Medicare Program; Contract Year 2016 Policy and Technical Changes to the Medicare Advantage and the Medicare Prescription Drug Benefit Programs, 7911-7966 [2015-02671]

Download as PDF Vol. 80 Thursday, No. 29 February 12, 2015 Part II Department of Health and Human Services Rmajette on DSK2VPTVN1PROD with RULES2 Centers for Medicare & Medicaid Services 42 CFR Parts 417, 422, and 423 Medicare Program; Contract Year 2016 Policy and Technical Changes to the Medicare Advantage and the Medicare Prescription Drug Benefit Programs; Final Rule VerDate Sep<11>2014 14:05 Feb 11, 2015 Jkt 235001 PO 00000 Frm 00001 Fmt 4717 Sfmt 4717 E:\FR\FM\12FER2.SGM 12FER2 7912 Federal Register / Vol. 80, No. 29 / Thursday, February 12, 2015 / Rules and Regulations Department of Health and Human Services Centers for Medicare & Medicaid Services 42 CFR Parts 417, 422, and 423 [CMS–4159–F2] RIN 0938–AS20 Medicare Program; Contract Year 2016 Policy and Technical Changes to the Medicare Advantage and the Medicare Prescription Drug Benefit Programs Centers for Medicare & Medicaid Services (CMS), HHS. ACTION: Final rule. AGENCY: This final rule amends the Medicare Advantage (MA) program (Part C) regulations and Medicare Prescription Drug Benefit Program (Part D) regulations to implement statutory SUMMARY: requirements; improve program efficiencies; strengthen beneficiary protections; clarify program requirements; improve payment accuracy; and make various technical changes. Additionally, this rule finalizes two technical changes that reinstate previously approved but erroneously removed regulation text sections. DATES: This rule is effective March 16, 2015, except amendments to § 423.154, which are effective January 1, 2016. Applicability Dates: Except as specified in Table 1, the applicability date of these provisions is January 1, 2016. In the Supplemental section of this final rule, we provide a table (Table 1) that lists changes in this final rule that have either an effective date other than March 16, 2015 or an applicability date other than January 1, 2016, for Contract Year 2016. FOR FURTHER INFORMATION CONTACT: Christopher McClintick, (410) 786– 4682, Part C issues. Marie Manteuffel, (410) 786–3447, Part D issues. Kristy Nishimoto, (206) 615–2367, Part C and D enrollment and appeals issues. Whitney Johnson, (410) 786–0490, Part C and D payment issues. Joscelyn Lissone, (410) 786–5116, Part C and D compliance issues. The majority of the provisions listed in this rule are intended for implementation for contract year 2016. Changes in the Code of Federal Regulations (CFR) will be consistent with the effective date of the applicable provision. Table 1 lists those provisions with effective dates other than 30 days after the date of publication of this final rule or applicability dates other than January 1, 2016 for contract year 2016. The applicability and effective dates are discussed in the preamble for each of these items. SUPPLEMENTARY INFORMATION: TABLE 1—APPLICABILITY AND EFFECTIVE DATES OF SELECT PROVISIONS OF THE FINAL RULE Preamble section Section title Effective date II.A.2. ............. Enrollment Eligibility for Individuals Not Lawfully Present in the United States (§§ 417.2, 417.420, 417.422, 417.460, 422.1, 422.50, 422.74, 423.1, 423.30, and 423.44). Efficient Dispensing in Long-Term Care Facilities and Other Changes (§ 423.154) ....... ............................. II.A.5. ............. Rmajette on DSK2VPTVN1PROD with RULES2 Table of Contents I. Executive Summary and Background A. Executive Summary 1. Purpose 2. Summary of the Major Provisions a. Changes To Audit and Inspection Authority (§§ 422.503(d)(2), 423.504(d)(2)) b. Enrollment Eligibility for Individuals Not Lawfully Present in the United States (§§ 417.2, 417.420, 417.422, 417.460, 422.1, 422.50, 422.74, 423.1, 423.30, 423.44) c. Business Continuity for MA Organizations & PDP Sponsors (§§ 422.504(o) and 423.505(p)) d. Efficient Dispensing in Long Term Care Facilities and Other Changes (§ 423.154) 3. Summary of Costs and Benefits B. Background 1. General Overview and Regulatory History 2. Issuance of the Proposed Rule 3. Public Comments Received in Response to the Contract Year 2015 Policy and Technical Changes to the Medicare Advantage and the Medicare Prescription Drug Benefit Programs Proposed Rule II. Provisions of the Proposed Regulations A. Clarifying Various Program Participation Requirements 1. Changes to Audit & Inspection Authority (§§ 422.503(d)(2), 423.504(d)(2)) 2. Enrollment Eligibility for Individuals Not Lawfully Present in the United VerDate Sep<11>2014 13:56 Feb 11, 2015 Jkt 235001 States (§§ 417.2, 417.420, 417.422, 417.460, 422.1, 422.50, 422.74, 423.1, 423.30, 423.44) 3. Part D Notice of Changes (§ 423.128(g)) 4. Business Continuity for MA Organizations & PDP Sponsors (§§ 422.504(o), 423.505(p)) 5. Efficient Dispensing in Long Term Care Facilities and Other Changes (§ 423.154) 6. Medicare Coverage Gap Discount Program and Employer Group Waiver Plans (§ 423.2325) 7. Transfer of TrOOP Between PDP Sponsors Due To Enrollment Changes During the Coverage Year (§ 423.464) 8. Expand Quality Improvement Program Regulations (§ 422.152) B. Improving Payment Accuracy 1. Determination of Payments (§ 423.329) 2. Reopening (§ 423.346) 3. Payment Appeals (§ 423.350) 4. Payment Processes for Part D Sponsors (§ 423.2320) 5. Risk Adjustment Data Requirements— Proposal Regarding Annual Deadline for MAO Submission of Final Risk Adjustment Data (§ 422.310 (g)(2)(ii)) C. Strengthening Beneficiary Protections 1. MA–PD Coordination Requirements for Drugs Covered Under Parts A, B, and D (§ 422.112) 2. Good Cause Processes (§§ 417.460, 422.74, 423.44) 3. MA Organizations’ Extension of Adjudication Timeframes for Organization Determinations and PO 00000 Frm 00002 Fmt 4701 Sfmt 4700 Applicability date June 1, 2015. January 1, 2016. Reconsiderations (§§ 422.568, 422.572, 422.590, 422.618, 422.619) D. Strengthening Our Ability To Distinguish Stronger Applicants for Part C and D Program Participation and To Remove Consistently Poor Performers 1. Two-Year Prohibition When Organizations Terminate Their Contracts (§ 422.502, § 422.503, § 422.506, § 422.508, § 422.512) 2. Withdrawal of Stand-Alone Prescription Drug Plan Bid Prior to Contract Execution (§ 423.503) 3. Essential Operations Test Requirement for Part D (§ 423.503(a) and (c), § 423.504(b)(10), § 423.505(b)(28), § 423.509) E. Implementing Other Technical Changes 1. Requirements for Urgently Needed Services (§ 422.113) 2. Agent and Broker Training and Testing Requirements (§§ 422.2274, 423.2274) 3. Deemed Approval of Marketing Materials (§§ 422.2262, 422.2266, 423.2262, 423.2266) 4. Cross-Reference Change in the Part C Disclosure Requirements (§ 422.111) 5. Managing Disclosure and Recusal in P&T Conflicts of Interest (§ 423.120(b)(1)) 6. Thirty-Six Month Coordination of Benefits (COB) Limit (§ 423.466(b)) 7. Application and Calculation of Daily Cost-Sharing Rates (§ 423.153) 8. Technical Change To Align Regulatory Requirements for Delivery of Standardized Pharmacy Notice (§ 423.562) E:\FR\FM\12FER2.SGM 12FER2 Federal Register / Vol. 80, No. 29 / Thursday, February 12, 2015 / Rules and Regulations 9. MA Organization Responsibilities in Disasters and Emergencies (§ 422.100) 10. Technical Changes To Align Part C and Part D Contract Determination Appeal Provisions (§§ 422.641, 422.644) 11. Technical Changes To Align Parts C and D Appeal Provisions (§§ 422.660, 423.650) 12. Technical Change to the Restrictions on Use of Information Under Part D (§ 423.322) 13. Technical Changes to Regulation Text at § 423.104—Requirements Related to Qualified Prescription Drug Coverage 14. Technical Changes to Regulation Text at § 423.100—Definition of Supplemental Benefits III. Collection of Information Requirements A. ICRs Related to Eligibility of Enrollment for Individuals Not Lawfully Present in the United States (§§ 417.2, 417.420, 417.422, 417.460, 422.1, 422.50, 422.74, 423.1, 423.30, and 423.44) B. ICRs Related to Good Cause Processes (§§ 417.460, 422.74, 423.44) C. ICRs Related To Expanding Quality Improvement Program Regulations (§ 422.152) D. ICRs Related To Changes to Audit and Inspection Authority (§§ 422.503(d)(2) and 423.504(d)(2)) E. ICRs Related to Business Continuity for MA Organizations and PDP Sponsors (§§ 422.504(o) and 423.505(p)) F. Submission of PRA-Related Comments IV. Regulatory Impact Statement Regulations Text Rmajette on DSK2VPTVN1PROD with RULES2 Acronyms ADS Automatic Dispensing System AHFS American Hospital Formulary Service AHFS–DI American Hospital Formulary Service-Drug Information AHRQ Agency for Health Care Research and Quality ANOC Annual Notice of Change AO Accrediting Organization ALR Assisted Living Residence 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) BLA Biologics License Application BLS Bureau of Labor Statistics CAHPS Consumer Assessment Health Providers Survey CAP Corrective Action Plan CCIP Chronic Care Improvement Program CC/MCC Complication/Comorbidity and Major Complication/Comorbidity CCS Certified Coding Specialist CDC Centers for Disease Control CGDP Coverage Gap Discount Program CHIP Children’s Health Insurance Programs CMP Civil Money Penalty CMR Comprehensive Medical Review CMS Centers for Medicare & Medicaid Services CMS–HCC CMS Hierarchal Condition Category VerDate Sep<11>2014 17:55 Feb 11, 2015 Jkt 235001 CTM Complaints Tracking Module COB Coordination of Benefits CORF Comprehensive Outpatient Rehabilitation Facility CPC Certified Professional Coder CY Calendar Year DEA Drug Enforcement Administration DIR Direct and Indirect Remuneration DHS Department of Homeland Security DME Durable Medical Equipment DMEPOS Durable Medical Equipment, Prosthetic, Orthotics, and Supplies D-SNPs Dual Eligible SNPs DOL U.S. Department of Labor DUR Drug Utilization Review EAJR Expedited Access to Judicial Review 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 FDR First-tier, Downstream, and Related Entities FEHBP Federal Employees Health Benefits Plan FFS Fee-For-Service FIDE Fully-integrated Dual Eligible FIDE SNPs Fully-integrated Dual Eligible Special Needs Plans FMV Fair Market Value FY Fiscal Year GAO Government Accountability Office HAC Hospital-Acquired Conditions 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 ICFs/IID Intermediate care facilities for the mentally retarded ICL Initial Coverage Limit ICR Information Collection Requirement ID Identification IMD Institutes for mental disease IT Information Technology I/T/U Pharmacies Indian Health Service, Tribes and Tribal organizations, and urban Indian organizations (collectively referred to as ‘‘I/T/U’’). IVC Initial Validation Contractor LCD Local Coverage Determination LEP Late Enrollment Penalty LIS Low-Income Subsidy LPPO Local Preferred Provider Organization LTC Long Term Care MA Medicare Advantage MAAA Member of the American Academy of Actuaries MA–PD Medicare Advantage-Prescription Drug Plan MCO Managed Care Organization MIPPA Medicare Improvements for Patients and Providers Act of 2008 (Pub. L. 110– 275) MOC Medicare Options Compare MOOP Maximum Out-of-Pocket MPDPF Medicare Prescription Drug Plan Finder PO 00000 Frm 00003 Fmt 4701 Sfmt 4700 7913 MMA Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (Pub. L. 108–173) MS–DRG Medicare Severity Diagnosis Related Group MSA Metropolitan Statistical Area MSAs Medical Savings Accounts MSP Medicare Secondary Payer MTM Medication Therapy Management MTMP Medication Therapy Management Program NAIC National Association of Insurance Commissioners NCPDP National Council for Prescription Drug Programs NCQA National Committee for Quality Assurance NDA New Drug Application NDC National Drug Code NGC National Guideline Clearinghouse NIH National Institutes of Health NOMNC Notice of Medicare Non-Coverage NPI National Provider Identifier OES Occupational Employment Statistics OIG Office of Inspector General OMB Office of Management and Budget OPM Office of Personnel Management OTC Over the Counter PACE Programs of the All-Inclusive Care for the Elderly Part C Medicare Advantage Part D Medicare Prescription Drug Benefit Program Part D IRMAA Part D Income Related Monthly Adjustment Amount PBM Pharmacy Benefit Manager PDE Prescription Drug Event PDP Prescription Drug Plan PFFS Private Fee For Service Plan POA Present on Admission (Indicator) POS Point-of-Sale PPO Preferred Provider Organization PPS Prospective Payment System P&T Pharmacy & Therapeutics QRS Quality Review Study PACE Programs of All Inclusive Care for the Elderly PRWORA Personal Responsibility and Work Opportunity Reconciliation Act of 1996 RADV Risk Adjustment Data Validation RAC Recovery Audit Contractor RAPS Risk Adjustment Payment System RPPO Regional Preferred Provider Organization RTO Return to Operations/Recovery Time Objective SBA Small Business Association SCORM Sharable Content Object Reference Model SEP Special Enrollment Period SHIP State Health Insurance Assistance Programs SNF Skilled Nursing Facility SNP Special Needs Plan SNP MOC Special Needs Plan Model of Care SPAP State Pharmaceutical Assistance Programs SSA Social Security Administration SSI Supplemental Security Income T&C Terms and Conditions TPA Third Party Administrator TrOOP True Out-Of-Pocket U&C Usual and Customary UPIN Uniform Provider Identification Number E:\FR\FM\12FER2.SGM 12FER2 7914 Federal Register / Vol. 80, No. 29 / Thursday, February 12, 2015 / Rules and Regulations USP U.S. Pharmacopoeia ZPIC Zone Program Integrity Contractor I. Executive Summary and Background A. Executive Summary 1. Purpose The purpose of this final rule is to revise the Medicare Advantage (MA) program (Part C) regulations and Medicare Prescription Drug Benefit Program (Part D) regulations to implement statutory requirements, improve program efficiencies, strengthen beneficiary protections, clarify program requirements, improve payment accuracy, and make various technical changes for contract year 2016. 2. Summary of the Major Provisions Rmajette on DSK2VPTVN1PROD with RULES2 a. Changes to Audit and Inspection Authority (§§ 422.503(d)(2), 423.504(d)(2)) We proposed three changes to our audit and inspection authority. Due to significant concerns raised during the public comment period, we are finalizing only two of those three proposals. First, under section 6408 of the Affordable Care Act, new authority was provided to the Secretary that now requires that each contract provide the right to ‘‘timely’’ inspection and audit. We are revising both §§ 422.503(d)(2) and 423.504(d)(2) to insert the word ‘‘timely’’ at the end of both of the introductory paragraphs. We are also adding language to §§ 422.503(d)(2) and 423.504(d)(2) that will allow us to require that a sponsoring organization hire an independent auditor, working in accordance with CMS specifications, to validate if the deficiencies that were found during a CMS full or partial program audit have been corrected and provide CMS with a copy of the audit findings. The proposal to require MA organizations and Part D plan sponsors to hire an independent auditor to conduct full or partial program audits will not be finalized. b. Enrollment Eligibility for Individuals Not Lawfully Present in the United States (§§ 417.2, 417.420, 417.422, 417.460, 422.1, 422.50, 422.74, 423.1, 423.30, 423.44) After consideration of the public comments, we are finalizing the policies VerDate Sep<11>2014 13:56 Feb 11, 2015 Jkt 235001 mostly as proposed, with the exception of changes to the regulation text at §§ 417.422, 417.460, 422.50, 423.1, 423.3 and 423.44 to clarify that any individual not lawfully present is no longer eligible to remain enrolled in a cost, MA, or Part D plan, to establish the disenrollment effective date to be the first of the month following notice by CMS of ineligibility, and to delete the term ‘‘qualified alien.’’ Further, we are redesignating the current text at § 417.460(b)(2)(iv) as paragraph (b)(2)(v) and finalizing the provision establishing a lack of lawful presence as a basis for disenrollment from a cost plan at paragraph (b)(2)(iv). This provision is consistent with the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA) and with recommendations made by the Office of the Inspector General (OIG) in its January 2013 and October 2013 reports. c. Business Continuity for MA Organizations & PDP Sponsors (§§ 422.504(o) and 423.505(p)) To respond to concerns raised during the comment period, we revised the regulation text by providing a 72, rather than 24 hour, restoration time period for MA organizations and Part D sponsors after a systems failure. We also revised text as necessary to make clear that we require MA organizations and sponsors to ‘‘plan to’’ restore essential functions within the 72-hour time period, rather than guarantee complete restoration within the timeframe. Some commenters thought our intent was to require continuous operations under all conditions, and we revised language from the proposed regulation to make clear that that was not the case in our final rule. Lastly commenters distinguished between Part C and D operations and noted, for instance, that provider payments are not a 24-hour critical function for MA plans since payment is allowed to be made within 30 days and that health and safety would not be put at risk by failure of Part C claims processing and appeals processing. We removed language related to that requirement for MA plans. PO 00000 d. Efficient Dispensing in Long Term Care Facilities and Other Changes (§ 423.154) We are finalizing changes to the rule requiring efficient dispensing to Medicare Part D enrollees in long term care (LTC) facilities. Some Part D sponsors (or their pharmacy benefit managers) implemented the short-cycle dispensing requirement by pro-rating monthly dispensing fees, which penalize the offering and adoption of more efficient LTC dispensing techniques compared to less efficient LTC dispensing techniques. This is because when a medication is discontinued before a month’s supply has been dispensed, a pharmacy that dispenses the maximum amount of the medication at a time permitted under § 423.154 (which is 14 days’ supplies), collects more in dispensing fees than a pharmacy that utilizes dispensing techniques that result in less than maximum quantities being dispensed at a time. In other words, a less efficient pharmacy collects more in dispensing fees than a more efficient pharmacy. This is contrary to the Congress’ intent in enacting section 3310 of the Affordable Care Act, which is to reduce medication waste. Therefore, we have finalized a prohibition on payment arrangements that penalize the offering and adoption of more efficient LTC dispensing techniques by prorating dispensing fees based on days’ supply or quantity dispensed. We have also finalized a requirement to ensure that any difference in payment methodology among LTC pharmacies incentivizes more efficient dispensing techniques. Other changes to the rule requiring efficient dispensing to Medicare Part D enrollees in LTC facilities are eliminating language that has been misinterpreted as requiring the proration of dispensing fees and making a technical change to the requirement that Part D sponsors report on the nature and quantity of unused brand and generic drugs. We are not finalizing an additional waiver for LTC pharmacies using restock and reuse dispensing methodologies under certain conditions at this time. 3. Summary of Costs and Benefits Frm 00004 Fmt 4701 Sfmt 4700 E:\FR\FM\12FER2.SGM 12FER2 Federal Register / Vol. 80, No. 29 / Thursday, February 12, 2015 / Rules and Regulations 7915 TABLE 2—SUMMARY OF COSTS AND BENEFITS Provision Total costs Changes to Audit and Inspection ....................... We estimate that this change would require an annual cost of $2 million for the time and effort for all MA organizations or Part D sponsors with audit results that reveal noncompliance with CMS requirements to hire independent auditors to validate that correction has occurred. The total cost for 2015– 2019 is estimated to be $10 million. N/A ................................................................... Eligibility of enrollment for individuals not lawfully present in the U.S. Business Continuity Operations ......................... Rmajette on DSK2VPTVN1PROD with RULES2 B. Background 1. General Overview and Regulatory History The Balanced Budget Act of 1997 (BBA) (Pub. L. 105–33) created a new ‘‘Part C’’ in the Medicare statute (sections 1851 through 1859 of the Social Security Act (the Act)) which established what is now known as the MA program. The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) (Pub. L. 108–173), enacted on December 8, 2003, added a new ‘‘Part D’’ to the Medicare statute (sections 1860D–1 through 42 of the Act) entitled the Medicare Prescription Drug Benefit Program (Part D), and made significant changes to the existing Part C program, which it named 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). Since the inception of both Parts C and D, we have periodically revised our regulations either to implement statutory directives or to incorporate knowledge obtained through experience with both programs. For instance, in the September 18, 2008 and January 12, 2009 Federal Register (73 FR 54226 and VerDate Sep<11>2014 13:56 Feb 11, 2015 Jkt 235001 Transfers We estimate that this change could save the MA program up to $5 million in 2015, increasing to $8 million in 2019 (total of $32 million over this period), and could save the Part D program (includes the Part D portion of MA–PD plans) up to $5 million in 2015, increasing to $9 million in 2019 (total of $35 million over this period). We estimate that this change would require a first year cost of $8 million in 2015, for the time and effort for affected organizations to comply with the business continuity requirements. In subsequent years, 2016–2019, the cost for maintaining the business continuity is estimated to be $4 million. The total cost over the period 2015–2019 is estimated to be $24 million. 74 FR 1494, respectively), we issued Part C and D regulations to implement provisions in the Medicare Improvement for Patients and Providers Act (MIPPA) (Pub. L. 110–275). We promulgated a separate interim final rule on January 16, 2009 (74 FR 2881) to address MIPPA provisions related to Part D plan formularies. In the final rule that appeared in the April 15, 2010 Federal Register (75 FR 19678), we made changes to the Part C and D regulations which strengthened various program participation and exit requirements; strengthened beneficiary protections; ensured that plan offerings to beneficiaries included meaningful differences; improved plan payment rules and processes; improved data collection for oversight and quality assessment; implemented new policies; and clarified existing program policy. In a final rule that appeared in the April 15, 2011 Federal Register (76 FR 21432), we continued our process of implementing improvements in policy consistent with those included in the April 2010 final rule, and also implemented 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), as amended by the Health Care and Education Reconciliation Act (Pub. L. 111–152) (collectively the Affordable Care Act or ACA) added a number of new Medicare provisions and modified many existing provisions. The Affordable Care Act included significant reforms to both the PO 00000 Frm 00005 Fmt 4701 Sfmt 4700 private health insurance industry and the Medicare and Medicaid programs. Provisions in the Affordable Care Act concerning the Part C and D programs largely focused on beneficiary protections, MA payments, and simplification of MA and Part D program processes. These provisions affected implementation of our policies regarding beneficiary cost-sharing, assessing bids for meaningful differences, and ensuring that costsharing structures in a plan are transparent to beneficiaries and not excessive. In the April 2011 final rule, we revised regulations on a variety of issues based on the Affordable Care Act and our experience in administering the MA and Part D programs. The rule covered areas such as 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. In a final rule that appeared in the April 12, 2012 Federal Register (77 FR 22072 through 22175), we made several changes to the Part C and Part D E:\FR\FM\12FER2.SGM 12FER2 7916 Federal Register / Vol. 80, No. 29 / Thursday, February 12, 2015 / Rules and Regulations programs required by statute, including the Affordable Care Act, and made improvements to both programs through modifications reflecting experience we have obtained administering the Part C and Part D programs. Key provisions of that final rule implemented changes closing the Part D coverage gap, or ‘‘donut hole,’’ for Medicare beneficiaries who do not already receive low-income subsidies from us by establishing the Medicare Coverage Gap Discount Program. We also included provisions providing new benefit flexibility for fully-integrated dual eligible special needs plans, clarifying coverage of durable medical equipment, and combatting possible fraudulent activity by requiring Part D sponsors to include an active and valid prescriber National Provider Identifier on prescription drug event records. 2. Issuance of the Proposed Rule In the proposed rule titled ‘‘Contract Year 2015 Policy and Technical Changes to the Medicare Advantage and the Medicare Prescription Drug Benefit Programs,’’ which appeared in the January 10, 2014 Federal Register (79 FR 1918), we proposed to revise the MA program (Part C) regulations and Medicare Prescription Drug Benefit Program (Part D) regulations to implement statutory requirements; strengthen beneficiary protections; improve program efficiencies; and clarify program requirements. The proposed rule also included several provisions designed to improve payment accuracy. 3. Public Comments Received in Response to the Contract Year 2015 Policy and Technical Changes to the Medicare Advantage and the Medicare Prescription Drug Benefit Programs Proposed Rule We received approximately 7,600 timely pieces of correspondence containing multiple comments on the CY 2015 proposed rule. The majority of correspondence received was in reference to provisions that were either finalized in the final rule that appeared in the Federal Register on May 23, 2014 (79 FR 29844) (May 2014 final rule) or that will not be finalized. While we are finalizing in whole or in part approximately 30 of the provisions from the proposed rule in this final rule, there remain a small number of provisions from the proposed rule that were not finalized in the May 2014 final rule and that we are not finalizing in this rule. These provisions are listed later in this section in Table 2. Public comments on the provisions finalized in this rule were submitted between January 10, 2014 and March 7, 2014. We note that some of the public comments were outside of the scope of the proposed rule provisions that we are finalizing here. These out-of-scope public comments are not addressed in this final rule. Summaries of the public comments that are within the scope of the proposed rule and our responses to those public comments are set forth in the various sections of this final rule under the appropriate heading. However, we note that in this final rule we are not addressing comments received with respect to the provisions of the proposed rule that we are not finalizing. TABLE 2—PROVISIONS NOT BEING FINALIZED Proposed Rule January 10, 2014 Federal Register (79 FR 1918), section Topic Clarifying Various Program Participation Requirements III.A.2 ....................... III.A.9 ....................... III.A.12 ..................... III.A.14 ..................... III.A.15 ..................... III.A.23 ..................... III.A.26 ..................... III.A.38 ..................... Two-year Limitation on Submitting a New Bid in an Area Where an MA has been Required to Terminate a Low-enrollment MA Plan (§ 422.504(a)(19)). Collections of Premiums and Cost Sharing (§ 423.294). Separating the Annual Notice of Change (ANOC) from the Evidence of Coverage (EOC) (§ 422.111(a)(3) and 423.128(a)(3)). Exceptions to Drug Categories or Classes of Clinical Concern (§ 423.120(b)(2)(vi)). Medication Therapy Management Program (MTMP) under Part D (§ 423.153(d)(1)(v)(A))—outreach strategies. Medicare Coverage Gap Discount Program and Employer Group Waiver Plans (§ 423.2325)—disclosure requirement for Part D sponsors. Payments to PDP Plan Sponsors For Qualified Prescription Drug Coverage (§ 423.308) and Payments to Sponsors of Retiree Prescription Drug Plans (§ 423.882). Authorization of Expansion of Automatic or Passive Enrollment Non-Renewing Dual Eligible SNPs (D-SNPs) to another D-SNP to Support Alignment Procedures (§ 422.60). Strengthening Beneficiary Protections III.C.1 ...................... III.C.4 ...................... Providing High Quality Health Care (§ 422.504(a)(3) and § 423.505(b)(27)). Definition of Organization Determination (§ 422.566). Strengthening our Ability To Distinguish Stronger Applicants for Part C and D Program Participation and To Remove Consistently Poor Performers Rmajette on DSK2VPTVN1PROD with RULES2 III.D.4 ...................... Termination of the Contracts of Medicare Advantage Organizations Offering PDP for Failure for 3 Consecutive Years to Achieve 3 Stars on Both Part C and Part D Summary Star Ratings in the Same Contract Year (§ 422.510). Implementing Other Technical Changes III.E.2 ....................... VerDate Sep<11>2014 Skilled Nursing Facility Stays (§§ 422.101 and 422.102). 13:56 Feb 11, 2015 Jkt 235001 PO 00000 Frm 00006 Fmt 4701 Sfmt 4700 E:\FR\FM\12FER2.SGM 12FER2 Federal Register / Vol. 80, No. 29 / Thursday, February 12, 2015 / Rules and Regulations II. Provisions of the Proposed Regulations and Analysis of and Responses to Public Comments A. Clarifying Various Program Participation Requirements Rmajette on DSK2VPTVN1PROD with RULES2 1. Changes to Audit and Inspection Authority (§§ 422.503(d)(2), 423.504(d)(2)) Sections 1857(d)(2)(A) and 1860D– 12(b)(3)(C) of the Act specify that each contract under these sections must state that CMS has the right to audit and inspect the facilities and records of each organization. We proposed three changes to our audit and inspection authority. First, under section 6408 of the Affordable Care Act, new authority was provided to the Secretary that now requires that each contract provide the right to ‘‘timely’’ inspection and audit. We proposed to revise both §§ 422.503(d)(2) and 423.504(d)(2) to reflect this change. Specifically, we proposed to insert the word ‘‘timely’’ at the end of both of the introductory paragraphs for §§ 422.503(d)(2) and 423.504(d)(2). We also proposed to add language to §§ 422.503(d)(2) and 423.504(d)(2) that will allow us to require an MA organization or Part D plan sponsor to hire an independent auditor, working in accordance with CMS specifications, to perform full or partial program audits to determine compliance with CMS requirements and provide to CMS an attestation affirming that the audit has been completed as required. Lastly, we proposed to add language to §§ 422.503(d)(2) and 423.504(d)(2) that would allow us to require that a sponsoring organization hire an independent auditor, working in accordance with CMS specifications, to validate if the deficiencies that were found during a CMS full or partial program audit have been corrected and provide CMS with a copy of the audit findings. We received the following comments and our responses follow: Comment: Some commenters requested that CMS define ‘‘timely’’ as it is being added to § 422.503(d)(2) and § 423.504(d)(2) and that CMS define the existing language from paragraph (2) in that same section, specifically: ‘‘when there is reasonable evidence for some need for such inspection.’’ Response: We are following the exact working of the statute in adding the word ‘‘timely’’ to our current audit and inspection authority. We believe that the Congress recognized that what would be considered ‘‘timely’’ is based on a reasonableness standard that may change based on the specific VerDate Sep<11>2014 13:56 Feb 11, 2015 Jkt 235001 circumstances leading up to the audit. For example, we currently give sponsors 4-weeks notice prior to the start of a routine program audit and we do not envision this change altering that practice. However, if we were to become aware of a situation where beneficiaries’ health or safety may be at risk based on a plan’s poor performance, we will reserve the right to request records or any needed documentation in an expedited fashion. Therefore, we will not put restrictions on the broadly stated statutory language and believe that this is in line with the spirit and intent of the statutory change. Similarly, the language in paragraph (2) in that same section is not a change, but existing language from our regulations. Again, we believe that the wording is appropriate and does not require additional definition or explanation. Comment: One commenter suggested we utilize the NCPDP audit standard as a means of standardizing audit communications. Response: We appreciate the commenter’s suggestion and believe this would be a more appropriate approach if our audits largely focused on claim level audits between MA and Part D organizations and the providers or entities they pay. However, program audits cover a wide range of our program areas and corresponding programmatic requirements, many of which go well beyond claim determinations. We have received positive feedback from MA and Part D organizations in the past regarding the level of detail and useful information and feedback in our audit reports, which sponsors rely upon as they work towards implementing any necessary corrective actions. By limiting the communication to the codes and auditing standards used by NCPDP, we believe that—(1) many of our findings would not be adequately covered by these standards; and (2) they would not provide enough detail in many cases to allow for an organization to undertake meaningful correction. Comment: A commenter suggested that CMS specify that the same organization that performed the audit also perform the validation in order to ensure consistency in interpretation and try to keep costs down, or at the very least require at least one member from the original audit team be a member of the validation team. Response: We will not be finalizing the proposal requiring organizations to hire an independent auditor to conduct full or partial program audits, but we are finalizing the proposal that we may require an organization to hire an independent auditor to validate PO 00000 Frm 00007 Fmt 4701 Sfmt 4700 7917 correction of audit deficiencies. We will consider the recommendation to include a member from the original audit team in any validation activities whether they be performed by CMS internally or by an independent auditor hired by the MA or Part D organization at CMS’ request. Comment: Some commenters’ requested if CMS would set a time limit in which audits must be completed or conducted. Response: We will not be finalizing the proposal requiring organizations to hire an independent auditor to conduct full or partial program audits, but we are finalizing our proposal that we may require an organization to hire an independent auditor to validate correction of audit deficiencies. We will establish a timeframe in subregulatory guidance based on our current internal validation audit timeline. However, we recognize that some correction activities require more time than others, we will reserve the right to alter those timelines for deficiencies that we believe—(1) a more immediate correction is warranted due to the potential for beneficiary harm; or (2) require a longer correction timeline due to the technical or difficult nature of correction (for example, rebuilding or completely restructuring systems infrastructure). Comment: A commenter requested if CMS would pay for the cost to hire an independent auditor. Response: Our proposal was that an MA or Part D organization would retain the independent auditing firm to conduct the audit, but that the plan could account for the costs in their bid. However, we will not be finalizing the proposal requiring organizations to hire an independent auditor to conduct full or partial program audits, but we are finalizing our proposal that we may require an organization to hire an independent auditor to validate correction of audit deficiencies. Comment: Some commenters requested that CMS cap fees that independent audit firms would charge MA and Part D organizations to perform program audits. Response: If we decide to pursue this proposal in the future, we will explore our ability to cap the costs of performing these audit activities. Comment: Many commenters suggested that instead of requiring MA and Part D organizations to hire independent auditors to expand the number of audits conducted each year that we look to the various other compliance and monitoring activities the Agency engages in, which could be used to better target audits or results could be utilized in lieu of audit activities. E:\FR\FM\12FER2.SGM 12FER2 Rmajette on DSK2VPTVN1PROD with RULES2 7918 Federal Register / Vol. 80, No. 29 / Thursday, February 12, 2015 / Rules and Regulations Response: We do utilize the data and information obtained about sponsor performance to target our audit efforts as part of the overall risk assessment used to select sponsors for audit. We have also utilized data and information from our various monitoring efforts to assist in determining if certain deficiencies discovered during an audit may have been corrected (for example, if a sponsor had multiple deficiencies in a program area that will at a later date be the subject of a monitoring activity, we may use passing results from that monitoring activity as proof of correction). Comment: A commenter requested that CMS release the data driven elements of the risk assessment and define a sponsor who is high risk. Response: We believe that this comment is outside the scope of this final rule. However, we use a variety of existing data points from Medicare Star ratings, past performance and plan reported data, as a few examples, to develop our risk assessment. We focus on metrics that have the potential to affect beneficiary access to medications and services, and also look for operational metrics that program experience has demonstrated can cause contracting organizations to develop performance problems in core program areas (that is, large increases in enrollment over a short period of time). We do not release our risk assessment in its entirety, but these are the areas we focus on when conducting the analysis. Organizations should note that it is our goal to audit all organizations in the MA and Part D program, and the risk assessment is one way plans are selected for audit. Comment: Some commenters raised concerns over their available recourse if they disagreed with an independent auditor’s findings, given the impact on Medicare Star ratings and past performance. Response: We will not be finalizing the proposal requiring organizations to hire an independent auditor to conduct full or partial program audits, but we are finalizing the proposal that we may require an organization to hire an independent auditor to validate correction of audit deficiencies. Validation results have no impact on Medicare Star ratings or past performance. However, we stated in the proposal that organizations would have an opportunity to rebut audit findings, this would include during validation efforts, and CMS would be reviewing both draft and final reports from the independent auditor. Therefore, we would give organizations an avenue to dispute findings or policy interpretations that organizations VerDate Sep<11>2014 13:56 Feb 11, 2015 Jkt 235001 believed to be erroneous, even in the more limited use of an independent auditor to validate correction of deficiencies. Comment: A commenter stated that our proposal did not clarify how organizations hiring an independent auditor to conduct full or partial program audits would affect or involve the Zone Program Integrity Contractors (ZPICs) or the Recovery Audit Contractors (RACs). Response: The proposal to utilize an independent auditor to conduct full or partial program audits or validations has no impact on ZPICs or RACs, which is why they are not mentioned in our proposal. Comment: Several commenters suggested that CMS develop a core set of SNP auditors regardless of whether or not we implement our independent auditor proposal, given what the industry perceives as inexperienced or inconsistent SNP findings amongst auditors, which many SNPs believed would be aggravated if organizations were required to retain an independent audit firm. Some suggested that SNP auditors should be accredited by NCQA prior to being allowed to conduct SNP audits. Response: We believe that this is outside the scope of this proposal, but we thank the commenter for their suggestion to continue to strengthen the CMS MA and Part D audit program. We have conducted additional training and continue to welcome feedback on all of our audit processes and protocols. After the piloting of the SNP MOC protocols in 2013, we conducted specialized feedback sessions with organizations subject to SNP MOC audits and made changes to our protocols, methods of evaluation and training of auditors based on the industry’s feedback. We welcome additional feedback and hope that organizations will see continual improvements in our audit processes in 2014 and future years. Comment: A commenter inquired if the independent auditor proposals applied to PACE organizations. Response: No, these proposals do not apply to PACE organizations. These regulatory provisions do not apply to PACE plans because we are only proposing changes to Parts 422 and 423 which govern MA, other Managed care plans, and Part D organizations. PACE plans are governed by the regulations in part 460. With respect to this change applying to cost plans, we select sponsors for audit at their parent organization level, and if they have an 1876 cost plan, that contract would be included in our audit. Therefore, the parent organization may be requested to PO 00000 Frm 00008 Fmt 4701 Sfmt 4700 hire an independent auditor to validate the correction of their audit deficiencies. However, if an organization was a standalone cost plan, with no MA or Part D contracts under parts 422 or 423, this requirement would not apply to those organizations, as cost plans are governed by part 417. Comment: A commenter suggested that CMS develop and implement a robust annual or biannual training program for independent auditors to ensure that they were competent to perform program audits properly. Response: We will not be finalizing the proposal requiring organizations to hire an independent auditor to conduct full or partial program audits, but we are finalizing the proposal that CMS may require an organization to hire an independent auditor to validate correction of audit deficiencies. We will consider this suggestion if we repropose the larger full scale use of independent auditors to conduct full or partial program audits in the future. We will also share whatever materials we have developed and can provide technical assistance if we request an organization to retain an independent auditor to validate correction of audit deficiencies. Comment: A commenter suggested that instead of requiring plans to hire an independent auditor we require plans to conduct a robust internal audit and share the results with CMS. Response: We will not be finalizing the proposal requiring organizations to hire an independent auditor to conduct full or partial program audits, but we are finalizing the proposal that CMS may require an organization to hire an independent auditor to validate correction of audit deficiencies. We currently require organizations to conduct internal auditing and monitoring as part of having an effective compliance program, which we believe for purposes of a healthy and robust compliance program, such activities are appropriate. Comment: A commenter recommended that much like CMS’ use of independent auditors to conduct data validation audits, CMS should set criteria regarding who can conduct program audits. For example, the commenter suggested CMS clarify that organizations that currently assist plans with operations, compliance or consulting are disqualified from performing as independent auditors. Response: We will not be finalizing the proposal requiring organizations to hire an independent auditor to conduct full or partial program audits, but we are finalizing the proposal that CMS may require an organization to hire an independent auditor to validate E:\FR\FM\12FER2.SGM 12FER2 Rmajette on DSK2VPTVN1PROD with RULES2 Federal Register / Vol. 80, No. 29 / Thursday, February 12, 2015 / Rules and Regulations correction of audit deficiencies. We thank the commenter for their suggestion with respect to whom a contracting organization may retain to perform validation of correction of audit deficiencies. We will consider including any key criteria regarding who can perform these validations in subsequent subregulatory guidance. Comment: A few commenters questioned whether CMS has the statutory authority to require contracting organizations to retain an independent auditor to conduct full or partial program audits. These commenters raised many related issues, such as CMS trying to inappropriately expand their appropriation by requiring contracting organizations to bear the cost of hiring an audit firm to perform a function that the Congress has tasked CMS with performing. Other commenters stated that to the extent these funds expended by plans were later reimbursed by CMS through the bid process, it could implicate the AntiDeficiency Act. Response: We will not finalize the proposal requiring organizations to hire an independent auditor to conduct full or partial program audits, but we are finalizing the proposal that we may require an organization to hire an independent auditor to validate correction of audit deficiencies. We do not agree that our proposal allowing us the option to request a plan sponsor to retain an independent auditor to verify that deficiencies that we determined existed during our audit have been corrected implicates the concerns that organizations previously raised regarding our current appropriation or statutory authority. The proposal simply mirrors our current authority where we may require organizations under sanction to retain an independent auditor to perform an independent review to validate that the deficiencies upon which the sanction was based have been corrected and are not likely to recur. After consideration of all of the comments received, we are finalizing our proposal to revise both §§ 422.503(d)(2) and 423.504(d)(2) to insert the word ‘‘timely’’ at the end of both of the introductory paragraphs for §§ 422.503(d)(2) and 423.504(d)(2), and our proposal to have the option to require contracting organizations who were found to have deficiencies during a CMS program audit to hire an independent auditor to validate correction of those deficiencies. However, based on the strong opposition and valid concerns raised by contracting organizations, we have decided at this time not to finalize our VerDate Sep<11>2014 13:56 Feb 11, 2015 Jkt 235001 proposal to require plan sponsors to hire an independent auditor no less than every 3 years to conduct full or partial program audits. 2. Enrollment Eligibility for Individuals Not Lawfully Present in the United States (§§ 417.2, 417.420, 417.422, 417.460, 422.1, 422.50, 422.74, 423.1, 423.30, and 423.44) a. Basic Enrollment Requirements Sections 226 and 226A of the Act establish the conditions for Medicare Part A entitlement for individuals who have attained age 65, are disabled or have end stage renal disease (ESRD), and are entitled to monthly Social Security benefits under section 202 of the Act; individuals entitled to Part A under these sections do not have to pay premiums for such coverage, and they may, but are not required to, enroll in Medicare Part B. Section 1818 of the Act establishes the conditions for Medicare enrollment for individuals who are not entitled to Medicare Part A without a premium under sections 226 or 226A of the Act. Individuals must have Part B (under section 1836 of the Act) and must also meet citizenship or alien status requirements in order to purchase Part A hospital insurance under section 1818 of the Act; individuals covered under section 1836 of the Act must meet citizenship or alien status requirements, in addition to other requirements, in order to enroll in Part B if they are not entitled to premium-free Medicare under sections 226 or 226A. Sections 1851(a)(3)(B), 1860D 1(a)(3)(A), and 1876(a)(1)(A) of the Act outline the eligibility requirements to enroll in MA (Part C), Medicare prescription drug coverage (Part D), and Medicare cost plans. To be eligible for MA, Part D, or cost plan coverage, individuals must have active Medicare coverage. Specifically, to enroll in MA, an individual must be entitled to benefits under Part A and be enrolled in Part B; to enroll in Part D, an individual must be entitled to Part A and/or enrolled in Part B; to enroll in a Medicare cost plan, an individual must be enrolled in Part B (Part A entitlement is not required). b. Medicare Eligibility and Lawful Presence Section 401 of the PRWORA, amended by section 5561 of the Balanced Budget Act, limits the eligibility of individuals who are not qualified aliens to receive benefits under certain federal programs, including benefits under Title XVIII of the Act (Medicare); these provisions are codified at 8 U.S.C. 1611 and 1641. In PO 00000 Frm 00009 Fmt 4701 Sfmt 4700 7919 general pursuant to 8 U.S.C. 1611(a), an alien who is not a qualified alien is not eligible to receive any federal public benefit. The Congress has established some exceptions to this general rule. One exception, at 8 U.S.C. 1611(b)(3), permits certain aliens to obtain Medicare benefits and applies to an alien who is: (1) Lawfully present in the United States, as determined by the Attorney General and (2) was authorized to be employed with respect to wages attributable to employment, which were counted for the purpose of determining Medicare entitlement under Part A 1. An alien who is eligible under this exception is able to receive any benefit payable under Medicare. In contrast, an alien that is not lawfully present in the United States is not eligible to receive benefits under Medicare. As a result, individuals meeting certain criteria are able to earn qualified credits towards Social Security retirement benefits as outlined in 8 U.S.C. 1631 (federal attribution of sponsor’s income and resources to alien) and 8 U.S.C. 1645 (Qualifying quarters). Such individuals may earn the total number of qualified credits to be eligible under the Act to receive retirement benefits under sections 226 and 226A of the Act. However, should such individuals be unlawfully present in the United States, under PRWORA they are not eligible to receive the Social Security benefits they have earned for as long as they remain unlawfully present. When they are again lawfully present in the United States, or live outside the United States, they would regain eligibility to receive Social Security payments. Similarly, when those not lawfully present become eligible for Medicare based on age or disability under the Act, they would also automatically be entitled under the Act to premium free Part A benefits and be eligible under the Act to enroll in Part B during a valid enrollment period. Furthermore, if these same individuals were receiving Social Security retirement benefits 4 months prior to turning 65, or are in their 21st month of receiving Social Security disability benefits, they would also automatically be enrolled into both Part A and Part B, consistent with section 1837 of the Act and the enrollment process outlined in § 407.17. However, again under the PRWORA limitations previously discussed, payments for Medicare benefits cannot be made on behalf of these individuals as long as they are not lawfully present in the United States. Only upon becoming lawfully present would they become 1 This E:\FR\FM\12FER2.SGM includes qualified aliens. 