-based electronic interface that
would allow an enrollee (or an
enrollee’s prescriber or representative)
to immediately request a coverage
determination or redetermination via a
plan’s secure Web site. Our proposal
indicated that the interface would be the
‘‘electronic equivalent’’ of the paper
coverage determination and appeals
forms proposed at § 423.128(b)(7)(i). The
proposed rule described a system that
would provide some level of interactive
functionality on a plan’s Web site, such
as the ability to populate and submit an
online request form.
However, after reviewing all of the
comments on this provision, we agree
that requiring plans to develop an
interactive Web-based system by the
2012 plan year would impose
significant costs and operational
difficulties on many Part D plans.
Therefore, although we are finalizing
the regulatory language as proposed, we
are clarifying that ‘‘immediate access’’ to
the coverage determination and appeals
processes can be satisfied through a
variety of means. We strongly encourage
plans to establish interactive, web-based
systems to meet this requirement. At a
minimum, however, plans must have a
process for allowing an enrollee to
initiate a coverage determination or
appeal request by sending a secure email to an e-mail address that is
prominently displayed on the plan’s
Web site. In response to such requests,
plans must provide notice of decisions
in a timely manner, consistent with all
existing requirements in Subpart M of
our regulations. We believe that this
approach takes into consideration the
plans’ differing technological
capabilities, while implementing the
statutory requirement that plans provide
access to the coverage determination
and appeals processes via plan Web
sites. Although plans that have the
capability to deploy a more robust and
sophisticated Web-based system are
encouraged to do so, we do not intend
to specify systems functionality for plan
Web sites, beyond the requirement that
an enrollee (and an enrollee’s prescriber
or representative) be able to initiate a
request by sending a secure e-mail via
the plan’s Web site.
Finally, we note that enrollees (and
their prescribers and representatives)
will retain the right to make requests for
oral coverage determinations and
expedited appeals which serve as
another means of obtaining instant
access to the coverage determination
and appeals processes.
Comment: We received some
comments regarding the requirement
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that plans provide immediate access to
the coverage determination and
redetermination processes through a
toll-free phone number. Commenters
opposed to this requirement indicated
that maintaining a toll-free line creates
an undue burden on plans, provides
minimal benefit to enrollees and
increases confusion among enrollees.
These commenters also requested a
delayed implementation date.
Commenters who support the proposed
requirement requested that CMS require
plans to disseminate the toll-free
number and related information widely
in plan materials, and support
stakeholder input in the development of
model scripts for customer service
representatives (CSRs) who staff these
toll-free lines.
Response: The existing regulations at
§ 423.128(d)(1) already require plan
sponsors to maintain a toll-free
customer call center, and existing
subregulatory marketing guidance
clarifies applicable call center coverage
requirements for coverage
determinations and redeterminations.
The proposed change we intend to
finalize adds the requirement that plans
provide immediate access to the
coverage determination and
redetermination processes through their
toll-free customer call centers. If using
an existing toll-free number for
receiving and processing oral coverage
determination and appeals requests
could potentially cause delays and/or
missed time frames, plans may establish
a dedicated toll-free customer service
line for receiving these requests. We
note that plans are currently required
under § 423.568(a) and § 423.570(b)
respectively, to accept oral requests for
both standard coverage determinations
(excluding reimbursement requests) and
expedited coverage determinations, and
under § 423.584(b), to accept oral
requests for expedited redeterminations.
In the proposed rule, we noted that a
CSR could potentially access the plan’s
web-based application for coverage
determinations and appeals and enter
information supplied by the enrollee via
telephone. However, as discussed
previously, we are scaling back our
expectations with respect to plan
capabilities for having an interactive
web-based application for coverage
determinations and appeals. As such,
we expect that plans will continue to
utilize existing mechanisms for
receiving and processing oral coverage
determination and appeal requests,
including those received outside normal
business hours. Requests made through
the toll-free number would still be
subject to existing processing guidelines
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and timeframes outlined in Subpart M
of the regulations.
Comment: Several comments were
received regarding the proposed
requirement that Part D sponsors revise
their payment systems to notify network
pharmacies that they need to generate a
printed notice containing information
for enrollees about how to contact their
plan to request a coverage
determination, including an exception,
when a prescription cannot be filled as
written. Commenters indicated that
because the POS notice would not
provide enrollees with any more
information than what is already
provided on their member ID cards, it is
an undue burden on pharmacies, and is
not ‘‘green.’’
Response: We disagree with the
commenters’ concerns regarding the
lack of utility in the distribution of a
POS notice. Other commenters have
expressed concern that enrollees are not
aware of their right to request a coverage
determination and that having the
notice posted at the pharmacy counter
is only useful to the extent the enrollee
is directed to it by his/her pharmacist.
We also do not agree that the
distribution of the POS notice is an
additional burden on pharmacies. It is
likely the POS notice will relieve
pharmacy staff from being queried by
enrollees as to why their prescriptions
could not be filled as written, because
the notice refers the enrollee directly to
their plan to obtain a coverage
determination. Furthermore, we believe
that eliminating the current option of
directing enrollees to a posted notice
and requiring that they receive a printed
notice strengthens enrollee access to the
coverage determination process because
the enrollee will leave the pharmacy
with printed instructions about
contacting the plan to request a coverage
determination.
Comment: Several of the comments
regarding the proposed requirement to
distribute POS notices incorrectly
referred to the POS transaction at the
pharmacy counter as a denial of
prescription drug coverage (an adverse
coverage determination).
Response: We reiterate our position in
previous rulemaking and existing
subregulatory guidance that plan
sponsors are not required to treat the
presentation of a prescription at the
pharmacy counter as a request for
coverage determination. Accordingly,
the plan sponsor is not required to
provide the enrollee with a written
denial notice at the pharmacy as a result
of the transaction.
Comment: Several commenters
supported the requirement that a POS
notice be distributed at the pharmacy,
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but stated that the notice should be
tailored to each individual’s situation,
including a description of why the
prescription could not be filled as
written.
Response: We agree it would be useful
for enrollees to have additional
information such as the name of the
drug and the specific reason(s) the
prescription cannot be filled as written
as part of the POS notice. However,
such situation-specific messaging
cannot be generated at this time. Until
we have the opportunity to work with
the industry, specifically the National
Council of Prescription Drug Programs
(NCPDP), to develop and standardize
codes that will assist Part D sponsors,
processors and pharmacies with
generating this kind of information as
part of the transaction, we cannot
require Part D sponsors or their
processors to code their systems to
generate such a notice.
We are finalizing the proposed
language in § 423.128(b)(7) and
§ 423.562, with the modifications to
§ 423.128(b)(7)(i) described previously.
Consistent with section 3312 of the
ACA, these new requirements will be
effective January 1, 2012.
14. Including Costs Incurred by AIDS
Drug Assistance Programs (ADAPs) and
the Indian Health Service Toward the
Annual Part D Out-of-Pocket Threshold
(§ 423.100 and § 423.464)
Section 1860D–2(b)(4)(C) of the Act
provides protection against high out-ofpocket expenditures for Part D eligible
individuals. Under the standard Part D
benefit, a beneficiary is entitled to
reductions in cost sharing under the
catastrophic phase of the benefit once
his or her true out-of-pocket (TrOOP)
expenditures reach the annual Part D
out-of-pocket threshold. Prior to
enactment of the ACA, TrOOP
expenditures represented costs actually
paid by the beneficiary, another person
on behalf of the beneficiary, or a
qualified State Pharmaceutical
Assistance Program (SPAP).
Thus, prior to the passage of the ACA,
supplemental drug coverage provided
by the Indian Health Service (IHS),
Indian tribes and organizations, and
urban Indian organization facilities (as
defined in section 4 of the Indian Health
Care Improvement Act) were not
considered to be TrOOP eligible because
these entities fell under our definition of
‘‘government-funded health program,’’
under § 423.100. Similarly, the Health
Resources and Services Administration
(HRSA) Ryan White HIV/AIDS Programfunded AIDS Drug Assistance Programs
(ADAPs) cost sharing were not counted
toward TrOOP for the purpose of
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meeting the out-of-pocket threshold at
which catastrophic coverage under the
Part D benefit begins. As explained in
the preamble in the January 2005 final
rule (see 70 FR 4240 and 4241)
implementing the Part D program,
ADAPs were not considered SPAPs
because these programs received
Federal funding. With the passage of the
ACA, CMS regulations, as they relate to
IHS/Tribes and ADAPs, have been
superseded effective January 1, 2011.
Section 3314 of the ACA amends
section 1860D–2(b)(4)(C) of the Act to
specify that costs borne or paid for by
IHS, an Indian tribe or tribal
organization, or an urban Indian
organization, and costs borne or paid for
by an ADAP will be treated as incurred
costs for the purpose of meeting the
annual out-of-pocket threshold. Based
on these amendments, we proposed to
revise the definition of incurred cost at
§ 423.100(2)(ii) to include payments by
the IHS (as defined in section 4 of the
Indian Health Care Improvement Act),
an Indian tribe or tribal organization, or
an urban Indian organization (referred
to as I/T/U pharmacy in § 423.100) or
under an AIDS Drug Assistance Program
(as defined in part B of title XXVI of the
Public Health Service). We also
proposed to amend § 423.464(f)(2) to
specifically exclude expenditures made
by IHS, an Indian tribe or tribal
organization, or an urban Indian
organization (referred to as I/T/U
pharmacy in § 423.100) or under an
AIDS Drug Assistance Program (as
defined in part B of title XXVI of the
Public Health Service) from the
requirement to exclude such
expenditures for the purpose of
determining whether a Part D enrollee
has satisfied the out-of-pocket
threshold.
Comment: We received a comment
requesting that CMS revise regulations
at § 423.100 and § 423.464(f)(2) to
reference section 4 of the Indian Health
Care Improvement Act in the
parenthetical following the phrase
‘‘urban Indian organization,’’ and replace
the term ‘‘payments’’ in § 423.464(f)(2)
with the phrase ‘‘costs borne or paid by’’
to more closely track the statutory
language provided in 3314 of ACA.
Response: We agree with this
comment and revise the regulation text
at § 423.100 to reference section 4 of the
Indian Health Care Improvement Act. In
addition, in response to this comment
and to avoid confusion, we are
removing the redundant reference to
ADAPs and IHS/tribes/tribal
organizations in § 423.464(f)(2)(i)(B).
Because costs borne or paid by these
organizations already are included in
the definition of ‘‘incurred costs’’ as
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referenced in § 423.464(f)(2)(i)(A), they
need not be expressly referenced in
§ 423.464(f)(2)(i)(B). We also revised
§ 423.100(2)(ii) to remove the cross
reference to § 423.464.
Comment: Another commenter
requests that CMS provide a list of
ADAP BINs (bank identification
numbers)/PCNs (processor control
numbers) to ensure proper TrOOP
calculation for ADAP members by the
Part D sponsor.
Response: Both CMS and the Health
Resources and Services Administration
(HRSA) have provided training and
assistance to ADAP grantees about CMS’
coordination of benefits (COB) data
exchange process and its relationship to
the member’s TrOOP calculation.
Participation in this process will allow
ADAPs to provide the BIN and PCN
directly to CMS’ COB contractor, who
will then identify ADAPs as TrOOPeligible payers as part of transactions
sent from our TrOOP facilitator to Part
D sponsors.
Except for the technical amendments
to the proposed regulations text noted
previously, we are finalizing the
regulation as proposed.
15. Cost Sharing for Medicare-Covered
Preventive Services (§ 417.454 and
§ 422.100)
Effective January 1, 2011, sections
4103 and 4104 of the ACA revised
sections 1833 and 1861 of the Act to
create new coverage of Personalized
Prevention Plan Services (PPPS) or
‘‘annual wellness visits’’ and establish a
requirement that no cost sharing may be
charged to beneficiaries under Original
Medicare for the annual wellness visit,
the initial preventive physical exam
(IPPE) and Medicare-covered preventive
services graded as an A or B by the U.S.
Preventive Services Task Force
(USPSTF).
In light of the new legislative
requirements for Original Medicare, and
the importance of preventive services in
managed and coordinated care, we
included information related to
coverage and cost sharing for preventive
services in guidance issued 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 May 20, 2010 (‘‘Supplemental 2011
Benefits Policy and Operations
Guidance on Application of the
Mandatory Maximum Out-of-Pocket
(MOOP) for Dual Eligible SNPs, and
Cost Sharing for Preventive Services’’).
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In this guidance, we strongly
encouraged MA organizations to
provide all in-network Medicarecovered preventive services without
cost sharing charges under their MA
plans in contract year 2011, indicated
our intention to consider rulemaking to
require that such preventive services be
provided with no cost sharing, and
provided instructions on how to reflect
the zero cost sharing in their plan
benefit package (PBP) submissions for
contract year 2011.
As required at section 1852(a)(1)(A) of
the Act (except as provided in section
1859(b)(3) of the Act for MSA plans and
in section 1852(a)(6) of the Act for MA
regional plans), each MA plan must
provide to its members all Parts A and
B benefits included under the Original
Medicare fee-for-service program as
defined at section 1852(a)(1)(B) of the
Act. We agree that the utilization of
preventive services should be
encouraged by providing such services
without cost sharing. Therefore, we
believe it is necessary, and appropriate,
to provide this same incentive to all
Medicare beneficiaries, whether they
receive their benefits through Original
Medicare, under an MA plan, or under
a section 1876 cost contract.
Therefore, under our authority in
section 1856(b)(1) of the Act to establish
MA standards by regulation, and our
authority in section 1857(e)(1) of the Act
to establish requirements we find
‘‘necessary and appropriate,’’ we
proposed to add a new paragraph (k) to
§ 422.100, and under our authority in
section 1876(i)(3)(D) of the Act to
impose ‘‘other terms and conditions’’
deemed ‘‘necessary and appropriate,’’
new paragraph (f) to § 417.101, to
require MA organizations and section
1876 cost plans to provide in-network
Medicare-covered preventive benefits at
zero cost sharing, consistent with the
new regulations for Original Medicarecovered preventive benefits.
For specific information about the list
of preventive services covered under
Original Medicare without cost sharing
and information about what is included
in the annual wellness visit, we directed
plans to go to the following Medicare
Web sites: https://
www.cms.HospitalOPPS/ and https://
www.cms.gov/PhysicianFeeSched/.
Comment: Commenters expressed
their support for our proposal to require
MA organizations and section 1876 cost
plans to provide in-network Medicarecovered preventive benefits at zero cost
sharing, consistent with the new
regulations for Original Medicarecovered preventive benefits. Some of
those commenters also requested that
CMS clarify that only in-network
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preventive services will be required to
have zero cost sharing and that MA
plans will be required to cover the same
preventive services at zero cost sharing
as are provided under Original Medicare
without cost sharing.
Response: We thank the commenters
for their support. We clarify that the
preventive services to be provided by
MA plans without cost sharing are those
provided in-network and that they are to
be the same services that are covered
under Original Medicare with zero cost
sharing and will take into consideration
the commenters’ concerns as we move
forward with other guidance and
educational materials.
Comment: We received one comment
requesting that we extend the
requirement for preventive services’
zero cost sharing to out-of-network
settings. The commenter believes that
because preventive services are so
important for beneficiary health CMS
should provide equal access to them no
matter where the beneficiary receives
them.
Response: Our policy for cost sharing
is limited to in-network Medicare parts
A and B services and we made no
proposal to change that policy.
Furthermore, we believe that the nature
of the specified preventive services is
such that there is not a need for
beneficiaries to have the same access to
them out-of-network as is provided innetwork. We believe that the services
are most beneficial to an enrollee when
provided in-network because
communication among the enrollee’s
providers is an integral part of a
successful prevention plan. By receiving
in-network preventive services the
enrollee’s needs for any follow-on
services will be identified and furnished
and this is less likely to occur if
individual preventive services are
received elsewhere.
Comment: We received a comment
expressing concern that some of the
policies related to implementation of
zero cost sharing for Medicare-covered
preventive benefits would create
beneficiary confusion on specific
elements and that such confusion would
lead to complaints that could have an
impact on plans’ quality bonus
payments.
Response: We appreciate the
commenter’s concern and going
forward, we will continue to make every
effort to educate beneficiaries and
providers about the services and
situations in which zero cost sharing
applies.
Comment: We received a few
comments requesting that additional
services be included as Medicare-
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covered preventive services with zero
cost sharing.
Response: We thank the commenters
for their suggestions but they are beyond
the scope of this proposed rule.
Comment: Two commenters objected
to our codification in the proposed rule
of our proposal to extend the
requirement for plans to charge zero
cost sharing for CMS-specified innetwork preventive services to section
1876 cost plans by adding new
paragraph (f) to § 417.101, which
otherwise does not govern cost plans.
The commenters suggested that instead
we may want to propose to add a new
paragraph to § 417.454, Charges to
Medicare Enrollees.
Response: We thank the commenters
for alerting us to this codification issue.
In this final rule, we will not make a
change to § 417.101 and will instead
add new paragraph (d) to § 417.454 to
require that no cost sharing may be
charged by section 1876 cost plans for
CMS-specified in-network preventive
services.
We have considered all of the
comments received on this proposal and
will finalize our proposed policy to
amend § 422.100 by adding new
paragraph (k) to require that there be no
cost sharing for in-network Medicarecovered preventive services, as specified
by CMS annually. In addition, we are
adding new paragraph (d) to § 417.454
as previously specified.
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16. Elimination of the Stabilization
Fund (§ 422.458)
Section 221(c) of the MMA added
section 1858 of the Act to establish rules
for MA Regional Plans. Section 1858(e)
established an MA Regional Plan
Stabilization Fund (the Fund) for the
purpose of providing financial
incentives to MA organizations that
offered new MA Regional Plans
nationally, or in each MA region
without one.
Section 10327(c) of the ACA repealed
section 1858(e) of the Act, eliminating
the Stabilization Fund. Therefore, we
proposed to delete paragraph (f) from
§ 422.458, since the statutory basis for
the Fund no longer exists. We received
no comments on this proposal and
therefore are finalizing this provision
without modification. We are also
adopting § 422.258(f) as proposed in this
final rule.
17. Improvements to Medication
Therapy Management Programs
(§ 423.153)
As required by section 1860D–
4(c)(1)(C) of the Act, Part D sponsors
must establish Medication Therapy
Management Programs (MTMPs).
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Section 1860D–4(c)(2) of the Act
requires MTMPs to be designed to
ensure that, with respect to targeted
beneficiaries described in section
1860D–4(c)(2)(A)(ii) of the Act, covered
Part D drugs are appropriately used to
optimize therapeutic outcomes through
improved medication use and to reduce
the risk of adverse events. As noted in
our November 2010 proposed rule, these
requirements are codified in
§ 423.153(d) of the Part D regulations.
Effective January 1, 2013, section
10328 of the ACA amends section
1860D–4(c)(2) of the Act to require
prescription drug plan sponsors to
perform a quarterly assessment of all ‘‘at
risk’’ individuals who are not already
enrolled in an MTMP, establish opt-out
enrollment for MTM, and offer
medication therapy management
services to targeted beneficiaries. These
MTM services must include, at a
minimum, an annual comprehensive
medication review (CMR) that may be
furnished person-to-person or via
telehealth technologies and a review of
the individual’s medications, which
may result in the creation of a
recommended medication action plan,
with a written or printed summary of
the results of the review provided to the
targeted individual. The law also
requires that the action plan and
summary resulting from the CMR be
written in a standardized format.
In our November 2010 proposed rule,
we noted that prior to the passage of the
new legislation, we had already made
several improvements to the MTM
program. We also indicated that in
comparing the requirements in section
10328 of the ACA to those codified in
the April 2011 final rule containing
policy and technical changes under the
Part C and Part D programs (see 75 FR
19772 through 19776 and 19818 and
19819), we found that a number of the
provisions are consistent. Specifically,
the April 2011 final rule requires the
use of an opt-out method of enrollment
for targeted beneficiaries, an annual
comprehensive medication review
(CMR) with a written summary,
quarterly targeting of beneficiaries for
enrollment into the MTMP, and
quarterly targeted medication reviews
for individuals enrolled in the MTMP
with follow-up interventions when
necessary. However, to ensure that our
policies are fully consistent with the
new requirements added by section
10328 of the ACA, we proposed to
amend the current regulations to clarify
the Part D MTMP requirements relating
to the required use of a standardized
format for the written summary and
action plan that may result from the
CMR. Thus, in our November 2010
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proposed rule, we proposed to amend
§ 423.153(d)(1)(vii) to add the
requirement that Part D sponsors use a
standardized format for the action plan
and summary resulting from a review of
the targeted beneficiary’s individual
medications, and to provide the
individual with a written or printed
copy of the summary. We also noted our
plan to award a contract to an outside
entity, pending the availability of
funding, to work in consultation with
stakeholders in order to develop a
standardized format for the action plan
and summary which may result from
annual or quarterly targeted medication
reviews.
In our November 2010 proposed rule,
we also proposed to amend the MTMP
requirements at § 423.153(d)(1)(vii) to
explicitly permit the use of telehealth
technologies to conduct the required
annual CMR as referenced under the
ACA, to allow the sponsors to attempt
innovative techniques that provide care
at a distance in order to better serve the
beneficiary, especially beneficiaries who
cannot travel to the provider’s location,
or who reside in a remote location or in
a different time zone. We emphasized as
well that when using telehealth
technologies, personal health
information privacy and security must
be ensured. This would involve the
establishment of appropriate
administrative, technical, and physical
safeguards to protect the confidentiality
of data and to prevent unauthorized use
of, or access to, it. The safeguards must
provide a level and scope of security
that is not less than the level and scope
of security requirements established by
the Office of Management and Budget
(OMB) in OMB Circular No. A–130,
Appendix III—Security of Federal
Automated Information Systems) as
well as Federal Information Processing
Standard 200 entitled ‘‘Minimum
Security Requirements for Federal
Information and Information Systems’’;
and Special Publication 800–53
‘‘Recommended Security Controls for
Federal Information Systems.’’ The use
of unsecured telecommunications,
including the Internet, to transmit
individually identifiable information
would, therefore, be prohibited.
In addition to the proposed regulatory
changes required to implement the ACA
provisions, in our November 2010
proposed rule, we proposed to amend
the MTMP requirements related
specifically to MTM services furnished
in LTC facilities. As provided under
sections 1819(b)(4) and 1919(b)(4) of the
Act, LTC facilities must provide, either
directly or under arrangements with
others, for the provision of
pharmaceutical services to meet the
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needs of each resident. In our November
2010 proposed rule, we noted this
requirement is codified in regulations at
§ 483.60 which require LTC facilities to
employ or obtain the services of a
licensed pharmacist to provide
consultation on all aspects of the
provision of pharmacy services in the
facility, including a drug regimen
review at least once a month for each
facility resident. We stated further that,
although Part D sponsors are required to
provide MTM services to all
beneficiaries meeting the target criteria,
it is not clear that these services are
being made available to nursing home
residents meeting these criteria. We
noted our concern that if MTM is
provided, in the absence of
coordination, the MTMP and the
consultant pharmacist’s drug regimen
review could result in conflicting
recommendations relating to medication
management. Therefore, we proposed to
amend § 423.153(d)(5) to require Part D
sponsors to contract with LTC facilities
to provide appropriate MTM services to
residents in coordination with the
monthly medication reviews and
assessments performed by the LTC
consultant pharmacist. We expressed
our belief that this approach would
enable beneficiaries to receive the full
benefits of the sponsor’s MTMP and
would also result in coordinated
assessments that would be more likely
to discover evidence of adverse side
effects and medication overuse, and
solicited comments from the public on
how such coordination between
sponsors and LTC facilities might work
best.
Comment: One commenter noted that
much evidence has been provided over
the years indicating the superior results
of face-to-face encounters between
patients and health care providers and
asked that the regulation specifically
identify pharmacists as face-to-face
providers.
Response: While we recognize that
some MTM providers may prefer faceto-face encounters, section 1860D–
4(c)(2)(C) of the Act requires the annual
comprehensive medication reviews
include either an interactive person-toperson or telehealth consultation. We
believe that, given the variability of
beneficiary circumstances and needs
and the advances in technology such as
telehealth, it is important that MTM
providers take advantage of this
flexibility in the methods of delivery of
MTM services in order to maximize
beneficiary access to these services. We
note further that the proposed
regulation at § 423.153(d)(1)(vii)(B)
specifies that the annual comprehensive
medication reviews must be performed
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by a pharmacist or other qualified
provider. We will retain this
requirement in the final rule.
Comment: Several commenters
expressed strong support for the use of
telehealth technologies in conducting
CMRs; one commenter emphasized the
importance of face-to-face counseling in
the MTM context; and another
commenter opposed the use of remote
MTM for long term care (LTC)
beneficiaries. This latter commenter
noted that many LTC residents have
cognitive impairments and, thus, will
rarely be able to interact with, or
respond to, MTM services.
Response: We appreciate the support
commenters expressed for the use of
telehealth technologies for CMRs, but
note that use of these technologies is an
option. The ACA amended section
1860D–4(c)(2) of the Act to require an
annual CMR ‘‘furnished person-toperson or using telehealth technologies’’
(emphasis added). We agree that the use
of telehealth technologies for
conducting CMRs may not be
appropriate for all beneficiaries. We also
recognize and agree with the commenter
that beneficiaries residing in LTC
facilities who have cognitive
impairments may be unable to
participate in an interactive CMR. The
current regulations at
§ 423.153(d)(1)(vii)(B) reflect this
awareness by exempting sponsors from
offering interactive CMRs to targeted
beneficiaries in LTC settings. The Act,
as amended by section 10328 of ACA,
does not provide a basis for
distinguishing the offering of MTM
services based on setting. Since the ACA
requirements are not effective until
January 2013, we will undertake
additional rulemaking to further amend
the current regulations at
§ 423.153(d)(1)(vii)(B) to clarify the
requirement for MTM programs to offer
CMRs to targeted beneficiaries in LTC
settings.
Comment: One commenter
recommended that we ensure that when
MTM services are provided by
individuals who are not pharmacists
and who have not received the
extensive training in medications that a
pharmacist receives, these individuals
are qualified to provide MTM
consultations.
Response: We are not aware of
consensus within the industry regarding
the qualifications necessary to provide
MTM consultations. As a result, we are
not prepared at this time to establish
requirements regarding MTM provider
qualifications. However, we may
perhaps do so in the future and would
welcome information to assist us in
defining the qualifications.
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Comment: Numerous commenters
expressed support for a standardized
format for the written summary and
action plan resulting from an annual
comprehensive medication review
CMR). One commenter applauded our
plan to work with stakeholders to
develop the standardized formats.
Another commenter asked how the
stakeholders who would be included in
the development of the standardized
formats would be determined. Several
more commenters recommended we
consider input from all industry
stakeholders, including plan sponsors,
PBMs, pharmacy organizations, and
current MTM providers. Two
commenters expressed an interest in
working on the development and testing
of the formats. Two commenters noted
that there may be substantial
administrative costs associated with
implementing these new standardized
documents and recommended that we
issue the formats in draft for comment
and carefully review the comments
received to minimize the
implementation costs and burden.
Response: We appreciate the support
as well as the interest expressed by
commenters in participating in the
development process and we agree with
the recommendation to provide
opportunity for the industry to review
and comment on the draft formats. The
statute specifies that the standardized
formats for the action plan and
summary will be developed in
consultation with relevant stakeholders.
It is our intention to examine existing
model summaries and action plans in
current use and to create draft formats
based on the existing models. We have
already begun to solicit copies of the
existing models in use today and are in
the process of reviewing the documents
received in response to our request.
Once the draft standardized formats
have been developed, we will issue
them for industry review and comment.
We will consider the input from all
stakeholders and revise the draft
standardized formats based on the
comments received. Additional
opportunities for public review and
comment will be available as the revised
formats undergo the OMB approval
process required by the Paperwork
Reduction Act (PRA). We believe our
plan for developing the standardized
formats by offering multiple
opportunities for public review and
comment will be adequate to permit all
relevant stakeholders to provide input.
We will carefully consider the
comments received at all points in the
process to ensure that the standardized
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formats do not present an undue
implementation burden.
Comment: Several commenters
suggested that the standardized formats
should be limited and offer adequate
flexibility for plan sponsors to tailor the
summaries and action plans to meet the
needs of beneficiaries, caregivers, and
plan sponsors.
Response: As we interpret the statute,
Congress asked for standardized
formats. Therefore, although the specific
content of the summary or action plan
will be tailored to the beneficiary, there
will not be much variability in the style,
organization, and general appearance of
these documents.
Comment: Two commenters noted
that, with the exception of correcting his
or her non-adherence, a beneficiary
cannot make medication changes
without a prescriber’s intervention and,
as a result, suggested that a copy of the
CMR summary also should be provided
to all the beneficiary’s prescribers that
are known to the plan.
Response: We believe the results of
the medication review should be shared
with the prescribing physicians as
necessary, based on the professional
judgment of the reviewer and needs of
the beneficiary. In our view, mandating
that review summaries are always sent
to all prescribers would add
unnecessary administrative burden and
cost.
Comment: One commenter questioned
whether the standardized format would
require sponsors to use vendor software.
This commenter also asked when the
standardized formats would be available
and if the formats would be required for
the targeted medication reviews (TMRs)
or only CMRs.
Response: Use of the standardized
summary and action plan formats will
not require sponsors to use a specific
vendor’s software. As noted previously,
we expect to create draft formats based
on existing models and issue the draft
for review and comment. Since we have
already begun the process of examining
some of the existing models in use
today, we hope to have a draft available
for review within the next few months.
With regard to the required use of the
formats, the ACA amended section
1860D–4(c)(2) of the Act to require that
a CMR include the provision of a
written or printed summary and may
also result in the creation of an action
plan. The statute expressly required the
development of standardized formats for
summaries and action plans that are
provided as part of the CMR. However,
we would encourage plans to use these
formats for TMRs as well.
Comment: One commenter requested
that we define telehealth.
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Response: Section 1860D–4(c)(2) of
the Act states that an annual CMR must
be ‘‘* * * furnished person-to-person or
using telehealth technologies (as
defined by the Secretary) * * *’’ The
U.S. Department of Health and Human
Services’ Office of the National
Coordinator for Health Information
Technology (ONC) defines telehealth as
‘‘the use of telecommunications
technologies to deliver health-related
services and information that support
patient care, administrative activities
and health education. The technology is
a means to improve access to care, while
reducing cost of transportation and
increasing convenience to patients
care.’’ This definition is available on the
ONC Web site at https://healthit.hhs.gov/
portal/server.pt?open=
512&objID=1224&parentname=
CommunityPage&parentid=
27&mode=2&in_hi_userid=
11113&cached=true.
The ONC Web site also includes
descriptions of various telehealth
applications that may be considered for
performing a CMR, including for
example—
• Live videoconferencing: Audio and
video feeds used to connect two or more
geographically dispersed health care
facilities to enable patients and
physicians to consult in real time; and
• E-visits/e-consults: Evolved from
secure email or phone based encounters,
e-visits can be offered by health insurers
through a secure Web portal.
Whatever telehealth technology is used
for the CMR, it must enable the MTM
provider to perform an interactive
consultation with the targeted
beneficiary.
Comment: A few commenters
suggested that we monitor the outcomes
and methods for conducting CMRs,
including tracking the technology used
and outcomes for various telehealth
technologies.
Response: We agree that it is
important to evaluate outcomes and
identify best practices in MTM,
including possibly the use of telehealth
technologies. We will consider such
monitoring in the future.
Comment: A few commenters strongly
supported our proposed requirement to
coordinate MTM with LTC consultant
pharmacist evaluation and monitoring.
A large number of commenters,
however, expressed concerns regarding
the proposed requirement for Part D
sponsors to contract with all the LTC
facilities in which their Part D enrollees
reside and many offered alternative
contracting arrangements or approaches
for ensuring that LTC beneficiaries
receive the benefits of the sponsor’s
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MTM program and that evidence of
adverse side effects or medication
overuse is discovered and addressed.
Several commenters suggested we delay
implementation and work with industry
stakeholders to identify and evaluate
alternatives.
Response: We appreciate the support
expressed for our proposed requirement,
but we also agree that there may be a
less burdensome approach for achieving
our goal. Therefore, we are not
finalizing the proposed requirement in
§ 423.153(d)(5) and will work with
stakeholders to develop an alternate
proposal. We thank the many
commenters who suggested alternative
arrangements and will consider these
recommendations as we seek to identify
the best approach for coordinating MTM
and LTC consultant pharmacist
monitoring.
Based on the comments received, we
are finalizing this provision with the
amendments previously noted. This
provision will be effective January 1,
2013.
18. Changes To Close the Part D
Coverage Gap (§ 423.104 and § 423.884)
In our November 2010 proposed rule,
we noted that paragraphs (b)(3) and (d)
of section 1101 of the ACA amended
section 1860D–2(b) of the Act by adding
provisions that revise the Part D benefit
structure to close the gap in coverage
that occurs between the initial coverage
limit for the year and the out-of-pocket
threshold. We noted that the new
provisions not only will revise the
amount of coinsurance for costs of
covered drugs above the initial coverage
limit and below the out-of-pocket
threshold (that is, within the Part D
coverage gap) for applicable
beneficiaries, but also will reduce the
growth in the annual out-of-pocket
threshold from 2014 to 2019.
As stipulated under the new
provisions in section 1860D–2(b)(2)(C)
and (D) of the Act, effective January 1,
2011, cost sharing in the coverage gap
for ‘‘applicable beneficiaries’’ will be
determined on the basis of whether the
covered Part D drug is considered an
‘‘applicable drug’’ under the Medicare
coverage gap discount program as
defined at section 1860D–14A(g)(2).
Section 1860D–14A(g)(2)(A) defines an
applicable drug under the Medicare
coverage gap discount program as a
covered Part D drug that is either
approved under a new drug application
(NDA) under section 505(b) of the
Federal Food, Drug, and Cosmetic Act
or, in the case of a biologic product,
licensed under section 351 of the Public
Health Service Act (BLA) (other than
under section 351(k)). Under standard
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prescription drug coverage, coinsurance
for applicable beneficiaries in the
coverage gap for drugs that are not
applicable drugs under the Medicare
coverage gap discount program (that is,
generic drugs) will be either: (1) Equal
to the statutory generic gap coinsurance
percentage for the year; or (2) actuarially
equivalent to an average expected
coinsurance for covered Part D drugs
that are not applicable drugs under the
Medicare coverage gap discount
program at the statutory generic gap
coinsurance percentage for the year, as
determined through processes and
methods established under section
1860D–11(c) of the Act and
implemented at § 423.265(c) and (d) of
our regulations. In our November 2010
proposed rule, we explained that for
applicable drugs under the Medicare
gap coverage discount program,
coinsurance in the coverage gap for the
actual cost of the drug as defined at
§ 423.100 minus any applicable
dispensing fees will be either: (1) Equal
to the difference between the applicable
gap percentage for the year and the
discount percentage determined under
the Medicare coverage gap discount
program at section 1860D–14A(4)(A) of
the Act; or (2) actuarially equivalent to
an average expected payment of the
coinsurance for applicable covered Part
D drugs at the applicable gap percentage
for the year, as determined through
processes and methods established
under section 1860D–11(c) of the Act
and implemented at § 423.265(c) and (d)
of our regulations. We stated that, as a
result, when the applicable drug is
purchased at a network pharmacy, the
beneficiary will be fully liable for any
dispensing fees, since the statute
requires that the coinsurance apply only
to the negotiated price of the drug
minus dispensing fees.
We proposed to codify these new
requirements in § 423.104(d)(4).
Additionally, since the terms applicable
drug, applicable beneficiary, and
coverage gap have not been previously
defined in regulation, we proposed new
definitions for these terms at § 423.100.
Consistent with section 1101 of the
ACA, these reductions in cost sharing
during the coverage gap will apply only
to applicable beneficiaries. In defined
standard coverage, cost sharing during
the coverage gap will remain unchanged
at 100 percent coinsurance for all other
Part D beneficiaries (prior to application
of any low-income cost sharing
subsidy).
As provided under the new
provisions in section 1860D–
2(b)(4)(B)(i) of the Act, the rate of
growth of the annual out-of-pocket
threshold will be reduced from 2014 to
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2019. In our November 2010 proposed
rule, we proposed to amend
§ 423.104(d)(5)(iii) to state that the
annual out-of-pocket threshold for years
2014 and 2015 will be the amount
specified for the previous year,
increased by the ‘‘annual percentage
increase’’ in the average expenditures for
Part D drugs per eligible beneficiary
currently specified in
§ 423.104(d)(5)(iv), minus 0.25
percentage point. Further, we proposed
to amend § 423.104(d)(5)(iii) and (v) to
reflect that for years 2016 through 2019,
the annual out-of-pocket threshold will
be the amount specified for the previous
year, increased by the lesser of: (1) the
annual percentage increase in the
consumer price index specified in
§ 423.104(d)(5)(v) for the year involved
plus 2 percentage points; or (2) the
‘‘annual percentage increase’’ specified
in § 423.104(d)(5)(iv), rounded to the
nearest $50. We also noted that the new
provisions in section 1860D–
2(b)(4)(B)(i) of the Act require us to
calculate the annual out-of-pocket
threshold for 2020 and later as if no
change had been made to the
calculation of the out-of-pocket
threshold for 2014 through 2019 under
the ACA. Thus, we proposed to amend
§ 423.104(d)(5)(iii) to reflect this
requirement.
In our November 2010 proposed rule,
we noted the ACA also amended section
1860D–22(a)(2)(A) of the Act by adding
a provision with regard to the actuarial
equivalence of retiree prescription drug
plan coverage to standard coverage.
Specifically, the new provision requires
that when attesting to the actuarial
equivalence of the plan’s prescription
drug coverage to defined standard
coverage, qualified retiree prescription
drug plans not take into account the
value of any discount or coverage
provided during the gap in coverage that
occurs between the initial coverage limit
during the year and the out-of-pocket
threshold for defined standard coverage
under Part D. We proposed to codify
this new requirement in § 423.884(d).
As indicated in section II.A. of this
final rule, the regulations implementing
these provisions are effective 60 days
after the date of display of the final rule.
Comment: Several commenters
expressed support for this provision and
the proposed new definitions for
‘‘applicable drug,’’ ‘‘applicable
beneficiary’’ and ‘‘coverage gap.’’ Two
commenters urged us to provide
stakeholders, including beneficiaries
and independent pharmacists, with
educational materials regarding program
implementation as early as possible.
Response: We appreciate the
commenters’ support and we agree with
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those who encouraged us to provide
educational materials to inform
stakeholders of the changes to close the
coverage gap for applicable
beneficiaries.
Comment: We received many
comments regarding various aspects of
the Medicare coverage gap discount
program.
Response: Since these comments
pertain to the coverage gap discount
program as specified in section 1860D–
14A of the Act, rather than to the
revisions to the Part D benefit structure
specified in section 1860D–2(b) of the
Act that were the subject of the
November 2010 proposed rule, we
believe these comments are outside the
scope of the proposed rule. However we
plan, to address the comments as
appropriate in any future rulemaking
regarding the coverage gap discount
program.
Comment: One commenter requested
that the regulatory language define the
amount that will be counted toward the
beneficiary’s true out-of-pocket (TrOOP)
cost when the ‘‘generic’’ gap cost-sharing
is applied.
Response: We do not believe there is
a need to address this issue in
regulation. The amount of the
applicable beneficiary’s TrOOP for
generic drugs in the coverage gap will
be the coinsurance amount specified in
§ 423.104(d)(4)(i) and paid by the
beneficiary, another individual on the
beneficiary’s behalf, or by a TrOOPeligible payer under § 423.100.
Comment: Several commenters
recommended revisions to our proposed
definition of the term ‘‘applicable
drugs.’’ Two commenters suggested we
exclude all ‘‘authorized generics’’ from
the term and one commenter
recommended we clarify whether or not
the term includes ‘‘authorized generics.’’
Another commenter requested we
specify that a drug may be an
‘‘applicable drug’’ for a particular
applicable beneficiary if the drug is
provided through an exception or
appeal to that particular applicable
beneficiary.
Response: We believe ‘‘applicable
drug’’ means all drugs approved under
new drug applications (NDAs) and this
includes those ‘‘authorized generics’’
licensed by sponsors of NDAs. It is our
understanding that while most
‘‘authorized generics’’ are approved
under NDAs, others may be approved
under abbreviated new drug
applications (ANDAs). However, only
those ‘‘authorized generics’’ licensed by
sponsors of NDAs are applicable drugs.
To avoid confusion, we are defining
‘‘applicable drug’’ with respect to an
applicable beneficiary as a Part D drug
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that is approved under an NDA. We are
also removing the superfluous
parenthetical phrase that was
inadvertently included in the proposed
definition.
We agree with the commenter
requesting that we specify that drugs
provided through an exception or
appeal are applicable drugs only for that
particular beneficiary. As a result, we
are revising the final clause in the
definition to state that the drug ‘‘is
provided to a particular applicable
beneficiary through an exception or
appeal for that particular applicable
beneficiary.’’
Comment: One commenter indicated
the part of the proposed definition of
‘‘applicable beneficiary’’ that addresses
claims that straddle or span the benefit
phases is confusing and should be
deleted.
Response: We believe it is important
to reference straddle claims in the
definition of an applicable beneficiary.
However, we agree that the punctuation
in the proposed definition was incorrect
and the source of potential confusion.
As a result, we are retaining the clause
pertaining to claims that straddle or
span the benefit phases and revising the
punctuation to clarify that this clause is
part of the definition.
Comment: One commenter noted that,
in the definition of ‘‘coverage gap’’ we
should state that for purposes of
applying the initial coverage limit,
sponsors must apply their plan specific
initial coverage limit under enhanced
alternative benefit designs in addition to
the basic alternative and actuarially
equivalent benefit designs referenced in
the proposed definition.
Response: We agree with the
commenter and will revise this
definition in the final rule to include a
reference to enhanced alternative
benefit designs.
Comment: One commenter suggested
that we clarify that, in addition to
dispensing fees, vaccine administration
fees are not included in the definition
of negotiated price and, therefore,
should be excluded from the cost
sharing reductions in the coverage gap.
Response: We agree with the
commenter. In prior subregulatory
guidance, we expressed our belief that
vaccine administration fees are
analogous to dispensing fees for
purposes of the coverage gap discount
program and, therefore, must be
excluded from the definition of
negotiated price for purposes of
determining the applicable discount.
We noted that unlike sales tax,
dispensing fees, and vaccine
administration fees pay for services
apart from of the applicable drug itself.
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This is made clear by the fact that a
vaccine administration fee may be billed
separately from the dispensing of the
vaccine. Further, as the commenter
points out, the definition of negotiated
price would not include a vaccine
administration fee billed by someone
other than the pharmacy.
Therefore, in finalizing the proposed
rule, we will also exclude the vaccine
administration fee from the cost sharing
reductions and revise the regulatory
language in § 423.104(d)(4)(ii) to specify
coinsurance in the coverage gap is based
on actual cost minus the dispensing fee
and any vaccine administration fee.
We also clarify that the reductions to
cost sharing in the coverage gap
specified in § 423.104(d)(4) apply only
to ‘‘applicable beneficiaries’’ by revising
the title of this paragraph to ‘‘Costsharing in the coverage gap for
applicable beneficiaries.’’
Comment: One commenter
recommended that when attesting to the
actuarial equivalence of a qualified
retiree prescription drug plan’s coverage
to the defined standard coverage, the
plan sponsor be permitted to account for
the value of drug discounts and/or
coverage provided during the coverage
gap.
Response: As noted in the preamble to
our November 2010 proposed rule, the
ACA amended section 1860D–
22(a)(2)(A) by adding a new provision
requiring that when attesting to the
actuarial equivalence of the plan’s
prescription drug plan coverage to
defined standard coverage, qualified
retiree prescription drug plans not take
into account the value of any discount
or coverage provided during the gap in
coverage that occurs for defined
standard coverage under Part D. Thus,
this is a statutory requirement and we
cannot accept the commenter’s
recommendation.
Comment: One commenter
recommended that we permit Part D
sponsors to use actuarially equivalent
copayments as alternatives to the
coinsurance amounts for generic drugs
in the coverage gap as the enrollee costsharing is phased down to 25 percent in
2020.
Response: We agree with the
commenter that § 423.104(d)(4)(ii)(B) of
this regulation will permit actuarially
equivalent cost sharing for generic drugs
in the coverage gap. However, we
believe that there is a high degree of risk
associated with permitting actuarially
equivalent copayments for generic drugs
in the coverage gap. Due to significant
variations in price for generic drugs and
the coverage level for these drugs during
the first few years of the transition to 25
percent cost sharing, actuarially
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equivalent co-payments for these drugs
will often be higher than the actual cost
for commonly used generic drugs. As a
result, we are concerned that the
majority of beneficiaries will not benefit
from the cost sharing reductions in the
coverage gap if we permit actuarially
equivalent co-payments for these drugs.
We believe that the risk associated
with permitting actuarially equivalent
co-payments will be mitigated once
coverage for generic drugs in the
coverage gap reaches a reasonable
coverage level for actuarial equivalence.
We note that Chapter 4 of the Medicare
Managed Care Manual Section 50.1
provides that for an Original Medicare
item or service to be considered a
reasonable benefit, cost-sharing for that
service cannot exceed 50 percent of the
plan’s financial liability for the benefit.
Consistent with this policy, we believe
that 50 percent would be a reasonable
benefit level at which to permit
actuarial equivalence. Therefore, we
anticipate permitting actuarially
equivalent co-payments in the coverage
gap for drugs that are not applicable
(that is, generic drugs) starting in 2018
when beneficiary cost sharing for these
drugs will be below 50 percent.
For these reasons, we will continue
our current policy of not accepting
actuarially equivalent co-payments in
the coverage gap for drugs that are not
applicable (that is, generic drugs) until
2018.
We are finalizing this provision with
the amendments previously noted.
19. Payments to Medicare Advantage
Organizations (§ 422.308)
In our November 2010 proposed rule,
we proposed the revisions to the
regulations described below in order to
reflect changes in payment rules
specified in statute and implemented in
the Annual Announcement of MA
Capitation Rates and MA and Part D
Payment Policies.
a. Authority To Apply Frailty
Adjustment Under PACE Payment Rules
for Certain Specialized MA Plans for
Special Needs Individuals (§ 422.308)
In our November 2010 proposed rule,
we noted that section 3205 of the ACA
provides the Secretary with the
authority to apply a frailty adjustment to
payments to certain Special Needs Plans
(SNPs) that meet our definition of a
fully integrated dual-eligible special
needs plan at § 422.2, and have a similar
average level of frailty as the PACE
program, starting with plan year 2011.
The statute permits the Secretary to
apply the payment rules under section
1894(d) of the Act (other than paragraph
(3) of such section), rather than the
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payment rules that would otherwise
apply under this part, but only to the
extent necessary to reflect the costs of
treating high concentrations of frail
individuals.
We proposed that payments to Fully
Integrated Dual Eligible SNPs that
qualify for frailty adjusted payment
continue to be calculated using the
existing MA payment rules under which
all SNPs are paid, with the sole
exception of the application of a frailty
adjustment. Further, we stated that the
new law continued to allow us to use
the same methodology to adjust
payment to take into account the frailty
of SNP enrollees as we use for the PACE
program.
As the Secretary determines the
adjustment methodology for frailty,
which frailty scores will be considered
‘‘similar’’ to PACE program, and how to
measure the ‘‘average level of frailty of
the PACE program,’’ we noted that we
will announce any changes to the
methodology used to pay for frailty, as
well as how we determine PACE
program averages, and which SNPs have
similar levels of frailty to the PACE
program, in the Advance Notice and
Rate Announcement for the plan year in
question.
In order to have a frailty score that
can be compared to the PACE program,
we proposed requiring MA
organizations sponsoring a dual eligible
SNP that meets our definition of a fully
integrated dual-eligible SNP to fund any
survey used by us to support the
calculation of frailty scores. Moreover,
we proposed requiring the survey to be
fielded such that we can calculate a
frailty score at the plan benefit package
level for each SNP in question
(currently the counts of limitations on
activities of daily living (ADLs) used to
calculate frailty scores are taken from
the HOS or HOS–M), and to adhere to
the methodological requirements of any
such survey.
Comment: A commenter suggested
that CMS should either allow the frailty
adjustment to all plans based on a given
set of criteria or drop it for all plans. In
addition, another commenter suggested
that CMS consider applying frailty
adjustment on an individual basis
instead of at the plan level.
Response: By law, we must use the
same payment methodology for all MA
plans, except as explicitly provided for
in statute. Section 3205 of the ACA
changed the law to permit CMS to make
frailty-adjusted payments only to certain
D–SNPs—those fully integrated dualeligible special needs plans, as defined
in § 422.2., that have similar average
levels of frailty as the PACE program.
We have considered making frailty
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payments to all MA plans, but decided
that, given the use of the survey-based
data collection method, that calculating
frailty scores for every PBP across the
entire industry was prohibitive. Further,
frailty would need to be applied on a
budget neutral basis. Given the surveybased methodology used for measuring
frailty, a method of reliably calculating
individual level frailty scores is not
possible. We have explored other
methods of measuring frailty, all of
which posed substantial challenges to
calculating accurate payments.
Comment: Several commenters
requested that CMS provide specific and
transparent criteria that would be used
to determine those plans eligible for
frailty in determining similar average
frailty levels as PACE, including
providing to plans actual frailty scores,
the data to be used to calculate the
scores and the source of the data,
recommended criteria such as using a
range of PACE frailty scores, using the
same survey methods and data for both
populations, and not basing the
comparison on an average frailty across
all PACE organizations, and requested
that CMS provide plans with the
eligibility criteria for frailty adjusted
payments before plans are required to
request participation in PBP level HOS
surveys and before they submit their
Notices of Intent to offer a Fully
Integrated Dual Eligible SNP in the next
contract year.
Response: We appreciate these
comments and concerns; however, as
required by law, CMS provides
information on our payment
methodology in the Advance Notice and
Rate Announcement for the plan year in
question.
Comment: A few commenters
suggested that the intent of this
provision in the ACA was to provide a
frailty factor adjustment to all legacy
SNPs (that is, the dully integrated plans
in Minnesota, Wisconsin and
Massachusetts that serve as models for
SNP integration).
Response: Section 3205 of the ACA
permits CMS to make frailty-adjusted
payments to certain D–SNPs—those
fully integrated dual-eligible special
needs plans, as defined in § 422.2, that
enroll beneficiaries with similar average
levels of frailty the PACE program, and
does not refer to specific plans to which
it is to be applied.
Comment: One commenter expressed
concerns regarding the requirement to
have plans pay for the survey and urges
CMS to be flexible in coordinating with
and using ADL assessments from the
states.
Response: It is a contract requirement
that plans are financially responsible for
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the surveys that support measurement
of their performance and quality,
including the Consumer Assessment of
Health Plan Satisfaction (CAHPS) and
Health Effectiveness Data and
Information Set (HEDIS), and for
reporting payment-related data. The
responsibility to finance the HOS is
similar. Since SNPs bid and are paid at
the Plan Benefit Package (PBP) level,
CMS must be able to calculate a frailty
score at the PBP level. Further, our
frailty payment methodology is based
on surveying plan enrollees to
determine the plan’s average frailty
level and the use of assessments
conducted by the plans was specifically
ruled out in the development of this
methodology. Therefore, we must
require survey sampling at the PBP
level, rather than coordinating with
States.
Comment: A few commenters agree
with the clarification provided
regarding which plans will be eligible
for frailty adjusted payments because
they meet the definition of ‘‘fully
integrated dual eligible SNP’’ as well as
the ‘‘similar average frailty levels’’ as
PACE plans eligibility criteria.
Response: We appreciate the support
expressed for the proposed new
provisions.
Comment: Several commenters
inquired about the methodology and
implementation of the HOS and CHAPS
surveys.
Response: We appreciate these
commenters’ concerns. We will take
these comments under advisement in
the next survey update.
After considering the comments
received, we are adopting § 422.308(a)
as proposed into this final rule.
b. Application of Coding Adjustment
(§ 422.308)
In our November 2010 proposed rule,
we noted that the ACA adds new
statutory language clarifying our
existing authority to adjust risk scores
for coding trends in the FFS sector,
under CMS’s general authority to
conduct risk adjustment in an
actuarially equivalent manner under
1853(a)(1)(C)(i) of the Act. Further, this
new language extends the mandate that
CMS adjust risk scores for differences in
coding patterns between MA plans and
FFS beyond 2010.
Previously, in accordance with the
Deficit Reduction Act of 2005 (DRA),
the Secretary was expressly required to
conduct an analysis of the differences in
FFS and MA coding patterns in order to
ensure payment accuracy, and that such
analysis was to be completed in time to
ensure that the results of such analysis
were incorporated into the risk scores
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for 2008 through 2010. The ACA made
four modifications to this requirement
for analysis: (1) The analysis must now
be conducted annually; (2) the data used
in the analysis is to be updated as
appropriate; (3) the results of the
analysis are to be incorporated into risk
scores on a timely basis; and (4) the
application of an adjustment for
differences in coding patterns is
extended until the Secretary
implements risk adjustment using
Medicare Advantage diagnostic, cost,
and use data.
Moreover, we mentioned that the
ACA added two additional requirements
to the DRA-mandated requirements.
First, the ACA requires that the coding
adjustment factor for 2014 be not less
than the coding adjustment factor
applied for 2010 plus 1.3 percentage
points; for each of the years 2015
through 2018, not less than the coding
adjustment factor applied for the
previous year plus 0.25 percentage
points; and for 2019 and each
subsequent year not less than 5.7
percent. Second, the ACA requires the
Secretary to apply the coding
adjustment to risk scores until the
implementation of risk adjustment using
MA diagnostic, cost, and use data.
Comment: A commenter suggested
that the coding intensity adjuster should
be modified each year using payment
adjustments from the RADV audit
process which could be used to
determine industry wide averages to
estimate industry-wide accuracy. After
making this modification, the coding
adjuster should then be adjusted
downward given that plan payments
will be adjusted for inaccuracy through
the RADV audits.
Response: As we have noted in
previous guidance documents such as
the Rate Announcements, the MA
coding adjustment factor is not intended
to adjust for inaccurate coding in a
particular instance, and the specific
affects on an individual’s risk score, but
for the impact on risk scores of coding
patterns that differ from FFS coding, the
basis of the CMS–HCC model and the
Part C normalization factor. RADV
audits have the purpose of validating
that diagnosis codes submitted for risk
adjustment are documented in the
medical record and, therefore, are
correctly reported for the beneficiary in
question.
Comment: One commenter suggested
that there should not be a minimum
coding adjustment per year and that
more detailed information should be
released on the coding adjustment
calculations for the industry to review.
Response: The minimum adjustment
factors are specified in law. For
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additional information regarding our
coding adjustment methodology, please
refer to the 2010 Advance Notice and
Announcement, published on February
20, 2009 and April 6, 2009, respectively.
Any updates to our methodology will be
published in the appropriate future
Advance Notice.
After considering the comments we
received, we are adopting § 422.308 (b)
as proposed into this final rule.
c. Improvements to Risk Adjustment for
Special Needs Individuals With Chronic
Health Conditions (§ 422.308)
In the November 2010 proposed rule,
we proposed for 2011 and subsequent
years, for purposes of the adjustment
under section 1853(a)(1)(C)(i) of the Act,
using a risk score for chronic SNP
enrollees that reflects the known
underlying risk profile and chronic
health status of similar individuals, as
the Secretary is required to use such risk
score instead of using the default risk
score that is otherwise used in payment
for new enrollees in MA plans.
The risk score developed for this
purpose will be used in calculating
payments for a special needs individual
described in section 1859(b)(6)(B)(iii) of
the Act who enrolls in a specialized MA
plan for special needs individuals on or
after January 1, 2011.
We proposed for 2011 and
periodically thereafter, for the Secretary
to evaluate and revise the risk
adjustment system under this
subparagraph in order, as accurately as
possible, to account for higher medical
and care coordination costs associated
with frailty, individuals with multiple,
comorbid chronic conditions, and
individuals with a diagnosis of mental
illness, and also to account for costs that
may be associated with higher
concentrations of beneficiaries with
those conditions. We also noted that we
will publish in the Rate Announcement,
as described under section 1853(b) of
the Act, a description of any evaluation
conducted during the preceding year
and any revisions made under such
clause as a result of such evaluation.
Comment: Several commenters
supported the provisions in the ACA
that require the Secretary to evaluate
and revise the risk adjustment system in
order to, as accurately as possible,
account for higher medical and care
coordination costs associated with
frailty, individuals with multiple
comorbid chronic conditions, and
individuals with a diagnosis of mental
illness, and also to account for costs that
may be associated with higher
concentrations of beneficiaries with
those conditions, as well as to publish
as part of an announcement a
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description of any evaluation conducted
during the preceding year and any
revisions made as a result of such
evaluation. In addition, several
commenters pointed out that improving
risk adjustment will decrease plan
cherry-picking of healthier beneficiaries,
improve the plans’ incentive to focus on
costs, reduce unnecessary costs and stop
overpaying for low risk beneficiaries
and underpaying for high risk
beneficiaries.
Response: We appreciate the support
expressed for the provision for an
evaluation of the risk adjustment model.
Comment: A few commenters urge
CMS to implement some risk
adjustment model changes in 2012 and
more in 2013 in addition to
implementing the methodologies
announced in the 2011 Advance Notice.
Response: We continually work to
develop improvements to the risk
adjustment model. Changes to the
model for a particular year are discussed
in that year’s Advance Notice.
Comment: Several commenters
recommended that we consider
persistency of multiple comorbid
chronic conditions and one suggested
CMS use 2 years of data in the model
beginning in 2012.
Response: We do not believe that
using 2 years of data in the risk
adjustment model will improve the risk
scores, largely because a model
developed using 2 years of diagnostic
data would lower the model values for
chronic conditions and decrease the
predictive power of the model for those
with conditions under treatment. While,
theoretically, such a model may help
plans that do not code well, CMS
prefers that plans enrollees are seen by
providers and that current diagnoses are
documented as part of those visits.
Comment: One commenter
recommended that CMS engage in
active dialogue with MA organizations
to permit CMS to consider MAO
experience with these populations.
Response: We appreciate these
comments and look forward to working
with MAOs on this issue.
Comment: A few commenters
expressed that they had no knowledge
of any current evaluations performed by
CMS evaluating the adequacy of the
current risk adjustment methodology or
of any CMS research exploring
alternative methods of risk adjustment
that would include methods such as
frailty and disability factors, drug
utilization information, or using
multiple years of data to calculate risk
scores, while a few other commenters
expressed that they strongly support the
provisions in the ACA, however, note
that the proposed rule does not provide
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any additional clarity about how CMS
intends to implement these policies.
Response: We evaluate the
performance of the model regularly.
Please refer to the following
publications for information on model
development and performance: https://
www.cms.gov/
HealthCareFinancingReview/
Downloads/04summerpg119.pdf. The
ACA specified that the evaluation be
published as part of the Announcement.
We are planning to publish the
evaluation in the 2102 Announcement,
published on April 4, 2011.
Comment: One commenter requested
that no delays in the evaluation be
caused by the collection of encounter
data.
Response: We appreciate the
commenter’s concern. Evaluations of the
risk models are ongoing and are not
related to the collection of encounter
data.
Comment: A few commenters
requested that CMS recognize problems
in the 10 decile analysis for high risk
chronically ill beneficiaries as the
model inappropriately treats high
spending chronically ill beneficiaries as
healthy causing them to be assigned to
a lower than ‘‘true’’ risk decile.
Response: We measure model
predictive strength by comparing
predicted costs to actual costs. We
typically group beneficiaries into risk
deciles, meaning that we create ten
equal-sized groups of beneficiaries,
ranging from the group with the highest
predicted costs to the group with the
lowest predicted costs. For each riskbased group, we then create ratios of
predicted costs to actual costs. Using
predictive ratios, we find that the CMS–
HCC model performs well. Comparing
predictive ratios across beneficiaries
grouped by actual costs (as the comment
implies) is not an actuarially sound way
to look at the ability of the model to
accurately predict costs. If one looks at
the cost data retrospectively (after the
fact) the result will always be that high
cost beneficiaries are under-predicted as
high cost is largely due to random
events. Determining whether the costs
associated with beneficiaries predicted
to be high, medium or low cost is the
only actuarially sound way to evaluate
the risk adjustment model.
Comment: A commenter inquired as
to whether the new C–SNP policy
applies only to new Medicare
Beneficiaries or to all existing Medicare
beneficiaries who are newly enrolling in
a C–SNP—and recommended that
qualifying for the C–SNP should trigger
the assumed payment adjustment.
Response: Current law requires the
implementation of the new enrollee
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model for C–SNPs to apply only to new
Medicare beneficiaries.
Comment: One commenter urged
flexibility in expanding on the intent of
the ACA in the area of risk adjustment
for persons with chronic illness, and
recommended that the process should
apply to all SNPs, noting that persons
under age 65 who become eligible for
Medicare do so because of a disability
and the duals under age 65 are even
more likely to have a long history of
chronic as well as disabling conditions.
They are also more likely to have cooccurring mental health needs and the
current risk adjustment system unfairly
assumes these ‘‘new to Medicare’’
beneficiaries are healthier than their
history shows.
Response: We believe that absent
explicit statutory authority we cannot
pay Dual or Institutional SNPs
differently from regular MA plans.
Further, we are not considering
applying differential new enrollee risk
scores to all SNP enrollees. We believe
that for Dual-eligible and Institutional
SNPs’ our evidence shows that the new
enrollee risk scores in the CMS–HCC
model are adequate to address the
aggregate risk faced by these plans
because the current new enrollee risk
score model captures the additional
costs due to Medicaid and disabled
status. In creating the C–SNP new
enrollee model, we found that the new
enrollee age/sex factors had a similar
increment regardless of Medicaid status.
This finding indicates that the costs for
Medicaid and by age group (including
the disabled) are fully accounted for in
the current new enrollee model.
Comment: A commenter
recommended that prior claims data,
currently available through the
Medicaid program, be used to set
payment upon entry to a SNP.
Response: We disagree with the
comment. New enrollee risk scores
account for the average risk of the new
enrollee population, and already
account for additional costs attributable
to Medicaid status with an explicit
Medicaid status marker. Medicaid status
for new enrollees is based on concurrent
status in the payment year. This means
that a dual Medicare/Medicaid enrollee
to an MA plan (SNP or regular MA plan)
receives an increment that is adjusted
for their age/sex and Medicaid status in
the payment year.
After considering the comments we
received, we are adopting § 422.308(c)
as proposed into this final rule.
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20. Medicare Advantage Benchmark,
Quality Bonus Payments, and Rebate
(§ 422.252, § 422.258, and § 422.266)
a. Terminology (§ 422.252)
We proposed revising § 422.252 by
adding two new terms and revising one
term. We proposed adding the terms
‘‘new MA plan’’ and ‘‘low enrollment
contract.’’ A new MA plan means, for
the purpose of quality ratings under
§ 422.258(d)(7) (discussed below), with
respect to a year, a plan offered by an
organization or sponsor that has not had
a contract as an MA organization in the
preceding 3-year period. A low
enrollment contract is a contract that
could not undertake Healthcare
Effectiveness Data and Information Set
(HEDIS®) and Health Outcome Survey
(HOS) data collections because of a lack
of a sufficient number of enrollees to
reliably measure the performance of the
health plan.
We also proposed revising the
definition of Unadjusted MA areaspecific non-drug monthly benchmark
amount. Effective for 2012, the MA areaspecific non-drug monthly benchmark
amount is the blended benchmark
amount determined according to the
rules set forth under § 422.258(d). In
addition, this revision clarifies that ratesetting rules for county capitation rates
are specific to a time period, as set forth
at § 422.258(a). Finally, this revision
further clarifies that the term
‘‘unadjusted’’ refers to a standardized
amount, reflecting a risk profile based
on the national average.
We received no comments on these
proposals and therefore are finalizing
these provisions without modification.
We are also adopting the definitions
proposed for ‘‘new MA plan’’ and ‘‘low
enrollment contract’’ in § 422.252 in this
final rule.
b. Calculation of Benchmarks
(§ 422.258)
Section 3201(b) of the ACA
establishes a new blended benchmark as
the MA county rate, effective 2012, and
section 3201(c) of the ACA establishes
quality-based increases to the blended
benchmark. To implement these ratesetting rules, we proposed to amend
§ 422.258(a) and § 422.258(c)(3), and
add a new paragraph § 422.258(d),
which sets forth the provisions for MA
blended benchmarks, including
increases to the benchmarks for quality
bonuses at § 422.258(d)(7).
Section 3201(b)(2) of the ACA
introduces section 1853(n) of the Act,
which creates a new type of county
capitation rate, the ‘‘blended benchmark
amount’’ for an area for a year, which
also must be—used to determine MA
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plans’ service area-level benchmarks.
Effective 2012 onward, the blended
benchmark will be set at some
percentage of the county’s average FFS
expenditure (the FFS rate). There are
two components of the blended
benchmark: the applicable amount
determined under section 1853(k)(1) of
the Act and described at § 422.258(d)(1);
and the ‘‘specified amount’’ introduced
at section 1853(n)(2) of the Act and
described at § 422.258(d)(2). The two
components must be combined using
weights that are specific to the phase-in
period assigned each area (county),
according to rules set forth at sections
1853(n)(1) and (n)(3) of the Act and
implemented at paragraphs (d)(8) and
(d)(9) of § 422.258 of the regulations. At
the conclusion of an area’s phase-in
period, the blended benchmark for the
area for a year will be the area’s
specified amount under section
1853(n)(2) of the Act.
Specified Amount. Section 1853(n)(2)
of the Act, as implemented by proposed
§ 422.258(d)(2), (d)(3), and (d)(4), sets
forth the formula for the specified
amount and the rules for tabulating the
components of the formula. Specifically,
the specified amount is the product of
two quantities: the base payment
amount defined at section 1853(n)(2)(E)
of the Act (adjusted to carve-out the
indirect medical education (IME)
amount, as required at section
1853(k)(4)) of the Act and implemented
at § 422.306(c); and the applicable
percentage defined at section
1853(n)(2)(B) of the Act and
implemented at § 422.258(d)(4).
The base payment amount for an area
for 2012 is the average FFS expenditure
amount determined for 2012, as
specified in § 422.306(b)(2). For
subsequent years, the base payment
amount for an area is the average FFS
expenditure amount specified in
§ 422.306(b)(2), which includes the
requirement to rebase (update with
more recent data) the FFS rates no less
frequently than every 3 years.
The applicable percentage is one of
four values assigned to an area (a
county) based on our determination of
the quartile ranking for the previous
year of the area’s average FFS
expenditure amount (described at
§ 422.306(b)(2)) relative to this amount
for all counties. The FFS rate used for
the quartile ranking must be net of the
IME amount determined under
§ 422.306(c) for the year. For the 50
States or the District of Columbia,
counties whose FFS rates (net of the
IME amount for the year) fall in the
highest quartile of all such amounts for
the previous year receive an applicable
percentage of 95 percent, while counties
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falling in the second highest quartile
receive an applicable percentage of 100
percent, counties falling in the third
highest quartile receive an applicable
percentage of 107.5 percent, and
counties falling in the lowest quartile
receive an applicable percentage of 115
percent.
After establishing the basic formula
for the specified amount and setting the
rules for calculating its components—
the base payment amount and the
applicable percentage, sections 1853(n)
and (o) of the Act provide additional
rules for determining the applicable
percentage for a county for a year. There
are four sets of rules: (1) When to rerank the county FFS rates to determine
whether some counties receive quartile
reassignments; (2) how to transition a
county from one quartile assignment to
another; (3) how to assign a county its
transition period of 2, 4, or 6 years,
whereby at the conclusion of the
transition period, the county’s blended
benchmark equals 100 percent of the
specified amount; and (4) under what
conditions the applicable percentage
shall be increased to provide quality
bonus payments to qualifying plans.
The first three types of rules are
discussed here, and the fourth rule on
quality bonuses is discussed in the next
section on paragraph § 422.258(d)(7).
First, section 1853(n)(2)(C) of the Act,
implemented at § 422.258(d)(5)(i),
provides that the quartile ranking of all
county FFS rates (net of the IME carveout) for a contract year must be reranked whenever the FFS rates for the
year prior to the contract year are
rebased FFS rates, per the rebasing rule
set forth at § 422.306(b)(2). Second,
section 1853(n)(2)(D) of the Act,
implemented at § 422.258(d)(5)(ii),
provides that for a year after 2012, if
there is a change in a county’s quartile
ranking for a contract year compared to
the county’s ranking in the previous
year, the applicable percentage for the
area for the year shall be the average of
the applicable percentage for the
previous year and the applicable
percentage that would otherwise apply
for the area for the year in the absence
of this transitional provision. Third,
sections 1853(n)(2) and (n)(3) of the Act,
implemented at § 422.258(d)(8) and
(d)(9) respectively, establish the
methodology that we must use to assign
one of three transition periods to each
county—a 2-year, 4-year, or 6-year
transition to phase-in the blended
benchmark amount to be equal to 100
percent of the specified amount.
Assignment of a phase-in period is
determined by the size of the difference
between the 2010 applicable amount
under section 1853(k)(1) of the Act at
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paragraph (d)(1) and ‘‘the projected 2010
benchmark amount’’ at (d)(8)(i), which is
a quantity created at section
1853(n)(3)(C) of the Act solely for the
purpose of assigning a transition period
to each county. The projected 2010
benchmark amount is equal to one-half
of the 2010 applicable amount and onehalf of the specified amount; the latter
is calculated as if the 2012 effective date
for the specified amount were instead
2010. This modified specified amount
for 2010 is the product of two
quantities: The 2010 base payment
amount adjusted as required under
§ 422.306(c); and the applicable
percentage, which is determined under
the rules set forth at proposed paragraph
(d)(8)(ii)(B). Specifically, all applicable
percentages are increased as if all
counties were in qualifying plans in
2010 for the purpose of calculating the
projected 2010 benchmark amount (thus
adding 1.5 percentage points to each
county’s applicable percentage).
Further, we must determine a list of
2010 qualifying counties using the
criteria set forth for 2012 onward in
proposed paragraph (d)(7)(ii), thus
further increasing the applicable
percentage of this subset of 2010
counties an additional 1.5 percentage
points.
Once the special quantity ‘‘projected
2010 benchmark amount’’ is compared
to the 2010 specified amount under
section 1853(k)(1) of the Act, the phasein assignments are made as follows. A
county is assigned a 2-year phase-in
period if the difference between the
applicable amount and the projected
2010 benchmark amount is less than
$30, a 4-year phase-in period if the
difference is at least $30 but less than
$50, and a 6-year phase-in period if the
difference is at least $50.
Finally, section 1853(n)(3),
implemented at § 422.258(d)(8), sets
forth the rules for calculating the
blended benchmark depending on the
assigned phase-in period. For counties
assigned the 2-year phase-in period, the
blended benchmark for 2012 is the sum
of one-half of the applicable amount at
paragraph (1) and one-half of the
specified amount at paragraph (2); and
or subsequent years, the blended
benchmark equals the specified amount.
For counties assigned the 4-year phasein period, the blended benchmark is
calculated as follows: For 2012 the
blended benchmark is the sum of threequarters of the applicable amount for
the area and year and one-fourth of the
specified amount for the area and year;
for 2013, it is the sum of one-half of the
applicable amount for the area and year
and one-half of the specified amount for
the area and year; for 2014 it is the sum
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specified amount for the area and year;
for 2013 it is the sum of two-thirds of
the applicable amount for the area and
year and one-third of the specified
amount for the area and year; for 2014
it is the sum of one-half of the
applicable amount for the area and year
and one-half of the specified amount for
the area and year; for 2015 it is the sum
of one-third of the applicable amount
for the area and year and two-thirds of
the specified amount for the area and
year; for 2016 it is the sum of one-sixth
of the applicable amount for the area
and year and five-sixths of the specified
amount for the area and year; and for
subsequent years, the blended
benchmark equals the specified amount.