12FER2 7920 Federal Register / Vol. 80, No. 29 / Thursday, February 12, 2015 / Rules and Regulations Rmajette on DSK2VPTVN1PROD with RULES2 eligible to receive the Medicare benefits to which they would otherwise be entitled by paying into Social Security for the requisite number of quarters or paying premiums. We note that current regulations at §§ 406.28 and 407.27 outline the reasons for loss of premium Part A and Part B enrollment, and do not include the absence of lawful presence or citizenship as a reason for loss of entitlement. Similarly, individuals who are entitled to Part A and enrolled in Part B based on eligibility for Social Security benefits currently may be enrolled in Medicare even if they are not lawfully present in the United States. However, as previously outlined, Medicare benefits are not payable for individuals who are not lawfully present even if such individuals are enrolled in Medicare. Thus, there is a distinction between being ‘‘entitled to Part A’’ or ‘‘enrolled in Part B’’ as provided for in the Act and being eligible to receive the Part A and Part B benefits that ordinarily flow from such entitlement and enrollment. c. Alignment of MA, Part D, and Cost Plan Eligibility With Fee for Service (FFS) Payment Exclusion Policy In order to implement 8 U.S.C. 1611 and ensure that benefits are not incorrectly paid for individuals who are present in the United States unlawfully, the Social Security Administration (SSA) established internal policies and procedures to suspend Social Security benefits during periods in which individuals are not lawfully present in the United States. Because Medicare entitlement flows from entitlement to Social Security retirement and disability benefits, Medicare has also implemented this provision through its own payment exclusion process. Under Medicare’s payment exclusion process, data on lawful presence are transmitted to CMS from the Department of Homeland Security (DHS) via regular data exchanges with SSA. Once the data are received by CMS, lawful presence status is noted on an individual’s record and is retained in the FFS claims processing systems. As a result, payment of Part A and Part B claims for non-citizens is denied where lawful presence is not established on their record, and continues to be denied until these individuals regain lawful presence status. Although payment is being denied for claims, individuals who are entitled to Medicare per section 226 of the Act, maintain Part A entitlement and remain enrolled in Part B on Medicare’s records as long as Part B premiums are paid. Similarly, individuals who are enrolled in VerDate Sep<11>2014 13:56 Feb 11, 2015 Jkt 235001 premium Part A or Part B or both under sections 1818 and 1836 of the Act, maintain their enrollment status as long as premiums are paid. We proposed to align eligibility for enrollment in MA, Part D, and cost plans (and resulting Medicare payments to plans and by plans that would violate PRWORA) with the FFS payment exclusion policy to ensure that Medicare is only paying for benefits and services rendered to individuals who are eligible to receive them. These steps align with the recommendations made by the Office of Inspector General (OIG) in its January 2013 report (A–07–12– 01116) 2 regarding the need for CMS to maintain adequate controls to detect and prevent improper payments for Medicare services rendered to beneficiaries who are not lawfully present. Accordingly, we proposed to revise the regulations to establish U.S. citizenship and lawful presence as eligibility requirements for enrollment in MA, Part D, and cost plans. Further, we proposed that individuals who are not lawfully present in the United States would be involuntarily disenrolled from MA, Part D, and cost plans, based on the date on which they lose their lawful presence status. Under our proposal, disenrollments would have been effective the first of the month following the loss of lawful presence status, and the disenrollment process would follow the process currently set forth in the regulations for an individual who is no longer eligible to be enrolled in a plan. Such disenrolled individuals would continue to be considered entitled to Medicare Part A and (if enrolled) enrolled in Part B coverage, provided they continue to pay premiums, as applicable, but as noted payment of FFS claims would be denied based on unlawfully present status. These proposed regulatory changes were intended to prevent an individual known not to be lawfully present in the United States from enrolling in a Part C, Part D, or cost plan and/or remaining enrolled in such a plan, meaning that payments would not be made to plans or by plans with respect to such individuals during that period. This policy was intended to facilitate compliance with 8 U.S.C. 1611. We proposed the following changes in the regulations to refine the eligibility requirements for the MA and Part D programs and give MA and Part D plans the ability to disenroll individuals who 2 Medicare Improperly Paid Providers Millions of Dollars for Unlawfully Present Beneficiaries Who Received Services During 2009 Through 2011 (A– 07–12–01116), available at https://oig.hhs.gov/oas/ reports/region7/71201116.asp. PO 00000 Frm 00010 Fmt 4701 Sfmt 4700 are not lawfully present in the United States: • Sections 417.420, 417.422, 422.50, and 423.30 would be amended to add lawful presence or United States citizenship as eligibility criteria for enrollment in a cost, MA, or Part D plan. • Sections 417.460, 422.74, and 423.44 would be amended to require the involuntary disenrollment of individuals from cost, MA or Part D plans if they lose lawful presence status. • Conforming changes would be made to §§ 417.2, 422.1, and 423.1 to outline the authority for the aforementioned requirements, from 8 U.S.C. 1611 (Aliens who are not qualified aliens ineligible for federal public benefits). We received the following comments on our proposals: Comment: Overall we received general support for our proposal. Many commenters requested clarification about who would be responsible for verifying eligibility based on lawful presence. A few of these commenters stated specifically that CMS should verify this aspect of eligibility and that plans should not be expected or permitted to request proof of lawful presence from individuals. A commenter, who did not agree with the proposed change, expressed concern that plans do not have access to data to validate residency/lawful status for Medicare beneficiaries and requested what source would be used for status changes. Response: We appreciate the support expressed by most commenters. We agree that CMS would have to provide lawful presence information to plans. In most cases, the DHS determines citizenship and lawful presence status and that information is passed to SSA. SSA also has mechanisms to address changes in lawful presence status reported by beneficiaries themselves or other third parties. CMS receives the lawful presence information from SSA after it completes its processes related to such changes in status. Then, we will notify the plan if an individual is not eligible for MA, Part D or cost plan enrollment based on lawful presence and the plan must either deny the enrollment request or process the involuntary disenrollment. Plans are not expected to independently determine lawful presence when processing the enrollment request, nor should they request proof of citizenship from the beneficiary or include lawful presence as an element on the enrollment form. We will notify plans of ineligibility due to unlawful presence, through the same administrative mechanisms currently utilized to notify plans about other E:\FR\FM\12FER2.SGM 12FER2 Federal Register / Vol. 80, No. 29 / Thursday, February 12, 2015 / Rules and Regulations Rmajette on DSK2VPTVN1PROD with RULES2 involuntary disenrollments. Additionally, we will be providing more detailed information about the necessary processes and procedures in subregulatory guidance. Comment: A few commenters suggested that we amend the regulations to require a notice for the beneficiaries if they are disenrolled for absence or loss of lawful presence status. Other commenters suggested revisions for the content of a disenrollment notice, specifically suggesting that it contain pertinent information regarding loss of eligibility for enrollment and related impacts to unlawfully present individuals. Response: Under existing processes at SSA, individuals are notified of their potential change to lawful presence status and are provided an opportunity to be heard in advance of any final changes in status in SSA records (that is, before the information is transmitted to us 3). We believe that this process by SSA provides adequate notification to the beneficiary and, at this time, CMS will not require an additional notice from the plan at the time of disenrollment. This policy on notification from the plan is similar to CMS processes and regulations for other involuntary disenrollments based on information from CMS,4 but we will take into consideration the possibility of requiring notice in future rulemaking. In our existing subregulatory guidance, MA, Part D and cost plans are strongly encouraged to send confirmation of disenrollment to members even when it is not required. We agree that a notice regarding the reason for involuntary disenrollment and the impact unlawful presence status has on the payment of Medicare services would reinforce the messages already provided by SSA, and CMS encourages plans to send such notices in this situation. Sending a confirmation of disenrollment would ensure that these beneficiaries understand the restrictions of their Medicare coverage as they transfer to the FFS program. We appreciate the suggested notice language provided by the commenters and will consider it as we establish a model notice in Chapter 2 and Chapter 17Subchapter D of the Medicare Managed Care Manual and Chapter 3 of the Medicare Prescription Drug Benefit Manual. 3 Social Security Administration Program Operations Manual System (POMS) RS 00204.010 Lawful Presence Payment Provisions and RS 00204.080 Postentitlement Suspension—Alien is no Longer Lawfully Present. 4 Notices are required from the plans in cases of certain disenrollments. See 42 CFR.417.430, 422.74(c), and 423.44(c). VerDate Sep<11>2014 13:56 Feb 11, 2015 Jkt 235001 Further, for instances where an unlawfully present individual is denied enrollment into a MA, Part D, or cost plan due to ineligibility, we currently require that the plan provide written notice of the denial.5 We will consider the suggested language as we modify the existing model denial notices in these subregulatory chapters. Comment: Several commenters expressed concern about the effective date of disenrollment if it is based on the date of loss of lawful presence status. Specifically, commenters suggested that involuntary disenrollments be prospective because the plan provides coverage on the reasonable assumption of eligibility to receive services. Further, commenters were concerned about the recoupment of capitation payments as a result of these retroactive disenrollments. Response: In the proposed rule, we proposed that disenrollments would be effective the first of the month following the loss of eligibility to receive federal benefits because this is in line with the statutory requirement that individuals not receive federal benefits when they are not lawfully present in the United States. Operationally, we did not believe it was feasible to maintain enrollment in a Part C, Part D or cost plan for a period for which we would be required to recoup capitations retroactively. Therefore, we proposed a procedural mechanism to default enrollment for such individuals to Original Medicare, where the FFS payment exclusion policy would be applied. Any retroactive disenrollments would under our proposed approach result in recoupment of payments, as supported by existing regulations in §§ 417.464(a)(1), 422.308(f)(1), 423.315(f) and 423.343(a), which require CMS to retroactively adjust plan payments due to changes in enrollment status. At the time we made this proposal, it was consistent with the approach adopted under FFS Medicare, which also made retroactive recoupments in cases in which someone receiving Medicare benefits is determined not to have been eligible for them. While we believed that this approach was the best way to implement our obligation to comply with PRWORA, in considering comments received on the proposal, we are reconsidering the issue of retroactive disenrollment. First, while our proposal was consistent at the time it was made with FFS policy on retroactive recoupments, we have 5 Notices are required from the plans in cases of enrollment denials. See 42 CFR 417.430(b)(3), 422.50(e)(3), and 423.32(d). PO 00000 Frm 00011 Fmt 4701 Sfmt 4700 7921 revised that policy, based on section 1870 of the Act, and are now denying payments only prospectively. We are also aware of due process arguments that may apply to retroactive recoupment. Because, under our systems, retroactive disenrollment would automatically result in retroactive recoupment, and we are reconsidering the issue of whether such retroactive recoupment in the case of Part C, Part D and cost plans is appropriate, we are not finalizing the retroactive aspect of our proposal on disenrollment, and at this time are finalizing only the prospective period of disenrollment provided for in the proposed rule. We are moving forward with finalizing prospective disenrollment while reconsidering the issue of retroactive enrollment because we believe that prospective disenrollment should be put in place as soon as possible, both to implement the prohibition on benefit payments to individuals who are unlawfully present in the United States, and minimize the period of any potential retroactive recoupment in the event we decide at a future point to proceed with our original proposal to disenroll individuals retroactively. Therefore, we are finalizing text different from our original proposal to make all disenrollments effective the first of the month following the loss of eligibility to receive federal benefits (that is, retroactively), and instead at this time will revise §§ 417.460(j), 422.74(d)(8), and 423.44(d)(8) to provide that disenrollments are effective the first of the month following notice by CMS that the individual is ineligible. This adjustment will ensure that CMS establishes the required mechanisms to permit prospective enrollment into MA, Part D and cost plans only for individuals eligible to receive Medicare benefits, and prospectively disenroll beneficiaries currently enrolled in plans as of this provision’s applicability date. As discussed in the proposed rule, the OIG noted in a January 2013 report that CMS needed to increase efforts to detect and prevent improper payments for Medicare services rendered to unlawfully present beneficiaries. In a subsequent report published in October 2013 6, the OIG specifically recommended that CMS develop and implement controls to ensure that Medicare does not pay for prescription drugs for unlawfully present beneficiaries and that CMS do so by 6 Medicare Improperly Paid Providers Millions of Dollars for Prescription Drugs Provided to Unlawfully Present Beneficiaries During 2009 Through 2011 (A–07–12–006038) (https:// oig.hhs.gov/oas/reports/region7/71206038.pdf). E:\FR\FM\12FER2.SGM 12FER2 Rmajette on DSK2VPTVN1PROD with RULES2 7922 Federal Register / Vol. 80, No. 29 / Thursday, February 12, 2015 / Rules and Regulations preventing enrollment of unlawfully present beneficiaries, disenrolling any currently enrolled unlawfully present beneficiaries, and automatically rejecting PDE records submitted by sponsors for prescription drugs provided to this population. We believe that prospective disenrollments address these recommendations, and serve as an initial step in ensuring that payment is made for only individuals eligible to receive services. As we move forward with implementation, we will carefully consider enrollment retroactivity and resulting recoupments, and if determined appropriate, propose changes or additional regulations through future rulemaking. Lastly, we believe it is important to note while CMS is dependent upon the data received by the DHS through SSA, we ensure that the data are passed to the plans within 24 hours of receipt via the Daily Transaction Reply Report. In addition, we will work with these agencies to explore options for receiving these data in the most efficient and timely means possible. Comment: A few commenters suggested that beneficiaries who are involuntarily disenrolled due to unlawful presence should be entitled to appeal their disenrollment. Response: We thank these commenters for their suggestion to ensure that affected individuals have the opportunity to appeal the reason for their disenrollment from their plan. Currently, there is no right of appeal associated with MA, Part D or cost plans eligibility or enrollment, because enrollment in such plans is voluntary and involuntary disenrollments are not considered initial determinations as outlined in § 405.924(a). We reiterate that individuals disenrolled from MA, cost or Part D plans are defaulted to coverage under FFS Medicare unless Parts A and B entitlement and enrollment ends under 42 CFR part 406, subpart B and §§ 406.28 and 407.27. However, individuals who are subject to involuntary disenrollment from these plans due to lawful presence status are provided with due process prior to any change in their status by SSA and exchange of any data to CMS and loss of MA, Part D, or cost coverage (or denial of claims for an individual enrolled in the FFS program). These individuals are provided with advance notification in writing of the possible status change and an opportunity to respond or submit the necessary documentation to maintain a lawful presence status under existing VerDate Sep<11>2014 13:56 Feb 11, 2015 Jkt 235001 SSA processes.7 Following a status change to lawful presence status by SSA, individuals are also provided an opportunity to appeal the determination as outlined in 20 CFR 404.902. SSA has existing processes to accept and review evidence from individuals who believe that they are lawfully present and to update SSA’s records. These individuals, based on the date of regaining lawful presence status, would then have the opportunity to re-enroll and, in certain cases of government error, be reinstated into their former plans. As we prepare for implementation of this rule, we intend to consider these issues carefully to ensure beneficiaries are notified of the consequences to Medicare coverage that flow from changes in lawful presence status. Comment: A few commenters requested that CMS put in place a special enrollment period (SEP) for individuals who are disenrolled from their MA or Part D plan based on unlawful presence and then later regain lawful presence status and wish to reenroll in a Part D or MA plan. In addition, commenters requested that if an individual is involuntarily disenrolled from a Part D plan due to unlawful presence, and that individual later regains lawful presence status, the individual should not be subject to a late enrollment penalty (LEP) for the period of time they did not have Part D (or other creditable) coverage. Response: We appreciate the concern expressed by the commenters about ensuring access to Medicare coverage and limiting financial consequences after a beneficiary gains, or regains, lawful presence status. Medicare beneficiaries may incur an LEP for Part D if there is a continuous period of 63 days or more at any time after the end of the individual’s Part D initial enrollment period (IEP) during which they were eligible for, but did not enroll in, a Medicare Part D plan and were not covered under any creditable prescription drug coverage. If an individual is disenrolled from a Part D plan because of loss of lawful presence status, this is not considered a break in creditable prescription drug coverage because the individual is not eligible for Part D benefits during this time. Therefore, an LEP would not apply for that period of time. If an individual regains lawful presence status and, as a result, also regains Part C and/or Part D 7 Social Security Administration, Policy and Operations Manual System (POMS): RS 00204.010. Lawful Presence Payment Provisions, GN 03001.005 Notice Requirements for Title II Due Process Actions, and GN 03001.015 Notices Required Before And After Taking a Title II Adverse Action. PO 00000 Frm 00012 Fmt 4701 Sfmt 4700 eligibility, the individual does not get a new IEP, but we acknowledge that an SEP is warranted to allow these individuals to enroll in an MA or Part D plan, including a cost plan’s optional supplemental Part D benefit, under §§ 422.62(b)(4) and 423.36(c)(8)(ii) if the individual is not otherwise eligible for an SEP. The change in lawful presence status of an individual necessary to trigger a change in eligibility under these rules is extraordinary enough to justify the provision of a SEP under the existing authority of §§ 422.62(b)(4) and 423.36(c)(8)(ii), even without the additional concern that late enrollment penalties could be incurred by beneficiaries who are not able to enroll following their regained eligibility for Part D coverage. The parameters of this SEP will be outlined in subregulatory guidance. However, we note that in this scenario if the newly eligible individual does not take advantage of the SEP to enroll in a plan providing Part D coverage and has no other creditable prescription drug coverage, the individual may be subject to an LEP for any future Part D enrollment. Comment: A few commenters provided feedback regarding the proposed use of the term ‘‘qualified alien’’ in the proposed text at §§ 417.422, 417.460, 422.50, 423.1, 423.3, and 423.44. Commenters suggested changing it to more accurately reflect the lawful presence eligibility requirements for Medicare benefits outlined in 8 CFR 1.3 so that we are not restricting eligibility to only qualified noncitizens to enroll in or maintain their benefits. The broader term ‘‘lawfully present’’ for this purpose includes ‘‘qualified aliens’’ as well as several other categories of non-citizens, whereas the proposed terminology only included ‘‘qualified aliens’’ which is one of the subcategories included in those lawfully present. Response: We agree with the concern raised by commenters and are finalizing the regulatory language at §§ 417.422(h), 417.460(b)(2)(iv), 417.460(j), 422.50(a)(7), 422.74(b)(2)(v), 422.74(d)(8), 423.1(a)(3), 423.30(a)(1)(iii), 423.44(b)(2)(iv), and 423.44(d)(8) without references to qualified aliens; the final regulatory language encompasses all individuals who are lawfully present consistent with 8 CFR 1.3. After consideration of the public comments received, we are finalizing the policies and regulations text as proposed, with the following exceptions: • At §§ 417.422, 417.460, 422.50, 423.1, 423.3 and 423.44, we are deleting the term ‘‘qualified alien.’’ E:\FR\FM\12FER2.SGM 12FER2 Federal Register / Vol. 80, No. 29 / Thursday, February 12, 2015 / Rules and Regulations Rmajette on DSK2VPTVN1PROD with RULES2 • At §§ 417.460(j), 422.74(d)(8), and 423.44(d)(8), we are modifying the effective date of the involuntary disenrollment to be the first of the month following notification by CMS. • At § 417.460, we are redesignating paragraph (b)(2)(iv) as paragraph (b)(2)(v) and finalizing the provision establishing a lack of lawful presence as a basis for disenrollment from a cost plan at paragraph (b)(2)(iv). 3. Part D Notice of Changes (§ 423.128(g)) Section 1860D–4(a) of the Act requires Part D sponsors to disclose to beneficiaries information about their Part D drug plans in standardized form. The Act further directs Part D sponsors to include, as appropriate, information that MA organizations must disclose under section 1852(c)(1) of the Act, which includes a detailed description of benefits. (In guidance, we refer to the document containing this information and delivered to beneficiaries as the Evidence of Coverage (EOC).) To make informed decisions, enrollees need to understand how their benefits, including premiums and cost sharing, would change from one year to the next, should they reenroll in the same plan. (In guidance, we refer to the documents containing this information and delivered to beneficiaries as the Annual Notice of Change (ANOC).) Enrollees also need to be aware of changes that may take place during the course of the year as well. Part D regulations currently do not include language found in the Part C regulations at § 422.111(d) requiring notice of changes to the plan to be provided to CMS for review pursuant to procedures for marketing material review and to all enrollees at least 15 days prior to the annual coordinated election period. Given that guidance applicable to both programs discusses notice of changes, we proposed to require, for Part D, delivery of an ANOC. Specifically, we proposed to adopt in Part D, with modifications, the language contained in § 422.111(d). As is the case with the MA regulation, proposed § 423.128(g) would require that Part D sponsors submit their changes to us under the procedures contained in subpart V of part 423, and, for those changes taking effect on January 1, provide a notice of changes to all enrollees 15 days before the beginning of the annual election period. While part 422 requires a minimum of 30 days notice before the effective date for all other changes, we proposed at § 423.128(g)(3) that Part D sponsors remain subject to all other notice requirements specified elsewhere in the VerDate Sep<11>2014 13:56 Feb 11, 2015 Jkt 235001 Part D regulations. Our proposal reflected a programmatic difference between Parts C and D: Under Part D it is not unusual for access to drugs listed on a plan’s formulary to change during the course of a year. Changes can include changes to formulary status, tier placement, and utilization management or other restrictions. It is vital that beneficiaries currently taking a drug receive timely notice before such changes take place in order that they can decide whether to, for instance, change drugs or request an exception to cover the drug. Accordingly, our regulations currently specify when sponsors must provide notice of these kinds of changes. Our proposal to require the delivery of an ANOC was not intended to disrupt or change those existing notice requirements. In the proposed rule, we also took the opportunity to comment on the particular importance for Part D sponsors to provide notice in the ANOC of any changes they are making that will affect the amount of cost sharing that enrollees must pay for each drug belonging to a specific tier. As has been articulated in guidance for several years, we expect that sponsors will provide notice of such changes to all enrollees, including enrollees moved to a consolidated plan. Generally, sponsors compare information such as cost sharing for the same plan from one year to the next in the ANOC. However, comparing information for the same plan would not benefit individuals moved from one plan to another. For instance, when a sponsor crosswalks members from a non-renewing plan to a consolidated renewal plan from one year to the next, cost sharing may change at the drug-tier level. An enrollee who previously had zero cost sharing for all covered Part D drugs within the preferred generic tier may find that the consolidated plan now requires copays for drugs in that tier depending on how many months’ supplies he or she orders, and whether he or she obtains those drugs at a retail level pharmacy or through mail order. We expect that enrollees will receive ANOCs that clearly compare the nonrenewed and consolidated plans’ copayments or coinsurance for all drugs within each tier. We received the following comments on this proposal and our response follows: Comment: Commenters supported this proposal for informing beneficiaries about their coverage options. Several pointed out that it was important and appropriate for CMS to communicate cost-sharing changes through the Part D ANOC in addition to formulary PO 00000 Frm 00013 Fmt 4701 Sfmt 4700 7923 information. One commenter urged us to perform ongoing monitoring of formulary changes including cost sharing to ensure they are justified and appropriately communicated to beneficiaries. Response: We thank the commenters for the support. While we appreciate the concerns about monitoring, we did not propose any changes with respect to monitoring of formulary changes, and we decline to address that issue in this final rule. Comment: Several commenters observed that, while many Part D sponsors already provide this annual notice under CMS guidance, they thought it important that this requirement be made explicit through rulemaking. In contrast, a commenter noted that developing a Part D ANOC was not necessary because of information provided through other material. Another commenter suggested that, if possible, Part D information should be incorporated into the Part C ANOC to avoid the potential for confusion, missing information, and duplicate costs. Response: We thank the commenters for the support and can confirm that our goal in revising § 423.128(g) is to codify existing guidance. Our existing model ANOC includes sections on both Parts C and D, and CMS produces nine standardized model ANOCs and EOCs for all plan types. Comment: A commenter requested that CMS confirm that this provision would merely codify existing guidance and would not necessitate any changes in practice for Part D sponsors that already deliver ANOCs that address plan changes consistent with existing CMS guidance. Response: Section 423.128(g) will not affect current practice for Part D sponsors that that already deliver ANOCs consistent with our model notices. Comment: A few commenters pointed out that finalizing this revision would add costs due to increased printing and administration requirements, with one commenter noting premiums could possibly increase. Response: We disagree. Because we did not propose here to change existing practices, but rather only to codify existing guidance, we do not believe the revision to § 423.128(g) will increase costs. Comment: A commenter suggested that MA organizations and Part D sponsors be required to share ANOCs with LTC providers in plan networks to enable them to better coordinate and support the beneficiaries in making informed decisions when their health E:\FR\FM\12FER2.SGM 12FER2 7924 Federal Register / Vol. 80, No. 29 / Thursday, February 12, 2015 / Rules and Regulations Rmajette on DSK2VPTVN1PROD with RULES2 conditions limit their ability to effectively communicate about their coverage. Another commenter suggested that we add language to the Part D ANOC advising beneficiaries for the future that it was important to review the new contract year formulary. Response: We appreciate these suggestions and will take them into consideration for the future for our guidance on the model notices. However we decline to accept the commenter’s suggestion to add this to the regulation text because, as previously noted, our proposal was intended to codify existing guidance. After review of the public comments received, we are finalizing this provision as proposed without modification. 4. Business Continuity for MA Organizations and Part D Sponsors (§ 422.504(o) and § 423.505(p)) A variety of events ranging from power outages to disasters and warnings of disasters can disrupt normal business operations, and when these events occur it is important that MA organizations and Part D sponsors have a plan to ensure beneficiary access to health care services and drugs. Sections 1852(d) and 1860D–4(b) of the Act, respectively applicable to Parts C and D, establish access to services and covered Part D drugs as a core beneficiary protection. After Hurricane Sandy it became apparent that a few entities, particularly those with operational centers and/or information technology (IT) resources physically located in the affected areas, did not have consistent continuity plans or back-up systems and processes to ensure ongoing coordinated deployment of critical staff to alternate locations. Sections 1857(e)(1) and 1860D– 12(b)(3)(D) of the Act authorize the Secretary to adopt additional contract terms for, respectively, MA organizations and Part D sponsors, including section 1876 cost contracts and Programs of the All-Inclusive Care for the Elderly (PACE) organizations that provide qualified prescription drug coverage, that are not inconsistent with Parts C and D, respectively, of Title XVIII of the Act, when the Secretary finds it necessary and appropriate. While a limited number of beneficiaries were affected by problems on the part of a small number of entities as a result of Hurricane Sandy, we have a goal of consistent disaster response for plans within the scope of our proposal. Therefore, we proposed that all MA organizations and Part D sponsors limit the impact on beneficiaries of unavoidable disruptions and establish a plan to ensure rapid restoration of VerDate Sep<11>2014 13:56 Feb 11, 2015 Jkt 235001 operations. The scope of our proposal included section 1876 cost contract and PACE organizations that provide qualified prescription drug coverage under Part D. We also proposed to add contract provisions to require that MA organizations and Part D sponsors develop and maintain business continuity plans in order to better anticipate the types of disruptions that could occur and implement policies and procedures to reduce interference with business operations. Our proposal was based on a belief that such planning is appropriate and necessary to better ensure that Medicare beneficiaries have access to the care and coverage contemplated by the statute. The proposed provisions, in §§ 422.504(o)(1) and 423.505(p)(1), would require that every MA organization and Part D sponsor develop, maintain, and implement a business continuity plan that meets certain minimum standards. In §§ 422.504(o)(1)(i) and 423.505(p)(1)(i), we proposed that the business continuity plan assess risks posed to critical business operations by disasters and other disruptions to business as usual; in the preamble, we clarified that our proposal would apply regardless whether the risks, disasters or disruptions be natural, human, or environmental. In paragraph (1)(ii) of §§ 422.504(o) and 423.505(p), we proposed to require MA organizations and Part D sponsors to mitigate those risks through a variety of strategies, at a minimum by: (1) Identifying events (triggers) that would activate the business continuity plan; (2) developing contingency plans to maintain the availability and, as applicable, the confidentiality of hard copy and electronic essential records, including a disaster recovery plan for IT and beneficiary communication systems; (3) establishing a chain of command, which would better ensure that employees know the rules of succession; (4) creating a communications plan that includes emergency capabilities and means to communicate with employees and third parties; (5) establishing procedures to address management of space and transfer of employee functions; and (6) establishing a restoration plan with procedures to transition back to normal operations. Finally, we also proposed, in §§ 422.504(o)(1)(ii)(G) and 423.505(p)(1)(ii)(G), that the business continuity plan comply with all applicable federal, state, and local laws. In light of the nature of the records an MA organization or Part D sponsor would have in its possession, we PO 00000 Frm 00014 Fmt 4701 Sfmt 4700 proposed to emphasize continuing compliance with the contingency plan requirements of the Health Insurance Portability and Accountability Act of 1996 (HIPAA) Security Rule (45 CFR parts 160 and 164, subparts A and C) by including a cross-reference to those requirements in paragraph (1)(ii)(B)(2) of each proposed regulation. These areas of responsibility are essential to continuing the business operations that allow beneficiaries to access health care services and covered Part D drugs. To better ensure that a business continuity plan works as a practical matter, we next proposed in §§ 422.504(o)(1)(iii) and (iv) and 423.505(p)(1)(iii) and (iv) to require that on an annual basis, each MA organization and Part D sponsor test and revise the plan as necessary, and train employees on their responsibilities under the plan. Proposed §§ 422.504(o)(1)(v) and 423.505(p)(1)(v) would require that MA organizations and Part D sponsors keep records of their business continuity plans that would be available to CMS upon request. We stated our belief that the broad list of areas that we proposed to cover as part of business continuity plans were not new to MA organizations and Part D sponsors. We stated these topics typically appear in standard business continuity plans and that we also were building on some requirements that already existed under federal and state laws. For instance, with respect to electronic protected health information, health plans have long had to comply with the contingency plan requirements found in the HIPAA Security Rule. We indicated our goal was to provide a list broad enough to align with the business contingency plans that we believed most, if not the vast majority, of MA organizations and Part D sponsors already had in place. In contrast to the aforementioned list of broad content requirements, we stated that the need to protect beneficiary access required a prescriptive approach for some functions. In proposed §§ 422.504(o)(2) and 423.505(p)(2), as part of the proposal that essential functions must be restored within 24 hours of failure (whether due to disaster, emergency, or other disruption), we identified what we believed to be the minimum essential functions for both MA and Part D plans: Benefit authorization, if authorization requirements have not been waived, and claims adjudication and processing; an exceptions and appeals process; and call center operations. We stated that given the mandate of the Act to ensure beneficiary access to health care and E:\FR\FM\12FER2.SGM 12FER2 Rmajette on DSK2VPTVN1PROD with RULES2 Federal Register / Vol. 80, No. 29 / Thursday, February 12, 2015 / Rules and Regulations covered Part D drugs and the inability of many beneficiaries to pay for services or drugs without the Medicare benefit, we believed that the operations listed in the proposed regulations were the most essential operations because they directly supported the provision of Part C and D benefits. We stated that they ensured immediate electronic communication on the availability and extent of Part C and D benefits and also provided support that makes it more likely that Medicare benefits will be appropriately and timely provided (for example, by providing telephone assistance to beneficiaries with questions on how to obtain benefits and maintaining a forum in which beneficiaries can challenge benefit denials). We observed that without real time provision of Medicare benefits, beneficiaries might not pay for the entire cost of the services or drugs and therefore go without necessary treatment. We also proposed a list of the operations that we believed were essential operations that had to be restored in a rapid time frame. We intended our proposed deadline of the proposed 24 hours to be the outside limit and at that time articulated an expectation that MA organizations and Part D sponsors restore operation of essential functions as soon as possible but not later than 24 hours after they fail or otherwise stop functioning as usual. We stated the clock would begin running in cases of total failure (for example, a computer or telecommunications system crashes or stops working after disruption of the power supply) and also when significant problems occur (for example, a central database is corrupted). We stated that the need to ensure correct claims adjudication and benefit administration of health care services and drugs is no less acute during disasters or other emergencies, and that such disruptions in one part of the country might disable MA organization and Part D sponsor systems that affect enrollees in other regions. We noted that beneficiaries in those unaffected areas who are denied health care or drug benefits (that is, access to drugs or reimbursement for claims paid out of pocket) before the disruption took place should not be denied the right to immediately challenge those denials or to learn timely the resolution of earlier challenges. As proposed, §§ 422.504(o)(2)(i) and 423.505(p)(2)(i) identified benefit authorization (if not waived) and claim adjudication and processing as essential functions which had to be operational within 24 hours. Our proposal required restoration of VerDate Sep<11>2014 13:56 Feb 11, 2015 Jkt 235001 those operations for services rendered at a hospital, clinic, provider office, or at the point of sale for Part D covered drugs. We also stated in the proposed rule that this function was essential for both MA and Part D plans. In addition, we proposed standards specific to Part D sponsors in § 423.505(p)(2)(ii) and (iii) to ensure that a beneficiary who presents at a pharmacy with an appropriate prescription for a covered Part D drug during a disruption would be more likely to receive the drug at the point of sale. The first three prongs under proposed § 423.505(p)(2) classified as essential the following functions: (i) Authorization, adjudication, and processing of pharmacy claims at the point of sale; (ii) administration and tracking of enrollee’s drug benefits in real time, including automated coordination of benefits with other payers; and (iii) provision of pharmacy technical assistance. We noted these essential tasks entail numerous subfunctions. For instance, we stated that Part D sponsors would need to restore within the 24 hour return to operations (RTO) all computer and other systems that meet all privacy and security requirements in order to communicate to pharmacies information about topics including: coverage under Part D and the specific plan; costsharing and deductibles; any restrictions such as prior authorization, step therapy, or quantity limit edits; and coordination of benefits from other insurers and any low income subsidies. Additionally, we noted that the sponsor would need to undertake a concurrent drug utilization review (DUR) to address, for instance, safety issues, as well as restore its pharmacy help desk to provide prompt answers to any questions pharmacies might have. (For more detail on some of these functions and sub-functions, as related to Part D, please see section III. A.10, ‘‘Requirement for Applicants or their Contracted First Tier, Downstream, or Related Entities to Have Experience in the Part D Program Providing Key Part D Functions’’ of the May 23, 2014 final rule (79 FR 29867)). Proposed §§ 422.504(o)(2)(ii) and 423.505(p)(2)(iv) each classified as an essential operation an enrollee exceptions and appeals process including coverage determinations. Under these proposed rules we specified that, within 24 hours of failure, MA organizations and Part D sponsors would need to restore all IT and workforce support necessary to maintain the ‘‘safety net’’ that ensures beneficiaries the rights to appeal or to seek a formulary exception. PO 00000 Frm 00015 Fmt 4701 Sfmt 4700 7925 Finally, for both MA organizations and Part D sponsors, we proposed that the operation of the call center be an essential function which must be restored within 24 hours. We stated that by classifying operation of the call center as essential, proposed §§ 422.504(o)(2)(iii) and 423.505(p)(2)(v) would ensure that beneficiaries could receive the information necessary to find out where they need to go to access benefits and learn about any special rules that might apply (for example, whether pre-authorization requirements are waived or beneficiaries can obtain benefits at out-of-network providers or pharmacies). We stated that enabling a beneficiary who has just been denied Part D coverage at his or her usual pharmacy to call immediately and speak to a customer service representative while still standing in that pharmacy could ensure that he or she obtained drugs appropriately covered by his or her Part D plan before returning home or moving to a safer area. Furthermore, in the proposed rule we stated that because it might be difficult during a disaster to get to a provider’s office or a pharmacy, we believed it was important that benefit authorization, claims adjudication, and call center operations be restored within 24 hours after failure. While our proposed provisions required both MA organizations and Part D sponsors to coordinate their workforce, facilities, and IT and other systems support to meet a 24 hour RTO, in the preamble to the proposed rule we noted our belief that the vast majority of MA organizations and Part D sponsors already met, or would be able to meet, this requirement with their current resources, based on our knowledge of the industry and as evidenced by the lack of widespread problems with MA organization and Part D operations after recent natural disasters in different parts of the country. We observed that MA organizations and Part D sponsors would not be required to take any prescribed specific actions (for example, there was no requirement for redundant systems located at certain distances apart) to meet these standards. Rather, we stated that the proposed 24-hour RTO would allow MA organizations and Part D sponsors the flexibility to continue to seek their own disaster preparedness solutions (for instance, vendor sites or functions spread across facilities). We stated that our goal in proposing a contractual requirement for business continuity plans was to better ensure beneficiary access to health care services and Part D drugs during disasters and other interruptions to E:\FR\FM\12FER2.SGM 12FER2 Rmajette on DSK2VPTVN1PROD with RULES2 7926 Federal Register / Vol. 80, No. 29 / Thursday, February 12, 2015 / Rules and Regulations regular business operations, and we viewed prior planning as essential to achieving this goal. We specifically solicited comments regarding which functions should be identified as essential operations and the 24-hour timeframe for RTO and stated that we would appreciate any information unique to the role of MA organizations and Part D sponsors. We received the following comments on these proposals and our response follows: Comment: Some commenters strongly supported the proposed provision and noted that it was absolutely critical that MA organizations develop and test business continuity plans to ensure that beneficiary needs are met and commended CMS for its commitment to ensure beneficiary access to Medicare benefits. A number of commenters specifically approved that part of the proposed regulation that set forth minimum standards. Additionally, several commenters, including some who did not support the specific requirements of the proposed provision, agreed that there was a need for ‘‘robust’’ business continuity plans. Response: We thank those commenters who support the proposal in its entirety or approved the general outline of minimum requirements, as well as those who recognized there is a need for MA organizations and Part D sponsors to have business continuity plans. Comment: Noting that CMS acknowledged in the preamble there were relatively few problems in the past, some commenters stated that industry practices were adequate and questioned the need for detailed provisions that classified certain functions as essential which had to be restored within a 24-hour RTO deadline. A few commenters pointed to the fact, also acknowledged by CMS in the preamble, that the requirements overlapped with other existing federal, state, and local requirements such as the HIPAA Security Rule and stated that they saw no need for an additional layer of regulation. In contrast, another commenter stated that developing a business continuity plan should not be overly burdensome because the HIPAA Security Rule already requires development of such a plan. Response: We appreciate the fact that, as far as we are aware, only a limited number of beneficiaries experienced problems as the result of inadequate continuity planning in the wake of Hurricane Sandy. However, there were some beneficiaries who were unable to access benefits, and contingency planning might have prevented some of VerDate Sep<11>2014 13:56 Feb 11, 2015 Jkt 235001 those problems. Having a business continuity plan to prepare for business disruptions is an established business practice; the fact that most MA organizations and Part D sponsors successfully handled the disaster does not excuse those entities that did not. We do not believe that requiring a business continuity plan is imposing an unnecessary level of regulation. However, we would like to clarify that HIPAA requirements are distinct from our business continuity provision. As we noted previously, with respect to electronic protected health information, health plans have long had to comply with the contingency plan requirements found in the HIPAA Security Rule. Referencing this rule created no additional burden. Comment: Commenters stated that the regulation was significantly more detailed than necessary. While some commenters pointed to concerns regarding paragraph (1) of §§ 422.504(o) and 423.505(p) which lists basic minimum requirements (addressed later in this section), most commenters noted concern with paragraph (2) of §§ 422.504(o) and 423.505(p) which identified as essential specific functions and required that MA organizations and Part D sponsors restore them within 24 hours of failure or loss of function. • The majority of commenters opposed the requirement that MA organizations and Part D sponsors restore essential functions within 24 hours, with several stating this was not feasible. Many commenters noted that because catastrophes are by their nature hard to predict, out of the control of MA organizations and Part D sponsors, and result in major disruptions that have the potential to last for weeks (for instance, power outages), a 24-hour RTO deadline would hamper the flexibility of MA organizations and Part D sponsors to prioritize. A commenter suggested that we institute a ‘‘force majeure’’ clause to provide relief for causes beyond the control of MA organizations and Part D. • Commenters indicated that they generally agreed with CMS that the emphasis should be on quickly getting care to those beneficiaries who need it, and there was some consensus that providing drugs and services at point-ofsale (POS) should remain an essential function. Several commenters observed that, consistent with industry standards, Part D sponsors were generally able to restore the systems necessary to allow beneficiaries to obtain drugs within approximately 24 hours. For instance, a commenter identified benefit authorization, claims adjudication, and pharmacy services as higher priorities. Some commenters specifically PO 00000 Frm 00016 Fmt 4701 Sfmt 4700 identified call center services as timesensitive functions requiring a 24-hour recovery. • However, there was no clear consensus on the specific functions that should be considered essential or even how to prioritize among all of them. For instance, a commenter noted normal appeals would fall into a longer category than 24 hours recovery, but that expedited appeals might possibly fall within the 24 hour time line. Several commenters suggested that different functions would require different RTO time frames. Several commenters mentioned a 72-hour timeframe, with one noting it restored functions less critical for health and safety within 72, rather than 24, hours. • In evaluating essential functions, a number of commenters distinguished between the Part C and D programs. Commenters observed, for instance, that provider payments are not a 24-hour critical function for MA plans since payment is allowed to be made within 30 days and that in a disaster or emergency MA organizations should not be required to prioritize claims processing for services already rendered. In contrast, a few commenters agreed that the 24-hour restoration requirement could be applied to Part D point-of-sale claims that require immediate adjudication. Response: These commenters persuaded us that we need to build more flexibility into our business continuity plan requirements for RTO for essential functions and we are accordingly finalizing the regulation with changes from our proposal. In paragraph (2) of §§ 422.504(o) and 423.505(p), we are providing that MA organizations and Part D sponsors must plan to restore essential functions within 72, rather than 24, hours after any one of the essential functions fail or otherwise stop functioning as usual. As discussed in more detail later in this section, we also finalize regulation text to clarify that we require MA organizations and sponsors to ‘‘plan to’’ restore essential functions within the 72-hour time period, rather than guarantee complete restoration within the time frame. Given the lack of a clear consensus on how to prioritize all essential functions, we believe that this will provide MA organizations and Part D sponsors with the flexibility the commenters advocated, and still address our concerns about planning to better ensure beneficiary access to the Medicare benefit. However, we underscore that although we are finalizing a more flexible regulatory mandate, we expect that Part D sponsors will plan for a 24- E:\FR\FM\12FER2.SGM 12FER2 Rmajette on DSK2VPTVN1PROD with RULES2 Federal Register / Vol. 80, No. 29 / Thursday, February 12, 2015 / Rules and Regulations hour RTO deadline for POS transactions. We are concerned that beneficiaries who are not able to access their Part D drug coverage may in fact suffer adverse health effects. Our decision not to explicitly require a plan for a 24-hour restoration for POS drug transactions is informed by the fact that commenters suggested that a 24-hour RTO for POS transactions is an industry standard already generally met, and that relatively few problems were reported in the aftermath of recent disasters. We want to ensure that that track record not only continues but improves. We will continue to closely monitor the timing of POS transaction in the aftermath of disasters, emergencies, and other disruptions and take any necessary actions. We also will revisit the regulation if necessary. We also agreed with commenters that there are distinctions between the Part C and D programs relative to identifying what services are of the highest priority for speedy restoration. For instance, beneficiaries need to know whether they have Part D Medicare coverage at the POS because usually they rely on the benefit to obtain prescription drugs. For most beneficiaries, such claim denials may mean they leave pharmacies without medications or pay out-ofpocket for costs that are their plans’ responsibility. In contrast, this is often not the case for Part C health care services. Provision of Part C services is not so closely tied to plan authorizations and a provider may not bill the MA organization for services until days or weeks after the service is furnished. Thus, because beneficiary health and safety would not be put at risk by failure of Part C claims processing and appeals processes, we agree with the commenters that those systems are not essential functions to which the 72-hour timeframe would apply. Furthermore, as finalized in section II.E.9. of this final rule (MA Organization Responsibilities in Disasters and Emergencies (§ 422.100)), beneficiary access to health care services is protected in the more limited circumstances of disasters and public health emergencies and we believe that provision, in conjunction with § 422.504(o)(2), ensures, to the extent possible, that beneficiaries enrolled in MA organizations will have continued access to needed health care services when there are disruptions to normal business operations. Accordingly we are finalizing § 422.504(o)(2) to define as essential services, for Part C purposes, benefit authorization (if not waived) for services to be immediately furnished at a hospital, clinic, provider office, or other VerDate Sep<11>2014 13:56 Feb 11, 2015 Jkt 235001 place of service instead of the broader requirement that was proposed. This final rule text would include benefit authorization to the extent that members and providers contact the MA organization to request such authorizations even when the MA organization has waived that requirement. Similarly, we agree that restoration of Part C claims processing and appeals processes are not essential functions in that beneficiary health and safety is not put at risk by a failure of those systems that lasts for longer than 72 hours. We agree with the commenters that in a disaster or emergency, MA organizations should not be required to prioritize claims for services already rendered, but we do not want beneficiaries to lose access to necessary treatment at provider offices. Accordingly, for Part C, we are no longer characterizing ‘‘Operation of an enrollee exceptions and appeals process including coverage determinations’’ as an essential function and are not finalizing that part of our proposal for § 422.504(o)(2). Lastly, we agree with the commenters that characterized call center services as high priorities for both Part C and Part D plans. In a disaster or other emergency, normal procedures may be disrupted and beneficiaries need to be able to find out how and where they can obtain health care services and drugs by having contact with the plan. In contrast, for Part D we plan to finalize § 423.505(p)(2) as proposed. We discussed the importance of the elements in more detail in the preamble to the proposed rule, but would like to note here that a beneficiary cannot obtain Part D coverage without benefits authorization, adjudication, and processing of drug claims at the point of sale. A pharmacy’s inability to obtain, for instance, coordination of benefits information may affect the beneficiary’s ability to obtain the drug as well; and pharmacy technical assistance is critical in case the dispensing pharmacy has questions. We also believe the operation of the enrollee exceptions and appeals process is essential—a beneficiary who has been denied Part D coverage will want to resolve quickly any issues so he or she can obtain the drug timely. Lastly, as previously noted, we believe call center operations are essential. Comment: A commenter suggested there was a need for more detail in addition to that provided in the regulation as to exactly when the 24hour clock would start and that CMS would, for instance, need to clarify if the clock would begin running when the disaster was declared or when it PO 00000 Frm 00017 Fmt 4701 Sfmt 4700 7927 occurred. Another commenter suggested the proposed 24-hour RTO should begin running when the incident management team made the determination of action or after a specified amount of time after the disruption was reported. Response: We believe that the language we proposed, namely that the clock will start running ‘‘after any of the essential functions fail or otherwise stop functioning as usual,’’ provides adequate direction to MA organizations and Part D sponsors. We are finalizing a clearly defined time period—72 hours (rather than the 24-hour time period proposed)—in which MA organizations and Part D sponsors must plan to restore essential operations. In contrast, we deliberately chose to provide more flexibility to MA organizations and Part D sponsors to determine the precise point at which the 72-hour clock starts running. Essential functions could fail in an infinite variety of ways depending on the circumstances and the systems and supports in place (for instance, claims processing systems might fail in different ways than operation of the exceptions and appeals process). We believe that MA organizations and Part D sponsors are in the best position to both learn about failures or disruptions in usual functions or the facts that might potentially cause them and, in the aftermath of such occurrences, gather as much information as possible internally and from outside sources (such as firsttier, downstream and related entities (FDRs) and local authorities and utilities). We will revisit this regulation if problems arise in the future. Comment: A couple of commenters expressed concern that the requirement that MA organizations and Part D sponsors return functions to ‘‘normal’’ operations would not permit them to utilize temporary alternative workflows that could be more effective than normal business operations in preserving member access to care. Response: We disagree with this conclusion. Our proposal does not require MA organizations and Part D sponsors to return immediately to normal operations but rather, views that as an ultimate goal in an ongoing transition process. Paragraph (1)(ii) of §§ 422.504(o) and 423.505(p) requires MA organizations and Part D sponsors to create a mitigation strategy to ‘‘prioritize the order in which to restore [essential and] other functions to normal operations’’, while paragraph (1)(ii)(F) of §§ 422.504(o) and 423.505(p) requires MA organizations and Part D sponsors to ‘‘[e]stablish a restoration plan including procedures to transition to normal operations.’’ Additionally, we do not define ‘‘normal operations.’’ In E:\FR\FM\12FER2.SGM 12FER2 Rmajette on DSK2VPTVN1PROD with RULES2 7928 Federal Register / Vol. 80, No. 29 / Thursday, February 12, 2015 / Rules and Regulations fact, depending on the severity of a disaster or emergency, ‘‘normal operations’’ certainly might not be operations performed exactly the same as they were before the event. We do not prescribe when or how normal functions are performed; an MA organization or Part D sponsor may achieve a comparable level of performance (for example, in terms of appeals being heard on a timely basis at the same rate as before the disaster) and consider normal operations achieved even if different personnel or offices now perform those functions. We view ‘‘normal operations’’ as an operational level at which MA organizations and Part D sponsors are able to administer the benefit correctly and fulfill contract requirements. Comment: A commenter stated that the proposed provisions were inconsistent with Executive Order 13563 which requires that proposed rules specify performance objectives rather than the behavior or manner of compliance that regulated entities must adopt. Response: We disagree with this commenter. The first part of our proposed provisions simply lists basic areas that business continuity plans must cover. We also view as performance objectives the list of essential functions for which we require MA organizations and Part D sponsors to plan a 72-hour RTO. As revised, the regulation requires that each entity plan to restore those functions that directly support the timely provision of Part C and D Medicare benefits to beneficiaries. We leave it to the MA organizations and Part D sponsors to determine the manner by which they plan to meet these requirements timely after a failure occurs. Comment: Commenters took issue with the costs associated with the proposal. A number of commenters expressed concerns that we were requiring continuous service which would give rise to enormous costs to create systems redundancy, while several commenters were concerned about the cost of testing IT systems on an annual basis. Response: Although we believe the proposed regulation was clear in paragraphs (1)(ii)(B)(1) of §§ 422.504(o) and 423.505(p) that we do not expect plans to be able to maintain continuous service under all circumstances, we are revising both of these regulation paragraphs in this final rule to clarify the language that we believe caused this confusion. We are revising the language in the proposed paragraph (1) of §§ 422.504(o) and 423.505(p) to require MA organizations and Part D sponsors VerDate Sep<11>2014 13:56 Feb 11, 2015 Jkt 235001 to plan to restore business operations following disruptions, rather than plan to continue business operations during disruptions. To clarify, we do not expect MA organizations and Part D sponsors to prevent any disruptions on an absolute basis but rather to plan to ensure operations are restored as best they can when business operations fail. It is understood that disasters, emergencies, and other events may cause severe disruptions outside of the control of MA organizations and Part D sponsors; the reason we are requiring business continuity plans is to ensure that MA organizations and Part D sponsors are better equipped to handle those problems when they occur. Additionally, proposed §§ 422.504(o)(2) and 423.505(p)(2) required that MA organizations and Part D sponsors ‘‘restore’’ essential functions within the specified timeframe, which we believe raises the same concerns expressed by the commenter. We want to make it clear that the actual restoration of essential functions within 72 hours is the goal of the business continuity plan, not a requirement that is to be met in all circumstances. Accordingly, the regulation is being finalized to require that MA organizations and Part D sponsors plan to restore essential functions within the 72-hour time period. The business continuity plan must be designed with this 72-hour period as a deadline. As to the commenters’ concern about the cost of annual IT training, paragraph (1)(iii) of §§ 422.504(o) and 423.505(p) requires MA organizations and Part D sponsors to test and update the business operations continuity plan on at least an annual basis. This broad description does not detail specific kinds of testing but relies upon MA organizations and Part D sponsor discretion to adequately test and update the business continuity plan. This would include determining exactly what must be tested and how such testing must occur. Comment: A commenter expressed concern that the rule would require annual training for ‘‘all’’ employees, which might not be necessary under all conditions. Response: We agree that it is best left to MA organizations and Part D sponsors to determine which employees would most appropriately require annual training on the business continuity plan. We are finalizing the regulations to require annual training of appropriate employees rather than all employees, as well as making changes to make the language applying to both Parts C and D consistent. Specifically, we are removing the phrase ‘‘all PO 00000 Frm 00018 Fmt 4701 Sfmt 4700 employees, including contract staff’’ from § 422.504(o)(1)(iv) and ‘‘all new and existing employees’’ from § 423.505(p)(1)(iv), and replacing them both with ‘‘appropriate employees’’. Comment: Several commenters suggested that our regulatory impact analysis (RIA) significantly underestimated costs. Concerns were raised about the high cost of creating systems’ redundancy to avoid any disruption of processing of claims; one commenter mentioned that the requirement would necessitate spending millions of dollars. Another commenter mentioned that many business continuity plans currently in place for MA organizations and Part D sponsors would not meet requirements such as the restoration of essential functions within 24 hours. A commenter was concerned that the estimate did not take into account resources needed to ascertain the extent of damage and evaluate options. Response: We believe that the modifications, clarifications, and comments discussed previously about this final rule address the vast majority of concerns raised about the RIA. We are also well aware of the major expense of creating redundant computer systems to ensure there is no interruption in claims processing—and repeat that we are not requiring MA organizations and Part D sponsors to absolutely ensure that systems never fail or to build redundant systems to avoid any potential failure. We are requiring that MA organizations and Part D sponsors plan to avoid such system and other failures and, in the event they do occur, to be prepared to recover essential functions within a certain timeframe. We appreciate that while contracting organizations may plan—even plan well—to avoid such disruptions and to recover from them within 72 hours, there may be scenarios in which a return of functionality for essential operations within the timeframe of paragraph (2) of §§ 422.504(o) and 423.505(p) is impossible . We also believe that providing the greater flexibility to plan for a 72-hour, rather than 24-hour, RTO for MA organizations and Part D sponsors should further alleviate concerns about high costs. In this final rule, we also are revising the regulations to clarify that we require annual training of ‘‘appropriate’’ rather than ‘‘all’’ employees. As noted earlier, our requirement for annual testing of the business continuity plan does not specify exactly what must be tested or how such testing must be conducted. As to the last comment, MA organizations and Part D sponsors need to assess damages and evaluate alternatives E:\FR\FM\12FER2.SGM 12FER2 Rmajette on DSK2VPTVN1PROD with RULES2 Federal Register / Vol. 80, No. 29 / Thursday, February 12, 2015 / Rules and Regulations regardless of whether they have business continuity plans. Additionally, we have revised our cost estimates to account for costs of what we believe will be, at most, minimal changes to existing business continuity plans. We base this on: (1) The fact that we believe most MA organizations and Part D sponsors with existing business continuity plans already cover the same broad list of areas we require in this rule; and (2) revisions to our rule that provide flexibility that enables most MA organizations and Part D sponsors to follow the same industry standards commenters suggested they currently follow. (See section IV. Regulatory Impact Statement of this final rule.) Comment: A commenter stated that MA organizations and Part D sponsors could incur potentially very large additional costs to come into compliance with the new requirements which would amount to unexpected expenses that would unfairly count against a plan’s administrative expenses on its medical loss ratio (MLR) calculation. Response: Items that count as MLR are outside of the scope of this final rule. However, we note that this final rule will apply to all MA organizations and Part D sponsors and that we believe strongly that planning for the least disruption to operations and better provision of health care and drug benefits during disasters is an important function for insurance companies, and that such work will also benefit the MA organizations and Part D sponsors themselves. Comment: Noting that they are confidential and contain blueprint information on processes and supporting resources, a commenter requested that rather than make business continuity plans available to CMS upon request, that CMS require an in-camera review of certain elements. In contrast, another commenter recommended that CMS review such plans as part of the Medicare Part D application process as well as via regular CMS compliance audits. A third requested whether there would be an audit element that focuses on business continuity plans. Response: We appreciate the commenter’s concerns about confidentiality. First, we would like to note that we are not requiring MA organizations and Part D sponsors to submit these business continuity plans and materials as a matter of course or to make such plans publicly available. Furthermore, if we do request these documents, we do not intend to voluntarily disclose them to any parties VerDate Sep<11>2014 13:56 Feb 11, 2015 Jkt 235001 outside of the government. Under the Freedom of Information Act (FOIA), members of the public may request government records, which may include documents submitted to us. MA organizations and Part D sponsors may seek to protect their information from disclosure under FOIA by claiming FOIA exemption 4 and taking the appropriate steps—including labelling the information in question as ‘‘confidential’’ or ‘‘proprietary.’’ Furthermore, redaction of especially sensitive information is sometimes an option, depending on what information CMS needs and the nature of the information the organization seeks to redact. We will consider both compliance and confidentiality needs as we develop application and audit requirements related to this provision. Comment: A commenter requested that CMS require PACE and long term care services and support providers (such as skilled nursing facilities (SNFs) and assisted living residences (ALRs)) to create plans that deal with natural and other disasters. Response: As discussed in this final rule, the requirements in this regulation that are applicable to Part D sponsors also apply to 1876 cost contracts and PACE organizations that provide qualified prescription drug coverage. On December 27, 2013, we proposed regulations on emergency preparedness requirements for Medicare and Medicaid participating providers and suppliers (78 FR 79082). The emergency preparedness requirements of that regulation would apply to PACE organizations in their capacity as providers and, as we noted earlier, the Part D proposed requirements apply to PACE organizations to the extent they function as Part D sponsors. Both that proposed rule and this finalized Part C and D rule have the same goal of ensuring the least interruption to beneficiary health care and drugs as a result of disasters and emergencies by requiring entities to assess possible risks and lessen their impact through planning. However, this final rule applies to the entities providing coverage of the benefits (MA organizations and Part D sponsors), while the other rule, ‘‘Medicare and Medicaid Programs; Emergency Preparedness Requirements for Medicare and Medicaid Participating Providers and Suppliers’’ would apply to entities directly providing the services. Specifically, this Part C and D rule applies to MA organizations and Part D sponsors to better ensure that beneficiaries enrolled in their plans have access in a timely manner to the Medicare covered items and services, PO 00000 Frm 00019 Fmt 4701 Sfmt 4700 7929 supplemental benefits and prescription drugs. In contrast, the emergency preparedness rule would apply to both the Medicare and Medicaid programs and would require providers and suppliers to be adequately prepared to meet the direct health care needs of patients, residents, clients, and participants during disasters and emergencies. Comment: Commenters expressed concerns that the proposed regulation did not take into account disparate circumstances. A commenter noted that MA organizations and Part D sponsors typically were located in the same area where members experiencing disasters or emergencies were living, while other commenters suggested the requirement would particularly burden smaller entities or entities with less experience that might, for example, need to contract with third parties to meet RTO obligations. Response: We appreciate that different MA organizations and Part D sponsors will face different challenges during disasters and emergencies. However, we drafted broad areas of coverage to provide as much flexibility as possible to different entities. Given that emergencies and disasters are varied and unpredictable, we believe it would not be prudent for CMS to try and create different requirements based on different circumstances. We also believe that most of these concerns about costs and sufficient flexibility have been addressed through revisions or clarification of this proposed regulatory change. Comment: A commenter stated that it was not aware of any reason that there should be different standards for the protection of Medicare beneficiaries during disasters than those generally applicable to the rest of the population. Response: The treatment of individuals who are not Medicare beneficiaries is outside the scope of this regulation. However, we note that we are the steward of the Federal Trust Fund with direct authority over the Medicare program. Disasters, emergencies, and disruptions not only can limit beneficiary access to Medicare benefits, but they pose direct threats to the health of beneficiaries which in turn could create greater needs for health care services and drugs. Our core function is to ensure as best we can that beneficiaries are able to access their Medicare benefits; we believe the requirement that MA organizations and Part D sponsors establish business continuity plans that better enable them to deal with disasters is central to achieving this goal. E:\FR\FM\12FER2.SGM 12FER2 7930 Federal Register / Vol. 80, No. 29 / Thursday, February 12, 2015 / Rules and Regulations After consideration of the public comments received, we are finalizing our business continuity proposal with the following modifications as discussed and as follows: • In §§ 422.504(o)(1) and 423.505(p)(1) we are replacing the phrase ‘‘ensure the continuation of business operations during disruptions’’ with the phrase ‘‘ensure the restoration of business operations following disruptions’’. • In § 422.504(o)(1)(iv) we are replacing the phrase ‘‘all employees, including contract staff’’ with the phrase ‘‘appropriate employees’’. • In § 423.505(p)(1)(iv), we are replacing the phrase ‘‘all new and existing employees’’ with the phrase ‘‘appropriate employees’’. • In §§ 422.504(o)(2) and§ 423.505(p)(2), we are inserting the words ‘‘plan to’’ before the phrase ‘‘restore essential functions’’ in order that it reads ‘‘plan to restore essential functions.’’ We are also replacing the number ‘‘24’’ with ‘‘72’’. • In § 422.504(o)(2)(i), we are replacing the phrase ‘‘Benefit authorization (if not waived), adjudication, and processing of health care claims for services furnished at a hospital, clinic, provider office or other place of service’’ with ‘‘Benefit authorization (if not waived) for services to be immediately furnished at a hospital, clinic, provider office, or other place of service.’’ • We are removing proposed paragraph (ii) of § 422.504(o)(2) (‘‘Operation of an enrollee exceptions and appeals process including coverage determinations.’’) and renumbering proposed paragraph (iii). Rmajette on DSK2VPTVN1PROD with RULES2 5. Efficient Dispensing in Long Term Care Facilities and Other Changes (§ 423.154) We proposed changes to the rule requiring efficient dispensing to Medicare Part D enrollees in long term care (LTC) facilities. For background, section 3310 of the Affordable Care Act amended the Act to add a new paragraph (3) to section 1860D–4(c) of the Act. Section 1860D–4(c)(3) of the Act provides that the Secretary shall require Medicare Part D sponsors of prescription drug plans to utilize specific, uniform dispensing techniques, such as weekly, daily or automated dose dispensing, when dispensing covered Part D drugs to enrollees who reside in an LTC facility in order to reduce waste associated with 30-day fills. The section states that the techniques shall be determined by the Secretary in consultation with relevant stakeholders. VerDate Sep<11>2014 13:56 Feb 11, 2015 Jkt 235001 After extensive consultation with stakeholders, in the April 15, 2011 Federal Register, we published a final rule entitled ‘‘Medicare Program; Changes to the Medicare Advantage and the Medicare Prescription Drug Benefit Programs for Contract Year 2012 and Other Changes’’ (‘‘April 15, 2011 final rule’’), which governs the dispensing of prescription drugs in LTC facilities under Part D plans. In accordance with § 423.154, Part D sponsors generally must require their network pharmacies to dispense certain solid oral brand covered Part D drugs in quantities of 14 days or less, unless an exemption applies. As a clarification to the April 15, 2011 final rule, we proposed in the January 2014 proposed rule the following specific changes to the LTC short cycle dispensing requirements: • Add a prohibition on payment arrangements that penalize the offering and adoption of more efficient LTC dispensing techniques by prorating dispensing fees based on days’ supply or quantity dispensed, and a requirement to ensure that any difference in payment methodology among LTC pharmacies incentivizes more efficient dispensing techniques. • Eliminate language that has been misinterpreted as requiring the proration of dispensing fees. • Incorporate an additional waiver for LTC pharmacies using restock and reuse dispensing methodologies under certain conditions. • Make a technical change to eliminate the requirement that Part D sponsors report on the nature and quantity of unused brand and generic drugs. After providing a summary of the current LTC short cycle dispensing rule in the proposed rule, we addressed each proposed change in more detail. a. Prohibition on Payment Arrangements That Penalize the Offering and Adoption of More Efficient LTC Dispensing Techniques (§ 423.154) Our first proposed change was to add a paragraph to § 423.154 prohibiting payment arrangements that penalize the offering and adoption of more efficient LTC dispensing techniques by prorating dispensing fees based on days’ supply or quantity dispensed, and a requirement to ensure that any difference in payment methodology among long-term care pharmacies incentivizes more efficient dispensing techniques. Certain dispensing fee payment arrangements, for example, some proration arrangements, penalize the offering and adoption of more efficient LTC dispensing. For instance, if a medication is discontinued before a PO 00000 Frm 00020 Fmt 4701 Sfmt 4700 month’s supply has been dispensed, a pharmacy that dispenses the maximum amount of the medication at a time permitted under § 423.154 (for example, 14 days), collects more in dispensing fees than a pharmacy that utilizes dispensing techniques that result in less than maximum quantities being dispensed at a time. In other words, the least efficient pharmacy collects more in dispensing fees than a more efficient pharmacy. In the proposed rule, we provided the following example of two pharmacies— one more efficient at dispensing than the other—to illustrate our concern: A monthly $4.00 dispensing fee for a 30days’ supply is prorated, and a medication is discontinued after 21 days. The first pharmacy dispenses 14days’ supply at a time and receives approximately $3.73 in total dispensing fees for a 28-days’ supply ($0.1333 × 28), which results in 7 days’ worth of medication waste. The second pharmacy dispenses 3-days’ supply at a time and receives approximately $2.80 in dispensing fees for a 21-days’ supply in total ($0.1333 × 21), which results in no medication waste. We believe this example is contrary to the Congress’ intent in enacting section 3310 of the Affordable Care Act, which was to reduce medication waste. In this example, the second pharmacy’s more efficient dispensing techniques results in less medication waste, but the pharmacy itself receives less in dispensing fees than it would if it had dispensed in 14-day increments, which result in more medication waste. This approach creates a perverse incentive for LTC pharmacies to adopt the least efficient dispensing technique, if available, which is to dispense drugs in 14 days supplies. This encourages wasteful dispensing to the Part D program. Given the clear intent of the Affordable Care Act to reduce wasteful dispensing in the LTC setting, we proposed to prohibit payment arrangements that penalize the offering and adoption of more efficient LTC dispensing techniques by adding a new requirement that would state a Part D sponsor must not, or must require its intermediary contracting organizations not to, penalize long term care facilities’ choice of more efficient uniform dispensing techniques by prorating dispensing fees based on days’ supply or quantity dispensed. We proposed that this requirement would also state that a sponsor or its intermediary contracting organizations must ensure that any difference in payment methodology among LTC pharmacies incentivizes more efficient dispensing techniques. E:\FR\FM\12FER2.SGM 12FER2 Federal Register / Vol. 80, No. 29 / Thursday, February 12, 2015 / Rules and Regulations b. Misinterpretation of Language as Requiring the Proration of Dispensing Fees (§ 423.154) Our second proposed change to § 423.154 was to eliminate paragraph (e), which we believe has caused confusion. Section 423.154(e) currently states 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 not apply. The purpose of this language was to ensure that sponsors did not assess multiple monthly copayments for each incremental dispensing event in LTCs. We believe misinterpretation of paragraph (e) may have prompted some sponsors to prorate dispensing fees in a way that penalizes the offering and adoption of more efficient LTC dispensing techniques, even though the current regulation does not address dispensing fees. Moreover, effective January 1, 2014, the daily cost-sharing rate requirement in § 423.153(b)(4)(i) applies whenever a prescription is dispensed by a network pharmacy for less than a month’s supply, unless the drug is excepted, regardless of the setting in which the drug is dispensed. In other words, the daily cost-sharing rate requirement applies to brand drugs dispensed in LTC facilities to the extent they must be dispensed in supplies less than 30 days under § 423.154, and to generic drugs, to the extent a sponsor voluntarily dispenses generic drugs in LTC facilities in supplies less than a month’s supply. Consequently, the requirement of § 423.153(b)(4)(i) makes § 423.154(e) unnecessary, and we believe retaining both provisions could cause further confusion. For these reasons, we proposed to delete § 423.154(e). Rmajette on DSK2VPTVN1PROD with RULES2 c. Additional Waiver for LTC Pharmacies Using Restock and Reuse Dispensing Methodologies Under Certain Conditions (§ 423.154) Our third proposed change to § 423.154 was to waive the short-cycle dispensing requirements for LTC pharmacies meeting certain conditions. Currently, § 423.154(c) waives the requirements for pharmacies when they dispense brand name Part D drugs to enrollees residing in intermediate care facilities for the mentally retarded and institutes for mental disease, as well as for I/T/U pharmacies. We have learned that some institutional pharmacies maintain custody of medications within VerDate Sep<11>2014 13:56 Feb 11, 2015 Jkt 235001 the LTC facilities through operating a closed pharmacy within the facility, and as a result can ensure sufficient quality control over these medications to return all unused medications to stock for reuse that are eligible for return and reuse under applicable law. This has led us to believe there is another category of pharmacies, such as some on site pharmacies in veterans’ homes, for which a waiver from the LTC shortcycle dispensing requirement may be appropriate, if they meet certain conditions that demonstrate that applying the 14-day dispensing requirements in these instances would not serve to reduce waste. In light of this, we proposed to waive the requirements of § 423.154(a) for an LTC pharmacy that exclusively uses the dispensing technique of returning all unused medications to stock that can be restocked under applicable law for reuse and rebating full credit for the ingredient costs of the unused medication to the PDP sponsor. The proposed waiver also would require that for those drugs that cannot be returned for full credit and reuse under applicable law, such as controlled substances, the pharmacy uses a dispensing methodology that results in the delivery of no more than 14 days of a drug at a time. We proposed that the waiver would apply on a uniform basis to all similarly situated LTC pharmacies, but not to a pharmacy organization that is contracted to use this technique at some, but not all, of its pharmacies. Rather, the waiver would apply only to the qualifying pharmacies themselves. We proposed that we would not require the pharmacies to credit back any amount of the dispensing fee when the pharmacies return a drug to stock for reuse, since the level of effort for the pharmacies would not be expected to decrease. We stated that, if anything, the level of effort would be increased, since the pharmacies have to implement the appropriate internal controls for inspection and return to inventory of the unused medication. We further solicited comments on our proposal that to qualify for the waiver, a pharmacy would have to dispense any drugs that cannot be restocked under applicable law, such as controlled substances, in no greater than 14-day supply increments. Our rationale in proposing this condition to the waiver is that we do not want the waiver to inadvertently result in large quantities of medications being dispensed to Part D enrollees serviced by the pharmacies that would qualify for the waiver because they cannot be restocked under applicable law. PO 00000 Frm 00021 Fmt 4701 Sfmt 4700 7931 d. Technical Change To Eliminate the Requirement That PDP Sponsors Report on the Nature and Quantity of Unused Brand and Generic Drugs (§ 423.154) Finally, we proposed to make a technical change to § 423.154(a)(2), which requires Part D sponsors 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, as well as on the nature and quantity of unused brand and generic drugs dispensed by the pharmacy to enrollees residing in an LTC facility. This latter reporting requirement is waived for sponsors for drugs dispensed by pharmacies that dispense both brand and generic drugs in no greater than 7-day increments. In a memorandum titled, ‘‘Modifications to the Drug Data Processing System (DDPS) in Relation to Appropriate Dispensing of Prescription Drugs in Long Term Care Facilities,’’ issued by CMS on August 3, 2012, we explained that we planned to use the PDE data in conjunction with other CMS data (such as MDS) to determine the extent to which 14 day or less dispensing to enrollees in LTC facilities reduces the amount of unused drugs in LTC. We did this to lessen the burden on sponsors that would be created by a separate reporting requirement. Therefore, it is no longer necessary to waive the reporting requirement for any Part D sponsor, because Part D sponsors comply with the requirement (in the form and manner we specified in the previously-referenced memorandum) via PDE submission. Thus, we proposed deleting the language in in § 423.154(a)(2) that appeared to require separate reporting, to eliminate any confusion. We received the following comments on this proposal and our responses follow: Comment: Numerous commenters support the proposal to add a prohibition on payment arrangements that penalize the offering and adoption of more efficient LTC dispensing techniques by prorating dispensing fees based on days’ supply or quantity dispensed, and a requirement to ensure that any difference in payment methodology among long term care pharmacies incentivizes more efficient dispensing. Many of these comments in particular supported CMS’ view that there is not a justifiable reason for proration of monthly dispensing fees since the cost of dispensing is not directly related to the quantity dispensed. These commenters asserted that proration of dispensing fees ignored E:\FR\FM\12FER2.SGM 12FER2 Rmajette on DSK2VPTVN1PROD with RULES2 7932 Federal Register / Vol. 80, No. 29 / Thursday, February 12, 2015 / Rules and Regulations the clinical oversight and fixed costs for pharmacy professional services for each dispense. These commenters acknowledged that prorated professional fees have resulted in a perverse economic model that encourages pharmacies to dispense the maximum allowable quantity of drugs (for example, 14 days supplies) in each prescription drug event transaction. Other commenters opposed this proposal, stating that it would increase costs by requiring a full dispensing fee with each dispensing event in an LTC facility, and that since the LTC pharmacies determine dispensing increments, this will incentivize them to select the system that provides the highest number of dispensing fees. These commenters also noted that the Affordable Care Act did not specify a new LTC dispensing fee structure. A commenter provided an illustrative example of prorated monthly dispensing fees that may not penalize the offering and adoption of more efficient LTC dispensing techniques. Specifically, the example demonstrates how an increased dispensing fee with proration can create appropriate incentives to reduce waste and cost in LTC facilities. The example provided for a $10 base dispensing fee for a 30-day supply for a pharmacy with technology that dispenses in 7-day increments and a $4.00 base dispensing fee for a pharmacy that dispenses in 14day increments. Under this scenario, the more efficient pharmacy would receive $2.31 for dispensing 7 days of medication ($10/30 = $0.33 × 7) and the less efficient pharmacy would receive $1.82 ($4/30 = $0.13 × 14) for dispensing 14 days of medication. This commenter urged us to allow for any dispensing structure where the daily dispensing fee encourages all pharmacies, regardless of their size or negotiation capabilities, to use the most efficient dispensing technologies. Response: We thank the supportive commenters for their comments. With respect to the commenters that opposed the proposal, we note that the proposal did not require a full monthly dispensing fee with each dispensing event, or any specific dispensing fee or methodology for that matter. The intent of this rule is to prohibit dispensing fees that penalize the offering and adoption of more efficient LTC dispensing techniques by prorating dispensing fees based on days’ supply or quantity dispensed. This rule also adds a requirement to ensure that any difference in payment methodology among long-term care pharmacies incentivizes more efficient dispensing techniques. VerDate Sep<11>2014 13:56 Feb 11, 2015 Jkt 235001 With respect to the one commenter that pointed out that certain prorated dispensing fees may not penalize the offering and adoption of more efficient LTC dispensing techniques in certain instances, we take no position at this time on whether specific dispensing fee arrangements would be compliant with this rule. We reiterate that this rule does not require a specific dispensing fee or methodology, but rather, prohibits payment arrangements that penalize the offering and adoption of more efficient LTC dispensing techniques by prorating dispensing fees based on days’ supply or quantity dispensed. In addition, this rule requires that any difference in payment methodology among LTC pharmacies incentivizes more efficient dispensing techniques. Comment: A commenter stated that because its data shows 80 percent of all LTC dispense claims are for generic medications, modifying dispensing fees will not truly affect the use of shortcycle methodology. This commenter requested that CMS provide any research demonstrating the increased utilization of short-cycle fill in dispensing in pharmacies whose dispensing fees did not change to a prorated fee. Alternatively, this commenter requested CMS’ observations and supporting data demonstrating that a daily dispensing fee actively discourages pharmacies from short-cycle filling medications. Response: We do not believe the research and data requested are necessary to finalizing this proposal. We believe it is self-evident that proration of the same monthly dispensing fee based on days’ supply or quantity dispensed (which results in a type of daily dispensing fee or rate) penalizes more efficient pharmacies relative to less efficient ones—the more efficient pharmacy is reimbursed less per dispense because it dispenses in smaller increments. Moreover, that prorated dispensing fee decreases per dispense the more efficiently the pharmacy dispenses. Comment: A commenter stated that CMS confuses prorated dispensing fees with daily dispensing fees that are not necessarily pro rata adjustments of otherwise applicable dispensing fees. Response: Our prohibition of proration that penalizes more efficient dispensing would apply both to proration of a monthly dispensing fee amount and proration determined by setting a daily rate that is applied to the number of days dispensed. The intent is of our rule is to prohibit payment arrangements that penalize the offering and adoption of more efficient LTC dispensing techniques by prorating PO 00000 Frm 00022 Fmt 4701 Sfmt 4700 dispensing fees based on days’ supply or quantity dispensed, and to require that any difference in payment methodology among LTC pharmacies incentivizes more efficient dispensing techniques. Comment: A commenter stated that PBMs have very little leverage in negotiating cost effective strategies with LTC pharmacies on behalf of Part D sponsors, as the LTC landscape is controlled by three very large LTC pharmacy organizations that make up an estimated 80 percent of the market share, and that in many cases, only one of them is the provider of prescription medications in LTC facilities. This commenter further stated that these LTC pharmacy organizations dictated the contractual requirement to prorate dispensing fees, asserting that their member LTC pharmacies needed compensation for every prescription fill. Response: This rule prohibits payment arrangements that penalize the offering and adoption of more efficient LTC dispensing techniques by prorating dispensing fees based on days’ supply or quantity dispensed. For example, this rule prohibits payment arrangements that penalize LTC dispensing techniques of less than 14 days supplies of drugs at a time. This rule also requires that any difference in payment methodology among LTC pharmacies incentivizes more efficient dispensing techniques. For example, this rule requires that differences in payment methodologies among LTC pharmacies incentivize dispensing techniques of less than 14 days supplies of drugs at a time. If the prorated dispensing fees by days’ supply or quantity dispensed do not penalize the offering of more efficient dispensing techniques by these LTC pharmacies, and any difference in payment methodology relative to other LTC pharmacies incentivizes more efficient dispensing techniques, then this regulatory provision is not implicated. Comment: Some commenters asserted that our proposal was a violation of the non-interference clause and exceeded our delegated authority. Response: We disagree. Section 1860D–4(c)(3) of the Act provides that the Secretary shall require Medicare Part D sponsors of prescription drug plans to utilize specific, uniform dispensing techniques, such as weekly, daily, or automated dose dispensing, when dispensing covered Part D drugs to enrollees who reside in a LTC facility in order to reduce waste associated with 30-day fills. Thus, the Congress gave the Secretary authority to regulate with respect to reducing waste of covered Part D drugs in LTC facilities. Moreover, E:\FR\FM\12FER2.SGM 12FER2 Rmajette on DSK2VPTVN1PROD with RULES2 Federal Register / Vol. 80, No. 29 / Thursday, February 12, 2015 / Rules and Regulations this requirement does not dictate any specific dispensing fee amounts or methodologies, but rather prohibits only those dispensing fees that penalize more efficient dispensing and requires that any difference in payment methodology among LTC pharmacies incentivizes more efficient dispensing techniques. For the reasons stated previously, we believe this is consistent with the statutory directive to reduce waste associated with 30-day fills in LTC facilities. Comment: A commenter stated the regulatory text was vague. Response: We disagree. The policy reflected in the preamble and regulatory text is clear—to prohibit the prorated LTC dispensing fees in the Part D market today that are financially penalizing more efficient LTC pharmacies. In addition, we believe the discussion in this preamble, with examples provided, makes clear how sponsors must not penalize more efficient dispensing techniques in LTC facilities by prorating dispensing fees based on days’ supply or quantity dispensed and that any difference in payment methodologies among LTC pharmacies must incentivize more efficient dispensing techniques. We have deliberately struck a balance in drafting the regulatory text to be specific enough to accomplish the policy goal without being so specific as to dictate the particular dispensing fee arrangements that are permissible. Comment: A commenter requested whether this new requirement applies to all payments to LTC pharmacies; whether it applies to all prescriptions in LTC facilities or only to those subject to the short-cycle dispensing methodology; and whether a Part D sponsor must prove to each LTC pharmacy how its payment methodology incentivizes more efficient dispensing techniques. Response: The requirement in this final rule applies to payments to pharmacies related to the dispensing of Part D drugs to residents in LTC facilities, including those Part D drugs that are not subject to the short-cycle dispensing requirement. As noted previously, this rule does not address specific negotiations between Part D sponsors and pharmacies. Comment: One commenter stated that the regulatory text was confusing and contained three negatives. Response: We are moving the proposed language to § 423.154(a)(2) and (3) and revising the regulation text. We believe this will make the regulatory text less confusing. However, because we did not propose to waive this requirement with respect to pharmacies when they dispense Part D drugs to VerDate Sep<11>2014 13:56 Feb 11, 2015 Jkt 235001 residents of intermediate care facilities for the mentally retarded (ICFs/IID) and institutes for mental disease (IMDs) and for I/T/U pharmacies, we are making conforming changes to § 423.154(c) to make clear that the requirements of paragraph (a)(2) and (3) are not waived for with respect to these pharmacies. Comment: A commenter stated that it was unnecessary for CMS to memorialize the fact that the rule applies to contracting intermediaries in addition to Part D sponsors in the regulatory text. Response: We agree. The reference to ‘‘intermediary contracting organizations’’ in the regulatory text is now unnecessary because we are moving the requirement to § 423.154(a)(2) and (3), as noted just previously. Based on all the comments received, we are finalizing our proposal with the changes previously described in this section. Comment: Some commenters supported the removal of the language in § 423,154(e) that CMS believes may have been misinterpreted as requiring the proration of dispensing fee. A few commenters opposed this proposal. One of these commenters that opposed this proposal stated that plans did not interpret the provision as requiring the proration of dispensing fees, but rather as permitting it. Response: Based on the comments received, we are finalizing the removal of this language from the current regulatory text. As noted previously, this provision was intended to address cost sharing for short-cycle dispensing in LTC facilities, but the daily costsharing rate rule at § 423.153(b)(iv)(i) now addresses cost-sharing when less than a month’s supply of a Part D drug is dispensed. Thus, this regulatory text is no longer necessary. Moreover, we believe the comments support our view that the language was confusing. Comment: Several commenters supported CMS’ proposal in principle for an additional waiver from the shortcycle dispensing requirements for certain LTC pharmacies that maintain custody of medications by operating a closed pharmacy within the facility, but these commenters expressed concerns about how the waiver would be implemented. Specifically, these commenters pointed out that there is no current transaction standard that accommodates transmitting a net quantity for payment following the acceptance of a returned medication applied against a quantity dispensed for ingredient cost credit, and that use of an existing transaction to accomplish this would violate HIPAA. These PO 00000 Frm 00023 Fmt 4701 Sfmt 4700 7933 commenters stated that a new HIPAA standard transaction would be required to support a waiver based on return and reuse billing. Response: In the proposed regulation, while we used an industry term of art ‘‘restock and reuse,’’ we did not intend to implicate a billing standard that does not exist. This term, as used in the industry, encompasses a billing system that modifies pharmacy claims as unused medications are returned to stock. We are aware of the current limitations of this particular system. The type of pharmacy that would qualify for the waiver, as we described in the proposed rule, is an institutional, on-site, closed pharmacy, such as a pharmacy in a veteran’s home, which maintains custody of medications within the LTC facility, such that all unused medications that are eligible under applicable law are restocked and reused. In other words, such a pharmacy has such quality control over medications in the LTC facility that it does not have to dispense in 14-day supplies or less in order to reduce waste. Such pharmacies may use postconsumption billing, a reverse and rebill system, or some other billing method to only charge a Part D sponsor for the medications that are actually used. Given the misunderstanding of our proposed additional waiver from the LTC short-cycle dispensing rule, we are not finalizing it as this time. We will consider proposing the waiver again in future rulemaking. Comment: We received no comment on our proposal to delete language in § 423.154(a)(2) to eliminate any confusion about that there is a separate reporting requirement. Response: We are finalizing this deletion, except that we are redesignating the remaining language in (a)(2) as (a)(4) in light of the other changes previously described. Comment: Some commenters requested a delay in the effective date of this requirement until 2016, asserting that the requirement will necessitate significant changes in adjudication and network contracting logic to accommodate the replacement of prorated dispensing fees with standard dispensing fees. One commenter requested clarification of the effective date of this requirement. Response: The effective date of this requirement is January 1, 2016. 6. Medicare Coverage Gap Discount Program and Employer Group Waiver Plans (§ 423.2325) Section 3301 of the Affordable Care Act, codified in section 1860D–43 and 1860D–14A of the Act, established the E:\FR\FM\12FER2.SGM 12FER2 Rmajette on DSK2VPTVN1PROD with RULES2 7934 Federal Register / Vol. 80, No. 29 / Thursday, February 12, 2015 / Rules and Regulations Medicare Coverage Gap Discount Program (Discount Program), beginning in 2011. Under the Discount Program, manufacturer discounts are made available to applicable Medicare beneficiaries receiving applicable covered Part D drugs while in the coverage gap. Section 1860D– 14A(c)(1)(A)(ii) of the Act requires the manufacturer discount to be provided to beneficiaries at the point-of-sale. Employer Group Waiver Plans (EGWPs) are customized employer-offered plans available exclusively to employer/union health plan Part D eligible retirees and/ or their Part D eligible spouse and dependents. Section 423.458(c)(4) requires sponsors offering EGWPs to comply with all Part D requirements unless those requirements have been specifically waived or modified by CMS using our authority under section 1860D–22(b) of the Act. The Affordable Care Act did not exclude EGWP enrollees that otherwise meet the definition of an applicable beneficiary (as defined in § 423.100) from the Discount Program. Therefore, in order for an applicable drug to be covered by EGWPs, it must be covered under a manufacturer agreement, and the manufacturer must pay applicable discounts for applicable beneficiaries as invoiced. Beginning in 2014, all EGWP benefits beyond the parameters of the defined standard benefit will be treated as nonMedicare Other Health Insurance (OHI) that wraps around Part D. We excluded supplemental coverage offered through EGWPs from the definition of Part D supplemental benefits in § 423.100 in our 2012 rulemaking. However, as discussed in section II.E.14. of this final rule, the change was erroneously not included in the CFR. Therefore, we are making a technical change to rectify that problem. The change with respect to EGWPs was made so that the discount amount could be consistently and reliably determined. This was necessary to ensure that we can determine that the discount is always calculated accurately since we do not collect information on all EGWP retiree benefit arrangements to determine actual supplemental benefits. Not only would collecting such information be impractical, but we also believe instituting a requirement to collect the specific information on all such benefits would be so burdensome as to hinder the design of, the offering of, or the enrollment in employer plans. Consequently, the discount calculation is based upon the Part D Defined Standard benefit for all EGWPs beginning in 2014. While we believed that our justification for excluding any VerDate Sep<11>2014 13:56 Feb 11, 2015 Jkt 235001 supplemental benefits offered through EGWPs from Part D benefits clearly indicated that the basic EGWP Part D benefits would be limited to Defined Standard benefit because that is the only way we can determine that the discount is calculated accurately, we took the opportunity to propose this specific requirement in § 423.2325(h)(1) to remove any ambiguity. Comment: Some commenters strongly urged CMS to revise the policy established in our April 2012 rule that considers EGWP plan supplemental benefits to be outside of Part D, and therefore OHI. These commenters stated that treating EGWP benefits as OHI is inconsistent with the statute as it does not, on its face appear to result in direct reductions in beneficiary cost sharing. They state that since many EGWP enrollees do not experience a coverage gap the discounts are not used to offset beneficiary spending in the gap which is the original statutory intent. A few commenters stated that the current policy has led employer groups to migrate from Retiree Drug Subsidy plans to EGWPs which is costly to the taxpayer. Response: We did not propose any changes to our existing policy with respect to EGWP supplemental benefits, and we decline to do so now. For the reasons set forth in our April 2012 rulemaking, we believe our current regulation is consistent with the statute. The purpose of this final rule is solely to clarify that basic EGWP benefits are to be based upon the Defined Standard benefit. After considering the comments received, we are finalizing the portion of the provision which proposed that Part D sponsors offering employer group waiver plans must provide applicable discounts to EGWP plans as determined consistent with the Defined Standard benefit, except we are making a technical change to clarify that applicable discounts are available only to applicable beneficiaries enrolled in the EGWPs. We are not finalizing the proposed requirement that Part D sponsors of EGWPs disclose to each employer group the projected and actual manufacturer discount payments under the Discount Program attributable to the employer group’s enrollees, at least annually or upon request. 7. Transfer of TrOOP Between PDP Sponsors Due to Enrollment Changes During the Coverage Year (§ 423.464) Sections 1860D–23 and 1860D–24 of the Act specify that requirements for Part D sponsor coordination of benefits with State Pharmaceutical Assistance Programs and other plans providing PO 00000 Frm 00024 Fmt 4701 Sfmt 4700 prescription drug coverage, including treatment of expenses incurred by these payers toward a beneficiary’s out-ofpocket (TrOOP) threshold. Part D coordination of benefit requirements are codified at § 423.464, which defines ‘‘other prescription drug coverage’’ for COB purposes to include, among other entities, other Part D plans, and specifies Part D plan requirements for determining when an enrollee has satisfied the out-of-pocket threshold. Related regulations at § 423.104(d), codifying the requirements in section 1860D–2(b) of the Act, require sponsors to track beneficiary TrOOP and gross covered drug costs and correctly apply these costs to the benefit limits to correctly position the beneficiary in the benefit and provide the catastrophic level of coverage at the appropriate time. When a beneficiary transfers enrollment between Part D plans during the coverage year, the enrollee’s gross covered drug costs and TrOOP must be transferred between plans and applied by the subsequent plan in its administration of the Part D benefit. The process for a prior plan to report these TrOOP-related data and for the new plan of record to receive, upload, and use the data position the beneficiary in the correct phase of the benefit was initially manual. In 2009, this process was replaced by an automated process for TrOOP-related data transfer. Our guidance released in 2008 (HPMS memorandum dated October 21, 2008 titled, ‘‘Updated Part D Sponsor Automated TrOOP Balance Transfer Operational Guidance’’) described sponsor implementation of the automated TrOOP balance transfer process and reiterated sponsor requirements for data reporting by the prior plan and use of the data for proper positioning of the beneficiary in the benefit by the current plan. We have continued to specify these requirements in subsequent updated versions of the guidance. To ensure Part D benefits are correctly administered when a beneficiary transfers enrollment during the coverage year, we proposed to codify these requirements in federal regulations. Specifically, we proposed to amend § 423.464(f)(2) by adding a new paragraph (C) requiring Part D sponsors to— • Report benefit accumulator data in real time in accordance with the procedures established by CMS; • Accept in real-time data reported in accordance with CMS-established procedures by any prior plans in which the beneficiary was enrolled, or that paid claims on the beneficiary’s behalf, during the coverage year; and E:\FR\FM\12FER2.SGM 12FER2 Federal Register / Vol. 80, No. 29 / Thursday, February 12, 2015 / Rules and Regulations Rmajette on DSK2VPTVN1PROD with RULES2 • Apply these costs promptly. In our guidance on automated TrOOP balance transfer, we express our expectation that sponsors successfully transfer accumulator data for beneficiaries making enrollment changes during the coverage year in a timely manner 100 percent of the time. Although sponsors may be reporting and accepting these data in accordance with our expectations, we have been informed that some sponsors may not be promptly loading the data received into their systems so it is available for claims processing. As a result, the beneficiary’s previously incurred costs and gross covered drug costs are not considered in the processing of claims received by the new plan sponsor soon after the enrollment change. Comment: One commenter objected to the provision claiming it was vague and ill-defined and requested we include additional detail in lieu of deferring to sub-regulatory guidance. Response: We disagree. The proposed regulatory text specifies the requirements for sponsors to report, accept and apply accumulator data. We believe the details of the transfer process are more appropriately addressed in guidance because they are procedural, and retaining them in guidance will preserve flexibility to adapt these procedures as the need arises. CMS and the industry developed the automated data transfer process in collaboration with National Council for Prescription Drug Programs (NCPDP) and have continued to work collaboratively to refine and improve the process. When a change in the transfer process is agreed upon and substantive requirements are unaffected, use of guidance permits us to issue updated instructions in a timely manner. Comment: Three commenters expressed support for the provision. Response: We appreciate the support for this provision and are adopting this provision as proposed with a minor change. That is, we are redesignating the current paragraph (B) in § 423.464(f)(2)(i)(B) as (C) and adding this provision as paragraph (B) to more logically sequence the requirements. 