Comment: One commenter requested
that CMS offer plans more information
on how payments will be calculated, for
example what years will be used for the
calculations. Response: Detailed
payment calculations are available in
the Advance Notice of Methodological
Changes for Calendar Year (CY) 2012 for
Medicare Advantage (MA) Capitation
Rates, Part C and Part D Payment
Policies and 2012 Call Letter, published
on February 18, 2011 and the
Announcement of Calendar Year (CY)
2012 Medicare Advantage Capitation
Rates and Medicare Advantage and Part
D Payment Policies and Final Call
Letter, published on April 4, 2011.
These documents are available on the
CMS Web site at: https://www.cms.gov/
MedicareAdvtgSpecRateStats/.
Comment: Several commenters
asserted that while counties are
distributed evenly across the 4
quadrants, enrollment is skewed heavily
toward the top 95 percent quartile. In
order to address the inequities inherent
in the new benchmark methodology,
these commenters recommend that CMS
examine alternative benchmark-setting
formulas, such as re-stratifying the
quartiles based on enrollment numbers,
so as to address the disadvantaged plans
in the 95 percent quartile that maintain
a significant proportion of MA
beneficiaries. Additionally, the
commenters asserted that the FFS
quartile rule causes problems at the
cusps of the quartiles, due to the
arbitrary drawing of a line between 2
FFS rates that may only be $0.20
different, with the result that gets 107.5
percent of the FFS rate, and the other
only 100 percent of the FFS rate. The
commenters recommend that CMS
study alternative benchmark
methodologies to address inequities in
the current formula.
Response: The calculation of the
blended benchmark and the quartiles
are specifically laid out in 1853(n). Any
changes to the calculation would
require Congressional action.
We are finalizing this provision
without modification. We are also
adopting § 422.258 as proposed in this
final rule.
applicable amount and the specified
amount. Under the formula set forth in
the ACA, a qualifying organization that
receives 4 or more stars on a 5 star
rating system would receive an increase
in the specified amount component of
the blended benchmark amount of 1.5
percentage points in 2012, 3.0
percentage points in 2013 and 5.0
percentage points in 2014 and in
subsequent years. A qualifying
organization in a qualifying county will
receive double the applicable
percentage increase. A qualifying
county is defined as a county that has
an MA capitation rate that, in 2004, was
based on the amount specified in
subsection c1b for a Metropolitan
Statistical Area (MSA) with a
population of more than 250,000; has at
least 25 percent of MA eligible
individuals enrolled in MA
organizations as of December 2009; and
has a per capita fee-for-service spending
that is lower than the national monthly
per capita cost for expenditures for
individuals enrolled under the Original
Medicare fee-for-service program for the
year. The ACA specified that a new MA
contract will receive an increase in the
specified amount component of the
blended benchmark amount of 1.5
percentage points in 2012; 2.5
percentage points in 2013; and 3.5
percentage points in 2014 and in
subsequent years. The ACA provided
that MA organizations that fail to report
data as required by the Secretary would
be counted as having a rating of fewer
than 3.5 stars at the organization or
contract level.
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c. Increases to the Applicable
Percentage for Quality (§ 422.258(d))
We proposed regulations reflecting
the new statutory requirements that, as
of January 1, 2012, provided for
increases in MA plan benchmarks based
on an MA plan’s score under a star
quality rating system. For the purposes
of this preamble, we refer to these
quality-based increases in MA
benchmarks as quality bonus payments
(QBPs) for MA plans. The 5 star rating
system that serves as the basis for
making the bonus payment must be
based on quality information collected
by us under authority of section 1852(e)
of the Act.
The blended benchmark for 2012 and
future years reflects the level of quality
rating at the organization or contract
level that will be set forth in a notice to
MA organizations for the calendar year
in question. As discussed in section
II.B.20.b of this final rule, the blended
benchmark has two components—the
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of one-fourth of the applicable amount
for the area and year and three-fourths
of the specified amount for the area and
year; and for subsequent years, the
blended benchmark equals the specified
amount. For counties assigned the
6-year phase-in period, for 2012, the
blended benchmark is the sum of fivesixths of the applicable amount for the
area and year and one-sixth of the
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We proposed that the 5 star ratings
system that will be used would be based
on the Plan Rating system currently in
place for beneficiary information and to
identify contract performance issues.
Under the Plan Rating system, if an
MA–PD organization offers health and
drug benefits, both Part C and Part D
summary ratings scores are generated. In
the Fall of 2010, MA–PDs received a
combined Part C and D summary rating
to summarize overall contract
performance with respect to health and
drug issues. This combined rating is
used to determine the new QBPs based
on quality for MA organizations offering
prescription drug coverage. The Part C
summary rating is used to determine the
QBPs for MA only contracts.
As previously discussed, under
§ 422.252, we proposed definitions of a
low enrollment contract and a new MA
plan for the purpose of identifying
qualifying organizations eligible to
receive a bonus payment. Low
enrollment contracts will be qualifying
plans for 2012 and in subsequent years.
For the purpose of awarding 2012 QBPs,
we proposed to define low enrollment
contracts as those that could not
undertake HEDIS® and HOS data
collections because of a lack of a
sufficient number of enrollees to
reliably measure the performance of the
health plan. Under the ACA, new MA
plans that meet criteria specified by the
Secretary are also treated as qualifying
organizations for the purposes of QBPs.
We proposed to define a new MA plan
as an MA contract offered by a parent
organization that has not had another
MA contract in the previous 3 years;
these contracts will qualify for the QBP.
Under our proposal, other MA contracts
that open in a given year, but have had
other contracts offered by the parent
organization in the prior 3 years, would
be assigned a star rating based on the
average enrollment-weighted
performance of the other contracts
offered by the parent organization to
reflect the overall performance of the
organization.
In the proposed rule we discussed our
plan to transform the rating system in
future years in order to advance more
ambitious and comprehensive quality
improvement objectives. These
objectives will include greater emphasis
on demonstrable improvements in
beneficiary access to care, beneficiary
health status and outcomes, beneficiary
satisfaction and engagement, prevention
and management of chronic conditions
as well as coordination across the
continuum of care. By designing the MA
quality rating system around these types
of objectives, we expect to encourage
and incentivize MA plans and affiliated
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providers to transform their delivery
systems and processes to provide
beneficiaries with high-quality and
efficient care. Ultimately, we seek to
design the MA quality rating system to
ensure that Medicare beneficiaries
enrolled in MA organizations receive
efficient, high quality care and services
every time. Future quality agenda and
measurement development will be
designed to ensure that MA
organizations lead the healthcare
industry in providing cutting edge,
integrated and coordinated care for our
beneficiaries using evidence-based and
demonstrable metrics.
We also discussed potential guiding
principles for the MA quality agenda.
For instance, these principles could be
based on aims from the 2001 Institute of
Medicine (IOM) Report ‘‘Crossing the
Quality Chasm: A New Health System
for the 21st Century.’’ From this IOM
Report, the six aims that have been
described are a framework for the MA
Quality Strategic Plan. The IOM Report
provides the following definitions for
the six aims: Safe is defined as avoiding
injuries to patients from the care that is
intended to help them. Effective refers
to providing services based on scientific
knowledge to all who could benefit, and
refraining from providing services to
those not likely to benefit. Patientcentered is providing care that is
respectful of and responsive to
individual patient preferences, needs,
and values, and ensuring that patient
values guide all clinical decisions.
Timely is defined as reducing waits and
sometimes harmful delays for both those
who receive and those who give care.
Efficient is avoiding waste, including
waste of equipment, supplies, ideas, and
energy. Equitable is providing care that
does not vary in quality because of
personal characteristics such as gender,
ethnicity, geographic location, and
socioeconomic status (IOM, 2001).
As a part of developing our long-term
quality strategy, we discussed our work
to identify measures that can be
implemented in the near term to further
the MA quality agenda. Looking beyond
the 2012 Plan Ratings, we are exploring
using measures, such as reportable
adverse events and hospital acquired
conditions, which are submitted via the
Part C reporting requirements, and allcause readmission rates. We are also
examining the use of alternative
measurement sets (for example,
Assessing Care of Vulnerable Elders
(ACOVE)), exploring the use of data
collected in other settings (for example,
data from the Hospital Inpatient Quality
Reporting Program, formerly known as
Reporting Hospital Quality Data for the
Annual Payment Update (RHQDAPU)),
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considering incorporating encounter
data into quality measures, and are
considering development of additional
outcome measures designed specifically
for MA. The NCQA is also developing
measures of ambulatory care sensitive
conditions that we will look to
implement as they become available.
Further, beyond broadening the goals
of the MA quality rating system, for
instance by incorporating more
outcomes-based measures, we also
discussed our desire to continually raise
performance targets, so as to incentivize
continual quality improvement across
established metrics of performance and
quality. We invited public comment on
appropriate performance and quality
benchmarks, and what approach should
be used for updating these benchmarks,
including frequency of updates.
Additionally, we invited public
comment on what types of principles or
objectives that we should adopt for the
MA quality rating system over the
longer term. For instance, are there
specific frameworks or elements that we
should adopt from the National Quality
Forum (NQF), National Committee for
Quality Assurance (NCQA), the Agency
for Healthcare Research and Quality
(AHRQ) or other experts in this field?
How should these objectives evolve over
time so the rating system rewards
continual improvement and innovation
on the part of MA organizations?
Comment: Several commenters raised
concern that the 5 star rating system for
Plan Ratings is moving away from
clinical measures and more towards
regulatory compliance measures.
Specifically, it was noted that the star
rating system should be an appropriate
mix of measures with an emphasis on
giving greater weight to clinical or
outcome measures that better reflect
health outcomes. Another commenter
was concerned that Part D measures
inordinately weight the Part C and D
summary calculations; the commenter
suggested that CMS weight Part C and
D measures based on the contribution
towards health care quality.
One commenter encouraged CMS to
consider new and revised metrics that
focus more on patient care and
experiences and less on administrative
segments. Items listed that should
receive priority include patient safety
and reduction in preventable medical
errors, hospital infections and readmissions, to name a few. This
commenter wants CMS to provide
opportunities to comment on proposed
measures on an annual basis. One
commenter suggested that CMS refrain
from adding additional measures to the
star rating system at this time and
recommended that CMS continue to rely
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upon the existing indicators to allow
plans to focus improvement efforts
accordingly. Another commenter stated
that many of the evaluation measures in
the Staying Healthy domain focus on
early detection instead of primary
prevention. Also, this commenter
suggested that measures should be used
that emphasize patient safety and
efficiency of care, consistent with the
IOM’s Crossing the Quality Chasm
report.
Response: We are committed to
continuing to improve the Part C and D
quality performance measurement
system to increase focus on improving
beneficiary outcomes, beneficiary
satisfaction, population health, and
efficiency of health care delivery. To
that end, CMS has been working on
developing a more robust system to
measure quality and performance of Part
C and D contracts. As new measures are
developed and adopted, they will be
incorporated into the Plan Ratings
published each year on the Medicare
Plan Finder Web site.
We view the MA quality bonuses also
referred to as value-based payments as
an important step to revamping how
care and services are paid for, moving
increasingly toward rewarding better
value, outcomes, and innovations. As
we add measures to the Plan Ratings
over time, we will consider the
following principles:
• Public reporting and value-based
payment systems should rely on a mix
of standards, process, outcomes, and
patient experience measures, including
measures of care transitions and
changes in patient functional status.
Across all programs, we seek to move as
quickly as possible to the use of
primarily outcome and patient
experience measures. To the extent
practicable and appropriate, outcomes
and patient experience measures should
be adjusted for risk or other appropriate
patient population or provider
characteristics.
• To the extent possible and
recognizing differences in payment
system maturity and statutory
authorities, measures should be aligned
across Medicare’s and Medicaid’s public
reporting and payment systems. We
seek to evolve to a focused core-set of
measures appropriate to the specific
provider category that reflects the level
of care and the most important areas of
service and measures for that provider.
• The collection of information
should minimize the burden on
providers to the extent possible. As part
of that effort, we will continuously seek
to align its measures with the adoption
of meaningful use standards for health
information technology, so the
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collection of performance information is
part of care delivery.
• To the extent practicable, measures
used by CMS should be nationally
endorsed by a multi-stakeholder
organization. Measures should be
aligned with best practices among other
payers and the needs of the end users
of the measures. Our strategy is to
continue to adopt measures that are
nationally endorsed and are in
alignment with the private sector as we
do today through the use of measures
developed by NCQA and the Pharmacy
Quality Alliance (PQA), and the use of
measures that are endorsed by NQF.
As we modify the calculation
approaches for the Plan Ratings, we are
incorporating the following principles:
• Contracts should be scored on their
overall achievement relative to national
or other appropriate benchmarks. In
addition, scoring methodologies should
consider improvement as an
independent goal.
• Measures or measurement domains
need not be given equal weight, but over
time, scoring methodologies should be
more weighted towards outcome,
patient experience and functional status
measures.
• Scoring methodologies should be
reliable, as straightforward as possible,
and stable over time and enable
consumers, providers, and payers to
make meaningful distinctions among
providers’ performance.
A high priority for the 2012 Plan
Ratings is to weight the outcome and
clinical measures more than
performance measures such as call
center measures. This change would
limit the impact of performance
measures as well as create more
incentives for MA plans to improve
their outcome measures. Additionally,
we are exploring incorporating
additional measures focusing on health
outcomes in the Plan Ratings. Potential
outcome measures currently under
consideration for incorporation into the
Plan Ratings include: all-cause
readmission rates and MA mortality
rates. We will provide opportunities for
comment on proposed measures
annually through the draft Call Letter.
We believe that the current set of
quality measures are not driving quality
improvement as much as they could be.
Many of the existing measures have
been collected and reported to CMS for
more than 10 years, such as HEDIS®,
HOS, and CAHPS, so plans have had
ample opportunity to focus on quality
improvement. Given the increased focus
on the star ratings, we are reevaluating
the set of measures included in the star
ratings.
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In determining whether additional
measures will be added to the star rating
system, we will consider the value of
the proposed measure in improving the
star ratings and how it supports the
IOM’s six aims. These aims state that
healthcare delivery should be safe,
timely, effective, efficient, equitable and
patient-centered. These aims will serve
as a framework for selecting additional
measures and making methodological
enhancements to the Plan Ratings. The
comment that new measures should
focus on patient safety and efficiency of
care is a good point, and one we need
to consider in working with NCQA,
PQA, and other consensus-building
organizations in developing new
measures.
The MA quality agenda will also be
coordinated with the national priorities
for quality that are being set as part of
the ACA. As the national priorities for
quality are shaped, the MA quality
agenda will be aligned with these
priorities. We are working on the MA
quality agenda and have also
established an agency-wide Quality
Working Group Advisory Panel. Senior
CMS leadership has convened this
panel to facilitate the coordination of
the CMS quality initiatives in support of
the development of the HHS National
Strategy for Quality that is required by
the ACA. This working group will
ensure that the MA quality agenda
aligns with other components within
CMS and with HHS’ national goals.
CMS’ participation in the HHS-wide
Interagency Quality Measures
Workgroup will also further ensure that
MA quality measures are developed in
a coordinated way across the
Department.
Accordingly, based on the preceding,
we proposed to amend § 422.258 to add
a new paragraph (d)(7) to reflect our
authority to make bonus payments
based on quality. Under § 422.252, we
also proposed definitions of ‘‘low
enrollment contract’’ and ‘‘new MA
plan’’ for the purpose of identifying
qualifying organizations eligible to
receive a bonus payment.
While the regulations in this section
will implement the QBP provisions
specified in the ACA on a permanent
basis, for CYs 2012 through 2014, MA
payment will be determined under the
terms of the national QBP
demonstration project. Details on the
demonstration are provided on CMS’
Web site. During the demonstration, the
rules for determining QBPs set forth in
the ACA and in this final regulation will
be waived, and QBPs will instead be
determined under the terms of the
demonstration.
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Comment: We received a number of
comments on the QBP Demonstration.
Response: Because this rulemaking
establishes permanent regulations
implementing the QBP system provided
for in the ACA, the proposed regulations
did not reflect the terms of the QBP
Demonstration. Information on this
demonstration project was made
available for comment in the Advance
Notice of Methodological Changes for
Calendar Year (CY) 2012 for Medicare
Advantage (MA) Capitation Rates, Part C
and Part D Payment Policies and 2012
Call Letter, which was published on
February 18, 2011. We responded to
comments in the Announcement of
Calendar Year (CY) 2012 Medicare
Advantage Capitation Rates and
Medicare Advantage and Part D
Payment Policies and Final Call Letter,
published on April 4, 2011. Both
documents are available on the CMS
Web site at: https://www.cms.gov/
MedicareAdvtgSpecRateStats/.
Comment: Numerous commenters
supported and encouraged CMS to
develop the QBPs, including the current
nationwide demonstration program in a
fully transparent manner, while
emphasizing patient-reported
information in the star rating system.
The commenters request information
regarding the measures used to assess
performance, including the method
used to weight, score, determine cut
points and four-star thresholds, identify
benchmarks, and other details be fully
disclosed to the public. Further,
commenters recommended that CMS
continue to include beneficiaries and
their representatives in conversations
regarding QBPs.
Response: The measures used to
assess performance for MA plans are
derived from four sources: (1) CMS
administrative data; (2) surveys of
beneficiaries; (3) plan-reported data; and
(4) CMS contractor data. For each
contract, and each individual measure,
CMS groups the range of actual contract
scores for each measure into one of the
5 star groupings and assigns a star-rating
score based on a 5 star scale. In
establishing individual measure star
ratings, we consider whether the
measure is intended to achieve a
specified regulatory performance
standard; if not, we examine the
contract’s performance on a measure
relative to all other contracts’
performance on the same measure. The
segmentation of scores into groups is
based on statistical techniques that
minimize the distance between scores
within a grouping and maximize the
distance between scores in different
groupings. Once the star rating of 1
through 5 for each measure is known, a
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summary score for the contract is
computed by calculating a simple
average of the individual measure
ratings, and adding small consistent
bump-up amounts to the average if a
contract demonstrates consistency in 3,
4, or 5-star ratings among measures.
More details on the methodology to
calculate the star ratings are available
through the technical notes that are
available at https://www.cms.gov/
PrescriptionDrugCovGenIn/
06_PerformanceData.asp. The technical
notes describe in detail how the star
ratings are derived for each of the
individual measures, domains,
summary ratings, and the overall rating.
To ensure contracts are fully aware of
future enhancements to the Plan Ratings
and have an opportunity to comment on
the changes, we will include in the draft
and final Call Letter expected changes
in the star ratings 1 to 2 years in
advance. We will also provide
additional information through HPMS
memos and presentations to the plans
on User calls.
Comment: Some commenters
recommended creating a separate star
rating system for SNPs with SNPspecific measures that more accurately
reflect the quality of care delivered by
SNPs. The commenters argued that this
will place more focus on the needs of
their targeted populations. Some
specific suggestions were to create
‘‘transitional star ratings’’ for SNPs until
the current star ratings can be modified
and to add one-half stars to SNPs that
attain thresholds on SNP-specific
measures.
Response: We understand that SNPs
would like to be rated using SNPspecific measures and would like to be
judged using different standards to
account for their special populations.
We anticipate adding some SNP-specific
measures in the 2012 Plan Ratings. As
part of the ‘‘Advance Notice of
Methodological Changes for Calendar
Year (CY) 2012 for Medicare Advantage
(MA) Capitation Rates, Part C and Part
D Payment Policies, and 2012 Call
Letter,’’ published on February 18, 2011,
CMS sought comment on the feasibility
of creating a methodology to incorporate
SNP-specific measures into Plan
Ratings. We are taking into
consideration feedback we received as
we continue to study SNP-specific
measures.
In terms of using different standards
for the SNPs, we do not agree and want
to ensure performance standards are
consistent across all contracts. That
said, we typically case-mix adjust
measures when the data originate from
beneficiary surveys and we will
continue to determine the need for case-
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mix adjustments of any outcome
measures added over time. We do not
believe a transitional system is needed
as we are moving towards adding SNPspecific measures in the coming year.
Comment: Some commenters
expressed concerns about the
appropriateness and reliability of the
HOS data in the star rating system. One
commenter urged CMS to work with
health plans, providers, and patients to
reconsider the best mix of measures for
the star rating system.
Response: There has been a
published, peer-reviewed independent
evaluation of the HOS in 2004 that
found that it provides a rich and unique
set of reliable data https://
www.hqlo.com/content/2/1/33. For all
measures, we will continue to examine
the quality of the data and measure
accuracy, validity, and stability. For
those measures that are not proven to be
reliable and valid, we will determine
whether they are appropriate ‘‘display
measures,’’ which would appear on
www.cms.gov but not be used in the
plans’ star ratings.
Comment: A few commenters
recommended that the star ratings be
made more equitable by taking
geographic and demographic variations
into account. One commenter
recommended incorporating measures
of care coordination, care transitions,
readmissions, shared decision-making,
health literacy, patient activation, and
FFS/MA comparison into the star rating
system.
Response: As we pursue more
outcome measures, we will ensure that
measures are case-mix adjusted.
Currently, measures that originate from
beneficiary surveys are case-mix
adjusted. CMS does not consider
geographic differences by themselves as
sufficient reasons for adjusting Plan
Ratings so every state or region may
have a 5 star plan. However, CMS is
exploring the feasibility of adjusting for
provider shortages, such as Health
Professional Shortage Areas (HPSAs).
We are also currently exploring the
feasibility of incorporating potential
survey measures of care coordination,
care transitions and patient activation as
well as an all-cause readmissions
measure into the star rating system. In
terms of the FFS and MA comparisons,
we are working internally to identify
additional FFS comparison measures.
Comment: Several commenters
recommended that CMS periodically
evaluate the star rating system and the
measures selected for inclusion in the
star rating system in order to reflect
ongoing evolution of measures and to
ensure that the system is more accurate,
consistent, and transparent.
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Response: We strongly agree with the
need to periodically evaluate the star
rating system. Given the need for the
star ratings to adapt quickly to changes
in clinical practices and the state-of-theart in quality measurement, we plan to
each year evaluate the measurement set.
We will provide information in the draft
and final Call Letters about specific
expected changes in the star ratings
system.
Comment: One commenter urged
CMS not to factor Part D measures into
the benchmarks. They argue that since
benchmarks are established based on
healthcare services provided, adding
Part D measures into the benchmarks
will not reveal an accurate reflection of
the contracts’ performance.
Response: Drug services are part of
the continuum of care provided by MA
organizations so are included in the
overall rating.
Comment: A few comments expressed
concern about how Medicare Cost
contract organizations that convert to
MA contracts will be treated for star
rating and QBP purposes. It was
suggested that instead of treating such
converted organizations like other new
MA organizations, CMS should
recognize the star rating track record the
organization earned as a Medicare Cost
contractor and use this rating as the
basis for the QBP until the converted
organization can generate an MA track
record.
Response: The contract number of a
Medicare Cost contract which converts
to an MA organization does not change.
Since these cost contracts are required
to collect and report the same data as
MA contracts, they should have the data
needed to continue to receive a star
rating. The only difference is that they
will be included in the list of contracts
that receive a QBP rating because of
their new organization type designation.
Comment: One commenter supported
the implementation of enhanced, highquality Medication Therapy
Management (MTM) programs as a
component of the quality rating system.
Response: For the 2013 Plan Ratings,
we are developing MTM-specific
measures.
Comment: A commenter asked for an
explanation of the rationale for a new
and small plan receiving enhanced
payments prior to proving that
corresponding level of performance.
Response: Under the ACA, the
Secretary is required to consider a low
enrollment contract that does not have
sufficient data to compute a quality
rating to be a ‘‘qualifying plan’’ and
receive the QBP and that a new MA
plan, defined as a plan offered by an
organization or sponsor that has not had
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an MA contract in the prior 3-year
period, would qualify for the QBP.
Comment: One commenter expressed
concern that HEDIS® specifications for
certain measures are inappropriate,
irrelevant, potentially harmful and/or
not validated by medical literature. For
example, self-reported measures when
the beneficiary is cognitively impaired
or mentally ill were noted.
Response: Each HEDIS® measure does
have specific exclusions relevant for
that measure that NCQA has determined
by the standards of care for that
condition and each measure has gone
through rigorous clinical review.
Additionally, proxy respondents are
allowed for the beneficiary surveys.
More information about HEDIS®
specifications can be found in the
HEDIS® 2011 Technical Specifications,
Volume 2.
Comment: One commenter questioned
whether Plan D sponsors are rated using
old data that may not be statistically
accurate.
Response: We use the most recent
data available in updating each
measure. These data represent the best
available measures of a plan’s
performance or quality of care. Some of
the data we collect are based on
statistical sampling. When samples are
used, the sample sizes are chosen to
ensure that we produce reliable
estimates of true performance.
Comment: A few commenters stated
that Part D plans achieve very different
star ratings for identical services that are
performed by the same Pharmacy
Benefits Manager (PBM).
Response: The star ratings assigned to
each contract are based on the service or
performance in the specific measures,
and therefore may differ across contracts
associated with the same PBM or other
entity. For example, the measures
within the Drug Pricing and Patient
Safety domain utilize each contract’s
enrollees’ prescription drug event (PDE)
data; this is separate and independent of
a PBM’s function as a Pharmacy &
Therapeutics (P&T) committee, claims
adjudicator, or exceptions/appeals
processor for multiple Part D contracts.
Enrollees’ utilization patterns differ
among contracts, thus the resulting star
ratings for contracts will differ.
Comment: One commenter was
concerned that the demonstration
project would award low performing
contract a QBP. The same commenter
asked if the weighting can produce
anomalous results.
Response: The demonstration project
builds on the QBPs authorized in the
ACA by providing stronger incentives
for contracts to improve their
performance thereby accelerating
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quality improvements during the 3-year
period of the demonstration. Since the
star ratings we are using for QBPs are
the overall rating which combines both
Part C and D measures, there are some
contracts that have done poorly in Part
C or Part D for each of the past 3 years
(2.5 stars or below), but their overall
rating was a 3. In most cases the Part D
measures brought up the overall
summary rating to a 3. This is an issue
for the demonstration, but not for the
ongoing QBP program since contracts
after the demonstration will not receive
a bonus if they have 3 stars. As changes
are made in the weighting of clinical
and outcome measures, these anomalies
are likely to lessen.
Comment: One commenter suggested
that CMS develop outcome measures
relevant to Program of All-Inclusive
Care for the Elderly (PACE) and institute
QBPs for PACE programs.
Response: PACE programs are not MA
plans and according to statute do not
qualify for QBPs.
After consideration of the public
comments we received, we are
finalizing § 422.258(d) as proposed.
d. Beneficiary Rebates (§ 422.266)
The final rule for calculation of
beneficiary rebates implements section
3202(b)(1) of the ACA, which reduces
the amount of beneficiary rebate, and
ties the level of rebate to a plan’s star
rating for quality of performance.
Section 3202(b)(1) of the ACA
changes the share of savings that MA
plans must provide to enrollees as the
beneficiary rebate specified at
§ 422.266(a). Specifically, this provision
mandates that the level of rebate is tied
to the level of a plan’s star rating for
quality of performance. Under the new
provisions, the highest possible rebate,
for plans with a 4.5 star rating or higher,
is set at 70 percent of the average per
capita savings. The rebate is reduced
further for plans with lower star ratings
for a year. These new provisions are
phased-in from 2012 through 2014. The
demonstration project mentioned in
section II.B.20.(c). of this final rule will
not affect the rebate percentages
associated with a particular star rating,
under the terms of the ACA.
We revised § 422.266 by first
redesignating paragraph (a) as paragraph
(a)(1), and amending it to apply to years
2006 through 2011. We further added
paragraph (a)(2), which sets forth the
rebate determination rules for 2012 and
subsequent years. Section
422.266(a)(2)(ii) states that for 2014 and
subsequent years, the final applicable
rebate percentage (the percentage
applied to the savings amount to
determine the rebate amount) is 70
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percent in the case of a plan with a
quality rating under such system of at
least 4.5 stars; 65 percent in the case of
a plan with a quality rating of at least
3.5 stars and less than 4.5 stars; and 50
percent in the case of a plan with a
quality rating of less than 3.5 stars.
Section 422.266(a)(2)(i) describes the
transition period during which the old
75 percent rule at paragraph (a)(1) will
be phased-out and the (a)(2)(ii) rules
phased in. For 2012, the rebate
percentage equals the sum of: two-thirds
of the old proportion of 75 percent of
the average per capita savings; and onethird of the new proportion assigned the
plan or contract under paragraph (ii),
based on the plan’s star rating for the
year. For 2013, the rebate percentage
equals the sum of: 1⁄3 of the old
proportion of 75 percent of the average
per capita savings; and two-thirds of the
new proportion assigned the plan or
contract based on the plan’s star rating
for the year.
Section 422.266(a)(2)(iii) describes the
rules for low enrollment contracts. For
2012, the ACA requires that low
enrollment contracts shall be treated as
having a rating of 4.5 stars for the
purpose of determining the beneficiary
rebate amount. Section 422.266(a)(2)(iii)
describes the rules for new MA plans.
For 2012 or a subsequent years, a new
MA plan defined at § 422.252 that meets
the criteria specified by us for purposes
of § 422.258(d)(7)(v) must be treated as
a qualifying plan under paragraph (7)(i),
except that plan must be treated as
having a rating of 3.5 stars for purposes
of determining the beneficiary rebate
amount.
Comment: One commenter
recommended that CMS allow part of
the bonus to be reinvested into the
carrier’s quality program.
Response: The rebate amount must be
credited to one of the uses described in
section 1854(b)(1)(C) of the Act, as
described in the Advance Notice of
Methodological Changes for Calendar
Year (CY) 2012 for Medicare Advantage
(MA) Capitation Rates, Part C and Part
D Payment Policies and 2012 Call
Letter, published on February 18, 2011
and the Announcement of Calendar
Year (CY) 2012 Medicare Advantage
Capitation Rates and Medicare
Advantage and Part D Payment Policies
and Final Call Letter, published on
April 4, 2011. These documents are
available on the CMS Web site at:
https://www.cms.gov/
MedicareAdvtgSpecRateStats/. Quality
improvement program costs are
legitimate administrative costs and can
be added as such to the plan’s bid.
Comment: One commenter urged
CMS to analyze the effect of rebate
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reduction on duals. The commenter
believes that since the quality metrics
are not scaled in any way by the risk of
the population, beneficiaries in plans
with high concentrations of complex
needs will see a downward trend of
available benefits.
Response: We will consider analyzing
the effect of rebate reduction on duals.
However, as stated previously, the
statute at 1854(b)(1)(C) explicitly sets
out the savings that MA plans can
provide and star rating that the rebate is
tied to. Any change to this formulation
would require Congressional action.
We are finalizing this provision
without modification. We are also
adopting § 422.266 as proposed in this
final rule.
21. Quality Bonus Payment and Rebate
Retention Appeals (§ 422.260)
As noted in the proposed rule, while
the ACA provisions establishing the
QBP system do not specify a process for
requesting an administrative review of
the star ratings, historically, we have
made an administrative review process
available to MA organizations for
certain payment determinations.
Pursuant to our statutory authority to
establish MA program standards under
section 1856(b)(1) of the Act, we
proposed to implement a process
through which MA organizations may
request an administrative review of their
star rating (‘‘QBP status’’) for QBP
determinations. We proposed that this
review process would also apply to the
determinations made by us where the
organization’s Plan Rating sets its QBP
status at ineligible for rebate retention.
For calendar years 2012 through 2014,
we proposed that QBP payments would
be awarded under the terms of a
demonstration project; thus, we
proposed these regulations would not
take effect until after the demonstration
project has terminated. We requested
comment regarding our proposal to
delay the effective date of the appeals
process set forth in this final rule until
after the end of the demonstration.
We received no comments on this
specific proposal; however, based on
other comments regarding the appeals
process we are aligning the appeals
process in the regulation with the
administration review process that will
be used under the demonstration
project.
While we proposed to reserve the
right to use the same star rating that
applies to the Plan Rating for QBP
determinations, we will provide MA
organizations notice each year regarding
their QBP status. QBP determinations
would be considered made, subject to
the appeal rights described in this
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section, when the notice of QBP status
is released. We proposed MA
organizations would have 5 calendar
days from the date of CMS’ release of
QBP determinations to request from
CMS a technical report explaining the
development of their QBP status. As
stated in the proposed rule, if, after
reviewing the technical report, the MA
organization believes that we were
incorrect in its QBP determination, the
MA organization may request an appeal
to be conducted by a hearing officer
designated by CMS. The organization
would be required to make such a
request within 7 calendar days of the
MA organization’s confirmed receipt of
the technical report. We proposed the
scope of the hearing would be limited
to challenges of CMS’ application of its
QBP determination methodology to the
appealing MA organization and, in very
limited instances, the accuracy of the
data we used to make the QBP
determination. As a result, the appeals
process would not be used as a means
to challenge the validity of the adopted
methodology. We also proposed limiting
the scope of the hearing officer’s
consideration to data sets that have not
been previously subject to independent
validation. We solicited comments on
whether this is an appropriate limitation
on the scope of a QBP status appeal.
Comment: One commenter would like
to be able to appeal audited data.
Response: The auditor and contract
work together throughout the entire
audit. Any questions about the data or
the auditor’s assessment of the plan are
discussed and documented during the
audit, and all resolutions are
documented. A contract should raise
any concerns with respect to audited
data during their audit process. HEDIS®
audits, for example, ensure accurate,
reliable and publicly reportable data.
For this reason, NCQA encourages the
organization to collect data
simultaneously with the audit. A
concurrent audit lets the auditor detect
errors in the organization’s data
collection process while there is time
for the organization to correct its
methods and minimize the possibility of
Not Reportable rates.
As provided in the proposed rule, the
hearing officer’s decision would be final
and binding on both the MA
organization and CMS. In the event that
the hearing officer finds that CMS’ QBP
determination was incorrect, we would
be obligated to recalculate the
organization’s QBP status based on the
hearing officer’s findings. We proposed
to maintain the right to revise an MA
organization’s QBP status at any time
after the initial release of the QBP
determinations through May 15 of each
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year. We indicated that we may take this
action on the basis of any credible
information, including the technical
report issued pursuant to the process
identified here, which demonstrates that
the initial QBP determination was
incorrect. We are revising the date that
CMS may, on its own initiative, revise
an MA organization’s QBP status after
the initial release of the QBP
determinations. While changes may
occur after this date based on appeals of
QBP status, CMS, on its own initiative,
will only have through April 1 of each
year to make changes to an MA
organization’s QBP status. This change
will afford MA organizations more time
to incorporate their QBP status into
their plan bids, due to us by the first
Monday in June. Additionally, we did
not propose another level of
administrative review beyond the
hearing officer. We solicited comment
on the need for an independent
contractor-level review prior to an
appeal to be conducted by a hearing
officer designated by CMS or an
Administrator-level review.
Comment: One commenter
recommended that CMS have a threelevel appeals process to ensure contracts
have a robust mechanism to appeal
(such as, Level 1 would be a request for
reconsideration, Level 2 would be a
request for a hearing, and Level 3 would
be a request for CMS Administrator
review). Another commenter
recommended a second level of appeal
for QBP determinations.
Response: Based on these comments,
we are strengthening the administrative
review process for MA organizations
that appeal their star ratings for QBP.
We are aligning the process in the
regulation with the process used during
the demonstration. We will modify
§ 422.260(d) to create a two-step
administrative review process that
includes a request for reconsideration
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and a request for an informal hearing on
the record. MA organizations will no
longer be requesting a technical report
from CMS detailing the data and
measures used to determine the QBP;
however, as part of the reconsideration
determination, MA organizations will
receive information about how their star
rating for the given measure in question
was calculated and/or what data was
included in the measure. The MA
organization may appeal the
reconsideration official’s decision
regarding its QBP status by requesting
an informal hearing. The informal
hearing will be conducted by a CMS
hearing officer on the record.
Comment: A number of commenters
requested more than 5 calendar days to
submit a request for a technical report
and additional days to request the
appeal. Some commenters requested
extension of the 5 calendar day window
to 7 to 15 days, with clarification of
calendar or business days.
Response: The timeframes are tight
given we want to resolve any issues
prior to contracts submitting their bids
to CMS. However, in order to be
responsive to this concern, we are
revising the timeframes. MA
organizations will have 10 business
days from the time we issue the notice
of QBP status to submit a request for
reconsideration. MA organizations will
have 10 business days after the issuance
of the reconsideration determination to
request an informal hearing on the
record.
Comment: One commenter expressed
concern that the appeals process is not
fully transparent.
Response: The appeals process is
outlined in this regulation. Also, each
year MA contracts will receive
additional details through HPMS
memos about the timing for submitting
an appeal.
Comment: A few commenters
requested that CMS send technical
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reports to all contracts, without them
having to request one.
Response: The technical notes
published at https://www.cms.gov/
PrescriptionDrugCovGenIn/
06_PerformanceData.asp have detailed
information about how each of the star
ratings is calculated. Also, contracts
may request information about how
their scores were calculated at any time
by e-mailing CMS at
PartCratings@cms.hhs.gov.
Comment: A commenter requested
that Medicare Cost contracts be
permitted to submit requests for
Technical Reports and have appeal
rights.
Response: Medicare Cost contracts
may request any additional information
during the plan preview for Plan Ratings
or at any time by e-mailing CMS at
PartCratings@cms.hhs.gov. The appeals
rights under this regulation are related
to using the star ratings for payment for
QBPs. Medicare cost contracts are not
eligible for QBPs since they are not
considered MA contracts.
Based on the comments, we are
revising the proposed § 422.260(c) and
§ 422.260(d) to create a two-step
administrative review process that
includes a request for reconsideration
and a request for an informal hearing on
the record. We are also extending the
timeframes for requests.
C. Clarify Various Program Participation
Requirements
The provisions in this section of the
final rule clarify existing regulations or
implement new requirements consistent
with existing policy guidance to assist
sponsoring organizations with attaining
the goals of the Medicare Advantage and
Prescription Drug Benefit programs.
These clarifications are detailed in
Table 5.
BILLING CODE 4120–01–P
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1. Clarify Payment Rules for NonContract Providers (§ 422.214)
In our November 2010 proposed rule
(75 FR 71223), we proposed adding a
new paragraph (c) to § 422.214 to clarify
that a request for payment from an MA
organization by a non-contracted
provider who is paid using a
prospective payment system (PPS)
methodology under Original Medicare is
deemed to be a request to be paid at the
Original Medicare payment rate unless
the provider has notified the MA
organization in writing that it wishes to
bill less than the Original Medicare
payment amount. We proposed this
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provision to codify the guidance for
plans and out-of-network providers in
CMS’ Out-of-Network Payment Guide
released February 25, 2010. This
guidance, which was responsive to
questions we had received about this
issue, reflects CMS’ longstanding policy
that if a non-network facility such as a
hospital, skilled nursing facility, or
home health agency renders services
which were not arranged by the plan, a
non-private-fee-for-service MA
organization may pay the lesser of the
Original Medicare amount or a lower
billed amount if it is clear that the
provider is billing for less than the
Original Medicare rate. The guidance
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also clarified that when a provider of
services that is paid under a PPS system
under Original Medicare submits the
same information to an MA organization
that it would submit to Original
Medicare for the services in question,
this should be considered a bill for the
PPS amount (and not the ‘‘billed’’ or
‘‘charge’’ amount from the claim) that
Original Medicare would pay in the case
of the same submission.
We also proposed adding a new
paragraph (d) to § 422.214 to clarify that
an MA organization offering a regional
PPO MA plan must always pay noncontracted providers at least the
Original Medicare payment rate in those
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portions of its service area where it is
meeting access requirements by nonnetwork means under § 422.111(b)(3)(ii).
This is consistent with the Medicare
access requirements at section
1852(a)(2)(A) of the Act—which specify
that an MA plan may meet access
requirements if it pays providers at the
Original Medicare payment rate.
After considering the comments
received, we are finalizing these
provisions as proposed.
Comment: One commenter asked
CMS to clarify that our proposed policy
that a non-contracted provider’s request
for payment be deemed to be a request
for the Original Medicare payment rate,
unless the provider expressly notifies
the MA organization in writing that it is
billing a lesser amount, does not
preclude health plans from negotiating
payment terms with contracted
providers. Another commenter
requested clarification that MA plans
can negotiate payment terms with
providers for more than Original
Medicare rates. Another commenter
recommended that our proposed policy
be applied in the Medicaid program
such that non-contracted provider
payments are limited to no more than
what the provider would receive under
the State’s Medicaid fee-for-service
program.
Response: Our proposed policy does
not preclude MA plans from negotiating
payment terms with providers. It
implements section 1866(a)(1)(O) of the
Act, which applies only where no
agreement on payment levels is in place.
Extending our proposed policy to the
Medicaid program would be beyond the
scope of this regulation, which only
addressed payments to non-contracted
providers for Medicare services
provided to MA enrollees.
2. Pharmacist Definition (§ 423.4)
Pursuant to our authority under
section 1860D–4(b)(3)(A)(i) and 1860D–
4(c)(2)(A)(i) of the Act, we proposed to
codify our understanding that, for
purposes of the Part D program, a
pharmacist is an individual with a
current, valid license to practice
pharmacy issued by the appropriate
regulatory authority of any of the states
or territories of the United States or the
District of Columbia (DC) (collectively
referred to as United States authorities).
We proposed adding a definition for the
word pharmacist to § 423.4 in Subpart A
to reflect this understanding.
The change was prompted by recent
Medicare Part D sponsor audit findings
in which we found that at least some
Part D sponsors were relying on
pharmacists not licensed by United
States authorities to make clinical
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judgments associated with the
administration of the Part D benefit. As
Medicare provides coverage for services
throughout the United States,
beneficiaries should be able to expect
that individuals making clinical
decisions related to their access to
pharmaceuticals are experts in United
States pharmaceutical practice.
Requiring pharmacists to be licensed by
United States authorities will help
guarantee that Part D sponsors meet
these expectations.
Comment: CMS received support for
codifying this definition from numerous
pharmacy associations, industry, and
patient/beneficiary advocacy
organizations.
Response: We agree with these
commenters and appreciate the
widespread stakeholder support for this
definition. We received only supportive
comments for this proposal; therefore,
we are finalizing this provision without
modification.
3. Prohibition on Part C and Part 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 (§ 422.506, § 422.508, § 422.512,
§ 423.507, § 423.508, and § 423.510)
In the April 2010 final rule (75 FR
19678), we modified § 423.508 by
adding two paragraphs stating that: (1)
As a condition precedent to CMS’
consent to a mutual termination, CMS
requires language in the termination
agreement prohibiting the sponsor from
applying for new contracts or service
area expansions for a period of up to 2
years absent special circumstances
warranting special consideration; and
(2) that as a necessary condition to
contract as a Part D sponsor, an
organization must not have terminated a
contract by mutual consent within the 2
years preceding the application. Similar
modifications were made for the MA
regulations at § 422.508. These changes
ensured consistency across all situations
in which a sponsor elects— through
non-renewal, termination, or mutual
termination— to discontinue its
participation in the Part C or Part D
programs.
In the proposed rule, we proposed to
amend the 2-year new contract
prohibition in both § 422.508 and
§ 423.508 by adding a new paragraph
entitled ‘‘Prohibition against Part C [and
Part D] program participation by
organizations whose owners, directors,
or management employees served in a
similar capacity with another
organization that terminated its
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Medicare contract within the previous 2
years.’’ We also proposed similar
clarifying language to the existing
language at § 422.506, § 422.512,
423.508, and § 423.510. We stated our
belief that to carry out the intentions of
the 2-year exclusion we would need to
ensure that new contracting
organizations are not actually
repackaged versions of the same
organizations that elected to discontinue
their participation in the Part C and Part
D programs. Therefore, we proposed to
implement a requirement which would
allow us to determine whether the
primary players in the organization
submitting the new application are the
same as those in an organization that
has recently non-renewed, terminated,
or mutually terminated a Medicare
contract.
We noted that the proposed
requirement would assist CMS in
prohibiting and preventing such
organizations from gaming the Medicare
program by reapplying for a contract as
a new organization during the 2-year
ban, when the applying organization has
common ownership and management
control. This proposed requirement
would help to ensure that the provisions
of the 2-year application prohibition are
given full effect.
Therefore, we proposed that the 2year ban on new Part C or Part D
sponsor contracts to which nonrenewing, terminating, or mutually
terminating organizations are currently
subject under the regulation be
expanded to include organizations
owned or managed by an individual
(referred to as a covered person) who
served in a similar capacity for a
previously terminated or non-renewed
Part C or Part D organization. To
implement this provision, we proposed
to require as part of the contract
application process, that applicants
supply CMS with full and complete
information as to the identity of each
covered person associated with the
organization. In the proposed rule we
defined covered persons to include—
• All owners of applicant
organizations who are natural persons
(other than shareholders who: (1) Have
an ownership interest of less than 5
percent; and (2) acquired the ownership
interest through public trading). In
addition, is a natural person who is an
owner in whole or part interest in any
mortgage, deed of trust, note or other
obligation secured (in whole or in part)
by the entity or any of the property
assets thereof, which whole or part
interest is equal to or exceeds 5 percent
of the total property, and assets of the
entity; or
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• An officer or member of the board
of directors or board of trustees of the
entity, if the entity is organized as a
corporation.
We solicited comments on whether
plan sponsors, or other stakeholders
consider the definition of 5 percent or
more as truly representing current
market conditions. We requested
comment on this section because we do
not want to arbitrarily decide on the
percentage of interest the previously
mentioned persons could have in an
organization, especially if this
percentage does not reflect standard
business practices.
We proposed to amend § 422.508 and
§ 423.507 to make the 2-year exclusion
applicable to organizations for which
any covered persons were also covered
persons for the excluded organization.
We also proposed to make similar
amendments to § 422.506, § 422.512,
§ 423.508, and § 423.510.
Comment: Several commenters stated
that the definition of covered persons
was too broad, and that it should not
encompass senior executives of the
excluded organization. They noted that
in many instances, these executives
were not responsible for the
organization’s decision to terminate or
non-renew a Medicare contract, but
were simply honoring their fiduciary
duty to carry out the instructions of the
sponsor’s ownership. The regulation as
proposed would unfairly limit the
opportunities for these senior executives
to obtain employment with other
Medicare Advantage organizations or
PDP sponsors as those employers may
not want limit their ability to apply for
new Medicare business by hiring such
individuals. Also, the proposed
language may also prompt senior
executives to seek other employment
when Medicare contract termination or
non-renewal is even discussed within
their organization to ensure that they
preserve their eligibility for employment
with the broadest possible range of other
Medicare Advantage organizations or
PDP sponsors.
Response: We agree that the definition
of covered person, as proposed, is too
broad. CMS’ intention in drafting the
provision was to make certain that
organizations subject to the two-year
application prohibition did not evade
the restriction by simply forming a new
corporation. Based on these comments,
we have further clarified our thinking to
conclude that the focus of the restriction
should be on those individuals with
absolute responsibility for control of
and an ownership stake in the business
decisions of the terminating and nonrenewing sponsors—the owners of more
than 5 percent of the shares of the
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sponsor and the members of the board
of directors. Therefore, we have decided
to modify the definition of covered
person to delete the term ‘‘officer * * *
of the entity’’ in the final rule.
Comment: One organization
commented that the inclusion of
individuals who own less than 5
percent of the total number of shares of
a sponsor’s stock acquired other than
through public trading in the definition
of covered person was unnecessarily
broad and would unfairly include
individuals who receive shares through
an organization’s employee stock
ownership program.
Response: This comment is based in
part on a typographical error in the
proposed rule as published at
§ 422.506(a)(5)(i)(A), § 422.508(d)(1)(i),
and § 422.512(e)(2)(i)(A). We intended
for the prohibition to apply to
individuals who own more than 5
percent of the shares of the sponsoring
organization. However, in some parts of
the proposed rule, the standard was
mistakenly stated as less than 5 percent.
In the final rule, we have corrected the
error to make more than 5 percent the
standard for stock ownership. Also, we
acknowledge that making a distinction
between stock shares obtained through
public trading and shares obtained
through all other means, as we
proposed, would create an irrelevant
and confusing distinction. This
proposed provision was intended to
restrict the ability to resume
participation in the Medicare Advantage
and Part D programs of individuals who
could exercise control over a
terminating or non-renewing
organization through their ownership of
a significant portion of the organization.
We believe the level of an individual’s
control is established by the percentage
of shares owned, not by the source of
those shares. Therefore, we are also
modifying the proposed rule to delete
the language excluding shareholders
who acquired their stock through public
trading from classification as covered
persons.
Comment: One organization
expressed its concern that the inclusion
of members of a terminating or nonrenewing sponsor’s board of directors in
the definition of covered person would
unfairly restrict organizations with
overlapping board membership from
eligibility to submit applications. The
commenter noted that this could be a
problem especially for subsidiaries of
the same parent organization where this
kind of arrangement is common.
Response: We believe that the
arrangement the commenter described
represents one of the situations we
intended to address through this
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regulatory change. In drafting this
provision, we are trying to make certain
that the parties that were responsible for
a decision to terminate or non-renew a
Part C or D sponsor contract do not
subvert the 2-year application
prohibition by submitting a new
application through the use of a
different legal entity over which they
similarly exert control. As the
commenter has not presented a
justification as to why an organization
controlled by many or all of the same
individuals who controlled a
terminating or non-renewing
organization should not be subject to the
two-year application ban, we are making
no change in the final rule to reflect this
comment.
Comment: Two commenters asked
that we clarify whether the new
provision concerning covered
individuals will apply to terminations
only at the plan benefit package (PBP)
level.
Response: The regulation change we
make here is intended simply to define
which individuals related to an
organization already determined to be
subject to the 2-year application
restriction may cause a second
organization to be similarly restricted
when it has the same relationship with
those individuals. The methodology
CMS uses to determine whether
organizations are subject to the two-year
application restriction is outside the
scope of the proposed regulatory
change.
In summary, we received several
comments on this proposal. In response
to the comments opposing the inclusion
of a contracting organization’s senior
management in the definition of a
covered person, we have deleted the
reference to officer from
§ 422.506(a)(5)(iii), § 422.508(d)(3),
§ 422.512(e)(2)(iii), § 423.507(a)(4)(iii),
§ 423.508(f)(3), and § 423.510(e)(2)(iii).
Also, in response to the comments
opposing the inclusion in the definition
of covered person owners of small
amounts of stock acquired other than
through public trading, we deleted the
phrase ‘‘acquired the ownership through
public trading’’ from the proposed
§ 422.506(a)(5)(i)(B), § 422.508(d)(1)(ii),
§ 422.512(e)(2)(i)(B),
§ 423.507(a)(4)(i)(B), § 423.508(f)(1)(ii),
and § 423.510(e)(2)(i)(B). We also
corrected our typographical errors by
replacing the statement ‘‘more than 5
percent with less than 5 percent’’ at the
proposed § 422.506(a)(5)(i)(A),
§ 422.508(d)(1)(i), and
§ 422.512(e)(2)(i)(A), as we intended
only to exclude from the definition of
covered persons individuals whose
ownership stake is less than 5 percent.
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We received no responses to our request
for comments concerning whether the
use of the 5 percent ownership
threshold for covered persons reflected
current marketing conditions or
standard business practices and have
therefore otherwise made final this
provision of the proposed rule.
4. Timely Transfer of Data and Files
When CMS Terminates a Contract With
a Part D Sponsor (§ 423.509)
Federal regulations at § 423.509(a) (1)
through (a) (12) clearly define the
circumstances under which we have the
authority to terminate a Part D sponsor’s
contract. When we terminate a contract,
we must have assurances that the
terminated Part D sponsor will maintain
sufficient staff and operations to make a
smooth transition of the sponsor’s
enrollees to new Part D coverage in a
fashion that facilitates continuity of care
and fiscal responsibility. These
responsibilities include providing
timely documentation requested by
CMS, retaining all documents for the
periods specified in the Federal laws
and CMS regulations (see § 423.505(d)
and (e)) and otherwise providing the
resources necessary for an orderly
transition of Medicare beneficiaries to
their newly assigned or selected plan.
In order for a timely and orderly
transition to occur, the terminated Part
D sponsor must provide us with certain
critical Medicare beneficiary data
including information to identify each
affected beneficiary, pharmacy claims
files, true out-of-pocket (TrOOP) cost
balances, and information concerning
pending grievances and appeals. Data
such as TrOOP balances are necessary to
place the beneficiary in the correct drug
benefit phase and provide the
catastrophic level of coverage at the
appropriate time.
The requirement to provide such data
and files is already clearly articulated
for voluntarily non-renewing Part D
plan sponsors (§ 423.507(a) (4)); for
contracts terminated by mutual consent
(§ 423.508(d)); and for contracts
terminated by the plan sponsor for
cause (§ 423.510(f)). However, the
regulation is currently silent regarding
contracts terminated by CMS. Therefore,
in order to protect both Medicare
beneficiaries and CMS and to ensure
that the requirement to provide such
data and files is clear for all types of
contract non-renewals and terminations,
we proposed to add a new section (e)
Timely transfer of data and files to
§ 423.509 (Termination of Contract by
CMS) to state that should the Part D
plan sponsor’s contract be terminated by
CMS, the Part D sponsor must ensure
the timely transfer of any data or files.
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This language would inform Part D
sponsors being terminated by CMS that
they are required by Federal regulation
to timely transfer all requested data and
files to CMS or its designee for the
required time as specified under
§ 423.505(d) and (e). Because the failure
to provide this information directly
harms beneficiaries, plans that fail to
comply with this requirement may be
subject to a Civil Monetary Penalty as
defined in § 422.752(c) and § 423.753(c).
Comment: Several commenters
expressed their support for this
provision. One commenter
recommended that we go even further
by specifying through regulations the
time period which terminated Part D
sponsors have to transfer data and files.
Response: We appreciate the
commenters’ support of our proposal.
Further specifying the time period for
transfer of data in regulation is not
possible because circumstances vary
from one CMS-initiated termination to
the next. We will provide timeframes in
guidance to the affected sponsor upon
termination.
Comment: One commenter wanted
CMS to specify through regulations a
plan for the smooth transfer of
beneficiaries to a new Part D plan to
ensure that patients retain access to
needed medications, and that
pharmacies and other downstream
entities receive the reimbursement for
which they are entitled once a Part D
plan sponsor is terminated.
Response: As explained in the
proposed rule this provision merely
adds § 423.509(e) to the existing
regulations conforming the rules
regarding the timely transfer of critical
beneficiary data for Part D sponsors
being terminated under any
circumstance, and does not address the
transfer of beneficiaries nor
reimbursement. While these are
important concerns, they are outside the
scope of these proposed revisions. We
do, in fact, have protocols in place to
ensure the smooth transfer of
beneficiaries to other Part D coverage
with minimal interruption in access to
medications. With regard to
reimbursement of pharmacies, the
statute and regulations governing Part D
provide for CMS to contract with
entities that apply to be Part D sponsors
and are determined qualified as
provided in § 423.503. Once we evaluate
and determine an applicant is qualified
to be a Part D sponsor, that sponsor
retains the ultimate legal responsibility
for adhering to and otherwise fully
complying with all terms and
conditions of its contracts with
downstream providers, such as
pharmacies. Nevertheless, we have
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21495
recently strengthened its ability to
ensure that sponsors promptly pay
pharmacies by codifying at § 423.520 a
requirement that the contract between
CMS and all Part D sponsors contain
provisions obligating the sponsor to
promptly pay claims. As a result, Part D
sponsors that do not meet the prompt
payment requirements of § 423.520 may
be subject to contract compliance
actions by CMS.
Having received only support for this
proposal, we are therefore finalizing this
provision without modification.
5. Review of Medical Necessity
Decisions by a Physician or Other
Health Care Professional and the
Employment of a Medical Director
(§ 422.562, § 422.566, § 423.562, and
§ 423.566)
Based on sections 1852(g) and 1860D–
4(g) of the Act, we have established
procedures for making organization
determinations and reconsiderations
regarding health services under Part C,
and for making coverage determinations
and redeterminations regarding covered
drug benefits under Part D. These
requirements are codified in our
regulations at part 422 subpart M and
part 423 subpart M, respectively. In the
proposed rule, we noted that although
the Part C and Part D regulations require
physician review of appeals of adverse
organization determinations or coverage
determinations, respectively, that
involve medical necessity, the
regulations do not specify who must
conduct the initial determinations
involving medical necessity. We
proposed to modify our requirements in
§ 422.566 by adding a new paragraph (d)
which would require organization
determinations that involve medical
necessity to be reviewed by a physician
or other appropriate health care
professional with sufficient medical and
other expertise, including knowledge of
the Medicare program. We also
proposed to require the physician or
other health care professional to have a
current and unrestricted license to
practice within the scope of his or her
profession in a State, Territory,
Commonwealth of the United States
(that is, Puerto Rico), or the District of
Columbia.
As noted in the proposed rule, section
1860D–4(g) of the Act requires Part D
plan sponsors to meet the requirements
for processing requests for coverage
determinations and redeterminations in
the same manner as such requirements
apply to Part C organizations with
respect to organization determinations
and reconsiderations. Consistent with
the proposed changes to the Part C
organization determination process, we
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proposed similar changes to the Part D
coverage determination process in new
§ 423.566(d).
Comment: Many commenters
expressed strong support for this
proposal as it relates to the Part C and
Part D programs, but several of those
commenters conditioned their support
for the proposal on its applicability to
only those cases where the plan’s initial
review (for example, by a non-clinician
claims specialist) will result in an
unfavorable decision. In other words,
the commenters argued that if the initial
review of the request will result in a
favorable coverage decision for the
enrollee, there is no need to involve a
physician or other health care
professional in reviewing the case.
These commenters believe that the
additional safeguards of this provision
are only necessary if, based on the
initial review of the request, the plan
expects to issue an unfavorable
decision.
Response: We acknowledge that it is
common practice for an MA
organization or Part D plan sponsor to
use a claims specialist (who may not be
a clinician) to conduct initial reviews of
requests for organization and coverage
determinations. We agree that if the
initial review of an organization or
coverage determination request will
result in a fully favorable decision for
the enrollee, the request does not
require review by a physician or other
appropriate health care professional.
However, if the initial review of the
request will result in the plan issuing a
partially or fully unfavorable decision
based on medical necessity, a physician
or other appropriate health care
professional must be involved in
reviewing the request prior to the plan
issuing a final decision. We believe this
approach strikes an appropriate balance
between ensuring that organization and
coverage determination requests
involving medical necessity decisions
are subject to review by appropriate
health care professionals and allowing
MA organizations and Part D plan
sponsors to appropriately and efficiently
utilize health care professional staff
resources. We revised proposed
§ 422.566 and § 423.566 to reflect this
change.
Comment: Some commenters
requested that CMS clarify that the
statement appropriate health care
professional includes a pharmacist for
purposes of reviewing Part D coverage
determinations involving medical
necessity. A few commenters suggested
that pharmacists be explicitly listed as
health care professionals capable of
reviewing medical necessity
determinations.
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Response: We do not believe it is
necessary or advisable to explicitly list
specific health care professionals who
may appropriately review organization
or coverage determinations involving
medical necessity. The type of health
care professional who may be
appropriate to review a particular
request will depend on the type of
services being requested, related
medical necessity issues, and whether
the review is consistent with the health
care professional’s scope of practice
under State law.
Comment: Some commenters asked
that CMS clarify that the proposed
change does not impose a requirement
on plans to employ a particular number
of physicians or other health care
professionals for purposes of reviewing
organization or coverage
determinations. One commenter noted
that the new requirement will result in
undue increased cost to plans.
Response: We are not specifying the
number or mix of physicians and other
health care professionals MA
organizations or Part D plan sponsors
must employ or otherwise engage to
review initial coverage decisions
involving medical necessity. Plans are
responsible for ensuring adequate
staffing levels based on caseload mix
and volume and other business factors.
We believe that this flexibility, coupled
with our clarification in the final rule
that a physician or other appropriate
health care professional must be
involved in a medical necessity review
only if the plan expects to issue an
unfavorable decision significantly
reduces or eliminates any potential
burden to plan sponsors. We do not
believe it is unreasonable or excessively
burdensome for an MA organization or
Part D plan to utilize the services of
physicians and other health care
professionals for medical review
activities.
Comment: One commenter noted that,
instead of requiring knowledge of the
Medicare program as stated in the
proposed rule, reviewers need only have
knowledge of Medicare coverage
requirements.
Response: We agree with the
commenter that requiring knowledge of
the Medicare program is unnecessarily
broad, and that our primary expectation
is based on reviewers having knowledge
of Medicare coverage requirements. We
are revising the proposed language
accordingly. However, reviewers are
expected to follow all applicable
Medicare requirements, such as
adjudication timeframes, in the
performance of their duties. Plan
sponsors are responsible for having
adequate internal controls in place to
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ensure that their reviewers follow all of
these requirements. Thus, this change
does not in any way negate a plan
sponsor’s responsibility for ensuring
compliance with Medicare’s program
requirements.
Based on our review and
consideration of the comments received
on this proposal, we are finalizing both
§ 422.566 and § 423.566 by revising
them to include a new paragraph (d).
Under new § 422.566(d) and
§ 423.566(d), if a plan expects to issue
a partially or fully adverse medical
necessity decision based on the initial
review of the request, a physician or
other appropriate health care
professional with sufficient medical and
other expertise, including knowledge of
Medicare coverage criteria, must review
the request before the plan issues its
decision. We also require the physician
or other health care professional to have
a current and unrestricted license to
practice within the scope of his or her
profession in a State, Territory,
Commonwealth of the United States
(that is, Puerto Rico), or the District of
Columbia.
In a related proposal to enhance the
plans’ clinical decision making process,
we also proposed to revise § 422.562(a)
by adding paragraph (4) and to revise
§ 423.562(a) by adding paragraph (5) to
require MA organizations and Part D
plan sponsors, respectively, to employ a
medical director who is responsible for
ensuring the clinical accuracy of all
decisions involving medical necessity.
We also proposed that the medical
director must be a physician with a
current and unrestricted license to
practice medicine in a State, Territory,
Commonwealth of the United States
(that is, Puerto Rico), or the District of
Columbia. As noted in the proposed
rule, we believe the requirement to
employ a medical director will enhance
the coordination and accountability of
plan operations and strengthen quality
assurance activities within these
organizations. We received many
comments on these proposed revisions.
Comment: One commenter sought
clarification on whether the medical
director must review all medical
necessity determinations and appeals or
whether plans will be required to
establish a process for elevating reviews
to the medical director. Other
commenters sought clarification that the
medical director would only review
adverse organization determinations
and would not review favorable
organization determinations.
Response: Under our proposal, the
medical director would have overall
responsibility for the clinical accuracy
of plan decisions. In this oversight role,
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we expect there to be a process for
elevating issues of concern to the
medical director, but we do not expect
that a plan’s medical director will
review each and every decision
involving medical necessity. The
medical director should collaborate
with appropriate staff with respect to all
plan operations that involve medical
and utilization review, benefits and
claims management, and quality
assurance activities.
Comment: Some commenters argued
that the proposed regulatory language
should be revised to permit MA
organizations and Part D plans sponsors
to retain a medical director who is not
directly employed by the MA
organization or Part D plan sponsor, but
rather performs this function under a
contractual arrangement. A few
commenters stated that plans may prefer
to utilize physicians through a
physician organization, or physicians
who spend part of their time in clinical
practice. One commenter strongly
supported direct employment of a
medical director, but sought
clarification on whether a plan can
fulfill this requirement by retaining
multiple medical directors (such as, one
for Part C and one for Part D).
Response: We acknowledge that plans
utilize a variety of subcontracting
arrangements to perform some or most
of their functions, including
subcontracting with physician groups to
perform medical review activities.
Proper claims adjudication and accurate
clinical decision-making in organization
and coverage determinations,
reconsiderations, and redeterminations
are integral to the successful
performance of a plan’s contract. Those
decisions all involve items, services, or
medications ordered or performed by a
physician or other health care
professional. In that vein, it is not
unreasonable to expect a plan to employ
a medical director to ensure that the
decision-making process is clinically
accurate, appropriate, and comports
with Medicare coverage guidelines. We
have already clarified that we do not
expect that a medical director would
review all decisions issued by the plan,
but instead would have the primary
responsibility of providing oversight for
plan operations that involve medical
and utilization review, benefit,
formulary and claims management, and
quality assurance activities.
It should be noted that all other
entities that adjudicate Medicare cases
are already required to employ a
medical director, including the
Medicare Part C and Part D Independent
Review Entities (IREs). All Medicare
Administrative Contractors (MACs) in
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the Original Medicare Program are
required to employ a Medical Director,
as are all of the IREs, known as
Qualified Independent Contractors
(QICs) in the Original Medicare
program. The intent of imposing such a
requirement on MA organizations and
Part D plan sponsors is the same as it
is for those entities—that is, to ensure
that such decisions are clinically
accurate, appropriate, and comport with
Medicare coverage guidelines.
We note that plans are ultimately
responsible for the clinical accuracy and
appropriateness of their processes and
decisions, which includes oversight of
their first tier, downstream and related
entities. Without a medical director
employed by the plan to review
decision making processes of contracted
entities (such as IPAs or PBMs), the plan
would be unable to ensure the decisions
were clinically accurate or appropriate.
A medical director employed by a
contracted entity is ultimately
responsible to that entity and is in no
position to inform the plan if they
believe their employer’s procedures or
decisions are inappropriate. MA
organizations and Part D plan sponsors
must evaluate CMS’ requirements and
make staffing arrangements that will
ensure compliance with our
requirements. Therefore, we will move
forward with implementing the
requirement that MA organizations and
Part D plan sponsors employ a medical
director. We will not, however, specify
the staffing level needed for this
position. Instead, we will allow plans
the discretion to retain a medical
director that works less than full time or
multiple medical directors as they deem
appropriate to comply with our
requirements.
Comment: One commenter noted that
CMS’ rationale in support of the
requirement that plans employ a
medical director does not support the
accompanying requirement that the
medical director be a physician.
Response: We disagree with the
commenter. In the proposed rule, we
noted that MA organizations and Part D
plan sponsors will be required to
employ a medical director who would
be responsible for ensuring the clinical
accuracy of all decisions involving
medical necessity. This physician
oversight requirement is consistent with
the existing statutory and regulatory
requirements at 1852(g)(2)(B) of the Act
and § 422.590(g)(2) and § 423.590(f)(2)
that all medical necessity
redeterminations and reconsiderations
be reviewed by a physician with
expertise in the field of medicine that is
appropriate for the services at issue. We
also noted that, with respect to the Part
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21497
D program, the proposal to require the
employment of a medical director who
is a physician would enhance the
performance of other critical plan
functions such as formulary
administration and application of plan
coverage rules, and assist in the early
identification and correction of
potential quality concerns. Given this,
we continue to believe that the role of
a medical director requires the expertise
of a physician, and are retaining the
associated requirement.
After consideration of the comments
on this proposal, and for the reasons
noted previously, we are finalizing the
proposal to require MA organizations
and Part D plan sponsors to employ a
medical director by adding paragraph
(4) to § 422.562(a) and by adding
paragraph (5) to § 423.562(a).
6. Compliance Officer Training
(§ 422.503 and § 423.504)
Pursuant to our authority under
section 1857(d) of the Act for Part C,
and sections 1860D–4(c)(1)(D) and
1860D–12(b)(3)(C) of the Act (the latter
of which incorporates section 1857(d)
by reference), we proposed that MA
organization and Part D sponsor
compliance officers be required to
complete annual MA and/or Part D
compliance training starting in 2013.
Organizations applying for the 2013
contract year that are new to the MA or
Part D programs would have been
required under this proposal to have
their compliance officers obtain training
in 2012 to prepare for the upcoming
contract year. We proposed to add
§ 422.503(b)(4)(vi)(B)(1)(i) and (ii) to
subpart K of Part 422 and
§ 423.504(b)(4)(vi)(B)(1)(i) and (ii) to
subpart K of Part 423 to reflect this
change. We proposed these training
clarifications because our reviews have
found that many MA and Part D
compliance officers lack basic
knowledge about the requirements of
the MA and Part D programs. Our
reviews have also found that many
compliance officers do not seem to
understand that we expect sponsors to
actively ensure compliance with
Medicare program requirements; that
those requirements are distinct from any
commercial health or drug plan benefits
they may administer; and that they
should not solely rely on subcontractors
or CMS to identify and resolve Part C
and Part D contract compliance matters
for them. We stated our belief that
requiring annual training for
compliance officers would help to
address the knowledge gap by
emphasizing the necessity of
compliance officer training and the
compliance officer’s critical role in
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maintaining and ensuring program
compliance. However, based upon the
comments received, CMS will not be
codifying these provisions at this time.
Comment: Most commenters
supported CMS’ proposal to require
compliance officer training.
Response: We agree with these
commenters that compliance officer
training would address our
aforementioned concerns about the level
of knowledge compliance officers have
about the Medicare Part C and D
programs, but for reasons discussed
below, we are not finalizing our
proposals at this time.
Comment: The vast majority of
comments regarding compliance officer
training were requests for clarification
from industry regarding who should
take the training and the content, forum,
format, and duration of the training.
Specifically, commenters were unsure if
CMS intended for the organization’s
corporate compliance officer or for its
Medicare compliance officer to attend
training. Other commenters suggested
that only plan sponsors with poor audit
results or significant compliance
problems should be required to take
training. Nearly all commenters wanted
more details about the content or
curriculum for the training. Some
thought that training should be designed
to allow the compliance officer to focus
on areas or issues that presented the
most risk to their organization. Other
commenters wanted to know if the
content would focus on compliance
programs and plans or if it would focus
on Medicare Part C and D programs and
compliance with those requirements.
With respect to the format of the
training, some plan sponsors wanted
only CMS to provide the training either
in-person or via the Internet, while
other plan sponsors wanted compliance
courses and conferences offered by nonCMS entities to be counted towards the
annual training requirement. Lastly, one
commenter suggested that the training
should not exceed 12 hours per year.
Response: We agree that more
clarification is warranted regarding the
audience, content, forum, format, and
duration of proposed compliance officer
training. Therefore we will not be
codifying the proposed rule regarding
compliance officer training at this time.
We will carefully consider whether to
propose a similar rule in the future that
will address the clarifications suggested
by industry.
Accordingly, we have not included
Paperwork Reduction Act (PRA)
paperwork burden or regulatory impact
analysis estimate for this provision.
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7. Removing Quality Improvement
Projects and Chronic Care Improvement
Programs From CMS Deeming Process
(§ 422.156)
Under section 1852(e) of the Act, we
have delegated our authority to evaluate
whether an MA organization is in
compliance with certain Medicare
requirements to three private
accrediting organizations. Currently,
MA organizations may be deemed to
meet requirements in a number of areas,
including quality improvement (QI), as
specified in § 422.156(b).
We currently require all MA
organizations to submit their quality
improvement projects (QIPs) and
chronic care improvement programs
(CCIPs) on an annual basis. In our
November 2010 proposed rule (75 FR
71227), we proposed to amend
§ 422.156(b) to specify that, while QI
would still be a component of the
deeming process, QIPs and CCIPs would
be excluded from the deeming process
for QI. We also clarified that the QIPs
and CCIPs would instead be reviewed
and evaluated by CMS or an appropriate
CMS contractor. After considering
comments we received on this proposal,
we are finalizing this provision without
modification.
Comment: One commenter supported
the removal of QIPs and CCIPs from the
deeming process, to the extent that CMS
intends to collect QIPs and CCIPs for
review on an annual basis. This
commenter recommended that, in order
to avoid redundancy and unnecessary
burden for plans, deeming authorities
should not be allowed to request the
submission of QIPs and CCIPs as part of
the deeming process.
Two commenters stated that removing
the QIPs and CCIPs from the deeming
process would negatively impact
staffing resources for health plan
medical management, since both are
reviewed by NCQA during site visits.
These commenters believed that
maintaining two unique reporting
formats for the same quality programs
would be duplicative.
Response: We appreciate commenters’
concerns about duplication of efforts. In
our proposed rule, we proposed to
exclude the QIPs and CCIPs as
components of the deeming process for
QI precisely because we were aware of
the duplication of effort associated with
submission of this information to both
CMS and NCQA, as well as auditing
efforts by both entities. As we stated in
our proposed rule, removing the QIPs
and CCIPs from the deeming process for
QI will avoid redundancy and reduce
burden for MA organizations. We
believe removal of QIPs and CCIPs from
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the deeming process for QI is essential
to improving consistency in the
evaluation and assessment of the QIPs
and CCIPs, especially given that some
elements therein may be incorporated
into future plan ratings. Therefore, we
are finalizing our proposal without
modification.