8. Expand Quality Improvement Program Regulations (§ 422.152) Section 1852(e) of the Act requires MA organizations to have an ongoing quality improvement program for the purpose of improving the quality of care provided to enrollees. We proposed revising paragraph (a) of § 422.152 in order to codify our recent expansion of the quality improvement program policies and revising paragraph VerDate Sep<11>2014 13:56 Feb 11, 2015 Jkt 235001 (c) of § 422.152 to codify our recently expanded chronic care improvement program policies. The proposed revisions to these paragraphs more accurately reflect current quality care improvement program policies and requirements. Additionally, paragraph (g) of § 422.152 lists quality improvement program requirements that are specific to special needs plans (SNPs). We proposed revising paragraph (g) to clarify that the requirements listed there are in addition to program requirements listed in paragraphs (a) and (f) of § 422.152 and are not instead of the regular quality improvement program requirements. Finally, we proposed to delete paragraph (h)(2) of § 422.152 as it pertains to contract year 2010 and is no longer relevant. We received the following comments and our responses are as follows: Comment: We received several comments that supported § 422.152 overall and CMS efforts to implement policies that ensure high quality health care for enrollees. Response: We thank the commenters for their support. Comment: One commenter requested clarification as to what exactly has changed under § 422.152(c), ‘‘Chronic care improvement program requirements,’’ as it appears to expand only one requirement and reorder the others. Response: Our proposal, and the finalized rule here, revises paragraphs (c)(1)(ii) to add a requirement for the MA organization to evaluate participant outcomes (such as changes in health status), and add paragraphs (c)(1)(iii), (c)(1)(iv), and (c)(2). Paragraph (c)(1)(iii) requires performance assessments that use quality indicators that are objective, clearly and unambiguously defined, and based on current clinical knowledge or research, and (c)(1)(iv) requires systematic and ongoing follow-up on the effects of the chronic care improvement program. Finally, new paragraph (c)(2) requires that the organization report to CMS on the results of each chronic care program. The proposed changes also included reorganization of the section to parallel requirements in paragraph (d), ‘‘Quality improvement projects.’’ Comment: One commenter requested whether recent changes to the SNP Model of Care (MOC) requirements would be the vehicle for evaluating compliance in relation to the effectiveness of a plan’s Model of Care. Response: This comment is outside the scope of the proposed changes to this provision because we did not PO 00000 Frm 00025 Fmt 4701 Sfmt 4700 7935 propose, and are not finalizing in this rule, any changes to the SNP MOC requirements. Information about the MOC and associated requirements can be found in Chapter 5 of the Medicare Managed Care Manual. Comment: One commenter requested clarification on the additional quality improvement program requirements for SNP plans. Comment: The changes made to this provision do not create any new quality improvement program requirements for SNPs. The changes are to clarify the requirement that SNPs must comply with the requirements under paragraph (g) as well as those in paragraphs (a) through (f). The SNP-specific requirements in paragraph (g) do not replace the requirements in paragraphs (a) through (f), which apply to all plans, including SNPs. Comment: A commenter requested whether Quality Improvement Project and Chronic Care Improvement Program results will be included in Star Rating measurements in the near future. Response: This comment is outside the scope of the proposed changes to this provision as we did not propose, and are not finalizing in this rule, any Star Rating measures in connection with the quality improvement program requirement. Comment: A commenter expressed opposition to expanded quality improvement requirements as a whole because MA organizations respond to such requirements by setting unrealistic targets for physicians. The commenter added that compliance must often be at 100 percent for a physician to qualify for a payment incentive. Response: Our proposal codifies our recent expansion of the quality improvement program policies and revises paragraph (c) of § 422.152 to codify our recently expanded chronic care improvement program policies. The proposed revisions to these paragraphs more accurately reflect current quality care improvement program policies and requirements that are already in practice. While we understand the commenter’s concern, we do not agree that codifying requirements that are already in practice will place any further burden on MA organizations and thus tangentially increase the burden on physicians. Additionally, while we understand that our recent expansion of our quality improvement program policies may have impacted MA organizations and, in turn, providers, the requirements do not specify any provider requirements or address payment incentives of any type. MA organizations and providers remain free to contract and make agreements on E:\FR\FM\12FER2.SGM 12FER2 7936 Federal Register / Vol. 80, No. 29 / Thursday, February 12, 2015 / Rules and Regulations these topics without CMS interference, thus MA organizations have flexibility when shaping their provider processes, policies, and overall framework. Comment: A commenter stated that CMS’s guidance with respect to Quality Improvement Projects and Chronic Care Improvement Programs for SNP plans has been unclear. Response: Our proposal, and this final rule, revises paragraph (g) to clarify that the requirements listed there are in addition to program requirements listed in paragraphs (a) and (f) of § 422.152 and are not in lieu of the quality improvement program requirements presented in paragraphs (a) and (f). We believe the revisions to the regulation clarify that Quality Improvement Project and Chronic Care Improvement Program requirements are the same for SNP and non-SNP plans. After consideration of the public comments received, we are finalizing the proposed codification and clarification of our Quality Improvement Program regulation at § 422.152 without modification. Rmajette on DSK2VPTVN1PROD with RULES2 B. Improving Payment Accuracy 1. Determination of Payments (§ 423.329) In the January 2014 proposed rule, we proposed a technical change to § 423.329(d) to correctly describe the low-income cost-sharing subsidy payment amount as it is intended by statute and has been implemented and described in interpretive guidance by CMS. That amount had been defined in the regulation as the amount described in § 423.782. However, § 423.782 refers to the cost sharing paid by the beneficiary, not the cost-sharing subsidy paid on behalf of the low-income subsidy-eligible individual. The lowincome cost-sharing subsidy amount is correctly described in Chapter 13 of our Medicare Prescription Drug Benefit Manual, Premium and Cost Sharing Subsidies for Low Income Individuals ((Rev. 13, 07–29–11), at https:// www.cms.gov/Regulations-andGuidance/Guidance/Transmittals/ Downloads/Chapter13.pdf). As we stated in the proposed rule, under the basic benefit defined at § 423.100, the low-income cost-sharing subsidy payment amount is the difference between the Part D cost sharing for a non-LIS beneficiary under the Part D plan and the statutory cost-sharing for the LIS-eligible beneficiary. Under an enhanced alternative plan described at § 423.104(f), the cost-sharing subsidy applies to the beneficiary liability after the plan’s supplemental benefit is applied. We proposed to amend VerDate Sep<11>2014 13:56 Feb 11, 2015 Jkt 235001 § 423.329(d) consistent with this guidance. We also explained in our proposed rule that pursuant to § 423.2305, any coverage or financial assistance other than basic prescription drug coverage, as defined in § 423.100, offered by an employer group health or waiver plan is considered ‘‘other health or prescription drug coverage.’’ This definition applied to all of Medicare Part D. (See the April 12, 2012 final rule titled ‘‘Medicare Program; Changes to the Medicare Advantage and the Medicare Prescription Drug Benefit Programs for Contract Year 2013 and Other Changes’’ (77 FR 22082)). Therefore, the subsidy amount received by an employer group health or waiver plan is the subsidy amount received by a Part D plan offering defined standard coverage, as defined in § 423.100. Based on the preceding, we proposed to amend § 423.329(d) by deleting the reference to §§ 423.782 and amending 423.329(d) to define the low-income cost-sharing subsidy payment amount on behalf of a low-income subsidyeligible individual enrolled in a Part D plan for a coverage year as the difference between the cost sharing for a non low-income subsidy eligible beneficiary under the Part D plan and the statutory cost sharing for a lowincome subsidy-eligible beneficiary. In order to clarify that enhanced alternative benefits apply prior to determining the low-income costsharing subsidy payment amount, we clarify in this preamble and in the final regulation text that the low-income costsharing subsidy payment amount is the difference between the cost sharing (not the ‘‘Part D cost sharing,’’ as proposed) for a non-LIS beneficiary under the Part D plan and the statutory cost sharing for the LIS-eligible beneficiary. We received no comments on this proposal and are finalizing with a minor modification, as discussed previously. 2. Reopening (§ 423.346) We proposed to amend the reopening provisions such that we may perform one reopening within 5 years after the date of the notice of the initial payment determination to the Part D sponsors. We also proposed to amend the provision to accommodate reopening the Coverage Gap Discount Reconciliation described at § 423.2320(b). As we stated in the proposed rule, we had originally patterned the reopening provisions after the Medicare claims reopening regulations found in part 405, but now with a better understanding of the need for reopening a payment determination, we proposed to modify PO 00000 Frm 00026 Fmt 4701 Sfmt 4700 our regulation at § 423.346 to align with our experience. We stated that our experience indicates to us that we will likely have to perform a reopening of the initial payment determination for every contract year, and we proposed to remove the current timeframes for a reopening described in § 423.346(a)(1) through (a)(3), remove paragraph (b) describing ‘‘good cause’’ referred to in paragraph (a)(2), modify paragraph (c) to eliminate the reference to ‘‘good cause,’’ and amend paragraph (a) such that CMS may reopen one time within 5-years of notice of the initial payment determination. As stated in the proposed rule, we believe that data stability will occur within 5 years of the notice of the initial payment determination. Within 5-years of the notice of the initial payment determination, additional prescription drug event (PDE) data or PDE adjustments associated with coordination of benefits will be submitted by Part D sponsors consistent with the timeframe described at § 423.466(b). We know that audits and other post reconciliation oversight activity often take place more than 5years from notice of the initial payment determination. However, in light of the overpayment provision at section 6402(a) of the Affordable Care Act, which established section 1128J(d) of the Act and that we proposed to codify at § 423.360, we stated that we do not believe that it is necessary to reopen a payment reconciliation after that 5-year period, and that we believe it is not necessary to reopen a reconsidered payment determination. Therefore, we proposed to amend § 423.346(a) such that we will only reopen the initial payment determination and will not reopen a reconsidered payment determination. With respect to determining whether to reopen a contract year, we stated that we will consider a number of issues, including, but not limited to, whether the contract has terminated and received a final settlement. We stated that we will not approve a request to reopen for a contract that has terminated and received a final settlement. We also stated that when we performed a reopening on our own initiative, contracts that have been terminated and settled will not be included in the reopening. In addition, we proposed to establish a reopening provision for the Coverage Gap Discount Reconciliation for the same reasons and under the same authority that we established a reopening provision for the Part D payment reconciliation process described in our January 28, 2005 final E:\FR\FM\12FER2.SGM 12FER2 Rmajette on DSK2VPTVN1PROD with RULES2 Federal Register / Vol. 80, No. 29 / Thursday, February 12, 2015 / Rules and Regulations rule titled, ‘‘Medicare Program; Medicare Prescription Drug Benefit’’ (70 FR 4316). We noted that in a Health Plan Management System (HPMS) memorandum dated April 30, 2010, we stated that the final reconciled discount program payments are subject to the reopening provision in § 423.346. Due to the invoicing process that continues to occur after the reconciliation process, we do not anticipate the need to reopen the Coverage Gap Discount Reconciliation. However, we want to leave open the option to reopen if unforeseen events result in underpayments or overpayments to Part D sponsors. Therefore, we proposed to amend § 423.346 to accommodate reopening a Coverage Gap Discount Reconciliation. Based on the preceding, we proposed to revise § 423.346 by removing the phrase ‘‘or reconsidered’’ from paragraph (a), amending paragraph (a) to account for the proposed timing of the Part D reopening, removing paragraphs (a)(1) through (3) and (b)(1) through (3); adding a new paragraph (b) to accommodate a Coverage Gap Discount Reconciliation reopening; and revising paragraph (c) to eliminate the reference to ‘‘good cause.’’ We received the following comments and our responses follow: Comment: A commenter stated that the past 6 years indicate that unforeseen issues arise and require multiple reopenings to address them properly. A commenter recommended that CMS relax the proposed regulation and not unnecessarily restrict CMS’s ability to conduct more than one reopening. A commenter supported the goal of one reopening per contract year, but recommended that CMS set a threshold, such as a dollar amount, to restrict reopenings while preserving an appropriate amount of flexibility in the regulation to accommodate circumstances with a degree of materiality. Response: We agree with the commenter that multiple reopenings may be necessary. We know from experience that there are unforeseen circumstances that require us to do multiple global or targeted reopenings for a contract year. Target reopenings include reopening for a specific plan type (for example, PACE organizations) or for specific contracts or parent organizations. For this reason and also due to potential conflicts between the 5year time frame of this proposed provision and the 6-year look-back period associated with the overpayment provision recently codified at § 423.360 (see 79 FR 29847), we are not finalizing the proposal to reopen one time within VerDate Sep<11>2014 13:56 Feb 11, 2015 Jkt 235001 5 years after the date of the notice of the initial determination to the Part D sponsors. Our proposal to do one reopening within 5 years after the date of the notice of the initial determination may create difficulties for Part D sponsors to return overpayments that they identify and are required to report and return under § 423.360. Section 423.360 creates a 6-year look-back period at § 423.360(f). In accordance with § 423.360(f), a Part D sponsor must report and return any overpayment identified within the 6 most recent completed payment years. In our May 23, 2014 final rule, (79 FR 29843), we stated that CMS would recover plan-identified overpayment amounts through routine processing. For Part D, that means that if an overpayment is discovered, the Part D sponsor may fulfill its obligation to return the overpayment by requesting a reopening and submitting corrected data prior to CMS conducting the reopening. (For more information, see 79 FR 29923). To the extent possible, we want to allow for overpayments to be recovered through routine payment processes through the entire 6-year lookback period. The decision not to finalize our proposal to conduct one reopening within a 5-year period gives the Part D sponsor more flexibility to return overpayments and CMS more flexibility to collect overpayments through routine payment processes. Therefore, we are not finalizing the proposed provision that CMS will reopen one time within 5 years after the date of the notice of the initial determination to the Part D sponsors. We note that we agree with the commenter that making the decision whether to reopen could be based on a dollar amount threshold. We currently consider several factors, including dollar amount, to determine whether to do a reopening. However, the decision of whether or not to do a reopening beyond the initial global reopening will be decided based on factors specific to the circumstance. For that reason, we will not codify a threshold or any other list of factors that would give rise to multiple reopenings. Comment: A few commenters disagreed with our approach to do one global reopening. A commenter stated that unfocused reopenings would place a great burden on Part D sponsors, particularly when looking back as much as 5 years, and recommended that the current rule, requiring ‘‘good cause’’ for a reopening after 1 year after the final payment determination, remain in place. A commenter also considered the possibility of extending the timeframe PO 00000 Frm 00027 Fmt 4701 Sfmt 4700 7937 beyond the current 4 years to 5 years for reopening with cause. Response: Although we are not finalizing the proposed provision that we will reopen one time within 5 years after the date of the notice of the initial determination to the Part D sponsors, we disagree with the commenter’s statement that unfocused reopenings will place a great burden on Part D sponsors. We conduct reopenings after we see stability in the PDE and DIR data. We track the number of PDEs that we receive for each contract year on a weekly basis. We know that the Part D sponsors and their contracted pharmacy benefit managers (PBMs) submit significant amounts of data after the Part D payment reconciliation cut-off date. The data continues to be submitted well after 1 year of the notice of the initial payment determination. Given the volume of new data that we receive after the notice of the initial payment determination, we believe that it is necessary to conduct at least 1 global reopening for every contract year in order to accurately reconcile the prospective payment made to Part D sponsors with the corresponding actual costs reported by the Part D sponsor on the PDEs. In addition, and subsequent to our decision not to finalize the proposal that CMS perform one reopening within 5 year of the notice of the initial payment determination, we are not finalizing our proposal to remove the current timeframes for a reopening described in § 423.346 (a)(1) through (a)(3), remove paragraph (b) describing good cause referred to in paragraph (a)(2), or modify paragraph (c) to eliminate the reference to ‘‘good cause.’’ In other words, Part D plan payment reopenings will continue to be conducted as described at the current regulation at § 423.346. Comment: A commenter stated that experience would suggest that over the years since the Part D program’s inception, we have all improved in our efforts at the reconciliation and reopening of the Part D financial books, and therefore, encouraged CMS to enforce a shorter reopening timeframe after plan year initial closure. Specifically, the commenter recommended that CMS decrease the amount of time that plan years remain not finally reconciled to 4 years, not 5 years. This commenter encouraged a shorter time frame than 5 years, because from financial and compliance perspectives, this commenter thought that it would be beneficial to have a true final ‘‘closure’’ of the plan year earlier rather than later, to reduce uncertainty and risk. E:\FR\FM\12FER2.SGM 12FER2 Rmajette on DSK2VPTVN1PROD with RULES2 7938 Federal Register / Vol. 80, No. 29 / Thursday, February 12, 2015 / Rules and Regulations Response: We agree with the commenter that experience suggests that we have all improved our efforts at reconciliations and reopenings. We are also sympathetic to the Part D sponsors’ desires to ‘‘close’’ a plan year. However, we are not finalizing the proposal that CMS will reopen one time within 5 years after the date of the notice of the initial determination to the Part D sponsors. As previously stated, we believe that the proposal, if finalized, may create difficulties for Part D sponsors to return overpayments that they identify and are required to report and return under § 423.360. Comment: A commenter requested that CMS consider setting a time period for when global reopenings occur, so that the industry has some clarity and predictability around timing of the reopenings. This commenter thought that knowing when a reopening is expected would make planning for Part D sponsors and CMS much easier and more efficient. Response: Although we are not finalizing the proposal to reopen one time within 5 years after the date of the notice of the initial payment determination to the Part D sponsors, we agree with the commenter that setting a time period for when global reopenings occur would provide clarity and predictability around timing of the reopenings. As our experience and efficiencies improve, we expect that the reopenings will fall into a predictable, yearly schedule. Based upon recent historical experience, we anticipate beginning the global reopening process for a benefit year 4 years after releasing the initial reconciliation reports. We, at our discretion, may conduct reopenings after this time to rectify overpayments or unexpected issues resulting from the initial reopening. After consideration of the public comments we received, we are not finalizing the proposal that we will reopen one time within 5 years after the date of the notice of the initial payment determination to the Part D sponsors. Consequently, we are not finalizing our proposal to remove the current timeframes for a reopening described in § 423.346 (a)(1) through (a)(3), remove paragraphs (b) describing good cause referred to in paragraph (a)(2), or modify paragraph (c) to eliminate the reference to ‘‘good cause.’’ We did not receive specific comments on our proposal to modify § 423.346 to accommodate the Coverage Gap Discount Reconciliation. We proposed that, similar to the Part D plan payment reopening, the reopening for the Coverage Gap Discount would be conducted one time in a 5-year period. VerDate Sep<11>2014 13:56 Feb 11, 2015 Jkt 235001 For the same reasons previously stated for the Part D plan payment reopening, we are not finalizing that the Coverage Gap Discount reopening be conducted once in a 5-year period. However, consistent with that proposal, we are incorporating the Coverage Gap Discount reopening into the reopening process described at § 423.346. Therefore, we finalize the Coverage Gap Discount Reconciliation reopening by modifying § 423.346(a) by adding the phrase ‘‘or the Coverage Gap Discount Reconciliation (as described at § 423.2320(b))’’ to the end of the introductory paragraph. 3. Payment Appeals (§ 423.350) In our proposed rule, we proposed to revise § 423.350 to accommodate a Coverage Gap Discount Reconciliation appeals process under the same authority with which we established the Part D payment appeals process under section 1860D–15(d)(1) of the Act. Consistent with the Part D payment appeals process currently described at § 423.350, the proposed changes establish an appeals process where the final reconciliation of the interim Coverage Gap Discount Program (CGDP) payments may be subject to appeal. Consistent with the Part D payment appeals process, we also proposed to amend § 423.350(a)(2) to include information that is submitted and reconciled under § 423.2320(b) is final and may not be appealed nor may the appeals process be used to submit new information after the submission of information necessary to determine retroactive adjustments and reconciliations. Also consistent with the Part D payment appeals process, we proposed that the request for a reconsideration of the Coverage Gap Discount Reconciliation must be filed within 15 days from the date of the final payment, which is the date of the final reconciled payment made under § 423.2320(b). Based on the preceding, we proposed to revise § 423.350 by adding a new paragraph (a)(1)(v) to allow for an appeal of a reconciled coverage gap payment under § 423.2320(b), by revising paragraph (a)(2) to indicate that the payment information submitted to CMS and reconciled under § 423.2320(b) is final and may not be appealed, and by adding a new paragraph (b)(1)(iv) to define the timeframe for appealing the final reconciled payment under § 423.2320(b). We received the following comment and our response follows: Comment: A few commenters requested that CMS extend the proposed PO 00000 Frm 00028 Fmt 4701 Sfmt 4700 15-day deadline to file a request for reconsideration to 30 days due to the complexity of the CGDP. A commenter noted that 30 days would be more consistent with the existing plan-to-plan process. Another commenter stated that the15-day deadline would result in more ‘‘defensive’’ appeal from plans attempting to protect their interest in payments prior to the expiration of the appeal period, even where the subject plan may not yet, at this time of appeal, conclude that any payment discrepancies were in fact the result of methodological errors. A commenter believed that the proposed 15-day deadline would increase the administrative burden for CMS in processing unnecessary appeals and impair the efficient use of plan resources, which raises overall plan administrative costs. Response: We decline to modify § 423.350(b)(1) to extend the proposed 15-day deadline to file a request for reconsideration to 30 days for the CGDP. We believe that some commenters may think that the appeals process under § 423.350 is broader than it actually is. Section 423.350 describes the appeals process for the Part D payment reconciliation and, as we proposed, the Coverage Gap Discount Reconciliation. An appeal can be filed if a Part D sponsor believes that CMS did not correctly apply its stated payment methodology. An appeal for any other reason will be dismissed. If a sponsor identifies a data discrepancy, the sponsor would not file an appeal but would file a reopening request under § 423.346. The Part D sponsors are in possession of the same data CMS uses to determine the Coverage Gap Discount Reconciliation. The Part D sponsors will have the data in advance of the reconciliation and can validate the data prior to the reconciliation. Therefore, we believe that the proposed 15-day deadline is an adequate time for a Part D sponsor to determine whether CMS has correctly applied its stated payment methodology and, if necessary, file a request for reconsideration. After consideration of the public comments we received, we are finalizing § 423.350 as proposed. 4. Payment Processes for Part D Sponsors (§ 423.2320) In our proposed rule, we proposed to amend § 423.2320 such that we will assume financial liability for the applicable discount by covering the costs of the quarterly invoices that go unpaid by a bankrupt manufacturer at the time of the Coverage Gap Discount Reconciliation described at E:\FR\FM\12FER2.SGM 12FER2 Rmajette on DSK2VPTVN1PROD with RULES2 Federal Register / Vol. 80, No. 29 / Thursday, February 12, 2015 / Rules and Regulations § 423.2320(b). This will ensure that the Part D sponsors have the funds available to advance the gap discounts at the point of sale, as required under section 1860D–14A(c)(1)(A)(ii) of the Act. We also stated that we would file a proof of claim with the bankruptcy court to recover costs from the bankrupt manufacturer. We proposed that we would implement our policy by adjusting the Coverage Gap Discount Reconciliation for manufacturer discount amounts as they are reported on PDEs submitted by the submission deadline for the Part D reconciliation. Based on the preceding, we proposed to add a new paragraph (c) to § 423.2320 to describe a process for accounting for quarterly invoiced amounts that go unpaid by a bankrupt manufacturer. We received the following comment and our response follows: Comment: Commenters strongly supported our proposal. One commenter requested that CMS expand upon the section to include scenarios other than bankruptcy. Response: We appreciate the support expressed for our proposal. However, we will not be expanding § 423.2320(c) to include scenarios other than bankruptcy. We will cover the costs of unpaid quarterly invoices only in the event that a manufacturer becomes bankrupt and fails to pay the invoices. As stated in the proposed rule, if a manufacturer becomes bankrupt, we are concerned that a court will modify or reduce the amount of the civil money penalties (CMPs), rendering the CMPs ineffective for covering the cost of the invoices and leaving the Part D sponsor in the position of having to cover the costs of the gap discount. In all other scenarios, CMPs, described at § 423.2340, will cover the cost of the unpaid invoices. In light of the comment that we received recommending that we expand our proposal to include scenarios other than bankruptcy, we clarify that this provision will apply only to adjust for quarterly invoices that go unpaid after the manufacturer has declared bankruptcy. As previously stated, in all other cases, CMPs will cover the costs of unpaid quarterly invoices. Also, consistent with our proposal to adjust the Coverage Gap Discount Reconciliation amount of each of the affected Part D sponsors to account for the total unpaid quarterly invoiced amount owed to each of the Part D sponsors in the contract year being reconciled, we clarify in the regulation that we will only adjust the Coverage Gap Discount Reconciliation amount for unpaid quarterly invoices used for that particular Coverage Gap Reconciliation. VerDate Sep<11>2014 13:56 Feb 11, 2015 Jkt 235001 Use of a particular set of quarterly invoices in a Coverage Gap Discount Reconciliation is consistent with our current process, and we are not modifying that process for the purposes of this provision. Therefore, we clarify that we will not adjust the Coverage Gap Reconciliation amount for unpaid quarterly invoices that are not specifically used in that contract year’s Coverage Gap Reconciliation. After consideration of the public comments we received, we are finalizing § 423.2320(c) as proposed, with the minor clarifications discussed. 5. Risk Adjustment Data Requirements (§ 422.310) In addition to the provisions addressed in the May 23, 2014 final rule (79 FR 29847),8 we proposed to align § 422.310 regarding submission of risk adjustment data with § 422.326 by making a change in paragraph (g); specifically, we proposed the deletion of the January 31 deadline in paragraph (g)(2)(ii) and replacing it with the statement that CMS will announce the deadline by which final risk adjustment data must be submitted to CMS or its contractor. This would allow the risk adjustment data submission deadline to also function as the Part C applicable reconciliation date for purposes of § 422.326 on overpayment rules because § 422.326(a) refers to the annual final deadline for risk adjustment data submission as a date ‘‘announced by CMS each year.’’ In response to the January 10, 2014 proposed rule, we received approximately six pieces of correspondence from organizations and individuals regarding this specific proposal to replace the January 31 deadline with a date announced annually by CMS. We received the following public comments and our responses follow. Comment: A few commenters supported CMS’ proposal to remove the current date of January 31 as the annual final risk adjustment data submission deadline and replace it with the provision that CMS will announce the deadline annually, with the proviso that CMS’ timing of this annual deadline always allow sufficient opportunity for organizations to make final data submissions. Several other commenters stated their concern about this proposed 8 We proposed three amendments to § 422.310 in our January 10, 2014 proposed rule. In the May 23, 2014 final rule, we finalized one proposal, stated that we would not finalize the second proposal, and would finalize the third proposal at a later time. (See the May 23, 2014 final rule (79 FR 29848, 29925, and 29926). The third proposal is addressed in this final rule. PO 00000 Frm 00029 Fmt 4701 Sfmt 4700 7939 change in deadline, including a concern that CMS might announce a deadline earlier than January 31 in some years. These commenters requested that CMS clarify that the annual deadline would never be before January 31, and a few commenters suggested that the regulation state that the deadline is January 31 but may be extended. Finally, a few commenters requested that CMS not change the January 31 date to a floating date, in order to allow operational stability. Response: Our goal for eliminating January 31 as the final risk adjustment data submission deadline was to align this deadline at § 422.310(g)(2)(ii) with the overpayment provisions in § 422.326, so that the final risk adjustment data submission deadline would also function as the Part C applicable reconciliation date set forth in the overpayment provisions. As noted in the proposed rule, in order to align with the overpayment provisions, each year we expect to announce a date that would accommodate the current subregulatory guidance that MA organizations review the monthly enrollment and payment reports they receive from CMS within 45 days of the availability of the reports. We make these reports available to MA organizations each month according to an operational schedule that we release each year. Therefore, we expect to announce a final risk adjustment data submission deadline that falls on or just after the conclusion of this 45-day period for the January payment, which would be about 6 weeks after the end of the payment year, and no earlier than the current January 31 deadline. We do not expect the date of the annual final risk adjustment data submission deadline to vary much from year to year but we believe that providing flexibility in the regulation text is necessary to accommodate the operational routines of our systems. In response to comments, we are finalizing our provision at § 422.310(g)(ii) with modification, stating that the final risk adjustment data submission deadline will be announced by CMS each year and will be no earlier than January 31. C. Strengthening Beneficiary Protections 1. MA–PD Coordination Requirements for Drugs Covered Under Parts A, B, and D (§ 422.112) Under § 422.112(b) of the MA program regulations, coordinated care plans must ensure continuity of care and integration of services through arrangements with contracted providers. We believe that an important aspect of E:\FR\FM\12FER2.SGM 12FER2 Rmajette on DSK2VPTVN1PROD with RULES2 7940 Federal Register / Vol. 80, No. 29 / Thursday, February 12, 2015 / Rules and Regulations this coordination is ensuring that all needed services, including drug therapies, are provided in a timely manner. Certain drug classes, including certain infusion agents, oral anticancer therapies, oral anti-emetics, immunosuppressants, and injectables, may be covered by Part D only when coverage under Parts A or B is not available. Because coverage of these drugs cannot generally be determined based solely on the drug, plan formularies often apply prior authorization criteria before claims can be paid at the point-of-sale (POS). Additionally, when an MA–PD plan issues an adverse Part D coverage determination because they have determined the drug is covered under Parts A or B, we expect MA–PD plans to ensure the drug is provided under the Parts A and B basic benefit. In the January 2014 proposed rule, we proposed to add a new paragraph (b)(7)(i) to § 422.112 to require MA–PDs to establish and maintain a process to ensure that appropriate payment is assigned at the POS. In the preamble, we characterized this as a proposal to require MA–PDs to establish adequate messaging and processing standards with network pharmacies to achieve this goal. We also proposed to add a new paragraph (b)(7)(ii) to § 422.112 to require that MA–PD plans issue the determination and authorize or provide the benefit under the applicable part (A, B or D)—which would require the MA– PD plan to proactively coordinate their enrollees’ prescription drug coverage under Parts A, B and D—in order to ensure that enrollees receive Medicare covered prescription drugs as expeditiously as the enrollee’s health condition requires. We stated in the preamble that if a denial under Part D is based on the existence of coverage under Parts A or B, the MA–PD plan should authorize or provide the drug under that other benefit without requiring the enrollee to make a subsequent request for coverage under that other benefit. Such determinations about the coverage of the drug would have to be provided in accordance with part 422, subpart M and part 423, subpart M, when a party requests a coverage determination. We received the following comments on this proposal and our responses follow: Comment: Beneficiary advocacy groups, some health plans, and pharmacy groups expressed their support for our proposal to strengthen coordination of benefit requirements applicable to MA–PD plans. Those commenters believe that requiring more VerDate Sep<11>2014 13:56 Feb 11, 2015 Jkt 235001 appropriate messaging at the POS would decrease enrollees’ confusion and serve to improve coordination of benefits. One commenter urged CMS to adopt a policy to treat presentation of a prescription at the pharmacy counter by an enrollee as a request for a Part D coverage determination and the response from the plan as an initial coverage determination, giving the enrollee access to the appeals process. The commenter stated it is especially important for claims rejected at the POS under Part D because coverage may be available under Part A or Part B from the same MA entity, to be treated as a request for a coverage determination to avoid delays in access. Another commenter stated that CMS’ longstanding policy that presentation of a prescription at the pharmacy counter is not considered a request for a coverage determination may seem like CMS is requiring the enrollee to request an initial coverage determination twice, contrary to our statement in the proposed rule that enrollees should not have to make an initial request more than once. Furthermore, the comment states that many, if not most, plans do not choose to treat presentation of a prescription as a request for a coverage determination because the pharmacy is not a representative of the plan trained to accept such requests on the plan’s behalf, including collecting all the necessary information from the enrollee, conveying it to the plan within the required timeframe, and documenting its activities in this regard. Response: We appreciate the commenters’ support for our proposal, but would like to clarify that we are not requiring MA–PDs to pay at the POS for all drugs that might be covered under Parts A, B or D in all circumstances, nor are we requiring plans to treat a POS claim transaction as a request for a coverage determination. As we have stated since the inception of the Part D program, neither the presentation of a prescription at the pharmacy, nor a POS claim transaction constitutes a coverage determination or a request for a coverage determination by the plan. If a rejected claim cannot be resolved at the POS, the Part D plan is required to transmit a code to the network pharmacy instructing the pharmacy to provide the enrollee with the standardized pharmacy notice that advises the enrollee of the right to request a coverage determination from the plan. A coverage determination request must be made directly to the Part D plan by the enrollee, the enrollee’s representative, or the prescriber. Pharmacy staff does not have all of the information necessary to make PO 00000 Frm 00030 Fmt 4701 Sfmt 4700 a coverage determination on behalf of the plan. Comment: A commenter requested that CMS clarify that it does not prevent pharmacies from accessing readily available information to assist with appropriate payment determinations at the POS. Response: We would like to clarify that we do not prohibit pharmacies from using or transmitting to the MA–PD plan readily available information for purposes of determining appropriate payment at POS. This final rule does not change the guidance contained at section 20.2.2 of Chapter 6 of the Medicare Prescription Drug Benefit Manual, (Rev 10, 2–19–10), with respect to readily available information accessed by the pharmacy. The MA–PD plan will have met appropriate due diligence standards under Part D and the regulations implemented via this final rule without further contacting a physician if necessary and sufficient information is provided on the prescription, and the contracted pharmacy is able to communicate this information to the sponsor to assist in assigning appropriate payment at the POS. Comment: A few commenters requested that CMS extend this proposal to out-of-network pharmacies. Response: We disagree with these commenters. Plans do not have an established relationship with out of network pharmacies and, therefore, applying this proposal to them would be impractical. Comment: Most commenters expressed strong support regarding CMS’ proposal to coordinate Parts A, B, and D drug coverage during the coverage determination process. Response: We thank commenters for their support. We will continue to work with stakeholders to explore program enhancements that may be more uniquely suited for plans that offer both Parts A, B and D benefits. We are exploring the possibility for future subregulatory guidance on this topic. Comment: Several commenters suggested that CMS work with the Congress to simplify Medicare drug coverage by establishing clearer and simpler rules such as covering all prescription drugs under Part D instead of having coverage also under Parts A and B. Furthermore, a commenter urged CMS to consider using its regulatory authority to achieve some simplification by, for example, covering exclusively under Part D all drugs that are currently covered under Part D in the vast majority of cases. Response: We appreciate commenters’ desire for simpler coverage policies for E:\FR\FM\12FER2.SGM 12FER2 Rmajette on DSK2VPTVN1PROD with RULES2 Federal Register / Vol. 80, No. 29 / Thursday, February 12, 2015 / Rules and Regulations Medicare-covered prescription drugs. However, as recognized in the comments, statutory changes would be needed to simplify coverage and payment rules, which is outside the scope of this rulemaking. We will evaluate what appropriate simplifications we may be able to make using current regulatory authority. Comment: Many commenters stated that although they are supportive of CMS’ intention to ensure that beneficiaries are able to obtain their prescriptions without the inconvenience and delays that are due to differences in the coverage rules for drugs under Parts A, B, and D, there are going to be circumstances that require the enrollee or someone on the enrollee’s behalf to request a coverage determination from the MA–PD. They suggested that CMS revise the proposed rule language to recognize that ‘‘timely’’ adjudication might not, and often cannot, occur at the POS because information that is essential to determining whether a drug is covered under Parts A or B often is not available at the POS and must be obtained from the prescriber and sometimes an organization determination also is required from the MA–PD. Pharmacy groups say they follow up with prescribers and MA– PDs, but delays are inevitable when those steps have to be taken. Response: As indicated in the proposed rule, our intention is to add proposed § 422.112(b)(7)(i) to our regulatory provisions in an effort to improve at the POS the care continuity and coordination between Part D drug benefits and Parts A and B drug benefits administered by the MA–PD, not to establish a requirement that pharmacies be responsible for making coverage determinations. Although plans have the discretion to treat POS transactions as coverage determinations, it is our understanding that network pharmacies do not receive all of the information needed to act on behalf of hundreds of Part D sponsors in making robust coverage determinations and generating the required denial notice with detailed formulary information and appeal rights. Additionally, the current HIPAA transaction standards do not support the type and volume of information that would be necessary to treat POS rejections as adverse coverage determinations. We realize that there will be circumstances in which the information necessary to determine whether a drug that is not covered under Part D would be covered under Parts A or B will not be available at the POS. In those cases, enrollees will receive the standardized pharmacy notice that explains the right VerDate Sep<11>2014 13:56 Feb 11, 2015 Jkt 235001 to contact the plan for a coverage determination. However, we do believe that MA–PDs, by working with their network pharmacies and prescribers, are capable of a high degree of coordination and continuity. Through those collaborative efforts, the network pharmacy can often acquire information needed to obtain an edit override from the plan or otherwise ensure that the claim can be processed and paid at the POS. Comment: Some commenters suggested that CMS adopt use of specific prior authorization codes, increased interoperability across electronic systems, and changes to Medicare’s Common Working File (CWF) in order to make drug coverage determinations possible at the POS and decrease billing errors. Response: We appreciate those suggestions and expect that MA–PDs and their network pharmacies will explore enhancements to their systems to improve communications and otherwise streamline their processes in order to ensure timely and accurate processing of POS transactions. We welcome suggestions for appropriate approaches that would support such improvements but decline to adopt rules to that effect at this time. Comment: A few commenters stated that CMS’ proposal to have plans pay for a drug and subsequently chase the responsible party for reimbursement would be inefficient and costly. Response: We clarify for those commenters that neither our proposed nor this final rule include any provision that will require MA–PDs to pay for or cover a drug for an enrollee when another payor is responsible for that payment, or when a payment determination cannot be made at the POS. We agree that a ‘‘pay and chase’’ policy would not be efficient, and is not always in the best interest of the enrollee. As we discussed in the proposed rule, implementing a requirement to authorize all claims at the POS may interfere with medically appropriate pre-authorization requirements and may trigger retrospective enrollee liability depending on the difference in enrollee cost-sharing for coverage under Parts A, B, and D, retrospective TROOP adjustments and Part D reconciliation (79 FR 2009). We are finalizing the proposal to require MA–PDs to coordinate with their network pharmacies and prescribers to improve existing processes and develop new ones in order to ensure that enrollees receive their Medicare-covered prescribed medications, without delay, PO 00000 Frm 00031 Fmt 4701 Sfmt 4700 7941 when they present at the network pharmacy. After considering the comments, we are revising § 422.112(b)(7)(i) by deleting the reference to ‘‘claims adjudication’’ so there is a clearer distinction between the POS requirements addressed in paragraph (b)(7)(i) from the coverage determination requirements referenced in paragraph (b)(7)(ii). We are finalizing paragraph (b)(7)(i) to state that MA–PD plans must establish and maintain a process to ensure timely and accurate POS transactions. Compliance with this requirement may be achieved using adequate messaging and other procedures with network pharmacies to ensure care continuity and coordination at the POS between Part D drug benefits and Parts A or B drug benefits administered by the MA–PD. When processing a coverage determination for a prescription drug that may be covered under Parts A, B or D, if the MA–PD determines, as part of the coverage determination process, that the requested drug is not covered under Part D, it must then evaluate whether the drug in question is covered under Parts A or B. The MA–PD is responsible for providing a clear explanation of its decision, including the decision to cover the requested drug under a different benefit and how to obtain the drug (for example, instructions to take the plan decision notice to the pharmacy to obtain the requested drug) in the Part D standardized denial notice. We expect to work with stakeholders to explore program enhancements that may be more uniquely suited for plans that offer both Parts A, B, and D benefits. We are finalizing, as proposed, § 422.112(b)(7)(ii) and are exploring possibilities for future subregulatory guidance on this topic. 