Comment: One commenter advised
that removing two important elements
of the overall QI program would make
it almost impossible for NCQA to
provide a balanced and comprehensive
assessment of the overall QI program
and recommends that CMS reconsider
this proposal.
Response: We disagree with the
commenter’s assertion that removal of
QIPs and CCIPs will result in NCQA’s
inability to assess the QI program plans
of its deemed entities. There are a
number of quality performance
measures that an accreditation
organization may use to measure QI for
purposes of deeming. Therefore, we are
finalizing our proposal without
modification.
Comment: Several commenters
recommended that CMS consider
allowing MA plans the flexibility to
focus on QIPs and CCIPs that meet the
unique needs of their target populations.
Response: Irrespective of whether or
not CMS identifies a list of specific
clinical and/or non-clinical topics for
QIPs and CCIPs, MA plans will retain
the flexibility to develop their own
special projects. Furthermore, plans’
QIPs and CCIPs must always address the
target population for a specific plan in
order to demonstrate QI under their
plans. Identification of the appropriate
target population is a key component for
ensuring QI and is the first element
CMS assesses when reviewing the QIPs
and CCIPs.
Comment: One commenter
recommended that CMS release
standards that will be used in
determining if QIP and CCIP program
standards are met.
Response: We appreciate the
commenter’s interest in this issue. The
submission of QIPs and CCIPs will be an
ongoing annual QI assessment activity
for all MA organizations and SNPs. In
an effort to improve consistency, we are
reviewing the current QIP and CCIP
program standards in an effort to
determine where improvement is
necessary. Guidance regarding changes
to the QIP and CCIP program standards
will be provided in separate guidance
such as an HPMS memoranda and
annual call letters.
Comment: Several commenters
recommended that CMS continue to
permit MA organizations that currently
use the deeming process to continue to
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do so, and apply our proposed
requirement only to MA organizations
that avail themselves of the deeming
process in the future.
Response: We disagree that our
proposed requirement should apply
only to MA organizations not currently
using the deeming process. While MA
organizations may continue to utilize
the deeming process for areas specified
in § 422.156, including QI, we are
finalizing our proposal without
modification and clarify that it will
apply to all MA organizations including
SNPs.
Comment: One commenter
recommended that CMS should
consider allowing plans with a high star
rating on quality measures the option to
use the deeming process.
Response: We clarify that the goal of
our proposal in our November 2010
proposed rule was not to eliminate
deeming, or even deeming for QI
requirements but, rather, to exclude
QIPs and CCIPs as deemable QI
elements.
8. Definitions of Employment-Based
Retiree Health Coverage and Group
Health Plan for MA Employer/UnionOnly Group Waiver Plans (§ 422.106)
In our November 2010 proposed rule
(75 FR 71227), we stated our concern
that, since enactment of the MMA, MA
organizations have been contracting
with entities that cannot properly be
characterized as employment-based
group health plan coverage (for
example, professional or group
associations) to provide coverage to MA
beneficiaries via employer group waiver
plans (EGWPs) or individual MA plans.
Specifically, some MA organizations
have characterized contracts with
professional or group associations as
employment/union coverage. We stated
we believed that this was inconsistent
with the requirement in section 1857(i)
that such waivers facilitate a contract
between an MA organization and
employers, labor organizations, or the
trustees of a fund established by one or
more employers or labor organizations
(or a combination thereof) to furnish
benefits to the entity’s employees,
former employees (or combination
thereof) or members or former members
(or combination thereof) of the labor
organizations, as this language is
interpreted in guidance in Chapter 9 of
the Medicare Managed Care Manual
(https://www.cms.gov/manuals/
downloads/mc86c09.pdf), entitled
‘‘Employer/Union Sponsored Group
Health Plans. This guidance clearly
restricts employer/union group health
plan enrollment in EGWPs and
individual MA plans to beneficiaries
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who are Medicare eligibles of an
employer/union sponsored group health
plan. Such a plan is one that is
employment-based health coverage
through an employer/union group
health plan that has entered into a
contractual arrangement with an MA
organization to provide coverage or that
has contracted directly with CMS to
provide coverage for its Medicare
eligibles. To clarify our requirements for
offering employment-based retiree
coverage via an MA plan, we proposed
to codify definitions of the terms
employer-sponsored group MA plan,
employment-based retiree health
coverage, and group health plan at
§ 422.106(d)(4) through (6). We also
proposed to change the reference to an
MA plan at § 422.106(d) to a reference
to an employer-sponsored group MA
plan. In proposing these definitions, we
noted that they were consistent with
those provided for Part D sponsors at
§ 423.454 and § 423.882. We solicited
comment on our proposals to revise
these definitions.
After considering comments received
on these proposed changes, we are
finalizing these provisions without
modification.
Comment: One commenter agreed
with CMS that membership in an
association would by itself not have a
sufficient employment nexus to qualify
as employment-based coverage and also
noted that our proposed definitions of
the terms employer-sponsored group
MA plan, employment-based retiree
health coverage, and group health plan
are consistent with the comparable
definitions for Part D sponsors at
§ 423.454 and § 423.882.
Two commenters believed that our
proposed definitions of the terms
employer-sponsored group MA plan,
employment-based retiree health
coverage, and group health plan would
unintentionally exclude coverage by
associations that is truly tied to
employment in such associations, and
that a wholesale exclusion of
associations and similar entities from
the definition of employment-based
retiree coverage would be overly broad
and inconsistent with coverage in the
commercial market. One of these
commenters explained that there are a
variety of types of associations,
including (but not limited to) an
association of farm bureaus, for which
eligibility for health coverage is tied to
membership in the association or
bureau.
Response: We do not believe that
Congress envisioned granting access to
EGWP waivers based on membership in
an association or any entity that did not
meet the definition of a group health
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21499
plan, as defined under the Employee
Retirement Income Security Act
(ERISA). Our intent in defining an
employer-sponsored group MA plan,
employment-based retiree health
coverage, and a group health plan was
not to preclude all associations from
enrolling Medicare beneficiaries in
EGWPs and individual MA plans, but,
rather, to ensure that a beneficiary’s
enrollment in one of these MA plans is
based on his/her receipt of employmentbased health coverage from and
employer/union group health plan
sponsor. To the extent that membership
in an association is based on
employment, that association could
meet the definition employment-based
retiree coverage. For example, an
association may elect to provide
coverage via an EGWP or individual MA
plan to retirees who were formerly
employed by the association. We also
clarify that we believe that employers
such as school districts could form an
association for the purpose of
purchasing employer coverage on behalf
of retirees from the school districts and
that this would be acceptable because,
independently, each school district
would be eligible to enroll its retirees in
an EGWP or individual MA plan.
Therefore, two or more school districts
could combine to form an association
for the purpose of purchasing retirement
coverage for their retired employees.
However, an association of farm bureaus
would not meet this test if membership
in a farm bureau were not exclusively
based on former employment by these
farm bureaus.
Comment: Two commenters
expressed concern that our proposed
definitions of employment-based retiree
coverage and a group health plan at
§ 422.106(d)(5) and § 422.106(d)(6),
respectively, would preclude employers
that do not contribute financially to
retirees’ health care costs—including
cases where an employer plan is
provided at no cost to the employer or
the employer furnishes a pension in lieu
of payment for health care coverage for
its retirees—from enrolling retirees in an
employer-sponsored group MA plan.
This commenter recommended that
CMS revise its proposed regulatory
language to ensure that the definition of
employment-based coverage is not tied
to a financial contribution from the
employer.
Another commenter stated that
employers that are not contributing
financially to retirees’ health care costs,
which is an increasing trend in the
marketplace, can still meaningfully
contribute to their retirees’ health care
coverage by bargaining with an MA
organization on behalf of its retirees for
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by a union or trust is considered
employment-based as recognized by the
section 1857(i) of the Act.
Response: We agree that members or
former employees of unions and trusts,
as recognized under section 1857(i) of
the Act, generally meet the definition of
employment-based retiree coverage and
could offer MA coverage to retirees who
are Medicare eligible individuals
through an EGWP or individual MA
plan.
1. Agent and Broker Training
Requirements (§ 422.2274 and
§ 423.2274)
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the best possible deal on premium and
benefit design. This commenter also
noted that employers may choose to
assist their retirees by administering the
MA plan premium payment process.
Response: Our proposed definitions
would require that employment-based
retiree coverage include coverage of
health care costs in accordance with the
ERISA definition of a group health plan.
While there is not a minimum amount
an employer must contribute toward
such employment-based retiree
coverage, we believe it is important that
an employer make both a financial
contribution toward coverage and
negotiate on behalf of its retirees for a
benefit package and cost sharing levels
which are as favorable as possible for
them. We are therefore finalizing our
proposed revisions to § 422.106(d)
without modification.
Comment: One commenter requested
that CMS ensure that coverage offered
and § 423.2274(b) and (c) to require MA
organizations’ and Part D sponsors’
agents and brokers to receive training
and testing via a CMS-endorsed or
approved training program. We
proposed this revision to move toward
greater standardization of agent broker
training and testing and ensure that
agents and brokers selling Medicare
products have a comprehensive and
consistent base of understanding of
Medicare rules.
a. CMS Approved or Endorsed Agent
and Broker Training and Testing
(§ 422.2274 and § 423.2274)
In the November 2010 proposed rule,
in implementing sections 1851(h)(2),
1860D–1(b)(1)(B)(vi), 1851(j)(2)(E), and
section 1860D–4 (l)(2) of the Act, we
proposed revising § 422.2274(b) and (c)
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D. Strengthening Beneficiary Protections
This section includes proposed
provisions aimed at strengthening
beneficiary protections under Parts C
and D. Some of the provisions affecting
both Parts C and D include proposed
regulations codifying the requirement
that MA organizations and Part D
sponsors provide interpreters for nonEnglish speaking and limited English
proficient callers, and periodically
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disclose to each beneficiary specific
data for enrollees to use to compare
utilization and out-of-pocket costs in the
current plan year to the following plan
year. Changes affecting only Part C
include an extension of the mandatory
maximum out-of-pocket (MOOP)
amount requirements to regional PPOs,
and under Part D, we address the
delivery of adverse coverage
determinations.
In the area of Parts C and D marketing,
proposed provisions include a proposal
requiring MA organizations’ and Part D
sponsors’ agents and brokers to receive
training and testing via a CMS endorsed
or approved training program and a
proposal to extend annual training and
testing requirements to all agents and
brokers marketing and selling Medicare
products.
This information is detailed in Table
6.
In addition, we proposed that
following the implementation of the
final rule, we would review and endorse
or approve one or more entities to
provide annual testing and training to
Medicare agents and brokers. We
specifically requested comments and
suggestions on alternatives to using a
competitive request for proposals (RFP)
process under the Federal Acquisition
Rules to effectuate this effort.
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We further proposed that these new
requirements also be applicable to
section 1876 cost contract plans, since
in our April 2010 final rule (75 FR
19784 through 19785), we extended the
MA marketing provisions in part 422 to
section 1876 cost contract plans.
Comment: Many of the comments
received supported the proposal and
responded to our request for
suggestions. The suggestions offered in
conjunction with the approval were (1)
provide a low-cost option to the public
or non-profit sector; (2) provide uniform
training and testing materials that can
be graded by an outside independent
entity; (3) create a separate test for the
general Special Needs Plan (SNP); and
(4) include information regarding
SPAPs, COB rules and eligibility in the
training.
Response: The purpose of
standardizing the training and testing is
to ensure continuity, accuracy and
quality of training and testing vehicles.
We will evaluate and approve vendor
products by developing specific criteria
against which training and testing
programs will be assessed. We will take
into consideration and evaluate the
options for lower cost offerings to the
public and non-profit sector and will
also consider the suggestions for
developing training and testing
modules.
Comment: One commenter requested
clarification of our use of the terms CMS
‘‘endorsed’’ training program and CMS
‘‘approved’’ program.
Response: Although the intent of the
language was to use the two terms
interchangeably, we note that the final
selections of the developed vendor
products will first be approved by our
agency and subsequently certified or
endorsed.
Comment: One commenter
recommended that CMS apply the same
bid process as we apply to the plans
using the training portal. They
expressed full support for having a
certified company provide the training
and a certification that they can accept
without having to provide that training
themselves.
Response: We believe this commenter
was referring to our pilot agent/broker
training and testing module in 2009. We
do not believe the development
approach taken for that module is
appropriate for the current effort, given
that we developed the training under
that approach and solicited volunteer
plan sponsors to train and test their
agents via the pilot training and testing
module. We will consider all access and
value options prior to and throughout
the solicitation of training and testing
information and technical proposals.
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Comment: One commenter supported
CMS’s proposal to require specific
training for agents and brokers and also
recommended that CMS training be
specific to the plan the agent/broker is
actually selling. Other commenters
requested that plan sponsors be allowed
the option of continuing to develop and
administer training and testing that
complies with CMS specified criteria.
Specifically, the commenter stated that
plans should continue to be responsible
and held accountable for adequate
training regimens, and requested that
CMS continue to impose training
obligations on plans rather than
contracting with third-party entities to
provide such training to plan employees
and contractors.
Response: We do not have the
resources at this time to initiate
development by vendors of training and
testing vehicles that would contain
plan-specific details for each plan type
for which organizations contract with
CMS. Plan sponsors will continue to be
responsible for administering plan
specific training and testing to brokers
and agents. Our development of an
‘‘approved or endorsed’’ training and
testing program will ensure consistency
and accuracy across plan sponsors.
Comment: One commenter proposed
that we allow plans to review training
and testing products before they are
finalized and to make further
recommendations regarding the specific
companies and organizations that would
develop the specific products. The
commenter urged that CMS provide a
transparent process and agreed with
using the RFP process to develop an
‘‘approved or endorsed’’ training and
testing curriculum. The commenter
stated that the curriculum and its
development should not be considered
proprietary, even if it is developed by a
private contractor.
Response: We will not consider a plan
preview of products prior to finalizing
our decisions. We will develop specific
requirements and implement a process
for reviewing proposals to ensure
participants meet the requirements and
develop a training and testing program
as specified in future guidance.
Furthermore, we believe that allowing
plans to review the training and testing
proposals and recommend approval of
specific organizations might interfere
with our ability to ensure a level playing
field.
Comment: One commenter noted that
it is not a practice of PACE programs to
utilize agents and brokers in their efforts
to inform the public about their
program. The commenter requested the
CMS clarify that the training and testing
requirements to not supersede or modify
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21501
the requirements currently applicable to
PACE programs.
Response: PACE plans are governed
by separate requirements which are not
included in these provisions. These
requirements do not supersede or
modify the current requirements
applicable to PACE programs.
b. Extending Annual Training
Requirements to All Agents and Brokers
(§ 422.2274 and § 423.2274)
In the November 2010 proposed rule,
we proposed a change in the regulations
text that would correct an omission in
our current regulations at § 422.2274(b)
and (c) and § 423.2264(b) and (c). These
regulations currently require MA
organizations and Part D sponsors to
ensure that independent agents selling
Medicare products are trained and
tested annually on Medicare rules and
regulations specific to the plan products
they intend to sell. Consistent with our
statutory authority at sections
1851(j)(2)(E) and 1860D–4(l)(2) of the
Act, we proposed to revise § 422.2274
and § 423.2274 to correctly apply these
requirements to all agents and brokers
marketing and selling Medicare
products, whether independent agents
or employees.
In addition, we also noted that these
new requirements would be applicable
to section 1876 cost contract plans,
since in our April 2010 final rule (75 FR
19784 through 19785), we extended the
MA marketing provisions in Part 422
requirements to section 1876 cost
contract plans.
After considering the comments we
received, we are finalizing our proposal
without further modification.
Comment: One commenter expressed
support for correcting the error in
§ 422.2274(b) and (c) and § 423.2264(b)
and (c) that applied training
requirements only to independent
agents and brokers.
Response: We agree that all agents
and brokers, including those employed
by MA and Part D plans, should be
subject to the same training and testing
requirements. Therefore, we are
adopting as final our proposed
correction to § 422.2274(b) and (c) and
§ 423.2264(b) and (c).
2. Call Center and Internet Web site
Requirements (§ 422.111 and § 423.128)
a. Extension of Customer Call Center
and Internet Web site Requirements to
MA Organizations (§ 422.111)
Under the authority of section 1852(c)
of the Act, which requires MA
organizations to disclose MA plan
information upon request, as well as the
authority of section 1857(e) of the Act
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to specify additional contractual terms
and conditions the Secretary may find
necessary and appropriate, we proposed
to extend call center and Internet Web
site requirements to MA organizations
to parallel to those applicable to Part D
sponsors. We proposed to amend
§ 422.111 by adding a new paragraph (g)
to expressly require MA organizations to
operate a toll-free customer call center
that is open during usual business hours
and provides customer telephone
service in accordance with standard
business practices, as well as to provide
current and prospective enrollees with
information via an Internet Web site and
in writing (upon request). We proposed
this amendment to ensure that current
and prospective enrollees of MA plans
have the same access to customer
service call centers and information via
an Internet Web site as current and
prospective enrollees of a Part D plan in
order to obtain more information about
plan coverage and benefits. We also
noted that although similar call center
and Internet Web site requirements were
never codified for MA plans, we have
required through subregulatory
guidance (the Medicare Marketing
Guidelines at https://www.cms.gov/
ManagedCareMarketing/Downloads/
R91MCM.pdf) that MA organizations
comply with the same requirements
regarding customer service call centers
as Part D sponsors, and, for those
offering Part D benefits through MA–PD
plans, all Part D sponsor Internet Web
site requirements.
As part of the proposed rule, we also
proposed removing paragraph
§ 422.111(f)(12), which requires that
certain information—including the
evidence of coverage, summary of
benefits and information about network
providers—be posted to an Internet Web
site in the event that an MA
organization has a Web site or provides
MA plan information through the
Internet, and moving these requirements
to § 422.111(g)(2)(i).
After considering comments on our
proposal, we are adopting these
provisions as final with one
modification, proposed paragraph (g) is
redesignated as paragraph (h).
Comment: Several commenters
expressed their support of our extending
the call center and Web site
requirements to MA plans. One
commenter that supported our proposal
believed that these requirements will
serve to ensure beneficiaries receive the
information needed to make informed
decisions on their healthcare options.
Response: We thank the commenters
for their response. We believe this
change will allow MA enrollees the
same access to customer service call
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centers services as a current or
prospective members of a Part D plan.
Therefore, we are finalizing our
proposal without modification.
Comment: One commenter noted that
regulations governing the PACE
program provide for a waiver of the
requirement to maintain customer call
centers as well as the requirement to
provide information via an Internet Web
site.
Response: PACE plans are governed
by separate requirements that are not
included in these provisions. These
requirements do not supersede or
modify the current requirements
applicable to PACE programs.
Comment: One commenter
recommended that since the open
enrollment period that existed for the
first 3 months of the year has been
replaced with a period during which an
MA enrollee may disenroll from an MA
plan, CMS should allow extended call
center hours to coincide with the new
45-day annual period. Additionally, the
commenter indicated that there is no
need for continued weekend call center
coverage by live agents after the 45-day
period ends.
Response: We have taken these
comments into consideration and will
be proposing revisions to our Medicare
Marketing Guidelines for contract year
2012 that would require all plan
sponsors to have extended call center
hours during the 45-day annual
disenrollment period (January 1 to
February 14 of each contract year).
b. Call Center Interpreter Requirements
(§ 422.111 and § 423.128)
Pursuant to our authority under
sections 1857(e)(1) and 1860D–
4(a)(3)(A) of the Act to specify
additional contractual terms and
conditions the Secretary may find
necessary and appropriate, we proposed
to codify Medicare Part C and D
requirements regarding current and
prospective enrollee toll-free customer
call centers. Specifically, we clarified
that MA organizations and Part D
sponsors must provide interpreters for
all non-English speaking and limited
English proficient (LEP) callers. We
proposed to add new paragraphs
§ 422.111(g)(1)(iii) (redesignated as
paragraph (h)) and § 423.128(d)(1)(iii),
respectively, to reflect this clarification.
This clarification is a result of
findings from our call center
monitoring, which revealed that a
significant percentage of MA
organizations and Part D sponsors were
not providing foreign language
interpreters for non-English speaking
callers. This clarification addressed the
problem by explicitly codifying the
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requirement to provide interpreters for
LEP callers in regulations.
Comment: Several commenters from
advocacy groups and industry
supported codification of CMS’
requirement that MA organizations and
Part D sponsors must provide
interpreters for non-English speaking
and LEP individuals.
Response: We agree with these
commenters because requiring
interpreters ensures LEP beneficiaries
have access to Medicare Part C and D
benefit information.
Comment: A few commenters asked
for clarification regarding the
requirement that interpretation services
should be available for ‘‘all’’ languages.
Commenters offered alternatives such as
providing interpreters for languages that
meet a 10 percent threshold or require
plan sponsors to provide interpreters for
all languages spoken by more than 10
percent of the plan’s membership.
Response: We agree with commenters
who noted that ‘‘all’’ may be too
inclusive, as there are more than 6,000
languages spoken world-wide. As such,
we are striking the word ‘‘all’’ from the
proposed language. Based on data
collected during the 2000 U.S. Census,
more than 300 languages are spoken in
the United States. We revised the
regulatory language to read as follows,
‘‘Provides interpreters for non-English
speaking and limited English proficient
(LEP) individuals.’’ Our expectation is
that MA organizations and Part D
sponsors’ call centers will provide
interpretation services for all languages
that are served in common by the largest
commercial interpretation service
providers in the U.S., as these
organizations are experts in assessing
the languages for which interpretation
services are needed. Currently these
large organizations provide
interpretation services for
approximately 150 to 180 languages,
which accommodates the vast majority
of interpretation needs. Our Medicare
Marketing Guidelines have long
established the expectation that MA
organizations and Part D sponsors
provide interpretation services to any
LEP caller. Our monitoring of this area
has demonstrated that MA organizations
and Part D sponsors’ call centers are
capable of providing interpreters to
meet the needs of LEP callers when they
use commercial interpretation service
providers.
We do not accept the suggested
alternatives, that is, to require that plan
sponsors only provide an interpreter for
languages that meet a 10 percent
threshold or require plan sponsors to
provide interpreters for all languages
spoken by more than 10 percent of the
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plan’s membership. Because
beneficiaries are not required to indicate
their primary or preferred language
when they enroll in a plan, it would be
impossible for a plan sponsor to know
all the languages they would need to
interpret. Moreover, the availability of
commercial interpretation service
providers for these 150–180 languages is
a cornerstone of CMS’ effort to establish
the widest practical safety net for
providing access to those individuals
who are outside of the translation
threshold requirement for translating
marketing materials found in § 422.2264
and § 423.2264.
Comment: One commenter asked
CMS to clarify whether MA
organizations and Part D sponsors are
required to have interpreters on-site.
Response: We clarify that MA
organizations and Part D sponsors may
use on-site interpreters, contract with a
commercial interpretation service
provider, or employ some combination
of both approaches. For instance, many
MA organizations and Part D sponsors
provide Spanish language interpretation
on-site while using one of the numerous
and readily available commercial
interpreter services to providers for
other languages.
Comment: One commenter requested
clarification as to whether the Program
of All-inclusive Care for the Elderly
(PACE) program is subject to the
requirement that plan sponsors
maintain toll-free customer call centers.
Response: Although this comment is
not within the scope of the proposed
rule, we clarify that PACE programs are
not subject to this requirement.
Comment: One commenter suggested
that CMS provide best practices for plan
sponsors regarding interpretation
services. The commenter also asked
CMS to discuss methods for preventing
long wait times for non-English
speaking callers.
Response: We agree with this
comment, and we have made a
concerted effort to disseminate best
practices on this topic. In a Health Plan
Management System (HPMS) memo
published to all plan sponsors on
January 2, 2008 entitled ‘‘Best Practices
for Addressing the Needs of NonEnglish Speaking and Limited English
Proficient (LEP) Beneficiaries,’’ We
provided guidance to plans, which
addressed, among other topics, call
center phone systems and customer
service representative staffing, training,
and oversight. Additionally, when we
issue informational memos or
compliance letters to plan sponsors
regarding our call center monitoring
results, we include a special section that
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lists tips for how an organization can
improve its service to LEP beneficiaries.
With regard to concern about long
wait times for LEP callers, data collected
during our call center monitoring study
indicated that the average hold time for
an interpreter was one minute and
sixteen seconds. This hold time is below
our existing 2 minute hold time
standard in the Medicare Marketing
Guidelines.
In summary, we are finalizing this
provision, and the only change from the
proposed version is to strike the word
‘‘all.’’
3. Require Plan Sponsors To Contact
Beneficiaries To Explain Enrollment by
an Unqualified Agent/Broker
(§ 422.2272 and § 423.2272)
Current regulations (§ 422.2272 and
§ 423.2272) require plan sponsors that
use independent agents and brokers for
their sales and marketing to only use
State licensed and appointed agents or
brokers. Under these provisions, plan
sponsors must also report the
termination of agents or brokers to the
State. Based on information uncovered
during program audits, we proposed
revisions to § 422.2272(c) and
§ 423.2272(c) to require MA
organizations and Part D sponsors to
terminate unlicensed agents upon
discovery and notify any beneficiaries
who were enrolled in their plans by
unqualified agents. Since beneficiaries
rely heavily on information they receive
from agents regarding plan benefits and
costs, we believe they should have the
opportunity to ask additional questions
or reconsider their enrollment when
they have been enrolled in a plan by an
unqualified agent.
In addition, we noted that these
requirements would be applicable to
section 1876 cost contract plans, since
in our April 2010 final rule (75 FR
19784 and 19785), we extended the MA
marketing provisions in part 422 to
section 1876 cost contract plans.
After considering the comments we
received, we are modifying the proposal
as described below.
Comment: Several commenters were
concerned that the requirement to notify
beneficiaries when they have been
enrolled by an unqualified agent is
duplicative of the outbound enrollment
verification call requirement and is
unnecessary.
Response: The intent of this provision
is not to duplicate the outbound
enrollment verification process. Rather,
it is to ensure that beneficiaries are fully
informed of the circumstances of their
enrollment and to allow them the
opportunity to reconsider their options
given the new information about the
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agent. While we do not anticipate that
many beneficiaries will want to make
plan changes based on notification that
the agent is unqualified, especially
considering that the plan sponsor likely
would have already conducted the
required outbound verification call, we
believe that it is important that
beneficiaries are fully informed of the
details of their enrollment in the event
the agent misrepresented the package of
benefits in any way. Additionally, to
ensure that we do not confuse
beneficiaries with duplicative
information, we have modified our
original proposal at § 422.2272(c) and
§ 423.2272(c) to indicate that plan
sponsors are required to provide
affected enrollees with information
about their options to confirm
enrollment or make a plan change
(including a special election period) at
the beneficiary’s request.
Comment: A few commenters
requested clarification of our proposal,
since plan sponsors are not allowed to
use unlicensed agents.
Response: In the proposed rule, we
used the term ‘‘unlicensed’’ and
‘‘unqualified’’ interchangeably.
However, there is an important
difference between the two terms. Being
unlicensed is just one criterion for
determining whether an agent or broker
is qualified to sell Medicare plans. In
addition to having a license (in States
that require one), agents and brokers
must also be trained annually, pass a
Medicare test annually (with a score of
85 percent or better), and be appointed
in States with appointment laws.
The final provisions would require
plan sponsors to terminate unlicensed
agents and report them to the State upon
discovery. However, we have modified
our original proposal at § 422.2272(c)
and § 423.2272(c) to replace the term
‘‘unlicensed’’ with ‘‘unqualified’’ with
respect to the beneficiary notification
requirement. We did not propose
terminating all unqualified agents or
brokers because there may be
circumstances in which an unqualified
licensed agent should not be
terminated—for example, an agent who
takes an automated test, but a software
bug notifies the agent that he has passed
the entire test when he only passed the
first component of the test. In this case,
the plan sponsor would not be required
to terminate the agent or report him/her
to the State upon discovery; however,
the plan sponsor would be required to
notify individuals enrolled by that agent
of his/her unqualified status.
Comment: One commenter suggested
that CMS sanction plans that have
repeated instances of unlicensed agents
selling for them, and that agents be
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required to include their national
producer number (NPN) on the
application.
Response: Due to the fact that some
States do not participate with the
National Insurance Producer Registry
(NIPR), we are not considering requiring
the agent NPN on the enrollment
application. However, we will continue
to evaluate ways to better monitor agent
behavior, as part of our current
surveillance, compliance, and
enforcement processes. We will also
monitor plan compliance with this new
requirement.
Comment: A couple of commenters
stressed the importance that
beneficiaries not be pressured to enroll
in another plan offered by the plan
sponsor during the notification call.
Response: The purpose of the call is
to notify beneficiaries that an
unqualified agent was involved in their
enrollment, not to persuade them to join
other plans. We anticipate that most
beneficiaries will appreciate the notice
and may have some questions, but we
do not anticipate that the majority of
them will want to make a plan change.
Plan sponsors will be expected to take
the lead from the beneficiary, rather
than initiate conversation about plan
changes. We will provide more specific
instructions for plans in subregulatory
guidance.
Comment: One commenter asked
whether a special election period (SEP)
would apply when a beneficiary is
enrolled by an unqualified agent, if the
requirement would apply only during
the AEP or throughout the year and
what should a plan sponsor do if it is
unable to reach the beneficiary.
Response: There will be no SEP
specifically tied to enrollment by an
unqualified agent; however, these
circumstances will be treated just like
any other complaint regarding
marketing misrepresentation by an
agent. The requirement will apply
throughout the plan year because
beneficiaries eligible for an SEP (for
example, dual eligibles and those who
move outside their plan’s service area)
can enroll in a new plan at other times
during the year, and plans can market
to these individuals. The contact
requirements will be similar to the
contact requirements for outbound
enrollment verification calls. We will
provide more direction through
subregulatory guidance.
Comment: One commenter asked
whether this requirement applied to
family, friends, or others presenting
themselves as agents.
Response: This requirement does not
apply to situations in which family
members or friends (who are not agents)
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give advice or recommendations to
beneficiaries. However, plan sponsors
should report individuals impersonating
agents to the State Department of
Insurance as unlicensed agents.
4. Customized Enrollee Data (§ 422.111
and § 423.128)
In our November 2010 proposed rule
(75 FR 71230), we discussed our
concern that information that MA
organizations and Part D provide their
enrollees annually in the annual notice
of change/evidence of coverage (ANOC/
EOC) document may not be enough to
prompt enrollees to actively evaluate
their plans annually with respect to
plan costs, benefits, and overall value.
Therefore, we proposed to require MA
organizations and Part D sponsors to
periodically provide each enrollee with
enrollee specific data to use to compare
utilization and out-of-pocket costs in the
current plan year to projected utilization
and out-of-pocket costs for the following
plan year. We proposed to add new
paragraphs (12) and (11) to § 422.111(b)
and § 423.128(b), respectively, to specify
this requirement. Plans would disclose
this information to plan enrollees in
each year in which a minimum
enrollment period has been met, in
conjunction with the ANOC/EOC.
We discussed several options for
implementing this data disclosure
requirement (75 FR 71230 through
71233), and we noted that the proposed
rule only specified our authority to
require such a disclosure. We sought
suggestions and comments from MA
organizations, Part D sponsors, the
beneficiary community, and other
external stakeholders related to the
design, content, and the cost
calculations to assist us in
implementing these provisions. In
addition, we noted that we were
considering implementing a pilot
program for CY 2012 with a few MA
organizations and Part D sponsors to test
approaches to conveying customized
beneficiary data, based on the comments
and suggestions that we received.
We also solicited comments on the
possibility of exempting dual eligible
special needs plans (D–SNPs) from the
requirement to provide such customized
enrollee data through a customized outof-pocket cost statement or an
explanation of benefits (EOB), since
enrollees in these plans generally do not
incur out-of-pocket costs. We sought
comment on exempting D–SNPs from
this requirement.
After considering the comments we
received, we are modifying our original
proposal, as described below.
Comment: Many commenters
expressed appreciation for our effort to
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identify the best ways to provide useful
information to beneficiaries. However,
while a few commenters supported
requiring a customized statement that
would provide an estimate of future
costs, most commenters opposed this
model, citing the administrative and
financial burden on plans.
Many commenters stated that a
customized estimate of future costs
would create more significant
administrative, financial and IT
resource burdens on MA plans and Part
D sponsors than CMS anticipated in its
proposal. These commenters stated that
the expense and operational burden of
the proposal could not be justified
relative to its value to beneficiaries,
considering the potential for beneficiary
confusion and dissatisfaction that may
result from any projection of future
costs. Other commenters stated that
such a requirement would likely result
in the need for additional funding of
audits as well as rigorous quality
assurance programs consistent with
HIPAA requirements related to the
dissemination of this type of document
with the ANOC/EOC. Several
commenters expressed concerns that
such a requirement would result in a
need to significantly increase call center
or 1–800–Medicare staffing to handle
the questions resulting from the
documents; or that it would also result
in more complaints to monitor in the
Complaints Tracking Module. One
commenter suggested that the
significant costs of producing and
distributing a custom statement would
increase administrative costs that, in
turn, might increase plan bids and result
in a negative impact on benefits and or
premiums.
Several commenters suggested that
providing these reports for Part D
benefits would be very burdensome,
even assuming that drug prices will not
change in the following year. They
stated that it would be difficult to
estimate future expenses related to the
initial coverage limit and coverage gap.
Several commenters also stated that
since enrollees already receive Part D
EOBs, a customized out-of-pocket cost
statement would be redundant and
confusing for beneficiaries. Another
commenter asked how plans would be
expected to coordinate between the
medical and prescription drug portions
of their benefit to the extent that we
required a customized out-of-pocket
cost statement to include information
about Parts C and D costs.
Many stated that requiring a
customized out-of-pocket cost statement
to be ‘‘bundled with’’ the ANOC and
EOC presents an insurmountable timing
problem due to the change in the annual
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enrollment period (AEP). They
expressed concern that, due to the
timing of bid approvals, usually in
August, that the remaining four-to-six
week period would be much too short
to prepare these data and mail a
customized statement to each
beneficiary with his/her ANOC/EOC.
Several commenters stated that it is an
expensive and time consuming process
to place an extra customized document
into an envelope package with a
standard ANOC/EOC. However, one
commenter recommended that any
customized enrollee data be based on
current year utilization only and that
data should be included in the ANOC
instead of a separate document to save
on costs associated with development,
printing, and fulfillment of an
incremental document while creating
just one document for beneficiaries to
read.
One commenter stated that a
standard, CMS-designed report would
eliminate the existing flexibility that
plans have to tailor enrollee
communications to their particular
needs.
A few commenters expressed
concerns related to the ability of
network providers receiving capitated
payments for medical services to
calculate out-of-pocket costs. Several
commenters noted that some plans have
established limited mechanisms to
calculate the MOOP, but that these
systems may not incorporate necessary
utilization data such as the specific
service the enrollee received and that
this information would have to be
extracted from multiple sources.
Response: We appreciate the many
thoughtful and detailed responses
submitted by commenters. As we noted
in our proposed rule (75 FR 71230), we
have been concerned that the ANOC/
EOC information alone may not be
enough to prompt enrollees to actively
evaluate their plans annually with
respect to plan costs, benefits, and
overall value. We also acknowledged
receiving requests from the beneficiary
advocacy community to require that MA
organizations and Part D sponsors
provide enrollees with a personalized
dollar estimate of their out-of-pocket
costs in the coming contract year based
on their use of services in the current
contract year. We noted in the proposal
that we are aware of the inherent
difficulties in accurately estimating
future year plan costs, especially the
unknown variable of specific service
utilization, and presenting that
information to beneficiaries in a clear,
concise, and useful way. We also
recognized the impact of an earlier
annual election period (AEP) beginning
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in CY 2011, as well as plans’ ability to
gather a sufficient amount of utilization
data to make useful and accurate
projections of costs for the following
contract year.
Based on the comments we have
received, we are modifying our original
proposal and finalizing § 422.111(b)(12)
to state that CMS may require an MA
organization to furnish directly to
enrollees, in the manner specified by
CMS and in a form easily
understandable to such enrollees, a
written explanation of benefits, when
benefits are provided under Part 422.
We do not plan to test a customized outof-pocket cost statement that estimates
future costs in CY 2012. Rather, we
intend to work with MA organizations,
Part D sponsors and beneficiary
advocates to develop an EOB for Part C
benefits modeled after the EOB
currently required for Part D enrollees at
§ 423.128(e), and we will test that model
through a small pilot program with
volunteer organizations in CY 2012. We
will consider integration of Part C and
Part D EOBs, level of detail, and
frequency of EOB dissemination as part
of the pilot program. Our goal is to
finalize a model EOB document in the
future based on the pilot program and
to require all MA organizations to
periodically send an EOB to enrollees
for Part C benefits. In addition, since an
EOB requirement already exists for Part
D enrollees, we will not finalize the
language proposed for § 423.128(b)(11).
We believe that delaying full
implementation of this requirement will
provide MA organizations with
sufficient time to prepare for periodic
dissemination of a Part C EOB.
Comment: Many commenters
expressed concerns that a customized
statement, especially with future
projections, would not be meaningful or
useful for beneficiaries. Some stated that
it would create significant confusion in
relation to Part C costs and Part D costs
as medical and medication requirements
change over time or their Low Income
Subsidy (LIS) status changes. One
commenting organization stated that it
has encountered problems with
beneficiary understanding of the
maximum out-of-pocket (MOOP) limit,
believing that it is a financial obligation
on the beneficiary. This commenter was
concerned that a similar
misunderstanding would accompany a
customized EOB or statement with
estimated future costs. Other
commenters believed that it would
create a false assurance of future costs
as well as an expectation of what their
costs will be in the following year, and
significant dissatisfaction if their actual
costs are higher than projected. They
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21505
stated that if the beneficiary’s costs are
materially higher, beneficiaries are
likely to be alarmed, dissatisfied or
confused. Some commenters also
expressed concern about beneficiaries’
expectations of plan liability if their
costs are higher than the estimate.
Another commenter was concerned
about perceived credibility of the plans
to their enrollees if inadequate or
confusing information was to prompt
beneficiaries to move to a plan that
turns out to be of lesser value.
Some commenters also stated that any
information projecting future costs only
for an enrollee’s current plan would be
of limited use to beneficiaries because it
would provide no similar data for any
alternative plan. They expressed
concern that such a statement using
partial year data would not provide
information that is comparable to the
annual cost estimates available through
the Medicare Plan Finder (MPF) tool.
These commenters disagreed that CMS
would improved an enrollee’s ability to
compare plans to make better
enrollment choices from year to year
with a customized statement including
estimated future costs.
In addition, many commenters raised
concerns that fluctuations in utilization
of services per year and past utilization
of ‘‘one-time’’ services would mislead a
beneficiary with respect to his/her
decision. Some stated that beneficiaries
would not consider what would happen
if their health needs change. Another
commenter stated that enrollee-specific
information based on past utilization
has the potential to de-emphasize the
value of considering future needs.
Another commenter suggested that any
comparison of expenses should include
a comparison to Medicare FFS and
Medicare FFS with the most popular
Medigap plan (Plan F) as benchmarks in
order to give the data context and to
facilitate informed choice.
Response: We agree with commenters’
concerns that the information presented
to beneficiaries must be clear, concise
and useful, without creating a false
expectation of costs. We had similar
concerns and therefore requested
comments about the types of
information as well as the format plans
could use to provide customized
utilization data. We also agree that the
data that is presented to beneficiaries
should be of a type that it would lend
itself to comparisons with Medicare
FFS, as well as other plans’ information,
and could be understandable to
beneficiaries with a range of levels of
health literacy. As previously discussed,
we intend to consider these issues in
our CY 2012 pilot program.
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Comment: Several commenters
provided comments on the example
tables we included in our proposed rule.
A few commenters stated that Table 7
(75 FR 71232), which breaks out
Medicare Part C services by inpatient
care, outpatient care and supplemental
services, would provide the most useful
information to beneficiaries with respect
to services. Several commenters
suggested that this table should present
premium data for the entire year instead
of six months. Several other
commenters recommended that Table 6
in our proposed rule (75 FR 71232),
presenting an average monthly cost and
combining all Medicare Part A and B
services, but excluding supplemental
services, would be the best choice.
Several commenters contended that
data for a 6-month period does not
generally accurately reflect the
enrollee’s year-long utilization or out-ofpocket cost-sharing. One of these
commenters recommended that CMS
use at least nine months of data and
allow the out-of-pocket cost information
to be sent after the ANOC/EOC to give
beneficiaries a more complete picture
and to reduce burden on MA
organizations during the ANOC
timeframes. Many commenters were
also concerned about errors in
estimating future costs and the limited
value of these estimates due to future
changes in beneficiary health status or
one-time high expenditure items (such
as a power wheelchair).
One commenter suggested that CMS
study the feasibility of requiring plans
to use a minimum of 12 months of data
over 2 or more contract years and
whether this would provide more
reliable data. This commenter also
suggested that CMS incorporate more
information from the ANOC into the
estimate, such as page references for
more information about cost sharing for
specific services.
Another commenter suggested that
CMS implement procedures to ensure
that the systems and calculations
developed by plan sponsors are
uniform, especially in regard to
estimating future costs to minimize the
potential for fraudulent and misleading
practices by plans in order to retain
members.
Response: We appreciate the detailed
responses provided by commenters
concerning the type and amount of data,
the presentation of the data, and
procedures to ensure uniform
calculations and data population. As
previously discussed, we believe that
requiring an EOB that summarizes
incurred costs but does not project
future costs will address a number of
these concerns. We will continue to take
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data calculation and presentation issues
into consideration as we develop a
model EOB.
Comment: Many commenters
supported the use of an EOB to give
enrollees ongoing information
throughout the year about their Part C
utilization and their cost-sharing and to
help them in decision making during
the AEP. One commenter recommended
that a Part C EOB should clearly
distinguish between in- and out-ofnetwork costs and supplemental
benefits, as well provider and date of
service. Others commenters opposed an
EOB and considered it too costly and
burdensome to plans without clear
value to beneficiaries in comparing
utilization or costs from year to year.
Commenters supporting an EOB model
supported different frequencies of
distribution, including monthly,
quarterly, bi-annually and annually.
One commenter recommended
requiring an annual EOB that contains
utilization data for the months of
January through September, to be
received at the start of the annual
election period, so that it would provide
important information at the most
appropriate time for the beneficiary.
This commenter also stated that
requiring a monthly EOB would not
provide any additional benefit to
beneficiaries beyond that of an annual
EOB, but it would add significantly to
plans’ administrative expenses through
printing, postage and increased volume
of customer service calls.
One commenter recommended that
instead of enrollee out-of-pocket
expenses, CMS develop a list of
common services for which plan
sponsors would calculate out-of-pocket
costs under the current plan year and
the upcoming plan year. The commenter
believed that this would create a
comparable format, consistent across all
plans, that would be a more
economically viable option and could
be produced in the limited time frame
of the new AEP dates.
Another commenter asked that CMS
consider allowing MA organizations to
provide enrollees with comparison
information upon request only. This
commenter suggested that plans could
advise members via their websites or in
a notice with premium bills of the
opportunity to receive this comparison.
Response: We agree with commenters
that a Part C EOB without future
projections would be a useful tool for
beneficiaries, allowing them to keep
track of costs throughout the plan year.
While it would not achieve the goal of
specifically linking utilization to
projected costs, we do believe that it
would be a valuable tool in annual plan
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choice decisions. We will also continue
to consider commenters’ suggestions for
the development of a list of common
services tied to utilization and the
option of plans providing comparison
information to beneficiaries upon
request.
Comment: Several organizations
supported the use of a pilot to test
approaches to conveying custom
beneficiary data, but requested that CMS
delay finalizing the requirement in
regulation until a pilot program can be
conducted and evaluated. Another
commenter requested that the pilot aim
to identify other potential alternatives
for providing this information, such as
ways to enhance the MPF tool. Several
commenters suggested that CMS
conduct consumer focus groups to
ascertain the type and extent of
information consumers/beneficiaries
would find useful. A commenter
suggested that we include beneficiaries
with a range of health literacy and
decision making skills to determine
which models are the most beneficiaryfriendly and effective. Others
recommended that CMS convene a
CMS-industry-advocacy working group
to examine the value in this proposed
requirement and determine what design,
content and timing might enhance that
value.
Several commenters recommended
that CMS instead put its resources into
enhancing the MPF tool, since many
beneficiaries already rely on and are
familiar with this tool. They stated that
these enhancements would permit
enrollees to input their utilization data
and receive direct comparisons of plans
based on specific data. Another
commenter stated that their plan already
uses an online portal where members
can view all claims made, pending, and
paid. This commenter stated their belief
that this ‘‘real time’’ data is more useful
to beneficiaries to estimate their costs
than 6 months of data the plans would
use to estimate costs.
Other commenters requested that we
put more resources instead into
government agencies, community
organizations and other groups that
provide one-to-one counseling to
beneficiaries to help them choose the
best plans for them. One commenter
requested that we retain existing market
basket estimates instead of individual
estimates, because they provide useful
comparative information and
accomplish some goals of this provision.
Another commenter suggested that we
require plans to make MOOP
information more prominent in member
materials instead of providing more
information that would be marginally
helpful.
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Response: We appreciate the
commenters’ suggestions. We do not
believe that it is necessary to delay
finalizing the statement of authority in
regulation, but we note that our final
regulation text for § 422.111(b)(12), will
allow us to move forward with a pilot
program while allowing sufficient room
to modify our initial requirements based
the results of the pilot, to continue to
modify requirements over time, or to
extend the pilot program if necessary
before full-scale implementation. We
agree with commenters that enhancing
the MPF tools to be able to input
utilization data and generate enrollee
specific information on plan choices
would be an ideal option. However, we
do not foresee this as an option that
could be accomplished in a relatively
short timeframe of a year or two. While
the suggestion that CMS invest more
resources into organizations that
provide one-on-one counseling to
beneficiaries is a valuable one, it is
outside the scope of this regulation.
Also, only MA organizations have the
individual utilization data that would
be needed to enhance the MPF tools and
improve one-on-one counseling for
beneficiaries. Therefore, both improving
the MPF tool and improving one-to-one
counseling would require plans to track
and disclose individual Part C
utilization data.
Comment: A few commenters
recommended that EGWPs be exempt
from the requirement to distribute
customized beneficiary data.
Commenters noted the limited range of
choices available to beneficiaries who
receive coverage through these plans;
MA organizations’ lack of knowledge
regarding the contribution EGWP
retirees make toward the cost of the
premium for their plan; and changes
made by the employers to their EGWP
MA plans that are not known to the MA
organization at the time these
summaries are to be provided to
enrollees. Another commenter stated
that any summary sent to enrollees who
have employer group commercial group
coverage primary and Medicare as
secondary payer, and who enroll in
their employer’s EGWP MA plan to
obtain this Medicare secondary
coverage, will not be accurate because it
would be based on MA plan out-ofpocket cost-sharing but would not
account for the commercial group
coverage cost-sharing that these
enrollees actually pay. This commenter
also stated that some enrollees will not
have had the ‘‘minimum enrollment
period’’ of 6 months, so the plan would
have to exclude them from receiving the
summary.
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Response: We disagree with these
commenters and do not intend to
exempt EGWPs from the requirement
§ 422.111(b)(12). Given that we are
modifying our original proposal to
provide CMS with authority, under to
require an MA organization to furnish
directly to enrollees, a Part C EOB, we
do not believe that many of these
comments are relevant. We also note
that EGWPs currently must comply with
all MA marketing requirements under
§ 422.111, although they have flexibility
through previously granted waivers
with respect to submission, CMS
review, and timing requirements. Since
a Part C EOB would be part of MA
disclosure requirements under
§ 422.111, we expect EGWPs would be
afforded these same times of flexibility
but would still be required to comply
with the requirement.
Comment: Several commenters
responded to our request for comments
related to exempting dual eligible
special needs plans (D–SNPs) from the
requirements. Several commenters
recommended that D–SNPs and/or
chronic and institutional care SNPs
should be exempt from the requirement
to furnish customized enrollee data on
out-of-pocket costs. Another commenter
recommended that CMS exempt any
dual eligible beneficiary that enrolls in
an MA plan that is not a D–SNP. These
commenters believe that since the
States’ Medicaid plans generally pay
enrollees’ out-of-pocket costs, providing
customized enrollee data through a
customized out-of-pocket cost statement
or an EOB would be unnecessary and
confusing for enrollees.
Response: We appreciate the
responses from commenters, but given
the modification of our original
proposal, we believe that an EOB
allowing beneficiaries to track
utilization of services as well as any outof-pocket costs would be a useful tool
for dual eligible MA enrollees. While we
are not exempting any MA plan type
from the requirements at
§ 422.111(b)(12) at this time, we intend
to study the issue of applicability to
dual eligible MA enrollees—regardless
of whether they are enrolled in D–
SNPs—further under our pilot program.
Comment: A few commenters
requested confirmation that cost plans
will be exempt from furnishing
customized enrollee data, since we did
not specifically include cost plans in the
proposal. One commenter stated that
cost plans should not have to provide an
EOB due to the difficulty of gathering
the information and the significant cost
and time required. One commenter also
stated that because out-of-network
services are paid directly by Medicare
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Administrative Contractors (MACs), cost
plans do not know a member’s full outof-pocket costs. This commenter also
stated that for most cost plans, the
MACs process claims before sending
them to the cost plan; thus there could
be a delay in receiving the information,
resulting in an inability to produce
customized enrollee documents in time
to be distributed with the ANOC/EOC.
Response: We did not propose to
include cost plans in the proposal for
customized enrollee data and, therefore,
will not include them in this final
policy. However, we will continue to
study whether to apply the EOB
requirement to cost plans in the future.
5. Extending the Mandatory Maximum
Out-of-Pocket (MOOP) Amount
Requirements to Regional PPOs
(§ 422.100 and § 422.101)
In our April 2010 final rule (75 FR
19709 through 19711), we established a
mandatory maximum out-of-pocket
(MOOP) requirement for local MA plans
effective contract year 2011. As
provided at § 422.100(f)(4), all local MA
plans, including HMOs, HMOPOS, local
PPO (LPPO) plans and PFFS plans, must
establish an annual MOOP limit on total
enrollee cost sharing liability for Parts A
and B services, the dollar amount of
which will be set annually by CMS. As
provided at § 422.100(f)(5), LPPO plans
are required to have a catastrophic limit
inclusive of both in- and out-of-network
cost sharing for all Parts A and B
services, the dollar amount of which
also will be set annually by CMS. Since
a statutory MOOP requirement was
already in effect with respect to RPPO
plans, we had proposed to apply the
new mandatory MOOP requirement
only to local MA plans, and thus in our
April 2010 final rule (75 FR 19711)
subjected only local MA plans to the
requirement that they meet the MOOP
dollar amount specified. We encouraged
RPPOs to adopt either the mandatory or
voluntary MOOPs established in CMS
guidance, stating that, to the extent an
RPPO sets its MOOP and catastrophic
limits above the mandatory amounts set
by CMS for other plan types, it may be
subject to additional CMS review of its
Parts A and B services cost sharing
amounts. We also expressed our intent
to address this discrepancy in future
notice-and-comment rulemaking.
In our November 2010 proposed rule
(75 FR 71233 and71234), we proposed
to extend these mandatory MOOP and
catastrophic limit amount requirements
to RPPO plans beginning in contact year
2012, in order to make it easier for
beneficiaries to understand and
compare MA plans. Each RPPO plan
would establish an annual MOOP limit
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on total enrollee cost sharing liability
for Parts A and B services, the dollar
amount of which would be set annually
by CMS. All cost sharing (that is,
deductibles, coinsurance, and
copayments) for Parts A and B services
would be included in RPPO plans’
MOOPs. We proposed to codify this
requirement by revising § 422.100(f) to
include regional MA plans. In addition,
we proposed revisions to paragraphs
(d)(2) and (d)(3) of § 422.101(d) to
specify that the catastrophic limits set
by RPPOs may not be greater than the
annual limit set by CMS.
After considering the comments
received, we are finalizing these
proposed provisions without further
modification.
Comment: We received several
comments on this proposal, most of
which expressed support for our
proposal to extend the mandatory
MOOP and catastrophic limits to RPPOs
and agreement that doing so would
make it easier for beneficiaries to
understand and compare plans.
However, a commenter argued that
since CMS is paying MA plans based on
projected costs of providing Parts A and
B benefits under the fee-for-service
program, we should not require MA
plans to provide richer benefits than
Parts A and B required benefits without
being compensated for the additional
cost.
Response: We agree with commenters
that extending the MOOP and
catastrophic limit requirements
applicable to RPPOs will make plan-toplan comparisons easier and will level
the playing field for RPPOs relative to
LPPOs.
We disagree with the commenter that
recommended that MA plans be
compensated for the additional cost of
including MOOP and catastrophic limits
in their benefit packages. As discussed
previously in our April 2010 final rule
(75 FR 19710), we believe that requiring
the inclusion of a MOOP limit is an
important step to ensure that
individuals who utilize higher than
average levels of health care services are
not discouraged from enrolling in MA
plans that do not have such a limit in
place. Given that RPPO plans are
required by statute to have such a
liability limit in place, we were
concerned that enrollees with high outof-pocket costs would be discouraged
from enrolling in RPPOs if similar
protection from high out-of-pocket costs
is not offered under those plans. We
continue to believe that requiring a
mandatory MOOP and catastrophic
limits set by CMS does not unduly
disadvantage MA plans relative to
original Medicare.
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We are therefore finalizing our
proposal to extend the mandatory
MOOP and catastrophic limit
requirements to RPPO plans at
§ 422.100(f) and § 422.101(d). Effective
contract year 2012, each RPPO plan
must establish an annual MOOP limit
on total enrollee cost sharing liability
for Parts A and B services, the dollar
amount of which would be set annually
by CMS. All cost sharing (that is,
deductibles, coinsurance, and
copayments) for Parts A and B services
will be included in RPPO plans’ MOOPs
and catastrophic limits.
Comment: Several commenters
recommended that we eliminate the
MOOP requirement for dual eligible
SNPs (D–SNPs) because members are
not responsible for out-of-pocket costs.
Response: We disagree with these
commenters. As we explained
previously in our April 2010 final rule
(75 FR 19711), dual-eligible individuals
entitled to have their cost sharing paid
by the State and enrolled in a SNP may
experience mid-year changes in their
Medicaid eligibility. In those cases,
these individuals may be required to
directly pay the plan cost sharing that
otherwise would be the obligation of the
State. Accordingly, we will not exempt
D–SNPs from the requirement that they
implement MOOP and catastrophic
limits as established annually by CMS.
Like all MA plans, D–SNPs must
establish a MOOP limit to provide this
enrollee protection, even though the
State Medicaid program is usually
paying those costs on the enrollee’s
behalf. For purposes of tracking out-ofpocket spending relative to its MOOP
limit, a D–SNP must count only the
enrollee’s actual out-of-pocket spending.
Thus, for any D–SNP enrollee, MA
plans must count only those amounts
the individual enrollee is responsible
for paying net of any State responsibility
or exemption from cost sharing toward
the MOOP limit rather than the costsharing amounts for services the plan
has established in its plan benefit
package.
6. Prohibition on Use of Tiered Cost
Sharing by MA Organizations
(§ 422.262)
As provided in section 1854(c) of the
Act and implemented at § 422.100(d)(2),
an MA organization offering an MA plan
must offer the plan to all Medicare
beneficiaries residing in the service area
of the MA plan at a uniform premium,
with uniform benefits and levels of cost
sharing throughout the plan’s service
area, or segment of the service area, as
provided at § 422.262(c)(2). In spite of
this regulatory guidance, we have
become aware that an increasing
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number of plans are charging
beneficiaries different amounts of cost
sharing for services depending on, for
example, which provider group the
beneficiary selects, the plan’s network
of hospitals, or how frequently the
beneficiary uses selected services.
In an effort to ensure that MA
organizations establish cost sharing that
is fully consistent with the intent of the
uniformity requirement in section
1854(c) of the Act, we proposed to
revise § 422.262 to stipulate that MA
organizations cannot vary the level of
cost sharing for basic or supplemental
benefits for any reason, including based
on provider groups, hospital network, or
the beneficiary’s utilization of services.
Comment: We received many
comments that opposed our proposal to
prohibit ‘‘tiered’’ cost sharing on the
basis of provider group or hospital
network. Comments stated that
prohibiting tiering would create an
overly restrictive environment and
would prevent plans from developing
benefit designs that encourage enrollees
to compare providers on the basis of
price. For example, plans would be
prevented from implementing various
value-based insurance designs. Others
asserted tiering allows plans to develop
benefit designs that encourage enrollees
to compare providers on the basis of
price and is valuable component of the
MA program. Further, some stated that
tiered cost sharing is an integral
component of HMO point-of-service and
PPO plans’ benefit structures and is
generally an acceptable practice in
health insurance. One comment stated
that CMS should not restrict a plan’s
ability to create innovative benefit
package designs that would encourage
member participation in programs that
support increased access to quality care
and allow members to seek services
from lower cost providers.
In addition, commenters expressed
their concern that the CMS proposal
failed to recognize the value of using
cost sharing incentives to encourage
enrolled beneficiaries to choose high
quality, efficient providers. They stated
the belief that tiered networks that
group providers into tiers based on
quality and efficiency may be used to
promote quality, and that lower cost
sharing could be used to encourage
enrollees to receive care from high-value
providers rather than low quality or
inefficient providers. Other commenters
mentioned that plans may use tiering to
encourage enrollees to join patientcentered ‘‘medical homes’’ that improve
quality while reducing hospitalizations,
ER visits, and per capita cost.
Several commenters stated that rather
than prohibiting tiered cost sharing for
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medical services CMS should use
revised summary of benefit (SB)
sentences and plan benefit package
(PBP) software revisions to make
transparent plans’ tiered cost sharing.
Response: Our proposal to prohibit
tiering of medical benefits would not
restrict the benefit design of PPO or
HMO–POS plans, as beneficiaries are
able to clearly distinguish cost sharing
differences on the basis of in-network
and out-of-network providers. Our
proposal addressed designs that would
create sub-networks with varying levels
of cost sharing for in-network services
that may not be clearly distinguishable
and/or accessible by beneficiaries.
We do not disagree with commenters
that believe it is important for plans to
be able to design benefit packages that
allow enrollees to choose providers
based on both quality and cost. Our
concerns about tiered cost sharing for
medical services are focused on the
potential barriers to access that may be
created if plans implement differential
cost sharing by provider network (or on
any basis) and the lack of transparency
to beneficiaries as they compare plans,
and to providers and enrolled
beneficiaries that are participants of any
such benefit design. We require that all
enrollees in a plan’s service area must
have adequate access to plan providers
and that permitting different levels of
cost sharing for provider networks or
provider groups may create inconsistent
access to providers at each cost sharing
tier. We believe some enrollees in a
service area could have access only to
the highest cost providers or that
implementation of tiered cost sharing
could disrupt an established
relationship with a provider that
becomes one of those grouped into a
higher cost sharing level or that the
enrollee would begin paying the higher
cost sharing, not realizing that lower
cost providers are available.
We also are committed to ensuring
that beneficiaries are able to understand
their choices of plan offerings and there
is currently no system to facilitate the
disclosure of tiered cost sharing to
beneficiaries as they compare plans or
to beneficiaries that are enrolled in the
plan. Further, tiered cost sharing based
on provider group or network
complicates referrals within the plan
network as the providers themselves
must be informed about the enrollee
costs to see other plan providers to
effectively manage enrollees’ health care
needs.
Finally, we are committed to ensuring
that enrolled beneficiaries have access
to high quality, efficient providers and
to supporting MA plans that create
innovative benefit packages that would
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provide enrollees with low cost, high
quality services. We greatly appreciate
the comments that expressed plans’
same goal of providing enrollees with
affordable, high quality care and their
belief that enrollees appreciate having
choices about providers and the amount
they are spending for care.
To date, we are aware of only a few
instances of tiered cost sharing for
medical services but, in those cases, we
believe the differential cost sharing was
not based on quality of care or value but
rather, on a plan’s ability to negotiate
favorable rates with providers. That is
not to say that we are not persuaded that
it may be possible to allow plans more
flexibility to design benefit packages
that include some differential cost
sharing in order to encourage enrollees
to seek care from the most efficient
providers. In fact, we have decided that
we will not finalize at this time our
proposal to prohibit tiered cost sharing.
After carefully considering all of the
comments, we have determined that it
would be appropriate for us to consider
this policy more broadly. We will
provide future guidance and investigate
a number of aspects for possible future
policymaking related to tiered cost
sharing, including, but not limited to:
possible revisions to the PBP and SB
sentences that would enable
transparency; methods for verifying that
any tiered cost sharing for medical
benefits does not impede access to care
for a plan’s enrollees; identifying
methods for evaluating quality of care
furnished by providers or provider
networks; processes by which plans
could submit for review proposed tiered
benefit structures.
Further, we note that although we are
not finalizing our proposal, based on
our authority at section 1852(b)(1) of the
Act and as codified at § 422.100(f)(2),
we prohibit tiered cost sharing based on
utilization as a type of cost sharing that
discriminates against beneficiaries,
promotes discrimination, discourages
enrollment or encourages disenrollment,
steers subsets of Medicare beneficiaries
to particular plans or inhibits access to
services. Thus, although we included
tiered cost sharing based on utilization
in our proposal to prohibit all tiered
cost sharing, it is also prohibited
because it is discriminatory against
beneficiaries.
Comment: There were many
comments that supported our proposal
to prohibit tiered cost sharing on any
basis.
Response: We thank the commenters
for their support of the proposal but, as
explained previous comment, we are
not finalizing our proposal at this time.
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Comment: There were two
commenters that specifically supported
the prohibition of tiering based on
utilization and several others that stated
tiering based on utilization could result
in most plan members having lower cost
sharing obligations because the first few
provider services would have low cost
sharing and only the minority of plan
enrollees that over-utilize services
would have to pay the higher cost
sharing amounts charged for more
frequent use of services.
Response: We believe that increasing
enrollees’ cost sharing to charge more to
enrollees as they use more services is an
example of discriminatory cost sharing
which we prohibit under our authority
as codified at § 422(f)(2). While the
commenters believe that some enrollees
are over-utilizing services, we must
consider that the enrollees who use the
most services may be the sickest
enrolled beneficiaries who need more
services than do most enrollees. We
expect plans to manage enrollees’ care
and believe there are tools available that
enable plans to do so without
implementing policies that
inappropriately create barriers to access
to care. Our policies (for example, cost
sharing standards, benefit package
review) are designed to prevent
discriminatory cost sharing and are in
place to protect sicker enrollees from
plan designs that charge higher costs for
more frequent or more costly utilization
in order to discourage use of needed
services.
Comment: There were several
commenters that requested general
clarification of the proposal. There were
other comments that stated the proposal
was inconsistent with the objectives of
the ACA. One plan’s comment also
requested clarification of what the
proposal does to prohibit plans from
varying cost sharing by place of service
in order to manage cost. For example,
lowering cost sharing for physical
therapy delivered in the PCP’s office
compared to the hospital outpatient
setting, since such variation is
instrumental in plans’ efforts to
encourage enrollees to utilize the most
effective setting for care and to manage
cost. Another commenter explained
tiering allows health plans to
experiment with alternative cost sharing
structures that promote better access to
care for sicker beneficiaries and better
compliance with treatment regimens.
For example, by waiving co-payments
for certain services provided to
diabetics. The commenter also
suggested that tiering can be found
throughout the Medicare FFS and MA
programs since plans are allowed to
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charge different cost sharing for out-ofnetwork services and providers.
Response: We believe these
disagreements with our proposal are
based on a misunderstanding of what
we mean by tiered cost sharing,
specifically the examples regarding the
prohibition of higher cost sharing for
out-of-network services and the special
cost sharing arrangements for diabetic
services/supplies. These examples cited
by the commenters are not what we
define as tiering of medical services.
Therefore, we would like to clarify that
even under our proposal, higher cost
sharing would have been permitted for
out-of-network services (for example,
PPOs) and incentivizing enrollees
through cost sharing to use more costeffective settings to receive the same
service (for example, charging lower
cost sharing for the same service in a
PCP’s office than in the hospital
outpatient department, or for services in
a freestanding imaging facility than in
the outpatient department of a hospital).
Comment: One commenter questioned
CMS’s elimination of tiered cost
sharing, especially as the industry
moves towards patient centered medical
homes and accountable care
organizations to ensure quality care and
tiered cost sharing could be one way to
encourage these types of organizations.
Response: We recognize that there is
an evolving market for new models for
care such as medical home and
accountable care organizations. We do
not believe that MA cost sharing
standards create barriers to plans
providing access to those high quality
care delivery organizations. CMS will
take these comments into consideration
in future rulemaking.
Comment: One commenter wanted to
clarify whether this prohibition of tiered
cost sharing would be at the Plan
Benefit Package (PBP) level.
Response: The tiered cost sharing we
have observed has been at the PBP level
and our proposal would have prohibited
tiering at the PBP level.
Comment: One commenter sought
clarification on whether or not the
proposal applies to the drug portion of
Part C plans and encouraged CMS to
apply the proposed change to the drug
portion of Part C plans. Another
commenter proposed that CMS allow
differential cost sharing based on
provider group or hospital, or modify
the meaningful differences test to allow
for evaluation of differences in network
or referral requirements between plans.
Response: Our proposal targeted
tiering of all medical benefits, including
Part B drugs under Part C. We thank the
commenters and will include the
suggestion that allowing differential cost
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sharing and including the resulting
differentiation in provider networks to
be considered in our evaluation of
meaningful differences during bid
review, in our future policy discussions
and rulemaking.
Comment: One commenter stated that
tiering is the core of modern drug
therapy management.
Response: We would like to clarify
that our proposal would have no effect
on the drug tiering under the Medicare
Part D drug benefit.
Comment: One commenter suggested
expanding the proposed prohibition to
the Part D Program.
Response: We thank the commenter
for their suggestions but tiering within
Part D is beyond the scope of this
proposed rule.
Comment: One commenter requested
that CMS establish an employer group
waiver excepting MA plans offered
through employer/union group health
plans from the tiered cost sharing.
Response: We thank the commenter
for the suggestion, but we believe that
employer group plans must be subject to
the same cost sharing as other MA plans
in order to provide the beneficiaries
enrolled in those plans the same
protections as beneficiaries enrolled in
other MA and cost plans.
Based on the comments received on
this proposal, we will not finalize the
proposal to amend § 422.262 by revising
paragraph (c)(1). We will consider
further rulemaking related to this
practice in the future.
7. Delivery of Adverse Coverage
Determinations (§ 423.568)
Section 1860D–4(g) of the Act
requires Part D plan sponsors to
establish procedures for processing
requests for coverage determinations
and redeterminations. Those procedures
must apply to Part D plan sponsors in
the same manner as they apply to MA
organizations with respect to
organization determinations and
reconsiderations under Part C. Under
§ 422.568(d), an MA organization must
provide written notice when it makes an
unfavorable standard organization
determination.
In accordance with section 1860D–
4(g) of the Act, we created a parallel
notice provision in § 423.568(f) for
unfavorable Part D standard coverage
determinations. We proposed to revise
§ 423.568(f) by allowing a Part D plan
sponsor to first provide oral notice of an
adverse standard coverage
determination decision, so long as it
also provides a written follow-up notice
of the decision within 3 calendar days
of the oral notification.
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As noted in the proposed rule, we
believe this change is necessary because
of the short decision-making timeframes
under Part D. As we also noted in the
proposed rule, this change is consistent
with § 422.572(c) whereby an MA
organization may choose to meet the 72hour notification timeframe for adverse
expedited organization determinations
by first providing oral notice of its
decision within 72 hours, so long as it
also sends a written follow-up notice
within 3 calendar days after providing
oral notice.
After considering the comments
received in response to this proposal,
we are adopting this provision without
modification. Thus, we have revised
§ 423.568(f) to allow a Part D plan
sponsor to provide initial notice of an
adverse standard coverage
determination decision orally, so long as
it also provides a written follow-up
notice within 3 calendar days of the oral
notice.
Comment: Several commenters
supported this policy. Some of the
comments in support of the proposal
also requested that CMS clarify that
plan sponsors have 3 business days
from the date of the oral notice to send
written notice. Other commenters
requested that plans have the option of
mailing the notice within 3 days of
receipt of the request if oral notice is not
provided, citing the difficulty in
providing oral notice in cases where the
plan does not have a telephone number
for the enrollee or the enrollee is
difficult to reach by telephone.
Response: The regulations in Subpart
M of Part 423 related to providing notice
to enrollees refer to calendar days, not
business days. We do not believe there
is a good reason to deviate from that
approach for purposes of § 423.568(f).
Accordingly, if a plan chooses to
provide the initial notice orally, the
written follow-up notice must be mailed
to the enrollee within 3 calendar days
of the oral notice. We appreciate
commenters’ concerns about those
instances where the enrollee cannot be
reached by telephone. However,
providing oral notice is optional. If the
plan does not provide oral notice of a
standard coverage determination to
deny a drug benefit, the plan sponsor
must notify the enrollee of its
determination in writing as
expeditiously as possible, but no later
than 72 hours after receipt of either the
request or, for an exceptions request, the
physician or other prescriber’s
supporting statement.
Comment: One commenter expressed
concern that the intent of the provision
to provide enrollees with information
quickly will be diminished if
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beneficiaries have to wait to receive the
written notice to learn the reason for the
denial and appeal rights. The
commenter requested that the regulation
require the oral notice to include the
reason for the denial and information
about requesting a redetermination. The
commenter also requested that CMS
issue guidance to plans and develop
model scripts.
Response: We believe that the written
notice plans must send the enrollee
following the oral notice is the most
effective means of providing detailed
information on the coverage decision
and an explanation of appeal rights.
However, we agree there is value in
providing guidance to plans on the
information that should be conveyed to
enrollees when providing an oral
decision. Therefore, we will provide
guidance in relevant manual provisions
regarding the content of oral notification
provided by plans.
8. Extension of Grace Period for Good
Cause and Reinstatement (§ 422.74 and
§ 423.44)
Section 1851(g)(3)(B)(i) of the Act
provides that MA plans may terminate
the enrollment of individuals who fail
to pay basic and supplemental
premiums after a grace period
established by the plan. Section 1860D–
1(b)(1)(B) of the Act generally directs us
to use disenrollment rules for Part D
sponsors that are similar to those
established for MA plans under section
1851 of the Act. Consistent with these
sections of the Act, the Part C and D
regulations set forth our requirements
with respect to involuntary
disenrollment procedures under
§ 422.74 and § 423.44, respectively.
Currently, § 422.74(d)(1)(i)(B)
specifies that an MA organization must
provide, at minimum, a 2-month grace
period before disenrolling individuals
for failure to pay the premium.
Similarly, under current regulations at
§ 423.44(d)(1)(ii), Part D sponsors must
also provide a 2-month minimum grace
period before disenrolling individuals
for failure to pay the premium. For both
Part C and Part D, involuntary
disenrollments are not mandatory and,
thus, organizations may choose to
implement longer grace periods or forgo
involuntary disenrollments entirely as
long as they apply their policy
consistently. MA and Part D plans that
choose to disenroll beneficiaries for
failure to pay premiums must notify the
beneficiary of the delinquency and
provide the beneficiary at least 2
months to resolve the delinquency. The
plan must also be able to demonstrate to
CMS that it has made reasonable efforts
to collect the unpaid premium amounts.
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Since beneficiaries who are
disenrolled from an MA or Part D plan
for failure to pay premiums generally
are not eligible for a special enrollment
period, the next opportunity to enroll in
another plan is during the annual
election period in the fall. As a result,
these beneficiaries may lose their
prescription drug coverage for the
remainder of the year, and may incur a
late enrollment penalty if they
subsequently choose to re-enroll in Part
D. For these reasons, and to be
consistent with the provision for
delinquent premium payments for
Supplementary Medical Insurance (Part
B of Medicare), we proposed to permit
reinstatement of enrollment in an MA or
Part D plan for instances in which the
individual was involuntarily
disenrolled for failure to pay plan
premiums, but subsequently
demonstrated good cause for failing to
submit the premium payment timely.
We proposed that good cause would be
established only when an individual
was prevented from submitting timely
payment due to unusual and
unavoidable circumstances beyond his
or her control.
Specifically, we proposed amending
§ 422.74(d)(1) and § 423.44(d)(1)
regarding disenrollment for nonpayment of premiums to allow for the
reinstatement of enrollment for good
cause subsequent to an involuntary
disenrollment associated with the
failure to pay premiums within the
grace period. A reinstatement of
enrollment would remove the
involuntary disenrollment from the
enrollment record, resulting in
continuous coverage as if the
disenrollment never occurred. Further,
before such reinstatement could occur,
we proposed to require that the
individual pay in full all premium
arrearages on which the disenrollment
was based, as well as all other
premiums that would have been due
since the disenrollment. Consistent with
the provision for delinquent premium
payments for Supplementary Medical
Insurance (Part B of Medicare), we
proposed that the disenrolled individual
would have a maximum of 3 months
from the disenrollment date in which to
request the good cause reinstatement
and resolve all premium delinquencies.
Comment: The overwhelming
majority of commenters expressed
support for the proposed regulatory
revision. Several commenters further
requested that CMS provide additional
guidance to plans regarding the
circumstances that would constitute
‘‘good cause’’ and would allow for
reinstatement of enrollment following
an involuntary disenrollment for failure
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to pay premiums. It was also suggested
that CMS require plans to include in
their information to beneficiaries an
explanation of a grace period, including
the eligibility criteria.
Response: We appreciate the support
for this proposal and are adopting it as
proposed. We will provide additional
guidance regarding implementation of
these new provisions in manual
guidance (Chapter 2 of the Medicare
Managed Care Manual and Chapter 3 of
the Medicare Prescription Drug Benefit
Manual).
Comment: A commenter favored an
extension of the minimum required
grace period for nonpayment of
premium from 2 months to 3 months
and supports the development of
provisions for payment plans for
circumstances in which the beneficiary
owes more than 1 month’s premium.
Another commenter asked that CMS
consider a waiver of the grace period
requirements for employer group waiver
plans (EGWPs), stating that some
employers pay a portion of the
beneficiary’s premium and may not be
financially able to incur the cost of
members not paying their portion of the
premium during a 2 month grace period.
Response: Issues involving the length
and applicability of the minimum grace
period have been the subject of recent
rulemaking (see our April 2010 final
rule (75 FR 19678)), and we do not
believe it would be appropriate or
warranted to revisit these issues in this
final rule, given that they were not
raised in the proposed rule. With
respect to the request that we require
plans to establish payment plans for
premium arrearages, plans are by no
means precluded from establishing such
arrangements with beneficiaries, but we
do not believe such arrangements
should be mandatory.
Comment: Several commenters who
supported our proposal expressed
concern about the examples in the
proposed rule preamble of
circumstances that likely would not
constitute good cause. They suggested
certain scenarios they believed would
warrant a good cause determination. For
example, some commenters opposed the
statement in the preamble indicating
that we would not expect to find good
cause in instances where an individual’s
legal guardian or authorized
representative was responsible for
making premium payments but failed to
do so in a timely manner. The
commenters indicated that beneficiaries
may be penalized for errors made by
their appointed representatives in
situations when the beneficiary is
unable to manage his or her affairs and
may be unaware of the delinquency or
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pending disenrollment. It was requested
that CMS direct plans to find good cause
in situations where a caregiver,
authorized representative or legal
guardian is responsible for making
payment, but failed to do so timely. In
addition, commenters suggested
allowing for reinstatement of enrollment
if the request is supported by a
physician who states that any lapse in
coverage could seriously jeopardize the
beneficiary’s health due to the potential
for a disruption in care or if a member
of a State Pharmaceutical Assistance
Program (SPAP) is disenrolled because
the SPAP failed to provide appropriate
premium payments.
Response: The examples provided in
the proposed rule were intended to be
illustrative, and we do not intend to
codify those principles in regulation.
Accordingly, we will take these
comments into consideration as we
develop additional ‘‘good cause’’
guidance to plans in the Medicare
Managed Care and Medicare
Prescription Drug Benefit Manuals.
However, we note that the fundamental
basis of a good cause determination
rests on the circumstances that
prevented timely payment of the
premium. Thus, a physician’s statement
about the health consequences of a
coverage lapse would not appear to be
germane to whether a good cause
determination was warranted.
Comment: Two commenters requested
clarification as to whether our proposal
applied to cost plans.
Response: Cost plans were not a part
of our proposal and we did not set forth
any proposed changes to 42 CFR part
417. We may consider expanding this
policy to cost plans in future
rulemaking.
9. Translated Marketing Materials
(§ 422.2264 and § 423.2264)
Pursuant to our authority under
sections 1851(d)(2)(C), 1860D–1(c), and
1860D–4(a) of the Act, we proposed to
codify existing MA and Part D guidance
for marketing materials in markets with
a significant non-English speaking
population or large percentage of
limited English proficient (LEP)
individuals. We proposed to include a
requirement in the regulations that plan
sponsors must provide translated
marketing materials in any language that
is spoken by more than 10 percent of the
general population in a plan benefit
package (PBP) service area. We
proposed revisions to § 422.2264(e) of
Subpart V and § 423.2264(e) of Subpart
V to reflect this clarification.
The proposed clarification would
codify existing guidance regarding
translated marketing materials. We
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proposed taking this step as a result of
frequent complaints to CMS from
beneficiaries and advocacy
organizations that revealed plan
sponsors were not providing translated
marketing materials upon request in
languages spoken by more than 10
percent of the general population of a
particular PBP service area. The August
15, 2005 version of the Medicare
Marketing Guidelines and every version
thereafter, included language stating,
‘‘Organizations/plan sponsors should
make marketing materials available in
any language that is the primary
language of more than 10 percent of a
plan’s geographic service area.’’
Nevertheless, plan sponsors have
indicated they were uncertain whether
translated marketing materials were
required. For example, plan sponsors
we talked to were confused about
whether the 10 percent threshold
applied to a specific age group (for
example, only those 65 and older,
which does not take into account
younger beneficiaries who are Medicareeligible based on disability). Other plan
sponsors assumed they did not have to
conduct a language analysis for their
plan because they were not aware of any
LEP enrollees in their plans. By
explicitly codifying the requirement to
translate marketing materials for LEP
individuals, we are addressing the
problem of plan sponsor confusion by
removing any ambiguity concerning the
translation requirement that may have
been created by differences between the
language of § 422.2264 and § 423.2264
and the Medicare Marketing Guidelines.
Additionally, Title VI of the Civil Rights
Act of 1964 prohibits discrimination on
the basis of race, color, or national
origin by recipients of Federal financial
assistance. Recipients must take
reasonable steps to provide persons
with limited English proficiency
meaningful access to their programs and
activities. This may require the
translation or interpretation of certain
information into languages other than
English. Under an Executive Order
13166, issued in 2000 and reaffirmed in
February 2011 by the Attorney General,
each Federal agency must also
implement a system by which LEP
persons can meaningfully access the
agency’s programs. This codification is
consistent with that obligation.
Comment: We received more than 100
comments regarding the proposal to
codify the 10 percent threshold
standard. The majority of commenters
proposed new, more rigorous threshold
standards. The most commonly
suggested threshold standard was 5
percent of the population or 500 people
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in a service area, whichever is lower. A
small number of commenters suggested
a 1 percent threshold. None of these
commenters quantified the
improvement in access that these
standards, particularly the 500 person
minimum or 1 percent options, would
bring. Some of the commenters
recommending this translation standard
were unaware that this regulation would
only pertain to the Medicare population
enrolled in Part C or D plans or that the
proposed rule was only requiring
translation of marketing materials and
not lab test results or patient
instructions. Additionally, some
commenters supporting the 5 percent or
500 people threshold indicated that
many of the LEP individuals they serve
are illiterate in any language.
A variety of industry representatives
indicated that they supported CMS’
rule. Some of these commenters further
recommended, however, that CMS base
the standard on an individual’s primary
language in order to focus on
individuals that were proficient in only
a non-English language rather than
those who were bi-lingual. One
commenter from industry suggested the
standard should be based on the
Medicare population; another suggested
the standard should be based on the
PBP’s membership; and another
suggested we should look at only
individuals age 65 and older. Industry
commenters justified their suggestions
for modifying CMS’ current standard
based on their experience that they only
receive a few requests for hard copies of
the materials each year. The industry
commenters also expressed concern
about the cost of developing and
printing translated materials when they
anticipate a low demand.
Response: In response to both
industry and advocacy stakeholders that
commented on the proposed rule, we
will move the standard populationbased translation threshold from 10
percent to 5 percent. Further, we will
revise our methodology for calculating
these thresholds by focusing on
individuals who primarily speak a nonEnglish language and who have a
limited ability to read, write, speak, or
understand English, as opposed to also
including individuals who are at least
bilingual. Specifically, we will require
plan sponsors to translate marketing
materials into any non-English language
that is the primary language of at least
5 percent of the individuals who reside
in a PBP’s service area.
At this time, we will continue to use
the U.S. Census Bureau’s American
Community Survey (ACS) data to
determine the languages spoken in each
sponsor’s PBP’s service area. However,
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we recognize that the ACS data may be
superseded by more accurate or timely
data in the future; therefore, we will
continue to monitor and review data
sources that are available to all plan
sponsors. In particular, we will continue
to evaluate forthcoming data sources
that most accurately identify
individuals who are unable to read
English-language materials, but are
literate in non-English languages. We
prefer to use data sources that are
publicly available in order to reduce the
burden on plan sponsors. We will, as we
have done since 2009, continue to
calculate, on behalf of all plan sponsors,
the specific languages that meet the
threshold for each PBP service area.
From a public policy perspective,
moving to a 5 percent threshold and
focusing on individuals’ primary
language produces the best outcome
because it will focus sponsor resources
on individuals with the most need for
translated materials. We conducted an
impact analysis of how this standard
and revised methodology would change
current translated materials offerings.
The results of our analysis indicated
moving to 5 percent and focusing on
primary language will slightly reduce
the burden on plan sponsors because a
small number of them will no longer be
required to translate materials at all.
(There was a slight net reduction, which
may vary from year to year. Under the
new standard, some PBPs that did not
require translation in the past will now
be required to translate.) Additionally,
focusing on the primary language
spoken by individuals more closely
aligns with the HHS definition of a LEP
individual. The HHS Guidance to
Federal Financial Assistance Recipients
Regarding the Title VI Prohibition
Against National Origin Discrimination
Affecting Limited English Proficient
Persons (HHS LEP Guidance) defines
LEP individuals as those ‘‘who do not
speak English as their primary language
and who have a limited ability to read,
write, speak, or understand English.’’
Focusing on individuals’ primary
language is more consistent with the
definition than our current practice of
looking at any languages spoken by the
general population.
We disagree with the other suggested
translation threshold approaches from
the commenters for several reasons.
First, the suggested standard threshold
of 5 percent or 500 people, whichever
is less, would result in all PDPs and
nearly all MAOs providing translated
materials in all languages captured in
the ACS data because 500 is such a
small number of speakers. This would
be a significant increase in the number
of plan sponsors required to translate
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and the number of languages required
for translation, and absent definitive
evidence to support the sharp increase,
this would result in insupportable costs
and burden. The same argument holds
true for the suggestion of a 1 percent
standard. Second, the suggested
standard of 10 percent of a plan’s
membership (as opposed to population
data) would be impossible for plan
sponsors or CMS to calculate because
beneficiary language preference is an
optional field for beneficiaries to
complete on a plan enrollment form.
There is no guarantee that all LEP
beneficiaries would be counted by the
sponsor. Also, because we do not collect
the enrollment form language preference
data from sponsors, we would need to
establish a reporting requirement and
then wholly rely upon sponsorgenerated data when monitoring for
compliance. With regard to the
suggestion to only look at language data
for those age 65 and older, we cannot
lose sight of the fact that some
individuals that qualify for Medicare
(and for participation in the Part C and
D programs) are younger than 65.
However, we will conduct additional
sensitivity analyses in the future to
assess if applying a weighted-average to
account for the age distribution of the
Medicare population would affect
translation requirements. Should we
ever change our data source or
methodology for calculating translation
requirements, we will publish that
information in subregulatory guidance.
Comment: One industry organization
suggested that plan sponsors should not
have to translate any documents, and
beneficiaries should rely on oral
interpretation services available through
their call centers.
Response: We do not agree with this
comment. In order to ensure that LEP
beneficiaries have access to vital
information needed to make appropriate
decisions about their health care, our
goal is to make marketing materials
available to beneficiaries, wherever it is
reasonable to do so. Because of the
particular effort required to make these
translations available, we must balance
those resource costs with the likelihood
of the documents being requested and
used. As such, we apply a threshold,
and thus our rules do not require
translation of marketing materials into
all languages. However, call center
interpreters, must be made available in
virtually all languages spoken in the
U.S. Fulfillment of this requirement
provides a safety net in geographic areas
where only a few beneficiaries speak a
particular non-English language. We
reached our decision after conducting
the four factor analysis in the
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21513
aforementioned HHS LAP Guidance,
and, based on this analysis, a mix of
language services (that is, both oral
interpretation services and written
translated materials when a standard
translation threshold has been met), is
the most appropriate solution for the
population served by the Medicare Parts
C and D programs.
Comment: Several comments were
outside of the scope of this proposed
rule. The comments were technical and
operations oriented, and are more
appropriate as comments on the
Medicare Marketing Guidelines.
Industry requested that plans should not
have to have pre-printed copies of
translated materials on hand; rather,
they preferred to meet the requirement
through a print-on-demand capability
and provide the translated material
within a reasonable timeframe to the
beneficiary. Another comment
suggested CMS require plans to provide
enrollment materials in any language
that the plan was advertised in via any
media (for example, print, radio,
Internet, etc.). Lastly, a commenter
requested clarification regarding which
marketing materials required
translation.
Response: We agree that these
comments raise valid points that merit
clarification, and we will consider them
in the context of future revisions of the
Medicare Marketing Guidelines.
However, we remind MA organizations
and Part D plan sponsors that, pursuant
to the current Medicare Marketing
Guidelines, all Medicare marketing
materials that are required to be
translated and available in print upon
request are also required to be posted on
the plan’s Web site. The specific
marketing materials required for
translation are contained within the
Medicare Marketing Guidelines.
Comment: One industry commenter
suggested that CMS provide translations
of the model evidence of coverage (EOC)
in the top five languages other than
English most commonly spoken by
Medicare beneficiaries nationally.
Response: We are aware of the cost
burden on plan sponsors to produce
translated marketing materials, and
CMS and beneficiary advocates have
concerns about the quality and accuracy
of translated materials provided to
beneficiaries. In response, for the 2012
contract year, CMS anticipates
providing a few translated versions of
certain model marketing materials. Our
aim is to reduce the burden on plan
sponsors and increase the quality,
consistency, and accuracy of these
marketing materials for beneficiaries. By
providing translations of some or all
model materials in all languages in
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which translation is required for at least
one plan benefit package, plan sponsors
would merely need to translate their
own plan-specific inserts or
modifications, in addition to required
materials for which there is no model or
translation available. In future years we
would prefer to translate all required
model marketing materials and will
actively pursue this goal, but we are
uncertain about viability of this practice
because we cannot guarantee that we
would be able to fund this initiative
annually. Additionally, we are
exploring creating a 1-page model
document that would inform
beneficiaries, in multiple languages, that
free interpreter services are available
when beneficiaries call the plan’s
customer service call center.
Comment: One commenter requested
clarification as to whether the Program
of All-inclusive Care for the Elderly
(PACE) program is subject to the
requirement that plan sponsors provide
translated marketing materials.
Response: We clarify that PACE
programs are not subject to this
requirement.
In summary, we received numerous
comments on this proposed rule. In
response to commenters, we are
finalizing the proposed rule, with
modification. We factored in advocacy
organizations’ comments to reduce the
percentage threshold and addressed
industry’s concerns by refining our
methodology, which will slightly reduce
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sponsors’ administrative burden.
Further, the revised analysis
methodology is more consistent with
the HHS definition of an LEP individual
than our current practice. Our final rule
will require plan sponsors to translate
marketing materials into any nonEnglish language that is the primary
language of at least 5 percent of the
individuals in a PBP’s service area. This
new translation standard will go into
effect for contract year 2012; therefore,
2012 enrollment materials must be
produced with this new translation
standard in mind, in keeping with all
relevant deadlines that occur in 2011 in
preparation for the 2012 marketing
season. As in the past, we will continue
monitoring sponsors’ compliance with
translated materials requirements.
E. Strengthening Our Ability To
Distinguish for Approval Stronger
Applicants for Part C and Part D
Program Participation and To Remove
Consistently Poor Performers
This section addresses a number of
provisions designed to strengthen our
ability to approve strong applicants and
remove poor performers in the Part C
and D programs. Since the
implementation of revisions to the MA
program and initial implementation of
the prescription drug program in
January 2006 as a result of the MMA, we
have steadily enhanced our ability to
measure MA organization and PDP
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sponsor performance through efforts
such as the analysis of data provided
routinely by sponsors and by our
contractors, regular review of
beneficiary complaints, marketing
surveillance activities, and routine
audits. This information, combined with
feedback we have received from
beneficiary satisfaction surveys, HEDIS
data, and information from MA
organizations and PDP sponsors
themselves, has enabled us to develop a
clearer sense of what constitutes a
successful Medicare organization
capable of providing quality Part C and
D services to beneficiaries. This
information has also allowed us to
identify and take appropriate action
against organizations that are not
meeting program requirements and not
meeting the needs of beneficiaries.
As our understanding of Part C and D
program operations has deepened since
implementation of the MMA, our use of
our authority to determine which
organizations are qualified to offer MA
and PDP sponsor contracts, evaluate
their compliance with Part C and D
requirements, and make determinations
concerning intermediate sanctions,
contract non-renewals and contract
terminations has evolved as well. The
changes identified in this rule will
further allow us to make these
determinations more effectively. These
provisions are described in detail in
Table 7.
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1. Expand Network Adequacy
Requirements to All MA Plan Types
(§ 422.112)
In our November 2010 proposed rule
(75 FR 71236), we proposed applying
the network adequacy standards at
§ 422.112(a)(10) to all MA plans that
meet Medicare access and availability
requirements by directly contracting
with network providers, including MSA
plans that choose to use a contracted
networks of providers. This proposed
change would bring MSA network
adequacy requirements in line with
those applicable to MA coordinated care
(CCP) plans and network private-fee-forservice (PFFS) plans, per a provision
finalized in our April 2010 final rule (75
FR 19691 through 19693). This rule
established criteria that MA CCP and
PFFS plans must meet so that we can
ensure that the network availability and
accessibility requirements specified in
section 1852(d)(1) of the Act are
satisfied. We are finalizing this
provision without modification.
Comment: One commenter
recommended that CMS require all MA
plans, including non-network PFFS and
MSA plans, to meet the network
adequacy requirements at
§ 422.112(a)(10).
Response: We do not have the
statutory authority to require that the
network adequacy standards at
§ 422.112(a)(10) be applied to MSA
plans that do not use a network of
providers or to PFFS plans that are not
required to have a network that meets
network adequacy requirements. MSA
plans are not required under section
1859 of the Act to establish networks of
providers, and section 1852(d)(5) of the
Act permits PFFS plans to operate
without networks when fewer than two
network-based plans are operating in an
area.
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2. Maintaining a Fiscally Sound
Operation (§ 422.2, § 422.504, § 423.4,
and § 423.505)
Under the authority of sections
1857(d)(4)(A)(i) and 1860D–12(b)(3)(C)
of the Act, which establish requirements
for MA organizations and PDP sponsors
to report financial information
demonstrating that the organization has
a fiscally sound operation, we proposed
in § 422.2 and § 423.4 to define a fiscally
sound operation as one which, at the
very least, maintains a positive net
worth (total assets exceed total
liabilities). We noted that the States’
oversight and enforcement of financial
solvency of MA organizations and PDP
sponsors provides an important
protection for Medicare beneficiaries
enrolled in MA and Part D plans.
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However, we also noted that the
requirement for plans to report financial
information demonstrating that the
organization has a fiscally sound
operation and our authority to audit and
inspect any books and records, is an
indication that we have an interest in
the organization maintaining a fiscally
sound operation and that this interest is
separate and apart from the State
licensure and financial solvency
requirements for an organization.
Additionally, under the authority of
sections 1857(e)(1) and 1860D–
12(b)(3)(D) of the Act which afford the
Secretary the authority to include terms
and conditions in the contracts with MA
organizations and PDP sponsors that are
necessary and appropriate, we proposed
the addition of a contract provision at
§ 422.504(a) and § 423.505(b)(23), under
which the MA organization or Part D
sponsor agrees to maintain a fiscally
sound operation by at least maintaining
a positive net worth (total assets exceed
total liabilities).
Comment: One commenter suggested
that the standard that ‘‘total assets
exceed total liabilities’’ was insufficient
and that CMS should set a higher
threshold.
Response: We believe that the role of
the state insurance departments in
providing oversight and enforcement of
licensure and financial solvency is the
primary tool for financial oversight of
organizations and therefore it is
unnecessary for CMS to modify this
standard.
Comment: One commenter asked if
the fiscally sound operation
requirement applied only to the
Medicare lines of business or to all lines
of business.
Response: We have not imposed any
new reporting requirement and will rely
on the financial reports that are
submitted for the organization as a
whole.
Comment: One commenter suggested
that CMS should publish clear
guidelines for when a plan’s finances
will be declared ‘‘unsound.’’
Response: We have specified in the
definitions that a ‘‘fiscally sound
operation’’ is one with a positive net
worth. We already require that
organizations submit the same
information that is submitted to their
state insurance departments under that
state’s requirements and guidelines.
Therefore it is not necessary for us to set
specific guidelines for calculating
positive net worth.
Comment: One commenter suggested
that CMS should publish its criteria for
selecting alternative plans for receiving
transitioned beneficiaries.
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Response: When appropriate, we
would follow all policies and
procedures specified in the current
guidance in Chapter 2 of the Medicare
Managed Care Manual https://
www.cms.gov/MedicareMangCare
EligEnrol/Downloads/
FINALMAEnrollmentand
DisenrollmentGuidance
UpdateforCY2011.pdf, entitled ‘‘Passive
Enrollment by CMS which are used for
the smooth transition of beneficiaries to
other plans when there are terminations
for reasons other than failure to
maintain a fiscally sound operation. For
prescription drug plans, we would
follow all policies and procedures
specified in the current guidance in
Chapter 3 of the Medicare Prescription
Drug Benefit Manual, https://
www.cms.gov/MedicarePresDrugElig
Enrol/Downloads/
FINALPDPEnrollmentandDisenrollment
GuidanceUpdateforCY2011.pdf, which
contains the Part D guidance on passive
enrollment.
Comment: One commenter agreed
with the definition for ‘‘fiscally sound
operation’’ with the understanding that
‘‘total assets’’ and ‘‘total liabilities’’ were
to be as defined by the state insurance
departments.
Response: We appreciate the
commenter’s support for the proposal
and confirm that we have not changed
our financial reporting requirements
and that we continue to use the
information that is submitted to the
state based on the State’s financial
reporting requirements and guidelines.
Comment: One commenter suggested
that CMS should take into consideration
arrangements providing for the financial
solvency of an MAO by the parent
organization consistent with the
treatment of those arrangements by the
relevant State insurance department.
Response: We continue to consult
regularly with state insurance regulators
to ensure that sponsoring organizations
are meeting State reserve requirements
and solvency standards required for
State licensure and their input is
included in any action related to fiscal
soundness.
Comment: One commenter requested
that CMS clarify how the Part D fiscally
sound requirement will apply to
Medicare cost organizations that also
offer Part D services.
Response: As mentioned previously,
we will rely on the financial reports that
are submitted for the organization as a
whole. Therefore, the cost organization,
including the Part D benefit, will be
held to the fiscally sound operation
requirement.
Comment: One commenter was
concerned that the fiscally sound
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requirement adds new reporting
requirements.
Response: As noted in the preamble to
the November 2010 proposed rule, a
determination of whether there is a
positive net worth will be made from
the financial reports submitted under
the currently approved financial
reporting requirements. No additional
filings will be required.
Comment: One commenter requested
that CMS explain how traditional state
regulation has not provided adequate
consumer protection such that
additional Federal oversight is required
and suggested that the proposal be
withdrawn to allow the states to
maintain primary supervision of plans
for fiscal soundness.
Response: As noted in the preamble to
the November 2010 proposed rule,
licensure does not deem an organization
to meet other requirements imposed
under Part C or Part D. The requirement
for an organization to be licensed under
State law and the requirement that an
organization must report financial
information demonstrating that the
organization has a fiscally sound
operation are separate requirements in
the Act. The authority to license an MA
organization or PDP sponsor and set
solvency standards rests with the state
licensing authority and therefore the
primary supervision of plans for fiscal
soundness continues to rest with the
states. The proposed rule clarifies what
we expect from a fiscally sound
operation. Further, as stated previously,
we consult regularly with state
insurance regulators and their input is
included in any action related to fiscal
soundness.
Comment: One commenter asked how
the requirement to maintain a fiscally
sound operation will protect
beneficiaries if the plan sponsor has
already encountered the financial
difficulties.
Response: We have historically been
limited in our ability to take compliance
and enforcement action against an
organization solely on the basis of
financial problems if the organization is
still licensed by the state and is not
otherwise out of compliance with CMS
requirements. In some cases, we have
been made aware by state insurance
departments that an organization would
inevitably lose its state licensure
because of its poor financial condition,
but we were unable to take action to
terminate the organization’s contract
and ensure that beneficiaries were
smoothly transitioned to a new
organization or sponsor, until the full
termination process was completed by
the state. The proposed rule will allow
us to work with the state insurance
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department and if appropriate, take
timely contract action in order to avoid
any additional potential risk to
enrollees.
After consideration of the comments
received in response to the proposed
rule, in this final rule, we are adopting
the provisions as proposed.
3. Release of Part C and Part D Payment
Data (§ 422.504, § 423.505, and
§ 423.884)
This final rule provides for the
Secretary to release Part C and D
summary payment data. The Secretary
believes these data should be made
available because other publicly
available data are not, in and of
themselves, sufficient for the public
(including policy analysts and
researchers) either to understand
expenditures for the MA and Part D
programs, or to inform the public on
how their tax dollars are spent.
In the proposed rule, we stated that in
keeping with the President’s January 21,
2009, Memorandum on Transparency
and Open Government (74 FR 26277),
we were proposing to routinely release
summary Part C and Part D payment
data. We stated that additional purposes
underlying release of these data
included allowing public evaluation of
the MA, prescription drug benefit, and
RDS programs, including their
effectiveness, and reporting to the
public regarding expenditures and other
statistics involving these programs.
In the proposed rule, we stated our
belief that the availability of the
payment data would permit potential
plan sponsors to better evaluate their
participation in the Part C and D
programs, as well as facilitate the entry
into new markets by existing plan
sponsors. As a result, the availability of
plan payment data would enhance the
competitive nature of the programs. We
stated that in knowing the per member
per month payment amounts and other
components of plan payment (plan
rebates and risk scores), new business
partners might emerge, and better
business decisions might be made by
existing partners. Thus, we believed that
including a provision in our contracts
with plan sponsors regarding the release
of summary payment data was both
necessary and appropriate for the
effective operation of those programs.
We proposed that these data would be
routinely released on an annual basis in
the year after the year for which
payments were made. The data release
would occur only after the final risk
adjustment reconciliation has been
completed for the payment year in
question and, for Part D, after final
payment reconciliation of the various
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subsidies. Thus, we would release data
for payment year 2010 in the Fall of
2011.
We stated this proposed timeframe
would not apply to the release of RDS
payment data, since we do not reconcile
RDS payment amounts until 15 months
following the end of the plan year. The
majority of our sponsors provide retiree
drug coverage on a calendar year basis.
Thus, if an applicable RDS plan year
ended December 31, 2010, the payment
reconciliation would not be due until
March 31, 2012, which would be after
the Fall 2011 target for release of other
Part C and D payment data. Therefore,
we proposed that we would release the
most current RDS payment data
available at the time the Part C and D
payment reconciliation has been
completed and at the same time those
other Part C and D payment data are
compiled and released.
Specifically, as we indicated in the
November 2010 proposed rule,
beginning in the Fall of 2011 we would
release reconciled payment data as
follows:
• Part C
++ Reconciled payment data
summarized at the plan benefit package
level including average per member per
month (PMPM) payment for A/B
(Medicare covered) benefits
standardized to the 1.0 (average risk
score) beneficiary and average PMPM
rebate amounts.
++ The average Part C risk score for
each plan benefit package.
++ Reconciled aggregated Part C
payment data by county including the
average PMPM payment amounts for
A/B benefits standardized to the 1.0
(average risk score) beneficiary and
average rebates amounts at the plan type
(including HMO, PPO, RPPO, and PFFS)
for each county in which such plan
types are represented.
• Part D
++ Reconciled payment data
summarized at the plan benefit package
level including average PMPM payment
for the direct subsidy standardized to
the 1.0 (average risk score) beneficiary,
the average low-income cost sharing
subsidy, and the average Federal
reinsurance subsidy.
++ The average Part D risk score for
each plan benefit package.
++ Final payment reconciliation data
arrayed by parent organization, number
of plan benefit packages, the gross
reconciliation amount broken out by
risk sharing reconciliation amount,
reinsurance reconciliation amount, and
low income cost sharing reconciliation
amount.
++ Retiree drug subsidy (RDS) data
including the gross aggregate reconciled
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subsidy amount paid to each eligible
sponsor of qualified retiree prescription
drug coverage and the total number of
unduplicated Medicare eligible retirees
for each sponsor.
We noted that because the proposed
provisions would apply to all Part C and
Part D sponsors, it would apply to any
entity offering either Part C or Part D
plans, including MA organizations
offering and not offering prescription
drug plans, as well as all Part D drug
plan sponsors. It would also apply to
sponsors entitled to Federal RDS
subsidies.
We solicited comment generally on
the public release of Part C and Part D
payment data. We also specifically
solicited comment on whether
commenters believed that any of the
Part C and Part D payment data we
proposed to release contained
proprietary information, and asked
commenters to suggest, if they believed
proprietary data were implicated,
safeguards that might appropriately
protect those data.
Comment: We received numerous
comments on this provision of the
proposed rule from beneficiary
advocacy groups, researchers, PDPs,
PBMs, associations, and MA
organizations. The beneficiary advocacy
group comments supported our
proposal to release payment data. One
beneficiary advocacy group supported
release of all payment data, to the extent
it could be done without compromising
beneficiary personally identifiable
health information, and recommended
we codify release in regulation text.
Response: We accept the comment
from the beneficiary advocacy group
regarding codifying a process for release
of summary payment data in regulation
text. We believe that codifying the
release in the Code of Federal
Regulations will permit interested
parties to have a better understanding of
exactly what summary payment data to
expect CMS to release and when to
expect to be able to access it. As we
indicated in the proposed rule, the
Secretary has the authority to include in
MA organization and Part D sponsor
contracts any terms and conditions the
Secretary deems necessary and
appropriate. (See sections 1857(e)(1)
and 1860D–12(b)(3)(D) of the Act, which
incorporates section 1857(e) into Part
D.) As we also stated in the proposed
rule, our regulations at sections
§ 422.504(j) and § 423.505(j) permit us to
include other terms and conditions in
these contracts that we find necessary
and appropriate to implement the Part
C and D programs. Similarly, we stated
that under § 423.884(c)(3)(i), RDS
sponsors agree to comply with the terms
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and conditions for eligibility for a
subsidy payment in our regulations and
in related CMS guidance. Accordingly,
we are codifying in our regulations at
§ 422.504(n) our intent to release Part C
summary payment data as proposed, at
§ 423.505(o) our intent to release Part D
summary payment data as proposed,
and at § 423.884(c)(3)(ii) our intent to
release summary RDS payment data as
proposed. We will also modify MA
organization and Part D sponsor
contracts as well as RDS sponsor
agreements to account for the release of
summary payment data. As we discuss
in more detail, below, in our response
to comments opposed to our release of
summary payment data, we believe we
have the authority to promulgate these
regulations providing for the routine
release of these data.
Finally, in response to the statement
from a beneficiary advocacy group that
supported release only in the event that
personally identifiable beneficiary
health information could be protected,
we will only release summary data to
the extent individually identifiable
information is protected—consistent
with existing CMS policy. Thus, for
instance, to the extent that less than 11
MA plan members of a specific MA plan
type reside in a county, we will not
release summary payment information
or average Part C risk scores for that
plan type in that county.
Comment: Some MA organizations
supported release of payment data as
proposed, while many of them
recommended limiting data release in
varying ways. Two recommended
releasing only average monthly
payments and rebates, while others
suggested plans should have the right to
veto release of any payment information
prior to public dissemination. Another
MA organization suggested aggregating
data at a higher level, for instance by
plan type, thus masking plan-specific
data. A commenter stated that reporting
or releasing payment data at the plan
benefit package level is not aggregating
or summarizing payment data at all and
that such a release would be
inconsistent with our stated intent to
only release summary payment data.
Some Part D plan sponsors
recommended releasing Part D payment
data on only an aggregate basis—where
individual plan payment data would not
be revealed. Some health plan
associations also recommended
releasing payment data on a more
aggregated, non-plan-specific basis—for
instance, releasing only aggregated Part
C or D payment data at the county level
with no plan identifiers.
Response: We do not believe it is
appropriate to provide veto power to
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MA organizations regarding release of
payment data. If we were to allow some
MA organizations to withhold data, the
value of the remaining, released data
would be diminished and would
potentially become useless to
researchers and the public. Similarly,
were we to aggregate payment data at a
higher level prior to release, the public
would know very little about what
payments were being received by
specific CMS contractors—which would
undermine a specifically stated goal of
release which was to inform the public
on how their tax dollars are spent.
Researchers would also be hampered in
their ability to conduct meaningful
studies that analyze the Medicare
program and Federal expenditures. We
believe we have identified the
appropriate level of aggregation such
that researchers and the public will
have specific enough information to
meet their needs, while we will
continue to shelter from disclosure
bidding and provider contracting
information both MA organizations and
Part D plan sponsors want protected.
Comment: Some MA organizations
contended that proprietary plan
payment information related to
providers could be deduced from the
payment data we proposed to release.
Some Part D plan sponsors and
associations stated that competitors
would be able to reverse engineer bids.
One commenter stated that the data we
proposed to release could be used with
other Part D data currently released by
CMS, such as PDP enrollment
information, plan premiums, and
generic dispensing rates, to reverse
engineer bid data and other sensitive
information relevant to Part D sponsors’
bidding and business strategies.
Response: We do not agree. The bid
pricing tool (BPT) document that MA
organizations and Part D plan sponsors
submit to CMS as part of the annual
bidding process asks the plans to
provide detailed information on their
costs to furnish Part C and D services.
In the case of MA organizations, over a
dozen initial values related to Part C
costs are further broken out by costs for
services, administrative costs, expected
utilization and member cost sharing.
These costs and others are trended from
the base year (derived from costs from
the calendar year before the bid is
submitted) to the year for which plans
are bidding. Thus, the input values in
the bids are already composed of
aggregated cost and utilization
information. Information provided on
the BPT is aggregated in a number of
ways—across providers, beneficiaries,
and sites of service. Additionally, the
different components of cost—direct
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medical, indirect medical,
administrative, profit, etc. are also
aggregated. Thus, to suggest that a
competitor would be able to derive or
disaggregate specific bidding
information from the aggregated
payment data we proposed to release,
or, much less, that a competitor would
be able to derive payment information
related to any specific provider, is
simply not credible.
A similar argument applies to Part D
bid submissions in the sense that
dozens of input values representing type
of drug (generic, preferred brand,
specialty, etc.), expected utilization and
cost information aggregated over a
number of provider types, and a
multitude of contracting entities ensures
sufficient protection for plan bidding
information. While the payment data
proposed for release will be very helpful
in understanding the payments received
by Part D sponsors and their ability to
estimate their revenue needs in their
Part D bids, we do not believe that this
information will be sufficient for others
to determine sensitive components of
the Part D bids, such as expected
manufacturer rebates and profits. The
Part D data to be released do not provide
information about administrative costs
and drug costs incurred by Part D
sponsors in sufficient detail for other
parties to determine the sensitive
components of bid data. In the few
numbers we will release, no specific
provider contractual information is in
danger of being exposed. Those viewing
and using the aggregated data will have
no way to disaggregate the data since
there are dozens, if not hundreds, of
individual components that are used to
build up the few data elements that will
be released.
Comment: Some commenters stated
that by reviewing 2 or more years of
payment data, an MA organization of
Part D sponsor would be able to
determine the cost trends of their
competitors. The commenters stated
that these entities would be able to
determine where their competitors are
heading, which would jeopardize the
fairness and competitive dynamics of
the bidding process. The commenters
also stated that competitors would gain
information about business strategies
that could undermine the bidding
process and the competitive nature of
the Part C and D programs. Other
commenters stated that release would
undermine the integrity of the bid
process and alter the competitive
marketplace.
Response: We do not agree that
release of summary payment data as we
proposed would affect the integrity of
the bidding process in either the Part C
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or D programs. First of all, as we
described briefly in response to an
earlier comment, bids are built up of
costs related to a multitude of
components (plan costs for health care
services, administrative activities,
utilization, and profits). Further, such
costs must be trended from the base
year—the calendar year before the bid—
to the year for which the bid is
submitted—the year after the year in
which bids are submitted in June.
Utilization, costs, and trends must be
certified by a qualified, independent
actuary prior to bid submission. Since
we will continue to require actuarial
certification, integrity is unaffected.
Second, the MA and Part D programs
are not competitive in the way that term
is normally understood. Although Part C
and D plans do compete for members,
primarily through the benefits offered
and the cost (member cost sharing and
premium) of those benefits, they do not
directly compete for the payments that
CMS makes. Rather, we approve all
sustainable bids that are otherwise
qualified without preference for the
lowest bidder. The fact that MA-eligible
Medicare beneficiaries can, on average,
select from over 2 dozen MA and Part
D plans in every county of the nation is
ample evidence that competition is
robust. As we mentioned in the
preamble of the proposed rule, we
believe the availability of the summary
payment data we proposed to release
will permit potential plan sponsors to
better evaluate their participation in the
Part C and D programs, as well as
facilitate the entry into new markets by
existing plan sponsors. In other words,
we believe competition, if anything, will
be enhanced by release rather than
harmed in any way. Further, although
trends from one year to the next might
be revealed through release of payment
data for sequential years, the fact
remains that such trends will be stale (at
least 2 years old) and reveal little about
competitive strategies in future years.
Finally, where plans are free to modify
the actual competitive components that
are used to build up bids, such as
benefit offerings and member costsharing, little is left of the argument that
revealed cost trends will have an impact
on the competitive nature of the
programs.
Comment: One commenter stated that
payment data release would work to the
programs’ detriment.
Response: We do not agree. We
believe that a more extensive knowledge
of summary payment data will not only
not harm competition in the Part C and
D programs, but rather that it will
permit both existing and potential plan
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sponsors to better assess the business
opportunities available to them.
Comment: Many commenters stated
release of summary payment data was
prohibited under Exemption 4 of the
Freedom of Information Act (FOIA),
others cited a prohibition on release
based on Exemption 6, still others cited
both Exemptions 4 and 6 as prohibiting
release under the FOIA. Some provided
extensive arguments, citing case law to
support their positions. These, and
other commenters, also invoked the
Trade Secrets Act and argued that there
was a strong potential for compromising
proprietary information of both Part C
and D plan sponsors. Still others stated
that the Privacy Act is implicated
because release of risk scores might
allow someone to identify the health
status of an individual enrollee or
enrollees.
Response: In response to comments
arguing that the Trade Secrets Act (18
U.S.C. 1905) or FOIA exemptions
prohibit release of this information or
citing past practices of this agency with
respect to FOIA requests, as noted
previously, we do not believe that the
release of the data at issue necessarily
would be subject to the FOIA exemption
for information protected by the Trade
Secrets Act, because we do not believe
the data we would be releasing could be
used to obtain proprietary information.
However, with respect to the data we
are proposing to release, we believe the
merits of such arguments are moot in
light of the fact that we have decided
through this rulemaking to require the
disclosure of data at issue. Section
1106(a) of the Act (42 U.S.C. 1306(a))
provides authority to enact regulations
that would enable the agency to release
information filed with this agency. (See
Parkridge Hospital, Inc. v. Califano, 625
F.2d 719, 724–25 (6th Cir. 1980). We
have engaged in notice-and-comment
rulemaking to promulgate regulations to
enable the disclosure of the summary
payment information. The Trade Secrets
Act permits government officials to
release otherwise confidential
information when authorized by law. A
substantive regulation issued following
notice-and-comment rulemaking, such
as this one, provides the authorization
of law required by the Trade Secrets
Act. Because the Trade Secrets Act
would allow disclosure, Exemption 4 (5
U.S.C. 552(b)(4)), which is as coextensive with the Trade Secrets Act,
would also not preclude disclosure with
respect to the information that would be
released under this final rule. This
conclusion would not apply to other
payment data with respect to which a
Trade Secrets Act argument might be
made.
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With respect to the commenters, who
argued that FOIA Exemption 6 (5 U.S.C.
552(b)(6)) protects information that
would cause a clearly unwarranted
invasion of an individual’s personal
privacy and argued that releasing plan
payment and risk score data could lead
to the disclosure of the name or health
status of an individual enrollee, we
disagree, because the concerns
expressed are too speculative to lead to
a legitimate privacy interest.
Furthermore, there is a substantial
public interest in the release of this
summary payment data which can be
used to shed light on the government’s
operation of the Part C and D programs,
outweighing the speculative privacy
interest.
Finally, with regard to protection of
individually identifiable data through
the release of risk scores, as we stated
previously, we will not release summary
payment information or average Part C
or D risk scores when the small number
of enrollees in a plan or in an area might
reasonably permit disaggregation such
that individually identifiable
information could be revealed.
Comment: Some commenters stated
release of payment data would harm
business partners and thus, the Part D
program.
Response: We do not agree. As we
have already explained, we are not
releasing payment data at a sufficient
level of granularity to permit
extrapolation of specific contract terms
or purchase information. Rather, we will
only be releasing summary payment and
risk score data that is sufficiently
aggregated to prevent extrapolation to
any individual provider’s or
manufacturer’s terms with any plan
sponsor.
Comment: Some Part D sponsors and
one association cited Congressional
Budget Office (CBO) and Federal Trade
Commission (FTC) letters warning that
release of rebate information could lead
low bidders to increase their bids
compared to the bids they would have
submitted without such information on
competitor prices. They argued that
release of rebate data might foster
collusion or otherwise undercut
vigorous competition on drug pricing.
Response: These commenters seem to
be conflating the release of summary
data on the component of savings in the
Part C payment calculation known as
the Part C rebate with the release of Part
D drug manufacturer rebate information.
In the CBO and FTC documents we
were able to review, warnings were
provided solely related to the release of
the latter. In the proposed rule we did
not propose the release of any Part D
drug manufacturer rebate information.
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The Part C rebate information we
proposed to release is solely related to
Part C and represents 75 percent of the
difference between the plan riskadjusted statutory non-drug monthly bid
amount and the plan risk-adjusted areaspecific non-drug monthly benchmark
amount—when the bid is below the
benchmark. (See § 422.264(ff).)
Revealing this Part C rebate information
is little different than revealing the Part
C plan basic beneficiary premium
amount (see § 422.262), release of which
is already required by regulation. (See
§ 422.111(f)(6).)
Comment: Some commenters cited
past practices by CMS where CMS
specifically denied release of similar
data by invoking Exemptions 4 and 6 of
the FOIA.
Response: As we previously
indicated, the data that would be
released under this rule have been
specifically limited in nature, and as to
the year involved to avoid proprietary
data issues. It thus is not necessarily the
case that previous denials of FOIA
requests would apply to these data.
Also, as noted previously, the issue of
whether these data would be withheld
from release in response to a FOIA
request absent this final rule is moot in
light of the fact that we have now
engaged in notice-and-comment
rulemaking to promulgate regulations
which clearly enable the disclosure of
this information regardless of whether it
would have been disclosable in the
absence of this final rule.
Comment: Some commenters stated
that release of this summary payment
data would have limited value to
researchers. One researcher cited more
than 20 scholarly articles that he and
colleagues had written using data on
MA payments and enrollment since
2000 and urged us to release the type of
MA payment data discussed in the
proposed rule for years between 2006
and 2010. An additional commenter
also urged the release of the same
payment data for years prior to 2010,
and argued that this notice and
comment process would apply equally
to such prior year data.
Response: First, we would note that
researchers have informed us that they
believe the data we proposed releasing
does have value to them. With respect
to 2006 through 2009 payment data,
while the proposed rule referenced 2010
data in discussing the timing of our
release of payment data, we agree that
the same analysis and rationale would
apply equally to data for prior years as
well, and that through our publication
of a proposed rule and our response to
comments, we have satisfied the
requirements in section 1106(a) of the
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Act (42 U.S.C. 1306(a)) for a regulation
that authorizes release of this
information for any year. Given the
interest of these commenters in such
prior year data, we will release data for
these prior years as well as 2010, and
will release data for future years on the
schedule set forth in the proposed rule.
Comment: One commenter stated that
we had not stated what public policy
goal was being served by releasing
payment data at the plan level. Another
commenter stated that currently
available data are sufficient to CMS’
stated purposes for release.
Response: We do not agree that
currently available data are sufficient to
accomplish the broad public policy
purposes supporting release of this
information, which we discussed in the
proposed rule. In the preamble of the
proposed rule we explained that other
publicly available data are not, in and
of themselves, sufficient for the studies
and operations that researchers want to
undertake to analyze the Medicare
program and Federal expenditures, and
to inform the public on how their tax
dollars are spent. This is so because
currently available data do not provide
researchers a means of analyzing
payment data at a granular enough level
to draw conclusions about regional
variations in CMS payment—such as
rural/urban differences or the payment
variances between MSAs. We also cited
the President’s January 21, 2009,
Memorandum on Transparency and
Open Government. Finally, we stated
that additional purposes underlying
release included allowing public
evaluation of the MA, prescription drug
benefit, and RDS programs, including
their effectiveness, and reporting to the
public regarding expenditures and other
statistics involving these programs.
Comment: Some commenters stated
that release would not help beneficiaries
select the MA or Part D plan that is best
for them. Others stated that release
would adversely impact beneficiaries
due to related impacts on MA and Part
D plan offerings. Still others stated that
release of payment data would be
misinterpreted by MA enrollees.
Response: The intent of releasing
summary payment data and risk score
information is not necessarily to help
Medicare beneficiaries to select the right
plan for them. When the data are
published we will provide appropriate
disclaimers to ensure the greatest
likelihood of understanding by
researchers, enrollees, and other
interested parties. As far as the potential
for adverse impacts on beneficiary
offerings, we have already addressed the
issues of competition and collusion and
explained our belief that release will
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neither limit competition nor engender
collusion.
Comment: One commenter noted that
release of this information was not
authorized by the Social Security Act.
Response: We do not agree. Section
1106(a) of the Act (42 U.S.C. 1306(a))
provides authority to enact regulations
that enable the agency to release
information filed with this agency.
Comment: One commenter stated that
there was a unique situation in their
State where they are the largest MA
organization offering MA plans. This
commenter stated that its primary
competition is from Medicare Cost
HMOs/CMPs and Medigap insurers—
neither of which are impacted by this
regulation. The commenter stated it was
unfair that its aggregate payment
information would be released, while
that of Cost HMOs/CMPs with which it
was competing would not be released.
Response: While it might be true that
in some markets a single MA
organization is predominant, it is also
true that a valid public policy goal
related to the release of summary
payment data is to encourage
competition. Although Cost HMOs/
CMPs and Medigap insurers are not
subject to this rulemaking, information
on medical loss ratios for Medigap
insurers should be available from the
State Insurance Department. Thus,
while the payment data we release will
be available with respect to MA plans
but not Cost HMOs/CMPs or Medigap
plans, Medigap MLR data will be
available with respect to Medigap plans
but not MA plans.
Comment: A commenter
recommended that when CMS modifies
the MA organization contracts, as it
proposed in the proposed rule, it should
modify them only to say that CMS will
release the specifically described
payment data. The commenter
suggested that the new contractual
language should not simply reference
MA data, as this could be construed to
permit CMS to release data that was not
the subject of this notice and comment
process.
Response: We agree with the
commenter and when modifying MA
plan contracts, we will limit language
regarding payment data disclosure to
only the items discussed in the
proposed rule. In a similar manner we
have limited the regulatory language we
are adding to sections § 422.504(n),
§ 422.505(o) and § 423.884(c)(3)(ii) to
provide for disclosure of only those
items specifically proposed in the rule.
Comment: One commenter argued
that section 1860D–12(b)(3)(D) of the
Act, as amended by section 181 of the
Medicare Improvement for Patients and
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Providers Act of 2008 (MIPPA),
specifically prohibited release of
payment data since the only authorized
release would be under the conditions
enumerated in that section of the law.
The commenter argued that the law
authorizes release only when one of the
following conditions is met: (1) To carry
out Part D; (2) to improve public health
through research on the utilization,
safety, effectiveness, quality, and
efficiency of health care services; or (3)
to release the data to Congressional
support agencies for Congressional
oversight purposes.
Response: The summary payment
data that CMS proposed to release are
not data that are provided by Part D
sponsors—either under section 1860D–
12 or under section 1860D–15 of the
Act. Rather, the data that CMS proposed
to release are CMS data. The data are
compiled and derived solely from CMS
internal payment files.
Further, we do not agree with the
commenter’s interpretation of law. In
reviewing the House Ways and Means
summary of section 181 of MIPPA, we
find that Congressional intent in adding
the matter after the first sentence in
section1860D–12(b)(3)(D) of the Act was
to provide a directive to the Secretary to
release claims data to appropriate
Congressional support agencies. The
Ways and Means summary of section
181 reads, in full: ‘‘Clarifies the use of
Part D data collected under section
1860D–12 of the Act for research and
other purposes. Requires the Secretary
to release Part D claims data to
Congressional support agencies to the
extent that the agencies have authority
to request the data in their respective
authorizing statutes.’’ In effect, the
legislation was intended to require the
Secretary to release claims data to
Congressional support agencies and not
to prohibit its release to any others.
Section 1860D–12(b)(3)(D)(i) of the Act
reads, in full: ‘‘[Information provided to
the Secretary] may be used for the
purposes of carrying out this part,
improving public health through
research on the utilization, safety,
effectiveness, quality, and efficiency of
health care services (as the Secretary
determines appropriate;)’’ Thus, the law
provides discretion to the Secretary to
use the data broadly for these purposes,
‘‘as the Secretary determines
appropriate.’’ Although it is clear to us
that the provision was narrowly
intended and meant to cover release of
only PDE data—‘‘Part D claims data’’–
because that language only appears in
the Ways and Means summary, and not
in the statute, we must assume broad
application. However, the statutory
language, provides discretion to the
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Secretary, ‘‘as the Secretary determines
appropriate,’’ to use the data for the
purpose of ‘‘research on the efficiency of
health care.’’ In our proposed rule we
cited research and analysis of the
Medicare program as one of the reasons
for our proposed disclosure of Part C
and D summary payment data and risk
scores. We stated, ‘‘the Secretary
believes these data should be made
available * * * for the studies and
operations that researchers want to
undertake to analyze the Medicare
program and Federal expenditures.’’ We
believe studies related to the efficiency
of Part D services are coextensive with
our stated purposes for release. As
explained earlier, by engaging in noticeand-comment rulemaking to promulgate
regulations, proactive disclosure of
summary Part C and D payment data is
now permitted.
Comment: Some commenters stated
that CMS should not release retiree drug
subsidy (RDS) payment data. Some
stated that RDS plans are not public
plans and therefore no payment data
should be released for them. Others
stated that RDS data should not be
released because data would be based
on member utilization in commercial
prescription drug plans. One commenter
stated that RDS plans are private plans
in the private market and release of the
subsidy amount is tantamount to release
of private payment data since the former
is a simple 28 percent of the latter. This
commenter went on to say that they
were unaware of any precedent for
releasing private plan data and that they
knew of no public policy data analysis
that could be conducted using such
data. Finally, one commenter stated that
they opposed release of RDS data
because RDS is a competitive
commercial program and there is no
basis for release.
Response: We do not agree that RDS
summary payment data should not be
released. In the proposed rule we stated
we would release the gross dollar
amount paid to eligible sponsors and
the total number of unduplicated
Medicare eligible retirees. While we
agree that RDS sponsors are private
plans, we do not agree that no data
should be released. Taxpayers and
interested parties should be apprised of
how their tax dollars are being spent. To
the extent the RDS is a ‘‘simple 28
percent of private payment data, ‘‘this is
merely a consequence of the way the
RDS payment is authorized in statute.
Knowing that 28 percent of a specific
portion of the cost of such plans is being
paid by CMS does not reveal the final
cost of the plan for a number of reasons,
not the least of which is that we are not
publishing member months, but only
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the number of unduplicated Medicare
eligible retirees. There are other factors
that confound the relationship between
the RDS subsidy CMS pays and the cost
of a private plan, including the fact that
CMS only pays 28 percent of the
allowable retiree costs—which are
defined in § 423.882. Further, we note
that all MA and Part D plans are private
plans and the release of summary data
regarding payments to RDS plan
sponsors is no different than the release
of MA and Part D plan summary
payment data. As we have noted earlier
in this section in our response to other
comments, having engaged in noticeand-comment rulemaking to promulgate
regulations, disclosure of summary RDS
payment data is now permitted.
Comment: Some commenters stated
that the 2008 Part D Data rule regarding
the release of PDE data should be
followed and that no additional
payment data should be released. They
stated that CMS needs to protect
commercially sensitive data and that the
threat of release is just as great today as
it was in 2008. Others stated that release
of summary Part D payment data is
contrary to the 2008 Medicare Part D
Claims Data final rule regarding limited
release of PDE data.
Response: We do not agree. The Part
D Data rule (73 FR 30664) published in
the Federal Register on May 28, 2008,
addressed limits on release of Part D
claims data—so called PDE
(prescription drug event) data. In the
proposed rule, we did not propose any
changes to the process finalized in the
Part D Data rule with respect to release
of PDE data. Rather, we proposed to
release summary Part D payment data
and risk scores. As we have explained
in our responses to previous comments,
we do not believe that the summary
payment data we will be releasing can
be disaggregated in such a way as to
gain granular knowledge of PDE data.
Therefore, while we will continue to
follow the guidelines we set out in the
Part D Data rule with respect to PDE
data, we will also proceed with the
release of summary Part D payment and
risk score data, consistent with our
proposed rule.
For the reasons outlined in our
responses to comments and consistent
with our proposed rule, we are
finalizing our proposal to release
summary Part C and D payment data
and average risk scores and are
codifying this policy in our regulations
at § 422.504(n), § 423.505(o) and
§ 423.884(c)(3)(ii).
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4. Required Use of Electronic
Transaction Standards for MultiIngredient Drug Compounds; Payment
for Multi-Ingredient Drug Compounds
(§ 423.120)
As provided under section 1860D–
4(b)(2)(A) of the Act and codified in
§ 423.120(c) of the regulations, Part D
sponsors must issue (and reissue, as
appropriate) a card or other technology
that may be used by an enrollee to
assure access to negotiated prices under
section 1860D–2(d) of the Act. Under
section 1860D–4(b)(2)(B) of the Act we
must provide for the development,
adoption, or recognition of standards
relating to a standardized format for the
card or other technology that are
compatible with the HIPAA
administrative simplification
requirements of part C of Title XI of the
Act and consult with the NCPDP and
other standard setting organizations, as
appropriate.
In our November 2010 proposed rule,
we noted that the NCPDP
Telecommunications Standard Version
D.0 (Version D.0), which was adopted as
the HIPAA standard that must be used
by HIPAA covered entities for retail
pharmacy drug claims on and after
January 1, 2012, standardizes claims
processing for compounded drugs.
Unlike the current version, in 2012 the
pharmacy claim will reflect all
ingredients of a drug compound. Since
under § 423.120(c)(2), Part D sponsors
will be required to adhere to the new
standard, we proposed adding a new
paragraph (d) to § 423.120 to clarify how
Part D sponsors must treat compounded
products under the Part D program.
Our preamble observed that a
compounded product as a whole
generally does not satisfy the definition
of a Part D drug; only costs associated
with ingredients of a compounded
product that satisfy the definition of a
Part D drug are allowable costs under
Part D. Since pharmacy transactions
prior to the new standard have not
captured all ingredients of a billed
compounded drug, under our current
policy Part D plans generally pay for the
most expensive Part D drug ingredient
in a compound and submit that
ingredient on the prescription drug
event record for Part D payment
reconciliation purposes. Our guidance
to date has been limited to clarifying
that the dispensing fee may include the
labor costs associated with mixing the
compounded product (provided that at
least one ingredient of the compound is
a Part D drug) and providing direction
regarding appropriate cost-sharing.
Given that the new standard, Version
D.0, will provide plan sponsors with
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access to information regarding
ingredients, we thought it appropriate to
clarify the treatment under Part D of
compounds in general and, in
particular, those that contain non-Part D
ingredients. We proposed to codify our
existing guidance that only
compounded products that contain at
least one ingredient that independently
meets the definition of a Part D drug
may be covered under Part D. Consistent
with our current policy, we proposed to
clarify that—subject to the exception for
compounds containing Part B
ingredients—sponsors may cover the
Part D ingredients even if the
compounded product as a whole does
not satisfy the definition of a Part D
drug.
We further explained that the
aforementioned exception for Part B
ingredients is based both on current Part
B payment policy and section 1860D–
2(e)(2)(B) of the Act, and proposed
codifying the following: if a compound
includes a Part B drug ingredient, no
ingredients of the compound may be
covered under Part D, even if one or
more ingredients of the compound
would individually meet the definition
of a Part D drug.
In our November 2010 proposed rule,
we proposed that Part D sponsors
determine cost-sharing for Part D
ingredients of Part D compounds and, in
so doing, apply either a flat copayment
amount equal to the copayment of the
tier for the most expensive Part D
ingredient or a coinsurance amount
based on the tier of the most expensive
Part D ingredient. In both cases, we
proposed applying cost-sharing to the
whole amount of the Part D claim. In the
case of low income subsidy (LIS)
beneficiaries, we recommended that
sponsors select the cost-sharing amount
based on whether the most expensive
Part D ingredient is a generic or brandname drug.
In our preamble, we identified an
underlying premise of our policy: if a
compound as a whole is considered by
a Part D sponsor to be on-formulary at
the time of adjudication, for the sake of
consistency, then all Part D ingredients
of that compound would be considered
on-formulary, even if any individual
Part D ingredients would be considered
off-formulary as single drug claims.
Accordingly, we proposed that if a Part
D sponsor considers a Part D compound
as a whole to be on-formulary, it must
adjudicate the Part D ingredients as
formulary drugs.
Stating in our November 2010
proposed rule that the government
could not require Part D sponsors to
reimburse pharmacies for non-Part D
drugs in Part D compounds, we
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proposed three options for a sponsor:
Contract with the pharmacy to pay for
the non-Part D ingredients without
reporting these costs to us; deny
payment, but allow the pharmacy to
balance bill the beneficiary; or both
deny payment and prohibit balance
billing. Noting that limiting
reimbursement of ingredients in Part D
compounds might deter pharmacies
from compounding services and
subsequently affect beneficiary access to
drugs, we invited comment.
Comment: One commenter requested
that we clarify that Part D compounds
could include certain non-Part D
ingredients such as over-the-counter
(OTC) products or excluded Part D
drugs that may or may not be covered
under a supplemental benefit.
Response: As proposed in
§ 423.120(d)(1), a compound is
considered a Part D compound if it
contains ‘‘at least one Part D drug that
independently meets the definition of a
Part D drug’’ and does not contain any
ingredients covered under Part B as
prescribed and dispensed or
administered. As long as a Part D
compound satisfies these two
requirements, we clarify that it also may
include other non-Part D ingredients
such as OTC products and excluded
Part D drugs.
Comment: One commenter questioned
if there will be additional new reporting
requirements for purposes of validating
Part D coverage of compounds.
Response: We are not proposing any
new reporting requirements specific to
Part D compounds in this rule.
Comment: One commenter contended
that the policy of allowing coverage for
only Part D ingredients of a Part D
compound is inconsistent with and
contradicts our combination drug
product policy. It stated that the
combination drug product policy
provides a product is covered under
Part D if it contains at least one Part D
drug ingredient even if one of its
ingredients would separately be covered
under Part B.
Response: We disagree with the
commenter. The combination drug
product policy does not apply to Part D
compounds. As stated in Chapter 6,
section 10.3 of the Prescription Drug
Benefit Manual, the combination drug
product policy applies to commercially
available combination prescription drug
products. Part D compounds are
extemporaneously compounded by
pharmacies and not otherwise
commercially available. Nevertheless,
neither commercially available
combination prescription drug products
nor extemporaneously compounded
prescription drug products can be
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covered under Part D if payment is
available for these products under Part
B as prescribed and administered or
dispensed.
Comment: One commenter requested
that CMS clarify when an ingredient is
considered covered under Medicare Part
B so that the compound cannot be
covered under Part D.
Response: This rulemaking is
intended to address when Part D covers
a multi-ingredient compound and is not
intended to address coverage rules
under Part B. For purposes of
determining Part D coverage of a
compound, we consider a compound to
be covered under Part B (for purposes of
§ 423.120(d)(1)(i)) if, as prescribed and
dispensed or administered, it meets the
definition of a drug in section 1861(t) of
the Act, fits within a Part B benefit
category, and otherwise meets Part B
coverage requirements. However, the
fact that a compound meets the criteria
in § 423.120(d)(1)(i) does not guarantee
coverage of that compound under Part
B. That stated, we will revise
§ 423.120(d)(1)(i) to clarify that the
criteria applies when an ingredient in
the compound is covered under Part B
‘‘as prescribed and dispensed or
administered.’’
Comment: One commenter asked us
to waive the 60 day notice when
individual Part D ingredients within the
compound change formulary or tier
status.
Response: We decline to adopt this
recommendation. We do not see a
compelling reason to deny beneficiaries
notice of changes in formulary status for
Part D drugs they take simply because
they take those drugs in a compounded
form. However, if a Part D sponsor’s
formulary includes Part D compounds
(that is, identified as such rather than by
Part D ingredient), and the formulary
status of the compound as a whole
remains unchanged, then it follows that
there would be no formulary change
with respect to that compound about
which beneficiaries would need to be
notified.
Comment: Most commenters
supported the proposed policy that if a
Part D compound as a whole is
considered by a Part D sponsor to be onformulary, then all Part D ingredients
within the Part D compound must be
considered on-formulary even if a
specific Part D ingredient would be
considered off-formulary if it were
provided separately. However, a few
commenters recommended that CMS
give Part D sponsors the option to
determine formulary status not only by
the Part D compound as a whole, but
also Part D ingredient by Part D
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ingredient for purposes of meeting
transition fill requirements.
Response: We appreciated the
comments that supported the proposed
policy to consider Part D compounds as
a whole as either on-formulary or offformulary. However, we disagree that
Part D sponsors should determine
formulary status of a compound on an
ingredient-by-ingredient basis. We
believe such an approach would be
confusing for beneficiaries.
Comment: While strongly supporting
the classification of compounds as
either on-formulary or off-formulary,
one commenter requested that CMS
require Part D plans both to include
commonly used compounds on their
formularies to ensure adequate access
and to provide criteria to pharmacy and
therapeutic committees in making the
formulary classification, for instance,
tailored separately for parenteral
nutrition.
Response: We did not propose to
make any changes with respect to which
drugs plans must include on their
formularies and, therefore, we believe
this comment is beyond the scope of
this regulation.
Comment: One commenter asked that
CMS clarify whether compounded drugs
would still be eligible for the generic
drug cost-reduction in the coverage gap
in 2013 when, under the ACA, the
brand drug cost-sharing will be reduced
in the coverage gap.
Response: We believe this commenter
is asking if our existing policy with
respect to determining the cost-sharing
of a compound will change in 2013 and,
therefore, we confirm that at this time
we have no plans to change the existing
policy.
Comment: A few commenters stated
that CMS should not require Part D
sponsors to base Part D compound costsharing on the most expensive Part D
ingredient and instead allow Part D
sponsors to determine which costsharing tier (copayment or coinsurance)
under the benefit plan applies to a Part
D compound. One commenter
recommended that Part D sponsors have
the option to base Part D compound
cost-sharing on the highest unit cost or
a specific copayment/coinsurance that
would apply to all Part D compounds
because this would allow for a more
consistent beneficiary experience since
beneficiaries are not aware of the
individual ingredients within a Part D
compound. Another commenter asked
us to clarify that Part D cost-sharing
cannot apply to or be based on non-Part
D ingredients. One commenter
supported the proposal to base the lowincome subsidy (LIS) cost-sharing on
the most expensive ingredient, while
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another commenter recommended that
the LIS cost-sharing should be brand
cost-sharing when compounds contain
both generic and brand name Part D
ingredients (that is, when not all Part D
ingredients are generic).
Response: We agree with the
commenters’ recommendation not to
require Part D sponsors to establish Part
D compound cost-sharing based upon
the tier associated with the most
expensive Part D drug ingredient. We
recognize that there are reasonable
alternative methods for determining
which cost-sharing tier should apply to
Part D compounds and believe that each
Part D sponsor should have the
discretion to determine the cost-sharing
for Part D compounds within its existing
benefit design and in accordance with
CMS tier requirements (for example,
specialty tier cost threshold).
While we have decided that a Part D
sponsor can determine which existing
cost-sharing tier (copayment or
coinsurance) applies to Part D
compounds under its benefit design,
CMS maintains that the cost-sharing for
low-income subsidy (LIS) beneficiaries
(as described in § 423.782) must be
based on whether the most expensive
Part D ingredient is a generic or brandname drug regardless of which costsharing tier the Part D compound is
placed on for non-LIS beneficiaries. We
believe that this will ensure the LIS
cost-sharing for Part D compounds will
be consistent across all Part D plans
regardless of benefit design in the same
manner that LIS cost-sharing is
consistent across Part D plans for noncompounded Part D drugs. Therefore,
based on the comments, we are revising
§ 423.120(d)(ii) to remove the
requirement to base non-LIS costsharing on the most expensive Part D
drug ingredient.
Comment: Several commenters asked
CMS to clarify that the most expensive
Part D ingredient refers to the highest
line item computed Part D ingredient
cost (unit cost multiplied by quantity)
and not the unit cost alone.
Response: We agree with these
commenters and clarify that by most
expensive Part D ingredient we mean
the Part D ingredient with the highest
line item computed ingredient cost (unit
cost multiplied by the quantity) of that
ingredient.
Comment: A few commenters
supported the flexibility proposed for
addressing non-Part D ingredients
included in a Part D compound.
However, a number of commenters did
not support the proposed approach for
several reasons. Some recommended
that we require Part D sponsors to cover
all Part D and non-Part D ingredients in
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a Part D compound or always allow
balance billing. These commenters
reasoned that the proposed approach
would deter pharmacies from
continuing to provide compounding
services because they might not be paid
for all ingredients. Others suggested that
CMS should not allow Part D sponsor
pharmacy contracts to allow pharmacies
to balance bill for non-Part D
ingredients because it could
substantially increase beneficiary costsharing and create access problems for
beneficiaries who could not afford the
additional costs for any unpaid
ingredients. Another commenter stated
that current Part D sponsor pharmacy
contracts generally do not allow
member billing for anything other than
what is specified as beneficiary costsharing on the paid response returned
by the Part D sponsor on the pharmacy
claim. These commenters also wrote
that balance billing would confuse
beneficiaries because they would not
know which ingredients were not
covered and the amounts listed on the
explanation of benefits would differ
from what the beneficiaries actually
paid at the pharmacies. Another
commenter stated that balance billing
for only some ingredients in the
compound would be difficult if
secondary payers were involved.
Response: Based on the comments, we
have reconsidered this issue, and we
now agree with the commenters that
recommended that Part D sponsors not
allow their network pharmacies to
balance bill beneficiaries above and
beyond the Part D beneficiary costsharing specified on the paid response
returned by the Part D sponsor on the
pharmacy claim. The proposed policy
would have allowed for balance billing
based upon the premise that only a
portion of some Part D compounds are
covered because non-Part D ingredients
included within the compound might
not be directly paid for by the Part D
sponsor and cannot be reported as Part
D ingredient costs on PDEs, and we
recognize that some commenters are
concerned that pharmacies simply will
stop preparing Part D compounds if they
believe they are insufficiently
compensated for that service. However,
after considering the comments, we
believe a better approach to this issue is
one that is more straightforward for
beneficiaries, Part D sponsors, and
pharmacies. Thus, we are amending our
final regulation to prohibit balance
billing for non-Part D ingredients of Part
D compounds.
Further, in response to concerns about
pharmacy reimbursement, we wish to
clarify that Part D sponsors and
pharmacies are able to negotiate prices
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21523
for covered Part D compounds that
account for non-Part D ingredients. We
believe they can accomplish this in one
of two ways: (1) Part D sponsors can
directly pay for non-Part D ingredients
on the pharmacy claim (without
charging the beneficiary or reporting
these costs on the PDE to CMS); or (2)
Part D sponsors can reimburse
pharmacies for these ingredients as part
of the dispensing fee. In addition, we
note that, in our view, our definition of
dispensing fees supports the proposition
that pharmacies already are reimbursed
by the plan for those ingredients of a
Part D compound that do not
independently meet the definition of
Part D drug. For these reasons, we
further do not believe that the billing
and payment of specific line items on a
pharmacy claim for a Part D compound
determines whether a Part D sponsor
has paid the full negotiated price for the
entire Part D compound. Instead, we
believe that Part D sponsors and
pharmacies have negotiated how Part D
compounds are priced in general and
that such prices adequately account for
any non-Part D ingredients, which
usually account for a small portion of
the overall cost, regardless of how an
individual paid claim represents
payment for individual ingredients.
Consequently, because the plan’s
payment to the pharmacy represents
payment in full, there are no remaining
unpaid amounts to be balance billed.
We believe this policy appropriately
protects beneficiaries by ensuring that
they only pay Part D negotiated prices
for Part D compounds without
interfering with the ability of
pharmacies to negotiate prices that
provide adequate reimbursements for
Part D compounds. Based on the
comments, we are revising § 423.120(d)
to prohibit Part D sponsors from balance
billing (or permitting pharmacies to
balance bill) beneficiaries for non-Part D
ingredients in Part D compounds.
Comment: Several commenters stated
separately that the proposed approach
for covering Part D compounds might
increase Medicare costs significantly
and noted that CMS did not estimate the
savings, if any, this policy would bring
to the beneficiary or the Medicare Part
D program.
Response: We disagree with the
commenters that the proposed approach
might significantly increase Medicare
costs. The proposed approach to allow
reimbursement only for ingredients that
independently meet the definition of a
Part D drug is not new policy but rather
a clarification of existing policy in light
of the changing pharmacy billing
standard that makes pharmacy claims
for compounded drugs more
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transparent. We also note that Part D
compounds represent significantly less
than one percent of the PDEs submitted
to CMS. Additionally, as noted
previously, CMS revisited its policies in
light of a new industry standard rather
than to achieve specified savings per se.
For these reasons, we do not believe any
further action is necessary.
Comment: A number of commenters
disagreed with the preamble discussion
on PDE reporting for compounds.
Specifically, these commenters stated
that the quantity reported on the PDE
should not reflect only the quantity of
the most expensive Part D ingredient
national drug code (NDC) submitted on
the PDE, but rather should reflect the
total quantity of the Part D compound
as a whole.