2. Good Cause Processes (§§ 417.460, 422.74 and 423.44) Section 1851(g)(3)(B)(i) of the Act provides that MA organizations 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 establish regulations related to enrollment, disenrollment, and termination for Part D plan sponsors that are similar to those established for MA organizations under section 1851 of the Act. In addition, section 1860D– 13(a)(7) of the Act mandates that the premiums paid by individuals with higher incomes be increased by the applicable Part D income related monthly adjustment amount (Part D IRMAA), for the months in which they E:\FR\FM\12FER2.SGM 12FER2 Rmajette on DSK2VPTVN1PROD with RULES2 7942 Federal Register / Vol. 80, No. 29 / Thursday, February 12, 2015 / Rules and Regulations are enrolled in Part D coverage. Consistent with these sections of the Act, subpart B in both the Part C and Part D regulations sets forth requirements with respect to involuntary disenrollment procedures at § 422.74 and § 423.44, respectively. An MA or Part D plan that chooses to disenroll beneficiaries for failure to pay premiums must be able to demonstrate that it made a reasonable effort to collect the unpaid amounts by notifying the beneficiary of the delinquency, providing the beneficiary a period of no less than 2 months in which to resolve the delinquency, and advising the beneficiary of the termination of coverage if the amounts owed are not paid by the end of the grace period. In addition, current regulations at § 417.460(c) specify that a cost plan, specifically a health maintenance organization (HMO) or competitive medical plan may disenroll a member who fails to pay premiums or other charges imposed by the plan for deductible and coinsurance amounts. With the exception of the grace period, the procedural requirements for cost plans to disenroll a member for failure to pay premiums are similar to those for MA and Part D plans. The cost plan must demonstrate that it made reasonable efforts to collect the unpaid amount and sent the enrollee written notice of the pending disenrollment at least 20 days before the disenrollment effective date. In the April 2011 final rule (76 FR 21432), we amended both the Parts C and D regulations at § 422.74(d)(1)(v), § 423.44(d)(1), and § 423.44(e)(3) regarding involuntary disenrollment for nonpayment of premiums or Part D IRMAA to allow for reinstatement of the beneficiary’s enrollment into the plan for good cause. In the April 2012 final rule (77 FR 22071), we extended the policy of reinstatement for good cause to include beneficiaries enrolled in cost plans in § 417.460(c)(3), thus aligning the cost plan reinstatement provision with the MA and PDP provisions. These good cause provisions authorize us to reinstate a disenrolled individual’s enrollment without an interruption in coverage in certain circumstances where the non-payment was due to circumstances that the individual could not reasonably foresee or could not control, such as an unexpected hospitalization. Since its inception, the process of accepting, reviewing, and processing beneficiary requests for reinstatement for good cause has been carried out exclusively by CMS. However, we have received feedback from plans on ways to improve the good cause process and make it more efficient VerDate Sep<11>2014 13:56 Feb 11, 2015 Jkt 235001 for both the plans and CMS. Based on this feedback, we updated Chapter 2 of the Medicare Managed Care Manual and Chapter 3 of the Medicare Prescription Drug Benefit Manual to clarify the language of the notice provided to beneficiaries, and the process and timing of receiving payments during the extended grace period in connection with § 417.460(c)(3), § 422.74(d)(1)(v), and § 423.44(d)(1)(vi). In addition, we updated the Complaints Tracking Module (CTM) Standard Operating Procedures (SOP) to permit plans to transfer requests for reinstatement for good cause to CMS. In light of ongoing feedback, in the January 2014 proposed rule we proposed to amend § 417.460(c)(3), § 422.74(d)(1)(v), and § 423.44(d)(1)(vi) to permit an entity acting on behalf of CMS to effectuate reinstatements when good cause criteria are met. This proposal would allow us to designate another entity, including a plan (MA organization, Part D sponsor, or entity offering a cost plan) to carry out portions or all of the good cause process. While we envisioned an expanded role for plans to accept incoming requests for reinstatement directly from former enrollees, which would allow them to be more responsive to their current and former members, we stated that ensuring objectivity in the review of these cases and equity among beneficiaries regarding the determination of good cause was critically important. Accordingly, we indicated that we would establish operational policy and processes in subregulatory guidance to set parameters for the application of the good cause standard, including the submission to us of certain cases for review to ensure that plans remain impartial and equitable in their assessment and treatment of former members who have been disenrolled for nonpayment of premiums. These changes would be accompanied by the development of an oversight protocol for any activities assigned to a designee that are currently carried out by CMS. In addition, we proposed a technical change to the language in § 417.460 to clarify that good cause protections for enrollees in cost plans apply to instances where there was a failure to pay either plan premiums or other charges. We received the following comments and our responses follow: Comment: Commenters expressed both support for and opposition to our proposal to allow an entity acting on behalf of CMS to effectuate reinstatements when it is determined that good cause criteria are met. Several PO 00000 Frm 00032 Fmt 4701 Sfmt 4700 commenters agreed that plans or an independent contractor could perform this function if provided appropriate guidance and that this new process could produce efficiencies that would be advantageous to beneficiaries, plans and CMS. Other commenters believed that only CMS or an independent contractor would have the knowledge and impartiality to consider these cases appropriately. In addition, a few commenters expressed concerns with the quality of work currently performed by plans and CMS contractors and did not believe that their current performance warranted an increase in responsibility. Response: We thank commenters for their feedback in response to this proposal. We continue to believe that with proper guidelines, instructions and oversight, entities to which we assign this activity could review and process good cause requests in an appropriate manner. Given the feedback we have received since establishing the good cause review process handled exclusively by us, we have learned that some good cause reinstatement requests could be resolved more efficiently by plans since they can readily access a former enrollee’s premium billing and payment history, and as such, are well positioned to more easily resolve disenrollment disputes that are erroneously being treated, at least initially, as good cause requests. We fully understand that impartiality would be a key concern if this function is performed by plans. That is why we noted in the January 2014 proposed rule that if we were to exercise the authority we proposed to include in these regulations, an oversight protocol would be developed and CMS would retain the right to review cases to ensure that determinations made by a CMS designee are in line with our guidance. Comment: Under the assumption that plans would be given the responsibility to perform good cause reviews, a few commenters had questions about the plans’ scope of responsibility. Specifically, a commenter questioned whether plans would be permitted to refer a case to CMS for review and decision. Another commenter questioned whether plans would be able to opt out of this work if they did not want to take on the burden or costs related to this activity. Lastly, a commenter questioned whether or not beneficiaries would be able to appeal the plan’s decision. Response: In the event we assign the good cause process to plans, the expectation would be that they perform the work from start to finish (that is, intake, research, decision, notification, E:\FR\FM\12FER2.SGM 12FER2 Rmajette on DSK2VPTVN1PROD with RULES2 Federal Register / Vol. 80, No. 29 / Thursday, February 12, 2015 / Rules and Regulations and effectuation). We would provide guidance regarding these activities in our enrollment manuals (Chapter 2 and Chapter 17, Subchapter D, of the Medicare Managed Care Manual and Chapter 3 of the Medicare Prescription Drug Benefit Manual) and, as part of the designation, we would retain the authority to review both favorable and unfavorable decisions to ensure that results are fair and sound. In addition, as mentioned previously, we would develop an oversight protocol to ensure that plans are compliant with our guidelines. As with other MA and Part D policies, we realize that sometimes plans need feedback or guidance from us to address certain unique issues. That would continue to be the case for good cause reviews, but the expectation would be that once we assign this process to plans, they would develop their own internal processes for reviews, based on our guidance, and carry out the majority of this workload without involving us. Beneficiaries do not currently have the right to appeal good cause determinations. Ultimately our goal is to streamline the good cause review process and make it easier for all parties (beneficiaries, plans, and CMS) to navigate. As such, we believe that the key to any successful delegation of this work to the plans would be providing clear and complete guidance to plans, but not adding another layer of review to the process. Finally, should we conclude that plans are appropriate entities to perform good cause reviews, we would assign this function to all plans, and under the revisions to the regulations being finalized here, we would require plans to accept this additional responsibility. Specifically, we are finalizing the revisions to the applicable regulations to provide that a third party to which CMS has assigned this responsibility, such as an entity offering a cost plan, a MA organization, or a Part D plan sponsor, may reinstate an enrollee based upon the good cause showing. We believe it would be more complicated operationally, and confusing to beneficiaries, if we did not implement a uniform process for handling requests for reinstatement. Comment: A commenter expressed support for the proposed revision to include language regarding a cost plan enrollee’s ability to request reinstatement for good cause not only for failure to pay premiums, but also for nonpayment of ‘‘other charges’’ including deductibles and cost-sharing. Response: We thank the commenter for their support for this regulatory change and for confirmation of the need VerDate Sep<11>2014 13:56 Feb 11, 2015 Jkt 235001 to expand this beneficiary protection to cost plan enrollees. After careful consideration of these comments, we are finalizing the proposed amendments to the regulations with modifications to clarify that the third party to which CMS may assign this responsibility may be an MA organization, a Part D sponsor or an entity offering a cost plan. 3. MA Organizations’ Extension of Adjudication Timeframes for Organization Determinations and Reconsiderations (§ 422.568, § 422.572, § 422.590, § 422.618, § 422.619) Sections 1852(g)(1)(A) and 1852(g)(2) of the Act respectively require MA organizations to make all organization determinations on a timely basis, and to provide for reconsideration, or review, of organization determinations within a timeframe specified by the Secretary, but no later than 60 days from the date of receipt of the request for reconsideration. Section 1852(g)(3)(B) of the Act requires MA organizations to maintain procedures for expediting organization determinations and reconsiderations when a physician’s request indicates that applying the standard timeframe could seriously jeopardize the life or health of the enrollee or the enrollee’s ability to regain maximum function or when, in the case of an enrollee’s request, the MA organization makes such a determination on its own. In expedited cases, the MA organization generally must issue its decision no later than 72 hours from receipt of the request. Section 1852(g)(3)(B)(iii) of the Act permits the Secretary to extend this 72hour decision-making timeframe in certain cases. Our existing regulations at 42 CFR part 422, subpart M, codify the procedures MA organizations must follow in issuing standard and expedited organization determinations and reconsiderations, including setting forth the required adjudication timeframes and the circumstances under which plans are permitted to extend those timeframes. As we stated in the proposed rule (79 FR 2011), we believe the current language that permits extension of the adjudication timeframes set forth in § 422.568(b), § 422.572(b), § 422.590(a)(1), and § 422.590(d)(2) is being interpreted more broadly than we intended and that MA organizations are regularly invoking extensions of the adjudication timeframes for organization determinations and reconsiderations. Based on information ascertained during recent MA program audits, we have seen circumstances in PO 00000 Frm 00033 Fmt 4701 Sfmt 4700 7943 which MA organizations are routinely and inappropriately invoking the 14-day extension in cases where the plan: (1) Lacks adequate internal controls to ensure coverage requests are reviewed and adjudicated within the required regulatory timeframe; and (2) is awaiting receipt of supporting clinical documentation from one of its contract providers. Routinely invoking an extension of the applicable adjudication timeframe is counter to the intent of the statutory and regulatory requirements for timely determinations that emphasize the health needs of the beneficiary in determining the appropriate adjudication timeframe. Extensions that are not affirmatively requested by the enrollee should be permitted only in limited circumstances, and only if the extension is in the enrollee’s interest. MA organizations are required by regulation to render all coverage decisions as expeditiously as the enrollee’s health condition requires. When plans choose to subject an item or service to a prior authorization requirement, we expect them to have the resources to process those requests in a timely manner. In the proposed rule, we suggested revising these regulatory provisions to clarify our intended standard for when it is appropriate for an MA organization to extend an adjudication timeframe. Specifically, we proposed the following changes: • At § 422.568(b), § 422.572(b), and § 422.590(e), to add new text and to restructure the regulation paragraphs for clarity. • At § 422.568(b)(1)(ii), § 422.572(b)(1)(ii), and § 422.590(e)(1)(ii), to clarify that an extension may be justified and in the enrollee’s interest due to the need to obtain additional medical information, which may result in changing the MA organization’s denial of coverage of an item or service only from a non-contract provider. • At new § 422.568(b)(1)(iii), § 422.572(b)(1)(iii), and § 422.590(e)(1)(iii), to clarify that an extension of the adjudication timeframe may be permitted when the extension is justified due to extraordinary, exigent or other non-routine circumstances, and it is in the enrollee’s interest. • To make corresponding technical edits to subpart M to improve clarity in our guidance related to extensions and to remove duplicative language (that is, to remove § 422.590(d)(2) and add a new § 422.590(e), to update cross references in § 422.618(a)(1) and § 422.619(a), to make changes within § 422.568(b), § 422.572(b), and § 422.590(d) to ensure E:\FR\FM\12FER2.SGM 12FER2 Rmajette on DSK2VPTVN1PROD with RULES2 7944 Federal Register / Vol. 80, No. 29 / Thursday, February 12, 2015 / Rules and Regulations consistency in the structure and language of these provisions). We received the following comments on this proposal and our responses follow: Comment: Several commenters expressed general agreement that extensions to adjudication timeframes for organization determinations and reconsiderations should not be invoked routinely. Some commenters expressed strong support for this proposal and stated that it would reduce inappropriate delays in coverage decision-making and, therefore, reduce current delays in access to needed care that result from more routine use of extensions. Response: We appreciate the support expressed by these commenters. The clarifications we proposed reinforce longstanding statutory and regulatory program requirements for timely decision-making that emphasize the beneficiary’s health condition and the urgency of the requested item or service. Comment: A few commenters who did not support the proposal stated that both contract and noncontract providers are not always responsive to plan requests for clinical information. A commenter further stated that MA organizations should not be penalized for delays resulting from third parties’ failure to provide documentation necessary for a timely coverage decision. Another commenter added that it is not realistic to expect contract providers to produce complete medical documentation in response to every coverage request, and that it is not reasonable to expect provider contracting to ensure that full documentation is produced without the need for extensions. Because of those concerns, these commenters did not believe MA organizations should be restricted from using extensions on the basis of the provider’s contracting status. Response: We have considered contract providers as agents of the MA organization offering the plan, and we believe it is reasonable to expect MA organizations to use provider contracting to establish a wide range of expectations for network providers to ensure compliance with program rules, including timely receipt of relevant clinical documentation. MA organizations remain responsible for compliance with MA rules and requirements, even when using contractors or other entities to fulfill those responsibilities. (For more detailed information, see § 422.504(i)). We expect the contract terms between MA organizations and their contract providers to properly incentivize VerDate Sep<11>2014 13:56 Feb 11, 2015 Jkt 235001 contract providers, as necessary, to produce requested clinical records in a timely manner. We appreciate that health care providers working with managed care plans must navigate a complex and changing health care environment and routinely contract with multiple plans. However, we do not agree that these challenges should prevent MA organizations from rendering coverage decisions that are completed as expeditiously as the enrollee’s health condition requires. The contractual arrangement with network providers is an important tool plans can use to ensure compliance with these beneficiary protections. We expect plans to promptly solicit and obtain contract providers’ clinical documentation when an enrollee requests coverage of an item or service. When the case file contains incomplete information, we expect plans to work diligently with contract providers to cure the defect while adhering to the requirement to issue all decisions as expeditiously as the enrollee’s health condition requires. As stated previously and described in more detail later in this final rule, the new regulation text at § 422.568(b)(1)(iii), § 422.572(b)(1)(iii) and § 422.590(e)(1)(iii) clarifies that extensions are permitted—regardless of provider contracting status—if necessary clinical documentation is not readily available due to extraordinary, exigent or other non-routine circumstances. We believe that plans can mitigate overuse of extensions by correcting other common compliance problems. For example, plans often receive audit findings for failure to conduct timely or sufficient outreach to providers to obtain necessary clinical information during the coverage determination process. Ensuring reasonable and diligent provider outreach will improve the plan’s ability to issue timely decisions based on consideration of complete clinical information. We expect plans to make reasonable, timely, and diligent efforts to obtain medical records from both contract and non-contract providers without having to extend the adjudication timeframe. However, we agree with the commenters that MA organizations have little control over a non-contract provider who does not respond to the plan’s requests for documentation. For this reason, we are clarifying at § 422.568(b)(1)(ii), § 422.572(b)(1)(ii) and § 422.590(e)(1)(ii) that extensions are permitted when the plan is seeking clinical information from a noncontract provider, as long as the extension is in the enrollee’s best interest. While we acknowledge this PO 00000 Frm 00034 Fmt 4701 Sfmt 4700 limitation, we nevertheless expect plans to make reasonable efforts to obtain necessary information from noncontract providers in a manner which affords the enrollee a timely decision. We believe our proposed changes strike the appropriate balance between minimizing the burden on MA plans and providers (both contract and noncontract) and protecting enrollees’ statutory right to timely decisions and to timely access to the appeals process. Comment: A few commenters disagreed with our proposal because they believed that CMS was eliminating all extensions. Response: It appears that these commenters misunderstood our proposed change. This change will not eliminate extensions. Extensions of up to 14 days will continue to exist for both standard and expedited requests for organization determinations and reconsiderations. As we stated in the proposed rule, we proposed these changes to clarify our existing intent that extensions at the MA organization’s behest should only be taken on a limited basis and only when they are in the enrollee’s interest. Comment: Several commenters—both supportive and not supportive of CMS’ proposal—noted that consideration of complete clinical documentation during the coverage decision process is in the best interest of the enrollee. Some of those commenters who disagreed with our proposal also stated that use of extensions to obtain missing clinical information when the plan is seeking that information is, therefore, also in the best interest of the enrollee. Likewise, some of these commenters expressed a belief that not taking an extension would be detrimental to enrollees by resulting in increased denials and delays in access to care. Response: While we agree that it is in the best interest of an enrollee that the MA organization reviews complete clinical information when adjudicating a coverage request, we disagree with the commenters that use of extensions is in the best interest of the enrollee when such extensions are taken in the absence of extraordinary, exigent, or other nonroutine circumstances. Section 1852(d) of the Act requires reasonably prompt access to medically necessary services— including compliance with provider network adequacy requirements established at § 422.112 of the regulations—and section 1852(g) of the Act requires timely coverage decisions that emphasize the health needs of the beneficiary in determining the appropriate adjudication timeframe. We do not believe that complete consideration of clinical documentation E:\FR\FM\12FER2.SGM 12FER2 Rmajette on DSK2VPTVN1PROD with RULES2 Federal Register / Vol. 80, No. 29 / Thursday, February 12, 2015 / Rules and Regulations and adjudication within the established timeframes are mutually exclusive activities. We established MA adjudication timeframes with strong support from stakeholders, including the managed care industry, and physician groups. (For a more detailed discussion, see the June 29, 2000 Federal Register (65 FR 40278)). Therefore, we do not believe that our proposed changes will cause a delay in access to care since MA organizations should be able to obtain the necessary information and render a decision within the established timeframes. The new regulatory provisions at § 422.568(b)(1)(iii), § 422.572(b)(1)(iii) and § 422.590(e)(1)(iii) permits MA plans to invoke an extension in limited circumstances where timely receipt of necessary clinical information is not possible, for example, if a provider’s office is flooded and additional time is needed to reach the provider and/or to obtain off-site or electronic records that would support a favorable coverage decision. We recognize that these extraordinary, exigent or other nonroutine circumstances may arise regardless of whether the provider(s) involved has a contract with the plan; therefore, these extensions are not restricted to noncontract providers. Comment: A commenter recommended that, instead of finalizing this proposal, CMS should use its existing oversight authority to take compliance or enforcement action against the MA organizations that over utilize extensions of adjudication timeframes. Response: We agree with this commenter that imposing corrective action on MA organizations that are routinely noncompliant with required decision-making timeframes is an appropriate use of CMS’ oversight authority, but we disagree that this should be done in lieu of our proposed changes. Based on recent program experience, we believe our intended restrictions from the original adoption of these rules on the use of extensions are broadly misinterpreted and that our proposed changes to clarify our policy will enhance beneficiary protections by reducing inappropriate delays in access to care and access to the appeals process. Relying on compliance and enforcement authority alone is not a sufficient response to identification of a broadly misinterpreted policy. By clarifying our intent that extensions are appropriate only in a limited set of circumstances, we aim to assist MA plans in their development of operational policies and procedures related to processing coverage decisions VerDate Sep<11>2014 17:55 Feb 11, 2015 Jkt 235001 and, ultimately, to meet our goal of overall program compliance in the absence of corrective action and the beneficiary risks that may come with it. After consideration of the comments received on this proposal, and for the reasons noted in our January 2014 proposed rule, we are finalizing without modification the proposal to clarify that an extension to an adjudication timeframe for organization determinations and reconsiderations should be permitted only in limited circumstances. D. Strengthening Our Ability To Distinguish Stronger Applicants for Part C and D Program Participation and To Remove Consistently Poor Performers 1. Two-Year Prohibition When Organizations Terminate Their Contracts (§§ 422.502, 422.503, 422.506, 422.508, and 422.512) Section 1857(c)(4)(A) of the Act prohibits organizations from re-entering the MA program in the event that a previous contract with the organization was terminated at the request of the organization within the preceding 2year period, except in circumstances that warrant special consideration. We proposed to amend the text of the regulations implementing these provisions to maintain consistency in their application and harmony with our policy. Specifically, we proposed to amend the regulations at §§ 422.502(b)(3), 422.506(a)(4), and 422.512(e)(1) to explicitly apply the 2year prohibition to applications for service area expansions in addition to applications for new contracts. These changes to §§ 422.502(b)(3), 422.506(a)(4), and 422.512(e)(1) would make the text of these regulations consistent with the text at §§ 422.503(b)(7) and 422.508(c) with regard to the 2-year prohibition imposed as a condition of a mutual termination of an MA contract. We also proposed to amend our policy on the current application of regulations implementing the 2-year prohibition to avoid unnecessarily narrowing the scope of the 2-year prohibition or precluding us from preventing poor performing MA organizations from reentering the MA program. We proposed to interpret §§ 422.503(b)(6) and 422.503(b)(7) as authorizing denials of new contracts and service area expansions, consistent with the proposed text for §§ 422.502, 422.506 and 422.512, regardless of the contract type, product type, or service area of the previous nonrenewal. We further proposed adding a sentence to paragraphs (c) and (d) of § 422.508 to PO 00000 Frm 00035 Fmt 4701 Sfmt 4700 7945 make it clear that a mutual termination of a MA contract would result in a ban on all contract types and service area expansions. We received the following comments on this proposal and our responses follow: Comment: A commenter supported the proposal, stating that it will prevent poor performing organizations from reentering the program through another product type of extension of an existing service area. Response: We thank the commenter for this support. Comment: A commenter supported CMS’s interpretation of the 2-year prohibition rule to voluntary nonrenewals and mutual terminations and CMS’s efforts to ensure poor performing MA organizations do not reenter the marketplace. Response: We thank the commenter for this support. Comment: A commenter requested that CMS consider only applying the 2year prohibition to the legal entity level, rather than applying the 2-year prohibition to the parent organization level, as this would be an overly broad application which could affect multiple legal entities and numerous contracts. Response: We currently apply the 2year prohibition at the legal entity level and will continue to do so. We are finalizing the amendments to §§ 422.502(b)(3), 422.506(a)(4), 422.508(c) and 422.512(e) as proposed. Although we discussed the amendments to § 422.508(c) and § 422.508(d) in the preamble to the January 6, 2014 proposed rule, we inadvertently omitted the proposed amendments to §§ 422.508(c) and 422.508(d) from the proposed regulation text. We are including the revision to § 422.508(c) in this final rule. We are not finalizing the proposed amendment to § 422.508(d) as upon further consideration we believe that this amendment is not appropriate. We are also amending § 422.506(a)(4) by removing the word ‘‘special’’ before ‘‘circumstances warranting special consideration’’ in order to maintain consistency with the regulation text at § 422.503(b)(6), § 422.508(c) and § 422.512(e), as we do not differentiate between circumstances warranting special consideration and special circumstances warranting special consideration in our administration of these regulations. We believe the use of ‘‘special’’ in § 422.506(a)(4) is redundant and its removal does not affect our interpretation of the provision and its inclusion potentially leads to ambiguity in § 422.506(a)(4). We are also finalizing, without modification, our proposal regarding the interpretation of E:\FR\FM\12FER2.SGM 12FER2 7946 Federal Register / Vol. 80, No. 29 / Thursday, February 12, 2015 / Rules and Regulations Rmajette on DSK2VPTVN1PROD with RULES2 related regulations that implement the 2-year prohibition. We clarify here that the 2-year prohibition, for purposes of §§ 422.502, 422.506, 422.508, and 422.512, is applied at the legal entity level. We are further clarifying that the 2-year ban is applicable for the 2 contract years following the year in which the non-renewal or termination of an organization’s contract is effective. For example, if an organization does not renew its contract for an effective date of December 31, 2015 then we would not enter into a contract with the organization for contract years 2016 and 2017 unless there are circumstances that warrant special consideration. The organization can apply to contract with us in contract year 2017 to operate in contract year 2018. Likewise, if an organization enters a mutual termination for a contract with CMS midyear during 2015, then we will not enter into a contract with the organization for contract years 2016 and 2017 absent circumstances warranting special consideration, but the organization can apply to contract with us in 2017 to operate in contract year 2018. We understand there are a variety of reasons that an organization may decide to terminate or to renew a contract, and subsequently want to reenter the program. We will consider these circumstances on a case-by-case basis. 2. Withdrawal of Stand-Alone Prescription Drug Plan Bid Prior to Contract Execution (§ 423.503) Occasionally, organizations new to Part D that have qualified for a Medicare PDP sponsor contract withdraw their bids after we have announced the lowincome subsidy (LIS) benchmark but prior to executing the contract for the coming plan year. These withdrawals interfere with our administration of the Part D program, in particular the autoassignment of LIS beneficiaries. To address this problem, we proposed to adopt regulatory provisions that would impose a 2-year application ban on organizations not yet under contract with us as PDP sponsors that withdraw their applications and bids after we have issued our approvals. We made this proposal under our authority at section 1860D–12(b)(3)(D) of the Act to adopt additional contract terms, including the conditions under which we would enter into contracts, not inconsistent with the Part D statute. In February of each year, we solicit applications from organizations seeking to qualify to enter into a contract to offer stand-alone PDPs in the upcoming plan year. These organizations, along with current PDP sponsors who wish to VerDate Sep<11>2014 13:56 Feb 11, 2015 Jkt 235001 continue participating in the Part D program, submit bids in June for our review and approval. We review these applications and bids with the expectation that, upon approval, the organizations would enter into PDP sponsor contracts with us in September to provide the Part D benefit for the plan year starting the following January. As part of the annual bid review, we calculate the LIS benchmark for each PDP Region based on the bids for basic PDPs submitted annually by current PDP sponsors that will operate in that region in the coming year. Sponsors whose monthly premiums fall at or below the benchmark in a region receive auto enrollments from us of LIS eligible beneficiaries in those regions. We normally announce the LIS benchmark in late July or early August. In recent years, some organizations have withdrawn their applications and bids following the announcement of the LIS benchmark. Because these organizations withdrew prior to executing a contract, and we cannot compel them to sign the contract, they are not subject to our compliance or oversight authority, and nothing in our current regulations prevents these applicants from withdrawing their applications late enough in the process to cause significant disruption. In contrast, when an existing PDP sponsor withdraws its bid, we treat such an action as an election by the PDP sponsor to non-renew its contract in that PDP Region, which renders the sponsor ineligible to submit another application for 2 years, under our regulations at § 423.507(a)(3). We proposed to make a regulatory change to ensure equal treatment between new applicants and existing PDP plan sponsors, which would allow us to maintain an accurate depiction of the contracting landscape. Specifically, we proposed to amend § 423.503 by adding paragraph (d) which would impose a 2-year Part D application ban on organizations approved by CMS as qualified to enter into stand-alone PDP sponsor contracts but which elect, after our announcement of the LIS benchmark, not to enter into such contract and withdraw their PDP bids. This proposed regulatory change, in effect, would subject a withdrawing applicant to the same penalty we may apply to an organization already under contract that elects to terminate or not renew its PDP contract. It is critical that we have an accurate portrayal of the number and type of plan benefit packages that would be available to beneficiaries in every PDP Region, especially during the end of the summer when much of the bid review, both the formulary and actuarial components, PO 00000 Frm 00036 Fmt 4701 Sfmt 4700 has been completed. During this period, we need to confirm that there is the required minimum number of plans available in each PDP region. We also need accurate plan information at the end of the summer so that we can meet the production deadlines associated with the annual election period, including publication of the Medicare & You handbook as well as updating the Medicare Plan Finder Web site and our payment and enrollment systems. An applicant that withdraws its application late in the process alters the contracting landscape, potentially disrupting preparations we have already made, including those related to the auto assignment of LIS beneficiaries, for the upcoming plan year. In adopting the proposed regulatory authority, we would place a reasonable limit on prospective PDP sponsors’ option to withdraw bids and applications without penalty. By imposing consequences on applicants that withdraw their bids following the announcement of the LIS benchmark, we also would discourage any ‘‘gaming’’ of the bid review and auto assignment processes (for example, by participating in the bid review process until it learns that it will not qualify for auto-assignments) that can occur when applicants opt out of participation in the PDP at the last minute. We received the following comments and our response follows: Comment: A number of commenters expressed support for CMS’ proposal. Response: We appreciate the commenters’ support of our proposal. We received only supportive comments for this proposal; therefore, we are finalizing this provision without modification. 3. Essential Operations Test Requirement for Part D (§§ 423.503(a) and (c), 423.504(b)(10), 423.505(b)(28), and 423.509) We proposed to create, through regulation, an essential operations test, which will be a new step in the application and contracting process with newly contracted entities operating as stand-alone PDP sponsors or MA organizations offering Part D plans (MA–PDs). This step will be administered to ‘‘newly contracted entities.’’ We used the term ‘‘newly contracted entity’’ in the proposed rule and in this final rule to describe an organization that has entered or applied to enter into a Part D contract with us for the first time for the upcoming plan year, and neither it, nor another subsidiary of the organization’s parent organization, is offering Part D benefits during the current benefit year. This E:\FR\FM\12FER2.SGM 12FER2 Rmajette on DSK2VPTVN1PROD with RULES2 Federal Register / Vol. 80, No. 29 / Thursday, February 12, 2015 / Rules and Regulations would include organizations that are offering EGWPs for the first time. Existing plan sponsors or new sponsors that are subsidiaries of a parent company that currently operates a Part D plan through another subsidiary would not be subject to the proposed essential operations test. The essential operations test will allow us to test whether an organization’s arrangements appear likely to allow the organization to effectively administer its contract. We proposed to require organizations to pass an essential operations test either— (1) as a qualification to contract, with failure to pass the test nullifying our approval of the application; or (2) after contract execution as a contract requirement but prior to the start of the benefit year, with a failure to pass the test triggering an immediate contract termination under § 423.509. Pursuant to section 1860D–12(b)(3)(D) of the Act, which incorporates by reference section 1857(e)(1) of the Act, we have the authority to add contract provisions that are necessary and appropriate to carry out the Part D program; section 1860D–11(b) of the Act provides authority for the collection of additional information as part of the bid as we may require to carry out the Part D program. Based on this authority we proposed adding § 423.504(b)(10) and § 423.505(b)(28) to include passing an ‘‘essential operations test’’ as a condition to enter into and a term of the Part D contract. Additionally, pursuant to our authority at section 1860D– 12(b)(3)(B) and (b)(3)(F) of the Act (which incorporate by reference section 1857(c)(2) and (h) of the Act, respectively, to apply to the Part D program), the current regulations at § 423.509(a) and (b)(2)(i), authorize immediate termination of contracts with Medicare Part D plan sponsors in certain circumstances. We believe that immediate termination would be authorized under the standard of section 1857(h)(2) of the Act because the inability of a plan sponsor to ensure future members’ access their drug benefit, as evidenced by failure to pass the essential operations test, would constitute an imminent and serious risk to beneficiary health and safety. We proposed adding § 423.509(a)(4)(xii) and revising § 423.509(b)(2)(i)(C) to subpart K to reflect this new cause for immediate termination. Additionally, we proposed to explicitly include the essential operations test as a means to evaluate Part D applicants in § 423.503(a)(1) and to add § 423.503(c)(4) to subpart K to establish failure of an essential operations test as VerDate Sep<11>2014 13:56 Feb 11, 2015 Jkt 235001 grounds for nullifying our approval of the application notice. Given that the heart of the Part D benefit is the sponsor’s ability to process claims for prescription drugs in real time, we proposed the essential operations test and associated regulatory changes because of our experience with certain newly contracted entities in the Part D program that experienced significant operational difficulties at the start of the benefit year as a result of their inexperience administering Part D benefits. To prevent the recurrence of this problem and ensure that new sponsors are prepared to and actually can deliver Part D benefits at an acceptable level, starting with the 2015 contract year application cycle, we proposed that we may require newly contracted entities to pass an essential operations test conducted by us beginning in the fall of 2014. In response to the later anticipated date of the finalization of this provision, we expect to adjust our proposed timing and begin requiring newly contracted entities to pass an essential operations test with the 2016 contract year application cycle. The essential operations test for newly contracted entities will entail testing of sponsors’ command of Part D benefit administration rules and systems related to these areas. Initially, the testing will consist of scenario testing with sponsors’ key staff to show us that they have a firm grasp of the Part D policies and essential operations. The test will be able to verify whether an applicant’s administrative and management arrangements, as attested to in its application, are sufficient for the applicant to carry out functions listed in § 423.504(b)(4)(ii) such as furnishing prescription drug services and implementing utilization management programs. Provided we have the resources, in the future, the test will likely become significantly more sophisticated and involve live testing of sponsors’ systems with test data. The more involved test would also likely include testing the processes related to enrollment such as MARx communication and processing; LIS processing and determinations; coverage determinations, appeals, and grievances (CDAG) processing; and realtime coordination of benefits data exchange and processing. For instance, the sponsor would need to demonstrate the ability to pay test claims correctly in real-time consistent with its CMSapproved benefit packages (including formulary) and the Part D transition fill policy. PO 00000 Frm 00037 Fmt 4701 Sfmt 4700 7947 a. Failing Essential Operations Test as Cause for Immediate Termination Once a sponsor signs its contract, it is obligated to perform all of the required functions to support the benefits described in the contract even though the sponsor does not start offering benefits until January 1. If we find that, based on the results of the essential operations test, a sponsor does not have the requisite systems and processes in place to offer Part D benefits in real time, our proposal was to consider this cause for immediate termination of the sponsor’s Part D contract in order to protect beneficiaries from harm at the start of the contract year. In accordance with section 1857(h)(2) of the Act (incorporated by reference into PDP by section 1860D–12(b)(3)(F) of the Act), we have the authority to immediately terminate a contract with a sponsor (without notice and opportunity for a hearing) when a delay in termination would pose an imminent and serious risk to the health of beneficiaries enrolled in the sponsor’s plans. Also, under §§ 423.509(b)(2)(i) and 423.652(b)(2), unlike standard CMS terminations, the effective date of an immediate termination is not stayed when the sponsor requests a hearing under § 423.650(a)(2). Because enrollment and accurate benefit administration through real time claims processing are so fundamental to the delivery of the Part D benefit, if a sponsor fails to demonstrate to us that it can perform these essential operations, we would view this as a substantial failure to meet the Part D contract requirements on the following grounds: (1) Evidence that the sponsor was carrying out the contract in a manner that was inconsistent with the effective and efficient administration of the plan; and (2) evidence that the sponsor did not substantially meet the applicable conditions set out in the Part D regulations which would ultimately justify, depending upon timing of the test, our termination of a contract consistent with § 423.509(a)(1) through (3) based on the sponsor’s failure to meet our proposed contract terms at § 423.504(b)(10) and § 423.505(b)(28). We believe that a newly contracted entity’s failure to demonstrate certain critical capabilities and failing the essential operations test represents a substantial failure to carry out its Part D contract. Such a failure poses an unacceptable risk to the new sponsor’s future members’ access to Part D drugs, which would constitute an imminent and serious risk to beneficiary health and safety, justifying our immediate termination of the sponsor’s contract. E:\FR\FM\12FER2.SGM 12FER2 7948 Federal Register / Vol. 80, No. 29 / Thursday, February 12, 2015 / Rules and Regulations For MA organizations that must offer Part D benefits pursuant to § 423.104(f)(3)(i), failing the test would support the termination of the organization’s Part D addendum as well as its MA contract under § 422.510(a)(3) because the inability to offer Part D benefits means that the organization no longer meets the applicable conditions associated with offering Part C benefits. Rmajette on DSK2VPTVN1PROD with RULES2 b. Failing Essential Operations Test as Failure of a Qualification to Contract and Grounds for Nullification of Approval If an organization fails an essential operations test we conducted prior to contract signature, we proposed that no termination would be necessary and that we would nullify our previous conditional approval of the organization’s Part D contract qualification application. We proposed to explicitly include the essential operations test as a qualification to contract at § 423.503(a)(1) to authorize our use of the test and any information learned in the course of the essential operations test in making the contract determination. We would view failure of the essential operations test as evidence that the applicant is not qualified to contract with us. As a result, we would nullify our approval based on determining the entity is not qualified. Successful applicants receive a conditional approval at the end of May of their Part D application in accordance with § 423.503(c)(1). The letter informs applicants that the conditional approval is based on the information contained in their application, and if we subsequently determined that any of the information was inaccurate or that qualification requirements are not met, we would withdraw the approval of the application. Through that notice, we preserve the right to nullify our approval. If that occurs, we would not provide the appeal rights described in part 423, subpart N to applicants that have their approval nullified based on failing the essential operations test because an appeals process started at that point could not be completed by the September 1 deadline imposed by § 423.650(c) for contracts to be effective on January 1 of the following year. We received the following comments and our response follows: Comment: Most commenters strongly supported CMS’ proposals. Response: We appreciate the support for these proposals. Comment: Several commenters requested that CMS elaborate on the content of the essential operations test. VerDate Sep<11>2014 13:56 Feb 11, 2015 Jkt 235001 Response: Our plan is to initially offer the essential operations test in scenario format rather than in real time. Scenario format means that we will provide the applicant or newly contracted sponsor with written scenarios or stories about fictional beneficiaries. The scenarios will describe the characteristics of the beneficiary such as plan enrollment, LIS level, prior drug claims data, prior authorization criteria information, application date, and any other details necessary for answering our questions. The questions would pertain to topics such as determining the correct effective date of coverage; the appropriate timeframes for specific notifications; drug dispensing formats and requirements; drug coverage and costs; coverage determination process; coordination of benefits; and demonstrating knowledge of new requirements for the upcoming year. The real time test, which may also be combined with scenario tests, would involve electronic data exchanges between CMS and the new organization and/or its PBM, claims processor, enrollment processor, and any other entity contracted with the new organization to carry out key Part D functions. Comment: Several commenters expressed concern that CMS would expect the new organization to demonstrate full system readiness in September. Other commenters provided information about the development schedule that their organizations follow for the upcoming benefit year. Response: It is not our expectation that a new organization would have all systems ready to implement the Part D benefit in September. We appreciated the information regarding the development schedule, and we will use the information to inform, in part, our expectations of system readiness when we administer a real time test. Comment: Several commenters requested that CMS provide new organizations with information about the system requirements of the essential operations test no later than May of each year. Response: We are aware that new organizations would need time to ensure that the proper infrastructure is in place for real time communication and electronic data exchange with CMS (and our contractors). Therefore, within sufficient time to allow it to make necessary arrangements prior to the test, we will inform the new organization of the types of data files that we will send or exchange. We are unlikely to provide this information before the end of May because, at that time, new organizations will have not yet submitted bids. The PO 00000 Frm 00038 Fmt 4701 Sfmt 4700 essential operations test criteria may be developed based upon areas of concern we identify during the application, bid, and formulary review processes; therefore, in May we may not be certain of the test contents and parameters. Comment: Several commenters suggested that CMS complete the essential operations test before November 1 due to the heavy workload in the last quarter of the year. Response: We are aware of the heavy workload at the end of the year created by the annual election period and preparations for the start of the new benefit year. We will try to complete essential operations tests prior to November 1. Comment: A commenter, a current Part D sponsor, was concerned that this provision would apply to existing or experienced sponsors. Response: We clarify that this provision would not apply to existing sponsors. Rather, as stated at § 423.503(c)(4)(ii), the essential operations test will only be required of new organizations that do not have any Part D experience or a subsidiary/parent relationship with an experienced organization. If the new organization’s parent company currently has other subsidiary organizations that are already offering Part D plans, then the new organization would not be subject to the essential operations test. We note that the proposed provisions of §§ 423.504(b)(10) and 423.505(b)(28) each began with the phrase, ‘‘Effective contract year 2015,’’. This language, originally published in January 2014 as part of a proposal that at the time was expected to be made final in the middle of 2014, has since become outdated and therefore has been deleted from the final version of the rule. The proposed language was intended to make clear that even though the rule was expected to be finalized during the CY 2015 application review cycle we would apply the essential operations test to eligible applicants during that cycle. These provisions are now being made final after the period during which CY 2015 essential operations tests would have been conducted (that is, the fall of 2014). They will also be finalized well in advance of the start of the CY 2016 application cycle in late February 2015, so there is no need to provide a special signal to CY 2016 applicants that they may be subject to the essential operations test other than through the publication of this final rule. We also note that we are finalizing with modification the proposed provision of § 423.505(b)(28). We are finalizing this provision as E:\FR\FM\12FER2.SGM 12FER2 Federal Register / Vol. 80, No. 29 / Thursday, February 12, 2015 / Rules and Regulations § 423.505(b)(27), instead of § 423.505(b)(28). In summary, given the support for this proposal, we are finalizing these provisions with only the technical modifications described previously. E. Implementing Other Technical Changes Rmajette on DSK2VPTVN1PROD with RULES2 1. Requirements for Urgently Needed Services (§ 422.113) Many MA plans have responded to the need to provide urgently needed services outside of the network’s business hours, for example, during the weekend or at night, by contracting with clinics that have hours of operation well beyond those of traditional physicians’ offices to furnish services to their enrollees when the plan network is not available. To better align the regulations with current practices regarding access to urgently needed care services, we proposed to revise the regulation by removing the phrase ‘‘under extraordinary and unusual circumstances’’ from the definition of ‘‘urgently needed services’’ at § 422.113(b)(1)(iii). The revised regulatory language would ensure that enrollees have access to out-of-network facilities in non-extraordinary circumstances. We received the following comments on this proposal and our response follows: Comment: Several commenters supported the policy because it provides improved access to enrollees. Response: We thank these commenters for their support. Comment: A commenter stated that CMS’ proposed revision would be burdensome on plans and would not improve health care to enrollees. Response: In the January 10, 2014 proposed rule, we noted that many plans already contract with clinics that operate 24 hours/day, 7 days/week (24/ 7) to address the needs of enrollees who need care on weekends or after normal business hours (79 FR 2018). We also noted that there are a small number of appeals each year from enrollees who sought care out-of-network on weekends or after normal business hours and were denied coverage. We do not believe our proposal adds any burden to health plans. Our proposed revision to the regulation aligns it with current practices for provision of urgently needed services and our intent that enrollees have access to needed care. In fact, we believe that plans could realize savings by making urgently needed services available in settings that are more appropriate to the VerDate Sep<11>2014 13:56 Feb 11, 2015 Jkt 235001 enrollees’ needs than more costly hospital emergency departments. Comment: A commenter expressed concern that the proposed regulatory language does not specify the circumstances under which the organization’s provider network is temporarily unavailable or inaccessible and that, as a result, enrollees might frequently leave the network to obtain care. Response: Circumstances under which the organization’s provider network is temporarily unavailable or inaccessible would largely include weekends or after normal business hours, which we believe is clearly understood from the discussion in the notice of proposed rulemaking. If more extreme situations, such as a natural disaster, result in the network being temporarily unavailable, this rule would apply in those situations as well. Comment: A commenter requested greater clarification of the definition of urgently needed services. Response: The definition of urgently needed services, provided at § 422.113(b)(1)(iii), presents several specific requirements for a service to be classified as urgently needed. Additional clarification of the definition of urgently needed services may be found in the preamble to the June 29, 2000 final rule establishing the Medicare+Choice program (65 FR 40198 and 40199). We believe this definition, as modified by the removal of the phrase ‘‘extraordinary and unusual circumstances,’’ is sufficient. After review of the public comments received, we are finalizing the proposed revision to § 422.113 without modification. 