Response: We agree with the
commenters that our preamble
incorrectly suggested the current PDE
guidance requires Part D sponsors to
submit the quantity for the most
expensive Part D ingredient NDC only.
In fact, current PDE guidance does not
specify whether the PDE should reflect
the quantity of the most expensive NDC
only or the total quantity of the Part D
compound as a whole. Until further PDE
guidance is issued, we will allow Part
D sponsors to submit either quantity.
However, given the industry consensus
for reporting total quantity as reflected
in the comments, we recommend that
Part D sponsors submit the total
quantity of the Part D compounds as a
whole.
The final provision, amended as
discussed in this section, will apply to
plan years on and after January 1, 2012.
5. Denial of Applications Submitted by
Part C and D Sponsors With Less Than
14 Months Experience Operating Their
Medicare Contracts (§ 422.502 and
§ 423.503)
Each year, as part of the application
evaluation process, we conduct a
comprehensive review of each Part C
and D sponsor’s past performance in the
operation of its Medicare contract(s).
Current regulations provide that
organizations with current or prior
contracts with CMS are subject to CMS
denial of any new applications for
additional or expanded Part C or D
contracts if they fail during the
preceding 14 months to comply with the
requirements of the Part C or D
programs, even if their applications
otherwise demonstrate that they meet
all of the Part C or D sponsor
qualifications. In the absence of 14
months of performance, however, this
leaves a gap whereby CMS must either
assume full compliance and exempt the
entity from the past performance
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review, or deny additional applications
from such entities until the applicant
has accumulated 14 months’ experience,
during which it complied fully with the
requirements of the Part C and/or Part
D programs.
Our interest in protecting Medicare
beneficiaries and limiting program
participants to the best performing
organizations possible strongly suggests
that we take the latter approach. Our
justification for proposing this change
was two-fold. First, we would ensure
that new entrants to the Part C or Part
D program could fully manage their
current contracts and books of business
before further expanding. Second, this
change would require that entities
rightfully focus their attention on
launching their new Medicare contracts
in a compliant and responsible manner,
rather than focusing attention almost
immediately on further expansions.
Therefore, we proposed modifying
§ 422.502(b) and § 423.503(b) by adding
additional language at § 422.502(b)(2)
and § 423.503(b)(2) that in the absence
of 14 months’ performance history, we
may deny an application based on a lack
of information available to determine an
applicant’s capacity to comply with the
requirements of the Part C or Part D
program, respectively.
Comment: Several commenters
requested that CMS clarify at what
organizational level this provision
would apply. Specifically, to determine
whether an applying organization met
the 14-month performance history
threshold, would CMS review—(1) its
experience in offering a particular plan
benefit package (PBP); (2) its experience
in operating a particular Part C or D
contract it holds with CMS; (3) its
experience in operating all contracts it
holds with CMS; or 4) the experience of
its parent organization’s operation of all
of the Medicare contracts held by its
subsidiaries?
Response: These provisions only
pertain to applying entities that
currently operate Part C or Part D
contract(s) but have done so for less
than 14 months, and further, are
unrelated (by virtue of being
subsidiaries of the same parent) to any
other contracting entity with at least 14
months’ experience. So long as a
contracting entity or another subsidiary
of its parent organization has operated
one or more Medicare contracts for the
requisite period of time, applications for
new contracts or service area
expansions submitted by a current
contracting entity will not be subject to
denial under § 422.502(b)(2) and
§ 423.503(b)(2). Rather, these
contracting entities will be subject to the
past performance review under
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§ 422.502(b) and § 423.503(b), which
CMS will conduct according to the
‘‘2012 Application Cycle Past
Performance Review Methodology’’
document CMS issued in December
2012 and expects to update each year.
Comment: One organization requested
that CMS specify approval criteria for
service area expansion.
Response: We have already published
our criteria for approving applications,
including service area expansions. This
information can be found within the
Part C and Part D application
solicitation materials, and in the memo
published on December 12, 2010
entitled, ‘‘2012 Application Cycle Past
Performance Review Methodology.’’ All
of these documents are posted on CMS’
Web site (https://www.cms.gov).
Comment: CMS received two
comments concerning its application of
the past performance methodology
generally. One organization urged CMS
to limit denials based on past
performance to instances where the
extent and intent of the plan’s noncompliance amounts to consistent and
willful inappropriate behavior or
misrepresentation by a particular plan
to beneficiaries. Another organization
expressed concern that the past
performance review CMS conducts on
all applying organizations pursuant to
§ 422.502(b) and § 423.503(b) (that is,
including those with more than 14
months’ Part C or D experience) creates
an uneven playing field for existing and
new sponsors, giving new carriers a
competitive advantage since they do not
undergo a past performance review.
Response: These comments concern
our general authority to deny
applications based on an applicant’s
past Medicare contract non-compliance
pursuant to § 422.502(b) and
§ 423.503(b). The latter comment, in
particular, concerns the application of
the past performance methodology to
entities with established relationships
with CMS versus those entities with no
prior Part C or Part D relationship with
CMS. Neither comment addresses the
issue of how CMS should treat entities
with less than 14 months experience
(neither long-established nor brand
new). As such, these comments fall
outside the scope of this proposal.
In summary, for the reasons stated in
the proposed rule, and after
consideration of the comments received
in response to the proposal, we are
finalizing this provision without
modification.
F. Other Clarifications and Technical
Changes
We have identified seven technical
changes in this section, affecting as
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21525
noted in Table 8, cost contract plans,
MA plans, or Part D plans.
We clarified in our November 2010
proposed rule (FR 75 71242) that we
will no longer waive the State licensure
requirement for organizations seeking to
offer a provider-sponsored organization
(PSO) because, under section
1855(a)(2)(A) of the Act and § 422.370 of
our regulations, we had the authority to
waive the State licensure requirement
for PSOs only for requests for waivers
submitted prior to November 1, 2002.
While we currently contract with
organizations that have previously met
the conditions for becoming a PSO and
will continue to contract with these
organizations, organizations that do not
meet State licensure requirements can
no longer offer new PSOs because
waiver of State licensure laws is
necessary in order to offer a PSO. A PSO
is defined in section 1855(d) of the Act,
and that definition is codified in
§ 422.350.
Even though the authority to waive
the State licensure requirement for PSOs
expired on November 1, 2002, and we
have not granted waivers of State
licensure requirements since that time,
we took the opportunity to clarify this
policy in our November 2010 proposed
rule because of questions we have
received. Accordingly, we proposed to
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revise paragraph (a) of § 422.4 to clarify
that we no longer have the authority to
waive the State licensure requirement
for PSOs. We received no comments on
this proposal; therefore, we are
finalizing this provision without
modification.
cost plans and lower plan
administrative costs.
Response: We appreciate the
commenter’s support of our proposal
and are finalizing this provision without
modification.
2. Cost Plan Enrollment Mechanisms
(§ 417.430)
3. Fast-Track Appeals of Service
Terminations to Independent Review
Entities (IREs) (§ 422.626)
As part of the enrollment process,
§ 417.430 requires that application
forms be submitted to an HMO or CMP
and must include a beneficiary’s
signature. The organization must
provide the beneficiary with written
notice of acceptance or rejection of the
application. We proposed changes to
§ 417.430(a)(1) to allow us to approve
other enrollment mechanisms for cost
plans in addition to paper forms, such
as electronic enrollment. We also
proposed to streamline § 417.430(b)(3)
and § 417.430(b)(4)(i) to allow for notice
delivery options other than the
traditional mailing of documents. These
changes take into consideration the
advancement of communication
technology and comport with revisions
we made with respect to the MA
program under § 422.50(a)(5) and
§ 422.60(e).
Comment: Commenters voiced
support for this proposal. They believed
that alternative enrollment mechanisms
provide easier access for beneficiaries to
To correct a typographical error in
§ 422.626(g)(3), we proposed to remove
the word ‘‘to’’ after the word ‘‘may’’ in
the regulation text. However, in the
proposed rule, we erroneously referred
to § 422.626(f)(3) as containing the
typographical error rather than
§ 422.626(g)(3). We are correcting both
of these errors in the final rule.
Although we did not include this
change in the proposed rule, we are
using this opportunity to make a
technical correction to a cross-reference
in § 422.622 (Requesting immediate QIO
review of the decision to discharge from
the inpatient hospital). Specifically, we
are amending paragraph (g)(1) to refer to
§ 422.626(g) rather than § 422.626(f).
We did not receive any comments on
these proposed revisions and are
finalizing these technical corrections
with the modifications previously
noted.
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1. Clarification of the Expiration of the
Authority To Waive the State Licensure
Requirement for Provider-Sponsored
Organizations (§ 422.4)
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4. Part D Transition Requirements
(§ 423.120)
We explained in our November 2010
proposed rule that as a result of section
3310 of the ACA and the proposed rule
at § 423.154, we proposed revising the
existing transition policy for enrollees
residing in LTC facilities to be more
consistent with 7-day-or-less
dispensing. We proposed a revised
transition fill supply from 93 days to 91
days to accommodate multiple
dispensing events associated with 7days-or-less dispensing in LTC facilities
whenever § 423.154(a) applies to drugs
dispensed in 7-day-or-less supplies. We
explained that the proposed change to a
91-day supply will permit exactly 13
weeks of 7-day transition fills. Under
this proposed requirement, a Part D
sponsor would be required to provide a
LTC resident enrolled in its Part D plan
a temporary supply of a prescription
when presenting in the first 90 days of
enrollment up to a 91-day supply, with
supply increments consistent with
§ 423.154 (unless the prescription is
written for less), with refills provided, if
needed.
We also proposed amending
§ 423.120(b)(3)(iii) to clarify the
transition notice requirements. Under
this requirement, notices must be sent to
beneficiaries within 3 business days of
adjudication of a temporary fill. We
proposed that a written notice be sent to
each affected enrollee, and in the case
of a LTC enrollee impacted by the
dispensing requirement in § 423.154,
the written notice be sent within 3
business days after adjudication of the
first transition fill. We explained that
we were persuaded by feedback from
the LTC industry that beneficiaries may
be confused when receiving multiple
transition notices within 7 to 10 days of
each 7-day-or-less dispensing event. We
solicited comments on this provision in
our proposed rule.
As described earlier in this final rule,
we modified the proposed rule at
§ 423.154 to reflect a 14-day-dispensing
requirement. The responses below
reflect that modification. As a result of
comments received, in this final rule,
we are modifying the proposed rule at
§ 423.120(b)(iii)(B) to state that the
temporary supply of non-formulary
drugs (including Part D drugs that are
on a sponsor’s formulary but require
prior authorization or step therapy
under a sponsor’s utilization
management rules) must be for up to at
least 91 days, and up to 98 days,
consistent with the dispensing
increment, for beneficiaries residing in
a long-term care setting.
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Comment: We received comments
requesting that we change the transition
fill supply requirement in the LTC
setting to 91 days across all claims
submitted in that setting. Commenters
stated that two different systems (91
days for 7-day-or-less-dispensing and 93
days for 31-day dispensing) would be
confusing and add unnecessary
complexity.
Response: We believe that
commenters want a transition
requirement that is straightforward, and
we believe a transition requirement that
is consistent with the way drugs are
dispensed will address the commenters’
concerns. Therefore, we will modify the
proposed rule to require Part D sponsors
provide a temporary supply of up to 91,
and up to 98 days if the plan desires to
have the transition supply mirror the
dispensing increment, with refills
provided, if needed, unless a lesser
amount is actually prescribed by the
prescriber. For ease of dispensing, plans
can require that the temporary supply
be evenly divisible by the quantities
dispensed (for example, up to 93 days
for a 31-day dispensing increment, up to
91 for a 7-day dispensing increment, or
up to 98 days for a 14-day dispensing
increment). As long as the beneficiary
who is receiving a transition fill can
obtain at least 91 days of medication
(unless a lesser amount is actually
prescribed by the prescriber), plan
sponsors will have the flexibility to
implement the transition to match the
dispensing increment if desired.
We encourage Part D sponsors to
establish policies and procedures that
will assist in the effectuations of
meaningful transitions prior to the
exhaustion of a transition fill. However,
also consistent with previous guidance,
we encourage Part D sponsors to make
arrangements to continue to provide
necessary drugs to an enrollee by
extending the transition supply period,
on a case-by-case basis, if the enrollee’s
exception request or appeal has not
been processed by the end of the
minimum transition period.
Comment: Several commenters
supported our proposal to send one
transition notice at the start of the
transition period. Some commenters
urged us to require another transition
notice prior to conclusion of the
transition period to ensure that
enrollees have access to medication
beyond the transition period.
Response: As stated in the proposed
rule, beneficiaries may be confused if
they were to receive multiple transition
notices for a drug dispensed in multiple
increments consistent with § 423.154.
As such, we believe that an additional
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notice sent prior to the end of the
transition period may lead to confusion.
We require Part D sponsors to send a
transition notice to inform enrollees
(and their caregivers) about the options
for ensuring that the enrollee’s medical
needs are safely accommodated within
the Part D sponsor’s formulary. We
require that transition notices be sent
within 3 business days of the transition
fill to allow for sufficient time for the
enrollee to be switched to a
therapeutically equivalent drug that is
on the formulary or for time to process
an exceptions request. Based on
previous Part D experience, we believe
that one notice sent within 3 business
days of the first temporary fill is
adequate notice to effectuate a
meaningful transition.
Comment: A commenter
recommended that the transition notices
be sent to the pharmacies as well as
beneficiaries residing in long-term care
facilities.
Response: Beginning in contract year
2010, we permitted Part D sponsors the
option of sending the required transition
fill notices to network LTC pharmacies.
For more details, see Chapter 6 of the
Medicare Prescription Drug Benefit
Manual, available at https://
www.cms.gov/
PrescriptionDrugCovContra/
12_PartDManuals.asp#TopOfPage. We
decline to require Part D sponsors to do
this, however, because the pharmacy is
not directly involved with effectuating a
meaningful transition. As stated in
previous guidance, the purpose of a
transition supply is to allow the sponsor
and/or the enrollee sufficient time to
work out with the prescriber an
appropriate switch to a therapeutically
equivalent medication or the
completion of an exception request to
maintain coverage of an existing drug
based on medical necessity reasons.
Pharmacies may assist in the process,
but cannot effectuate a meaningful
transition by switching the enrollee to a
therapeutically equivalent medication
or by requesting an exception under
§ 423.578(b).
As a result of comments received, in
this final rule, we are modifying the
proposed rule at § 423.120(b)(iii)(B) to
state that the temporary supply of nonformulary drugs (including Part D drugs
that are on a sponsor’s formulary but
require prior authorization or step
therapy under a sponsor’s utilization
management rules) must be for up to at
least 91 days, and up to 98 days,
consistent with the dispensing
increment, for beneficiaries residing in
a long-term care setting. This provision
will be effective January 1, 2012.
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5. Revision to Limitation on Charges to
Enrollees for Emergency Department
Services (§ 422.113)
As provided under section 1852(d)(1)
of the Act and codified at
§ 422.113(b)(2)(v). MA organizations are
financially responsible for emergency
and urgently needed services. Under
§ 422.113(b)(2)(v), charges to enrollees
for emergency department services may
not exceed $50, or what an MA
organization would charge an enrollee if
he or she obtained the services through
the MA organization, whichever is less.
This limit on cost sharing was first
included in the regulations at
§ 422.112(b)(4) in the June 26, 1998
interim final rule (63 FR 35081) as the
cost sharing limit for emergency
services received out-of-network.
Subsequently, new section § 422.113
was added to the regulations in the June
29, 2000 final rule (65 FR 40322) and
required that same limit on cost sharing
for emergency services regardless of
whether they were received in- or outof-network.
In our proposed rule, we explained
that because we believe the current limit
on cost sharing is outdated and has
constrained MA organizations’ ability to
control unnecessary use of emergency
departments we proposed to revise
§ 422.113(b)(2)(v) to remove the $50
amount and replace it with language
indicating that we will evaluate and
annually determine the appropriate
enrollee cost sharing limit for
emergency department services. We
would inform MA organizations of any
changes to the limit in annual guidance,
such as the Call Letter.
Comment: We received many
comments expressing support for our
proposal to eliminate the $50 maximum
for emergency department services and
CMS’ annual evaluation and
determination of the appropriate limit
on enrollee cost sharing. However, a few
commenters who were generally
supportive of our proposal also
expressed their interest in CMS
providing notice of the methodology
that would be used annually to
determine the cost sharing limit and to
specify what services are to be included
in that cost sharing. In addition, we
received one comment that supported
our proposal but suggested the limit for
ER services be no more than $100.
Response: We thank the commenters
for their support. CMS’ methodology for
developing the cost share limit for CY
2012 would be based on CY 2010 total
costs for emergency department services
visits under Original Medicare. We
would calculate a weighted average for
these visits and then determine the cost
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sharing limit to ensure that MA plans
would be responsible for at least 50
percent of the total cost of the visit.
Although we would not specifically
limit the cost sharing to $100 as
requested by a commenter, we believe
our method takes into account plans’
desire to manage utilization and
beneficiary access and protections from
high out-of-pocket costs to result in
appropriate and affordable care.
After consideration of all the public
comments received on this proposal, we
are finalizing our proposal to amend
§ 422.113 by revising paragraph (v) to
replace the $50 amount with language
indicating that CMS will evaluate and
determine an appropriate enrollee cost
sharing limit annually and that the
enrollee would be required to pay the
lesser of that amount or the amount the
plan would charge the enrollee if he or
she obtained the services through the
MA organization.
6. Clarify Language Related to
Submission of a Valid Application
(§ 422.502 and § 423.503)
Since we began our contracting efforts
under the MMA in 2005 in preparation
for the statute’s 2006 effective date, we
have established strict deadlines for the
initial submission of applications for
qualification for contracts to operate as
Medicare Part C or D sponsoring
organizations and the resubmission of
materials needed to cure identified
deficiencies. Consistent with that
policy, we do not review applications
that are submitted after the established
deadline, meaning that an organization
that misses the deadline would not
receive a Part C or D sponsor contract
for the following benefit year. Because
we do not review such applications, we
do not provide a notice of intent to deny
under § 422.502(c)(2) or § 423.503(c)(2),
nor is the organization entitled to a
hearing under § 422.660 or § 423.650.
To avoid the consequences of missing
the initial submission deadline, some
organizations have submitted
applications that we considered so
lacking in required information or
correct detail as to fail to constitute a
valid, timely submission. We suspect
that in many instances, these
organizations expected to take
advantage of our policy of affording
applicants two later opportunities
during the review process (including the
10-day cure period following the
issuance of a notice of intent to deny an
application issued under § 422.502(c)(2)
and § 423.503(c)(2)) to make their
applications complete by providing
information that had been omitted from
the initial submission. Organizations
that provide substantially incomplete
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21527
applications are effectively submitting
‘‘placeholders’’ designed to save their
eligibility to participate in the
application review process until they
can produce all the required materials.
We find this practice to be an abuse of
the application review process that
defeats the purpose of the established
deadline.
We believe that confusion about our
authority to enforce the application
deadline may be created by the
provisions of § 422.502(c)(2)(i) and
§ 423.503(c)(2)(i), which state that we
will provide an applicant a notice of
intent to deny when the organization
‘‘has not provided enough information
to evaluate the application.’’ We
intended this language to afford an
organization that had made a good faith
effort to complete a contract
qualification application the
opportunity to provide the materials
necessary to cure a discrete application
deficiency. As noted in our November
2010 proposed rule, it appears that this
language could provide an unintended
protection to an organization that
circumvented our established
application deadline by submitting a
‘‘placeholder’’ application.
We believe that the language in
§ 422.502(c)(2)(i) and § 423.503(c)(2)(i),
stating that the agency will issue a
notice of intent to deny if CMS finds
that the applicant does not appear
qualified to contract as a Part C or D
sponsor, combined with the language of
§ 422.502(c)(2)(ii) and § 423.503(c)(2)(ii)
allowing the organization to ‘‘revise its
application to remedy any defects CMS
identified’’ is sufficient to authorize us
to consider additional curing materials
submitted by a good faith applicant.
Therefore, to remove all ambiguity that
may exist concerning our authority to
decline to accept or review substantially
incomplete applications, we proposed
to revise the provisions of
§ 422.502(c)(2)(i) and § 423.503(c)(2)(i)
to delete the phrase, ‘‘and/or has not
provided enough information to
evaluate the application.’’
Comment: Several commenters
expressed their general opposition to
the proposed regulatory provision as
they were concerned that CMS would be
arbitrary in determining whether an
organization had submitted an invalid
application. They also stated that
should CMS adopt the provision in the
final rule, we should create exceptions
that would require us to accept
applications where the applicant had a
good reason for failing to complete the
application and could demonstrate a
good faith effort to submit a valid
application. Another commenter
advised that CMS should establish
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objective criteria for determining
whether an application is so incomplete
as to constitute an invalid submission.
Response: We do not believe that any
modification of the proposed regulatory
provision is necessary to address the
commenters’ concerns. With respect to
the recommendation that we provide
guidance to applicants on our criteria
for identifying an invalid application,
we already provide instructions in the
annual solicitation for applications
where we make clear our expectation
that organizations submit a complete
application by the established deadline
and provide guidance on how sponsors
can achieve that goal. To provide
guidance on how to submit successfully
something less than a complete
application would undercut our existing
direction and undermine the meaning of
the application deadline. Also, we do
not hold applicants to an unreasonable
standard of perfection as our regulations
provide organizations that met the
deadline an opportunity to submit
curing information during the
application review process.
We accept contract qualification
applications in all instances where there
is evidence that the applicant made a
good faith effort to submit a
substantially complete application by
the established deadline. For example,
we already make exceptions to the
application deadline when there has
been a technical systems error on our
part that prevented the submission of a
valid application. Beyond that limited
circumstance, we cannot foresee any
other legitimate reason for which we
should grant a waiver of our application
deadline.
Simply put, this authority is not
applicable to applications that are
missing only a few required elements
but otherwise demonstrate that the
submitting organization has completed
the arrangements necessary to operate a
Part C or D contract. As we noted in our
proposed rule, we intend to declare an
application invalid when it is so
incomplete as to constitute little more
than a placeholder submission that the
applicant is attempting to use to meet
the application deadline and then use
the cure period to complete work that
should have done prior to the deadline.
To illustrate our point, we provide here
examples, but not an exhaustive list, of
characteristics of an invalid application.
To complete a Part C or D contract
qualification application, an
organization must execute electronically
a series of attestations and provide
documentation demonstrating its
financial wherewithal and relationships
with first tier or downstream entities
with which it has contracted to provide
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required services on its behalf under its
contract with CMS. While the
attestations are important to the
application process, it is the
documentation concerning elements
such as the applicant’s authority to
operate as a risk bearing entity, its
relationships with first tier and
downstream entities (including fully
executed contracts), and the extent of its
contracted provider network that most
clearly substantiate an applicant’s
ability to administer Medicare benefit
plans. These elements also require the
most effort on the part of the applicant
as each completed document represents
the culmination of extensive work with
regulators and other business partners.
Failure to provide these kinds of
documents would be the most likely
reason that we would determine that the
organization has not submitted a valid
application by the stated deadline.
Further, if these documents are
submitted but are either: (1) Blank or
substantially blank, such as a retail
pharmacy network list missing data in
more than one required column; (2) a
Part C document submitted for a Part D
application and vice versa, in the
absence of the correct documents; or (c)
otherwise incorrect attachments, in the
absence of other correct documents,
CMS may consider the application
incomplete.
An example of an application we have
received in past years that would have
been excluded from further
consideration is one where the
applicant provided no information
concerning its Part D pharmacy
network; that is, no list of contracted
pharmacies, no pharmacy contract
templates, and no report demonstrating
the network’s compliance with Part D
pharmacy access requirements. Further,
the applicant presented no evidence of
licensure as a risk bearing entity and no
executed contracts with the first tier and
downstream entities the applicant had
identified in the body of its application
as providing Medicare-related services
on its behalf. In this instance, it was
clear that the deficiencies were not the
result of an honest mistake on the part
of the applicant, but instead indicated
that it had not finished the work
necessary to submit a substantially
complete application before the
deadline. We should not grant such an
organization the opportunity to
continue with the application review
process when its work shows that it
ignored a deadline that other
organizations made their best effort to
meet.
We already have significant
experience, through our administration
of the annual bid and formulary review
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processes, in assessing the validity of
submissions for the purposes of
determining compliance with a
submission deadline. Since 2005, we
have declined to accept a handful of bid
and formulary submissions that were so
lacking in detail that we could not
consider the submitting organizations to
have met the deadline. None of our
decisions in those cases has been
successfully challenged, and we intend
to apply the same level of judgment and
analysis used in those decisions to our
determinations concerning valid
contract qualification applications.
Comment: A commenter urged that
CMS provide appeal rights to those
organizations whose applications CMS
excludes from consideration pursuant to
this proposed regulatory provision.
Response: The point of the proposed
provision is to document our authority
to determine when an organization has
even qualified for further consideration
of its application, including the rights
that attach to that process, such as the
opportunity to cure deficiencies and
appeal a denial, by meeting the
submission deadline. To afford appeal
rights in instances where we have
determined that an organization
submitted an invalid application would
re-create the very program vulnerability
this provision is intended to eliminate.
Having addressed the comments in
the previous discussion, we are
finalizing this provision without
modification.
7. Modifying the Definition of
Dispensing Fees (§ 423.100)
In the November 2010 proposed rule,
we proposed a simplified and clarified
definition of ‘‘dispensing fees’’ under
§ 423.100. We explained in our
proposed rule that ‘‘dispensing fees,’’ as
defined in the final rule issued January
28, 2005, implied that the salaries of
pharmacists and other pharmacy
workers were reasonable pharmacy
costs only for pharmacies owned and
operated by a Part D plan itself. We
proposed to clarify that the salaries of
pharmacists and other pharmacy
workers may be reasonable pharmacy
costs for any pharmacy. We also
proposed to modify the definition of
‘‘dispensing fees’’ under § 423.100 to
include costs associated with the
acquisition and maintenance of
technology to maintain reasonable
pharmacy costs. We proposed adding to
the definition of ‘‘dispensing fees’’ a
restocking fee associated with return for
credit and reuse in long-term care
pharmacies when return for credit and
reuse is permitted under State law and
is allowed under the contract between
the Part D sponsor and the pharmacy.
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We explained in the proposed rule
that it was not our intent to include all
activities that are ‘‘reasonable costs’’ in
the definition of ‘‘dispensing fees,’’ but
in light of the statutory requirements
regarding LTC pharmacy dispensing, we
believed that it was particularly
important to highlight the potential
pharmacy costs aimed at reducing the
volume of unused Part D drugs and
increasing efficiency of dispensing. We
also stated that we believe dispensing
fees should differentiate among the
costs associated with different
dispensing methodologies and
appropriately address costs that are
incurred to offset the amount of unused
Part D drugs.
We proposed to clarify the definition
of ‘‘dispensing fees’’ by modifying
§ 423.100 and eliminating the
distinction between pharmacies owned
and operated by a Part D plan itself and
all other pharmacies. We also proposed
to modify § 423.100 by adding to the
definition that dispensing fees should
take into consideration the number of
dispensing events in a billing cycle, the
incremental costs associated with the
type of dispensing methodology, and
with respect to Part D drugs dispensed
in LTC facilities, the techniques to
minimize the dispensing of drugs that
go unused. Additionally, we proposed
adding that dispensing fees may also
take into account restocking fees
associated with return for credit and
reuse in long-term care pharmacies,
when return for credit and reuse is
permitted under State law and is
allowed under the contract between the
Part D sponsor and the pharmacy. As a
result of comments, in this final rule, we
further modify the definition to account
for costs associated with data collection
on unused Part D drugs in LTC
facilities.
Comment: Commenters supported our
proposal to modify the definition of
dispensing fees. Some commenters
requested that we amend the definition
of dispensing fees to include other costs
associated with the dispensing
requirement under § 423.154. Some of
the commenters requested that we add
costs associated with the return and
report requirement described in
§ 423.154(f)(1) and § 423.154(a)(2).
Response: In the proposed rule, we
modified the definition of ‘‘dispensing
fees,’’ in part, to highlight the potential
pharmacy costs aimed at reducing the
volume of unused Part D drugs and
increasing the efficiency of dispensing.
As we stated in the proposed rule, it is
not our intent to provide a
comprehensive list of all activities that
are ‘‘reasonable costs’’ in the definition
of ‘‘dispensing fees.’’ However, in this
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final regulation, we amend the
definition of ‘‘dispensing fees’’ to
include costs associated with the data
collection on unused Part D drugs.
Comment: Some commenters wanted
us to provide assurances that dispensing
fees would appropriately reflect the
increased costs associated with
dispensing requirements under
§ 423.154 in LTC facilities and to
monitor dispensing fees to pharmacies
dispensing to enrollees in LTC facilities
to ensure that dispensing fees are
adequate.
Response: As provided in section
1860D–11(i) of the Act, we are
prohibited from interfering with
negotiations between Part D plans and
pharmacies.
section 1881(b)(14)(B) of the Act, and
skilled nursing care defined as services
provided during a covered stay in a
skilled nursing facility would be subject
to this limitation. The burden associated
with this requirement is the time and
effort necessary for MA organizations
and section 1876 cost contracts to
submit their benefit designs, including
cost-sharing amounts, via the Plan
Benefit Package (PBP) software. While
this requirement is subject to the PRA,
the burden associated with it is
currently approved under OMB control
number (OCN) 0938–0763 with a May
31, 2011, expiration date.
III. Collection of Information
Requirements
Under the Paperwork Reduction Act
of 1995, we are required to provide 60day notice in the Federal Register and
solicit public comment before a
collection of information requirement is
submitted to the Office of Management
and Budget (OMB) for review and
approval. In order to fairly evaluate
whether an information collection
should be approved by OMB, section
3506(c)(2)(A) of the Paperwork
Reduction Act of 1995 requires that we
solicit comment on the following issues:
• The need for the information
collection and its usefulness in carrying
out the proper functions of our agency.
• The accuracy of our estimate of the
information collection burden.
• The quality, utility, and clarity of
the information to be collected.
• Recommendations to minimize the
information collection burden on the
affected public, including automated
collection techniques.
The following sections of this
document contain paperwork burden
but not all of them are subject to the
information collection requirements
(ICRs) under the PRA for reasons noted.
1. Dual-Eligible SNP Contracts With
State Medicaid Agencies (§ 422.107)
A. ICRs Regarding Cost Sharing for
Specified Services at Original Medicare
Levels (§ 417.454 and § 422.100)
Under § 417.454(d) and § 422.100(g)
and (h), we clarify that MA
organizations may not impose cost
sharing that exceeds that required under
Original Medicare. We evaluate the
following services annually to ensure
that MA plans are charging cost sharing
in the upcoming contract year that does
not exceed cost sharing in Original
Medicare. Specifically, chemotherapy
administration services that include
chemotherapy drugs and radiation
therapy integral to the treatment
regimen, renal dialysis as defined at
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B. ICRs Regarding SNP Provisions
(§ 422.101, § 422.107, and § 422. 152)
Section 422.107(d)(ii) extends the
deadline for new and existing dualeligible SNPs (D–SNPs) to operate
without a contract with their respective
State Medicaid agency(ies). New D–
SNPs and D–SNPs not seeking to
expand their service areas can continue
to operate without a State contract until
December 31, 2012.
For new and existing D–SNPs that are
seeking to expand in contract years 2011
through 2013, the burden associated
with this requirement is the time and
effort put forth by each dual eligible
SNP to confer and develop a contract
with the State Medicaid agency. While
this requirement is subject to the PRA,
this burden is already approved, under
OCN 0938–0753, with a November 30,
2011, expiration date.
2. ICRs Regarding NCQA Approval of
SNPs (§ 422.101 and § 422.152)
Sections 422.101 and 422.152 provide
for the approval of all SNPs, existing
and new, by NCQA beginning in 2012.
The burden associated with this
requirement is the time and effort put
forth by MA organizations offering SNPs
to submit their MOC to CMS for NCQA
evaluation and approval as per CMS
guidance. Although the submission of
the MOC document is already part of
the application process, scrutiny of
these documents by NCQA for approval
is a new requirement. Previously, all
SNPs were not required to complete the
SNP proposal portion of the application
each year. Under the new requirement,
we require all SNPs (that is, all of the
SNP plans offered by an MA
organization) must complete the SNP
proposal portion of the application. We
estimate that it will take each SNP plan
40 hours to complete the annual
application. Within those 40 hours, it
will take each SNP plan 6 hours to
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complete the SNP portion of the
application. For the existing 544 SNPs,
we estimate the burden associated with
completing the SNP section only is
3,264 hours.
The number of new plans each year
will vary and cannot easily be
predicted. However, based on the
number of new plans that submitted
SNP Proposals during the application
period in February 2010 for operation in
2011, we estimate that approximately 15
new applications will be submitted
annually. Thus, for 15 new plans at 40
hours each, we estimate the total annual
burden hours to be 600. The burden
associated with the proposed
requirement for the new plans is
currently approved under OCN 0938–
0935 with a January 21, 2011 expiration
date.
C. ICRs Regarding Voluntary De
Minimis Policy for Subsidy Eligible
Individuals (§ 423.34 and § 423.780)
Our regulatory modifications
pursuant to section 3303 of the ACA
ensure that our regulations reflect the
new statutory prohibition on reassigning
LIS beneficiaries from Part D plans that
waive a de minimis amount of their
premium on the basis that the premium
exceeded the low-income premium
benchmark. Further, the regulatory
modifications reflect statutory
discretion for us to auto-enroll or
reassign LIS beneficiaries to Part D
plans that waive the de minimis amount
of the premium. The modifications to
§ 423.34 do not by themselves impose
any new information collection
requirements on any external entity.
However, related proposals to modify
§ 423.780 do impose new information
collection requirements. Specifically,
the modifications provide for the
process for a Part D plan to volunteer to
waive a de minimis amount over the
monthly beneficiary premium for
certain low income subsidy eligible
(LIS) individuals. As specified in
proposed changes to § 423.34, we are
prohibited from reassigning LIS
beneficiaries from Part D plans that
waive the de minimis amount of the
premium based on the fact that their
premiums exceed the LIS benchmark
premium amount, and we may choose
to auto-enroll or reassign LIS
beneficiaries to such plans.
The burden associated with this
requirement is the time and effort
necessary for a Part D plan to submit
data to us indicating its decision to
volunteer to waive the de minimis
amount. Since we will collect this
information as part of an already
established system, we estimate that it
will take an additional 10 minutes
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annually for plans to read the
instructions, select an online check box,
and submit the information. The de
minimis amount will be established
each year, and the amount may vary
among years. For purposes of estimating
the burden, we assume that the de
minimis amount will be $1.00, and that
all Part D plans with premiums within
the de minimis amount over the
regional LIS benchmark will volunteer
to waive it. We estimate 150 Part D
plans will qualify for de minimis in a
given fiscal year. For 150 plans at 10
minutes each fiscal year, we estimate
the total annual burden hours to be 25.
We assume an hourly wage of $23.92 for
a compliance officer, resulting in a total
annual labor cost of $598.
D. ICRs Regarding Increase in Part D
Premiums Due to the Income Related
Monthly Adjustment Amount (Part D—
IRMAA) (§ 423.44)
Section 423.44(e)(4) requires PDPs to
provide Part D enrollees with a notice
of termination in a form and manner
determined by CMS. We estimate that
approximately 1.05 million of the 29.2
million Medicare beneficiaries enrolled
in the Part D program will exceed the
minimum income threshold amount and
will be assessed an income related
monthly adjustment amount. We also
estimate that approximately 80,000
beneficiaries will be directly billed for
the Part D—IRMAA because they are not
receiving monthly benefit payments
from SSA, the OPM, or the RRB, or the
monthly benefit payment is not
sufficient to have the Part D—IRMAA
withheld.
Of the 80,000 Part D enrollees who
will be directly billed for the Part D—
IRMAA, CMS cannot estimate how
many might accrue Part D—IRMAA
arrearages and be subsequently
terminated. However, in the event that
the 80,000 Part D enrollees who pay the
Part D—IRMAA through direct billing
become delinquent, PDPs would be
required to send all 118,000 enrollees a
notice of termination in accordance
with § 423.44(e)(4), and the burden
associated with this requirement would
be the time and effort that it takes a PDP
to populate the notice with a
beneficiary’s information. Termination
notices are generally automated;
therefore, CMS estimates that it will
take 1 minute to generate a termination
notice. As such, the total maximum
annual hourly burden associated with
this requirement is 1,333 hours (1
minute multiplied by 80,000 enrollees,
divided by 60 minutes). We estimate
that the hourly wage paid to an
individual tasked with generating the
automated letters is $40 (based on U.S.
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Department of Labor statistics for hourly
wages for administrative support). The
associated burden amount for this work
is $53,320. Additionally, Part D plan
sponsors will have to retain a copy of
the notice in the beneficiary’s records.
We estimate 5 minutes multiplied by
80,000 enrollees divided by 60 minutes.
This equates to 6,666 hours at
approximately $40 an hour (based on
U.S. Department of Labor statistics for
hourly wages for administrative
support). This associated burden
amount is $266,640. We estimate the
total maximum annual burden for all
Part D plan sponsors resulting from this
proposed provision to be $319,960.
E. ICRs Regarding Elimination of
Medicare Part D Cost-Sharing for
Individuals Receiving Home and
Community-Based Services (§ 423.772
and § 423.782)
We are amending § 423.772 and
§ 423.782 in accordance with section
3309 of the ACA. Specifically, the
changes provide for a definition of an
individual receiving home and
community based services, and for zero
cost-sharing for Medicare Part D
prescriptions filled by full-benefit dual
eligible beneficiaries receiving such
services.
To carry out these provisions, we
require State Medicaid Agencies to
submit data at least monthly identifying
these individuals. There is already an
established data exchange for States to
identify their dual eligible individuals
to CMS at least monthly. We will
leverage that data exchange by adding a
new value for the existing institutional
status field, which will prompt CMS to
set a zero copayment liability for fullbenefit dual eligible beneficiaries who
qualify for HCBS zero cost-sharing, as
set forth under section 3309 of the ACA.
The estimated size of the population to
be reported as being full benefit dual
eligible and receiving home and
community-based services is 600,000.
We estimate the burden associated
with the requirement for States to
provide CMS with the specified
information including a one-time
development cost and ongoing annual
costs. The startup development effort is
estimated at 20 hours per State, or an
additional 1,020 hours for all 51 State
Medicaid Agencies (50 States and the
District of Columbia), in the fiscal year
prior to the effective date of this
provision. Assuming an hourly salary of
$34.10 for computer programmers, this
results in a development cost of
$34,782. Once implemented, the
information collection burden is
estimated to be 1 hour each month, or
612 hours in each fiscal year for 51 State
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Medicaid Agencies. Assuming an hourly
salary of $34.10 for computer
programmers, we estimate an ongoing
cost of $20,862 per fiscal year.
F. ICRs Regarding Appropriate
Dispensing of Prescription Drugs in
Long-Term Care Facilities Under PDPs
and MA–PD Plans (§ 423.154) and
Dispensing Fees (§ 423.100)
Under § 423.154 (a), we implement
provisions of section 3310 of the ACA,
which require Part D sponsors to use
specific, uniform dispensing techniques
such as weekly, daily, or automated
dose dispensing when dispensing
covered Part D drugs to enrollees who
reside in long-term care facilities in
order to reduce waste associated with
30-day fills. The collection burden
associated with this proposed provision
is the reporting requirement and renegotiation of contracts.
We are introducing a new
requirement under § 423.154 (a)(2) for
Part D sponsors to collect and report to
CMS the method of dispensing
technique used for each dispensing
event described under § 423.154 (a) and
on the nature and quantity of unused
brand and generic drugs. We anticipate
a billing standard that incorporates the
collection of the method of dispensing
technique. So, pharmacies and plans
will not have to create unique data
collection processes to collect that data.
We estimate that 40 sponsorscontractors (28 drug claim processors
and 12 sponsors that process their drug
claims and data collection) will be
subject to this requirement. For the
collection of data on unused drugs, we
estimate that it will take a total of 2400
hours for 10 vendors (software vendors
plus pharmacies with proprietary
systems) to develop the programming
for this requirement. The estimated total
cost associated with the software
development is equal to the number of
software vendors plus the number of
pharmacies with proprietary systems
(10) times an hourly rate of $145.37 (this
includes $43.35 in direct wages and an
additional $102.02 in fringe benefits/
overhead/general and administrative
costs/fee) times 240 (estimated number
of hours to design and program one
system; the cost is $348,888. The
aforementioned burden will be included
in a revision of the collection currently
approved under OMB Control No 0938–
0992.
The requirements will necessitate the
renegotiation of contracts between Part
D sponsors and the pharmacies
servicing LTC facilities. We anticipate
dispensing fees will increase, consistent
with our proposed change in the
definition of dispensing fees (§ 423.100),
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with the relative investment in the
dispensing technologies and
corresponding dispensing efficiencies
associated with the dispensing
technologies used in § 423.154.
We estimate that the total annual
hourly burden for negotiating a contract
between the Part D sponsors and entity
contracting with the pharmacies
servicing long-term care facilities (for
example, PBM) to be equal to the
number of Part D sponsors (731)
multiplied by the average estimated
hours per sponsor (10), equaling 7,310
hours. We estimate the number of
entities contracting with pharmacies
servicing long-term care facilities to be
40 (28 processors and 12 other entities).
We estimate the total annual hourly
burden for negotiating a contract
between an entity described previously
and the pharmacies servicing LTC
facilities to be the number of entities
(40) multiplied by the average estimated
hours per entity (80), which is 3,200
hours. The total number of hours for
contract renegotiation is estimated to be
10,510 hours (7,310 hours + 3,200
hours). The estimated hourly labor cost
for reporting is $150.20. The total
estimated cost associated with these
contract negotiation requirements is
$1,578,602. We estimate that the total
burden cost associated with this
provision is $1,927,490.
Comment: We received comments
regarding the burden associated with
the reporting requirements. Many
commenters believed that the
Controlled Substance Act, hazardous
waste laws, and State laws would be a
barrier to LTC facilities returning
unused drugs to pharmacies.
Commenters stated that manual
reporting of unused drugs would create
a burden on the pharmacy and sponsor
and require additional staffing to
accommodate the increased workload.
Response: In response to the
comments, we will eliminate the
requirement that unused drugs be
transferred to the pharmacy and instead
retain only the requirement that Part D
sponsors collect information from the
network LTC pharmacies to determine
the amount of unused drugs. We believe
that this information can be collected by
the pharmacies from the LTC facilities
or determined by calculating the
difference between the quantity
dispensed and the quantity consumed
which can be used to calculate the
amount of unused medication. We are
revising the PRA package for the Part D
Reporting Requirements (OMB Control
No. 0938–0992) to reflect this approach.
Please comment on our approach in the
Part D Reporting Requirement PRA
package.
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G. ICRs Regarding Complaint System for
Medicare Advantage Organizations and
PDPs (§ 422.504 and § 423.505)
Under § 422.504(a) and § 423.505(b)
we would require MA organizations and
Part D sponsors to address and resolve
all complaints in the CMS complaint
tracking system and to include a link to
the electronic complaint form at https://
www.medicare.gov on their main Web
page. This requirement would allow
thorough monitoring of complaints
through the tracking system by
identifying how plan sponsors resolve
and close complaints and allow
members to access complaint forms
electronically on https://
www.medicare.gov.
The burden associated with this
proposed provision is the time and
effort of the MA organizations and Part
D sponsors in recording complaint
closure documentation in the CTM and
training staff, as well as posting and
maintaining a link from their Web site
to the electronic complaint form at the
Medicare.gov Internet Web site. While
this requirement is subject to the PRA,
we believe this burden is exempt as
defined in 5 CFR 1320.3(b)(2). That is,
the time, effort, and financial resources
necessary to comply with the
requirement would be incurred by the
Part D sponsors in the normal course of
their business activities.
Comment: We received comments
from one commenter expressing support
for the use of a drop-down checklist of
complaint closure reasons. However, the
commenter was concerned that a new
electronic complaint form that could be
accessed through the plan’s Web site as
well as https://www.medicare.gov would
be seen as a substitute for beneficiaries’
current avenues for issue resolution.
The commenter additionally
recommended that CMS establish a
strict process for monitoring and
reviewing how these complaints are
resolved.
Response: Sections 422.504(a) and
423.505(b) require MA organizations
and Part D sponsors to address and
resolve all complaints in the CMS
complaint tracking system and to
include a link to the electronic
complaint form at https://
www.medicare.gov on their main Web
page. The requirement allows complaint
monitoring through the tracking system
by identifying how plan sponsors
resolve and close complaints, and
allows enrollees to access complaint
forms electronically on https://
www.medicare.gov. We are therefore not
modifying the burden estimate in our
proposed rule in this final rule.
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H. ICRs Regarding Uniform Exceptions
and Appeals Process for Prescription
Drug Plans and MA–PD Plans (§ 423.128
and § 423.562)
In accordance with the new section
1860D–4(b)(3)(H) of the Act, we
proposed revising § 423.128 at
paragraphs (b)(7) and (d) in our
proposed rule to specifically provide
three mechanisms that plan sponsors
must have in place in order to meet the
uniform appeals requirements of
1860D–4(b)(3)(H) of the Act.
We proposed adding paragraph (i) to
§ 423.128(b)(7) to require that plan
sponsors make available standard forms
to request coverage determinations and
redeterminations (to the extent that
standard request forms have been
approved for use by CMS). In this final
rule, we modify the language of the
proposed rule to instead require plan
sponsors to make available uniform
model forms for requesting coverage
determinations and appeals, and we
clarify that we intend to revise our
existing model forms.
We also proposed adding paragraph
(ii) to § 423.128(b)(7), requiring sponsors
to develop a Web-based electronic
interface that allows an enrollee (or an
enrollee’s prescriber or representative)
to immediately request a coverage
determination or redetermination via a
plan’s secure Web site. The interface
would be the ‘‘electronic equivalent’’ of
the paper coverage determination and
appeals forms referenced at
§ 423.128(b)(7)(i). Based on comments
we received, we are finalizing the
language related to instant access to
coverage determinations and appeals
processes via the plan’s Web site, but
have clarified in the preamble that we
are interpreting instant access to mean,
at a minimum, the ability of Part D plan
sponsors to accept e-mail requests.
Similarly, we are revising § 423.128(d)
to require sponsors to provide a toll-free
telephone line for requesting coverage
determinations and redeterminations.
The burden associated with these
requirements involves collecting the
coverage determination request
information submitted through the
various processes.
We estimated that all 731 plan
sponsors would receive a total of
484,468 coverage determination
requests submitted by mail, with some
using the standardized coverage
determination request form, if available.
We further estimated that it would take
10 minutes to enter the information
submitted from each request into a
claims processing system, for a potential
total annual burden of 80,745 hours.
Although this final rule modifies the
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proposed language to include a
reference to a model coverage
determination request form, we do not
expect this modification to impact our
estimated burden for coverage
determination requests submitted by
mail. In the proposed rule, we estimated
that all plan sponsors would receive a
total of 52,086 coverage determination
requests submitted through secure
websites, but that this process would
not create an additional burden for plan
sponsors beyond that required for
requests submitted by mail because
enrollees would enter information into
a claims processing system themselves.
In this final rule, we scale back the Web
site requirement to mean, at a
minimum, the ability to accept requests
via e-mail. We expect plan sponsors to
process the e-mail requests in the same
manner as requests received by mail,
and estimate that it will take 10 minutes
to enter the information submitted from
each request into a claims processing
system, for a potential total annual
burden of 8,681 hours. Finally, we
estimated that all plan sponsors would
receive a total of 690,064 coverage
determination requests submitted by
telephone, and it would take 10 minutes
to enter the information submitted by
phone into the claims processing
system, for a total annual burden of
115,011 hours. The burden associated
with the redetermination process is
exempt under 5 CFR 1320.4(a)(2)
because a redetermination is an
administrative action. Information
collected when conducting an
administrative action is not subject to
the PRA.
Our final rule requires Part D
sponsors to modify their electronic
transactions to pharmacies so that they
can transmit codes instructing
pharmacies to distribute notices at the
POS. That is, pharmacies and processors
will be required to program their
systems to relay the message at the
pharmacy to distribute the POS
pharmacy notice that instructs the
enrollee to contact the plan sponsor to
request a coverage determination. In
cases when a prescription cannot be
filled as written, Part D sponsors would
be required under § 423.562(a)(3) to
arrange with their network pharmacies
to distribute a pharmacy notice that
advised the enrollee of his or her right
to contact the plan to request a coverage
determination. We estimate that the
burden on processors will be the
programming to send the code or billing
response to the pharmacy, as well as
revisions to the contract requirement
with the pharmacy. We estimate that the
number of hours for each processor (28
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PBMs and 12 plan organizations) to
perform these tasks will be 40 hours per
processor or plan organization, for a
total one-time burden of 1600 hours.
The estimated one-time cost associated
with the processor or plan organization
tasks is $64,000 (1600 hours × $40).
Each pharmacy will need to program to
receive the code and print the response.
Programming by the pharmacies (40
pharmacy software vendors) in order to
receive the code will be 10 hours, for a
total of 400 hours. The estimated onetime cost associated with the processor
tasks is $16,000 (400 hours × $40).
We estimate that the average time to
process a coverage determination is 10
minutes (0.167 hours), and that an
average of 734 coverage determination
requests received by mail or secure Web
site (e-mail) will be processed for each
respondent (n=731). Therefore, we
estimate that requiring plan sponsors to
process the information submitted in
model coverage determination request
forms (§ 423.128(b)(7)(i)) will result in
an annual burden of 89,605 hours (731
entities × 734 contracts per entity × .167
hours per contract to process). At an
estimated cost of $40.00 per hour, the
estimated total annual cost of this
change is $3.58 million. We estimate
that processing coverage determination
requests that are received by telephone
(§ 423.128(d)) will take an average of 10
minutes (0.167 hours) per request and
that entities (n=731) would process on
average 944 coverage determination
requests. We expect this to result in an
annual burden of approximately
115,240 hours (731 entities × 944
determination requests per entity ×
0.167 hours per determination request).
At an estimated cost of $40.00 per hour,
the estimated total annual cost of this
change is $4.6 million (115,240 hours ×
$40.00 per hour). We estimate that
contracting entities (n=731) will
distribute an average of 2,200 pharmacy
notices.
Therefore, requiring plan sponsors to
arrange with their network pharmacies
to distribute pharmacy notices at the
point-of-sale when prescriptions cannot
be filled as written (§ 423.562(a)(3)) is
estimated to result in an annual burden
of 53,071 hours (2 minutes or 0.033
hours at point-of-sale × 731 contracts ×
2200 pharmacy notices per contract). At
an estimated cost of $40.00 per hour, the
estimated total annual cost of this
change is $2.1228 million.
Comment: One commenter believed
that our estimate of $40 an hour was too
low for processing coverage
determinations and redeterminations.
Response: We disagree with the
commenter. The estimated hourly rate
of $40 is a composite rate based upon
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the Bureau of Labor Statistics National
Compensation Survey.
Comment: One commenter asked
CMS if the agency expects the pharmacy
to maintain a copy of the POS notice
according to the 10-year record
retention requirement. If so, the
commenter believed that this
requirement would increase dispensing
fees and present an additional hurdle
for pharmacies and PBMs in response to
CMS audit requests, thereby increasing
the burden estimate.
Response: Part D sponsors are
responsible for determining which
pertinent documents they must retain.
CMS does not specify which specific
records Part D sponsors must require
their network pharmacies to retain for
audit purposes. Therefore, the burden
estimate associated with the POS notice
does not account for record retention
requirements provided at § 423.505.
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 (§ 423.100 and § 423.464)
Revising the definition of ‘‘incurred
cost’’ at § 423.100 to include the costs
associated with IHS/ADAPs towards the
TrOOP does not impose new
information collection for CMS’ COB
contractor or ADAPs. The COB
contractor currently collects datasharing agreements from ADAPs under
the MSP information collection process.
The burden associated with this
collection is accounted for under OMB
0938–0214.
sponsors to use a standardized format
for the action plan and summary
resulting from the annual
comprehensive medication review, and
permit the use of telehealth technology
in the conduct of the CMR.
The burden associated with a number
of the new MTM program requirements
in the ACA, including the requirement
for a written summary of the CMR, was
summarized in our April 2010 final rule
(75 FR 19678 through 19826) and
approved under OCN 0938–0964 with
an expiration date of September 30,
2012. We believe the burden associated
with the requirement in
§ 423.153(d)(1)(vii)(D) to provide an
action plan and summary in a
standardized format is generally part of
that burden. Therefore, we do not
estimate an additional burden for this
requirement in this final rule. Further,
since the use of telehealth technology to
conduct the CMR is permitted but not
required, there is no burden associated
with this change.
In our proposed rule, we estimated an
ICR burden associated with the
proposed requirement for Part D
sponsors to coordinate MTM program
quarterly medication reviews with LTC
consultant pharmacist monitoring for
Part D enrollees in LTC facilities. We are
not finalizing this requirement and are
eliminating this burden from our
estimates. As a result, there is no burden
associated with this provision.
K. ICRs Regarding Changes to Close the
Part D Coverage Gap (§ 423.104 and
§ 423.884)
M. ICRs Regarding Quality Bonus
Appeals (§ 422.260)
L. ICRs Regarding Medicare Advantage
Benchmark, Quality Bonus Payments,
and Rebate (§ 422.252, § 422.258 and
§ 422.266)
Under § 422.258(d)(6) we base the
5-star rating system for quality bonus
payments on a modified version of the
plan ratings published each fall on
https://www.medicare.gov. The 5-star
rating system for quality bonus payment
will require no additional burden. The
data collection for the 5-star rating is
currently approved under the following
OCNs:
Section 423.104(d)(4) requires the
approximately 40 pharmacy claims
processors currently responsible for
adjudication of pharmacy benefits to
identify the applicable Part D covered
We have included new calculations
for the benchmarks and rebates in
§ 422.252, § 422.258, and § 422.266. The
burden associated with the bid data
used in these calculations is included in
the burden estimate associated with the
Bid Pricing Tool which is currently
approved under OCN 0938–0944 with a
May 31, 2011, expiration date.
drugs in their systems and apply a
different cost-sharing percentage when
processed in the coverage gap than the
percentage applied to non-applicable
drugs. We estimate a one-time burden to
be 12,000 hours per processor to make
the initial coding changes necessary to
implement this requirement and an
annual burden of 250 hours per
processor to perform periodic updates of
the applicable drugs in their systems.
There are an estimated 40 processors. At
an average labor cost of $105 per hour
for a senior computer programmer, we
estimate the first fiscal year annual
burden associated with this requirement
to be 480,000 hours (12,000 hours × 40
processors) at an estimated total cost of
$50.4 million. After the first fiscal year,
the estimated burden associated with
this requirement would be 10,000 hours
(250 hours × 40 processors) at an
estimated total annual cost of
$1,050,000.
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We add a new § 422.260 to state that
each MA organization is afforded the
right to request an administrative review
of CMS’ determination concerning the
organization’s qualification for a quality
bonus payment. The burden associated
with this proposed provision is MA
organizations’ time and effort in
developing and presenting their case
demonstrating that they should qualify
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for the quality bonus payment to a CMS
official and, ultimately, to the CMS
Administrator. Eligibility for quality
bonus payments will be based largely on
CMS’ application of a publicized
methodology for assigning star ratings to
MA organizations. These star ratings
will be calculated using a combination
of the MA organization’s performance
scores across a variety of quality
assessment measures. MA organizations
will have the opportunity to challenge
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J. ICRs Regarding Improvements to
Medication Therapy Management
Programs (§ 423.153)
This final rule amends
§ 423.153(d)(1)(vii) to require Part D
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CMS’ application of the methodology to
their performance.
We estimate that the total hourly
burden in a fiscal year for developing
and presenting a case to us for review
is equal to the number of organizations
likely to request an appeal multiplied by
the number of hours for the attorneys of
each appealing MA organization to
research, draft, and submit their
arguments to CMS. Based on the star
rating distributions of previous contract
years, out of the approximately 350 MA
contracts that are subject to star rating
analysis (that is, those not excluded
from analysis because of low
enrollment, contract type not required
to report data, or new contract with no
performance history), approximately
250 may receive less than a four-star
rating. We estimate that 10 percent of
those contracts (25) will request an
appeal of their rating under the
proposed rule. We further estimate that
one attorney working for 8 hours could
complete the documentation to be
submitted to CMS for each contract,
resulting in a total burden estimate of
200 hours (8 hours × 25 contracts = 200
hours). The estimated fiscal year cost to
MA organizations associated with this
provision (assuming an attorney billing
rate of $250 per hour) is $50,000 (200
hours × $250).
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N. ICRs Regarding Timely Transfer of
Data and Files When CMS Terminates a
Contract With a Part D Sponsor
(§ 423.509)
In this final rule, we are amending
§ 423.509 to state that when CMS
terminates a contract with a Part D plan
sponsor, the Part D plan sponsor must
ensure the timely transfer of any data or
files. Our intent is to ensure that
terminated Part D plan sponsors transfer
to CMS the necessary data to provide a
smooth transition for beneficiaries into
a new Part D plan similar to when the
Part D sponsor terminates the contract
or CMS and the Part D plan sponsor
mutually terminate the contract. The
burden associated with this proposed
provision is the time and effort that Part
D plan sponsors must undertake to
transfer the requisite data and files to
CMS. We have not developed a burden
estimate for this requirement because
we do not believe that we will exceed
the PRA threshold of 9 organizations per
any 12-month period.
O. ICRs Regarding Agent and Broker
Training Requirements (§ 422.2274 and
§ 423.2274)
Sections 422.2274(b) and (c) and
423.2274(b) and (c) would require MA
organizations’ and Part D sponsors’
agents and brokers to receive training
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and testing via a CMS endorsed or
approved training program. We are
considering implementing this
requirement through a RFP competitive
process. The burden associated with
this requirement is the time and effort
put forth by plan sponsors and/or third
party vendors to submit their proposals
for CMS review. We estimate that about
12 entities (plan sponsors and/or third
party vendors) will submit a proposal
and the average estimated hours per
entity to complete the proposal is 100
hours. The total estimated hourly
burden associated with this requirement
is equal to the estimated number of
entities (12) multiplied by the estimated
hours per entity (100) resulting in a total
of 1200 hours. We estimate the hourly
labor cost of $59.20 for the preparer
(based on hourly wages for management
analysts reported by the U.S.
Department of Labor Bureau of Labor
Statistics). We estimate that the total
annual labor cost of this proposal
preparation is $71,040 ($59.20 × 1200
hours) per fiscal year.
Also at § 422.2274 and § 423.2274, we
clarify that the annual agent and broker
training requirements apply to all agents
and brokers selling Medicare products
and not just independent agents and
brokers. The burden associated with this
requirement is the time and effort put
forth by the MA organization or Part D
sponsor to ensure all agents and brokers
selling Medicare products are trained
and tested annually. While this
requirement is subject to the PRA, the
burden is exempt as defined in 5 CFR
1320.3(b)(2). The time, effort, and
financial resources necessary to comply
with the requirement would be incurred
by persons in the normal course of their
business activities.
P. ICRs Regarding Call Center and
Internet Web site Requirements
(§ 422.111 and § 423.128)
At § 422.111(g)(1)(2)(3) (redesignated
as § 422.111(h)(1) through (3)), we
require MA organizations to operate a
toll-free customer call center that is
open during usual business hours and
provides customer telephone service in
accordance with standard business
practices, as well as to provide current
and prospective enrollees with
information via an Internet Web site and
in writing (upon request). In
§ 422.111(g)(1)(iii) and
§ 423.128(d)(1)(iii) (redesignated as
(h)(1)(iii)) we codify provisions from the
Medicare Marketing Guidelines (August
15, 2005 version and all subsequent
versions) that require plan sponsors to
provide call center interpreters for nonEnglish and LEP beneficiaries. The
burden associated with this requirement
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is the time and effort necessary to
maintain a customer call center and
Internet Web site, to provide
information to beneficiaries in writing
upon request, and to provide call center
interpreters. While this requirement is
subject to the PRA, we believe this
burden is exempt as defined in 5 CFR
1320.3(b)(2). The time, effort, and
financial resources necessary to comply
with the requirement would be incurred
by persons in the normal course of their
business activities.
Q. ICRs Regarding Requiring Plan
Sponsors to Contact Beneficiaries to
Explain Enrollment by an Unqualified
Agent/Broker (§ 422.2272 and
§ 423.2272)
Sections 422.2272(e) and 423.2272(e)
require MA organizations and Part D
sponsors, respectively, to notify
Medicare beneficiaries upon discovery
that they were enrolled in a plan by an
unqualified agent. While this
requirement is subject to the PRA, the
burden is exempt as defined in 5 CFR
1320.3(b)(2). The time, effort, and
financial resources necessary to comply
with the requirement would be incurred
by persons in the normal course of their
business activities.
R. ICRs Regarding Customized Enrollee
Data (§ 422.111 and § 423.128)
As discussed in our November 2010
proposed rule (75 FR 71249 through
71250), proposed § 422.111(b)(11) and
§ 423.128(b)(12) authorize CMS to
require MA organizations and PDP
sponsors to periodically provide each
enrollee with enrollee specific data to
use to compare utilization and out-ofpocket costs in the current plan year to
projected utilization and out-of-pocket
costs for the following plan year. Plans
would disclose this information to plan
enrollees in each year in which a
minimum enrollment period has been
met, in conjunction with the annual
renewal materials (currently the annual
notice of change/evidence of coverage,
or ANOC/EOC).
Plan sponsors already collect enrollee
utilization and cost-sharing information
as part of their claims processing
operations. In our proposed rule, we
stated that the burden associated with
this proposed requirement would be the
time and effort necessary for a plan
sponsor to complete program
development and testing, and to
disclose (print and mail) this
information to each beneficiary. We
anticipated that it would take 30 hours
per MA organization and 20 hours per
Part D sponsor to develop and submit
the required information. This included
2 hours for reading CMS’ published
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instructions, 20 hours per MA
organization and 10 hours per Part D
sponsor generating the document or
documents, and 8 hours printing and
disclosing to enrollees. We developed
this burden estimate using our burden
estimates for the ANOC/EOC documents
under OCN 0928–1051 as a baseline,
then expanded on that baseline, and
factored in expected programming and
development costs to provide
beneficiary specific information. We
estimated that 564 MA organizations
and 85 Part D sponsors would be
affected annually by this requirement.
We proposed that the total annual
burden associated with this requirement
would be 18,620 hours in a fiscal year.
In our proposed rule, we estimated
the subsequent annual burden
associated with this proposed
requirement by the time and effort
necessary for a plan sponsor to disclose
(print and mail) this information to each
beneficiary. We anticipated that it
would take 20 hours per MA
organization and 15 hours per Part D
sponsor to develop and submit the
required information. This included 1
hour for reading CMS’ published
instructions, 10 hours per MA
organization and 5 hours per Part D
sponsor generating the document or
documents, and 6 hours printing and
disclosing to beneficiary. We estimated
that 564 MA organizations and 85 Part
D sponsors would be affected annually
by this requirement. We estimated the
total annual burden associated with this
proposed requirement would be 12,555
hours in a fiscal year (20 hours for each
of the 564 MA organizations + 15 hours
for each of the 85 Part D sponsors).
Based on the comments we received on
our proposed rule, we are modifying our
burden estimate as described below.
Comment: As discussed in section
II.D.4 of this final rule, we received
many comments on our proposal to
authorize CMS to require MA
organizations and Part D drug sponsors
to periodically provide each enrollee
with enrollee specific data to use to
compare utilization and out-of-pocket
costs in the current plan year to
projected utilization and out-of-pocket
costs for the following plan year.
Commenters were particularly
concerned with the administrative and
cost burdens associated with providing
beneficiaries with customized enrollee
data that included an estimate of future
costs. Several of the commenters stated
that our analysis of the burden
associated with this proposed
requirement, which we developed by
expanding on the baseline burden
estimates for the ANOC/EOC documents
under OCN 0928–1051, was
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undervalued. One commenter stated
that the estimate did not take into
account the size of organizations’
memberships, sophistication of IT
systems, variances in benefit designs or
delivery systems. Several commenters
stated that creating systems to compile
current year information as well as to
calculate future year information would
require many more hours of IT and staff
time than we estimated. Commenters
offered estimates such as ‘‘more than 30
hours per plan option per product’’ and
‘‘thousands of hours.’’
Response: As discussed in section
II.D.4 of this final rule, we are
modifying our original proposal to
authorize CMS to require that MA
organizations periodically provide each
enrollee with enrollee specific data. We
are finalizing § 422.111(b)(12) to state
that we may require an MA organization
to furnish directly to enrollees, in the
manner specified by CMS and in a form
easily understandable to such enrollees,
a written explanation of benefits, when
benefits are provided under part 422. As
discussed in section II.D.4 of this final
rule, we intend to work with MA
organizations, Part D sponsors and
beneficiary advocates to develop an
explanation of benefits for Part C
benefits modeled after the EOB
currently required for Part D enrollees at
§ 423.128(e). We plan to continue the
research and development process
through a small pilot program with
volunteer organizations in CY 2012 with
the hope of implementing an EOB
requirement for all MA plans beginning
in the future.
Based on the comments received, and
our modified final policy, we have
recalculated our estimate of the burden,
based on the annual burden to Part D
plan sponsors to furnish enrollees with
an EOB for prescription drug benefits
under OMB 0938–0964. MA
organizations already collect enrollee
utilization and cost-sharing information
as part of their claims processing
operations. In the first year that the pilot
program is implemented, the burden
associated with this proposed
requirement would be the time and
effort necessary for 564 MA
organizations to complete program
development and testing of an
explanation of benefits when Part C
benefits are provided, and to disclose
(print and mail) this information to each
beneficiary. Given that stand alone PDPs
already produce an EOB in accordance
with § 423.128(e), the revised burden
estimate includes only MA
organizations. We estimate that in the
first year it will require each entity 200
hours on an annual basis to disseminate
the required materials, for a total annual
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burden of 112,800 hours. We calculate
the total labor cost estimate based on the
hourly rate of $34.92 for a GS–11/step
6 analyst. This first year estimate builds
from the estimated annual burden for
the Part D EOB. Our revised estimate
increases the number of hours
organizations will need to initiate and
complete program development and
testing of an EOB.
In subsequent years, the burden
associated with this requirement will be
the time and effort necessary for about
564 MA organizations to provide an
EOB when Part C benefits are provided
to enrollees. We estimate that it will
require each entity 160 hours on an
annual basis to disseminate the required
materials, for a total annual burden of
90,240 hours. We calculate the total
labor cost estimate based on the hourly
rate of $34.92 for a GS–11/step 6
analyst. The decreased estimate of
burden hours relative to the first year
reflects the completion of program
development in the first year and brings
the estimated hours in line with the
current estimated number of hours for
the Part D EOB.
S. ICRs Regarding Extending the
Mandatory Maximum Out-of-Pocket
(MOOP) Amount Requirements to
Regional PPOs (§ 422.100(f) and
§ 422.101(d))
In this final rule, we are extending the
mandatory MOOP and catastrophic
limit requirement to RPPO plans at
§ 422.100(f) and § 422.101(d). Each
RPPO plan will establish an annual
MOOP limit on total enrollee cost
sharing liability for Parts A and B
services. We will set the dollar amount
of the MOOP limit annually. RPPO
plans’ MOOPs will include all cost
sharing (that is, deductibles,
coinsurance, and copayments) for Parts
A and B services. These requirements
will not result in an additional data
collection burden for RPPOs since they
already collect this data to establish
their own in-network MOOP and
catastrophic limits under
§ 422.101(d)(4). While this requirement
is subject to the PRA, the burden is
exempt as defined in 5 CFR
1320.3(b)(2). The time, effort, and
financial resources necessary to comply
with the requirement is incurred by
persons in the normal course of their
business activities.
T. ICRs Regarding Prohibition on Use of
Tiered Cost Sharing by MA
Organizations (§ 422.100 and § 422.262)
Section § 422.262 clarifies that MA
organizations may not impose cost
sharing that varies across enrollees for
any reason, including provider group,
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hospital network or enrollees’
utilization of services. The burden
associated with this proposed revision
is the time and effort necessary for MA
organizations and section 1876 cost
contracts to submit their benefit designs,
including cost-sharing amounts, via the
Plan Benefit Package (PBP) software.
While this requirement is subject to the
PRA, the burden associated with it is
currently approved under OCN 0938–
0763 with a May 31, 2011 expiration
date.
U. ICRs Regarding Translated Marketing
Materials (§ 422.2264 and § 423.2264)
This clarification at § 422.2264(e) and
§ 423.2264(e) does not impose any
additional burden upon MA
organizations because they have been
required to provide translated marketing
materials pursuant to § 422.2264(e) and
§ 423.2264(e) (previously numbered
§ 422.80(c)(5) and § 423.50(d)(5)). We
believe the burden associated with these
proposed requirements is exempt from
the requirements of PRA as defined in
5 CFR 1320.3(b)(2) because the time,
effort, and financial resources necessary
to comply with the requirement would
be incurred by persons in the normal
course of their activities.
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V. ICRs Regarding Expanding Network
Adequacy Requirements to Additional
MA Plan Types (§ 422.112)
Our amendment to § 422.112(a)(10)
ensures that any MA plan that meets
Medicare access and availability
requirements through direct contracting
network providers does so consistent
with the requirements at
§ 422.112(a)(10). We do not include MA
MSAs in § 422.112(a)(10) because MSA
plans historically have not had
networks and enrollees in MSA plans
may see any provider. However, MSA
plans are not prohibited from having
networks as long as enrollee access is
not restricted to network providers.
While there are currently no MA MSA
network plans, we are aware of possible
interest in offering such plans.
The burden associated with this
requirement is the time and effort
required by MA organizations to submit
network adequacy data to CMS for
review and approval as part of the
application process. This burden is
already accounted for under OCN 0938–
0935. However, since this amendment
will extend the current network
adequacy requirements only to
Medicare MSA plans, and there is
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currently only one Medicare MSA
contract (which does not use a network
of providers), we believe that fewer than
10 applications would be subject to this
proposed requirement in each fiscal
year.
W. ICRs Regarding Maintaining a
Fiscally Sound Operation (§ 422.2,
§ 422.504, § 423.4, and § 423.505)
Sections 422.504(a) and 423.505(b)
add a contract term under which an MA
organization or PDP sponsor agrees to
maintain a fiscally sound operation by
at least maintaining a positive net
worth. A determination of whether there
is a positive net worth will be made
from the financial reports submitted
under the current financial reporting
requirements. The burden associated
with this requirement is the time and
effort necessary to submit these
financial reports. While this
requirement is subject to the PRA, the
associated burden is currently approved
under OCN 0938–0469 with an
expiration date of April 30, 2013.
X. ICRs Regarding Release of Part C and
Part D Payment Data (Parts 422 and
423, Subpart K)
This provision permits the Secretary
to release Part C and D summary
payment data for research, analysis, and
public information functions. The
Secretary believes these data should be
made available because other publicly
available data are not, in and of
themselves, sufficient for the studies
and operations that researchers want to
undertake to analyze the Medicare
program and Federal expenditures, and
to inform the public on how their tax
dollars are spent.
These data will be routinely released
on an annual basis in the year after the
year for which payments were made.
The data release will occur after final
risk adjustment reconciliation has been
completed for the payment year in
question and, for Part D, after final
payment reconciliation of the various
subsidies. Thus, we will release data for
payment year 2010 in the fall of 2011.
This timeframe will not apply to the
release of RDS data, since we do not
reconcile RDS payment amounts until
15 months following the end of the plan
year. The majority of our sponsors
provide retiree drug coverage on a
yearly basis. If an applicable plan year
ended December 31, 2010, the payment
reconciliation is not due until March 31,
2012, which would be after the fall 2011
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target for other Part C and D payment
data. We will release the most current
RDS payment data available at the time
Part C and D payment reconciliation has
been completed and those data are
compiled and released.
Since we are not seeking additional
information from MA organizations
or from Part D sponsors, there are
no PRA implications. Payment data are
quite different than the bid data plans
submit and for which we have existing
OMB authority for collection (OCN
0938–0944). The gross payment data we
are proposing to disclose are not derived
from information plans submit to us, but
rather are compiled and derived solely
from CMS internal payment files.
Comment: One commenter argued
that CMS should release MA payment
data in accordance with the Freedom of
Information Act (FOIA) and the current
administration’s FOIA policy. The
commenter believed that these data
were necessary to assess the impact and
operation of the MA program, requested
immediate release of 2006–2009 data,
and asked CMS to release 2010 data as
soon as possible.
Response: We disagree with the
commenter’s argument that we must
proactively release MA payment data in
accordance with FOIA. Accordingly, we
have engaged in notice and comment
rulemaking pursuant to our authority
under section 1106(a) of the Social
Security Act to authorize the proactive
release of data from 2010 and beyond.
We are therefore finalizing our burden
estimate as proposed.
Y. ICRs Regarding Revision to
Limitation on Charges to Enrollees for
EmergencyDepartment Services
(§ 422.113)
At § 422.113(b)(2)(v) we eliminate the
current $50 cost-sharing limit on
emergency department services and,
instead, to require CMS to evaluate and
determine the appropriate enrollee cost
sharing limit for emergency department
services on an annual basis. The burden
associated with this proposed
requirement is the time and effort
necessary to for MA organizations
to submit their benefit designs,
including cost-sharing amounts, via the
Plan Benefit Package (PBP) software.
While this proposed requirement is
subject to the PRA, the associated
burden is currently approved under
OCN 0938–0763 with an expiration date
of May 31, 2011.
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IV. Regulatory Impact Analysis
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A. Introduction
We have examined the impacts of this
rule as required by Executive Order
12866 on Regulatory Planning and
Review (September 30, 1993), Executive
Order 13563 on Improving Regulation
and Regulatory Review (January 18,
2011), the Regulatory Flexibility Act
(RFA) (September 19, 1980, Pub. L. 96–
354), section 1102(b) of the Social
Security Act, section 202 of the
Unfunded Mandates Reform Act of 1995
(March 22, 1995, Pub. L. 104–4),
Executive Order 13132 on Federalism
(August 4, 1999), and the Congressional
Review Act (5 U.S.C. 804(2)). Executive
Orders 12866 and 13563 direct agencies
to assess all costs and benefits of
available regulatory alternatives and, if
regulation is necessary, to select
regulatory approaches that maximize
net benefits (including potential
economic, environmental, public health
and safety effects, distributive impacts,
and equity). Executive Order 13563
emphasizes the importance of
quantifying both costs and benefits, of
reducing costs, of harmonizing rules,
and of promoting flexibility. This rule
has been designated an ‘‘economically’’
significant rule under section 3(f)(1) of
Executive Order 12866, and a major rule
under the Congressional Review Act. In
accordance with the provisions of
Executive Order 12866, this regulation
was reviewed by the Office of
Management and Budget.
The RFA requires agencies to analyze
options for regulatory relief of small
entities, if a rule has a significant impact
on a substantial number of small
entities. For purposes of the RFA, small
entities include small businesses,
nonprofit organizations, and small
governmental jurisdictions. The great
majority of hospitals and most other
health care providers and suppliers are
small entities, either by being nonprofit
organizations or by meeting the SBA
definition of a small business (having
revenues of less than $7.0 million to
$34.5 million in any 1 year; for details,
see the Small Business Administration’s
Web site at https://ecfr.gpoaccess.gov/
cgi/t/text/text-idx?c=ecfr&sid=2465b064
ba6965cc1fbd2eae60854b11&rgn=div8&
view=text
&node=13:1.0.1.1.16.1.266.9&idno=13).
Individuals and States are not included
in the definition of a small entity.
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MA organizations and Part D
sponsors, the entities that will largely be
affected by the provisions of this rule,
are not generally considered small
business entities. They must follow
minimum enrollment requirements
(5,000 in urban areas and 1,500 in
nonurban areas) and because of the
revenue from such enrollments, these
entities are generally above the revenue
threshold required for analysis under
the RFA. While a very small rural plan
could fall below the threshold, we do
not believe that there are more than a
handful of such plans. A fraction of MA
organizations and sponsors are
considered small businesses because of
their non-profit status. HHS uses as its
measure of significant economic impact
on a substantial number of small
entities, a change in revenue or costs of
more than 3 to 5 percent. We do not
believe that this threshold will be
reached by the requirements in this final
rule because this final rule will have
minimal impact on small entities.
Therefore, an analysis for the RFA will
not be prepared because the Secretary
has determined that this final rule will
not have a significant impact on a
substantial number of small entities.
In addition, section 1102(b) of the Act
requires us to prepare an analysis if a
rule may have a significant impact on
the operations of a substantial number
of small rural hospitals. This analysis
must conform to the provisions of
section 604 of the RFA. For purposes of
section 1102(b) of the Act, we define a
small rural hospital as a hospital that is
located outside of a metropolitan
statistical area and has fewer than 100
beds. We are not preparing an analysis
for section 1102(b) of the Act because
the Secretary certifies that this rule will
not have a significant impact on the
operations of a substantial number of
small rural hospitals.
Section 202 of the Unfunded
Mandates Reform Act of 1995 (UMRA)
also requires that agencies assess
anticipated costs and benefits before
issuing any rule whose mandates
require spending in any 1 year by State,
local, or tribal governments, in the
aggregate, or by the private sector of
$100 million in 1995 dollars, updated
annually for inflation. In 2011, that
threshold is approximately $136
million. This final rule is not expected
to reach this spending threshold.
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Executive Order 13132 establishes
certain requirements that an agency
must meet when it promulgates a final
rule that imposes substantial direct
requirement costs on State and local
governments, preempts State law, or
otherwise has Federalism implications.
Based on CMS Office of the Actuary
estimates, we do not believe that this
final rule imposes substantial direct
requirement costs on State and local
governments, preempts State law, or
otherwise has Federalism implications.
We note that we have estimated that our
provision to eliminate, pursuant to
section 3309 of the ACA, Medicare Part
D cost-sharing for full-benefit dual
eligible individuals receiving home and
community based services at § 423.772
and § 423.782 will have a very small
cost impact on States resulting from the
need to identify eligible individuals and
provide data to CMS. As discussed
elsewhere in this RIA, we estimate the
annual cost associated with the
requirement for States to provide CMS
with this data to be $34,782 in the first
year and $20,869 for subsequent years.
B. Statement of Need
The purpose of this final rule is to
make revisions to the Medicare
Advantage (MA) program (Part C) and
Prescription Drug Benefit Program (Part
D), to implement provisions specified in
the ACA and make other changes to the
regulations based on our continued
experience in the administration of the
Part C and Part D programs. These latter
revisions are necessary to, (1) clarify
various program participation
requirements, (2) make changes to
strengthen beneficiary protections, (3)
strengthen our ability to identify strong
applicants for Part C and Part D program
participation and remove consistently
poor performers, and (4) make other
clarifications and technical changes.
C. Overall Impact
The CMS Office of the Actuary has
estimated savings and costs to the
Federal government as a result of
various provisions of this final rule. As
detailed in Table 11, we expect savings
to the Federal government of
approximately $82.42 billion for fiscal
years (FYs) 2011 through 2016 as a
result of the implementation of the
following provisions:
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are the provisions with the most
significant costs (that is, costs greater
than $100 million between FY 2011 and
FY 2016) in this final rule:
Tables H2, H3, and H4 detail the
breakdown of costs by cost-bearing
entity. Specifically, Table 11 describes
costs and savings to the Federal
government, Table 12 describes costs to
MA organizations and/or PDP sponsors
and third party entities, and Table 13
describes costs to States.
Taking into account both costs and
savings estimated in this RIA, we
estimate a net savings of $76.17 billion
as a result of the provisions in this final
rule over FYs 2011 to 2016. Therefore,
this final rule is ’’economically
significant’’ as measured by the $100
million threshold, and is a major rule
under the Congressional Review Act.
Accordingly, we have prepared an RIA
that details anticipated effects (costs,
savings, and expected benefits), and
alternatives considered by this
requirement. For collection of
information burden associated with our
requirements and the bases for our
estimates, refer to the collection of
information section of this final rule.
addition to the ACA-required limits on
cost sharing in MA plans for
chemotherapy services, renal dialysis
services, and skilled nursing facility
care. We are not finalizing our proposed
requirement to requiring cost sharing
limits for in-network home health
services provided by MA plans. We
estimate that the Federal fiscal year
2012 (FY 2012) costs to Medicare of
limiting cost sharing in MA plans for
the service categories specified in the
ACA (that is, chemotherapy and
radiation services, renal dialysis, and
skilled nursing facility care) will be zero
because we already require plans to
charge in-network cost sharing for these
three service categories that does not
exceed cost sharing under Original
Medicare. In fact, we believe that
Congressional intent was to require that
CMS maintain the limits on in-network
cost sharing that we had already
implemented for SNF care, renal
dialysis services, and Part B
chemotherapy services. Thus, we expect
that there will be no effect on plans or
beneficiaries as a result of our
implementation of the cost sharing
limits specified in section 3202 of the
ACA. We believe 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.
b. Approval of SNPs by NCQA (§ 422.4,
§ 422.101, and § 422.152)
1. Expected Impact on States, Plans and
the Medicare Program
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a. Cost Sharing for Specified Services at
Original Medicare Levels (§ 417.454 and
§ 422.100)
We estimate that our implementation
of section 3202 of the ACA will result
in no additional program costs. In our
November 2010 proposed rule (75 FR
71250) we had proposed cost sharing
limits for in-network home health
services provided under MA plans in
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The burden associated with this
requirement is the time and effort put
forth by MA organizations offering SNPs
to submit their model of care (MOC) to
CMS for NCQA evaluation and approval
as per CMS guidance. Although the
submission of the MOC is already part
of the application process, review of this
document by NCQA for approval is a
new requirement. This requirement is
for all new and existing SNPs. We
estimate that it will take each SNP plan
40 hours to complete the annual
application. Within those 40 hours, we
estimate it will take SNP plans 6 hours
to complete the SNP proposal portion of
the MA application. Currently, there are
544 existing SNP plans. We estimate of
the 6 hours, it will take existing SNPs
2.5 hours to complete the MOC for the
SNP approval process. For the existing
544 SNPs, we estimate the burden
associated with completing the MOC for
the SNP approval process only is 1,360
hours. For the existing plans to
complete the SNP sections only, the
burden associated with this new
requirement is 3,264 hours.
The number of new plans each year
will vary and cannot easily be
predicted. However, based on the
number of new plans that submitted
SNP Proposals during the application
period in February 2010 for operation in
2011, we estimate that approximately 15
new applications will be submitted
annually. For the estimated 15 new plan
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detailed in Table 10, we expect costs of
approximately $5.35 billion for FYs
2011 through 2016 as a result of the
implementation of various additional
provisions of this final rule. Following
ER15AP11.013</GPH>
In Table 10, we estimate total costs to
the Federal government, States, Part D
sponsors, MA organizations, and other
private sector entities as a result of
various provisions of this final rule. As
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applications, we estimate of the 6 hours
to complete the SNP portion of the
application it will take new SNPs 2.5
hours to complete the MOC for the SNP
approval process. For the 15 new plan
applications, we estimate the burden
associated with completing the MOC for
the SNP approval process only is 38
hours. Thus, for 15 new plans at 40
hours each, we estimate the total annual
burden hours to be 600.
The estimated costs associated with
the burden hours are summarized in
Tables 10 through 12. Table 10
summarizes the estimated total costs for
the Federal government and MA SNP
plans from FYs 2011 to 2016. The costs
in Table 11 reflect the contract award to
NCQA for $1 million and a contract
award at the level of $500,000 for years
2012 to 2016. The additional costs
incurred in this table are for the Federal
salaries for two GS–13 step 10 analysts
and a GS–15 manager. Table 12 contains
the projected costs to the SNPs for
preparing the SNP sections of the
application. These costs are primarily
labor costs for staff employed by the
plans to complete the required
materials. The salaries are equivalent to
that of one GS–13 step-10 analyst at a
salary of $55.46 an hour.
c. Determination of Part D Low-Income
Benchmark Premium (§ 423.780)
Beginning in 2011, section 1860D–
14(b)(3)(B)(iii) of the Act requires CMS
to calculate the LIS benchmarks using
basic Part D premiums before the
application of Part C rebates each year.
This final rule updates our regulations
at § 423.780(b)(2)(ii)(C) to codify this
provision. This provision will decrease
the number of reassignments of lowincome beneficiaries from plans that are
above the low-income benchmark
because it will increase the benchmark,
thereby producing more zero-premium
plans. We believe this provision will
lead to additional costs to the Federal
government of approximately $90
million for FY 2011.
The estimated cost to the Federal
government between FY 2011 and FY
2016 is $770 million. The year-by-year
impacts in millions of dollars are shown
in Tables 10 through 12. Table 11 shows
that the bulk of this total cost is due to
increased Federal premium subsidy
payments, which are the result of
generally increasing the low-income
benchmarks. The higher benchmarks
allow a greater number of low-income
beneficiaries to remain in their current
plan, rather than reassigning them to a
lower cost plan. In each region, the lowincome benchmark essentially functions
as a ceiling for the Federal premium
subsidy for low-income beneficiaries.
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That is, the Federal premium subsidy
covers the full cost of the plan’s basic
Part D premium for a full-subsidy
beneficiary, up to the low-income
benchmark amount.
This approach maintains a strong
incentive to bid low to keep and
possibly add LIS beneficiaries. Absent
the provision, there may be a ‘‘winner
take all’’ outcome in certain regions with
one organization acquiring all of the LIS
beneficiaries in the region. It is difficult
to predict what will happen in the
absence of this provision, but we expect
some organizations will be induced to
bid even lower, while other
organizations will give up on this
population and bid higher.
We expect this rule to reduce the
administrative costs for plan sponsors
associated with the reassignment of LIS
beneficiaries. These costs include the
production of new member
informational materials by the new
plan, increased staffing of call centers to
field beneficiary questions, and costs
associated with implementing transition
benefits for new enrollees. The cost
estimate for the LIS benchmark
methodology change in Table 10 does
not include a projection for
administrative savings.
We believe this final rule will have an
effect on the number of reassignments,
and the number of zero-premium plans
available to full-subsidy eligible
individuals in each region. This final
rule will reduce the number of
reassignments and increase the number
of zero premium organizations available
to beneficiaries. This is because, under
the higher benchmarks, more PDPs are
likely to have premiums that are equal
to or less than the low-income
benchmark and, as a result, will be fully
covered by the premium subsidy. Lowincome subsidy beneficiaries will be
able to remain in these PDPs and will
not be reassigned to other lowerpremium PDPs. Under the current
framework we would expect 1.9 million
reassignments. Under the formula for
calculating benchmarks we will expect
900,000 reassignments, or
approximately one million fewer
reassignments. We expect the formula to
increase the number of zero premium
organizations available to beneficiaries
in 21 of the 34 PDP regions.
Although there is no quantifiable
monetary value to CMS to reducing
reassignments, we believe this benefit is
important, as it will increase program
stability and continuity of care.
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d. Voluntary De Minimis Policy for
Subsidy Eligible Individuals (§ 423.34
and § 423.780)
The new voluntary de minimis
provisions in § 423.34(d) and
§ 423.780(f) permit Part D plans to
volunteer to waive a de minimis amount
of the Part D premium above the LIS
benchmark. We expect that the only Part
D plans that will volunteer to do so are
those PDPs that would otherwise lose
LIS beneficiaries to reassignment. We
will establish a new de minimis amount
in August of each year, and the de
minimis amount may vary by year. For
purposes of illustration, if the de
minimis amount were $1.00, we would
estimate 800,000 LIS beneficiaries
would have an average of $0.50 per
month waived by Part D plans, resulting
in a total annual cost to all de minimis
plans of $5 million per year. Table 12
shows that this would result in a total
cost of $30 million to PDPs from FY
2011 to 2016. If the de minimis amount
were $2.00, we would estimate that
1,200,000 LIS beneficiaries would have
an average of $0.93 per month waived
by Part D plans, resulting in a total
annual cost to all de minimis plans of
$10 million per year.
Our voluntary de minimis provisions
are estimated (based on the assumption
of a $1.00 de minimis amount) to cost
the Medicare Trust Fund $140 million
over the 6-year period from FY 2011 to
FY 2016. Tables 11 and 12 illustrate
how these costs are borne by the Federal
government and PDPs, respectively.
PDPs that volunteer to waive a de
minimis amount will not have their LIS
beneficiaries reassigned to a zero
premium plan. The additional costs are
attributable to low-income beneficiaries
staying in higher cost plans. The result
of staying in higher costs plans is that
Medicare’s low-income premium and
cost-sharing subsidy and reinsurance
payments will be greater than would
have been the case if CMS reassigned
these beneficiaries to lower-cost plans.
e. Increase in Part D Premiums Due to
the Income Related Monthly
Adjustment Amount (D–IRMAA)
(§ 423.44)
Section 423.44(e)(3) requires PDPs to
provide Part D enrollees with a notice
of disenrollment in a form and manner
determined by CMS. PDPs will provide
disenrollment notices to enrollees who
were required to pay the Part D—
IRMAA because their modified adjusted
gross income exceeded the income
threshold amounts set forth in 20 CFR
418, but failed to pay it after a grace
period and appropriate notice has been
provided.
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Consistent with data from individuals
paying the Part B IRMAA (1.8 million)
and enrolled in a Part D plan, we
estimate that approximately 1.05
million of the 29.2 million Medicare
beneficiaries enrolled in the Part D
program will exceed the minimum
income threshold amount and will be
assessed an income related monthly
adjustment amount. Out of the 1.05
million affected beneficiaries, we
estimate that 0.22 million will drop the
Part D coverage in 2011. Under Part B,
approximately 122,000 (14.8 percent) of
the 1.8 million beneficiaries assessed an
IRMAA are billed directly. This
constitutes 5.17 percent of the Medicare
population. We estimate that
approximately 80,000 (7.6 percent) of
the 1.05 million beneficiaries enrolled
in Part D who must pay the Part D—
IRMAA will be directly billed for the
Part D—IRMAA either because they are
not receiving monthly benefit payments
from SSA, OPM, or the RRB, or the
monthly benefit payment is not
sufficient to have the Part D—IRMAA
withheld.
Of the 80,000 Part D enrollees who
will be directly billed for the Part D—
IRMAA, we cannot estimate how many
might accrue Part D—IRMAA arrearages
and be subsequently terminated.
However, in cases where the PDP is
required to send an enrollee a notice of
termination in accordance with
§ 423.44(e)(4), the burden associated
with this requirement would be the time
and effort it takes the PDP to populate
the notice. Termination notices are
generally automated; therefore,
assuming all 80,000 Part D enrollees
that have a Part D—IRMAA become
delinquent, we estimate 1 minute ×
80,000 enrollees divided by 60 minutes.
This equates to an annual burden for
PDP sponsors of 1,333 hours at
approximately $40/hour (based on U.S.
Department of Labor statistics for hourly
wages for administrative support). The
associated burden amount for this work
is $53,320. Additionally, Part D plan
sponsors would have to retain a copy of
the notice in the beneficiary’s records.
We estimate 5 minutes × 80,000
enrollees divided by 60 minutes. This
equates to 6,666 hours at approximately
$40/hour (based on U.S. Department of
Labor statistics for hourly wages for
administrative support). This associated
burden amount is $266,640. We
estimate the total maximum annual
burden for all Part D plan sponsors
resulting from this provision to be
$319,960. Therefore, as shown in Table
12, we estimate this provision to result
in a maximum burden cost, to PDP
sponsors, in the amount of $1.92 million
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for FYs 2011 through 2016. During
calendar year 2011, we expect that
implementation of the Part D—IRMAA
provisions, at § 423.286(d)(4) and
§ 423.293(d), will increase the Medicare
Trust Fund by $270 million, with a net
Federal government savings of
approximately $4.77 billion from FY
2011 through FY 2016 from increased
premium payments by Medicare
beneficiaries. We describe these savings
to the Federal government in Table 11,
and describe total year-by-year impact
for the Federal government and Part D
sponsors in Table 10. Also, because the
income thresholds do not increase
between 2011 and 2019, we anticipate
that more beneficiaries will be affected
by the IRMAA provision over time and
this, in turn, will produce significant
growth in the savings associated with
this program.
f. Elimination of Medicare Part D CostSharing for Individuals Receiving Home
and Community-Based Services
(§ 423.772 and § 423.782)
We are amending § 423.772 and
§ 423.782 pursuant to section 3309 of
the ACA. Specifically, the changes
provide for a definition of an individual
receiving home and community based
services, and for zero cost-sharing for
Medicare Part D prescriptions filled by
full-benefit dual eligible beneficiaries
receiving such services. As illustrated in
Table 12, this provision will not
increase costs for MA organizations or
PDP sponsors. The affected beneficiaries
already have LIS as full duals and are,
therefore, low-income individuals.
Their Part D copayment level is likely
to be low prior to the elimination of
copayments. The elimination of
copayments will allow them additional
disposable income for other expenses.
The reduction in the copayments to zero
will be fully offset by increasing low
income subsidy cost sharing subsidy
payments we make to their Part D plans.
The formal elimination of the fund will
have little or no impact on the current
operation of the MA program. We
believe the impact on the Federal
government will be minimal given that
most of the impacted individuals are
already at a low copayment level and
the shift from the low copayment level
to zero copayment is small.
This provision will impact States, as
they will have to identify eligible
individuals and provide data to CMS.
They will send the new data on an
existing monthly data exchange already
used to identify dual eligible
beneficiaries. We estimate the cost for
States to comply with this requirement
to include a one-time development cost
of $34,782 in FY 2011, and as well as
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an ongoing annual cost of $20,869
starting in FY 2012.
g. Appropriate Dispensing of
Prescription Drugs in Long-Term Care
Facilities Under PDPs and MA–PD
Plans (§ 423.154) and Dispensing Fees
(§ 423.100)
We are adding a new regulation at
§ 423.154 to require Part D sponsors to
utilize uniform dispensing techniques
in increments of 14-days-or-less when
dispensing covered brand name Part D
drugs to enrollees who reside in longterm care (LTC) facilities. Based on our
discussions with industry, we estimate
that 75 percent to 80 percent of the cost
related to drug waste arises from 20
percent of the drugs. That 20 percent is
made up of brand name medications. In
an effort to target the drugs resulting in
the most financial waste and to lessen
burden for facilities transitioning from
30-day supplies to 14-day-or-less
supplies, we are initially limiting the
requirement for 14-day-or-less
dispensing to brand name drugs as
defined in § 423.4.
Pharmacies servicing LTC facilities
may have upfront costs associated with
software upgrades, packaging and
hardware changes, and ongoing costs of
transaction fees, and additional
deliveries. These costs were not
reflected in Table 10 of the proposed
rule; instead, we solicited comments on
these costs. We expect some of these
expenses to be offset by an increase in
dispensing fees consistent with
§ 423.100. In addition, a decrease in
volume of drugs dispensed may result
in lower revenues and rebates.
We expect most pharmacies to
initially convert from a 30-day punch
card system to a 14-day punch card
system. Our conversations with
manufacturers of the 30-day punch card
systems have indicated that there is
minimal capital investment conversion
needed for the transition from 30-day to
14-day packaging. We expect only a
relatively small number of pharmacies
will convert to an automated dose
dispensing system in the very shortterm due to the acquisition costs of the
technology. We anticipate costs
associated with the change in software
and training of pharmacy staff
associated with the change. We also
expect a few pharmacies to incur a
small additional expense related to the
number of deliveries required to service
a facility with a 14-day-or-less
dispensing technique.
We anticipate that dispensing fees
will be developed to take into account
the marginal costs associated with
additional dispensing events in a single
billing cycle for a single prescription
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and consider costs undertaken to
acquire and maintain technology aimed
at reducing waste. We would expect
dispensing fees to be greater when a Part
D drug is dispensed using automated
dose dispensing technology, as opposed
to a Part D drug dispensed via a 14-day
blister pack, due to substantially greater
marginal costs of acquiring and
implementing automated dose
technology than in adjusting current
systems and workflows to dispense in
14-day rather than 30-day quantities.
For purposes of scoring this final rule,
we project that the current aggregate
level of dispensing fees will double. It
is not at all clear that negotiated
dispensing fees must or will increase
directly in proportion to the number of
dispensing events per month as some,
but not all, commenters assert.
Nonetheless, in order to be as
conservative as possible in projecting
cost increases, we have assumed a
doubling of the current aggregate level
of dispensing fees. In addition, the
information we have to work with in
projecting potential savings reflects
widely divergent estimates. The
variation in savings estimates range
from as low as approximately 3 percent
to as high as 17 percent for 7-day
supplies, and as high as 20 to 25 percent
for automated dose dispensing. Given
the divergence in estimates and the
uncertainty in the rate of conversion to
the more efficient methodologies, we
have elected to be very conservative in
estimating savings in this final rule in
order to ensure that savings do result
from the implementation of this
provision.
We estimate the total yearly burden
for negotiating a contract between the
Part D sponsor and the entity (for
example, PBM) contracting with the
pharmacies servicing LTC facilities to be
equal to the number of the Part D
sponsors (731) × the average estimated
hours per sponsor (10). This equals
7,310 hours. We estimate the number of
entities contracting the pharmacies
servicing LTC facilities to be 40 (28
processors and 12 sponsors). We
estimate the total yearly hourly burden
for negotiating a contract between the
entity described previously and the
pharmacies servicing LTC facilities to be
the number of entities (40) × the average
estimated hours per entity (80). This is
3200 hours. The total number of hours
for contract negotiation is estimated to
be 10, 510 hours. The estimated hourly
labor cost for reporting is $150.20.
Hourly rates in the RIA include fringe
benefits and overhead. This estimate is
a compilation of the hourly rate for a
lawyer and support staff from the
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Bureau of Labor Statistics. The total
estimated cost associated with these
contract negotiation requirements is
$1,578,602 ($150.20 × (3,200 + 7,310
hours) = $1,578,602) and is described in
Table 12. This is a one-time contract
negotiation cost.
We are introducing a new
requirement under § 423.154 (a)(2) for
Part D sponsors to collect and report to
CMS the method of dispensing
technique used for each dispensing
event described under § 423.154 (a) and
on the nature and quantity of unused
brand and generic drugs. We anticipate
a billing standard that incorporates the
collection of the method of dispensing
technique. So, pharmacies and plans
will not have to create unique data
collection processes to collect that data.
We estimate that 40 sponsorscontractors (28 drug claim processors
and 12 sponsors that process their drug
claims and data collection) will be
subject to this requirement. For the
collection of data on unused drugs, we
estimate that it will take a total of 2,400
hours for 10 vendors (software vendors
plus pharmacies with proprietary
systems) to develop the programming
for this requirement. The estimated total
cost associated with the software
development is equal to the number of
software vendors plus the number of
pharmacies with proprietary systems
(10) times an hourly rate of $145.37 (this
includes $43.35 in direct wages and an
additional $102.02 in fringe benefits/
overhead/general and administrative
costs/fee) times 240 (estimated number
of hours to design and program one
system; the cost is $348,888. The total
cost associated with this provision is
$1,927,490 and is described in Table 12.
We anticipate that the initial upfront
costs to convert to a 14-day-or-less
dispensing technique will eventually be
more than offset by the savings to the
Federal government associated with
dispensing (see Table 10 for estimates of
the year-by-year savings). We expect
this provision to reduce in Part D
program expenses, pharmaceutical
waste, environmental disposal costs
impact, and the risk of pharmaceutical
diversion associated with unused drugs
in 30-day fills.
Comment: Several commenters
believed that we failed to adequately
analyze the financial impact of the 7day-or-less dispensing requirement.
Some commenters also stated that we
failed to consider the increased costs
associated with hiring pharmacists and
pharmacy technicians that would be
needed to keep up with the 7-day-orless dispensing requirement.
Response: As discussed earlier in this
final rule, we modified the proposed
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rule at § 423.154 to reflect 14-day-or-less
dispensing as opposed to 7-day-or-less
dispensing. Given that the requirement
is for 14-day-or-less dispensing and is
limited to brand name drugs only
(which make up only 20 percent of the
drugs dispensed), we do not believe
there will be a significant increase in
pharmacy staff. In addition, this final
rule modifies our proposed rule in such
a way as to reduce the burden
associated with this provision. As
previously discussed, we eliminated the
requirement for Part D sponsors’
pharmacies to collect unused Part D
drugs the pharmacies had originally
dispensed to enrollees, and we
simplified the reporting requirements
associated with this provision by
allowing pharmacies to calculate the
number of doses that go unused by
enrollees in LTC facilities by utilizing
the discontinuation dates of the
prescription and the quantities
dispensed to the enrollee. Also, by
changing the requirement from 7-day-orless dispensing to 14-day-or-less
dispensing, we reduce the burden
associated with filling the prescriptions
by the pharmacies and checking-in
prescriptions by the LTC facilities. The
burden reduction should translate into a
reduction in costs associated with this
provision because, for example, fewer
additional staff will be needed to
implement the requirements of
§ 423.154. We also believe that at least
some of the costs associated with
implementing this requirement will be
offset by the increase in dispensing fees.
We have, however, modified our impact
estimate to reflect the assumption that
dispensing fees will double and to take
into consideration that the
implementation date is January 1, 2013.
Comment: Several commenters stated
that we failed to take into consideration
the costs associated with collecting
unused drugs from the LTC facilities
and the costs associated with disposal of
those unused drugs.
Response: We have eliminated the
requirement for Part D sponsors
contracted pharmacies to collect unused
Part D drugs from LTC facilities.
Therefore, the pharmacies will not incur
increased costs associated with the
collection of unused drugs or the
disposal of those drugs as a result of this
final rule.
h. Complaint System for Medicare
Advantage Organizations and PDPs
(§ 422.504 and § 423.505)
The burden associated with this
provision is the time and effort of the
MA organizations and Part D sponsors
in training staff and recording complaint
closure documentation in the CTM, as
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well as posting and maintenance of a
link from their Web site to the electronic
complaint form at https://
www.medicare.gov. We estimate that the
total annual hourly burden for training
staff and recording complaint closure in
the CTM is equal to the average
estimated hours per sponsor for
documentation for each complaint
closure (.25) × the average number of
complaints per sponsor (102) plus the
average estimated hours per sponsor for
training (8 hours), multiplied by the
average cost of a technical health care
worker ($15) × the number of Part C and
D contracts (757). We also estimate that
the total annual hourly burden for
posting and continued maintenance of a
link is 20 hours × the average cost of a
Web site developer ($34) × the number
of Part C and D contracts (757). We
estimate the annual burden associated
with all these changes equals 40,500
hours. The average cost per hour is
approximately $22.10. The estimated
annual cost associated with these
requirements is $895,160.
i. Uniform Exceptions and Appeals
Process for Prescription Drug Plans and
MA–PD Plans (§ 423.128 and § 423.562)
We are modifying our proposal in our
November 2010 proposed rule (75 FR
71250) to include a reference to the
availability of model forms for
requesting coverage determinations and
appeals, as opposed to requiring use of
a standardized form. We are finalizing
the language related to instant access to
the coverage determination and appeals
process via the plan’s Web site, but have
clarified in the preamble that we are
interpreting instant access to mean, at a
minimum, the ability of Part D plan
sponsors to accept e-mail requests. We
expect that streamlining the appeals and
exceptions process will allow
beneficiaries to access appeals more
quickly and will ensure beneficiaries
have access to covered medications in a
timely manner. MA organizations and
Part D sponsors will be required to
process coverage determination requests
submitted by mail or via an Internet
Web site (§ 423.128(b)(7)(i) and (ii)),
which is estimated to result in an
annual burden of 80,745 hours. At an
estimated cost of $40.00 per hour, the
estimated total annual cost of this
requirement is $3.23 million. Also,
processing coverage determination
requests that are received by telephone
(§ 423.128(d)) is estimated to result in
an annual burden of 115,010 hours. At
an estimated cost of $40.00 per hour, the
estimated total annual cost of this
requirement is $4.6 million.
In cases when a prescription cannot
be filled as written, Part D sponsors are
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required under § 423.562(a)(3) to
arrange with their network pharmacies
to distribute a pharmacy notice advising
the enrollee of his or her right to contact
the plan to request a coverage
determination. Under this provision,
Part D sponsors are required to modify
their electronic transactions to
pharmacies so that they can transmit
codes instructing pharmacies to
distribute notices at the POS. That is,
pharmacies and PBMs are required to
program their systems to relay the
message at the pharmacy to distribute
the POS pharmacy notice that instructs
the enrollee to contact the plan sponsor
to request a coverage determination.
We estimate the burden on plan
processors will be the programming to
send the code or billing response to the
pharmacy, as well as revising the terms
of their contracts with pharmacies. We
estimate that the number of hours for
each processor (28 PBMs and 12 plan
organizations) to perform these tasks
will be 40 hours per processor or plan
organization, for a total one-time burden
of 1,600 hours. The estimated one-time
cost associated with the processor or
plan organization tasks is $64,000 (1600
hours × $40). Each pharmacy will need
to program to receive the code and print
the response. Programming by the
pharmacies (40 pharmacy software
vendors) in order to receive the code by
each pharmacy will be 10 hours, for a
total of 400 hours. The estimated onetime cost associated with the processor
tasks is $16,000 (400 hours × $40).
We estimate that the 731 contracting
entities would distribute an average of
2,200 pharmacy notices. Therefore,
requiring plan sponsors to arrange with
their network pharmacies to distribute
pharmacy notices at the point-of-sale
when prescriptions cannot be filled as
written (§ 423.562(2)(3)) would result in
an annual burden of 53,071 hours (2
minutes or 0.033 hours at point-of-sale
× 731 contractors × 2,200 pharmacy
notices per contract). At an estimated
cost of $40.00 per hour, the estimated
total annual cost of this change would
be $2.12 million.
Comment: One commenter believes
that our estimate of $40 an hour was too
low for processing coverage
determinations and redeterminations.
Response: We disagree. The estimated
hourly rate of $40 is a composite rate
based upon the Bureau of Labor
statistics National Compensation
Survey.
Comment: One commenter asked
CMS if we expect the pharmacy to
maintain a copy of the POS notice
according to the 10 year record retention
requirement. The commenter argued
that this would increase the burden
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estimate since it would likely increase
dispensing fees and present an
additional hurdle for pharmacies and
PBMs in response to CMS audit
requests.
Response: We do not specify which
specific records must be retained by Part
D sponsors for audit purposes. Part D
sponsors are responsible for
determining which pertinent documents
their network pharmacies must retain.
Therefore, the burden estimate
associated with the POS notice does not
account for the record retention
requirements provided under § 423.505.
j. 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 (§ 423.100 and § 423.464)
As provided under § 423.100 and
§ 423.464, Part D sponsors are required
to count ADAP and IHS costs towards
a beneficiary’s TrOOP costs, allowing
the beneficiary to move through the
coverage gap portion of the benefit and
into catastrophic coverage phase. There
is no burden on IHS facilities since
claims will be identified as IHS provider
claims by the National Provider
Identifier (NPI). However, ADAPs will
be requested to submit information to
CMS Coordination of Benefits (COB)
contractor via a voluntary data sharing
agreement (VDSA), which will be sent
to the TrOOP facilitator to ensure proper
calculation of the TrOOP amounts.
Several ADAPs already participate in
the COB file exchange and have
submitted their VDSAs. The
approximate cost associated with this
submission is 30 minutes to complete
the VDSA per entity. We estimate a
negligible one-time annual cost to 50
ADAPs that require VDSAs.
The burden associated with this
provision is not expected to impact
sponsor organization costs, with the
exception of up-front programming
costs, which we estimate will be 1 hour
per sponsor for an approximate cost of
$40 per sponsor. Including these costs
toward TrOOP impacts how fast a
beneficiary will reach the catastrophic
limit, triggering Federal reinsurance
payments. Sponsors will not incur
additional costs due to this requirement.
The Federal cost impact is estimated at
$460 million from FY 2011 to FY 2016.
The additional cost to the Federal
government (Medicare program) is due
to more individuals reaching the
catastrophic coverage phase under the
Part D benefit. Overall, we expect this
provision to reduce the costs to ADAPs
and IHS.
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k. Cost Sharing for Medicare Covered
Preventive Services (§ 417.454 and
§ 422.100)
We estimate that our implementation
of sections 4103, 4104, and 4105 of the
ACA will result in additional program
costs as beneficiaries will pay no
portion of the costs for the Personalized
Prevention Plan Services, the Initial
Preventive Physical Exam and
Medicare-covered preventive services
for which cost sharing is waived under
Original Medicare (§ 417.454 and
§ 422.100). We estimate that the FY
2012 costs to Medicare for increasing
access to clinical preventive services in
accord with sections 4103, 4104, and
4105 of ACA will be $410 million.
Although slightly less than 30 percent
of Medicare expenditures for Parts A
and B are for MA enrollees, we estimate
that the cost to the MA program of
increasing access to clinical preventive
services as described by sections 4103,
4104, and 4105 of the ACA will be
significantly less than 30 percent of the
estimated cost to the Medicare program
for implementation of these provisions.
In contrast to the Original Medicare
program, most MA plans already
provide some in-network preventive
services without charging beneficiary
cost sharing. In contract year 2010, at
least 78 percent of plans provide many,
or all, of the Medicare-covered
preventive services without charging
beneficiary cost sharing. In fact, almost
all MA plans currently provide a few of
the Medicare-covered preventive
benefits without cost sharing. Therefore,
we estimate that our requirement for
MA plans to provide the Medicarecovered preventive services without
beneficiary cost sharing will not
increase plan costs by a significant
amount.
Based on our finding that 78 percent
of plans provide some preventive
benefits without cost sharing in contract
year 2010, we estimate that for FY 2012
plans will incur approximately $27.1
million in costs by providing in-network
Medicare preventive services without
charging beneficiary cost sharing as
provided under § 417.454 and § 422.100.
Over time, we estimate that the relative
cost to the MA program for provision of
improved access to Medicare-covered
preventive services will be consistent
with the estimated cost for Medicare,
which increases with growth in the
Medicare population. We estimate the
total cost of this provision to be $147.9
million between FYs 2011 and 2016.
Further, although not included in our
estimates, we believe that the increased
emphasis on provision of preventive
services may also result in improved
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beneficiary well-being and subsequently
decrease their need for, and utilization
of, more costly medical and surgical
interventions and may decrease overall
program costs.
l. Elimination of the Stabilization Fund
(§ 422.458)
Section 10327(c) of the ACA repealed
section 1858(e) of the ACA, eliminating
the stabilization fund. Therefore, we are
deleting paragraph (f) from § 422.458,
since the statutory basis for the Fund no
longer exists. The elimination of the
stabilization fund will have the effect of
savings for the Federal government, but
will also result in a loss of financial
incentives for regional plans to operate
in regions with no or low MA
penetration.
We expect the Federal government to
save approximately $181.2 million for
the fiscal years 2011 through 2016 from
the implementation of this provision.
The savings are a result of the
elimination of the national bonus
payment and recruitment and retention
bonus payments to MA plans that
would operate in regions with no or low
MA penetration.
The fund will no longer offer a
financial incentive for regional
organizations to offer plans in regions
with low or no MA penetration. The
funds have never been accessible,
however, because, since the fund’s
inception, payments have been delayed
through legislation. Therefore, the
formal elimination of the fund will have
little or no impact on the current
operation of the MA program.
m. Improvements to Medication
Therapy Management Programs
(§ 423.153)
Our proposed rule estimated first year
costs associated with the requirement
for Part D sponsors to contract with all
LTC facilities in which their Part D
enrollees reside to provide appropriate
MTM services in coordination with
independent consultant pharmacist
evaluation and monitoring was
$96,709,680 ($402,957 estimated cost
per parent organization or sponsor × 240
parent organizations or stand alone
sponsors with Part D LTC residents =
$96,709,680 estimated cost). Annual
costs for updating the contracts for
subsequent years were estimated to be
$32,236,560 ($134,319 estimated cost
per parent organization or sponsor × 240
parent organizations or sponsors with
Part D LTC residents = $32,236,560
estimated cost). After considering
comments on our proposal, we are not
finalizing the proposed requirement that
Part D sponsors contract with LTC
facilities for appropriate MTM services
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in coordination with LTC consultant
pharmacist evaluation and monitoring,
and, therefore, are not finalizing our
original cost estimate associated with
this proposal.
Comment: Two commenters requested
that we include in our costs estimate
include all costs related to the provision
of MTM services in LTC settings and not
merely those costs associated with Part
D sponsor contracting.
Response: We are not finalizing the
proposed requirement for Part D
sponsors to coordinate MTM with LTC
consultant pharmacist evaluation and
monitoring, and are, therefore, not
finalizing our original impact estimate.
We plan to work with the industry to
develop an alternate proposal and a
more inclusive estimate of the
associated costs.
n. Changes To Close the Part D Coverage
Gap (§ 423.104 and § 423.884)
With the implementation of
provisions related to closing of the Part
D coverage gap, Medicare beneficiaries
will have improved access to the
prescription drugs in the coverage gap.
They will likely enter the catastrophic
phase of the benefit earlier in the benefit
year as a result of our changes to close
the Part D coverage gap, because they
will be more likely to obtain necessary
drugs in the coverage gap, thereby
bringing them to the catastrophic phase
sooner. Beneficiary cost sharing in the
coverage gap would be determined on
the basis of whether the covered Part D
drug is considered an applicable drug
under the Medicare coverage gap
discount program. Different cost sharing
levels will apply during the coverage
gap to the drugs that are applicable and
not applicable under the coverage gap
discount program. In addition to the
cost sharing changes, the rate of growth
of the annual Part D out-of-pocket
threshold would be reduced from FY
2014 to FY 2016. Further, in attesting to
the actuarial equivalence of qualified
retiree prescription drug plans to the
standard Medicare Part D coverage,
sponsors would not take into account
the value of any discount or coverage
provided during the coverage gap.
For changes associated with closing
the Part D coverage gap, we estimate a
one-time total cost of $50,400,000
(12,000 burden hours for each processor
× 40 processors × $105 for the average
labor cost of a senior programmer based
on data from the Bureau of Labor
Statistics) in the first year for the 40
pharmacy claims processors to
implement systems changes. In
subsequent years, the estimated total
annual cost is $1,050,000 (250 burden
hours per processor × 40 processors ×
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$105 for the full cost of labor of a senior
programmer) to identify changes to the
applicable drugs under the Medicare
coverage gap discount program and
update systems with this information
each month. The total estimated costs to
the Medicare program for the
adjustments to beneficiary cost sharing
in the coverage gap are $130,400,000 in
the first year (FY 2011), increasing in
subsequent years as the coverage gap
closes and the Part D enrollment
increases. The estimated annual cost to
the Medicare program associated with
decreasing the rate of annual growth in
the Part D out-of-pocket threshold is
$40,000,000 in FY 2014, increasing in
subsequent years as the Medicare Part D
enrollment increases and the coverage
gap closes.
o. Medicare Advantage Benchmark,
Quality Bonus Payments, and Rebate
and Application of Coding Adjustment
(§ 422.252, § 422.258, § 422.266, and
§ 422.308)
Prior to enactment of the ACA, MA
payment benchmarks (county rates)
were established only partially in
relationship to average fee-for-service
costs in a county. Section 1102 of
reconciliation amendments links all
county benchmarks to FFS costs,
effective 2012. As a transition, the ACA
sets the 2011 MA benchmarks equal to
the benchmarks for 2010; for subsequent
years it specifies that, ultimately, the
benchmarks will be equal to a
percentage (95, 100, 107.5, or 115
percent) of the fee-for-service rate in
each county. During a transition period,
the benchmarks will be based on a
blend of the pre-ACA and post-ACA
benchmarks. The phase-in schedule for
the new benchmarks will occur over 2
to 6 years, with the longer transitions for
counties with the larger benchmark
decreases under the new method.
The ACA, as amended, also
introduces MA bonuses and rebate
levels that are tied to the plans’ quality
ratings. Beginning in 2012, benchmarks
will be increased for plans that receive
a 4-star or higher rating on a 5-star
quality rating system. The bonuses will
be 1.5 percent in 2012, 3.0 percent in
2013, and 5.0 percent in 2014 and later;
these bonuses increase the new
benchmark portion of the blended
benchmark until all transitions are
complete. An additional county bonus,
which is equal to the plan bonus, will
be provided on behalf of beneficiaries
residing in specified counties. The
percentage of the ‘‘benchmark minus
bid’’ savings provided as a rebate, which
historically has been 75 percent, will
also be tied to a plan’s quality rating. In
2014, when the provision is fully
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phased in, the rebate share will be 50
percent for plans with a quality rating
of less than 3.5 stars; 65 percent for a
quality rating of 3.5 to 4.49; and 70
percent for a quality rating of 4.5 or
greater. This provision will provide
incentives for plan quality to increase.
Plans will be paid based on quality
performance rather than just the specific
services they provide. However, the
rules for determining quality bonus
payments for CY 2012 through 2014 will
be modified under the terms of the
national quality bonus payment
demonstration project.
The ACA amended the statutory
provision that requires us to make an
adjustment to MA risk scores for
differences in coding patterns between
MA and FFS. The ACA made four
modifications to this requirement: The
analysis must be conducted annually;
the data used in the analysis is to be
updated as appropriate; the results of
the analysis are to be incorporated into
risk scores on a timely basis; and the
application of an adjustment for
differences in coding patterns was
extended past 2010 indefinitely.
Further, the ACA provides for minimum
adjustments for MA coding in future
years.
Our changes to § 422.252, § 422.258,
and § 422.266 codify section 1102 of the
ACA, which links county benchmarks to
FFS costs and provides eligible plans
with a quality bonus. These provisions
will lower payments from us, bringing
MA payments in line with FFS
payments. The new provisions will also
generally reduce MA rebates and
benchmarks for plans and thereby result
in less generous benefit packages. We
estimate that the Federal government
will save approximately $40.56 billion
from FY 2011 to FY 2014. The Federal
government will save approximately
$76.470 billion from the FY 2011 to FY
2016. The year-by-year savings in
millions of dollars are shown in Table
10.
p. Quality Bonus Appeals (§ 422.260)
We estimate a minimal overall impact
as a result of this provision, as we
expect only a minority of MA
organizations to take advantage of the
opportunity to appeal CMS’ annual
quality rating. Of those organizations
that do appeal their rating, a minimal
number of professional staff working
over a short period of time would be
required to prepare and present an
organization’s appeal.
We estimate that the total annual
hourly burden for developing and
presenting a case to us for review is
equal to the number of organizations
likely to request an appeal multiplied by
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the number of hours for the attorneys of
each appealing MA organization to
research, draft, and submit their
arguments to CMS. Based on the star
rating distributions of previous contract
years, out of the approximately 350 MA
contracts that are subject to star rating
analysis (that is, those not excluded
from analysis because of low
enrollment, contract type not required
to report data, or new contract with no
performance history), approximately
250 may receive less than a four-star
rating. We estimate that 10 percent of
those contracts (25) will request an
appeal of their rating under the final
rule. We further estimate that one
attorney working for eight hours could
complete the documentation to be
submitted to us for each contract,
resulting in a total burden estimate of
200 hours (8 hours × 25 contracts = 200
hours). The estimated annual cost to
MA organizations associated with this
provision (assuming an attorney billing
rate of $250 per hour) is $50,000 (200
hours × $250 = $50,000). Our intent in
finalizing this provision is to ensure that
MA organizations are afforded the
benefit of reasonable opportunity to
challenge CMS determinations that
ultimately affect an organization’s
payments from the Medicare Trust
Fund. Granting organizations an avenue
to challenge CMS’ determinations will
enhance the transparency and
credibility of the process CMS uses to
determine the recipients of quality
bonus payments.
q. Timely Transfer of Data and Files
When CMS Terminates a Contract With
a Part D Sponsor (§ 423.509)
We anticipate minimal financial
impact from our requirement that
terminated Part D plan sponsors help to
effectuate a smooth transition for their
enrollees by providing CMS with
Medicare beneficiary data including
information to identify each affected
beneficiary, pharmacy claims files, true
out-of-pocket (TrOOP) cost balances,
and information concerning pending
grievances and appeals.
We estimate that the total annual
burden for this provision to be the cost
of maintaining sufficient staff to transfer
the data required under § 423.509. As a
result, we estimate the total annual
burden to be the number of Part D
sponsors we anticipate terminating in a
contract year (2) × the hourly rate of
staff to transfer the required data ($75/
hour) × the number of hours required to
provide data to us (20 hours). Therefore,
the estimated annual cost associated
with these requirements is $3,000. We
do not anticipate that this provision will
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result in a financial benefit to the
terminated Part D sponsor.
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r. Review of Medical Necessity
Decisions by a Physician or Other
Health Care Professional and the
Employment of a Medical Director
(§ 422.562, § 422.566, § 423.562, and
§ 423.566)
We are modifying the language in the
proposed rule with respect to the
requirement for a physician or other
health care professional to review initial
determinations involving medical
necessity. Under this final rule, if the
plan expects to issue a partially or fully
adverse decision based on the initial
review of the request, a physician or
other appropriate health care
professional with sufficient medical and
other expertise, including knowledge of
Medicare coverage criteria, must review
the request for medical necessity before
the plan issues its decision.
We are finalizing our modifications to
§ 422.562, § 422.566, § 423.562, and
§ 423.566 to require MA organizations
and Part D plan sponsors to employ a
medical director. We estimate that 95
percent of MA organizations and Part D
sponsors already have a medical
director overseeing decisions of medical
necessity. Therefore, we believe that
there will be no increase in cost for the
majority of MA organizations and Part D
sponsors. We anticipate that 5 percent
of MA organizations and Part D
sponsors will incur a financial impact as
a result of this provision.
Of the 5 percent of MA organizations
and Part D sponsors that do not
currently employ a medical director, we
estimate that the total annual burden for
employing a medical director is equal to
5 percent of the number of MA
organization and Part D sponsors (757),
which equals 38 organizations and
sponsors, at a salary of $250,000 per
year. Therefore, the estimated annual
cost associated with these requirements
is $9,500,000.
We believe this approach balances the
need to ensure proper medical review of
initial coverage determinations with the
ability of MA organizations and Part D
plan sponsors to manage health care
professional staff resources. We believe
these provisions will enhance medical
review activities and overall
coordination and accountability of plan
operations.
s. Agent and Broker Training
Requirements (§ 422.2274 and
§ 423.2274)
Sections 422.2274(b) and (c) and
423.2274(b) and (c) require MA
organizations’ and Part D sponsors’
agents and brokers to receive training
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and testing via a CMS endorsed or
approved training program. We are
considering implementing this
requirement through a Request for
Proposal (RFP) competitive process. The
burden associated with this requirement
is the time and effort put forth by plan
sponsors and/or third party vendors to
develop and submit their proposals for
CMS review. We estimate that about 12
entities (plan sponsors and/or third
party vendors) will submit a proposal
annually and that the average estimated
hours per entity to complete the
proposal is 100 hours. The total
estimated hourly burden associated
with this requirement is equal to the
estimated number of entities (12)
multiplied by the estimated hours per
entity (100) = 1,200 hours. We estimate
the hourly labor cost for the preparer of
the proposal will be $59.20 (based on
the U.S. Department of Labor statistics
for hourly wages for management
analysts). The annual cost of proposal
preparation is estimated to be $71,040
($59.20 × 1200 hours).
t. Call Center Interpreter Requirements
(§ 422.111 and § 423.128)
We estimate the cost for our call
center requirements at the parent
organization level because most parent
organizations have one call center for all
of their contracts. For the parent
organizations that currently and
consistently provide interpreters, their
costs will not increase. Organizations
that provide interpreters, but not
consistently, will need to train their
CSRs on how to use the interpreter
service, which can be included in
regularly scheduled training meetings at
no increased cost. Lastly, we expect the
cost for each of the two parent
organizations that currently do not
provide interpreters to increase by
$9,933 per year. This estimated cost is
based on 1–800–MEDICARE foreign
language interpreter use, which is 4.5
percent of all calls. If 4.5 percent of calls
could require an interpreter over the
course of a standard 12-hour call center
day, this would translate into using
interpreter services for 33 minutes each
day. Over the course of a year for the
301 days a call center is required to be
open, and at a rate of $1.00 per minute,
based on CMS market research in for
interpreter costs, the cost for each of the
two parent organizations would increase
by $9,933 per year, which is $19,866 for
both in FY 2012.
u. Customized Enrollee Data (§ 422.111
and § 423.128)
In proposed rule (75 FR 71261
through 71262), proposed
§ 422.111(b)(11) and § 423.128(b)(12)
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would require MA organizations and
PDP sponsors to periodically provide
each enrollee with enrollee-specific data
to use to compare utilization and out-ofpocket costs in the current plan year to
projected utilization and out-of-pocket
costs for the following plan year. Plans
would disclose this information to plan
enrollees in each year in which a
minimum enrollment period has been
met, in conjunction with the annual
renewal materials (currently the annual
notice of change and evidence of
coverage documents).
We estimated that the initial year
burden associated with this requirement
would be the time and effort necessary
for a plan sponsor to complete program
development and testing, and to
disclose (print and mail) this
information to each beneficiary. We
developed this burden estimate using
our experience with burden estimates
for the ANOC/EOC documents under
OMB control number (OCN) 0928–
1051as a baseline, then expanding on
that baseline, and factoring in expected
programming and development costs to
provide beneficiary specific
information. We estimated the total
annual burden hours associated with
this provision at 18,620 hours for the
564 MA organizations and 85 Part D
sponsors that would be affected
annually by this requirement. Using the
same wage/cost estimate as the ANOC/
EOC documents, we applied an hourly
wage cost for GS–10, step 1 analyst at
an estimated cost of $27.24 per hour.
Therefore, the estimated total initial
year cost of this requirement is
approximately $507,208.00.
In subsequent years, we estimated
that the burden associated with this
requirement would be the time and
effort necessary for a plan sponsor to
disclose (print and mail) this
information to each beneficiary. We
estimated the total annual burden hours
associated with this provision at 12,555
hours for the 564 MA organizations and
85 Part D sponsors that would be
affected annually by this requirement.
At an estimated cost of $27.24 per hour,
the estimated total initial year cost of
this requirement would be
approximately $342,000.
After considering comments on our
proposed policy, we have modified both
the final policy and our cost estimate, as
described below.
Comment: Many commenters stated
that a customized estimate of future
costs would create significant
administrative, financial, IT resource,
and call center burdens on MA plans
and Part D sponsors, much more than
CMS has anticipated. They stated that
the expense and operational burden of
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the proposal cannot be justified
economically or in value to
beneficiaries, considering the potential
for beneficiary confusion and
dissatisfaction that may result from
relying on estimated future costs. One
commenter suggested that the
significant costs of producing and
distributing a custom statement will
increase administrative costs that in
turn may increase plan bids and result
in a negative impact on benefits and or
premiums. As discussed in section
II.D.4 of this final rule, we received
many comments on our proposal to
authorize CMS to require MA
organizations and Part D drug sponsors
to periodically provide each enrollee
with enrollee specific data to use to
compare utilization and out-of-pocket
costs in the current plan year to
projected utilization and out-of-pocket
costs for the following plan year.
Response: Based on the comments
received, and our modified final policy,
we have also recalculated our estimate
of the burden based on the annual
burden to Part D plan sponsors to
furnish enrollees with an EOB for
prescription drug benefits under OMB—
0938–0964. MA organizations already
collect enrollee utilization and costsharing information as part of their
claims processing operations. In 2012,
the burden associated with this
proposed requirement would be the
time and effort necessary for 564 MA
organizations to complete program
development and testing of an
explanation of benefits when Part C
benefits are provided, and to disclose
(print and mail) this information to each
beneficiary. Given that stand alone PDPs
already produce an EOB in accordance
with § 423.128(e), the revised burden
estimate includes only MA
organizations. We estimate that in the
first year it will require each entity 200
hours on an annual basis to disseminate
the required materials, for a total annual
burden of 112,800 hours. This first year
estimate builds from the estimated
annual burden for the Part D EOB,
expanding the total hour requirement to
include additional hours required to
initiate and complete program
development and testing of an EOB. The
estimated first year cost is $3,938,976.
This estimate is based upon the hourly
rate at the GS–11/step 6 ($34.92)
multiplied by the number of burden
hours (112,800).
In subsequent years, the burden
associated with this requirement will be
the time and effort necessary for about
564 MA organizations to provide an
explanation of benefits when Part C
benefits are provided to enrollees. We
estimate that it will require each entity
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160 hours on an annual basis to
disseminate the required materials, for a
total annual burden of 90,240 hours.
The decreased estimate of burden hours
relative to the first year reflects the
completion of program development in
the first year and brings the estimated
hours in line with the current estimated
number of hours for the Part D EOB. The
estimated annual cost is $3,151,181.
This estimate is based upon the hourly
rate at the GS–11/step 6 ($34.92)
multiplied by the number of burden
hours (90,240).
The anticipated effect of our modified
provision to require MA organizations
to provide an explanation of Part C
benefits would be greater access to
individualized information for
beneficiaries to track their own
utilization of services and to use in
making decisions about their enrollment
and their health care options. While this
new EOB requirement will result in less
of a cost burden for MA plans than the
burden of calculating out-of-pocket
costs including an estimate of costs in
the next plan year, we continue to
believe that plans should already have
the systems in place to collect the
required out-of-pocket cost information
as part of their claims processing
operations and for calculating MOOP
limits. Therefore, over time, we
anticipate that plans would continue to
refine and work to make their processes
for disclosing this information as well as
the annual notice of change, evidence of
coverage, and other plan documents
more efficient, thereby mitigating the
burden in future years.
v. Extending the Mandatory Maximum
Out-of-Pocket (MOOP) Amount
Requirements to Regional PPOs
(§ 422.100 and § 422.101)
Sections 422.100(f) and 422.101(d)
extend the mandatory MOOP and
catastrophic limit requirements to RPPO
plans. Each RPPO plan must establish
an annual MOOP limit on total enrollee
cost sharing liability for Parts A and B
services, the dollar amount of which
would be set annually by CMS. All cost
sharing (that is, deductibles,
coinsurance, and copayments) for Parts
A and B services will be included in
RPPO plans’ MOOPs. While this change
is significant in that it will help
beneficiaries to understand and
anticipate their possible health care
expenditures, as with the requirement to
establish a mandatory MOOP for local
MA plans, we do not believe that this
change would by itself have a
significant cost impact on RPPO plan
participation or plan costs.
We estimate that any impact on
enrollee premiums will be very limited
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for several reasons. First, since
implementation of the MMA, RPPOs
have been required to establish a MOOP
for in-network cost sharing and a
catastrophic limit; however those
amounts are currently at the discretion
of MA organizations offering RPPO
plans. For FY 2011, we encouraged
RPPO plans to adopt either the
mandatory or voluntary MOOPs
established in CMS guidance. For FY
2011, the voluntary MOOP limits for
local PPO plans were set at $3,400 innetwork and $5,100 catastrophic (inand out-of-network), and the mandatory
MOOP limits for local PPO plans were
set for FY 2011 at $6,700 in-network
and $10,000 catastrophic (in- and outof-network). Based on data for FY 2011
approved bids, we found that only 3
regional PPO plans (4 percent of all
RPPOs) did not meet or exceed our
voluntary or mandatory in-network or
catastrophic maximum out-of-pocket
limits. Based on this information, it is
our expectation that the impact on
RPPO plans will be very small.
Second, it is our intention to continue
setting both the MOOP and Parts A and
B cost-sharing thresholds at levels that,
while affording reasonable financial
protection for those beneficiaries with
high health care needs, do not result in
significant new operating costs for MA
plans or increased out-of-pocket costs
for beneficiaries to the extent that MA
plans pass along any increased costs to
their enrollees in the form of premium
increases. Given a competitive
marketplace and Medicare beneficiary
sensitivity to premium amounts, we
believe that MA plans may choose
instead to modify their benefit packages
to reduce costs elsewhere. Furthermore,
we estimated that beneficiaries in
regional PPO plans that currently offer
the FY 2011 voluntary or mandatory
MOOP limits (about 92 percent of RPPO
plans) would experience no cost
increases as a result of these provisions.
In our April 2010 final rule, we
estimated that the maximum impact of
these requirements on beneficiary
premiums for those plans that currently
have no MOOP limit of any kind (8
percent of all prospective FY 2011
RPPO plans) would average $5 in the
absence of other adjustments to benefit
packages to account for the annual
MOOP requirements. However, in this
case, the RPPO plans already offer
MOOP and catastrophic limits, so we
estimated that any premium impact
would be less than $5.
By setting the parameters for the
annual mandatory MOOP limit, we
believe that we will make it easier for
plans to compete on a level playing
field.
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w. Translated Marketing Materials
(§ 422.2264 and § 423.2264)
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Our final rule slightly modifies
existing subregulatory guidance, so the
impact to plan sponsors (MA
organizations and PDP sponsors)
depends upon whether, and to what
extent, they are currently translating
marketing materials. In the preamble,
we indicate that moving to a 5 percent
translation standard (from 10 percent)
and focusing on the primary language
spoken by individuals in the service
area who have limited ability to read,
write, speak, or understand English will
result in a slight burden reduction. For
2011, 321 contract sponsors are required
to translate marketing materials at the
10 percent translation standard. Under
the 5 percent primary language
translation standard, we used 2011 data
to determine that sponsors would be
required to translate marketing materials
for only 305 contracts, which is 16
contracts fewer than under the 10
percent standard. In 2010, sponsors
were required to provide translated
marketing materials for 307 contracts.
Because the number of contracts (307)
from 2010 is extremely close to the
revised number of contracts (305) that
we estimate for 2011, we are not
changing our impact estimate from the
2010 estimate. We acknowledge that the
original estimates would have been
higher if we had used 2011 data when
originally compiling these estimates. At
the beginning of 2010, we conducted a
translated marketing material
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monitoring study in which preliminary
findings revealed that some sponsors
had produced a few materials. However,
we do not yet know the specific number
of sponsors that are providing all
translated materials. Our research
indicates that the average translation
cost is 20 cents per word, and that will
cost approximately $18,325 for a
sponsor to produce all of the required
plan materials in one language for the
first year because there are
approximately 17 documents containing
91,623 words for translation. In
subsequent years, sponsors will only
need to edit existing documents with
the new data and any changes required
by CMS, which could result in
approximately 5 percent of the
documents being changed. As a result,
after the first year of translating all
required documents, plan sponsors will
need to spend $916 updating translated
materials. Because we do not have final
data from our translated materials study,
we do not know what proportion of
sponsors would have to develop a
complete set of translated materials for
the first year and what proportion
would only need to update existing
documents. Because not all required
translated marketing materials are plan
benefit package (PBP) specific, if a plan
sponsor translates the document for one
PBP, it could use the document for all
PBPs offered that year. For the purpose
of this analysis, we assume that the
sponsors of all 307 contracts would
have to translate all materials for the
first year at a total cost of $5,625,775. In
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subsequent years, sponsors will only
need to edit existing translated
documents, which we estimate will cost
a total of $281,212 annually for all
sponsors. As mentioned in the
preamble, CMS hopes to further reduce
burden in the future by providing
pretranslated model materials. However,
as we do not have funding committed
for this effort at this time, we have not
changed the burden estimates to reflect
this goal.
Comment: One industry commenter
identified that this impact analysis did
not include the cost of an employee’s
time involved with coordinating the
translated materials effort.
Response: We did not include
employee time because, as stated in the
Collection of Information Requirements
section of this final rule, the
requirement to provide translated
materials is not a new responsibility for
Medicare Part C and D plans. We do not
have complete data on which plan
sponsors are providing translated
materials, and which ones are not. The
number of employees that would be
involved with coordinating this effort is
also unknown. Therefore, to err on the
side of caution, we presumed all
sponsors would have to develop first
year translations. Thus, we believe the
overall cost is an over estimate that
would more than compensate for not
including employee coordination time.
We are therefore finalizing our proposed
impact estimate without modification.
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Federal Register / Vol. 76, No. 73 / Friday, April 15, 2011 / Rules and Regulations
2. Expected Effects on Beneficiaries
a. Cost Sharing for Specified Services at
Original Medicare Levels (§ 417.454 and
422.100)
We believe that the requirement that
MA plan cost sharing may not exceed
that required under Original Medicare
for chemotherapy services, renal
dialysis services, and skilled nursing
facility care will provide additional
transparency and cost sharing and
predictability for beneficiaries as they
evaluate their health plan options, and
also will strengthen our beneficiary
protections against discriminatory cost
sharing and benefit designs.
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b. Approval of SNPs by NCQA (§ 422.4,
§ 422.101, and § 422.152)
We believe that our requirement that
all SNPs be approved by NCQA based
on evaluation of each plan’s model of
care (MOC) will result in SNP options
that are appropriate for special needs
beneficiaries and address their targeted
populations’ particular health care
needs. SNP MOCs provide the structure
for care management processes and
systems that enable SNPs to provide
coordinated care for special needs
individuals. By ensuring that these
documents provide an adequate
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framework for coordinated care for the
vulnerable beneficiaries eligible to
enroll in SNPs through the NCQA SNP
approval process, we believe the quality
of care under SNPs will be positively
impacted.
c. Determination of Part D Low-Income
Benchmark Premium (§ 423.780)
This final rule supports pharmacy and
formulary consistency for the
beneficiary. Particularly in regions with
high MA–PD penetration, this final rule
will reduce the year-to-year volatility in
reassignments of LIS beneficiaries and
would help avoid the disruption that is
inherent anytime a beneficiary is
switched from one plan to another.
d. Voluntary De Minimis Policy for
Subsidy Eligible Individuals (§ 423.34
and § 423.780)
The voluntary de minimis provisions
permit Part D plans to volunteer to
waive a de minimis amount of the Part
D premium above the low income
benchmark and, thus, avoid losing LIS
beneficiaries to reassignment. We
perform reassignments to ensure that
beneficiaries whom we originally
assigned to a zero premium plan will
not incur a new premium liability when
their current plan’s premium goes above
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the LIS benchmark in the following
year. The number of reassignments has
ranged between 1 and 2 million over
each of the past 4 years. While
reassignments are effective at avoiding
new premium liabilities, they can create
confusion and disrupt continuity of
care. We expect that the de minimis
provisions will reduce reassignments.
e. Increase in Part D Premiums Due to
the Income Related Monthly
Adjustment Amount (D–IRMAA)
(§ 423.44, § 423.286, § 423.293)
Beginning in CY 2011, we estimate
that approximately 1.05 million of the
29.2 million Medicare beneficiaries
enrolled in the Part D program will
exceed the minimum income threshold
amount and will be assessed an income
related monthly adjustment amount.
During calendar year 2011, we expect
that implementation of the Part D—
IRMAA provisions, at § 423.286(d)(4)
and § 423.293(d), will increase the
Medicare Trust Fund by $270 million,
with a net increase to the Medicare
Trust Fund over a 5-year period from FY
2011 through FY 2016 of $4.77 billion.
The Part D—IRMAA 2011 income levels
and premium adjustment amounts are
as follows:
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21557
Approximately 3.6 percent of
Medicare beneficiaries will be impacted.
We estimate that the number of
beneficiaries impacted per tier will be as
follows:
f. Elimination of Medicare Part D CostSharing for Individuals Receiving Home
and Community-Based Services
(§ 423.772 and § 423.782)
h. Complaint System for Medicare
Advantage Organizations and PDPs
(§ 422.504(a) and § 423.505(b))
k. Cost Sharing for Medicare Covered
Preventive Service (§ 417.454 and
§ 422.100)
We expect this provision to reduce
the volume of calls using 1–800–
MEDICARE as members will have
online access to the complaint tracking
system to file complaints regarding their
MA or prescription drug benefit plan.
We also expect the provision will
benefit Medicare beneficiaries by
offering another means for them to file
their complaints. Electronic complaint
filing should also save time for those
beneficiaries who choose to use this
method.
We believe that our requirement for
MA organizations and section 1876 cost
plans to provide in-network Medicarecovered preventive benefits at zero cost
sharing puts MA enrollees on a level
playing field with enrollees in Original
Medicare. Furthermore, we believe that
the increased emphasis on provision of
preventives services will result in
improved beneficiary well-being and
subsequently decrease their need for,
and utilization of, more costly medical
and surgical interventions, and possibly
in decreased overall program costs.
i. Uniform Exceptions and Appeals
Process for Prescription Drug Plans and
MA–PD Plans (§ 423.128, and § 423.562)
l. Elimination of the Stabilization Fund
(§ 422.458)
jlentini on DSKJ8SOYB1PROD with RULES2
g. Appropriate Dispensing of
Prescription Drugs in Long-Term Care
Facilities under PDPs and MA–PD Plans
(§ 423.154) and Dispensing Fees
(§ 423.100)
We expect that Part D enrollees who
use a 14-day supply (or less) of Part D
drugs described in the requirements
under section 423.154 (a) will benefit
from the savings resulting from a
reduction in cost sharing that would be
associated with a full 30-day supply
whenever a Part D drug is discontinued
within the first 2 weeks from the start
date of the drug. We would expect that
many drugs discontinued due to adverse
drug reactions or side effects will be
discontinued within the first 2 weeks. In
addition, Part D enrollees residing in
LTC facilities that elect to use more
efficient dispensing systems, such as
automated dose dispensing, may also
benefit from additional interactions
with nursing staff a result of decreased
medication preparation time associated
with automated dose dispensing. Over
time, we expect a decrease in drug
expenditures in the Part D program will
be reflected by a reduction in Part D
premiums.
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We expect that as a result of
implementation of this provision,
beneficiaries and the health care
providers or representatives that assist
them will benefit from a more
streamlined approach to the exceptions
and appeals process than what is in
place currently. They will have access
to the appeals process via a Web site or
a customer call center, if their plan
sponsor has not already adopted this
approach.
j. 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 (§ 423.100 and § 423.464)
Prior to implementation of this
provision, beneficiaries in both
programs had difficulty reaching the
catastrophic phase of the Part D benefit.
This provision will not only enable
beneficiaries to reach the catastrophic
limit where they will experience
significant reductions to their drug
costs, but will relieve the ADAPs and
IHS from incurring excessive
prescription costs.
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As previously stated, the formal
elimination of the fund will have little
or no impact on the current operation of
the MA program. Thus, we do not
believe this provision will have any
impact on beneficiaries.
m. Improvements to Medication
Therapy Management Programs
(§ 423.153)
We expect that beneficiaries will
benefit from this provision.
Standardized formats for the action plan
and summary resulting from annual
Comprehensive Medication Reviews
(CMR) will enable beneficiaries to have
a better understanding of the CMR
review findings and recommendations.
Also, the opportunity for sponsors to
use telehealth technology will improve
access to MTM services for
beneficiaries, particularly those in
remote locations or unable to travel.
n. Changes To Close the Part D Coverage
Gap (§ 423.104 and § 423.884)
Under these provisions to close the
Part D coverage gap, beneficiaries would
pay less for drugs in the coverage gap,
and would reach the out-of-pocket
threshold earlier in the benefit year. We
expect that, because beneficiaries
should find their prescription drugs
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The expected benefit of the
elimination of the Medicare Part D costsharing for individuals receiving home
and community based services
provision is greater access to
prescription drug coverage for a
population that traditionally has high
medical needs. These individuals are
already eligible for the full low income
subsidy, and likely qualify for the $1.10/
$3.30 copayment level now. The
elimination of the copayment will
provide financial relief for those who
are able to pay at that level and greater
access for those who are not.