2. Agent and Broker Training and Testing Requirements (§§ 422.2274 and 423.2274) We proposed to revise §§ 422.2274(b) and (c) and 423.2274 (b) and (c) to accomplish the following: (i) Remove CMS-endorsed or approved training and testing as an option; (ii) require that agents and brokers be trained annually on Medicare rules and regulations and details specific to the plan products they intend to sell; and (iii) require annual training to ensure appropriate knowledge and understanding of Medicare rules and specific plan products. Pursuant to our authority under sections 1851(h)(2), 1860D– 1(b)(1)(B)(vi), 1851(j)(2)(E), and 1860D– 4(l)(2) of the Act, we previously codified agent and broker training and testing requirements at §§ 422.2274 (b) and (c) and 423.2274 (b) and (c) to require all agents and brokers selling Medicare products be trained and tested annually PO 00000 Frm 00039 Fmt 4701 Sfmt 4700 7949 through a CMS-endorsed or approved training program, or as specified by us, on Medicare rules and regulations specific to the plan products they intend to sell. As we noted in the preamble to the proposed rule, since the training and testing requirements were implemented, we have embarked on various activities to improve and ensure the efficacy of training and testing. We also noted that, through our monitoring efforts, plans are complying with the annual guidance and providing an adequate level of detailed information. Furthermore, our ability to nationally accommodate agents and brokers through various training and testing modules creates a significant burden. We also noted in the preamble to the proposed rule that our ability to maintain consistency with endorsing other entities that would facilitate the training and testing and oversee these entities is limited. We also proposed that the provisions for ‘‘Reducing the Burden of the Compliance Program Training Requirements’’ (§§ 422.503(b)(4)(vi)(C) and 423.504(b)(4)(vi)(C)) require a standardized compliance training program and that, under those provisions, MA organizations and Part D sponsors would not be permitted to develop and implement plan specific training materials or supplemental materials. The requirement in this section is exclusive for agent and broker marketing activities under the MA and Part D program. We received the following comments and our response follows: Comment: A commenter supported the provision. However, the commenter requested clarification as to whether CMS will continue to provide annual guidance on training and testing requirements for agents and brokers. Response: We appreciate the commenter’s support and will continue to provide annual guidance on the training and testing requirements. Comment: A commenter stated that the provision assigns responsibility for the annual agent/broker training to the MA organization, which is an operational burden and additional cost. Response: We disagree. Since MA organizations and Part D sponsors currently facilitate the agent broker training and testing or contract with a third party, our proposal would not create an operational burden or cost. Comment: A few commenters stated that this provision potentially conflicts with the proposed requirement under § 422.503 that MA organizations and Part D sponsors use only CMS training for general compliance. A commenter requested clarification on how the first E:\FR\FM\12FER2.SGM 12FER2 7950 Federal Register / Vol. 80, No. 29 / Thursday, February 12, 2015 / Rules and Regulations Rmajette on DSK2VPTVN1PROD with RULES2 tier, downstream, and related entities’ standardized training applies to agents and brokers. Response: We believe that this provision does not conflict with the proposed provision in § 422.503. The provision in this section is specific to marketing activities for MA organizations and Part D sponsors. After review of the public comment received on this proposed provision, we are finalizing this provision without modification. 3. Deemed Approval of Marketing Materials (§§ 422.2262, 422.2266, 423.2262, and 423.2266) In the January 10, 2014 proposed rule, we proposed to move the substance of the current requirements in §§ 422.2266 and 423.2266 to 422.2262(a)(2) and 423.2262(a)(2), respectively. As previously noted, §§ 422.2266 and 423.2266 provide the regulatory requirements for materials that are deemed approved. These requirements are part of the review and distribution process of marketing materials. Therefore, the provisions were moved to align with the requirements in §§ 422.2262 and 423.2262. Additionally, we proposed reserving §§ 422.2266 and 423.2266 to further clarify the requirements for deemed materials by revising them to state that, if CMS does not approve or disapprove marketing materials within the specified review timeframe, the materials will be deemed approved. Deemed approved means that an MA organization or Part D sponsor may use the material. We believe that this change clarifies the present regulatory requirement for deemed marketing materials. We received several comments regarding this provision, and our responses follow. Comment: Several commenters supported this provision. However, a few commenters did request clarification, while others emphasized the importance of streamlining the review and approval process for FIDE SNPs. A commenter also stated that CMS, Medicaid, and the plans should work closer to benefit enrollees. Response: We thank the commenters for supporting our proposal to revise this provision. In response to the request for further clarification, we will consider including additional guidance in the Medicare Marketing Guidelines as that is the appropriate vehicle for providing detail on the requirements. We also appreciate the concerns with streamlining the review and approval process for FIDE SNPs; however, the comment is outside the scope of this rule. VerDate Sep<11>2014 13:56 Feb 11, 2015 Jkt 235001 Comment: A commenter opposed this provision on the grounds that MA organizations are expanding and offering more plan offerings with higher penetration rates in certain counties and regions. The commenter also stated that CMS is responsible for ensuring that marketing practices and materials are carefully monitored. Response: While we appreciate the commenter’s concern, we do not believe that the expansion of plan offerings will have an impact on this provision. Since this provision has been in existence, our analysis of deemed materials has shown that very few marketing materials have been approved through this process. Furthermore, we have protocols in place to monitor marketing materials, including materials that are deemed approved. We note in the Medicare Marketing Guidelines that we may require an MA organization or Part D sponsor to change any previously approved marketing materials if found to be inaccurate, altered or otherwise noncompliant. After review of the public comments received on this proposal, we are finalizing this proposed provision without modification. 4. Cross-Reference Change in the Part C Disclosure Requirements (§ 422.111) In the January 10, 2014 proposed rule, we proposed a technical correction to § 422.111(d)(1) to reflect the correct cross reference for procedures that MA organizations must follow when submitting changes to their rules for review. Section 422.111(d)(1) currently references § 422.80, which was removed when the marketing requirements were moved to subpart V, Medicare Marketing Requirements. We noted previously that subpart V, Medicare Marketing Requirements, was published in the September 18, 2008, final rule (73 FR 54208). We received no comments on our proposal and therefore are finalizing this provision without modification. 5. Managing Disclosure and Recusal in P&T Conflicts of Interest: Formulary Development and Revision by a Pharmacy and Therapeutics Committee Under Part D (§ 423.120(b)(1)) Section 1860D–4(b)(3)(A)(ii) of the Act requires Part D sponsors who use formularies to include on their P&T committees at least one practicing physician and at least one practicing pharmacist, each of whom is independent and free of conflict with respect to the sponsor and the plan and who has expertise in the care of elderly or disabled persons. In our August 3, 2004 proposed rule (69 FR 46659), we PO 00000 Frm 00040 Fmt 4701 Sfmt 4700 proposed to interpret ‘‘independent and free of conflict’’ to mean that such P&T committee members could have no stake, financial or otherwise, in formulary determinations. In our January 28, 2005 final rule (70 FR 4256), we adopted this interpretation, and clarified that we would consider a P&T committee member not to be free of conflict of interest if he or she had any direct or indirect financial interest in any entity—including Part D plans and pharmaceutical manufacturers—that would benefit from decisions regarding plan formularies. In a recent report (‘‘Gaps in Oversight of Conflicts Of Interest in Medicare Prescription Drug Decisions,’’ OEI–05– 10–00450), the HHS OIG recommended improvements in our requirements for Part D plan P&T committees. Specifically, the OIG report recommended that we establish minimum standards to ensure that these committees have clearly articulated and objective processes to determine whether disclosed financial interests are conflicts and to manage recusals due to conflicts of interests. The OIG report also suggested that we tell sponsors that they need to designate an objective party, such as a compliance officer, to flag and enforce the necessary recusals. In other words, the identification and evaluation of whether a disclosed financial interest represents a conflict of interest should be made by a knowledgeable and accountable representative of the sponsor’s organization, such as the compliance officer, and not solely by the P&T committee members themselves. We concurred that P&T committees should have clearly articulated and objective processes to determine whether disclosed financial interests are conflicts, and to manage recusals arising from any such conflicts. Therefore, we proposed to revise our regulations at § 423.120(b)(1) to renumber the existing provisions and add a new paragraph (b)(1)(iv) to require that the sponsor’s P&T committee clearly articulates and documents processes to determine that the requirements under paragraphs (b)(1)(i) through (iii) have been met, including the determination by an objective party of whether disclosed financial interests are conflicts of interest and the management of any recusals due to such conflicts. We also solicited comment on the pros and cons of defining PBMs as entities that could benefit from formulary decisions from which one practicing physician and one practicing pharmacist on the P&T committee must be free of conflict of interest. E:\FR\FM\12FER2.SGM 12FER2 Rmajette on DSK2VPTVN1PROD with RULES2 Federal Register / Vol. 80, No. 29 / Thursday, February 12, 2015 / Rules and Regulations We received the following comments and our response follows: Comment: A commenter noted that the current CMS formulary review process provides the necessary protections to beneficiaries and ensures that formularies are developed and managed in accordance with best practices. This commenter also pointed out that since the P&T committee members do not generally provide their services for free, it is standard practice that the PBM compensates the committee members for their committee-related activities; thereby, providing a financial conflict of interest. The commenter believes that without this financial compensation it would be difficult to engage qualified clinicians for the committee. Response: While the compensation that P & T committee members receive from PBMs for performing committeerelated activities could be seen as a potential conflict of interest, this practice is widely known and generally accepted as necessary to engage the most qualified clinicians. Moreover, we agree with the commenter that the current CMS formulary review process provides the necessary protections to beneficiaries and ensures that formularies are developed and managed in accordance with best practices. We have devoted extensive resources to the oversight of plan formularies and the audit of P&T committee proceedings to ensure that they comply with industry best practices and ensure beneficiaries’ access to clinically appropriate therapies. As discussed more fully in the January 10, 2014 proposed rule (79 FR 2019), we believe that our current formulary review process confers appropriate protections to beneficiaries from any potential adverse effects of conflicts of interest. The OIG report recommended that the P & T committee should have clearly articulated and objective processes to determine if disclosed financial interests are conflicts, and to manage any recusals if conflicts are found. We concur with this recommendation and proposed to revise our formulary requirements pertaining to the development and revision by a P & T committee at § 423.120(b)(1) to make it clear that the Part D sponsor must establish these processes. In our response to the OIG report, we noted that statutory and regulatory provisions (section 1860D–4(b)(3) of the Act and 42 CFR 423.120(b)) indicate that it is the plan’s responsibility to meet the formulary requirements; which include the development of these processes. Comment: Several commenters supported CMS’ proposal that P&T VerDate Sep<11>2014 13:56 Feb 11, 2015 Jkt 235001 committee processes must be clearly articulated, documented, and enforced by an objective party. However, a commenter requested that CMS better define the term ‘‘objective party’’ to include a knowledgeable and accountable person at the PBM. Response: We agree with the commenter and clarify that the objective party may be a representative of the PBM, as long as that representative is not also a member of the sponsor’s P&T committee. The objective party should be someone not on the P & T committee, and may include a representative from the PBM that is not on the P & T committee. Comment: A commenter pointed out that while the proposed recusal process is logical, it is duplicative and the current P&T policy is sufficient for dealing with conflicts of interest. Response: We disagree with the commenter and concurred with the OIG report’s recommendation (as discussed in the January 2014 proposed rule) that P&T committees should have clearly articulated and objective processes to determine conflicts of interest and manage any recusals. We are implementing these requirements on the recommendation of OIG. These requirements are supplemental to the beneficiary protections outlined in existing P&T policy, which does not address recusal and only provides that committee members should sign a conflict of interest statement revealing economic or other relationships with entities affected by drug coverage decisions that could influence committee decisions. After review of the comments received, we are finalizing this provision without modification. 6. Thirty-Six Month Coordination of Benefits (COB) Limit (§ 423.466(b)) In our April 15, 2010 final rule (75 FR 19819), we exercised our authority under sections 1860D–23 and 1860D–24 of the Act to impose a timeframe on the coordination of benefits between Part D sponsors and other payers including State Pharmaceutical Assistance Programs (SPAPs), other providers of prescription drug coverage, or other payers. In the April 15, 2010 final rule, we explained our approach to determining the 3-year timeframe, including the benefits derived from its establishment. We stated in our regulation at § 423.466(b) that, Part D sponsors must coordinate benefits with SPAPs, other entities providing prescription drug coverage, beneficiaries, and others paying on the beneficiaries’ behalf for a period not to exceed 3 years from the PO 00000 Frm 00041 Fmt 4701 Sfmt 4700 7951 date on which the prescription for a covered Part D drug was filled. The phrase ‘‘a period not to exceed 3 years’’ has caused confusion among some sponsors, who interpreted this to mean that the coordination of benefits period could be shorter than 3 years and have consequently imposed tighter timeframes for coordination of benefits. To clarify the requirement and avoid further confusion, we proposed to remove from the regulation the phrase ‘‘not to exceed,’’ and add the word ‘‘of.’’ This would clarify that sponsors must employ a coordination of benefits period of 3 years, and would remove any uncertainty about whether they may impose a shorter coordination of benefits period. We also proposed to revise the heading of § 423.466 to reference claims adjustments, which are addressed in § 423.466(a). Comment: A commenter indicated the proposed change was an appropriate modification. Response: We appreciate the support for this provision. Comment: A few commenters suggested we define the date on which the 3-year COB limit begins as the date the drug is dispensed or the first date of service. Response: The regulation already specifies the 36-month period begins on the date the prescription for a covered Part D drug was filled. However, we note the date of fill as referenced in the regulation is synonymous with the NCPDP date of service (Field # 401–D1) included in HIPAA standard transactions, such as the billing transaction, and required on the Part D prescription drug event record. After review of the public comments received in response to this proposal, we are finalizing the provision as proposed. 7. Application and Calculation of Daily Cost-Sharing Rates (§ 423.153) We proposed technical changes to the daily cost-sharing rate regulation to clarify the application and calculation of daily cost-sharing rates and cost sharing under the regulations. Section 423.153(b)(4)(i) requires sponsors to establish and apply a daily cost-sharing rate whenever a prescription is dispensed by a network pharmacy for less than a 30-days’ supply, unless the drug is excepted in the regulation. Currently, under § 423.100, in cases when a copayment is applicable, ‘‘daily cost-sharing rate’’ is defined as the monthly copayment under the enrollee’s Part D plan, divided by 30 or 31 and rounded to the nearest lower dollar amount, if any, or to another amount, E:\FR\FM\12FER2.SGM 12FER2 Rmajette on DSK2VPTVN1PROD with RULES2 7952 Federal Register / Vol. 80, No. 29 / Thursday, February 12, 2015 / Rules and Regulations but in no event to an amount that would require the enrollee to pay more for a month’s supply of the prescription than would otherwise be the case. We proposed to replace the numbers with the phrase ‘‘the number of days in the approved month’s supply for the drug dispensed’’ to address how Part D sponsors that have other days’ supplies as their month’s supplies are to calculate daily cost-sharing rates. Also, under our existing definition of ‘‘daily cost-sharing rate’’ in § 423.100, as noted previously, and with respect to copayments, the daily copayment cannot be an amount that would require the enrollee to pay more for a month’s supply of the prescription than would otherwise be the case. In other words, rounding up is not permitted under the current definition of ‘‘daily cost-sharing rate’’ and this has been another cause of confusion for some Part D sponsors. While our original intention was to prohibit significant increases in cost sharing, such as charging the full 30-day copay for both the trial supply and any subsequent refill of a medication, the current limitation on any increase in cost sharing over the 30-day supply amount has reportedly led to unnecessarily complicated programming, as well as proration of other amounts on the claim, such as the dispensing fees. Therefore, we proposed to replace the language ‘‘lower dollar amount, if any, or to another amount,’’ with ‘‘the nearest cent.’’ We believe this language better conveys the concept of rounding, while realizing this language allows Part D sponsors to round daily cost-sharing rates up or down to the nearest 2 decimal places. We also proposed other technical changes to the daily cost-sharing rate regulation at § 423.153(b)(4)(i) to improve the regulation’s clarity. First, we proposed to consolidate the language of § 423.153(b)(4)(i)(A) into § 423.153(b)(4)(i) and to consolidate § 423.153(b)(4)(i)(B)(1) and (2) into a new paragraph § 423.153(b)(4)(ii). Second, we proposed that the language in § 423.153(b)(4)(i) that addresses the application of the daily cost-sharing rate in the case of a monthly copayment be revised for clarity, and moved to a new paragraph (b)(4)(iii)(A). This paragraph states that in the case of a drug that would incur a copayment, the Part D sponsor must apply cost-sharing as calculated by multiplying the applicable daily cost sharing rate by the days’ supply actually dispensed when the beneficiary receives less than a 30-days’ supply. Third, we proposed that § 423.153(b)(4)(iii)(B) states that, in the case of a drug that would incur a coinsurance percentage, the Part D VerDate Sep<11>2014 13:56 Feb 11, 2015 Jkt 235001 sponsor must apply the coinsurance percentage for the drug to the days’ supply actually dispensed. We note that this means, with respect to dispensing fees, that the enrollee’s portion of additional dispensing fees for the incremental supply is calculated by application of this percentage. These technical clarifications should assist sponsors in correctly setting, calculating, and applying daily costsharing rates in the retail and LTC settings whenever a prescription is dispensed by a network pharmacy for less than a 30-days’ supply, unless the drug is excepted in the regulation. The proposal solicited comments on whether sponsors needed additional guidance surrounding the rounding methodology. We received the following comments and our responses follow: Comment: We received several comments in support of our proposal to clarify the daily cost sharing rule. Response: We thank the commenters for their supportive comments on our proposal. Comment: A commenter requesting that the application of the daily costsharing rule should be consistent with the changes CMS proposed to the definition of the ‘‘daily cost-sharing rate.’’ In other words, the commenter recommended that the daily costsharing rule apply whenever less than the approved month’s supply is dispensed; rather than, whenever less than a 30-day supply is dispensed. The commenter highlighted that this change would ensure beneficiaries are not required to pay more than they otherwise would have. This is consistent with CMS’ intent that even when the member does receive the remainder of a month’s supply, the total payment not exceed the 1-month’s cost sharing, except by a nominal rounding amount. This commenter provided the following example: A plan’s approved month’s supply is 34 days, and the applicable copayment is $30. If a member first obtains a 30-day supply and then a 4-day supply, under the current regulatory language, which provides that the daily cost-sharing rule applies when a covered Part D drug is dispensed for a supply less than 30 days, the member would pay $30 for the first supply since it is not for ‘‘less than 30 days’’ and then $3.52 (4 x $0.88) for the second supply, for a total of $33.52. However, if the daily cost-sharing rule applied whenever less than the approved month’s supply is dispensed, the member would pay $26.40 (30 x $0.88) for the first supply and $3.52 (4 x $0.88) for the second, for a total of $29.92. PO 00000 Frm 00042 Fmt 4701 Sfmt 4700 Response: We were persuaded by the comments that this suggested change is necessary to avoid confusion with the technical change that we proposed, by making the terminology consistent with the regulatory text. Therefore, we are making the following change to the final regulatory text: Replace ‘‘30 days’’ with ‘‘approved month’s supply’’ in § 423.153(b)(4)(i) and (iii). Comment: Several commenters indicated that CMS guidance is needed regarding the rounding methodology. Response: We will provide additional rounding guidance, if needed, after publication of this final rule. Based on comments received, we are finalizing this proposal as proposed and with the following modification: replacing ‘‘30 days’’ with ‘‘approved month’s supply’’ where applicable in § 423.153(b)(4)(i) and (iii). 8. Technical Change To Align Regulatory Requirements for Delivery of the Standardized Pharmacy Notice (§ 423.562) The current regulations at § 423.562(a)(3) require Part D plan sponsors to make arrangements with their network pharmacies to distribute notices instructing enrollees how to contact their plans to obtain a coverage determination or request an exception. This is accomplished through delivery of a standardized notice, CMS–10147— ‘‘Medicare Prescription Drug Coverage and Your Rights’’ (‘‘pharmacy notice’’). Section 423.562(a)(3) cross-references § 423.128(b)(7)(iii), added in our April 2011 final rule (76 FR 21432), which requires plans to have a system in place that transmits codes to network pharmacies so the pharmacy is notified to deliver the pharmacy notice at the POS in designated circumstances where the prescription cannot be filled as written. Pursuant to the 2011 regulatory change, we issued subsequent guidance (HPMS memoranda dated October 14, 2011 (‘‘Revised Standardized Pharmacy Notice’’) and December 27, 2012 (‘‘Revised Guidance for Distribution of Standardized Pharmacy Notice’’)) which clarifies that distribution of the pharmacy notice is required upon receipt of certain transaction responses indicating that the claim is not covered by Part D, as well as revised manual guidance in Chapter 18, section 40.3.1 of the Medicare Prescription Drug Benefit Manual related to operationalization of this requirement specific to a variety of specialty pharmacy settings. In practice, we have never based distribution of or referral to the pharmacy notice on whether or not the E:\FR\FM\12FER2.SGM 12FER2 Federal Register / Vol. 80, No. 29 / Thursday, February 12, 2015 / Rules and Regulations Rmajette on DSK2VPTVN1PROD with RULES2 enrollee disagrees with information provided by the pharmacist, but rather on whether the drug in question can be provided under Part D and whether the enrollee is able to obtain coverage for the drug at the pharmacy counter. Because the existing regulation text at § 423.562(a)(3) ties delivery of the pharmacy notice to the enrollee’s disagreement with information provided by the pharmacist, we proposed to remove this reference. This proposed technical change would not alter the circumstances under which the pharmacy notice must be delivered to an enrollee and will align the regulation and the operational requirements for distribution of the pharmacy notice. In addition, this proposed change would be consistent with both the current OMB-approved instructions regarding the pharmacy notice and current CMS manual guidance. We do not prohibit distribution of the pharmacy notice in any circumstance, so pharmacies may choose to also provide a copy of the notice in circumstances where the enrollee disagrees with the information provided (for example, if the enrollee believes they are being charged an incorrect costsharing amount), but the notice is not required under the standards established in § 423.128(b)(7)(iii). Provision of the pharmacy notice is not a prerequisite for an enrollee to request a coverage determination or access the appeals process. Similarly, a plan sponsor’s failure to comply with the requirements of § 423.128(b)(7)(iii) or § 423.562(a)(3) does not in any way limit an enrollee’s right to request a coverage determination or appeal. We received no comments on this proposal and therefore are finalizing the proposed revision to this provision without modification. 9. MA Organization Responsibilities in Disasters and Emergencies (§ 422.100) We proposed to add paragraph (m) to § 422.100 to codify and further clarify an MA organization’s responsibilities when health plan services are affected by public health emergencies or disasters in order to ensure that beneficiaries continue to have access to care in situations in which normal business operations are disrupted due to public health emergencies or disasters and enable out-of-network providers to be informed of the terms of payment for furnishing services to affected enrollees during public health emergencies or disasters. The proposed new paragraph would require MA organizations to ensure access, at in-network cost sharing, to VerDate Sep<11>2014 13:56 Feb 11, 2015 Jkt 235001 covered services even when furnished by noncontracted providers when disruption in the service area impedes enrollees’ ability to access contracted providers and/or contracted providers’ ability to provide needed services. The new paragraph also provides the basis for determining the beginning and end of a disaster or emergency, and requires that the organization annually post on its Web site and notify enrollees and contracted providers of its disaster and emergency policies. We received the following comments on this proposal and our response follows: Comment: A commenter requested clarification of whether this proposed requirement applies if plan service delivery is not affected even though in a declared disaster area. Response: Generally, a disaster creates multiple disruptions. For example, although provider offices may be operating as usual, transportation, electricity and phone service may be disrupted. Consequently, the proposed requirements would apply to all MA plans from the time the disaster is declared and continue to apply until the end of the disaster, as described in the proposed paragraph (m)(3). Comment: Several commenters stated that the proposed revision should only apply to emergency and urgently needed services that are sought during a public health emergency or disaster. Response: To the extent possible, we expect MA plans to provide continued and uninterrupted access to all health care services covered by the plan, whether routine or unforeseen. Disruption to a plan’s network does not relieve an MA plan from fulfilling its contractual obligation to furnish all covered services to enrollees, even if it must do so by covering services furnished to its enrollees by noncontracted providers. Comment: A commenter suggested that reduced out-of-network cost sharing be required only if contracted providers are unavailable or not accessible. Response: Availability of networks depends on several factors—the status of provider offices, transportation, phone service, electric service, etc.— which may be impacted to varying degrees during a disaster. The primary goal during a disaster is the provision of continued and uninterrupted access of health care to all enrollees. To achieve this goal, enrollees must be allowed to obtain medically necessary plancovered services without prior approval, at in-network cost sharing, from qualified providers, even if those providers are out-of-network. PO 00000 Frm 00043 Fmt 4701 Sfmt 4700 7953 Comment: A commenter stated that CMS should reconsider how this proposed regulation may manipulate enrollee incentives, reduce access for enrollees that need services more urgently and increase costs to MA organizations and the MA program. Response: We recognize that disasters can create unavoidable disruptions and increased costs for MA organizations. Our primary goal during a disaster is the provision of continued and uninterrupted access to medically necessary plan-covered services for all enrollees. Our intention is to facilitate achievement of this goal by ensuring that plans facilitate increased access to providers from whom enrollees in the disaster area may seek high quality services at in-network cost sharing. We do not believe that these temporary and unusual episodes of increased access will incentivize enrollees in a negative way or result in significant cost increases for affected MA organizations. After review of the public comments received on this proposal, we are finalizing the proposed provisions with modification. To provide for greater readability, we are finalizing paragraph (m)(1)(iii) with slight revisions to the text from the proposed version. 10. Technical Changes To Align Part C and Part D Contract Determination Appeal Provisions (§§ 422.641 and 422.644) Sections 1857(h) and 1860D– 12(b)(3)(F) of the Act describe the procedures for termination for both MA organizations and Part D Plan sponsors, respectively. These statutory provisions provide a contracting organization with an opportunity for a hearing before its contract is terminated. Appeal procedures were established under sections 1856(b)(2) and 1860D–12(b)(3) of the Act for both Part C and Part D sponsors, respectively. Sections 422.641 and 423.641 list the types of Part C and Part D contract determinations that may be appealed. a. Technical Change (§ 422.641) Currently in § 422.641, the contract termination is discussed in paragraph (b) and contract non-renewal is discussed in (c). Conversely, in § 423.641 the contract terminations are discussed in paragraph (c) and contract non-renewal is discussed in (b). Therefore, we proposed to align § 423.641 with the current list order for (b) and (c) in the contract determinations section at § 422.641. E:\FR\FM\12FER2.SGM 12FER2 7954 Federal Register / Vol. 80, No. 29 / Thursday, February 12, 2015 / Rules and Regulations b. Technical Changes (§ 422.644(a) and (b)) Sections 1857(h)(1)(B) and 1860D– 12(b)(3)(F) of the Act describe the procedures for contract terminations for both MA organizations and Part D sponsors, respectively. In § 423.642(a) we specify that the notice is based upon a contract determination made ‘‘under § 423.641.’’ Therefore, since Part C and Part D language should be consistent, the same reference should be made in the corresponding Part C § 422.644(a). To remedy this, we proposed to insert ‘‘under § 422.641’’ into § 422.644(a) for Part C contract determinations. In addition, the Part D plan sponsor language in § 423.642(b) states ‘‘(b) The notice specifies the—(1) Reasons for the determination; and’’. The corresponding Part C language in § 422.644(b) states that ‘‘(b) The notice specifies—(1) The reasons for the determination; and’’. We proposed to change § 422.644(b) by moving the word ‘‘the’’ and revising it to read ‘‘(b) The notice specifies the— (1) Reasons for the determination; and’’. We received no comments on this proposal and therefore are finalizing these changes without modification. 11. Technical Changes To Align Parts C and D Appeal Provisions (§§ 422.660 and 423.650) Rmajette on DSK2VPTVN1PROD with RULES2 Sections 1857(h)(1)(B) and 1860D– 12(b)(3)(F) of the Act provide organizations with an opportunity for a hearing before its contract is terminated in the Part C and Part D programs, respectively. Appeal procedures were established under section 1856(b)(2) of the Act for both MA organizations and Part D plan sponsors. We proposed to replace the term ‘‘under’’ with the phrase ‘‘in accordance with’’ in § 422.660(a)(2), § 422.660(a)(3), and § 423.650(a)(2). We proposed to replace the word ‘‘and’’ with ‘‘through’’ in § 423.560(a)(4) to ensure consistency between § 422.660(a)(4) and § 423.650(a)(4). In addition, we proposed to modify § 422.660(b)(4) and § 423.650(b)(4) to add the language ‘‘§ 422.752(a) through (b)’’ and ‘‘§ 423.752(a) through (b)’’, respectively, to refer the reader to the applicable regulations for intermediate sanctions. We received no comments on this proposal and therefore are finalizing this provision without modification. 12. Technical Change to the Restrictions on Use of Information Under Part D (§ 423.322) We proposed a technical change to § 423.322 due to section 6402(b)(1) of the Affordable Care Act which amended section 1860D–15(f)(2) of the Act. For VerDate Sep<11>2014 13:56 Feb 11, 2015 Jkt 235001 background, most of the payment provisions for the Part D program are found in section 1860D–15 of the Act, and as originally enacted, both subsections (d) and (f) authorized the Secretary to collect any information needed to carry out this section but also stated that information disclosed or obtained pursuant to section 1860D–15 of the Act may be used by officers, employees, and contractors of HHS only for the purposes of, and to the extent necessary in, carrying out section 1860D–15 of the Act. Section 6402(b)(1) of the Affordable Care Act amended section 1860D– 15(f)(2) of the Act to relax the limitation on the use of information that is disclosed or obtained under section 1860D–15 of the Act. Specifically, the Affordable Care Act removed the word ‘‘only’’ from subsection (f)(2)(A) and added a new subsection (ii) which states that information disclosed or obtained under section 1860D–15 of the Act may be used by officers, employees, and contractors of HHS for the purposes of, and to the extent necessary, in conducting oversight, evaluation, and enforcement under this title. Section 6402(b)(1) of the Affordable Care Act also added a new subsection (B) which states that information disclosed or obtained pursuant to section 1860D–15 of the Act may be used by the Attorney General and the Comptroller General of the United States for the purposes of, and to the extent necessary in, carrying out health oversight activities. Thus, the Affordable Care Act considerably broadened the purposes for which HHS, its contractors, and the Attorney General and Comptroller General may use such information. However, we note, that the Affordable Care Act did not change the existing restriction on the use of information under subsection (d). In light of the Affordable Care Act amendment to section 1860D–15(f) of the Act, we proposed to make conforming changes to § 423.322. We received no comments regarding this proposal and are finalizing the proposed amendments to this provision without modification. 13. Technical Changes to Requirements Related to Qualified Prescription Drug Coverage (§ 423.104) In the April 15, 2010 Federal Register (75 FR 19711), we finalized new requirements at § 423.104 related to qualified prescription drug coverage. At that time, we codified a new paragraph, § 423.104(d)(2)(iii) stating that tiered cost sharing under (d)(2)(ii) of the same paragraph may not exceed levels annually determined by CMS to be discriminatory. In the April 15, 2011 PO 00000 Frm 00044 Fmt 4701 Sfmt 4700 Federal Register (76 FR 21432), the language at (d)(2)(iii) was inadvertently removed when making other revisions to § 423.104. To reinstate the language that was removed, we are including a technical change to add this language back to § 423.104. This technical correction does not represent a change in policy. 14. Technical Changes to the Definition of Supplemental Benefits (§ 423.100) In the April 12, 2012 Federal Register (77 FR 22169), we revised the definition of supplemental benefits at § 423.100 by defining supplemental benefits as benefits offered by Part D plans, other than employer group health or waiver plans, that meet the requirements of § 423.104(f)(1)(ii). We subsequently issued a correction notice in the June 1 2012 Federal Register (77 FR 32407) with unrelated changes that inadvertently resulted in the revised definition not being included in the CFR. To address this omission, we are issuing a technical change at this time to include the definition of supplemental benefits finalized in the April 12, 2012 Federal Register (77 FR 22169). This technical correction does not represent a change in policy. III. Collection of Information Requirements Under the Paperwork Reduction Act of 1995 (hereafter, ‘‘PRA’’), we are required to provide 30-day 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. To fairly evaluate whether an information collection should be approved by OMB, section 3506(c)(2)(A) of the PRA 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. In the January 10, 2014, proposed rule (79 FR 1917) we solicited public comment on each of the following provisions that contained information collection requirements (ICRs). E:\FR\FM\12FER2.SGM 12FER2 Federal Register / Vol. 80, No. 29 / Thursday, February 12, 2015 / Rules and Regulations A. ICRs Related to Eligibility of Enrollment for Individuals Not Lawfully Present in the United States (§§ 417.2, 417.420, 417.422, 417.460, 422.1, 422.50, 422.74, 423.1, 423.30, and 423.44) As amended here sections 417.2, 417.420, 417.422, 417.460, 422.1, 422.50, 422.74, 423.1, 423.30, and 423.44 set out the eligibility requirement of citizenship or lawful presence to enroll in MA, Part D, and cost plans. To implement these provisions, we will: (1) Relay data regarding an individual’s lawful presence status to plans through the MARx system so that the plans will be aware of an individual’s eligibility when requesting enrollment; and (2) notify plans of loss of eligibility for current members based on unlawful presence status. In this final rule, we explicitly direct MA organizations, Part D sponsors, and entities offering cost plans not to request or solicit information about lawful presence from Medicare beneficiaries in connection with this rule as CMS will provide the necessary information. This data is already available to us; thus no new data will be collected. We received no comments on the proposed ICR assessment. Consequently, we are finalizing that assessment without modification. Rmajette on DSK2VPTVN1PROD with RULES2 B. ICRs Related to Good Cause Processes (§ § 417.460, 422.74, and 423.44) Sections 417.460, 422.74, and 423.44 establish the ability for us to designate an entity other than CMS to implement the good cause process. If we assign the good cause process to entities operating a cost plan, MA organization, or a Part D sponsor, the plan would already have the enrollment data necessary to make the determinations required by the process. In addition, the former enrollee is already required by the applicable regulations to provide a credible statement to establish good cause for the failure to make timely payments. Thus no additional data will be collected by the plan. However, if we designate plans to implement good cause processes, there would be additional burden to each plan. The burden would consist of completing the operational process, such as—(1) responding to requests for reinstatement from former members; (2) gathering the attestation from the individual regarding his or her reason for not paying the plan premiums within the grace period; (3) making the determination as to whether the individual meets the good cause criteria; and (4) maintaining the case notes and documentation to support its VerDate Sep<11>2014 17:55 Feb 11, 2015 Jkt 235001 determination should it need to be reviewed. As plans already provide customer service to their current and past members, we estimate 30 minutes for each reinstatement request. According to the most recent wage data provided by the Bureau of Labor Statistics (BLS) for May 2013, the mean hourly wage for the category of ‘‘Customer Service Representatives’’— which we believe, considering the common point of entry for all issues at the plan, is the most appropriate category is $16.04/hr. With fringe benefits and overhead, the rate is $23.74/hr. It is calculated that the cost for 30 minutes would be $11.87. Not all plans disenroll for nonpayment of premiums. However, for those who do implement this voluntary policy, it results in an average of 20,000 disenrollments each month. In response, we receive an average of 698 requests for reinstatement per month. The plan representative cost of $11.87 for each case is multiplied by 698 cases. Therefore, under the revised regulations, handling of these requests would result in a total monthly cost of $8,285 (or $99,423 and 4,188 hours, annually) for all plans in the MA, Part D, and cost plan programs. The requirements and burden will be submitted to OMB under control number 0938—New (CMS–10544). We received no comments on the proposed ICR assessment. Consequently, we are finalizing this assessment with only a minor modification in order to reflect the updated 2013 wage data. C. ICRs Related To Expanding Quality Improvement Program Regulations (§ 422.152) We explained in the proposed rule that we do not believe this provision would impose any new or revised collection requirements or burden because it codifies a submission process that currently applies for quality improvement program information. PRA approval is current under OMB control number 0938–1023 (CMS–10209). We received no comments on the ICRs for this proposal and are finalizing these provisions without modification. D. ICRs Related To Changes to Audit and Inspection Authority (§§ 422.503(d)(2) and 423.504(d)(2)) In §§ 422.503(d)(2) and 423.504(d)(2), MA organizations and Part D sponsors are required to hire an independent auditor to perform validation exercises to confirm correction of deficiencies found during an audit. We currently conduct these validation exercises and collect data associated with these PO 00000 Frm 00045 Fmt 4701 Sfmt 4700 7955 activities under OMB control number 0938–1000 (CMS–10191). We believe the provision will not impose any additional burden on MA organizations or Part D sponsors. E. ICRs Related to Business Continuity for MA Organizations and PDP Sponsors (§§ 422.504(o) and 423.505(p)) This provision requires MA organizations and Part D sponsors to develop, maintain, and implement business continuity plans that meet certain minimum standards. The proposed provision was modified due to public comment. Specifically, in this final rule MA organizations and Part D sponsors plan to restore essential operations within 72, rather than 24, hours of a failure. While the cost estimates are set out under this rule’s Regulatory Impact Analysis, the PRArelated burden will be made available for public comment through a separate Federal Register notice under OMB control number 0938–0964 (CMS– 10141). F. Submission of PRA-Related Comments We have submitted a copy of this rule to OMB for its review of the rule’s information collection and recordkeeping requirements. These requirements are not effective until they have been approved by OMB. To obtain copies of the supporting statement and any related forms for the paperwork collections referenced above, access CMS’ Web site at https:// www.cms.hhs.gov/ PaperworkReductionActof1995; email your request, including your address, phone number, OMB number, and CMS document identifier, to Paperwork@ cms.hhs.gov; or call the Reports Clearance Office at 410–786–1326. When commenting on the stated information collections, please reference the document identifier or OMB control number. To be assured consideration, comments and recommendations must be received by the OMB desk officer via one of the following transmissions: Mail: OMB, Office of Information and Regulatory Affairs, Attention: CMS Desk Officer, Fax: (202) 395–5806, OR Email: OIRA_submission@omb.eop.gov. PRA-related comments must be received on/by March 16, 2015. IV. Regulatory Impact Statement We examined the impact of this final 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 E:\FR\FM\12FER2.SGM 12FER2 Rmajette on DSK2VPTVN1PROD with RULES2 7956 Federal Register / Vol. 80, No. 29 / Thursday, February 12, 2015 / Rules and Regulations (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). A regulatory impact analysis (RIA) must be prepared for major rules with economically significant effects ($100 million or more in any 1 year). We determined that this final rule does not reach the threshold for being considered economically significant, and thus, is not considered a major rule. There are five provisions with nonmeasurable impact: Efficient dispensing, requirements for drugs covered under Part D, two-year prohibition when organizations terminate their contract, requirements for urgently needed services, and MA organization responsibilities in disasters and emergencies. Some of these provisions do not impose new requirements or costs but rather, clarify the necessary actions to meet existing regulatory requirements, and therefore, are expected to have no impact. Other provisions reflect widespread industry practices or would only impact a few plans and therefore are expected to have no, or minimal, impact. There are three provisions with measurable impacts: Citizenship or lawful presence; audit and inspection authority; and business continuity operations. We discuss these three provisions as follows. Citizenship or Lawful Presence. This final rule adds ‘‘citizenship or lawful presence’’ as an eligibility requirement to enroll and remain enrolled in MA, Part D, and section 1876 cost contracts to comply with section 401 of the Personal Responsibility and Work Opportunity Act, which mandates that aliens who are not lawfully present in the United States are not eligible to receive any federal benefit, including Medicare. As indicated in the proposed rule of January 10, 2014 (79 FR 1918), based on estimates reflecting scoring by the CMS Office of the Actuary and 2012 lawful presence data provided by the SSA, this provision has an anticipated savings of $67 million over 5 years. VerDate Sep<11>2014 13:56 Feb 11, 2015 Jkt 235001 We estimate 10 million dollars expected savings for 2015 consisting of $5 million savings for Medicare Advantage (MA) and $5 million savings for Part D. These savings increase annually and by 2019, we estimate $17 million savings consisting of $8 million for MA and $9 million for Part D. Audit and Inspection Authority. This rule finalizes some, but not all, proposed changes to the audit and inspection authority included in the proposed rule. We proposed two changes to §§ 422.503(d)(2) and 423.504(d)(2) that would allow CMS to require sponsors (MA organizations and Part D sponsors) to hire an independent auditor to conduct full or partial program audits of the sponsors’ operational areas and/or correction validation exercises. Under the first proposal, each MA organization and/or Part D sponsor would have been required to hire an independent auditor to perform a full or partial program audit at least every 3 years. However, due to public comment, we are not finalizing this proposal. We also proposed to revise our regulations to permit CMS to require MA organizations or Part D sponsors with audit results that reveal noncompliance with CMS requirements to hire an independent auditor to validate that correction has occurred. With our existing resources we currently conduct approximately 30 audits per year. We received numerous comments indicating that our initial estimate was not accurate and considerably lower than the sponsors’ actual costs. Based on the public comments, we revaluated our methods of estimating the sponsor costs associated with procuring an independent auditor to conduct validations and as a result we decreased: (1) The number of organizations that may be subject to a validation each year; and (2) the number of team members likely required to perform the validation exercise; and increased: (3) The estimated total cost per hour for the audit team. The estimate for 23 sponsors is closer to the maximum number of sponsors that would be expected to hire an independent auditor to validate correction of audit deficiencies that we identified. As additional organizations are subject to a CMS program audit or utilize CMS’ audit protocols to perform their own internal auditing, we expect that the performance of these organizations and the industry in general will improve; this in turn will reduce the likelihood that an organization would need to hire an independent auditor to validate PO 00000 Frm 00046 Fmt 4701 Sfmt 4700 correction of audit deficiencies. Therefore, we expect the total number of organizations that may be required to hire an independent auditor to validate correction of audit deficiencies will decline over time. While some sponsor audit findings can be validated through means other than a full-scale validation audit, we have found several organizations with significant performance deficiencies. We estimate that approximately 75 percent of the 30 organizations we audit per year (23 organizations) may be requested to retain an independent auditor to validate correction of their audit deficiencies. Under these circumstances we estimated that the independent auditor hired would need to have a team consisting of the following professionals: • Formulary and Benefits Administration—pharmacist, a senior claims analyst, and a senior auditor. • Coverage Determinations, Part D Appeals, Part D Grievances—physician, pharmacist and senior auditor. • Organization Determinations, Part C Appeals, Part C Grievances—physician, nurse practitioner, and senior auditor. • Compliance Program effectiveness—two senior auditors. • Special Needs Plan Model of Care (SNP MOC) implementation—nurse practitioner and senior auditor. We used 2013 wage statistics supplied by the Bureau of Labor and Statistics, along with benefit and overhead included to develop estimates of direct wages. The estimated total cost per hour for each audit team is $1,202.00. A team of 13 professionals (listed previously) is necessary for the performance of each validation effort. The estimated total number of hours the team will need to perform the validation per sponsor is 80. The total cost per sponsor to procure and support the independent audit team is therefore: 80 (hours) × $1,202.00 = $96,160.00. The validation costs will be allowable costs in the plan’s bid. Under existing regulations, the estimated total annual burden related to the time and effort for sponsors to perform the validation is $2,211,680.00 (23 sponsors × $96,160.00 per sponsor). Since only 30 sponsors are audited per year and only those with the most serious findings would likely be subjected to hiring an independent auditor to conduct validation, the cost per sponsor per year is $2,211,680 ÷ 193 (unique parent organizations) = $11,459 per year. The number 193 represents the 193 unique parent organizations as of June 2014. This figure includes all coordinated care plans (CCPs), private fee for service (PFFS) plans, section E:\FR\FM\12FER2.SGM 12FER2 Rmajette on DSK2VPTVN1PROD with RULES2 Federal Register / Vol. 80, No. 29 / Thursday, February 12, 2015 / Rules and Regulations 1876 Medicare cost plans whose parent organizations also have an MA or Part D plan, stand-alone prescription drug plans (PDPs), and employer group waiver plans (800 series). Sponsors will be allowed to account for this cost in their bid. Business Continuity. Commenters in general took issue with the costs associated with the proposal for Business Continuity for MA organizations and Part D Sponsors (§§ 422.504(o) and 423.505(p)). Several commenters suggested that our RIA significantly underestimated costs because requiring MA organizations and Part D sponsors to restore essential functions within 24 hours would necessitate systems redundancy. Other commenters were concerned about the cost of testing IT systems on an annual basis; another commenter questioned the need to train ‘‘all’’ employees. As detailed in section II.A.4. of this final rule (Business Continuity for MA organizations and Part D Sponsors (§§ 422.504(o) and 423.505(p)), we believe that the modifications to regulatory text that we are finalizing in this final rule, as well as clarifications provided in our responses (for instance, we are not requiring systems redundancy), address the vast majority of concerns raised about the RIA. Business continuity plans are well established in the business community, and we believe that most MA organizations and Part D sponsors already have business continuity plans in place which cover the basic proposed subject areas. We still estimate that 5 percent of MA organizations and Part D sponsors do not have business continuity plans, but are updating our estimates from our proposed rule to reflect the most recent data available. For 2015, there are 568 MA organizations and Part D sponsors, resulting in an estimated 28 (5 percent × 568) affected entities. More recent May 2013 wage data from the BLS OES sets the hourly rate for an emergency management director, General Medical and Surgical Hospitals, at $36.90. We now estimate the first year burden of a full time emergency management director to help design the plan to be 58,240 hours (28 entities × 2,080 hours). The estimated cost associated with such an expert is the estimated number of hours multiplied by the estimated hourly rate of $36.90, plus 100 percent for fringe benefits and overhead, which equals a first year estimated cost of $4,298,112. In subsequent years, the estimated burden associated with this requirement will be the cost of an emergency management director working on a part VerDate Sep<11>2014 13:56 Feb 11, 2015 Jkt 235001 time basis for an ongoing burden of 29,120 hours (28 entities × 1,040 hours). The estimated cost associated with such an expert would be the estimated number of hours multiplied by the estimated hourly rate of $36.90 plus 100 percent for fringe benefits and overhead, which equals an estimated annual cost of $2,149,056 for subsequent years. Additionally, as discussed in section II.A.4. of this final rule, we agree with the commenters that the regulation may require some changes, which we believe are minimal, to existing business continuity plans and are adding estimates to cover those costs. We estimate that an additional 10 percent of the 568 contracting entities, or about 57 entities, will be affected by this requirement. This means the estimated first year burden of a part time emergency management director to conform the existing business continuity plans will be 59,280 hours (57 entities × 1,040 hours). The estimated cost associated with such an expert is the estimated number of hours multiplied by the estimated hourly rate of $36.90 plus 100 percent for fringe benefits and overhead, which equals a first year estimated cost of $4,373,864. In subsequent years, we estimate the burden associated with this requirement for MA organizations and Part D sponsors that are continuing to conform their business continuity plans with our regulation will decrease, for an ongoing burden of 29,640 hours (57 entities × 520 hours). The estimated cost associated with such an expert is the estimated number of hours multiplied by the estimated hourly rate of $36.90 plus 100 percent for fringe benefits and overhead, which equals a first year cost of $2,187,432. Lastly, as previously discussed in our summary of the proposed effects, we believe that savings that we cannot capture will be realized by this regulation, especially for those MA organizations and Part D sponsors that do not currently have business continuity plans in place. Business continuity planning helps to protect resources and minimize losses. If as a consequence, MA organizations and Part D sponsors, that currently do not have these plans in place, provide Medicare benefits more efficiently after disasters and disruptions, this could result in fewer risks to beneficiary health. Our analyses of the three provisions with measurable impact—unlawful presence, audit and inspection authority and business continuity operations— show that aggregate savings over 5 years is $33 million. Estimated savings for 2015 is $0 million and the savings PO 00000 Frm 00047 Fmt 4701 Sfmt 4700 7957 increase annually to $11 million for 2019. Consequently, the savings do not reach the $100 million threshold and therefore this final rule is not a major rule. The Regulatory Flexibility Analysis (RFA), as amended, requires agencies to analyze options for regulatory relief of small businesses, 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 health insurance industry was examined in depth in the RIA prepared for the proposed rule on establishment of the MA program (69 FR 46866, August 3, 2004). It was determined, in that analysis, that there were few, if any, ‘‘insurance firms,’’ including HMOs that fell below the size thresholds for ‘‘small’’ business established by the Small Business Administration (SBA). We assume that the ‘‘insurance firms’’ are synonymous with health plans that conduct standard transactions with other covered entities and are, therefore, the entities that will have costs associated with the new requirements finalized in this rule. At the time the analysis for the MA program was conducted, the market for health insurance was and remains, dominated by a handful of firms with substantial market share. However, we estimate that the costs of this rule on ‘‘small’’ health plans do not approach the amounts necessary to be a ‘‘significant economic impact’’ on firms with revenues of tens of millions of dollars. Therefore, this rule would not have a significant economic impact on a substantial number of small entities. In addition, section 1102(b) of the Act requires us to prepare a regulatory analysis for any rule or regulation proposed under Title XVIII, Title XIX, or Part B of the Act that may have significant impact on the operations of a substantial number of small rural hospitals. 