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more affordable, there would be greater
adherence to drug therapies and fewer
instances of adverse health outcomes
arising from failure to take medications
as prescribed.
o. Medicare Advantage Benchmark,
Quality Bonus Payments, and Rebate
and Application of Coding Adjustment
(§ 422.252, § 422.258 and § 422.266, and
§ 422.308)
We have not determined an impact on
beneficiaries as a result of this
provision.
p. Quality Bonus Appeals (§ 422.260)
While we expect the QBP system will
encourage and incentivize MA plans to
transform their delivery systems and
processes to provide beneficiaries with
high-quality and efficient care, we do
not anticipate the QBP appeals process
will have any effect on beneficiaries.
jlentini on DSKJ8SOYB1PROD with RULES2
q. Timely Transfer of Data and Files
When CMS Terminates a Contract With
a Part D Sponsor (§ 423.509)
Our intent in implementing this
provision is to ensure that terminated
Part D plan sponsors transfer to CMS the
necessary data to provide a smooth
transition for beneficiaries into a new
Part D plan similar to when the Part D
sponsor terminates the contract or CMS
and the Part D plan sponsor mutually
terminate the contract. We anticipate
that this provision will benefit
beneficiaries by ensuring that TrOOP
and gross covered drug cost data are
transferred from the terminated plan to
the beneficiaries’ new plan, enabling the
members to be correctly positioned in
the new plan’s benefit.
r. Review of Medical Necessity
Decisions by a Physician or other Health
Care Professional and the Employment
of a Medical Director (§ 422.562,
§ 422.566, § 423.562, and § 423.566)
We are modifying the language in the
proposed rule with respect to the
requirement for a physician or other
health care professional to review initial
determinations involving medical
necessity. Under this final rule, if the
plan expects to issue a partially or fully
adverse decision based on the initial
review of the request, a physician or
other appropriate health care
professional with sufficient medical and
other expertise, including knowledge of
Medicare coverage criteria, must review
the request for medical necessity before
the plan issues its decision. This
requirement will favorably impact
beneficiaries by ensuring their requests
for coverage receive medical review by
an individual with appropriate clinical
expertise, without imposing any burden
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on beneficiaries because the
requirements for requesting an
organization or coverage determination
are not modified by this requirement.
s. Agent and Broker Training
Requirements (§ 422.2274 and
§ 423.2274)
Requiring all agents and brokers to
receive training and testing via a CMS
endorsed or approved training program
will further ensure that beneficiaries are
educated about Medicare health plan
options by plan agents and brokers who
are thoroughly and consistently trained
on the fundamentals of Medicare
regulations. We believe that such
thorough and consistent training will
help ensure that beneficiaries receive
accurate information about their
Medicare health care options and make
the best choices about their health care
coverage options for their particular
health care needs.
t. Call Center Interpreter Requirements
(§ 422.111 and § 423.128)
The expected benefit of our call center
interpreter requirements is that all
beneficiaries, regardless of language
spoken, will have access to all the
information they need to make
appropriate decisions about their health
care to utilize their Medicare benefits
most effectively.
u. Customized Enrollee Data (§ 422.111
and § 423.128)
We believe that our requirement that
MA organizations send enrollees an
explanation of benefits will ensure that
the beneficiaries periodically receive
information about their Part C
utilization and out-of-pocket costs to
help them make the best choices about
their health care coverage options for
their particular health care needs.
v. Extending the Mandatory Maximum
Out-of-Pocket (MOOP) Amount
Requirements to Regional PPOs
(§ 422.100 and § 422.101)
We believe extending the mandatory
MOOP requirement to RPPOs will
provide significant protection for MA
enrollees from out-of-pocket costs so
that beneficiaries will better understand
and anticipate their out-of-pocket
expenditures. This requirement
increases transparency for beneficiaries,
and will ensure all RPPO plan enrollees
are protected against high out-of-pocket
costs and are better able to compare
plans by focusing on differences in
premium and plan quality.
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w. Translated Marketing Materials
(§ 422.2264 and § 423.2264)
The expected benefit of our
requirement to codify existing
subregulatory guidance with respect to
translated marketing materials is to help
limited-English proficient beneficiaries
obtain access to the information they
need to make appropriate decisions
about their health care to utilize their
Medicare benefits most effectively.
Comment: One commenter indicated
that the impact analysis in the proposed
rule improperly indicated that we
would be helping all beneficiaries have
access to translated materials.
Response: We agree with the
commenter, and have revised the impact
discussion in this final rule to remove
language insinuating that all
beneficiaries speaking all languages will
have access to translated materials.
E. Alternatives Considered
The alternatives that were considered
are summarized as follows.
1. Cost Sharing for Specified Services at
Original Medicare Levels (§ 417.454 and
§ 422.100)
We considered using the authority
granted to the Secretary by section 3202
to limit MA cost sharing for service
categories in addition to those specified
in the ACA. However, we decided that
it is preferable to restrict our
implementation of section 3202 of the
ACA to the specified service categories,
allowing ourselves time to evaluate the
effects of those provisions, as well as
other recently-established policies
before using the new authority to adopt
those cost sharing limits for an
expanded list of service categories.
Although we proposed to use our
authority under sections 1856(b)(1) and
1857(e)(1) of the Act to limit the cost
sharing for home health services to
Original Medicare levels we have
decided not to finalize our proposal, as
discussed elsewhere in this final rule.
2. Cost Sharing for Medicare-Covered
Preventive Services (§ 417.454 and
§ 422.100)
We are proposing to implement
regulations to require MA organizations
and 1876 cost plans to provide innetwork Medicare-covered preventive
benefits at zero cost sharing, consistent
with the new regulations for Original
Medicare-covered preventive benefits.
More specifically, we are requiring that
all MA organizations provide Medicarecovered preventive services, as specified
by CMS, without enrollee cost sharing
charges.
We considered allowing plans to
charge cost sharing for Medicare-
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covered preventive services or to
voluntarily adopt zero cost sharing for
the specified preventive services. We
determined that in light of the
importance of preventive services in
managed and coordinated care, and the
requirements at section 1852(a)(1)(A) of
the Act (except as provided in section
1859(b)(3) of the Act for MSA plans and
in section 1852(a)(6) of the Act for MA
regional plans) that each MA plan must
provide to its members all Parts A and
B benefits included under the Original
Medicare fee-for-service program as
defined at section 1852(a)(1)(B) of the
Act, that requiring the same level of cost
sharing for the specified preventive
services for enrollees of Medicare health
plans as required under Original
Medicare would be the more
appropriate policy.
3. Quality Bonus Appeals (§ 422.260)
We considered not affording bonus
payment appeal rights to MA
organizations. We rejected this option
partly in recognition of the obligation
the law generally imposes on us to
afford entities affected by CMS
determinations concerning contract
performance or payment to have an
opportunity to challenge such
determinations. We also believe, as
noted previously, that the appeals
process promotes fairness in and
enhances the credibility of the bonus
payment determination process.
jlentini on DSKJ8SOYB1PROD with RULES2
4. Timely Transfer of Data and Files
When CMS Terminates a Contract With
a Part D Sponsor (§ 423.509)
We did not consider alternatives to
our provision regarding the timely
transfer of data and files following the
CMS termination of a Part D sponsor’s
contract. These data are necessary for
the proper adjudication of all Part D
benefits when a beneficiary changes
plans, such as calculating the true outof-pocket cost and determining whether
the beneficiary has any outstanding
claims for which the terminating
contract is responsible. Because of these
important beneficiary protections, we
did not consider alternatives to these
requirements.
5. Review of Medical Necessity
Decisions by a Physician or Other
Health Care Professional and the
Employment of a Medical Director
(§ 422.562, § 422.566, § 423.562, and
§ 423.566)
We did not consider alternatives
regarding review of medical necessity
decisions by a physician or other health
care professional and employment of a
medical director, as a majority of MA
organizations and Part D sponsors
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21559
already employ a medical director to
oversee decisions of medical necessity.
As noted previously, we are modifying
our proposed rule language on the
requirement for a physician or other
health care professional to review initial
determinations involving medical
necessity. Under this final rule, if the
plan expects to issue a partially or fully
adverse decision based on the initial
review of the request, a physician or
other appropriate health care
professional with sufficient medical and
other expertise, including knowledge of
Medicare coverage criteria, must review
the request for medical necessity before
the plan issues its decision.
further considered requiring plans to
disclose this information to plan
enrollees in each year in which a
minimum enrollment period has been
met, in conjunction with the annual
renewal materials (currently the annual
notice of change/evidence of coverage,
or ANOC/EOC). However, we are not
finalizing this policy alternative in our
final rule. Instead, as discussed in
section II.D.4 of this final rule, we
intend to work with MA organizations,
Part D sponsors and beneficiary
advocates to develop an explanation of
benefits for Part C benefits modeled
after the EOB currently required for Part
D enrollees at § 423.128(e).
6. Agent and Broker Training
Requirements (§ 422.2274 and
§ 423.2274)
Sections 422.2274(b) and (c) and
423.2274(b) and (c) require MA
organizations’ and Part D sponsors’
agents and brokers to receive training
and testing via a CMS-endorsed or
-approved training program. The
alternative we considered was to
continue to allow plans to conduct
training and testing on their own or
through third party vendor(s) and for
CMS to continue to review some
of these training programs upon
request by third party vendors for
comprehensiveness and accuracy.
However, we believe that it is in the best
interest of beneficiaries who are
educated about Medicare health plan
options by plan agents and brokers that
those agents and brokers be consistently
and thoroughly trained on the
fundamentals of Medicare regulations.
We believe the best method to achieve
this end is to require agents and brokers
to receive training and testing through
one or more CMS-endorsed or
-approved training programs.
9. Extending the Mandatory Maximum
Out-of-Pocket (MOOP) Amount
Requirements to Regional PPOs
(§ 422.100 and § 422.101)
The alternative we considered was
not extending the mandatory MOOP and
catastrophic limit requirements to RPPO
plans, but instead to permit plans to
continue to establish their own innetwork MOOP and catastrophic limits
without a maximum limit set by CMS
while encouraging them to adopt either
the mandatory or voluntary MOOPs
established in CMS guidance. However,
as we discussed in our April 2010 final
rule, (75 FR 19711), we believe RPPOs
should be subject to the same
requirements with respect to a MOOP as
local PPO plans. As discussed
elsewhere in this preamble, we believe
that the alternative chosen will make it
easier for beneficiaries to understand
and compare MA plans and will provide
significant protection for MA enrollees
from out of pocket costs.
7. Call Center Interpreter Requirements
(§ 422.111 and § 423.128)
Compliance with Title VI of the Civil
Rights Act of 1964 to serve all
individuals regardless of national origin
is a contractual requirement for MA and
Part D sponsors; therefore, we did not
consider any other alternatives to our
call center interpreter requirements.
8. Customized Enrollee Data (§ 422.111
and § 423.128)
In our November 2010 proposed rule
(75 FR 71249 through 71250), we
considered an alternative to require MA
organizations and PDP sponsors to
provide each enrollee with specific data
to use to compare utilization and out-ofpocket costs in the current plan year to
projected utilization and out-of-pocket
costs for the following plan year. We
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10. Translated Marketing Materials
(§ 422.2264 and § 423.2264)
Compliance with Title VI of the Civil
Rights Act of 1964 to serve all
individuals regardless of national origin
is a contractual requirement for MA and
Part D sponsors. Therefore, we did not
consider any other alternatives to our
translated marketing materials
requirements.
Comment: One commenter was
concerned that we did not consider any
alternatives to codifying the existing
population-based translation threshold
stated in our subregulatory guidance
(that is, the 10 percent translation
standard).
Response: In response to numerous
comments regarding the translation
standard itself, we conducted several
analyses using 2011 plan service area
data and the most recent American
Community Survey datasets. We
analyzed the effect of keeping our
standard at 10 percent, the effect of
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11. Increases to the Applicable
Percentage for Quality (§ 422.258(d))
List of Subjects
amendments to 42 CFR 422.564,
422.624, and 422.626 published April 4,
2003 at 68 FR 16652 and further amends
42 CFR chapter IV as set forth below:
42 CFR Part 417
Administrative practice and
procedure, Grant programs-health,
Health care, Health insurance, Health
maintenance organizations (HMO), Loan
programs—health, Medicare, and
Reporting and recordkeeping
requirements.
jlentini on DSKJ8SOYB1PROD with RULES2
42 CFR Part 422
Administrative practice and
procedure, Health facilities, Health
maintenance organizations (HMO),
Medicare, Penalties, Privacy, and
Reporting and recordkeeping
requirements.
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PART 417—HEALTH MAINTENANCE
ORGANIZATIONS, COMPETITIVE
MEDICAL PLANS, AND HEALTH CARE
PREPAYMENT PLANS
1. The authority citation for part 417
continues to read as follows:
■
Authority: Secs. 1102 and 1871 of the
Social Security Act (42 U.S.C. 1302 and
1395hh), secs. 1301, 1306, and 1310 of the
Public Health Service Act (42 U.S.C., 300e,
300e–5, and 300e–9), and 31 U.S.C. 9701.
As required by OMB Circular A–4
(available at https://
www.whitehouse.gov/omb/circulars/
a004/a-4.pdf), in Table 14, we have
prepared an accounting statement
showing the classification of the costs,
benefits, and transfers associated with
the provisions of this final rule. The
accounting statement is based on
estimates provided in Tables H10
through 13, (our best estimate of the
costs, savings, and transfers as a result
of the changes) and discounted at the 7
percent and 3 percent for the time
period of FY 2011 through FY 2016.
contracted service area using procedures
in § 417.492(b) and § 417.494(a) for any
period beginning on or after January 1,
2013, where—
*
*
*
*
*
Subpart K—Enrollment, Entitlement,
and Disenrollment Under Medicare
Contract
3. Section 417.430 is amended as
follows:
■ A. Revising the paragraph heading for
paragraph (a).
■ B. Revising paragraphs (a)(1), (b)(3),
and (b)(4).
■
§ 417.430
42 CFR Part 423
Administrative practice and
procedure, Emergency medical services,
Health facilities, Health maintenance
organizations (HMO), Health
professionals, Medicare, Penalties,
Privacy, and Reporting and
recordkeeping requirements.
For the reasons set forth in the
preamble, the Centers for Medicare &
Medicaid Services announces the
effective date of June 6, 2011 for
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The ACA requires a 5-star rating
system. We considered whether the 5star rating system should be consistent
with the current 5-star rating system in
place for beneficiary choice or should be
a separate system. We believe that plans
should be rated the same for consumer
choice and payment. There should not
be two different systems to rate the
quality and performance of MA plans.
Thus, the plan ratings are the basis for
the star rating system for quality bonus
payments.
F. Accounting Statement
Subpart J—Qualifying Conditions for
Medicare Contracts
2. Section 417.402 is amended by
revising paragraph (c) introductory text
to read as follows:
■
§ 417.402 Effective date of initial
regulations.
*
*
*
*
*
(c) Mandatory HMO or CMP and
contract non-renewal or service area
reduction. CMS will non-renew all or a
portion of an HMO’s or CMP’s
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Application procedures.
(a) Application forms and other
enrollment mechanisms. (1) The
application form must comply with
CMS instructions regarding content and
format and be approved by CMS. The
application must be completed by an
HMO or CMP eligible (or soon to
become eligible) individual and include
authorization for disclosure between the
HHS and its designees and the HMO or
CMP.
*
*
*
*
*
(b) * * *
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moving to a 10 percent standard
focusing on primary language, the effect
of moving to 5 percent standard
focusing on primary language, the effect
of moving to a simple 5 percent
standard, and the effect of using a 5
percent or 500 person standard. After
reviewing the results from these
sensitivity analyses, we determined that
a 5 percent threshold that focuses on
primary language spoken would be the
most appropriate approach for
beneficiaries and plans. We are
therefore maintaining this 5 percent
threshold in the final rule.
Federal Register / Vol. 76, No. 73 / Friday, April 15, 2011 / Rules and Regulations
(3) The HMO or CMP gives the
beneficiary prompt notice of acceptance
or denial in a format specified by CMS.
(4) The notice of acceptance. If the
HMO or CMP is currently enrolled to
capacity, explains the procedures that
will be followed when vacancies occur.
*
*
*
*
*
4. Section 417.454 is amended by
adding paragraphs (d) and (e) to read as
follows.
§ 417.454
Charges to Medicare enrollees.
*
*
*
*
*
(d) Limit on charges for specified
preventive services. An HMO may not
charge deductibles, copayments, or
coinsurance for in-network Medicarecovered preventive services (as defined
in § 410.152(l)).
(e) Services for which cost sharing
may not exceed cost sharing under
original Medicare. On an annual basis,
CMS will evaluate whether there are
service categories for which HMOs’ cost
sharing may not exceed that required
under original Medicare and specify in
regulation which services are subject to
that cost sharing limit. The following
services are subject to this limit on cost
sharing:
(1) Chemotherapy administration
services to include chemotherapy drugs
and radiation therapy integral to the
treatment regimen.
(2) Renal dialysis services as defined
at section 1881(b)(14)(B) of the Act.
(3) Skilled nursing care defined as
services provided during a covered stay
in a skilled nursing facility during the
period for which cost sharing would
apply under Original Medicare.
PART 422—MEDICARE ADVANTAGE
PROGRAM
5. The authority citation for part 422
continues to read as follows:
■
Authority: Secs. 1102 and 1871 of the
Social Security Act (42 U.S.C. 1302 and
1395hh).
Subpart A—General Provisions
6. Section 422.2 is amended by adding
the definitions of ‘‘fiscally sound
operation,’’ ‘‘fully integrated dual
eligible special needs plan,’’ and ‘‘senior
housing facility plan’’ in alphabetical
order to read as follows:
■
§ 422.2
Definitions.
jlentini on DSKJ8SOYB1PROD with RULES2
*
*
*
*
*
Fiscally sound operation means an
operation which at least maintains a
positive net worth (total assets exceed
total liabilities).
*
*
*
*
*
Fully integrated dual eligible special
needs plan means a CMS approved
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MA–PD dual eligible special needs plan
that—
(1) Enrolls special needs individuals
entitled to medical assistance under a
Medicaid State plan, as defined in
section 1859(b)(6)(B)(ii) of the Act and
§ 422.2;
(2) Provides dual eligible beneficiaries
access to Medicare and Medicaid
benefits under a single managed care
organization;
(3) 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;
(4) 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
(5) Employs policies and procedures
approved by CMS and the State to
coordinate or integrate member
materials, enrollment, communications,
grievance and appeals, and quality
improvement.
*
*
*
*
*
Senior housing facility plan means an
MA coordinated care plan that—
(1) Restricts enrollment to individuals
who reside in a continuing care
retirement community as defined in
§ 422.133(b)(2);
(2) Provides primary care services
onsite and has a ratio of accessible
physicians to beneficiaries that CMS
determines is adequate consistent with
prevailing patterns of community health
care referenced at § 422.112(a)(10);
(3) Provides transportation services
for beneficiaries to specialty providers
outside of the facility; and
(4) Was participating as of December
31, 2009 in a demonstration established
by CMS for not less than 1 year.
*
*
*
*
*
■ 7. Section 422.4 is amended as
follows:
■ A. Revising paragraphs (a)(1)(iii) and
(iv).
■ B. Adding paragraph (a)(1)(vi).
The revisions and additions read as
follows:
§ 422.4
Types of MA plans.
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(a) * * *
(1) * * *
(iii) Coordinated care plans include
plans offered by any of the following:
(A) Health maintenance organizations
(HMOs);
(B) Provider-sponsored organizations
(PSOs), subject to paragraph (a)(1)(vi) of
this section.
(C) Regional or local preferred
provider organizations (PPOs) as
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specified in paragraph (a)(1)(v) of this
section.
(D) Other network plans (except PFFS
plans).
(iv) A specialized MA plan for special
needs individuals (SNP) includes any
type of coordinated care plan that meets
CMS’s SNP requirements and
exclusively enrolls special needs
individuals as defined by § 422.2 of this
subpart. All MA plans wishing to offer
a SNP will be required to be approved
by the National Commission on Quality
Assurance (NCQA) effective January 1,
2012. This approval process applies to
existing SNPs as well as new SNPs
joining the program. All SNPs must
submit their model of care (MOC) to
CMS for NCQA evaluation and approval
as per CMS guidance.
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(vi) In accordance with § 422.370,
CMS does not waive the State licensure
requirement for organizations seeking to
offer a PSO.
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Subpart B—Eligibility, Election, and
Enrollment
■
8. Add § 422.53 to read as follows:
§ 422.53 Eligibility to elect an MA plan for
senior housing facility residents.
(a) Basic eligibility requirements. To
be eligible to elect an MA senior
housing facility plan, the individual
must meet both of the following:
(1) Be a resident of an MA senior
housing facility defined in § 422.2.
(2) Be eligible to elect an MA plan
under § 422.50.
(b) Restricting enrollment. An MA
senior housing facility plan must restrict
enrollment to only those individuals
who reside in a continuing care
retirement community as defined at
§ 422.133(b)(2).
(c) Establishing eligibility for
enrollment. An MA senior housing
facility plan must verify the eligibility of
each individual enrolling in its plan
using a CMS approved process.
■ 9. Section 422.62 is amended as
follows:
■ A. Revising paragraphs (a)(2)(i),
(a)(2)(iii), and (a)(5).
■ B. Adding paragraphs (a)(2)(iv) and
(a)(7).
The revisions and additions read as
follows:
§ 422.62
plan.
Election of coverage under an MA
(a) * * *
(2) * * **
(i) For 2002 through 2010, except for
2006, the annual coordinated election
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period for the following calendar year is
November 15 through December 31.
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(iii) Beginning in 2011, the annual
coordinated election period for the
following calendar year is October 15
through December 7.
(iv) During the annual coordinated
election period, an individual eligible to
enroll in an MA plan may change his or
her election from an MA plan to
Original Medicare or to a different MA
plan, or from Original Medicare to an
MA plan. If an individual changes his
or her election to Original Medicare, he
or she may also elect a PDP.
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(5) Open enrollment and
disenrollment from 2007 through 2010.
(i) Open enrollment period. For 2007
through 2010, except as provided in
paragraphs (a)(5)(ii), (iii), and (a)(6) of
this section, an individual who is not
enrolled in an MA plan but is eligible
to elect an MA plan may make an
election into an MA plan once during
the first 3 months of the year.
(ii) Newly eligible MA individual. An
individual who becomes MA eligible in
2007 through 2010 may elect an MA
plan or change his or her election once
during the period that begins the month
the individual is entitled to both Part A
and Part B and ends on the last day of
the third month of the entitlement, or on
December 31, whichever is earlier,
subject to the limitations in paragraphs
(a)(5)(i)(A) and (a)(5)(i)(B) of this
section.
(iii) Single election limitation. The
limitation to one election or change in
paragraphs (a)(5)(i) and (a)(5)(ii) of this
section does not apply to elections or
changes made during the annual
coordinated election period specified in
paragraph (a)(2) of this section, or
during a special election period
specified in paragraph (b) of this
section.
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(7) Annual 45-day period for
disenrollment from MA plans to
Original Medicare. For 2011 and
subsequent years, at any time from
January 1 through February 14, an
individual who is enrolled in an MA
plan may elect Original Medicare once
during this 45-day period. An
individual who chooses to exercise this
election may also make a coordinating
election to enroll in a PDP as specified
in § 423.38(d).
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10. Section 422.68 is amended by
adding paragraph (f) to read as follows:
■
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§ 422.68 Effective dates of coverage and
change from coverage.
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(f) Annual 45-day period for
disenrollment from MA plans to
Original Medicare. Beginning in 2011,
an election made from January 1
through February 14 to disenroll from
an MA plan to Original Medicare, as
described in § 422.62(a)(7), is effective
the first day of the first month following
the month in which the election is
made.
■ 11. Section 422.74 is amended by
adding paragraphs (d)(1)(v) and (vi) to
read as follows:
§ 422.74 Disenrollment by the MA
organization.
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(d) * * *
(1) * * *
(v) Extension of grace period for good
cause and reinstatement. When an
individual is disenrolled for failure to
pay the plan premium, CMS may
reinstate enrollment in the MA plan,
without interruption of coverage, if the
individual shows good cause for failure
to pay within the initial grace period,
and pays all overdue premiums within
3 calendar months after the
disenrollment date. The individual must
establish by a credible statement that
failure to pay premiums within the
initial grace period was due to
circumstances for which the individual
had no control, or which the individual
could not reasonably have been
expected to foresee.
(vi) No extension of grace period. A
beneficiary’s enrollment in the MA plan
may not be reinstated if the only basis
for such reinstatement is a change in the
individual’s circumstances subsequent
to the involuntary disenrollment for
non-payment of premiums.
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*
Subpart C—Benefits and Beneficiary
Protections
12. Section 422.100 is amended by
adding paragraphs (j) and (k) to read as
follows.
■
§ 422.100
General requirements.
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*
*
*
*
(j) Services for which cost sharing may
not exceed cost sharing under Original
Medicare. On an annual basis, CMS will
evaluate whether there are service
categories for which MA plans’ innetwork cost sharing may not exceed
that required under Original Medicare
and specify in regulation which services
are subject to that cost sharing limit.
The following services are subject to
this limit on cost sharing:
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(1) Chemotherapy administration
services to include chemotherapy drugs
and radiation therapy integral to the
treatment regimen.
(2) Renal dialysis services as defined
at section 1881(b)(14)(B) of the Act.
(3) Skilled nursing care defined as
services provided during a covered stay
in a skilled nursing facility during the
period for which cost sharing would
apply under Original Medicare.
(k) Cost sharing for in-network
preventive services. MA organizations
may not charge deductibles,
copayments, or coinsurance for innetwork Medicare-covered preventive
services (as defined in § 410.152(l)).
■ 13. Section 422.101 is amended as
follows:
A. Revising paragraphs (d)(2) and (3).
B. Adding paragraph (f)(2)(vi).
The revisions and addition read as
follows.
§ 422.101
benefits.
Requirements relating to basic
*
*
*
*
*
(d) * * *
(2) Catastrophic limit. MA regional
plans are required to establish a
catastrophic limit on beneficiary out-ofpocket expenditures for in-network
benefits under the Original Medicare
fee-for-service program (Part A and Part
B benefits) that is no greater than the
annual limit set by CMS.
(3) Total catastrophic limit. MA
regional plans are required to establish
a total catastrophic limit on beneficiary
out-of-pocket expenditures for innetwork and out-of-network benefits
under the Original Medicare fee-forservice program. This total out-of-pocket
catastrophic limit, which would apply
to both in-network and out-of-network
benefits under Original Medicare, may
be higher than the in-network
catastrophic limit in paragraph (d)(2) of
this section, but may not increase the
limit described in paragraph (d)(2) of
this section and may be no greater than
the annual limit set by CMS.
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*
*
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*
(f) * * *
(2) * * *
(vi) All MAOs wishing to offer or
continue to offer a SNP will be required
to be approved by the National
Committee for Quality Assurance
(NCQA) effective January 1, 2012 and
subsequent years. All SNPs must submit
their model of care (MOC) to CMS for
NCQA evaluation and approval in
accordance with CMS guidance.
■ 14. Section 422.106 is amended as
follows:
■ A. Revising paragraph (d)(1).
■ B. Adding paragraphs (d)(4) through
(d)(6).
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The revision and additions read as
follows.
§ 422.106 Coordination of benefits with
employer or union group health plans and
Medicaid.
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(d) * * *
(1) CMS may waive or modify any
requirement in this part or Part D that
hinders the design of, the offering of, or
the enrollment in, an employersponsored group MA plan (including an
MA–PD plan) offered by one or more
employers, labor organizations, or the
trustees of a fund established by one or
more employers or labor organizations
(or combination thereof), or that is
offered, sponsored or administered by
an entity on behalf of one or more
employers or labor organizations, to
furnish benefits to the employers’
employees, former employees (or
combination thereof) or members or
former members (or combination
thereof) of the labor organizations. Any
entity seeking to offer, sponsor, or
administer such an MA plan described
in this paragraph may request, in
writing, from CMS, a waiver or
modification of requirements in this
part that hinder the design of, the
offering of, or the enrollment in, such
MA plan.
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*
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*
(4) An employer-sponsored group MA
plan means MA coverage offered to
retirees who are Medicare eligible
individuals under employment-based
retiree health coverage, as defined in
paragraph (d)(5) of this section,
approved by CMS as an MA plan.
(5) Employment-based retiree
coverage means coverage of health care
costs under a group health plan, as
defined in paragraph (d)(6) of this
section, based on an individual’s status
as a retired participant in the plan, or as
the spouse or dependent of a retired
participant. The term includes coverage
provided by voluntary insurance
coverage, or coverage as a result of a
statutory or contractual obligation.
(6) Group health plans include plans
as defined in section 607(1) of ERISA,
(29 U.S.C. 1167(1)). They also include
the following plans:
(i) A Federal or State governmental
plan, which is a plan providing medical
care that is established or maintained
for its employees by the Government of
the United States, by the government of
any State or political subdivision of a
State (including a county or local
government), or by any agency or
instrumentality or any of the foregoing,
including a health benefits plan offered
under 5 U.S.C. 89 (the Federal
Employee Health Benefit Plan (FEHBP)).
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(ii) A collectively bargained plan,
which is a plan providing medical care
that is established or maintained under
or by one or more collective bargaining
agreements.
(iii) A church plan, which is a plan
providing medical care that is
established and maintained for its
employees or their beneficiaries by a
church or by a convention or association
of churches that is exempt from tax
under section 501 of the Internal
Revenue Code of 1986 (26 U.S.C. 501).
(iv) Any of the following plans:
(A) An account-based medical plan
such as a Health Reimbursement
Arrangement (HRA) as defined in
Internal Revenue Service Notice 2002–
45, 2002–28 I.R.B. 93.
(B) A health Flexible Spending
Arrangement (FSA) as defined in
Internal Revenue Code (Code) section
106(c)(2).
(C) A health savings account (HSA) as
defined in Code section 223.
(D) An Archer MSA as defined in
Code section 220, to the extent they are
subject to ERISA as employee welfare
benefit plans providing medical care (or
would be subject to ERISA but for the
exclusion in ERISA section 4(b), 29
U.S.C.1003(b), for governmental plans
or church plans).
■ 15. Section 422.107 is amended by
revising paragraph (d)(1)(ii) to read as
follows:
written explanation of benefits, when
benefits are provided under this part.
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*
(h) Provision of specific information.
Each MA organization must have
mechanisms for providing specific
information on a timely basis to current
and prospective enrollees upon request.
These mechanisms must include all of
the following:
(1) A toll-free customer service call
center that meets all of the following:
(i) Is open during usual business
hours.
(ii) Provides customer telephone
service in accordance with standard
business practices.
(iii) Provides interpreters for nonEnglish speaking and limited English
proficient (LEP) individuals.
(2) An Internet Web site that includes,
at a minimum the following:
(i) The information required in
paragraph (b) of this section.
(ii) Copies of its evidence of coverage,
summary of benefits, and information
(names, addresses, phone numbers, and
specialty) on the network of contracted
providers. Such posting does not relieve
the MA organization of its responsibility
under § 422.111(a) to provide hard
copies to enrollees.
(3) The provision of information in
writing, upon request.
■ 17. Section 422.112 is amended by
revising paragraph (a)(10) introductory
text to read as follows:
§ 422.107 Special needs plans and dualeligibles: Contract with State Medicaid
Agency.
§ 422.112
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*
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*
(d) * * *
(1) * * *
(ii) Existing dual-eligible SNPs that do
not have a State Medicaid agency
contract—
(A) May continue to operate through
the 2012 contract year provided they
meet all other statutory and regulatory
requirements.
(B) May not expand their service areas
during contract years 2010 through
2012.
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■ 16. Amend § 422.111 as follows:
■ A. Adding paragraph (b)(12).
■ B. Removing paragraph (f)(12).
■ C. Adding paragraph (h).
The additions read as follows.
§ 422.111
Disclosure requirements.
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*
(b) * * *
(12) Claims information. CMS may
require an MA organization to furnish
directly to enrollees, in the manner
specified by CMS and in a form easily
understandable to such enrollees, a
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Access to services.
(a) * * *
(10) Prevailing patterns of community
health care delivery. MA plans that meet
Medicare access and availability
requirements through direct contracting
network providers must do so consistent
with the prevailing community pattern
of health care delivery in the areas
where the network is being offered.
Factors making up community patterns
of health care delivery that CMS will
use as a benchmark in evaluating a
proposed MA plan health care delivery
network include, but are not limited to
the following:
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*
■ 18. Amend § 422.113 by revising
paragraph (b)(2)(v) to read as follows:
§ 422.113 Special rules for ambulance
services, emergency and urgently needed
services, and maintenance and poststabilization care services.
(b) * * *
(2) * * *
(v) With a limit on charges to
enrollees for emergency department
services that CMS will determine
annually, or what it would charge the
enrollee if he or she obtained the
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services through the MA organization,
whichever is less.
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network means under § 422.111(b)(3)(ii)
of this part.
Subpart D—Quality Improvement
Subpart F—Submission of Bids,
Premiums, and Related Information
and Plan Approval
19. Amend § 422.152 by revising
paragraph (g) introductory text to read
as follows:
■
■
§ 422.152
Quality improvement program.
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*
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*
*
(g) Special requirements for
specialized MA plans for special needs
individuals. All special needs plans
(SNPs) must be approved by the
National Committee for Quality
Assurance (NCQA) effective January 1,
2012 and subsequent years. SNPs must
submit their model of care (MOC) to
CMS for NCQA evaluation and
approval, in accordance with CMS
guidance. A SNP must conduct a quality
improvement program that—
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*
■ 20. Amend § 422.156 by revising
paragraph (b)(1) to read as follows:
§ 422.156 Compliance deemed on the
basis of accreditation.
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*
(b) * * *
(1) Quality improvement. The
deeming process should focus on
evaluating and assessing the overall
quality improvement (QI) program.
However, the quality improvement
projects (QIPs) and the chronic care
improvement programs (CCIPs) will be
excluded from the deeming process.
*
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*
Subpart E—Relationships With
Providers
21. Amend § 422.214 by adding
paragraphs (c) and (d) to read as follows:
■
§ 422.214 Special rules for services
furnished by noncontract providers.
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(c) Deemed request for Medicare
payment rate. A noncontract section
1861(u) of the Act provider of services
that furnishes services to MA enrollees
and submits the same information that
it would submit for payment under
Original Medicare is deemed to be
seeking to be paid the amount it would
be paid under Original Medicare unless
the provider expressly notifies the MA
organization in writing that it is billing
an amount less than such amount.
(d) Regional PPO payments in nonnetwork areas. An MA Regional PPO
must pay non-contract providers the
Original Medicare payment rate in those
portions of its service area where it is
providing access to services by non-
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22. Section 422.252 is amended as
follows:
■ A. Adding the definitions ‘‘low
enrollment contract’’ and ‘‘new MA
plan.’’
■ B. Revising the definition of
‘‘unadjusted MA area-specific non-drug
monthly benchmark amount.’’
The additions and revision read as
follows:
§ 422.252
Terminology.
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*
Low enrollment contract means a
contract that could not undertake
Healthcare Effectiveness Data and
Information Set (HEDIS) and Health
Outcome Survey (HOS) data collections
because of a lack of a sufficient number
of enrollees to reliably measure the
performance of the health plan.
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New MA plan means a MA contract
offered by a parent organization that has
not had another MA contract in the
previous 3 years.
*
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*
Unadjusted MA area-specific nondrug monthly benchmark amount
means, for local MA plans serving one
county, the county capitation rate CMS
publishes annually that reflects the
nationally average risk profile for the
risk factors CMS applies to payment
calculations as set forth at § 422.308(c)
of this part, (that is, a standardized
benchmark). For local MA plans serving
multiple counties it is the weighted
average of county rates in a plan’s
service area, weighted by the plan’s
projected enrollment per county. The
rules for determining county capitation
rates are specific to a time period, as set
forth at § 422.258(a). Effective 2012, the
MA area-specific non-drug monthly
benchmark amount is called the
blended benchmark amount, and is
determined according to the rules set
forth under § 422.258(d) of this part.
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■ 23. Section 422.254 is amended by
adding paragraph (a)(5) to read as
follows:
§ 422.254
Submission of bids.
(a) * * *
(5) CMS may decline to accept any or
every otherwise qualified bid submitted
by an MA organization or potential MA
organization.
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24. Section 422.256 is amended by
revising paragraph (a) introductory text
to read as follows:
■
§ 422.256 Review, negotiation, and
approval of bids.
(a) Authority. Subject to paragraphs
(a)(2), (d), and (e) of this section, CMS
has the authority to review the aggregate
bid amounts submitted under § 422.252
and conduct negotiations with MA
organizations regarding these bids
(including the supplemental benefits)
and the proportions of the aggregate bid
attributable to basic benefits,
supplemental benefits, and prescription
drug benefits and may decline to
approve a bid if the plan sponsor
proposes significant increases in cost
sharing or decreases in benefits offered
under the plan.
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*
■ 25. Section 422.258 is amended as
follows:
■ A. Revising paragraphs (a)(1) and (2).
■ B. In paragraph (c)(3)(i), removing the
phrase ‘‘county capitation rate’’ and
adding the phrase ‘‘amount determined
under paragraph (a) of this section for
the year’’ in its place.
■ C. Adding paragraph (d).
The revisions and additions read as
follows:
§ 422.258
Calculation of benchmarks.
(a) * * *
(1) For MA local plans with service
areas entirely within a single MA local
area:
(i) For years before 2007, one-twelfth
of the annual MA capitation rate
(described at § 422.306) for the area,
adjusted as appropriate for the purpose
of risk adjustment.
(ii) For years 2007 through 2010, onetwelfth of the applicable amount
determined under section 1853(k)(1) of
the Act for the area for the year,
adjusted as appropriate for the purpose
of risk adjustment.
(iii) For 2011, one-twelfth of the
applicable amount determined under
1853(k)(1) for the area for 2010.
(iv) Beginning with 2012, one-twelfth
of the blended benchmark amount
described in paragraph (d) of this
section, subject to paragraph (d)(8) of
this section and adjusted as appropriate
for the purpose of risk adjustment.
(2) For MA local plans with service
areas including more than one MA local
area, an amount equal to the weighted
average of amounts described in
paragraph (a)(1) of this section for the
year for each local area (county) in the
plan’s service area, using as weights the
projected number of enrollees in each
MA local area that the plan used to
calculate the bid amount, and adjusted
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as appropriate for the purpose of risk
adjustment.
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(d) Determination of the blended
benchmark amount—(1) General rules.
For the purpose of paragraphs (a) and
(b) of this section, the term blended
benchmark amount for an area for a year
means the sum of two components: the
applicable amount determined under
section 1853(k)(1) of the Act and the
specified amount determined under
section 1853(n)(2) of Act. The weights
for each component are based on the
phase-in period assigned each area, as
described in paragraphs (d)(8) and (d)(9)
of this section. At the conclusion of an
area’s phase-in period, the blended
benchmark for an area for a year equals
the section 1853(n)(2) of the Act
specified amount described in
paragraph (d)(2) of this section. The
blended benchmark amount for an area
for a year (which takes into account
paragraph (d)(8) of this section), cannot
exceed the applicable amount described
in paragraph (d)(2) of this section that
would be in effect but for the
application of this paragraph.
(2) Applicable amount. For the
purpose of paragraphs (a) and (b) of this
section, the applicable amount
determined under section 1853(k)(1) of
the Act for a year is—
(i) In a rebasing year (described at
§ 422.306(b)(2), an amount equal to the
greater of the average FFS expenditure
amount at § 422.306(b)(2) for an area for
a year and the minimum percentage
increase rate at § 422.306(a) for an area
for a year.
(ii) In a year when the amounts at
§ 422.306(b)(2) are not rebased, the
minimum percentage increase rate at
§ 422.306(a) for the area for the year.
(iii) In no case the blended benchmark
amount for an area for a year,
determined taking into account
paragraph (d)(8) of this section, be
greater than the applicable amount at
paragraph (d)(2) of this section for an
area for a year.
(iv) Paragraph (d) of this section does
not apply to the PACE program under
section 1894 of Act.
(3) Specified amount. For the purpose
of paragraphs (a) and (b) of this section,
the specified amount under section
1853(n)(2) of the Act is the product of
the base payment amount for an area for
a year (adjusted as required under
§ 422.306(c)) multiplied by the
applicable percentage described in
paragraph (d)(5) of this section for an
area for a year.
(4) Base payment amount. The base
payment amount is as follows:
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(i) For 2012, the average FFS
expenditure amount specified in
§ 422.306(b)(2), determined for 2012.
(ii) For subsequent years, the average
FFS expenditure amount specified in
§ 422.306(b)(2).
(5) Applicable percentage. Subject to
paragraph (d)(7) of this section, the
applicable percentage is one of four
values assigned to an area based on
Secretary’s determination of the quartile
ranking of the area’s average FFS
expenditure amount (described at
§ 422.306(b)(2) and adjusted as required
at § 422.306(c)), relative to this amount
for all areas.
(i) For the 50 States or the District of
Columbia, a county with an average FFS
expenditure amount adjusted under
§ 422.306(c) that falls in the—
(A) Highest quartile of such rates for
all areas for the previous year receives
an applicable percentage of 95 percent;
(B) Second highest quartile of such
rates for all areas for the previous year
receives an applicable percentage of 100
percent;
(C) Third highest quartile of such
rates for all areas for the previous year
receives an applicable percentage of
107.5 percent; or
(D) Lowest quartile of such rates for
all areas for the previous year receives
an applicable percentage of 115 percent.
(ii) To determine the applicable
percentages for a territory, the Secretary
ranks such areas for a year based on the
level of the area’s § 422.306(b)(2)
amount adjusted under § 422.306(c),
relative to the quartile rankings
computed under paragraph (d)(5)(i) of
this section.
(6) Additional rules for determining
the applicable percentage. (i) In a
contract year when the average FFS
expenditure amounts from the previous
year were rebased (according to the
periodic rebasing requirement at
§ 422.306(b)(2)), the Secretary must
determine an area’s applicable
percentage based on a quartile ranking
of the previous year’s rebased FFS
amounts adjusted under § 422.306(c).
(ii) If, for a year after 2012, there is a
change in the quartile in which an area
is ranked compared to the previous
year’s ranking, the applicable
percentage for the area in the year must
be the average of the applicable
percentage for the previous year and the
applicable percentage that would
otherwise apply for the area for the year
in the absence of this transitional
provision.
(7) Increases to the applicable
percentage for quality. Beginning with
2012, the blended benchmark under
paragraphs (a) and (b) of this section
will reflect the level of quality rating at
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the plan or contract level, as determined
by the Secretary. The quality rating for
a plan is determined by the Secretary
according to a 5-star rating system
(based on the data collected under
section 1852(e) of the Act). Specifically,
the applicable percentage under
paragraph (d)(5) of this section must be
increased according to criteria in
paragraphs (d)(7)(i) through (v) of this
section if the plan or contract is
determined to be a qualifying plan or a
qualifying plan in a qualifying county
for the year.
(i) Qualifying plan. Beginning with
2012, a qualifying plan means a plan
that had a quality rating of 4 stars or
higher based on the most recent data
available for such year. For a qualifying
plan, the applicable percentage at
paragraph (d)(5) of this section must be
increased as follows:
(A) For 2012, by 1.5 percentage
points.
(B) For 2013, by 3.0 percentage points.
(C) For 2014 and subsequent years, by
5.0 percentage points.
(ii) Qualifying county. (A) A
qualifying county means a county that
meets the following three criteria:
(1) Has an MA capitation rate that, in
2004, was based on the amount
specified in section 1853(c)(1)(B) of the
Act for a Metropolitan Statistical Area
with a population of more than 250,000.
(2) Of the MA-eligible individuals
residing in the county, at least 25
percent of such individuals were
enrolled in MA plans as of December
2009.
(3) Has per capita fee-for-service
spending that is lower than the national
monthly per capita cost for expenditures
for individuals enrolled under the
Original Medicare fee-for-service
program for the year.
(B) Beginning with 2012, for a
qualifying plan serving a qualifying
county, the increase to the applicable
percentage described at paragraph
(d)(7)(i) of this section must be doubled
for the qualifying county.
(iii) MA organizations that fail to
report data as required by the Secretary
must be counted as having a rating of
fewer than 3.5 stars at the plan or
contract level, as determined by the
Secretary.
(iv) Application of applicable
percentage increases to low enrollment
contracts. (A) For 2012, for an MA plan
that the Secretary determines is unable
to have a quality rating because of low
enrollment, the Secretary treats this
plan as a qualifying plan under
paragraph (d)(7)(i) of this section.
(B) For 2013 and subsequent years,
the Secretary develops a methodology to
apply to MA plans with low enrollment
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(as defined by the Secretary) to
determine whether a low enrollment
contract is a qualifying plan.
(v) Application of increases in
applicable percentage to new MA plans.
A new MA plan (as defined at
§ 422.252) that meets criteria specified
by the Secretary must be treated as a
qualifying plan under paragraph (d)(7)(i)
of this section, except that the
applicable percentage must be increased
as follows:
(A) For 2012, by 1.5 percentage
points.
(B) For 2013, by 2.5 percentage points.
(C) For 2014 and subsequent years, by
3.5 percentage points.
(8) Determination of phase-in period
for the blended benchmark amount. For
2012 through 2016, the blended
benchmark amount for an area for a year
depends on the phase-in period
assigned to that area. The Secretary
assigns one of three phase-in periods to
each area: 2-year, 4 year, or 6 year. The
phase-in period assigned to an area is
based on the size of the difference
between the 2010 applicable amount at
paragraph (d)(2) of this section and the
projected 2010 benchmark amount
defined at paragraph (d)(8)(i) of this
section.
(i) The projected 2010 benchmark
amount is calculated once for the
purpose of determining the phase-in
period for an area. It is equal to one-half
of the 2010 applicable amount at
paragraph (d)(2) of this section and onehalf of the specified amount at
paragraph (d)(3) modified to apply to
2010 (as described in (d)(8)(ii) of this
section).
(ii) To assign a phase-in period to an
area, the specified amount is modified
as if it applies to 2010, and is the
product of—
(A) The 2010 base payment amount
adjusted as required under § 422.306(c)
of this part; and
(B) The applicable percentage
determined as if the reference to the
‘‘previous year’’ at paragraph (d)(5) of
this section were deemed a reference to
2010 and increased as follows:
(1) The increase at paragraph (d)(7)(i)
of this section for a qualifying plan in
the area is applied as if the reference to
a qualifying plan for 2012 were deemed
a reference for 2010; and
(2) The increase at paragraph (d)(7)(ii)
of this section is applied as if the
determination of a qualifying county
were made for 2010.
(iii) Two-year phase-in. An area is
assigned the 2-year phase-in period if
the difference between the applicable
amount at paragraph (d)(2) of this
section and the projected 2010
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benchmark amount at paragraph (d)(8)(i)
of this section is less than $30.
(iv) Four-year phase-in. An area is
assigned the 4-year phase-in period if
the difference between the applicable
amount at paragraph (d)(2) of this
section and the projected 2010
benchmark amount at paragraph (d)(8)(i)
of this section is at least $30 but less
than $50.
(v) Six-year phase-in. An area is
assigned the 6-year phase-in period if
the difference between the applicable
amount at paragraph (d)(2) of this
section and the projected 2010
benchmark amount at paragraph (d)(8)(i)
of this section is at least $50.
(9) Impact of phase-in period on
calculation of the blended benchmark
amount. (i) Weighting for the 2-year
phase-in. (A) For 2012, the blended
benchmark is the sum of one-half of the
applicable amount at paragraph (d)(2) of
this section and one-half of the specified
amount at paragraph (d)(3) of this
section.
(B) For 2013 and subsequent years,
the blended benchmark equals the
specified amount.
(ii) Weighting for the 4-year phase-in.
The blended benchmark is the sum of
the applicable amount at paragraph
(d)(2) of this section and the specified
amount at paragraph (d)(2) of this
section in the following proportions:
(A) For 2012, three-fourths of the
applicable amount for the area for the
year and one-fourth of the specified
amount for the area and year.
(B) For 2013, one-half of the
applicable amount for the area for the
year and one-half of the specified
amount for the area and year.
(C) For 2014, one-fourth of the
applicable amount for the area for the
year and three-fourths of the specified
amount for the area and year.
(D) For 2015 and subsequent years,
the blended benchmark equals the
specified amount for the area and year.
(iii) Weighting for the 6-year phase-in.
The blended benchmark is the sum of
the applicable amount at paragraph
(d)(2) and the specified amount at
paragraph (d)(3) of this section in the
following proportions:
(A) For 2012, five-sixths of the
applicable amount for the area and year
and one-sixth of the specified amount
for the area and year.
(B) For 2013, two-thirds of the
applicable amount for the area and year
and one-third of the specified amount
for the area and year.
(C) For 2014, one-half of the
applicable amount for the area and year
and one-half of the specified amount for
the area and for year.
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(D) For 2015, one-third of the
applicable amount for the area and year
and two-thirds of the specified amount
for the area and for year.
(E) For 2016, one-sixth of the
applicable amount for the area and year
and five-sixths of the specified amount
for the area and for year.
(F) For 2017 and subsequent years,
the blended benchmark equals the
specified amount for the area and year.
26. Section 422.260 is added to read
as follows:
■
§ 422.260 Appeals of quality bonus
payment determinations.
(a) Scope. The provisions of this
section pertain to the administrative
review process to appeal quality bonus
payment status determinations based on
section 1853(o) of the Act.
(b) Definitions. The following
definitions apply to this section:
Quality bonus payment (QBP)
means—
(i) Enhanced CMS payments to MA
organizations based on the
organization’s demonstrated quality of
its Medicare contract operations; or
(ii) Increased beneficiary rebate
retention allowances based on the
organization’s demonstrated quality of
its Medicare contract operations.
Quality bonus payment (QBP)
determination methodology means the
formula CMS adopts for evaluating
whether MA organizations qualify for a
QBP.
Quality bonus payment (QBP) status
means a MA organization’s standing
with respect to its qualification to—
(i) Receive a quality bonus payment,
as determined by CMS; or
(ii) Retain a portion of its beneficiary
rebates based on its quality rating, as
determined by CMS.
(c) Administrative review process for
QBP status appeals. (1) Reconsideration
request. An MA organization may
request reconsideration of its QBP
status.
(i) The MA organization requesting
reconsideration of its QBP status must
do so by providing written notice to
CMS within 10 business days of the
release of its QBP status. The request
must specify the given measure(s) in
question and the basis for
reconsideration such as a calculation
error or incorrect data was used to
determine the QBP status. The error
could impact an individual measure’s
value or the overall star rating.
(ii) The reconsideration official’s
decision is final and binding unless a
request for an informal hearing is filed
in accordance with paragraph (2) of this
section.
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(2) Informal hearing request. An MA
organization may request an informal
hearing on the record following the
reconsideration official’s decision
regarding its QBP status.
(i) The MA organization seeking an
appeal of the reconsideration official’s
decision regarding its QBP status must
do so by providing written notice to
CMS within 10 business days of the
issuance of the reconsideration
decision. The notice must specify the
errors the MA organization asserts that
CMS made in making the QBP
determination and how correction of
those errors could result in the
organization’s qualification for a QBP or
a higher QBP.
(ii) The MA organization may not
request an informal hearing of its QBP
status unless it has already requested
and received a reconsideration decision
in accordance with paragraph (c)(1) of
this section.
(iii) The informal hearing request
must pertain only to the measure(s) and
value(s) in question that precipitated the
request for reconsideration.
(iv) The informal hearing is
conducted by a CMS hearing officer on
the record. The hearing officer receives
no testimony, but may accept written
statements with exhibits from each
party in support of their position in the
matter.
(v) The MA organization must provide
clear and convincing evidence that
CMS’ calculations of the measure(s) and
value(s) in question were incorrect.
(vi) The hearing officer issues the
decision by electronic mail to the MA
organization.
(vii) The hearing officer’s decision is
final and binding.
(3) Limits to requesting an
administrative review. (i) CMS may
limit the measures or bases for which a
contract may request an administrative
review of its QBP status.
(ii) An administrative review cannot
be requested for the following: the
methodology for calculating the star
ratings (including the calculation of the
overall star ratings); cut-off points for
determining measure thresholds; the set
of measures included in the star rating
system; and the methodology for
determining QBP determinations for
low enrollment contracts and new MA
plans.
(4) Designation of a hearing officer.
CMS designates a hearing officer to
conduct the appeal of the QBP status.
The officer must be an individual who
did not directly participate in the initial
QBP determination.
(d) Reopening of QBP determinations.
CMS may, on its own initiative, revise
an MA organization’s QBP status at any
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time after the initial release of the QBP
determinations through April 1 of each
year. CMS may take this action on the
basis of any credible information,
including the information provided
during the administrative review
process that demonstrates that the
initial QBP determination was incorrect.
27. Amend § 422.266 by revising
paragraph (a) to read as follows:
■
§ 422.266
Beneficiary rebates.
(a) Calculation of rebate. (1) For 2006
through 2011, an MA organization must
provide to the enrollee a monthly rebate
equal to 75 percent of the average per
capita savings (if any) described in
§ 422.264(b) for MA local plans and
§ 422.264(d) for MA regional plans.
(2) For 2012 and subsequent years, an
MA organization must provide to the
enrollee a monthly rebate equal to a
specified percentage of the average per
capita savings (if any) at § 422.264(b) for
MA local plans and § 422.264(d) for MA
regional plans. For 2012 and 2013, this
percentage is based on a combination of
the (a)(1) rule of 75 percent and the
(a)(2)(ii) rules that set the percentage
based on the plan’s quality rating under
a 5 star rating system, as determined by
the Secretary under § 422.258(d)(7). For
2014 and subsequent years, this
percentage is determined based only on
the paragraph (a)(2)(ii) of this section.
(i) Applicable rebate percentage for
2012 and 2013. Subject to paragraphs
(a)(2)(iii) and (iv) of this section, the
transitional applicable rebate percentage
is, for a year, the sum of two amounts
as follows:
(A) For 2012. Two-thirds of the old
proportion of 75 percent of the average
per capita savings; and one-third of the
new proportion assigned the plan under
paragraph (a)(2)(ii) of this section, based
on the quality rating specified in
§ 422.258(d)(7).
(B) For 2013. One-third of the old
proportion of 75 percent of the average
per capita savings; and two-thirds of the
new proportion assigned the plan under
paragraph (d)(2)(ii) of this section, based
on the quality rating at § 422.258(d)(7).
(ii) Final applicable rebate
percentage. For 2014 and subsequent
years, and subject to paragraphs
(a)(2)(iii) and (iv) of this section, the
final applicable rebate percentage is as
follows:
(A) In the case of a plan with a quality
rating under such system of at least 4.5
stars, 70 percent of the average per
capita savings;
(B) In the case of a plan with a quality
rating under such system of at least 3.5
stars and less than 4.5 stars, 65 percent
of the average per capita savings.
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21567
(C) In the case of a plan with a quality
rating under such system of less than
3.5 stars, 50 percent of the average per
capita savings.
(iii) Treatment of low enrollment
contracts. For 2012, in the case of a plan
described at § 422.258(d)(7)(iv), the plan
must be treated as having a rating of 4.5
stars for the purpose of determining the
beneficiary rebate amount.
(iv) Treatment of new MA plans. For
2012 or a subsequent year, a new MA
plan defined at § 422.252 that meets the
criteria specified by the Secretary for
purposes of § 422.258(d)(7)(v) must be
treated as a qualifying plan under
§ 422.258(d)(7)(i), except that plan must
be treated as having a rating of 3.5 stars
for purposes of determining the
beneficiary rebate amount.
*
*
*
*
*
Subpart G—Payments to Medicare
Advantage Organizations
28. Amend § 422.308 by adding
paragraphs (c)(4) through (6) to read as
follows:
*
*
*
*
*
(c) * * *
(4) Authority to apply frailty
adjustment under PACE payment rules
for certain specialized MA plans for
special needs individuals. (i)
Application of payment rules. For plan
year 2011 and subsequent plan years, in
the case of a plan described in
paragraph (c)(4)(ii) of this section, the
Secretary may apply the payment rules
under section 1894(d) of the Act (other
than paragraph (3) of that section) rather
than the payment rules that would
otherwise apply under this part, but
only to the extent necessary to reflect
the costs of treating high concentrations
of frail individuals.
(ii) Plan described. A plan described
in this paragraph is a fully integrated
dual-eligible special needs plan, as
defined at § 422.2, and has a similar
average level of frailty (as determined by
the Secretary) as the PACE program.
(5) Application of coding adjustment.
(i) In applying the adjustment under
paragraph (c)(1) of this section for
health status to payment amounts, the
Secretary ensures that such adjustment
reflects changes in treatment and coding
practices in the fee-for-service sector
and reflects differences in coding
patterns between MA plans and
providers under Part A and B to the
extent that the Secretary has identified
such differences.
(ii) In order to ensure payment
accuracy, the Secretary annually
conducts an analysis of the differences
described in paragraph (c)(5)(i) of this
section.
■
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(A) The Secretary completes such
analysis by a date necessary to ensure
that the results of such analysis are
incorporated on a timely basis into the
risk scores for 2008 and subsequent
years.
(B) In conducting such analysis, the
Secretary uses data submitted with
respect to 2004 and subsequent years, as
available and updated as appropriate.
(iii) In calculating each year’s
adjustment, the adjustment factor is as
follows:
(A) For 2014, not less than the
adjustment factor applied for 2010, plus
1.3 percentage points.
(B) For each of the years 2015 through
2018, not less than the adjustment factor
applied for the previous year, plus 0.25
percentage points.
(C) For 2019 and each subsequent
year, not less than 5.7 percent.
(iv) Such adjustment is applied to risk
scores until the Secretary implements
risk adjustment using MA diagnostic,
cost, and use data.
(6) Improvements to risk adjustment
for special needs individuals with
chronic health conditions—(i) General
rule. For 2011 and subsequent years, for
purposes of the adjustment under
paragraph (c)(1) of this section with
respect to individuals described in
paragraph (c)(6)(ii) of the section, the
Secretary uses a risk score that reflects
the known underlying risk profile and
chronic health status of similar
individuals. Such risk score is used
instead of the default risk score for new
enrollees in MA plans that are not
specialized MA plans for special needs
individuals (as defined in section
1859(b)(6) of the Act).
(ii) Individuals described. An
individual described in this clause is a
special needs individual described in
section 1859(b)(6)(B)(iii) of the Act who
enrolls in a specialized MA plan for
special needs individuals on or after
January 1, 2011.
(iii) Evaluation. For 2011 and
periodically thereafter, the Secretary
evaluates and revises the risk
adjustment system under this paragraph
in order to, as accurately as possible,
account for—
(A) Higher medical and care
coordination costs associated with
frailty, individuals with multiple,
comorbid chronic conditions, and
individuals with a diagnosis of mental
illness; and
(B) Costs that may be associated with
higher concentrations of beneficiaries
with the conditions specified in
paragraph (c)(6)(iii)(A) of this section.
(iv) Publication of evaluation and
revisions. The Secretary publishes, as
part of an announcement under section
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1853(b) of the Act, a description of any
evaluation conducted under paragraph
(c)(6)(iii) of this section during the
preceding year and any revisions made
under paragraph (c)(6)(iii) of this section
as a result of such evaluation.
*
*
*
*
*
Subpart J—Special Rules for MA
Regional Plans
§ 422.458
[Amended]
29. In § 422.458, paragraph (f) is
removed.
■
Subpart K—Application Procedures
and Contracts for Medicare Advantage
Organizations
30. Amend § 422.502 as follows:
A. Redesignating paragraph (b) as
paragraph (b)(1).
■ B. Adding paragraph (b)(2).
■ C. Revising paragraph (c)(2)(i).
The revisions read as follows:
■
■
§ 422.502 Evaluation and determination
procedures.
*
*
*
*
*
(b) * * *
(2) In the absence of 14 months of
performance history, CMS may deny an
application based on a lack of
information available to determine an
applicant’s capacity to comply with the
requirements of the MA program.
(c) * * *
(2) * * *
(i) If CMS finds that the applicant
does not appear to be able to meet the
requirements for an MA organization,
CMS gives the applicant notice of intent
to deny the application and a summary
of the basis for this preliminary finding.
*
*
*
*
*
■ 32. Amend § 422.504 as follows:
■ A. Redesignating paragraph (a)(14) as
paragraph (a)(16).
■ B. Adding new paragraphs (a)(14) and
(a)(15).
■ C. Revising newly redesignated
paragraph (a)(16).
■ D. Adding paragraph (n).
The additions and revision read as
follows.
§ 422.504
Contract provisions.
*
*
*
*
*
(a) * * *
(14) Maintain a fiscally sound
operation by at least maintaining a
positive net worth (total assets exceed
total liabilities).
(15) Address complaints received by
CMS against the MAO by—
(i) Addressing and resolving
complaints in the CMS complaint
tracking system.
(ii) Displaying a link to the electronic
complaint form on the Medicare.gov
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Internet Web site on the MA plan’s main
Web page.
(16) An MA organization’s
compliance with paragraphs (a)(1)
through (15) and (c) of this section is
material to performance of the contract.
*
*
*
*
*
(n) Release of summary CMS payment
data. The contract must provide that the
MA organization acknowledges that
CMS releases to the public summary
reconciled CMS payment data after the
reconciliation of Part C and Part D
payments for the contract year as
follows:
(1) For Part C, the following data—
(i) Average per member per month
CMS payment amount for A/B (original
Medicare) benefits for each MA plan
offered, standardized to the 1.0 (average
risk score) beneficiary.
(ii) Average per member per month
CMS rebate payment amount for each
MA plan offered (or, in the case of MSA
plans, the monthly MSA deposit
amount).
(iii) Average Part C risk score for each
MA plan offered.
(iv) County level average per member
per month CMS payment amount for
each plan type in that county, weighted
by enrollment and standardized to the
1.0 (average risk score) beneficiary in
that county.
(2) For Part D plan sponsors, plan
payment data in accordance with
§ 423.505(o) of this subchapter.
■ 33. Amend § 422.506 by adding
paragraph (a)(5) to read as follows:
§ 422.506
Nonrenewal of contract.
(a) * * *
(5) During the same 2-year period as
specified in paragraph (a)(4) of this
section, CMS will not contract with an
organization whose covered persons
also served as covered persons for the
non-renewing sponsor. A ‘‘covered
person’’ as used in this paragraph means
one of the following:
(i) All owners of nonrenewed or
terminated organizations who are
natural persons, other than shareholders
who have an ownership interest of less
than 5 percent.
(ii) An owner in whole or part interest
in any mortgage, deed of trust, note or
other obligation secured (in whole or in
part) by the organization, or any of the
property or assets thereof, which whole
or part interest is equal to or exceeds 5
percent of the total property, and assets
of the organization.
(iii) A member of the board of
directors or board of trustees of the
entity, if the organization is organized as
a corporation.
*
*
*
*
*
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34. Amend § 422.508 by adding
paragraph (d) to read as follows:
Subpart M—Grievances, Organization
Determinations, and Appeals
§ 422.626 Fast-track appeals of service
terminations to independent review entities
(IREs).
§ 422.508 Modification or termination of
contract by mutual consent.
■
36. Amend § 422.562 by adding
paragraph (a)(4) to read as follows:
(g) * * *
(3) If the IRE reaffirms its decision, in
whole or in part, the enrollee may
appeal the IRE’s reconsidered
determination to an ALJ, the MAC, or a
Federal court, as provided for under this
subpart.
*
*
*
*
*
■
*
*
*
*
*
(d) Prohibition against Part C program
participation by organizations whose
owners, directors, or management
employees served in a similar capacity
with another organization that mutually
terminated its Medicare contract within
the previous 2 years. During the same 2year period, CMS will not contract with
an organization whose covered persons
also served as covered persons for the
mutually terminating sponsor. A
‘‘covered person’’ as used in this
paragraph means one of the following:
(1) All owners of nonrenewal or
terminated organizations who are
natural persons, other than shareholders
who have an ownership interest of less
than 5 percent.
(2) An owner in whole or part interest
in any mortgage, deed of trust, note or
other obligation secured (in whole or in
part) by the organization, or any of the
property or assets thereof, which whole
or part interest is equal to or exceeds 5
percent of the total property, and assets
of the organization.
(3) A member of the board of directors
of the entity, if the organization is
organized as a corporation.
■ 35. Amend § 422.512 as follows:
A. Redesignating paragraph (e) as
(e)(1).
B. Adding a new paragraph (e)(2).
§ 422.512 Termination of contract by the
MA organization.
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*
*
*
*
*
(e) * * *
(2) During the same 2-year period
specified in paragraph (e)(1) of this
section, CMS will not contract with an
organization whose covered persons
also served as covered persons for the
terminating sponsor. A ‘‘covered person’’
as used in this paragraph means one of
the following:
(i) All owners of nonrenewal or
terminated organizations who are
natural persons, other than shareholders
who have an ownership interest of less
than 5 percent.
(ii) An owner in whole or part interest
in any mortgage, deed of trust, note or
other obligation secured (in whole or in
part) by the organization, or any of the
property or assets thereof, which whole
or part interest is equal to or exceeds 5
percent of the total property and assets
of the organization.
(iii) A member of the board of
directors of the entity, if the
organization is organized as a
corporation.
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§ 422.562
General provisions.
*
*
*
*
*
(a) * * *
(4) An MA organization must employ
a medical director who is responsible
for ensuring the clinical accuracy of all
organization determinations and
reconsiderations involving medical
necessity. The medical director must be
a physician with a current and
unrestricted license to practice
medicine in a State, Territory,
Commonwealth of the United States
(that is, Puerto Rico), or the District of
Columbia.
*
*
*
*
*
37. Amend § 422.566 by adding
paragraph (d) to read as follows:
■
§ 422.566
Organization determinations.
*
*
*
*
*
(d) Who must review organization
determinations. If the MA organization
expects to issue a partially or fully
adverse medical necessity (or any
substantively equivalent term used to
describe the concept of medical
necessity) decision based on the initial
review of the request, the organization
determination must be reviewed by a
physician or other appropriate health
care professional with sufficient
medical and other expertise, including
knowledge of Medicare coverage
criteria, before the MA organization
issues the organization determination
decision. The physician or other health
care professional must have a current
and unrestricted license to practice
within the scope of his or her profession
in a State, Territory, Commonwealth of
the United States (that is, Puerto Rico),
or the District of Columbia.
38. Amend § 422.622 by revising
paragraph (g)(1) to read as follows:
■
§ 422.622 Requesting immediate QIO
review of the decision to discharge from the
inpatient hospital.
*
*
*
*
*
(g) * * *
(1) Right to request a reconsideration.
If the enrollee is still an inpatient in the
hospital and is dissatisfied with the
determination, he or she may request a
reconsideration according to the
procedures described in § 422.626(g).
*
*
*
*
*
39. Amend § 422.626 by revising
paragraph (g)(3) to read as follows:
■
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Subpart V—Medicare Advantage
Marketing Requirements
40. Amend § 422.2264 by revising
paragraph (e) to read as follows:
■
§ 422.2264
Guidelines for CMS review.
*
*
*
*
*
(e) For markets with a significant nonEnglish speaking population, provide
materials in the language of these
individuals. Specifically, MA
organizations must translate marketing
materials into any non-English language
that is the primary language of at least
5 percent of the individuals in a plan
benefit package (PBP) service area.
■ 41. Amend § 422.2272 by adding
paragraph (e) to read as follows:
§ 422.2272 Licensing of marketing
representatives and confirmation of
marketing resources.
*
*
*
*
*
(e) Terminate upon discovery any
unlicensed agent or broker employed as
a marketing representative and notify
any beneficiaries enrolled by an
unqualified agent or broker of the
agent’s or broker’s status and, if
requested, of their options to confirm
enrollment or make a plan change
(including a special election period, as
described in § 422.62(b)(3)(ii)).
■ 42. Amend § 422.2274 by revising the
introductory text and paragraphs (b) and
(c) to read as follows:
§ 422.2274
Broker and agent requirements.
For purposes of this section
‘‘compensation’’ includes pecuniary or
nonpecuniary remuneration of any kind
relating to the sale or renewal of a
policy including, but not limited to,
commissions, bonuses, gifts, prizes,
awards, and finder’s fees.
‘‘Compensation’’ does not include the
payment of fees to comply with State
appointment laws, training,
certification, and testing costs;
reimbursement for mileage to, and from,
appointments with beneficiaries; or
reimbursement for actual costs
associated with beneficiary sales
appointments such as venue rent,
snacks, and materials. If a MA
organization markets through
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independent (that is, non-employee)
brokers or agents, the requirements in
paragraph (a) of this section must be
met. The requirements in paragraphs (b)
through (e) of this section must be met
if a MA organization markets through
any broker or agent, whether
independent (that is, non-employee) or
employed.
*
*
*
*
*
(b) It must ensure that all agents
selling Medicare products are trained
annually through a CMS endorsed or
approved training program or as
specified by CMS, on Medicare rules
and regulations specific to the plan
products they intend to sell.
(c) It must ensure agents selling
Medicare products are tested annually
by CMS endorsed or approved training
program or as specified by CMS.
*
*
*
*
*
PART 423—MEDICARE PROGRAM;
MEDICARE PRESCRIPTION DRUG
PROGRAM
43. The authority citation for part 423
continues to read as follows:
■
Authority: Secs. 1102, 1860D–1 through
1860D–42, and 1871 of the Social Security
Act (42 U.S.C. 1302, 1395w–101 through
1395w–152, and 1395hh).
Subpart A—General Provisions
44. Amend § 423.4 by adding the
definitions of ‘‘fiscally sound operation’’
and ‘‘pharmacist’’ to read as follows:
■
§ 423.4
Definitions.
*
*
*
*
*
Fiscally sound operation means an
operation which at least maintains a
positive net worth (total assets exceed
total liabilities).
*
*
*
*
*
Pharmacist means any individual
who holds a current valid license to
practice pharmacy in a State or territory
of the United States or the District of
Columbia.
*
*
*
*
*
Subpart B—Eligibility and Enrollment
45. Amend § 423.34 as follows:
A. Revising paragraphs (c) and (d)(1).
B. Adding paragraph (d)(4).
The revisions and addition read as
follows:
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■
■
§ 423.34 Enrollment of low-income
subsidy eligible individuals.
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(c) Reassigning low income subsidy
eligible individuals—(1) General rule.
Notwithstanding § 423.32(e) of this
subpart, during the annual coordinated
election period, CMS may reassign
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certain low income subsidy eligible
individuals in another PDP if CMS
determines that the further enrollment
is warranted, except as specified in
paragraph (c)(2) of this section.
(2) Part D prescription drug plans that
waive a de minimis premium amount. If
a Part D plan offering basic prescription
drug coverage in the area where the
beneficiary resides has a monthly
beneficiary premium amount that
exceeds the low-income subsidy amount
by a de minimis amount, and the Part
D plan volunteers to waive that de
minimis amount in accordance with
§ 423.780, then CMS does not reassign
low income subsidy individuals who
would otherwise be enrolled under
paragraph (d)(1) of this section on the
basis that the monthly beneficiary
premium exceeds the low-income
subsidy by a de minimis amount. A Part
D plan that volunteers to waive such a
de minimis amount agrees to do so for
each month during the contract year for
which a beneficiary qualifies for 100
percent low-income premium subsidy
as provided in § 423.780(f).
(d) Automatic enrollment rules—(1)
General rule. Except for low income
subsidy eligible individuals who are
qualifying covered retirees with a group
health plan sponsor, as specified in
paragraph (d)(3) of this section, CMS
enrolls those individuals who fail to
enroll in a Part D plan into a PDP
offering basic prescription drug
coverage in the area where the
beneficiary resides that has a monthly
beneficiary premium amount that does
not exceed the low income subsidy
amount (as defined in § 423.780(b) of
this part). In the event that there is more
than one PDP in an area with a monthly
beneficiary premium at or below the
low income premium subsidy amount,
individuals are enrolled in such PDPs
on a random basis.
*
*
*
*
*
(4) Enrollment in PDP plans that
voluntarily waive a de minimis
premium amount. CMS may include in
the process specified in paragraph (d)(1)
of this section that PDPs that voluntarily
waive a de minimis amount as specified
in § 423.780, if CMS determines that
such inclusion is warranted.
*
*
*
*
*
■ 46. Amend § 423.38 as by revising
paragraph (b) and adding paragraph (d)
to read as follows:
§ 423.38
Enrollment periods.
*
*
*
*
*
(b) Annual coordinated election
period—(1) For 2006. This period begins
on November 15, 2005 and ends on May
15, 2006.
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(2) For 2007 through 2010. The
annual coordinated election period for
the following calendar year is November
15 through December 31.
(3) For 2011 and subsequent years.
Beginning with 2011, the annual
coordinated election period for the
following calendar year is October 15
through December 7.