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 2014, that threshold is approximately $141 E:\FR\FM\12FER2.SGM 12FER2 7958 Federal Register / Vol. 80, No. 29 / Thursday, February 12, 2015 / Rules and Regulations million. This final rule is not expected to reach this spending threshold. Executive Order 13132 establishes certain requirements that an agency must meet when it promulgates a proposed rule (and subsequent final rule) that imposes substantial direct requirement costs on state and local governments, preempts state law, or otherwise has federalism implications. Since this rule does not impose any substantial costs on state or local governments, the requirements of Executive Order 13132 are not applicable. In accordance with the provisions of Executive Order 12866, this rule was reviewed by the Office of Management and Budget. List of Subjects 42 CFR Part 417 Administrative practice and procedure, Grant programs-health, Health care, Health insurance, Health maintenance organizations (HMO), Loan programs-health, Medicare, Reporting and recordkeeping requirements. 42 CFR Part 422 Administrative practice and procedure, Health facilities, Health maintenance organizations (HMO), Medicare, Penalties, Privacy, Reporting and recordkeeping requirements. 42 CFR Part 423 Administrative practice and procedure, Emergency medical services, Health facilities, Health maintenance organizations (HMO), Health professionals, Medicare, Penalties, Privacy, Reporting and recordkeeping requirements. For the reasons set forth in the preamble, the Centers for Medicare & Medicaid Services amends 42 CFR Chapter IV as follows: PART 417—HEALTH MAINTENANCE ORGANIZATION, COMPETITIVE MEDICAL PLANS, AND HEALTH CARE PREPAYMENT PLANS Rmajette on DSK2VPTVN1PROD with RULES2 2. Amend § 417.2 by revising paragraph (b) to read as follows: ■ Basis and scope. * * * * (b) Subparts G through R of this part set forth the rules for Medicare contracts with, and payment to, HMOs and VerDate Sep<11>2014 13:56 Feb 11, 2015 Jkt 235001 [Amended] 3. Amend § 417.420, paragraph (a) by removing the phrase ‘‘Individuals who are entitled to’’ and adding in its place the phrase ‘‘Eligible individuals who are entitled to’’. ■ 4. Amend § 417.422 as follows: ■ a. In the introductory text, by removing the phrase ‘‘any individual who—’’ and adding in its place the phrase ‘‘any individual who meets all of the following:’’ ■ b. In paragraphs (a) through (e), by removing the ‘‘;’’ and adding in its place ‘‘.’’. ■ c. In paragraph (f), by removing the ‘‘; and’’ and adding in its place ‘‘.’’. ■ d. Adding paragraph (h). The addition reads as follows: ■ § 417.422 CMP. Eligibility to enroll in an HMO or * * * * (h) Is a United States citizen or an individual who is lawfully present in the United States as determined in 8 CFR 1.3. ■ 5. Amend § 417.460 as follows: ■ a. In paragraph (b)(2)(i) by removing ‘‘.’’ and adding in its place ‘‘;’’. ■ b. In paragraph (b)(2)(iii) by removing ‘‘; or’’ and adding in its place ‘‘;’’. ■ c. Redesignating paragraph (b)(2)(iv) as paragraph (b)(2)(v). ■ d. Adding a new paragraph (b)(2)(iv). ■ e. In paragraph (b)(3), by removing the cross-reference ‘‘paragraphs (c) through (i)’’ and adding in its place the crossreference ‘‘paragraphs (c) through (j)’’. ■ f. By revising paragraph (c)(3). ■ g. In paragraph (c)(4), by removing the phrase ‘‘non-payment of premiums.’’ and adding in its place the phrase ‘‘nonpayment of premiums or other charges.’’ ■ h. By adding paragraph (j). The revisions and the additions read as follows: * * * * (b) * * * (2) * * * (iv) Is not lawfully present in the United States; or * * * * * (c) * * * (3) Good cause and reinstatement. When an individual is disenrolled for failure to pay premiums or other charges imposed by the HMO or CMP for deductible and coinsurance amounts for which the enrollee is liable, CMS (or a PO 00000 Frm 00048 third party to which CMS has assigned this responsibility, such as an HMO or CMP) may reinstate enrollment in the plan, without interruption of coverage, if the individual shows good cause for failure to pay and pays all overdue premiums or other charges within 3 calendar months after the disenrollment date. The individual must establish by a credible statement that failure to pay premiums or other charges was due to circumstances for which the individual had no control, or which the individual could not reasonably have been expected to foresee. * * * * * (j) Enrollee is not lawfully present in the United States. Disenrollment is effective the first day of the month following notice by CMS that the individual is ineligible in accordance with § 417.422(h). PART 422—MEDICARE ADVANTAGE PROGRAM 6. 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), 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. * § 417.420 § 417.460 Disenrollment of beneficiaries by an HMO or CMP. 1. The authority citation for part 417 continues to read as follows: ■ § 417.2 competitive medical plans (CMPs) under section 1876 of the Act and 8 U.S.C. 1611. * * * * * Fmt 4701 Sfmt 4700 Authority: Secs. 1102 and 1871 of the Social Security Act (42 U.S.C. 1302 and 1395hh). 7. Amend § 422.1 by revising paragraph (a) to read as follows: ■ § 422.1 Basis and scope. (a) Basis. This part is based on the indicated provisions of the following: (1) The following provisions of the Act: (i) 1128J(d)—Reporting and Returning of Overpayments. (ii) 1851—Eligibility, election, and enrollment. (iii) 1852—Benefits and beneficiary protections. (iv) 1853—Payments to Medicare Advantage (MA) organizations. (v) 1854—Premiums. (vi) 1855—Organization, licensure, and solvency of MA organizations. (vii) 1856—Standards. (viii) 1857—Contract requirements. (ix) 1858—Special rules for MA Regional Plans. (x) 1859—Definitions; enrollment restriction for certain MA plans. (2) 8 U.S.C. 1611—Aliens who are not qualified aliens ineligible for Federal public benefits. * * * * * ■ 8. Amend § 422.50 as follows: ■ a. In paragraph (a) introductory text, by removing the phrase ’’ if he or she— ’’ and adding in its place the phrase ‘‘if he or she meets all of the following:’’ ■ b. In paragraphs (a)(1) and (4), by removing ‘‘;’’ and adding in its place ‘‘.’’. E:\FR\FM\12FER2.SGM 12FER2 Federal Register / Vol. 80, No. 29 / Thursday, February 12, 2015 / Rules and Regulations c. In paragraph (a)(5), by removing ‘‘; and’’ and adding in its place ‘‘.’’. ■ d. By adding paragraph (a)(7). The addition reads as follows: ■ § 422.50 Eligibility to elect an MA plan. * * * * * (a) * * * (7) Is a United States citizen or is lawfully present in the United States as determined in 8 CFR 1.3. * * * * * ■ 9. Amend § 422.74 as follows: ■ a. By adding paragraph (b)(2)(v). ■ b. By revising paragraph (d)(1)(v). ■ c. By adding paragraph (d)(8). The additions and revision read as follows: § 422.74 Disenrollment by the MA organization. * * * * * (b) * * * (2) * * * (v) The individual is not lawfully present in the United States. * * * * * (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 (or a third party to which CMS has assigned this responsibility, such as an MA organization) may reinstate enrollment in the MA plan, without interruption of coverage, if the individual— (A) Shows good cause for failure to pay within the initial grace period; and (B) Pays all overdue premiums within 3 calendar months after the disenrollment date; and (C) Establishes 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. * * * * * (8) Enrollee is not lawfully present in the United States. Disenrollment is effective the first day of the month following notice by CMS that the individual is ineligible in accordance with § 417.422(h) of this chapter. * * * * * 10. Amend § 422.100 by adding paragraph (m) to read as follows: Rmajette on DSK2VPTVN1PROD with RULES2 ■ § 422.100 General requirements. * * * * * (m) Special requirements during a disaster or emergency. (1) When a state of disaster is declared as described in paragraph (m)(2) of this section, an MA organization offering an MA plan must, VerDate Sep<11>2014 13:56 Feb 11, 2015 Jkt 235001 until one of the conditions described in paragraph (m)(3) of this section occurs, ensure access to benefits in the following manner: (i) Cover Medicare Parts A and B services and supplemental Part C plan benefits furnished at non-contracted facilities subject to § 422.204(b)(3). (ii) Waive, in full, requirements for gatekeeper referrals where applicable. (iii) Provide the same cost-sharing for the enrollee as if the service or benefit had been furnished at a plan-contracted facility. (iv) Make changes that benefit the enrollee effective immediately without the 30-day notification requirement at § 422.111(d)(3). (2) Declarations of disasters. A declaration of disaster will identify the geographic area affected by the event and may be made as one of the following: (i) Presidential declaration of a disaster or emergency under the either of the following: (A) Stafford Act. (B) National Emergencies Act. (ii)(A) Secretarial declaration of a public health emergency under section 319 of the Public Health Service Act. (B) If the President has declared a disaster as described in paragraph (m)(2)(i) or (ii) of this section, then the Secretary may also authorize waivers or modifications under section 1135 of the Act. (iii) Declaration by the Governor of a State or Protectorate. (3) End of the disaster. The public health emergency or state of disaster ends when any of the following occur: (i) The source that declared the public health emergency or state of disaster declares an end. (ii) The CMS declares an end of the public health emergency or state of disaster. (iii) Thirty days have elapsed since the declaration of the public health emergency or state of disaster and no end date was identified in paragraph (m)(3)(i) or (ii) of this section. (4) MA plans unable to operate. An MA plan that cannot resume normal operations by the end of the public health emergency or state of disaster must notify CMS. (5) Disclosure. In addition to other requirements of annual disclosure under § 422.111, an organization must do all of the following: (i) Indicate the terms and conditions of payment during the public health emergency or disaster for noncontracted providers furnishing benefits to plan enrollees residing in the state-ofdisaster area. PO 00000 Frm 00049 Fmt 4701 Sfmt 4700 7959 (ii) Annually notify enrollees of the information listed in paragraphs (m)(1) through (3) and (m)(5) of this section. (iii) Provide the information described in paragraphs (m)(1), (2), (3), and (4)(i) of this section on its Web site. 11. Amend § 422.111 by revising paragraph (d)(1) to read as follows: ■ § 422.111 Disclosure requirements. * * * * * (d) * * * (1) Submit the changes for CMS review under procedures of subpart V of this part. * * * * * ■ 12. Amend § 422.112 by adding paragraph (b)(7) to read as follows: § 422.112 Access to services. * * * * * (b) * * * (7) With respect to drugs for which payment as so prescribed and dispensed or administered to an individual may be available under Part A or Part B, or under Part D, MA–PD plans must coordinate all benefits administered by the plan and— (i) Establish and maintain a process to ensure timely and accurate point-of-sale transactions; and (ii) Issue the determination and authorize or provide the benefit under Part A or Part B or as a benefit under Part D as expeditiously as the enrollee’s health condition requires, in accordance with the requirements of subpart M of this part and subpart M of part 423 of this chapter, as appropriate, when a party requests a coverage determination. * * * * * ■ 13. Amend § 422.113 by revising paragraph (b)(1)(iii) introductory text to read as follows: § 422.113 Special rules for ambulance services, emergency and urgently needed services, and maintenance and poststabilization care services. * * * * * (b) * * * (1) * * * (iii) Urgently needed services means covered services that are not emergency services as defined in this section, provided when an enrollee is temporarily absent from the MA plan’s service (or, if applicable, continuation) area (or provided when the enrollee is in the service or continuation area but the organization’s provider network is temporarily unavailable or inaccessible) when the services are medically necessary and immediately required— * * * * * ■ 14. Amend § 422.152 as follows: ■ a. Revising paragraph (a) introductory text. E:\FR\FM\12FER2.SGM 12FER2 7960 Federal Register / Vol. 80, No. 29 / Thursday, February 12, 2015 / Rules and Regulations b. Redesignating paragraphs (a)(1) through (3) as paragraphs (a)(2) through (4), respectively. ■ c. Adding new paragraph (a)(1). ■ d. In newly redesignated (a)(2), by removing the ‘‘;’’ and adding a ‘‘.’’. ■ e. In newly redesignated (a)(3), by removing the ‘‘; and’’ and adding a ‘‘.’’. ■ f. Revising paragraph (c). ■ g. Revising paragraph (g) introductory text. ■ h. Revising paragraph (h). The revisions and addition read as follows: ■ Rmajette on DSK2VPTVN1PROD with RULES2 § 422.152 Quality improvement program. (a) General rule. Each MA organization that offers one or more MA plan must have, for each plan, an ongoing quality improvement program that meets applicable requirements of this section for the service it furnishes to its MA enrollees. As part of its ongoing quality improvement program, a plan must do all of the following: (1) Create a quality improvement program plan that sufficiently outlines the elements of the plan’s quality improvement program. * * * * * (c) Chronic care improvement program requirements. (1) Develop criteria for a chronic care improvement program. These criteria must include the following: (i) Methods for identifying MA enrollees with multiple or sufficiently severe chronic conditions that would benefit from participating in a chronic care improvement program. (ii) Mechanisms for monitoring MA enrollees that are participating in the chronic improvement program and evaluating participant outcomes such as changes in health status. (iii) Performance assessments that use quality indicators that are objective, clearly and unambiguously defined, and based on current clinical knowledge or research. (iv) Systematic and ongoing follow-up on the effect of the program. (2) The organization must report the status and results of each program to CMS as requested. * * * * * (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), as defined under § 422.101(f), to CMS for NCQA evaluation and approval, in accordance with CMS guidance. In addition to the requirements under VerDate Sep<11>2014 13:56 Feb 11, 2015 Jkt 235001 paragraphs (a) and (f) of this section, a SNP must conduct a quality improvement program that does the following: * * * * * (h) Requirements for MA private-feefor-service plans and Medicare medical savings account plans. MA PFFS and MSA plans are subject to the requirement that may not exceed the requirement specified in § 422.152(e). ■ 15. Amend § 422.310 by revising paragraph (g)(2)(ii) to read as follows: § 422.310 Risk adjustment data. * * * * * (g) * * * (2) * * * (ii) After the final risk adjustment data submission deadline, which is a date announced by CMS that is no earlier than January 31 of the year following the payment year, an MA organization can submit data to correct overpayments but cannot submit diagnoses for additional payment. * * * * * § 422.502 [Amended] 16. Amend § 422.502(b)(3) by removing the phrase ‘‘CMS may deny an application based on the applicant’s’’ and adding in its place the phrase ‘‘CMS may deny an application for a new contract or service area expansion based on the applicant’s’’. ■ 17. Amend § 422.503 by adding paragraph (d)(2)(iv) to read as follows: ■ § 422.503 General provisions. * * * * * (d) * * * (2) * * * (iv) CMS may require that the MA organization hire an independent auditor to provide CMS with additional information to determine if deficiencies found during an audit or inspection have been corrected and are not likely to recur. The independent auditor must work in accordance with CMS specifications and must be willing to attest that a complete and full independent review has been performed. * * * * * ■ 18. Amend § 422.504 by adding paragraph (o) to read as follows: § 422.504 Contract provisions. * * * * * (o) Business continuity. (1) The MA organization agrees to develop, maintain, and implement a business continuity plan containing policies and procedures to ensure the restoration of business operations following disruptions to business operations PO 00000 Frm 00050 Fmt 4701 Sfmt 4700 which would include natural or manmade disasters, system failures, emergencies, and other similar circumstances and the threat of such occurrences. To meet the requirement, the business continuity plan must, at a minimum, include the following: (i) Risk assessment. Identify threats and vulnerabilities that might affect business operations. (ii) Mitigation strategy. Design strategies to mitigate hazards. Identify essential functions in addition to those specified in paragraph (o)(2) of this section and prioritize the order in which to restore all other functions to normal operations. At a minimum, each MA organization must do the following: (A) Identify specific events that will activate the business continuity plan. (B) Develop a contingency plan to maintain, during any business disruption, the availability and, as applicable, confidentiality of communication systems and essential records in all forms (including electronic and paper copies). The contingency plan must do the following: (1) Ensure that during any business disruption the following systems will operate continuously or, should they fail, be restored to operational capacity on a timely basis: (i) Information technology (IT) systems including those supporting claims processing at point of service. (ii) Provider and enrollee communication systems including telephone, Web site, and email. (2) With respect to electronic protected health information, comply with the contingency plan requirements of the Health Insurance Portability and Accountability Act of 1996 Security Regulations at 45 CFR parts 160 and 164, subparts A and C. (C) Establish a chain of command. (D) Establish a business communication plan that includes emergency capabilities and procedures to contact and communicate with the following: (1) Employees. (2) First tier, downstream, and related entities. (3) Other third parties (including pharmacies, providers, suppliers, and government and emergency management officials). (E) Establish employee and facility management plans to ensure that essential operations and job responsibilities can be assumed by other employees or moved to alternate sites as necessary. (F) Establish a restoration plan including procedures to transition to normal operations. (G) Comply with all applicable Federal, State, and local laws. E:\FR\FM\12FER2.SGM 12FER2 Federal Register / Vol. 80, No. 29 / Thursday, February 12, 2015 / Rules and Regulations (iii) Testing and revision. On at least an annual basis, test and update the business operations continuity plan to ensure the following: (A) That it can be implemented in emergency situations. (B) That employees understand how it is to be executed. (iv) Training. On at least an annual basis, educate appropriate employees about the business continuity plan and their own respective roles. (v) Records. (A) Develop and maintain records documenting the elements of the business continuity plan described in paragraphs (o)(1)(i) through (iv) of this section. (B) Make the information specified in paragraph (o)(1)(v)(A) of this section available to CMS upon request. (2) Restoration of essential functions. Every MA organization must plan to restore essential functions within 72 hours after any of the essential functions fail or otherwise stop functioning as usual. In addition to any essential functions that the MA organization identifies under paragraph (o)(1)(ii) of this section, for purposes of this paragraph (o)(2) of the section essential functions include, at a minimum, the following: (i) Benefit authorization (if not waived) for services to be immediately furnished at a hospital, clinic, provider office, or other place of service. (ii) Operation of call center customer services. ■ 19. Amend § 422.506 by revising paragraph (a)(4) to read as follows: § 422.506 Nonrenewal of contract. (a) * * * (4) If an MA organization does not renew a contract under paragraph (a) of this section, CMS may deny an application for a new contract or a service area expansion from the MA organization for 2 years unless there are circumstances that warrant special consideration, as determined by CMS. This prohibition may apply regardless of the product type, contract type or service area of the previous contract. * * * * * ■ 20. Amend § 422.508 by revising paragraph (c) to read as follows: § 422.508 Modification or termination of contract by mutual consent. Rmajette on DSK2VPTVN1PROD with RULES2 * * * * * (c) Agreement to limit new MA applications. As a condition of the consent to a mutual termination CMS will require, as a provision of the termination agreement language prohibiting the MA organization from applying for new contracts or service area expansions for a period of 2 years, VerDate Sep<11>2014 13:56 Feb 11, 2015 Jkt 235001 7961 absent circumstances warranting special consideration. This prohibition may apply regardless of the product type, contract type or service area of the previous contract. * * * * * ■ 21. Amend § 422.512 by revising paragraph (e)(1) to read as follows: condition requires, but no later than upon expiration of the extension. * * * * * ■ 23. Amend § 422.572 by revising paragraph (b) to read as follows: § 422.512 Termination of contract by the MA organization. * * * * * * (e) * * * (1) CMS may deny an application for a new contract or a service area expansion from an MA organization that has terminated its contract within the preceding 2 years unless there are circumstances that warrant special consideration, as determined by CMS. This prohibition may apply regardless of the contract type, product type, or service area of the previous contract. * * * * * ■ 22. Amend § 422.568 by revising paragraph (b) to read as follows: § 422.568 Standard timeframes and notice requirements for organization determinations. * * * * * (b) Timeframe for requests for service. Except as provided in paragraph (b)(1) of this section, when a party has made a request for a service, the MA organization must notify the enrollee of its determination as expeditiously as the enrollee’s health condition requires, but no later than 14 calendar days after the date the organization receives the request for a standard organization determination. (1) Extensions. The MA organization may extend the timeframe by up to 14 calendar days if— (i) The enrollee requests the extension; (ii) The extension is justified and in the enrollee’s interest due to the need for additional medical evidence from a noncontract provider that may change an MA organization’s decision to deny an item or service; or (iii) The extension is justified due to extraordinary, exigent, or other nonroutine circumstances and is in the enrollee’s interest. (2) Notice of extension. When the MA organization extends the timeframe, it must notify the enrollee in writing of the reasons for the delay, and inform the enrollee of the right to file an expedited grievance if he or she disagrees with the MA organization’s decision to grant an extension. The MA organization must notify the enrollee of its determination as expeditiously as the enrollee’s health PO 00000 Frm 00051 Fmt 4701 Sfmt 4700 § 422.572 Timeframes and notice requirements for expedited organization determinations. * * * * (b) Extensions. (1) The MA organization may extend the 72-hour deadline by up to 14 calendar days if— (i) The enrollee requests the extension; (ii) The extension is justified and in the enrollee’s interest due to the need for additional medical evidence from a noncontract provider that may change an MA organization’s decision to deny an item or service; or (iii) The extension is justified due to extraordinary, exigent, or other nonroutine circumstances and is in the enrollee’s interest. (2) Notice of extension. When the MA organization extends the deadline, it must notify the enrollee in writing of the reasons for the delay and inform the enrollee of the right to file an expedited grievance if he or she disagrees with the MA organization’s decision to grant an extension. The MA organization must notify the enrollee of its determination as expeditiously as the enrollee’s health condition requires, but no later than upon expiration of the extension. * * * * * ■ 24. Amend § 422.590 as follows: ■ a. By revising paragraph (a)(1). ■ b. In paragraph (d)(1), by removing the cross reference ‘‘paragraph (d)(2) of this section’’ and adding in its place the cross-reference ‘‘paragraph (e) of this section’’. ■ c. By removing paragraph (d)(2). ■ d. By redesignating paragraphs (d)(3) through (5) as paragraphs (d)(2) through (4), respectively. ■ e. By redesignating paragraphs (e) through (g) as paragraphs (f) through (h), respectively; ■ f. By adding paragraph (e). The addition and revision read as follows: § 422.590 Timeframes and responsibility for reconsiderations. (a) * * * (1) Except as provided in paragraph (e) of this section, if the MA organization makes a reconsidered determination that is completely favorable to the enrollee, the MA organization must issue the determination (and effectuate it in accordance with § 422.618(a)) as expeditiously as the enrollee’s health condition requires, but no later than 30 E:\FR\FM\12FER2.SGM 12FER2 7962 Federal Register / Vol. 80, No. 29 / Thursday, February 12, 2015 / Rules and Regulations calendar days from the date it receives the request for a standard reconsideration. * * * * * (e) Extensions. (1) As described in paragraphs (e)(1)(i) through (iii) of this section, the MA organization may extend the standard or expedited reconsideration deadline by up to 14 calendar days if— (i) The enrollee requests the extension; or (ii) The extension is justified and in the enrollee’s interest due to the need for additional medical evidence from a noncontract provider that may change an MA organization’s decision to deny an item or service; or (iii) The extension is justified due to extraordinary, exigent or other nonroutine circumstances and is in the enrollee’s interest. (2) Notice of extension. When the MA organization extends the deadline, it must notify the enrollee in writing of the reasons for the delay and inform the enrollee of the right to file an expedited grievance if he or she disagrees with the MA organization’s decision to grant an extension. The MA organization must notify the enrollee of its determination as expeditiously as the enrollee’s health condition requires, but no later than upon expiration of the extension. * * * * * § 422.618 [Amended] 25. In § 422.618, amend paragraph (a)(1) by removing the cross-reference ‘‘§ 422.590(a)(1)’’ and adding in its place the cross-reference ‘‘§ 422.590(e)’’. ■ (b) * * * (1) Reasons for the determination; and * * * * * (c) * * * (1) General rule. Except as provided in paragraph (c)(2) of this section, CMS mails notice to the MA organization 45 calendar days before the anticipated effective date of the termination. * * * * * ■ 29. Amend § 422.660 by revising paragraphs (a)(2) and (3) and (b)(4) to read as follows: § 422.660 Right to a hearing, burden of proof, standard of proof, and standards of review. (a) * * * (2) An MA organization whose contract has been terminated in accordance with § 422.510. (3) An MA organization whose contract has not been renewed in accordance with § 422.506. * * * * * (b) * * * (4) During a hearing to review the imposition of an intermediate sanction as described at § 422.750, the MA organization has the burden of proving by a preponderance of the evidence that CMS’ determination was inconsistent with the requirements of § 422.752(a) and (b). * * * * * ■ 30. Amend § 422.2262 by adding paragraph (a)(2) to read as follows: § 422.2262 Review and distribution of marketing materials. 26. In § 422.619, amend paragraph (a) by removing the cross-reference ‘‘§ 422.590(d)(2)’’ and adding in its place the cross-reference ‘‘§ 422.590(e)’’. ■ 27. Amend § 422.641 by revising paragraphs (b) and (c) to read as follows: (a) * * * (2) If CMS does not approve or disapprove marketing materials within the specified review timeframe, the materials will be deemed approved. Deemed approved means that the MA organization may use the material. * * * * * § 422.641 § 422.2266 § 422.619 [Amended] ■ Contract determinations. Rmajette on DSK2VPTVN1PROD with RULES2 * * * * * (b) A determination not to authorize a renewal of a contract with an MA organization in accordance with § 422.506(b). (c) A determination to terminate a contract with an MA organization in accordance with § 422.510(a). * * * * * ■ 28. Amend § 422.644 by revising paragraphs (a), (b)(1), and (c)(1) to read as follows: § 422.644 Notice of contract determination. * * * * * (a) When CMS makes a contract determination under § 422.641, it gives the MA organization written notice. VerDate Sep<11>2014 13:56 Feb 11, 2015 Jkt 235001 [Removed and Reserved] 31. Section 422.2266 is removed and reserved. ■ 32. Amend § 422.2274 by revising paragraphs (c) and (d) to read as follows: ■ § 422.2274 Broker and agent requirements. * * * * * (c) Annual training. The MA organization must ensure that all agents and brokers selling Medicare products are trained annually on the following: (1) Medicare rules and regulations. (2) Details specific to the plan products they intend to sell. (d) Annual testing. It must ensure that all agents and brokers selling Medicare products are tested annually, to ensure the following: PO 00000 Frm 00052 Fmt 4701 Sfmt 4700 (1) Appropriate knowledge and understanding of Medicare rules and regulations. (2) Details specific to the plan products they intend to sell. * * * * * PART 423—VOLUNTARY MEDICARE PRESCRIPTION DRUG BENEFIT 33. The authority citation for part 423 continues to read as follows: ■ Authority: Sections 1102, 1106, 1860D–1 through 1860D–42, and 1871 of the Social Security Act (42 U.S.C. 1302, 1306, 1395w– 101 through 1395w–152, and 1395hh). 34. Amend § 423.1 by adding paragraph (a)(3) to read as follows: ■ § 423.1 Basis and scope. (a) * * * (3) Section 1611 of Title 8 of the United States Code regarding individuals who are not lawfully present and ineligible for Federal public benefits. * * * * * ■ 35. Amend § 423.30 as follows: ■ a. In paragraph (a)(1) introductory text, by removing the phrase ‘‘if he or she:’’ and adding in its place the phrase ‘‘if he or she does all of the following:’’. ■ b. In paragraph (a)(1)(i), by removing ‘‘; and’’ and adding in its place ‘‘.’’. ■ c. By adding paragraph (a)(1)(iii). The addition reads as follows: § 423.30 Eligibility and enrollment. (a) * * * (1) * * * (iii) Is a United States citizen or is lawfully present in the United States as determined in 8 CFR 1.3. * * * * * ■ 36. Amend § 423.44 as follows: ■ a. Adding paragraph (b)(2)(vi). ■ b. Revising paragraph (d)(1)(vi). ■ c. Adding paragraph (d)(8). The additions and revision read as follows: § 423.44 Involuntary disenrollment from Part D coverage. * * * * * (b) * * * (2) * * * (vi) The individual is not lawfully present in the United States. * * * * * (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 (or a third party to which CMS has assigned this responsibility, such as a Part D sponsor) may reinstate enrollment in the PDP, E:\FR\FM\12FER2.SGM 12FER2 Federal Register / Vol. 80, No. 29 / Thursday, February 12, 2015 / Rules and Regulations 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. * * * * * (8) Individual is not lawfully present in the United States. Disenrollment is effective the first day of the month following notice by CMS that the individual is ineligible in accordance with § 423.30(a)(1)(iii). * * * * * ■ 37. Amend § 423.100 by revising the definitions of ‘‘Daily cost-sharing rate’’ and ‘‘Supplemental benefits’’ to read as follows: § 423.100 Definitions. * * * * * Daily cost-sharing rate means, as applicable, the established— (1) Monthly copayment under the enrollee’s Part D plan, divided by the number of days in the approved month’s supply for the drug dispensed and rounded to the nearest cent; or (2) Coinsurance percentage under the enrollee’s Part D plan. * * * * * Supplemental benefits means benefits offered by Part D plans, other than employer group health or waiver plans, that meet the requirements of § 423.104(f)(1)(ii). * * * * * ■ 38. Amend § 423.104 by adding paragraph (d)(2)(iii) to read as follows: § 423.104 Requirements related to qualified prescription drug coverage. Rmajette on DSK2VPTVN1PROD with RULES2 * * * * * (d) * * * (2) * * * (iii) Tiered cost sharing under paragraph (d)(2)(ii) of this section may not exceed levels annually determined by CMS to be discriminatory. * * * * * ■ 39. Amend § 423.120 by redesignating paragraphs (b)(1)(iv) through (x) as paragraphs (b)(1)(v) through (xi), respectively, and adding paragraph (b)(1)(iv) to read as follows: § 423.120 Access to covered Part D drugs. * * * * * (b) * * * (1) * * * (iv) Clearly articulates and documents processes to determine that the VerDate Sep<11>2014 13:56 Feb 11, 2015 Jkt 235001 requirements under paragraphs (b)(1)(i) through (iii) of this section have been met, including the determination by an objective party of whether disclosed financial interests are conflicts of interest and the management of any recusals due to such conflicts. * * * * * ■ 40. Amend § 423.128 by adding paragraph (g) to read as follows: § 423.128 Dissemination of Part D information. * * * * * (g) Changes in rules. If a Part D sponsor intends to change its rules for a Part D plan, it must do all of the following: (1) Submit the changes for CMS review under the procedures of Subpart V of this part. (2) For changes that take effect on January 1, notify all enrollees at least 15 days before the beginning of the Annual Coordinated Election Period as defined in section 1860D–1(b)(1)(B) of the Act. (3) Provide notice of all other changes in accordance with notice requirements as specified in this part. ■ 41. Amend § 423.153 by revising paragraph (b)(4) to read as follows: § 423.153 Drug utilization management, quality assurance, and medication therapy management programs (MTMPs). * * * * * (b) * * * (4)(i) Daily cost sharing rate. Subject to paragraph (b)(4)(ii) of this section, establishes a daily cost-sharing rate (as defined in § 423.100) and applies it to a prescription presented to a network pharmacy for a covered Part D drug that is dispensed for a supply less than the approved month’s supply, if the drug is in the form of a solid oral dose and may be dispensed for less than the approved month’s supply under applicable law. (ii) Exceptions. The requirements of paragraph (b)(4)(i) of this section do not apply to either of the following: (A) Solid oral doses of antibiotics. (B) 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. (iii) Cost-sharing—(A) Copayments. In the case of a drug that would incur a copayment, the Part D sponsor must apply cost-sharing as calculated by multiplying the applicable daily costsharing rate by the days’ supply actually dispensed when the beneficiary receives less than the approved month’s supply. (B) Coinsurance. In the case of a drug that would incur a coinsurance PO 00000 Frm 00053 Fmt 4701 Sfmt 4700 7963 percentage, the Part D sponsor must apply the coinsurance percentage for the drug to the days’ supply actually dispensed. * * * * * ■ 42. Amend § 423.154 as follows: ■ a. By redesignating paragraph (a)(2) as paragraph (a)(4). ■ b. By adding paragraphs (a)(2) and (3). ■ c. By revising newly designated paragraph (a)(4). ■ d. By revising paragraph (c). ■ e. By removing paragraph (e). ■ f. By redesignating paragraph (f) as paragraph (e). The revisions and addition read as follows: § 423.154 Appropriate dispensing of prescription drugs in long-term care facilities under PDPs and MA–PD plans. (a) * * * (2) Not penalize long-term care facilities’ choice of more efficient uniform dispensing techniques described in paragraph (a)(1)(ii) of this section by prorating dispensing fees based on days’ supply or quantity dispensed. (3) Ensure that any difference in payment methodology among long-term care pharmacies incentivizes more efficient dispensing techniques. (4) 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. * * * * * (c) Waivers. CMS waives the requirements under paragraph (a) of this section, except paragraphs (a)(2) and (3), for pharmacies when they service intermediate care facilities for the mentally retarded (ICFs/IID) and institutes for mental disease (IMDs) as defined in § 435.1010 and for I/T/U pharmacies (as defined in § 423.100). * * * * * ■ 43. Amend § 423.322 by revising paragraph (b) to read as follows: § 423.322 Requirement for disclosure of information. * * * * * (b) Restrictions on use of information. (1) Officers, employees, and contractors of the Department of Health and Human Services may use the information disclosed or obtained in accordance with the provisions of this subpart for the purposes of, and to the extent necessary— (i) In carrying out this subpart, including, but not limited to, determination of payments, and payment-related oversight and program integrity activities. E:\FR\FM\12FER2.SGM 12FER2 7964 Federal Register / Vol. 80, No. 29 / Thursday, February 12, 2015 / Rules and Regulations (ii) In conducting oversight, evaluation, and enforcement under Title XVIII of the Act. (2) The United States Attorney General and the Comptroller General of the United States may use the information disclosed or obtained in accordance with the provisions of this subpart for purposes of, and to the extent necessary in, carrying out health oversight activities. (3) The restrictions described in paragraphs (b)(1) and (2) of this section do not limit either of the following: (i) OIG’s authority to fulfill the Inspector General’s responsibilities in accordance with applicable Federal law. (ii) CMS’ ability to use data regarding drug claims in accordance with section 1848(m) of the Act. § 423.329 [Amended] 44. Amend § 423.329(d)(1), by removing the phrase ‘‘the amount described in § 423.782.’’ and adding in its place the phrase ‘‘the difference between the cost sharing for a non-lowincome subsidy eligible beneficiary under the Part D plan and the statutory cost sharing for a low-income subsidy eligible beneficiary.’’ ■ § 423.346 [Amended] 45. Amend § 423.346(a) introductory text by removing the phrase ‘‘as described in § 423.336)—’’ and adding in its place the phrase ‘‘as described in § 423.336) or the Coverage Gap Discount Reconciliation (as described at § 423.2320(b))—’’ . ■ 46. Amend § 423.350 as follows: ■ a. In paragraph (a)(1)(iii), by removing ‘‘; or’’ and adding in its place ‘‘.’’. ■ b. In paragraph (a)(1)(iv), by removing ’’).’’ adding in its place ‘‘.’’. ■ c. By adding paragraph (a)(1)(v). ■ d. By revising paragraph (a)(2). ■ e. By adding paragraph (b)(1)(iv). The additions and revision read as follows: (iv) For the Coverage Gap Discount Program, the date of the final reconciled payment under § 423.2320(b). * * * * * ■ 47. Amend § 423.464 by redesignating paragraph (f)(2)(i)(B) as paragraph (f)(2)(i)(C) and adding paragraph (f)(2)(i)(B) to read as follows: § 423.464 Coordination of benefits with other providers of prescription drug coverage. * * * * * (f) * * * (2) * * * (i) * * * (B) Report, accept and apply benefit accumulator data in a timeframe and manner determined by CMS. * * * * * ■ 48. Amend § 423.466 by revising the section heading and, in paragraph (b), removing the phrase ‘‘a period not to exceed 3 years’’ and adding in its place the phrase ‘‘a period of 3 years’’ to read as follows: § 423.466 Timeframes for coordination of benefits and claims adjustments. * * * * * 49. Amend § 423.503 by revising paragraph (a)(1) and adding paragraphs (c)(4) and (d) to read as follows: ■ ■ Rmajette on DSK2VPTVN1PROD with RULES2 § 423.350 Payment appeals. (a) * * * (1) * * * (v) The reconciled coverage gap discount payment under § 423.2320(b). (2) Payment information not subject to appeal. Payment information submitted to CMS under § 423.322 and reconciled under § 423.343 or submitted and reconciled under § 423.2320(b) is final and may not be appealed nor may the appeals process be used to submit new information after the submission of information necessary to determine retroactive adjustments and reconciliations. (b) * * * (1) * * * VerDate Sep<11>2014 13:56 Feb 11, 2015 Jkt 235001 § 423.503 Evaluation and determination procedures for applications to be determined qualified to act as a sponsor. (a) * * * (1) With the exception of evaluations conducted under paragraph (b) of this section, CMS evaluates an entity’s application solely on the basis of information contained in the application itself and any additional information that CMS obtains through on-site visits and any essential operations test. * * * * * (c) * * * (4) Nullification of approval of application. If CMS discovers through any means that an applicant is not qualified to contract based on information gained subsequent to application approval (for example, failure of an essential operations test, absence of required employees, etc.), CMS gives the applicant written notice indicating that the approval issued under paragraph (c)(1) of this section is nullified and the applicant no longer qualifies to contract as a Part D plan sponsor. (i) This determination is not subject to the appeals provisions in subpart N of this part. (ii) This provision only applies to applicants that have not previously entered into a Part D contract with CMS PO 00000 Frm 00054 Fmt 4701 Sfmt 4700 and neither it, nor another subsidiary of the applicant’s parent organization, is offering Part D benefits during the current year. (d) Withdrawal of application and bid in a previous year. An applicant that withdraws its application and corresponding bid after the release of the low-income subsidy benchmark is not eligible to be approved as a Part D plan sponsor for the 2 succeeding annual contracting cycles. ■ 50. Amend § 423.504 by adding paragraphs (b)(10) and (d)(2)(iv) to read as follows: § 423.504 General provisions. * * * * * (b) * * * (10) Pass an essential operations test prior to the start of the benefit year. This provision only applies to new sponsors that have not previously entered into a Part D contract with CMS when neither it, nor another subsidiary of the applicant’s parent organization, is offering Part D benefits during the current year. * * * * * (d) * * * (2) * * * (iv) CMS may require that the Part D Plan sponsor hire an independent auditor to provide CMS with additional information to determine if deficiencies found during an audit or inspection have been corrected and are not likely to recur. The independent auditor must work in accordance with CMS specifications and must be willing to attest that a complete and full independent review has been performed. * * * * * ■ 51. Amend § 423.505 by adding paragraphs (b)(27) and (p) to read as follows: § 423.505 Contact provisions. * * * * * (b) * * * (27) Pass an essential operations test prior to the start of the benefit year. This provision only applies to new sponsors that have not previously entered into a Part D contract with CMS and neither it, nor another subsidiary of the applicant’s parent organization, is offering Part D benefits during the current year. * * * * * (p) Business continuity. (1) The Part D sponsor agrees to develop, maintain, and implement a business continuity plan containing policies and procedures to ensure the restoration of business operations following disruptions to business operations during disruptions to business operations which would E:\FR\FM\12FER2.SGM 12FER2 Rmajette on DSK2VPTVN1PROD with RULES2 Federal Register / Vol. 80, No. 29 / Thursday, February 12, 2015 / Rules and Regulations include natural or man-made disasters, system failures, emergencies, and other similar circumstances and the threat of such occurrences. To meet the requirement, the business continuity plan must, at a minimum, include the following: (i) Risk assessment. Identify threats and vulnerabilities that might affect business operations. (ii) Mitigation strategy. Design strategies to mitigate hazards. Identify essential functions in addition to those specified in paragraph (p)(2) of this section and prioritize the order in which to restore all other functions to normal operations. At a minimum, each Part D sponsor must do the following: (A) Identify specific events that will activate the business continuity plan. (B) Develop a contingency plan to maintain, during any business disruption, the availability and, as applicable, confidentiality of communication systems and essential records in all forms (including electronic and paper copies). The contingency plan must do the following: (1) Ensure that during any business disruption the following systems will operate continuously or, should they fail, be restored to operational capacity on a timely basis: (i) Information technology (IT) systems including those supporting claims processing at point of service. (ii) Provider and enrollee communication systems including telephone, Web site, and email. (2) With respect to electronic protected health information, comply with the contingency plan requirements of the Health Insurance Portability and Accountability Act of 1996 Security Regulations at 45 CFR parts 160 and 164, subparts A and C. (C) Establish a chain of command. (D) Establish a business communication plan that includes emergency capabilities and procedures to contact and communicate with the following: (1) Employees. (2) First tier, downstream, and related entities. (3) Other third parties (including pharmacies, providers, suppliers, and government and emergency management officials). (E) Establish employee and facility management plans to ensure that essential operations and job responsibilities can be assumed by other employees or moved to alternate sites as necessary or both. (F) Establish a restoration plan including procedures to transition to normal operations. (G) Comply with all applicable Federal, State, and local laws. VerDate Sep<11>2014 13:56 Feb 11, 2015 Jkt 235001 (iii) Testing and revision. On at least an annual basis, test and update the business operations continuity plan to ensure the following: (A) That it can be implemented in emergency situations. (B) That employees understand how it is to be executed. (iv) Training. On at least an annual basis, educate appropriate employees about the business continuity plan and their own respective roles. (v) Records. (A) Develop and maintain records documenting the elements of the business continuity plan described in paragraph (p)(1)(i) through (iv) of this section. (B) Make the information specified in paragraph (p)(1)(v)(A) of this section available to CMS upon request. (2) Restoration of essential functions. Every Part D sponsor must plan to restore essential functions within 72 hours after any of the essential functions fail or otherwise stop functioning as usual. In addition to any essential functions that the Part D sponsor identifies under paragraph (p)(1)(ii) of this section, for purposes of this paragraph (p)(2) of this section essential functions include at a minimum, the following: (i) Benefit authorization (if not waived), adjudication, and processing of prescription drug claims at the point of sale. (ii) Administration and tracking of enrollees’ drug benefits in real time, including automated coordination of benefits with other payers. (iii) Provision of pharmacy technical assistance. (iv) Operation of an enrollee exceptions and appeals process including coverage determinations. (v) Operation of call center customer services. ■ 52. Amend § 423.509 by adding paragraph (a)(4)(xii) and revising paragraph (b)(2)(i)(C) to read as follows: § 423.509 CMS. Termination of a contract by (a) * * * (4) * * * (xii) Failure of an essential operations test before the start of the benefit year by an organization that has entered into a Part D contract with CMS when neither it, nor another subsidiary of the organization’s parent organization, is offering Part D benefits during the current year. (b) * * * (2) * * * (i) * * * (C) The contract is being terminated based on the grounds specified in PO 00000 Frm 00055 Fmt 4701 Sfmt 4700 7965 paragraphs (a)(4)(i) and (xii) of this section. * * * * * § 423.562 [Amended] 53. Amend § 423.562(a)(3) by removing the phrase ‘‘request an exception if they disagree with the information provided by the pharmacist.’’ and adding in its place the phrase ‘‘request an exception.’’. ■ § 423.650 [Amended] 54. Amend § 423.650 as follows: a. In paragraph (a)(2), by removing the term ‘‘under’’ and adding in its place the phrase ‘‘in accordance with’’. ■ b. In paragraph (a)(4), by removing the cross-reference ‘‘§ 423.752(a) and (b) of this part’’ and adding in its place the cross-reference ‘‘§ 423.752(a) through (b)’’. ■ 55. Amend § 423.2262 by adding paragraph (a)(2) to read as follows: ■ ■ § 423.2262 Review and distribution of marketing materials. (a) * * * (2) If CMS does not approve or does not disapprove marketing materials within the specified review timeframe, the materials are deemed approved and the Part D sponsor may use the material. * * * * * § 423.2266 [Removed and Reserved] 56. Section 423.2266 is removed and reserved. ■ 57. Amend § 423.2274 by revising paragraphs (c) and (d) to read as follows: ■ § 423.2274 Broker and agent requirements. * * * * * (c) Annual training. The Part D sponsor must ensure that all agents and brokers selling Medicare products are trained annually on the following: (1) Medicare rules and regulations. (2) Details specific to the plan products they intend to sell. (d) Annual testing. The Part D sponsor must ensure that all agents and brokers selling Medicare products are tested annually, to ensure the following: (1) Appropriate knowledge and understanding of Medicare rules and regulations. (2) Details specific to the plan products they intend to sell. * * * * * ■ 58. Amend § 423.2320 by adding paragraph (c) to read as follows: § 423.2320 sponsors. Payment processes for Part D * * * * * (c) Manufacturer bankruptcy. In the event that a manufacturer declares E:\FR\FM\12FER2.SGM 12FER2 7966 Federal Register / Vol. 80, No. 29 / Thursday, February 12, 2015 / Rules and Regulations Rmajette on DSK2VPTVN1PROD with RULES2 bankruptcy, as described in Title 11 of the United States Code, and as a result of the bankruptcy, does not pay the quarterly invoices described in § 423.2315(b)(10) used for a particular contract year’s Coverage Gap Discount Reconciliation described in paragraph (b) of this section, CMS adjusts the Coverage Gap Discount Reconciliation amount of each of the affected Part D sponsors to account for the total unpaid quarterly invoiced amount owed to each VerDate Sep<11>2014 13:56 Feb 11, 2015 Jkt 235001 of the Part D sponsors for that particular contract year being reconciled. ■ 59. Amend § 423.2325 by adding paragraph (h) to read as follows: § 423.2325 Provision of applicable discounts. * * * * * (h) Treatment of employer group waiver plans. As of 2014, Part D sponsors offering employer group waiver plans must provide applicable discounts to applicable beneficiaries who are employer group waiver plan PO 00000 Frm 00056 Fmt 4701 Sfmt 9990 enrollees as determined consistent with the defined standard benefit. Dated: December 18, 2014. Marilyn Tavenner, Administrator, Centers for Medicare & Medicaid Services. Approved: February 4, 2015. Sylvia M. Burwell, Secretary, Department of Health and Human Services. [FR Doc. 2015–02671 Filed 2–6–15; 4:15 pm] BILLING CODE 4120–01–P E:\FR\FM\12FER2.SGM 12FER2