*
*
*
*
*
(d) Enrollment period to coordinate
with MA annual 45-day disenrollment
period. Beginning in 2011, an
individual enrolled in an MA plan who
elects Original Medicare from January 1
through February 14, as described in
§ 422.62(a)(7), may also elect a PDP
during this time.
■ 47. Amend § 423.40 by adding
paragraph (d) to read as follows:
§ 423.40
Effective dates.
*
*
*
*
*
(d) PDP enrollment period to
coordinate with the MA annual
disenrollment period. Beginning in
2011, an enrollment made from January
1 through February 14 by an individual
who has disenrolled from an MA plan
as described in § 422.62(a)(7) will be
effective the first day of the month
following the month in which the
enrollment in the PDP is made.
■ 48. Amend § 423.44 by revising the
section heading and adding paragraphs
(d)(1)(vi), (d)(1)(vii), and (e) as follows:
§ 423.44 Involuntary disenrollment from
Part D coverage.
*
*
*
*
*
(d) * * *
(1) * * *
(vi) Extension of grace period for good
cause and reinstatement. When an
individual is disenrolled for failure to
pay the plan premium, CMS may
reinstate enrollment in the PDP, without
interruption of coverage, if the
individual shows good cause for failure
to pay within the initial grace period,
and pays all overdue premiums within
3 calendar months after the
disenrollment date. The individual must
establish by a credible statement that
failure to pay premiums within the
initial grace period was due to
circumstances for which the individual
had no control, or which the individual
could not reasonably have been
expected to foresee.
(vii) No extension of grace period. A
beneficiary’s enrollment in the PDP may
not be reinstated if the only basis for
such reinstatement is a change in the
individual’s circumstances subsequent
to the involuntary disenrollment for
non-payment of premiums.
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*
*
*
*
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(e) Involuntary disenrollment by
CMS—(1) General rule. CMS will
disenroll individuals who fail to pay the
Part D income related monthly
adjustment amount (Part D—IRMAA)
specified in § 423.286(d)(4) and
§ 423.293(d) of this part.
(2) Initial grace period. For all Part
D—IRMAA amounts directly billed to
an enrollee in accordance with
§ 423.293(d)(2), the grace period ends
with the last day of the third month
after the billing month.
(3) Extension of grace period for good
cause and reinstatement. When an
individual is disenrolled for failing to
pay the Part D—IRMAA within the
initial grace period specified in
paragraph (e)(2) of this section, CMS (or
an entity acting on behalf of CMS) may
reinstate enrollment, without
interruption of coverage, if the
individual shows good cause as
specified in § 423.44(d)(1)(vi), pays all
Part D—IRMAA arrearages, and any
overdue premiums due the Part D plan
sponsor within 3 calendar months after
the disenrollment date.
(4) Notice of termination. Where CMS
has disenrolled an individual in
accordance with paragraph (e)(1) of this
section, the Part D plan sponsor must
provide notice of termination in a form
and manner determined by CMS.
(5) Effective date of disenrollment.
After a grace period and notice of
termination has been provided in
accordance with paragraphs (e)(2) and
(4) of this section, the effective date of
disenrollment is the first day following
the last day of the initial grace period.
Subpart C—Benefits and Beneficiary
Protections
49. Amend § 423.100 as follows:
A. Adding the definitions of
‘‘Applicable beneficiary,’’ ‘‘Applicable
drug under the Medicare coverage gap
discount program,’’ and ‘‘Coverage gap.’’
■ B. Revising paragraph (2) of the
definition of ‘‘Dispensing fees’’ and
paragraph (2)(ii) of the definition of
‘‘Incurred costs.’’
The additions and revisions read as
follows:
■
■
§ 423.100
Definitions.
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Applicable beneficiary means an
individual who, on the date of
dispensing a covered Part D drug—
(1) Is enrolled in a prescription drug
plan or an MA–PD plan;
(2) Is not enrolled in a qualified
retiree prescription drug plan;
(3) Is not entitled to an income-related
subsidy under section 1860D–14(a) of
the Act;
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(4) Has reached or exceeded the initial
coverage limit under section 1860D–
2(b)(3) of the Act during the year;
(5) Has not incurred costs for covered
part D drugs in the year equal to the
annual out-of-pocket threshold specified
in section 1860D–2(b)(4)(B) of the Act;
and
(6) Has a claim that—
(i) Is within the coverage gap;
(ii) Straddles the initial coverage
period and the coverage gap;
(iii) Straddles the coverage gap and
the annual out-of-pocket threshold; or
(iv) Spans the coverage gap from the
initial coverage period and exceeds the
annual out-of-pocket threshold.
Applicable drug means a Part D drug
that is—
(1)(i) Approved under a new drug
application under section 505(b) of the
Federal Food, Drug, and Cosmetic Act
(FDCA); or
(ii) In the case of a biological product,
licensed under section 351 of the Public
Health Service Act (other than a product
licensed under subsection (k) of such
section 351); and
(2)(i) If the PDP sponsor of the
prescription drug plan or the MA
organization offering the MA–PD plan
uses a formulary, which is on the
formulary of the prescription drug plan
or MA–PD plan that the applicable
beneficiary is enrolled in;
(ii) If the PDP sponsor of the
prescription drug plan or the MA
organization offering the MA–PD plan
does not use a formulary, for which
benefits are available under the
prescription drug plan or MA–PD plan
that the applicable beneficiary is
enrolled in; or
(iii) Is provided to a particular
applicable beneficiary through an
exception or appeal for that particular
applicable beneficiary.
*
*
*
*
*
Coverage gap means the period in
prescription drug coverage that occurs
between the initial coverage limit and
the out-of-pocket threshold. For
purposes of applying the initial
coverage limit, Part D sponsors must
apply their plan specific initial coverage
limit under basic alternative, enhanced
alternative or actuarially equivalent Part
D benefit designs.
*
*
*
*
*
Dispensing fees * * *
(2) Include only pharmacy costs
associated with ensuring that possession
of the appropriate covered Part D drug
is transferred to a Part D enrollee.
Pharmacy costs include, but are not
limited to, any reasonable costs
associated with a pharmacist’s time in
checking the computer for information
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21571
about an individual’s coverage,
performing quality assurance activities
consistent with § 423.153(c)(2),
measurement or mixing of the covered
Part D drug, filling the container,
physically providing the completed
prescription to the Part D enrollee,
delivery, special packaging, and salaries
of pharmacists and other pharmacy
workers as well as the costs associated
with maintaining the pharmacy facility
and acquiring and maintaining
technology and equipment necessary to
operate the pharmacy. Dispensing fees
should take into consideration the
number of dispensing events in a billing
cycle, the incremental costs associated
with the type of dispensing
methodology, and with respect to Part D
drugs dispensed in LTC facilities, the
techniques to minimize the dispensing
of unused drugs. Dispensing fees may
also take into account costs associated
with data collection on unused Part D
drugs and restocking fees associated
with return for credit and reuse in longterm care pharmacies, when return for
credit and reuse is permitted under the
State in law and is allowed under the
contract between the Part D sponsor and
the pharmacy.
*
*
*
*
*
Incurred costs * * *
(2) * * *
(ii) Under a State Pharmaceutical
Assistance Program (as defined in
§ 423.464); by the Indian Health Service,
an Indian tribe or tribal organization, or
an urban Indian organization (as defined
in section 4 of the Indian Health Care
Improvement Act) or under an AIDS
Drug Assistance Program (as defined in
part B of title XXVI of the Public Health
Service); or
*
*
*
*
*
■ 50. Amend § 423.104 as follows:
■ A. Revising paragraphs (d)(2)(i)
introductory text, (d)(2)(ii), (d)(3)
introductory text, and (d)(4).
■ B. Redesignating paragraph
(d)(5)(iii)(B) as (d)(5)(iii)(F).
■ C. Adding new paragraphs (d)
(5)(iii)(B) through (E).
■ D. Revising newly redesignated
paragraph (d)(5)(iii)(F).
■ E. Adding paragraph (d)(5)(v).
The revisions and additions read as
follows:
§ 423.104 Requirements related to
qualified prescription drug coverage.
*
*
*
*
*
(d) * * *
(2) * * *
(i) Subject to paragraph (d)(4) of this
section, coinsurance for actual costs for
covered Part D drugs covered under the
Part D plan above the annual deductible
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specified in paragraph (d)(1) of this
section, and up to the initial coverage
limit under paragraph (d)(3) of this
section, that is—
*
*
*
*
*
(ii) Tiered copayments. A Part D plan
providing actuarially equivalent
standard coverage may apply tiered
copayments, provided that any tiered
copayments are consistent with
paragraphs (d)(2)(i)(B) and (d)(4) of this
section and are approved as described
in § 423.272(b)(2).
(3) Initial coverage limit. Except as
provided in paragraphs (d)(4) and (d)(5)
of this section, the initial coverage limit
is equal to—
*
*
*
*
*
(4) Cost-sharing in the coverage gap
for applicable beneficiaries. (i)
Coinsurance in the coverage gap (as
defined in § 423.100) for costs for
covered Part D drugs that are not
applicable drugs (as defined in
§ 423.100) under the Medicare coverage
gap discount program that is—
(A) Equal to the generic gap
coinsurance percentage described in
paragraph (d)(4)(iii) of this section; or
(B) Actuarially equivalent to an
average expected coinsurance for
covered Part D drugs that are not
applicable drugs under the Medicare
coverage gap discount program, as
determined through processes and
methods established under § 423.265 (c)
and (d).
(ii) Coinsurance in the coverage gap
for the actual cost minus the dispensing
fee and any vaccine administration fee
for covered Part D drugs that are
applicable drugs under the Medicare
coverage gap discount program that is—
(A) Equal to the difference between
the applicable gap coinsurance
percentage described in paragraph
(d)(4)(iv) of this section and the
discount percentage determined under
the Medicare coverage gap discount
program; or
(B) Actuarially equivalent to an
average expected coinsurance for
covered Part D drugs that are applicable
drugs under the Medicare coverage gap
discount program, as determined
through processes and methods
established under § 423.265 (c) and (d).
(iii) Generic gap coinsurance
percentage. The generic gap coinsurance
percentage is equal to—
(A) For 2011, 93 percent.
(B) For years 2012 through 2019, the
amount specified in this paragraph for
the previous year, decreased by 7
percentage points.
(C) For 2020 and each subsequent
year, 25 percent.
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(iv) Applicable gap coinsurance
percentage. The applicable gap
coinsurance percentage is equal to—
(A) For 2013 and 2014, 97.5 percent.
(B) For 2015 and 2016, 95 percent.
(C) For 2017, 90 percent.
(D) For 2018, 85 percent.
(E) For 2019, 80 percent.
(F) For 2020 and subsequent years, 75
percent.
(5) * * *
(iii) * * *
(B) For each year 2007 through 2013.
The amount specified in this paragraph
for the previous year, increased by the
annual percentage increase specified in
paragraph (d)(5)(iv) of this section, and
rounded to the nearest multiple of $50.
(C) For years 2014 and 2015. The
amount specified in this paragraph for
the previous year, increased by the
annual percentage increase specified in
paragraph (d)(5)(iv) of this section,
minus 0.25 percentage point.
(D) For each year 2016 through 2019.
The amount specified in this paragraph
for the previous year, increased by the
lesser of—
(1) The annual percentage increase
specified in (d)(5)(v) of this section plus
2 percentage points; or
(2) The annual percentage increase
specified in (d)(5)(iv) of this section.
(E) For 2020. The amount specified in
this paragraph for 2013 increased by the
annual percentage increases specified in
paragraph (d)(5)(iv) of this section for
2014 through 2020, and rounded to the
nearest $50.
(F) For 2021 and subsequent years.
The amount specified in this paragraph
for the previous year, increased by the
annual percentage increase specified in
paragraph (d)(5)(iv) of this section, and
rounded to the nearest $50.
*
*
*
*
*
(v) Additional annual percentage
increase. The annual percentage
increase for each year is equal to the
annual percentage increase in the
consumer price index for all urban
consumers (United States city average)
for the 12-month period ending in July
of the previous year.
*
*
*
*
*
■ 51. Section 423.120 is amended as
follows:
■ A. Revising paragraphs (b)(3)(iii)(B)
and (b)(3)(iv).
■ B. Adding paragraph (d).
The revisions and addition read as
follows.
§ 423.120
Access to covered Part D drugs.
*
*
*
*
*
(b) * * *
(iii) * * *
(B) In the long-term care setting, the
temporary supply of non-formulary Part
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D drugs (including Part D drugs that are
on a sponsor’s formulary but require
prior authorization or step therapy
under a sponsor’s utilization
management rules) must be for up to at
least 91 days and may be up to at least
98 days, consistent with the dispensing
increment, with refills provided, if
needed, unless a lesser amount is
actually prescribed by the prescriber.
(iv) Ensure written notice is provided
to each affected enrollee within 3
business days after adjudication of the
temporary fill. For long-term care
residents dispensed multiple supplies of
a Part D drug, in increments of 14-daysor-less, consistent with the requirements
under § 423.154, the written notice must
be provided within 3 business days after
adjudication of the first temporary fill.
*
*
*
*
*
(d) Treatment of compounded drug
products. With respect to multiingredient compounds, a Part D sponsor
must—
(1) Make a determination as to
whether the compound is covered under
Part D.
(i) A compound that contains at least
one ingredient covered under Part B as
prescribed and dispensed or
administered is considered a Part B
compound, regardless of whether other
ingredients in the compound are
covered under Part B as prescribed and
dispensed or administered.
(ii) Only compounds that contain at
least one ingredient that independently
meets the definition of a Part D drug,
and that do not meet the criteria under
paragraph (d)(1)(i) of this section, may
be covered under Part D. For purposes
of this paragraph (d) these compounds
are referred to as Part D compounds.
(iii) For a Part D compound to be
considered on-formulary, all ingredients
that independently meet the definition
of a Part D drug must be considered onformulary (even if the particular Part D
drug would be considered off-formulary
if it were provided separately—that is,
not as part of the Part D compound).
(iv) For a Part D compound that is
considered off-formulary—
(A) Transition rules apply such that
all ingredients in the Part D compound
that independently meet the definition
of a Part D drug must become payable
in the event of a transition fill under
§ 423.120(b)(3); and
(B) All ingredients that independently
meet the definition of a Part D drug
must be covered if an exception under
§ 423.578(b) is approved for coverage of
the compound.
(2) Establish consistent rules for
beneficiary payment liabilities for both
ingredients of the Part D compound that
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independently meet the definition of a
Part D drug and non-Part D ingredients.
(i) For low income subsidy
beneficiaries the copayment amount is
based on whether the most expensive
ingredient that independently meets the
definition of a Part D drug in the Part
D compound is a generic or brand name
drug (as described under § 423.782).
(ii) For any non-Part D ingredient of
the Part D compound (including drugs
described under § 423.104(f)(1)(ii)(A)),
the Part D sponsor’s contract with the
pharmacy must prohibit balance billing
the beneficiary for the cost of any such
ingredients.
■ 52. Amend § 423.128 as follows:
■ A. Revising paragraph (b)(7).
■ B. Adding paragraphs (d)(1)(iii) and
(d)(1)(iv).
The revision and additions read as
follows:
§ 423.128 Dissemination of Part D plan
information.
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(b) * * *
(7) Grievance, coverage
determination, and appeal procedures.
All grievance, coverage determination,
and appeal rights and procedures
required under § 423.562 et. seq.,
including—
(i) Access to a uniform model form
used to request a coverage
determination under § 423.568 or
§ 423.570, and a uniform model form
used to request a redetermination under
§ 423.582 or § 423.584, to the extent
such uniform model forms have been
approved for use by CMS;
(ii) Immediate access to the coverage
determination and redetermination
processes via an Internet Web site; and
(iii) A system that transmits codes to
network pharmacies so that the network
pharmacy is notified to populate and/or
provide a printed notice at the point-ofsale to an enrollee explaining how the
enrollee can request a coverage
determination by contacting the plan
sponsor’s toll free customer service line
or by accessing the plan sponsor’s
internet Web site.
*
*
*
*
*
(d) * * *
(1) * * *
(iii) Provides interpreters for nonEnglish speaking and limited English
proficient (LEP) individuals.
(iv) Provides immediate access to the
coverage determination and
redetermination processes.
*
*
*
*
*
Subpart D—Cost Control and Quality
Improvement Requirements
■
53. Amend § 423.150 as follows:
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A. Redesignating paragraphs (b)
through (g) as paragraphs (c) through
(h).
■ B. Adding a new paragraph (b) to read
as follows:
■
§ 423.150
Scope.
*
*
*
*
*
(b) Appropriate dispensing of
prescription drugs in long-term care
facilities under PDPs and MA–PD plans.
*
*
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*
*
■ 54. Amending § 423.153 as follows:
■ A. Revising paragraph (d)(1)(vii)(B).
■ B. Adding paragraph (d)(1)(vii)(D).
The revision and addition read as
follows:
§ 423.153 Drug utilization management,
quality assurance, and medication therapy
management programs (MTMPs).
*
*
*
*
*
(d) * * *
(1) * * *
(vii) * * *
(B) Annual comprehensive
medication review with written
summaries. The comprehensive
medication review must include an
interactive, person-to-person, or
telehealth consultation performed by a
pharmacist or other qualified provider
unless the beneficiary is in a long-term
care setting and may result in a
recommended medication action plan.
*
*
*
*
*
(D) Standardized action plans and
summaries that comply with
requirements as specified by CMS for
the standardized format.
*
*
*
*
*
■ 55. Section 423.154 is added to read
as follows:
§ 423.154 Appropriate dispensing of
prescription drugs in long-term care
facilities under PDPs and MA–PD plans.
(a) In general. Except as provided in
paragraph (b) of this section, when
dispensing covered Part D drugs to
enrollees who reside in long-term care
facilities, a Part D sponsor must—
(1) Require all pharmacies servicing
long-term care facilities, as defined in
§ 423.100 to—
(i) Dispense solid oral doses of brandname drugs, as defined in § 423.4, to
enrollees in such facilities in no greater
than 14-day increments at a time;
(ii) Permit the use of uniform
dispensing techniques for Part D drugs
dispensed to enrollees in long-term care
facilities under paragraph (a)(1)(i) of this
section as defined by each of the longterm care facilities in which such
enrollees reside; and
(2) Collect and report information, in
a form and manner specified by CMS,
on the dispensing methodology used for
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21573
each dispensing event described by
paragraph (a)(1) of this section, and on
the nature and quantity of unused brand
and generic drugs, as defined in § 423.4,
dispensed by the pharmacy to enrollees
residing in a LTC facility. Reporting on
unused drugs is waived for Part D
sponsors for drugs dispensed by
pharmacies that dispense both brand
and generic drugs, as defined in § 423.4,
in no greater than 7-day increments.
(b) Exclusions. CMS excludes from
the requirements under paragraph (a) of
this section—
(1) Solid oral doses of antibiotics; or
(2) Solid oral doses that are dispensed
in their original container as indicated
in the Food and Drug Administration
Prescribing Information or are
customarily dispensed in their original
packaging to assist patients with
compliance (for example, oral
contraceptives).
(c) Waivers. CMS waives the
requirements under paragraph (a) of this
section for pharmacies when they
service intermediate care facilities for
the mentally retarded (ICFs/MR) and
institutes for mental disease (IMDs) as
defined in § 435.1010 and for I/T/U
pharmacies (as defined in § 423.100).
(d) Applicability date. The
applicability date for this section is
January 1, 2013. Nothing precludes a
Part D sponsor and pharmacy from
mutually agreeing to an earlier
implementation date.
(e) Copayments. Regardless of the
number of incremental dispensing
events, the total cost sharing for a Part
D drug to which the dispensing
requirements under this paragraph (a)
apply must be no greater than the total
cost sharing that would be imposed for
such Part D drug if the requirements
under paragraph (a) of this section did
not apply.
(f) Unused drugs returned to the
pharmacy. The terms and conditions
that must be offered by a Part D sponsor
under § 423.120(a)(5) must include
provisions that address the disposal of
drugs that have been dispensed to an
enrollee in a long-term care facility but
not used and which have been returned
to the pharmacy, in accordance with
Federal and State regulations, as well as
whether return for credit and reuse is
authorized where permitted under State
law.
Subpart F—Submission of Bids and
Monthly Beneficiary Premiums; Plan
Approval
56. Amend § 423.265 by adding
paragraph (b)(3) to read as follows:
■
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§ 423.265 Submission of bids and related
information.
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*
(b) * * *
(3) CMS may decline to accept any or
every bid submitted by a Part D sponsor
or potential Part D sponsor.
*
*
*
*
*
■ 57. Amend § 423.272 by adding
paragraph (b)(4) to read as follows:
§ 423.272 Review and negotiation of bid
and approval of plans submitted by
potential Part D sponsors.
*
*
*
*
*
(b) * * *
(4) CMS may decline to approve a bid
if the Part D sponsor proposes
significant increases in cost sharing or
decreases in benefits offered under the
plan.
*
*
*
*
*
■ 58. Amend § 423.286 as follows:
■ A. Revising paragraph (a).
■ B. Adding paragraph (d)(4).
The revision and addition read as
follows:
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§ 423.286
(a) General rule. Except as provided in
paragraphs (d)(3), (d)(4), and (e) of this
section, and with regard to employer
group waivers, the monthly beneficiary
premium for a Part D plan in a PDP
region is the same for all Part D eligible
individuals enrolled in the plan. The
monthly beneficiary premium for a Part
D plan is the base beneficiary premium,
as determined in paragraph (c) of this
section, adjusted as described in
paragraph (d) of this section for the
difference between the bid and the
national average monthly bid amount,
any supplemental benefits and for any
late enrollment penalties.
*
*
*
*
*
(d) * * *
(4) Increase for income-related
monthly adjustment amount (Part D—
IRMAA). Beginning January 1, 2011,
Medicare beneficiaries enrolled in a
Medicare Part D plan must pay an
income-related monthly adjustment
amount in addition to the Part D
premium as determined under
paragraph (c) of this section and
adjusted under paragraph (d) of this
section, if the enrollee’s modified
adjusted gross income exceeds the
threshold amounts specified in 20 CFR
418.2115.
(i) Social Security Administration
determination. (A) SSA determines
which Part D enrollees are subject to the
Part D—IRMAA and the amount each
enrollee will have to pay.
(B) If an individual disagrees with
SSA’s determination that such
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§ 423.293 Collection of monthly
beneficiary premium.
*
Rules regarding premiums.
VerDate Mar<15>2010
individual is subject to the Part D—
IRMAA, or about the amount the
individual must pay, an individual may
file an appeal or request a new initial
determination consistent with 20 CFR
part 418.
(ii) Calculating the income-related
monthly adjustment amount. The
income-related monthly adjustment is
equal to the product of the quotient
obtained by dividing the applicable
premium percentage specified in
§ 418.2120 (35, 50, 65, or 80 percent)
that is based on the level of the Part D
enrollee’s modified adjusted gross
income for the calendar year reduced by
25.5 percent; and the base beneficiary
premium as determined under
paragraph (c) of this section.
*
*
*
*
*
■ 59. Amend § 423.293 as follows:
■ A. Redesignating paragraphs (d) and
(e) as (e) and (f), respectively.
■ B. Add new paragraph (d).
*
*
*
*
(d) Collection of the income-related
monthly adjustment amount (Part D—
IRMAA). (1) Collection through
withholding. Where the Social Security
Administration has determined the
income-related monthly adjustment
amount for an individual whose income
exceeds the income threshold amounts
specified at 20 CFR 418.2115, the Part
D—IRMAA must be paid through
withholding from the enrollee’s Social
Security benefit payments, or benefit
payments by the Railroad Retirement
Board (RRB) or the Office of Personnel
Management (OPM) in the manner that
the Part B premium is withheld.
(2) Collection through direct billing. In
cases where an enrollee’s benefit
payment check is not sufficient to have
the Part D—IRMAA withheld, or if an
enrollee is not receiving such benefits,
the beneficiary must be billed directly
for the Part D—IRMAA. The beneficiary
will have the option of paying the
amount through an electronic funds
transfer mechanism (such as automatic
charges of an account at a financial
institution or a credit or debit card
account) or according to other means
that CMS may specify.
(3) Failure to pay the income-related
monthly adjustment amount: General
rule. CMS will terminate Part D
coverage for any individual who fails to
pay the Part D—IRMAA as determined
by the Social Security Administration.
CMS will terminate an enrollee’s Part D
coverage as specified in § 423.44(e).
*
*
*
*
*
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Subpart J—Coordination Under Part D
Plan With Other Prescription Drug
Coverage
60. Amend § 423.464 by revising
paragraph (f)(2) to read as follows:
■
§ 423.464 Coordination of benefits with
other providers of prescription drug
coverage.
*
*
*
*
*
(f) * * *
(2) Treatment under out-of-pocket
rule. (i) For purposes of determining
whether a Part D plan enrollee has
satisfied the out-of-pocket threshold
provided under § 423.104(d)(5)(iii), a
Part D plan must—
(A) Include the enrollee’s incurred
costs (as defined in § 423.100); and
(B) Exclude expenditures for covered
Part D drugs made by insurance or
otherwise, a group health plan, or other
third party payment arrangements,
including expenditures by plans
offering other prescription drug
coverage.
(ii) A Part D enrollee must disclose all
these expenditures to a Part D plan in
accordance with requirements under
§ 423.32(b)(ii).
*
*
*
*
*
Subpart K—Application Procedures
and Contracts With PDP Sponsors
61. Amend § 423.503 as follows:
A. Redesignating paragraph (b) as
paragraph (b)(1).
■ B. Adding paragraph (b)(2).
■ C. Revising paragraph (c)(2)(i).
The revisions and addition read as
follows:
■
■
§ 423.503 Evaluation and determination
procedures for applications to be
determined qualified to act as a sponsor.
*
*
*
*
*
(b) * * *
(2) In the absence of 14 months of
performance history, CMS may deny an
application based on a lack of
information available to determine an
applicant’s capacity to comply with the
requirements of the Part D program.
*
*
*
*
*
(c) * * *
(2) * * *
(i) If CMS finds that the applicant
does not appear qualified to contract as
a Part D sponsor, it gives the applicant
notice of intent to deny the application
and a summary of the basis for this
preliminary finding.
*
*
*
*
*
■ 62. Amend § 423.505 as follows:
■ A. Adding paragraphs (b)(22) and
(b)(23).
■ B. Adding paragraph (o).
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The additions read as follows:
§ 423.505
Contract provisions.
*
*
*
*
*
(b) * * *
(22) Address complaints received by
CMS against the Part D sponsor by—
(i) Addressing and resolving
complaints in the CMS complaint
tracking system.
(ii) Displaying a link to the electronic
complaint form on the Medicare.gov
Internet Web site on the Part D plan’s
main Web page.
(23) Maintain a fiscally sound
operation by at least maintaining a
positive net worth (total assets exceed
total liabilities).
*
*
*
*
*
(o) Release of summary CMS payment
data. The contract must provide that the
Part D sponsor acknowledges that CMS
releases to the public summary
reconciled Part D payment data after the
reconciliation of Part D payments for the
contract year as follows:
(1) The average per member per
month Part D direct subsidy
standardized to the 1.0 (average risk
score) beneficiary for each Part D plan
offered.
(2) The average Part D risk score for
each Part D plan offered.
(3) The average per member per
month Part D plan low-income cost
sharing subsidy for each Part D plan
offered.
(4) The average per member per
month Part D Federal reinsurance
subsidy for each Part D plan offered.
(5) The actual Part D reconciliation
payment data summarized at the Parent
Organization level including breakouts
of risk sharing, reinsurance, and low
income cost sharing reconciliation
amounts.
■ 63. Amend § 423.507 as follows:
■ A. Redesignating paragraph (a)(4) as
paragraph (a)(5).
■ B. Adding a new paragraph (a)(4) to
read as follows:
jlentini on DSKJ8SOYB1PROD with RULES2
§ 423.507
(a) * * *
(4) During the same 2-year period
specified under paragraph (a)(3) of this
section, CMS will not contract with an
organization whose covered persons
also served as covered persons for the
non-renewing sponsor. A ‘‘covered
person’’ as used in this paragraph means
one of the following:
(i) All owners of nonrenewed or
terminated organizations who are
natural persons, other than shareholders
who have an ownership interest of less
than 5 percent.
(ii) An owner of a whole or part
interest in a mortgage, deed of trust,
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§ 423.508 Modification or termination of
contract by mutual consent.
*
*
*
*
*
(f) Prohibition against Part D program
participation by organizations whose
owners, directors, or management
employees served in a similar capacity
with another organization that mutually
terminated its Medicare contract within
the previous 2 years. During the 2-year
period specified in paragraph (e) of this
section, CMS will not contract with an
organization whose covered persons
also served as covered persons for the
mutually terminating sponsor. A
‘‘covered person’’ as used in this
paragraph means one of the following:
(1) All owners of nonrenewed or
terminated organizations who are
natural persons, other than shareholders
who have an ownership interest of less
than 5 percent.
(2) An owner of a whole or part
interest in a mortgage, deed of trust,
note or other obligation secured (in
whole or in part) by the organization, or
any of the property or assets thereof,
which whole or part interest is equal to
or exceeds 5 percent of the total
property, and assets of the organization.
(3) A member of the board of directors
or board of trustees of the entity, if the
organization is organized as a
corporation.
■ 65. Amend § 423.509 by adding
paragraph (e) to read as follows:
§ 423.509
Termination of contract by CMS.
*
Nonrenewal of contract.
VerDate Mar<15>2010
note or other obligation secured (in
whole or in part) by the organization, or
by any of the property or assets thereof,
which whole or part interest is equal to
or exceeds 5 percent of the total
property and assets of the organization.
(iii) A member of the board of
directors or board of trustees of the
entity, if the organization is organized as
a corporation.
*
*
*
*
*
■ 64. Amend § 423.508 by adding
paragraph (f) to read as follows:
*
*
*
*
(e) Timely transfer of data and files.
If a contract is terminated under
paragraph (a) of this section, the Part D
plan sponsor must ensure the timely
transfer of any data or files.
■ 66. Amend § 423.510 as follows:
■ A. Redesignating paragraph (e) as
(e)(1).
■ B. Adding a new paragraph (e)(2).
The addition reads as follows:
§ 423.510 Termination of contract by Part
D sponsor.
*
*
*
*
*
(e) * * *
(2) During the same 2-year period
specified in (e)(1) of this section, CMS
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21575
will not contract with an organization
whose covered persons also served as
covered persons for the terminating
sponsor. A ‘‘covered person’’ as used in
this paragraph means one of the
following:
(i) All owners of nonrenewed or
terminated organizations who are
natural persons, other than shareholders
who have an ownership interest of less
than 5 percent.
(ii) An owner of a whole or part
interest in a mortgage, deed of trust,
note or other obligation secured (in
whole or in part) by the organization, or
any of the property or assets thereof,
which whole or part interest is equal to
or exceeds 5 percent of the total
property and assets of the organization.
(iii) A member of the board of
directors or board of trustees of the
entity, if the organization is organized as
a corporation.
*
*
*
*
*
Subpart M—Grievances, Coverage
Determinations, and Appeals
67. Amend § 423.562 as follows:
A. Redesignating paragraphs (a)(1)(ii)
and (iii) as paragraphs (a)(1)(iii) and (iv),
respectively.
■ B. Adding new paragraph (a)(1)(ii).
■ C. Revising paragraph (a)(3).
■ D. Adding paragraph (a)(5).
The revision and additions read as
follows:
■
■
§ 423.562
General provisions.
(a) * * *
(1) * * *
(ii) Use a single, uniform exceptions
and appeals process which includes,
procedures for accepting oral and
written requests for coverage
determinations and redeterminations
that are in accordance with § 423.128
(b)(7) and (d)(1)(iii).
*
*
*
*
*
(3) A Part D plan sponsor must
arrange with its network pharmacies to
distribute notices instructing enrollees
how to contact their plans to obtain a
coverage determination or request an
exception if they disagree with the
information provided by the pharmacist.
These notices must comply with the
standards established in
§ 423.128(b)(7)(iii).
*
*
*
*
*
(5) A Part D plan sponsor must
employ a medical director who is
responsible for ensuring the clinical
accuracy of all coverage determinations
and redeterminations involving medical
necessity. The medical director must be
a physician with a current and
unrestricted license to practice
medicine in a State, Territory,
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Commonwealth of the United States
(that is, Puerto Rico), or the District of
Columbia.
*
*
*
*
*
■ 68. Amend § 423.566 by adding
paragraph (d) to read as follows:
§ 423.566
Coverage determinations.
*
*
*
*
*
(d) Who must review coverage
determinations. If the Part D plan
sponsor expects to issue a partially or
fully adverse medical necessity (or any
substantively equivalent term used to
describe the concept of medical
necessity) decision based on the initial
review of the request, the coverage
determination must be reviewed by a
physician or other appropriate health
care professional with sufficient
medical and other expertise, including
knowledge of Medicare coverage
criteria, before the Part D plan sponsor
issues the coverage determination
decision. The physician or other health
care professional must have a current
and unrestricted license to practice
within the scope of his or her profession
in a State, Territory, Commonwealth of
the United States (that is, Puerto Rico),
or the District of Columbia.
■ 69. Amend § 423.568 by revising
paragraph (f) to read as follows:
§ 423.568 Standard timeframe and notice
requirements for coverage determinations.
*
*
*
*
*
(f) Written notice for denials by a Part
D plan sponsor. If a Part D plan sponsor
decides to deny a drug benefit, in whole
or in part, it must give the enrollee
written notice of the determination. The
initial notice may be provided orally, so
long as a written follow-up notice is
mailed to the enrollee within 3 calendar
days of the oral notification.
*
*
*
*
*
Subpart P—Premium and Cost-Sharing
Subsidies for Low-Income Individuals
70. Section 423.772 is amended by
adding the definition of ‘‘Individual
receiving home and community-based
services’’ to read as follows:
■
§ 423.772
Definitions.
jlentini on DSKJ8SOYB1PROD with RULES2
*
*
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*
*
Individual receiving home and
community-based services means a fullbenefit dual-eligible individual who is
receiving services under a home and
community-based program authorized
for a State in accordance with one of the
following:
(1) Section 1115 of the Act.
(2) Section 1915(c) or (d) of the Act.
(3) State plan amendment under
section 1915(i) of the Act.
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(4) Services are provided through
enrollment in a Medicaid managed care
organization with a contract under
section 1903(m) of the Act or section
1932 of the Act.
*
*
*
*
*
■ 71. Amend § 423.780 as follows:
■ A. Revising paragraph (b)(2)(ii)(C).
■ B. Adding paragraph (f).
The revision and addition read as
follows:
§ 423.780
Premium subsidy.
*
*
*
*
*
(b) * * *
(2) * * *
(ii) * * *
(C) The MA monthly prescription
drug beneficiary premium (as defined
under section 1854(b)(2)(B) of the Act)
for a MA–PD plan and determined
before the application of the monthly
rebate computed under section
1854(b)(1)(C)(i) of the Act for that plan
and year involved.
*
*
*
*
*
(f) Waiver of de minimis premium
amounts. CMS will permit a Part D plan
to waive a de minimis amount that is
above the monthly beneficiary premium
defined in § 423.780(b)(2)(ii)(A) or (B)
for full subsidy individuals as defined
in § 423.780(a) or § 423.780(d)(1),
provided waiving the de minimis
amount results in a monthly beneficiary
premium that is equal to the established
low income benchmark as defined in
§ 423.780(b)(2).
■ 72. In § 423.782, revise paragraph
(a)(2)(ii) to read as follows:
§ 423.782
Cost-sharing subsidy.
*
*
*
*
*
(a) * * *
(2) * * *
(ii) Full-benefit dual-eligible
individuals who are institutionalized or
who are receiving home and
community-based services have no costsharing for Part D drugs covered under
their PDP or MA–PD plans.
*
*
*
*
*
Subpart R—Payments to Sponsors of
Retiree Prescription Drug Plans
73. Amend § 423.884 as follows:
A. Redesignating paragraph (c)(3)(ii)
and (c)(3)(iii) as paragraphs (c)(3)(iii)
and (c)(3)(iv), respectively.
■ B. Adding a new subparagraph
(c)(3)(ii).
■ C. Revising paragraphs (d)
introductory text, (d)(1)(i) and (ii), and
(d)(5)(iii)(C).
The addition and revisions read as
follows:
■
■
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§ 423.884 Requirements for qualified
retiree prescription drug plans.
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*
*
*
*
(c) * * *
(3) * * *
(ii) Acknowledge that at the same
time CMS releases Part C and Part D
summary payment data in accordance
with § 422.504(n) and § 423.505(o) CMS
will also release Part D retiree drug
subsidy payment data for the most
recently reconciled year including the
name of the eligible sponsor, the total
gross aggregate dollar amount of the
CMS subsidy, and the number of
eligible retirees;
*
*
*
*
*
(d) Actuarial attestation—general.
The sponsor of the plan must provide to
CMS an attestation in a form and
manner specified by CMS that the
actuarial value of the retiree
prescription drug coverage under the
plan is at least equal to the actuarial
value of the defined standard
prescription coverage (as defined at
§ 423.100), not taking into account the
value of any discount or coverage
provided during the coverage gap (as
defined at § 423.100). The attestation
must meet all of the following
standards:
(1) * * *
(i) The actuarial gross value of the
retiree prescription drug coverage under
the plan for the plan year is at least
equal to the actuarial gross value of the
defined standard prescription drug
coverage under Part D for the plan year
in question, not taking into account the
value of any discount or coverage
provided during the coverage gap.
(ii) The actuarial net value of the
retiree prescription drug coverage under
the plan for that plan year is at least
equal to the actuarial net value of the
defined standard prescription drug
coverage under Part D for that plan year
in question, not taking into account the
value of any discount or coverage
provided during the coverage gap.
*
*
*
*
*
(5) * * *
(iii) * * *
(C) The valuation of defined standard
prescription drug coverage for a given
plan year is based on the initial
coverage limit cost-sharing and out-ofpocket threshold for defined standard
prescription drug coverage under Part D
in effect at the start of such plan year,
not taking into account the value of any
discount or coverage provided during
the coverage gap.
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74. In § 423.2264, revise paragraph (e)
to read as follows:
(including a special election period, as
described in § 423.38(c)(8)(i)(C)).
■ 76. Amend § 423.2274 by revising the
introductory text and paragraphs (b) and
(c) to read as follows:
§ 423.2264
§ 423.2274
Subpart V—Part D Marketing
Requirements
■
Guidelines for CMS review.
*
*
*
*
*
(e) For markets with a significant nonEnglish speaking population, provide
materials in the language of these
individuals. Specifically, Part D plan
sponsors must translate marketing
materials into any non-English language
that is the primary language of at least
5 percent of the individuals in a plan
benefit package (PBP) service area.
■ 75. Amend § 423.2272 by adding
paragraph (e) to read as follows:
§ 423.2272 Licensing of marketing
representatives and confirmation of
marketing resources.
*
*
*
*
(e) Terminate upon discovery any
unlicensed agent or broker employed as
a marketing representative and notify
any beneficiaries enrolled by an
unqualified agent or broker of the
agent’s or broker’s status and, if
requested, of their options to confirm
enrollment or make a plan change
jlentini on DSKJ8SOYB1PROD with RULES2
*
VerDate Mar<15>2010
17:41 Apr 14, 2011
Jkt 223001
Broker and agent requirements.
For purposes of this section
‘‘compensation’’ includes pecuniary or
nonpecuniary remuneration of any kind
relating to the sale or renewal of a
policy including, but not limited to,
commissions, bonuses, gifts, prizes,
awards, and finder’s fees.
‘‘Compensation’’ does not include the
payment of fees to comply with State
appointment laws, training,
certification, and testing costs;
reimbursement for mileage to, and from,
appointments with beneficiaries; or
reimbursement for actual costs
associated with beneficiary sales
appointments such as venue rent,
snacks, and materials. If a Part D
sponsor markets through independent
(that is, non-employee) brokers or
agents, the requirements in paragraph
(a) of this section must be met. The
requirements in paragraphs (b) through
(e) of this section must be met if a Part
D sponsor markets through any broker
PO 00000
Frm 00147
Fmt 4701
Sfmt 9990
21577
or agent, whether independent (that is,
non-employee) or employed.
*
*
*
*
*
(b) It must ensure that all agents
selling Medicare products are trained
annually, through a CMS endorsed or
approved training program or as
specified by CMS, on Medicare rules
and regulations specific to the plan
products they intend to sell.
(c) It must ensure agents selling
Medicare products are tested annually
by CMS endorsed or approved training
program or as specified by CMS.
*
*
*
*
*
Authority: (Catalog of Federal Domestic
Assistance Program No. 93.773, Medicare—
Hospital Insurance; and Program No. 93.774,
Medicare—Supplementary Medical
Insurance Program).
Dated: March 16, 2011.
Donald M. Berwick,
Administrator, Centers for Medicare &
Medicaid Services.
Approved: March 31, 2011.
Kathleen Sebelius,
Secretary.
[FR Doc. 2011–8274 Filed 4–5–11; 4:15 pm]
BILLING CODE 4120–01–P
E:\FR\FM\15APR2.SGM
15APR2
]]>Agencies
[Federal Register Volume 76, Number 73 (Friday, April 15, 2011)]
[Rules and Regulations]
[Pages 21432-21577]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-8274]
[[Page 21431]]
Vol. 76
Friday,
No. 73
April 15, 2011
Part II
Department of Health and Human Services
-----------------------------------------------------------------------
Centers for Medicare & Medicaid Services
-----------------------------------------------------------------------
42 CFR Parts 417, 422 and 423
Medicare Program; Changes to the Medicare Advantage and the Medicare
Prescription Drug Benefit Programs for Contract Year 2012 and Other
Changes; Final Rule
Federal Register / Vol. 76 , No. 73 / Friday, April 15, 2011 / Rules
and Regulations
[[Page 21432]]
-----------------------------------------------------------------------
DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Parts 417, 422, and 423
[CMS-4144-F]
RIN 0938-AQ00
Medicare Program; Changes to the Medicare Advantage and the
Medicare Prescription Drug Benefit Programs for Contract Year 2012 and
Other Changes
AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: This final rule makes 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 experience in the
administration of the Part C and Part D programs. These latter
revisions clarify various program participation requirements; make
changes to strengthen beneficiary protections; strengthen our ability
to identify strong applicants for Part C and Part D program
participation and remove consistently poor performers; and make other
clarifications and technical changes.
DATES: Effective Dates: These regulations are effective on June 6,
2011, unless otherwise specified in this final rule. Amendments to 42
CFR 422.564, 422.624, and 422.626 published April 4, 2003 at 68 FR
16652 are effective June 6, 2011.
Applicability Date: In section II.A. of the preamble of this final
rule, we provide a table (Table 1) which lists key changes in this
final rule that have an applicability date other than the effective 60
days after the date of display of this final rule.
FOR FURTHER INFORMATION CONTACT:
Vanessa Duran, (410) 786-8697, Christopher McClintick, (410) 786-
4682, and Sabrina Ahmed, (410) 786-7499, General information.
Heather Rudo, (410) 786-7627 and Christopher McClintick, (410) 786-
4682, Part C issues.
Deborah Larwood, (410) 786-9500, Part D issues.
Kristy Nishimoto, (410) 786-8517, Part C and Part D enrollment and
appeals issues.
Deondra Moseley, (410) 786-4577, Part C payment issues.
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Background
II. Provisions of the Final Regulations and Analysis of and
Responses to Public Comments
A. Overview of the Final Changes and Public Comments Received
1. Overview of the Final Changes
2. Public Comments Received on the Proposed Rule
B. Changes to Implement the Provisions of the Affordable Care
Act
1. Cost Sharing for Specified Services at Original Medicare
Levels (Sec. 417.454 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. Sec. 422.4, 422.101, and 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)
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.
417.454 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 Part 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. 423.507, Sec. 423.508,
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)
[[Page 21433]]
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 All 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 (Sec. 422.504,
Sec. 423.505, and Sec. 423.884)
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 Part 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. 417.454 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 and Sec.
423.562)
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)
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 Contract With a Part D Sponsor (Sec. 423.509)
O. ICRs Regarding Agent and Broker Training Requirements (Sec.
422.2274 and Sec. 423.2274)
P. ICRs Regarding Call Center and Internet Web site Requirements
(Sec. 422.111 and Sec. 423.128)
Q. ICRs Regarding Requiring Plan Sponsors to Contact
Beneficiaries to Explain Enrollment by an Unqualified Agent/Broker
(Sec. 422.2272 and Sec. 423.2272)
R. ICRs Regarding Customized Enrollee Data (Sec. 422.111 and
Sec. 423.128)
S. ICRs Regarding Extending the Mandatory Maximum Out-of-Pocket
(MOOP) Amount Requirements to Regional PPOs (Sec. 422.100(f) and
Sec. 422.101(d))
T. ICRs Regarding Prohibition on Use of Tiered Cost Sharing by
MA Organizations (Sec. 422.100 and Sec. 422.262)
U. ICRs Regarding Translated Marketing Materials (Sec. 422.2264
and Sec. 423.2264)
V. ICRs Regarding Expanding Network Adequacy Requirements to
Additional MA Plan Types (Sec. 422.112)
W. ICRs Regarding Maintaining a Fiscally Sound Operation (Sec.
422.2, Sec. 422.504, Sec. 423.4, and Sec. 423.505)
X. ICRs Regarding Release of Part C and Part D Payment Data
(Parts 422 and 423, Subpart K)
Y. ICRs Regarding Revision to Limitation on Charges to Enrollees
for Emergency Department Services (Sec. 422.113)
IV. Regulatory Impact Analysis
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
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 or Competitive Medical Plan
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
[[Page 21434]]
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 Program
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
TMR Targeted Medication Review
TrOOP True Out-Of-Pocket
U&C Usual and Customary
USP U.S. Pharmacopoeia
I. Background
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 (known as Medicare+Choice under the BBA). 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 Part D regulations to continue to improve or clarify
existing policies and/or codify current guidance for both programs. 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 Part 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). We also clarified the MIPPA marketing provisions in a November
2008 interim final rule (73 FR 67407).
Proposed and final rules addressing additional policy
clarifications under the Part C and Part 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
Part 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 Part 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 Part 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.
On November 22, 2010, a proposed rule (hereinafter referred to as
the November 2010 proposed rule) appeared in the Federal Register (75
FR 224), in which we proposed to continue 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
[[Page 21435]]
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 Part 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 proposed 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, the proposed rule was intended to strengthen the way we
administer the Part C and Part D programs, and to aid beneficiaries in
making the best plan choices for their health care needs.
II. Provisions of the Final Regulations and Analysis of and Responses
to Public Comments
A. Overview of the Final Changes and Public Comments Received
1. Overview of the Final Changes
In the sections that follow, we discuss the changes made in the
final rule to 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 have structured
the preamble narrative by topic area rather than in subpart order.
Accordingly, we 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 stronger
applicants for Part C and Part D program participation and to remove
consistently poor performers.
Implementing other clarifications and technical changes.
A number of the revisions and clarifications in this final rule
affect both the MA and prescription drug programs, and 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 are being revised.
We note that these regulations are effective 60 days after the date
of display of the final rule. Table 1 lists key changes that have an
applicability date other than 60 days after the date of display of this
final rule. The applicability dates are discussed in the preamble for
each of these items.
We are implementing several changes to the regulations to reflect
provisions in the ACA which are already in effect. Table 2 lists the
key changes. While these ACA provisions became effective on the
statutory effective date, the regulations implementing these provisions
will be effective 60 days after the date of display of the final rule.
BILLING CODE 4120-01-P
[[Page 21436]]
[GRAPHIC] [TIFF OMITTED] TR15AP11.000
[[Page 21437]]
[GRAPHIC] [TIFF OMITTED] TR15AP11.001
[[Page 21438]]
2. Public Comments Received on the Proposed Rule
We received approximately 261 timely public comments on the
November 2010 proposed rule. These public comments addressed issues on
multiple topics. Commenters included health and drug plan
organizations, insurance industry trade groups, pharmacy associations,
pharmaceutical benefit manager (PBM) organizations, provider
associations, representatives of hospital and long term care
institutions, drug manufacturers, mental health and disease specific
advocacy groups, beneficiary advocacy groups, researchers, and others.
In this final rule, we address all comments and concerns on the
policies included in the proposed rule. We also reference comments that
were outside the scope of the proposals set forth in the proposed rule,
in the comment and response sections of this final rule.
We present a summary of the public comments and our responses to
them in the applicable subject-matter sections of this final rule.
Comment: A commenter stated that CMS revised the date for the
closing of the comment period from January 21, 2011 to January 11, 2011
and requested that CMS provide a rationale for shortening the comment
period for the proposed rule.
Response: Our proposed rule was placed on display at the Office of
the Federal Register and made available on the CMS Web site on November
10, 2010. Section 1871(b)(1) of the Act requires ``notice'' of the
proposed rule, and a period of 60 days for public comment thereon.
Because notice of the provisions of the proposed rule was provided on
November 10, 2010 the comment period closed on January 11, 2011, which
is 60 days after the date of display of the proposed rule at the Office
of the Federal Register and on the CMS Web site.
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 ACA that concern the Part C and Part D programs 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.
[[Page 21439]]
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BILLING CODE 4120-01-C
1. Cost Sharing for Specified Services at Original Medicare Levels
(Sec. 417.454 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 service categories 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 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 April 2010 final rule (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 proposed to amend Sec. 422.100 by adding new paragraph (j). 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 proposed to add new paragraph (e) in Sec. 417.101 to
extend the requirements in section 3202 of the ACA to section 1876 cost
contracts. In this rule we explain that our proposed addition to Sec.
417.101 was technically incorrect and have corrected the regulation
citation so that our proposed addition is new paragraph (e) to Sec.
417.454 to extend the requirements in section 3202 of the ACA 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.
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
[[Page 21441]]
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 do not apply to such services during this period.
In our proposed additions to Sec. 417.454 and Sec. 422.100, we
proposed to incorporate these definitions for the two service
categories. We welcomed comments on these proposed cost sharing
standards.
We also proposed to limit cost sharing for home health services
under MA plans to that charged under Original Medicare and noted 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
instead indicated that we would rely 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 solicited public comment on our proposal to limit cost sharing
for home health services to that charged for those services under
Original Medicare.
Comment: There were many commenters who opposed our proposal to
limit cost sharing for home health services under MA and cost plans at
Original Medicare levels. The commenters expressed concern that
limiting cost sharing for home health decreases their flexibility in
their plan design and limits the plans' tools to ensure appropriate
utilization of home health care.
MedPAC strongly opposed our proposal to limit home health cost
sharing to $0 for several reasons including: Home health is a less
well-defined benefit in Medicare and its appropriate use is more
difficult to monitor and the proposed prohibition on cost sharing for
home health is unduly restrictive. They also argued that CMS' proposal
is based on weak rationale. The comment included a statement of
MedPAC's belief that cost sharing should be one of the tools that plans
can use at their discretion as a means of ensuring appropriate
utilization. The comment informed us that MedPAC was currently
considering these kinds of issues as a part of their deliberations on
whether or not to recommend that traditional FFS Medicare should have
cost sharing for home health services, along with the level of such
cost sharing and the circumstances in which the cost sharing would
apply.
Response: We find MedPAC's concerns about our proposal, in addition
to those expressed by many other commenters to be persuasive and
believe we should not finalize, at this time, our proposal to prohibit
cost sharing for in-network home health services. MedPAC has
recommended to Congress that it should direct the Secretary to
establish a per episode copayment for home health episodes of care that
are not preceded by a hospitalization or post-acute care use. We
believe it is reasonable for us to take time to perform additional
analyses of home health service utilization by beneficiaries enrolled
in MA plans.
Comment: We received several comments that supported our proposal
to limit cost sharing for home health services at Original Medicare
levels. Those commenters believe that it will provide beneficiaries
with a benefit package that is transparent and easily predictable for
out-of-pocket expenses.
Response: We thank the commenters for their support but, as
previously discussed at length, we believe that it would be more
appropriate not to finalize our proposal. We will continue to evaluate
the effectiveness of our current policies to protect beneficiaries from
unfair or discriminatory cost sharing, confusing plan choices, and
unaffordable care before implementing any additional policy change.
Furthermore, under current policy only plans that provide extra
beneficiary protection from high cost sharing by adopting a voluntary
MOOP are permitted to charge cost sharing for home health services. We
will continue to find the most appropriate balance between protecting
beneficiaries from excessive out-of-pocket cost sharing and ensuring
the financial viability of the MA program.
Comment: One commenter stated that prohibiting cost sharing for
home health could lead to further pricing challenges and another stated
there are a number of provisions in the ACA that limit a plan's ability
to charge cost sharing for specified services and that these provisions
are being implemented at the same time that CMS is implementing payment
cuts and medical costs are continuing to increase. The commenter stated
all plans would be in jeopardy of financial insolvency if they are
prohibited from balancing costs, benefits, and payment cuts.
Response: As stated in our proposed rule, we estimated that the
cost to the Medicare program of our proposal would not be significant.
We also stated that we did not expect a significant financial impact on
the relatively few plans that charge cost sharing for home health
services. However, given our decision not to move forward with this
proposal for other reasons, this issue is moot.
Comment: We received one comment that expressed concern that our
proposed codification section 3202 of the ACA could be interpreted and
implemented in a manner so as to mandate the cost sharing obligation to
be charged, rather than permitting plans to set cost sharing levels at
or below that cost sharing limit amount.
Response: We thank the commenter for sharing this concern. We
thought we were clear in our proposal that plans would be able to set
cost sharing levels at or below those charged under Original Medicare
but will make every effort to be clear and consistent in our guidance
related to these limits.
Comment: We received two comments that requested that we add
Durable Medical Equipment (DME) to the list of service categories for
which cost sharing may not exceed the levels required under Original
Medicare.
Response: We thank the commenters for their suggestion and we will
consider proposing that addition in future rulemaking.
Comment: We received several comments that challenged CMS' decision
to allow plans to charge cost sharing during the first 20 days of
skilled nursing care. One commenter
[[Page 21442]]
stated that charging cost sharing in the first part of the SNF stay
makes sense for the plans but does not make sense for the
beneficiaries. They stated that they understand CMS' actuarial
equivalency rationale and that the law allows MA cost sharing for the
services, but believe CMS' policy is contrary to the intent of health
care reform. Another commenter stated that prohibiting cost sharing for
the first 20 days of skilled nursing care would increase transparency
for beneficiaries and could offer better opportunities for frail
beneficiaries.
Response: Prior to the ACA, we allowed plans to charge cost sharing
during the first 20 days of skilled nursing care so long as the plan's
SNF benefit satisfied the actuarial equivalence test. In subregulatory
guidance subsequent to enactment of the ACA, we clarified that because
there is not cost sharing under Original Medicare for the first 20 days
of SNF care, under section 1852(a)(1)(B)(v) of the Act, the new
restrictions in section 3202 of the ACA do not apply to such services
during this period and that we would continue our policy to allow cost
sharing during the first 20 days of SNF care. We do not believe that
enrolled beneficiaries are disadvantaged by this policy for at least
two reasons. First, plans' cost sharing for SNF care is transparent to
beneficiaries as it is reflected in the Summary of Benefits and the
Medicare Plan Finder and second, because of the beneficiary protections
from unexpected, unmanageable out-of-pocket costs that Medicare
requires all MA plans to provide.
CMS limits the cost sharing that may be charged for SNF care so
that it does not exceed what the beneficiary would pay under Original
Medicare, including the minimal cost sharing we allow during the first
20 days in a covered SNF stay. We believe that minimal cost sharing is
more than offset by other savings and protections offered under plans'
benefit packages. One very important protection that all plans are
required to offer is the maximum out-of-pocket (MOOP) limit on enrolled
beneficiaries' out-of-pocket costs for covered in-network services. The
maximum amount an enrolled beneficiary can be required to pay for those
services is $6,700. In addition, most plans that charge cost sharing in
the first 20 days of SNF care, waive the Original Medicare requirement
for a 3-day qualifying inpatient hospital stay which saves
beneficiaries enrolled in those plans from having to pay the costs for
an inpatient stay.
Comment: One commenter requested that CMS establish an employer
group waiver excepting MA plans offered through employer/union group
health plans from the proposed cost sharing standards.
Response: We thank the commenter for this suggestion but we believe
that employer group plans must be subject to the same cost sharing as
other MA plans in order to provide the beneficiaries enrolled in those
plans the same protections as beneficiaries enrolled in other MA and
cost plans.
Comment: Several commenters supported our proposed codification of
section 3202 of the ACA to limit cost sharing for chemotherapy
administration services, renal dialysis services, skilled nursing care,
and such other services as the Secretary determines appropriate to
levels not to exceed that charged under Original Medicare and stated
that it was welcome news for beneficiaries. One commenter specifically
expressed support for the extension of the cost sharing limits to
section 1876 cost contracts. Some of the commenters also requested that
CMS provide greater clarity that the limits on cost sharing apply only
to in-network services.
Response: We thank the commenters for their support and in response
to the these comments we will revise our proposed regulation text to
clarify in Sec. 422.100 that the cost sharing charged for chemotherapy
administration services, renal dialysis services and skilled nursing
care provided in-network may not exceed the amount of cost sharing
required for those services under Original Medicare. Thus, in part, the
final regulation text will be revised to read: ``On an annual basis,
CMS would evaluate whether there are service categories for which MA
plans' in-network cost sharing may not exceed that required under
Original Medicare and specify in regulation which services are subject
to that cost sharing limit.''
Comment: A few commenters objected to our codification in the
proposed rule of our proposal to extend the cost sharing limits of
section 3202 of the ACA to section 1876 cost plans because we proposed
to set forth this requirement in a new paragraph (g) to Sec. 417.101,
which otherwise does not govern cost plans. The commenters suggested
that we instead add a new paragraph to Sec. 417.454, Charges to
Medicare enrollees. One commenter also recommended that we change our
reference to ``MA plans'' in the proposed regulation language to
``HMO'' or ``CMP'' to be consistent with the standard terminology used
in the regulations to refer to the section 1876 contracting entity.
Response: We thank the commenters for their suggestions.
Accordingly, in this final rule, we will not include the cost-sharing
requirements in Sec. 417.101, but will instead add new paragraph (e)
to Sec. 417.454 to require cost sharing charged by section 1876 cost
plans for chemotherapy, renal dialysis and skilled nursing care to be
limited to that charged under Original Medicare. We also will remove
reference to ``MA plans'' in the new regulatory text language and
replace it with ``HMO or CMP.''
We have considered all of the comments on this proposal and will
finalize, as revised, the addition of a new paragraph and (j) to Sec.
422.100 to implement section 3202 of the ACA requiring that MA plans'
in-network cost sharing charges for chemotherapy, SNF care and dialysis
will be no greater than that charged under Original Medicare, and a new
paragraph (e) to Sec. 417.454 to extend these protections to section
1876 cost contracts. However, we will not finalize our proposal to add
new paragraph (4) to Sec. 417.454(e) or new paragraph (4) to Sec.
422.100(j) to prohibit plans from charging cost sharing for home health
services.
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 proposed to amend 0Sec. 422.62(a)(2) and Sec.
423.38(b) to codify this change.
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, also referred to as the Medicare Advantage
Disenrollment Period (MADP), replaces the open enrollment period (OEP)
that previously occurred annually from January 1st through March 31st.
To codify this provision, we proposed the following changes:
Sec. 422.62(a) was amended to provide for this new
disenrollment opportunity and clarify that the OEP ended after 2010;
Sec. 422.68(f) was amended to specify the effective date
for disenrollment
[[Page 21443]]
requests submitted during the new 45-day disenrollment period;
Sec. 423.38(d) was amended to allow individuals who
disenrolled from an MA plan between January 1 through February 14th to
enroll in a standalone PDP; and
Sec. 423.40(d) was amended to 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.
Comment: Commenters requested that CMS conduct beneficiary
education on the new AEP timeframe.
Response: We are strongly committed to using all available means
for ensuring that beneficiaries are made aware of the new AEP
timeframes. Thus, we expect to conduct specific outreach and education
on this topic and highlight the change in Medicare & You 2012 which
will be mailed to all beneficiaries.
Comment: Commenters recommended that CMS adjust the timing of plan
bids and make other important information, such as model notices,
available earlier for plan preparation of the AEP. In addition,
commenters requested that plan marketing be allowed to start earlier
than October 1 for the AEP.
Response: We are considering the timing of our processes and will
be making appropriate adjustments as we prepare for a successful
implementation of the new AEP timeframe, but we do not plan to change
the bid submission or plan marketing dates. The plan bid submission
date is set by statute and remains the first week in June, leaving only
a narrow timeframe for review and approval of bids and benefits and to
ensure that marketing materials align with approved benefits. Accurate
marketing materials are key to enabling beneficiaries to make
appropriate determinations regarding their health care and prescription
drug coverage. Also, we do not believe it is appropriate or necessary
to allow plans to market earlier than October 1 given that a
beneficiary may not enroll in a plan until October 15th.
Comment: Commenters recommended that CMS create an open enrollment
period that would allow beneficiaries to enroll in Medigap products
without regard to health status or pre-existing conditions. Another
commenter recommended that CMS clarify that beneficiaries who disenroll
from an MA plan using the 45-day disenrollment period do not have
guaranteed issue rights to prevent underwriting the plan premium if
they choose to purchase a Medigap policy.
Response: Section 1882 of the Act does not provide for a Federal
annual open enrollment period for Medigap. Further the commenter is
correct that using the MADP does not give the beneficiary guaranteed
issue rights under Federal law to prevent health-based underwriting of
the Medigap policy premium. In some cases, State Medigap laws may offer
additional guaranteed issue rights to beneficiaries who are affected by
the MADP.
Comment: Some commenters recommended that CMS establish a special
election period (SEP) for the first year of the new AEP timeframe to
allow individuals to make plan elections through December 31.
Additionally, one commenter suggesting allowing plan sponsors to accept
and process enrollment requests received from December 8 through
December 31.
Response: Again, we will take a number of steps to ensure that
beneficiaries are made aware of the new AEP timeframes, and that they
have the tools they need to make informed decisions during the new AEP
timeframe. We believe that through planned outreach and education
efforts directly to beneficiaries and with stakeholders and plans,
beneficiaries will have sufficient notification to make their health
plan elections by December 7. We believe that the establishment of the
suggested SEP would directly conflict with the clear intent of the
statute.
Comment: A commenter recommended that individuals using the
opportunity afforded by the MADP be allowed to enroll in an MA plan
offered by the same parent organization instead of defaulting to
Original Medicare. Another commenter recommended CMS find a less
expensive alternative to the MADP such as reinstating the open
enrollment period or eliminating lock-in.
Response: Again, the new 45-day disenrollment period, as
established in the ACA, is clearly designed to permit only moves from
MA to Original Medicare. Eliminating or broadening the scope of this
election period would contradict the intent of the statute. Similarly,
``lock-in'' is mandated by the statute and cannot be eliminated by CMS.
Comment: A commenter addressed CMS' plans to establish an SEP to
allow beneficiaries in an MA plan with less than five stars to enroll
in a plan with five stars outside of the normal enrollment periods. The
commenter recommended that, in regions where there are no plans with
five stars, individuals be allowed to enroll in plans with 4.5 stars
outside of the normal enrollment periods.
Response: We appreciate the suggestion; however the SEP for
individuals to enroll in 5-star plans is outside the scope of this
regulation. We will consider this suggestion as we finalize guidance
concerning the scope of the SEP associated with Plan Ratings later this
year. We appreciate the comments that were submitted and will be
finalizing these proposals without modification.
3. Special Needs Plan (SNP) Provisions (Sec. 422.2, Sec. 422.4, Sec.
422.101, Sec. 422.107, and Sec. 422.152)
In our proposed rule, we defined a fully integrated dual eligible
special needs plan (SNP) as specified by the ACA, and set forth
proposed regulations implementing changes made by the ACA. These
changes would extend the authority to offer SNPs, extend provisions
permitting existing D-SNPs that are not expanding their service areas
to continue operating without contracts with State Medicaid agencies
through 2012, and establish a required NCQA quality 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 to
provide authority to apply a frailty payment under PACE payment rules
for certain individuals enrolled in fully integrated dual eligible
special needs plans described in section 3205(b) of the ACA. In order
to implement this provision, we proposed a definition of fully
integrated dual eligible special needs plan to Sec. 422.2 that will
apply for these purposes. Under our proposed definition, the D-SNP must
meet the following criteria in order to be considered a fully
integrated dual eligible special needs plan:
Enroll special needs individuals entitled to medical
assistance under a Medicaid State plan, as defined in section
1859(b)(6)(B)(ii) of the Act and Sec. 422.2.
Provide dual eligible beneficiaries access to Medicare and
Medicaid benefits under a single managed care organization (MCO).
Have 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.
Coordinate 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.
[[Page 21444]]
Employ policies and procedures approved by CMS and the
State to coordinate or integrate member materials, including
enrollment, communications, grievance and appeals, and quality
assurance.
In this final rule, we adopt our proposed definition of a fully
integrated dual eligible special needs plan with some modification. For
reasons discussed below, we have in this final rule revised the
definition by removing the word ``including'' and have replaced the
word ``assurance'' with ``improvement.''
Comment: The majority of commenters supported our proposed
definition of a fully integrated dual eligible special needs plan.
However, three commenters raised concerns about two potential
ambiguities in the part of the proposed definition which requires that
a fully integrated dual eligible special needs plan ``[e]mploy policies
and procedures approved by CMS and the State to coordinate or integrate
member materials, including enrollment, communications, grievance and
appeals, and quality assurance.'' Specifically, these commenters
recommended that we eliminate the word ``including'' after member
materials, because the functions that follow the word ``including'' in
the proposed definition are not all related to member materials.
Further, these same commenters suggested that we use the terms
``performance measurement'' in place of ``quality assurance'' in the
proposed definition, because, as suggested by the commenters, the term
``performance measurement'' is more consistent with current regulatory
language.
Response: We appreciate the commenters' support for the definition
we proposed for a fully integrated dual eligible special needs plan. We
agree with the commenters that, as written, the final prong of the
proposed definition is not sufficiently clear about what policies and
procedures must be approved by CMS and the State to ensure integration
and coordination. Accordingly, in response to these comments, we have
revised this part of the proposed definition in Sec. 422.2 of the MA
program regulations by eliminating the word ``including'' after member
materials because, as the commenters suggest, the functions that follow
the word ``including'' are not all related to member materials. We
believe this word deletion makes this prong of the definition more
clear, and also more accurately reflects our intention that a fully
integrated dual eligible special needs plan coordinate or integrate
Medicaid and Medicare member materials, enrollment, communications,
grievance and appeals, and quality improvement. In addition, we revised
this part of the proposed definition by substituting the terms
``quality improvement'' for ``quality assurance'' (or ``performance
measurement'' as suggested by three commenters). ``Quality
improvement'' is most consistent with existing MA terminology. We
believe the term ``performance measurement'' does not sufficiently
specify our intention to ensure that this portion of the definition
requires coordinated or integrated policies regarding quality. Further,
the use of the term ``quality improvement'' intentionally demonstrates
our intention that a fully integrated dual eligible special needs plan
integrate or coordinate the full spectrum of programs and tools
utilized to ensure quality.
Comment: Several commenters suggested that we broadly or flexibly
interpret the definition of a fully integrated dual eligible special
needs plan to allow for the broad variety of dual eligible special
needs plan contracting arrangements in place in different States.
Additionally, one commenter that submitted a comment with this
suggestion also requested that under the third prong of the definition,
we allow for some combination of specified primary, acute and long-term
care benefits and services because States need flexibility to design
the details of their programs in response to their stakeholders' needs
and concerns. In contrast, another commenter urged us to use caution
when approving plans as fully integrated dual eligible special needs
plans, and recommended that we specify that any fully integrated dual
eligible special needs plan purporting to offer long-term supports and
services must offer the full range available in a given State.
Response: We believe that there is a great deal of flexibility in
our proposed definition of a fully integrated dual eligible special
needs plan, as written in the proposed rule and this final rule, to
account for the variability in State integration efforts. For example,
the terms ``consistent with State policy'' in the definition recognizes
the variability in the degree and extent to which Medicaid services are
covered from one State to the next. Additionally, as highlighted by
another commenter, use of the word ``specified'' in the definition
(``coverage of specified primary, acute, and long term care benefits
and services, consistent with State policy'') also acknowledges that
States vary in the degree to which Medicaid services are covered by the
State by only requiring the plan to cover those services specified by
the State Medicaid Agency. Moreover, fully integrated dual eligible
special needs plans and States have the flexibility to choose to
contract to serve certain subsets of the sState's overall dual eligible
population, provided that the MIPPA compliant State contract between
the State and the fully integrated dual eligible special needs plan
supports this arrangement. Therefore, in order to meet this definition
a plan will be required to provide all covered Medicaid primary, acute
and long-term care services and benefits to beneficiaries, and not some
combination thereof.
Comment: One commenter recommended that we include in the
definition of a fully integrated dual eligible special needs plan the
reference to PACE frailty levels from the statutory definition of a
fully integrated dual eligible special needs plan found in section 3205
of the ACA. This commenter suggested that this reference to PACE
frailty levels should be included in the definition of a fully
integrated dual eligible special needs plan, as well as where it now
appears in Sec. 422.308.
Response: While section 3205 of the ACA provides us with the
authority to apply a frailty adjustment payment to a fully integrated
dual eligible special needs plan with a similar average level of
frailty as the PACE program, the statute does not limit our ability to
use the definition of a fully integrated dual eligible special needs
plan for only this purpose. Therefore, we will not include this
requested reference in the final definition so we are able use this
definition for other purposes in the future.
Comment: One commenter asked us to clarify what is meant by
``aligned care management and specialty care network methods for high-
risk beneficiaries,'' and also provided brief recommendations on how to
implement this requirement. Further, the commenter recommended that any
clarification on the ``aligned care management'' requirement specify
that a fully integrated dual eligible special needs plan is responsible
for managing care that is covered by Medicare or Medicaid in such a way
that the individual beneficiary gets full access to all services
covered by both programs.
Response: Section 164(d) of the Medicare Improvement for Patients
and Providers Act of 2008 (MIPPA) requires that special needs plans
``have in place an evidenced-based model of care with appropriate
networks of providers and specialists * * * and use[s] an
interdisciplinary team in the
[[Page 21445]]
management of care.'' The terms ``aligned care management and specialty
care network methods for high-risk beneficiaries'' derive from this
requirement in MIPPA. In the September 18, 2008 Federal Register, we
issued an interim final rule with comment on this MIPPA provision. We
have received several comments on this provision and will finalize the
provision later this year. As such, the final rule will provide
additional clarification on what is required to ``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'' as required by the definition for
a fully integrated dual eligible special needs plan.
Comment: One commenter asked us to clarify the requirement that a
plan designated as a fully integrated dual eligible special needs plan
must provide notices specific to the dual-eligible population it is
serving as opposed to generic notices designed for non-dual
beneficiaries that do not correctly identify their rights and
obligations.
Response: We appreciate this concern and currently require certain
communications be developed specific to a beneficiary's eligibility.
For example, we have created an Annual Notice of Change/Evidence of
Coverage standard template specifically for dual eligible special needs
plans for use starting with contract year 2012. The template was
developed through several rounds of consumer testing and listening
sessions with SNP representatives and consumer advocates. Other CMS
models may be customized to meet the needs of dual eligible members.
Furthermore, fully integrated and dual eligible special needs plans are
required to coordinate and integrate member materials to contain
information specific to both the Medicare and Medicaid benefits. We are
committed to ensuring beneficiaries receive appropriate and helpful
marketing materials and will continue to explore opportunities to
improve beneficiary experience in this regard.
Comment: One commenter recommends that we approve and allow both
fully integrated dual eligible special needs plans and non-fully
integrated dual eligible special needs plans to operate so that a
larger population of duals may be served by these plans.
Response: We agree with this commenter's recommendation. We will
continue to approve and allow both fully integrated dual eligible
special needs plans and non-fully integrated dual eligible special
needs plan to operate so a larger population of duals may be served by
these plans.
Comment: One commenter seeks clarific