Agencies

[Federal Register Volume 80, Number 29 (Thursday, February 12, 2015)]
[Rules and Regulations]
[Pages 7911-7966]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2015-02671]

[[Page 7911]]

Vol. 80

Thursday,

No. 29

February 12, 2015

Part II

Department of Health and Human Services

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Centers for Medicare & Medicaid Services

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42 CFR Parts 417, 422, and 423

Medicare Program; Contract Year 2016 Policy and Technical Changes to
the Medicare Advantage and the Medicare Prescription Drug Benefit
Programs; Final Rule

Federal Register / Vol. 80 , No. 29 / Thursday, February 12, 2015 /
Rules and Regulations

[[Page 7912]]

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Department of Health and Human Services

Centers for Medicare & Medicaid Services

42 CFR Parts 417, 422, and 423

[CMS-4159-F2]
RIN 0938-AS20

Medicare Program; Contract Year 2016 Policy and Technical Changes
to the Medicare Advantage and the Medicare Prescription Drug Benefit
Programs

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

ACTION: Final rule.

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SUMMARY: This final rule amends the Medicare Advantage (MA) program
(Part C) regulations and Medicare Prescription Drug Benefit Program
(Part D) regulations to implement statutory requirements; improve
program efficiencies; strengthen beneficiary protections; clarify
program requirements; improve payment accuracy; and make various
technical changes. Additionally, this rule finalizes two technical
changes that reinstate previously approved but erroneously removed
regulation text sections.

DATES: This rule is effective March 16, 2015, except amendments to
Sec. 423.154, which are effective January 1, 2016.
Applicability Dates: Except as specified in Table 1, the
applicability date of these provisions is January 1, 2016. In the
Supplemental section of this final rule, we provide a table (Table 1)
that lists changes in this final rule that have either an effective
date other than March 16, 2015 or an applicability date other than
January 1, 2016, for Contract Year 2016.

FOR FURTHER INFORMATION CONTACT: Christopher McClintick, (410) 786-
4682, Part C issues. Marie Manteuffel, (410) 786-3447, Part D issues.
Kristy Nishimoto, (206) 615-2367, Part C and D enrollment and appeals
issues. Whitney Johnson, (410) 786-0490, Part C and D payment issues.
Joscelyn Lissone, (410) 786-5116, Part C and D compliance issues.

SUPPLEMENTARY INFORMATION: The majority of the provisions listed in
this rule are intended for implementation for contract year 2016.
Changes in the Code of Federal Regulations (CFR) will be consistent
with the effective date of the applicable provision. Table 1 lists
those provisions with effective dates other than 30 days after the date
of publication of this final rule or applicability dates other than
January 1, 2016 for contract year 2016. The applicability and effective
dates are discussed in the preamble for each of these items.

Table 1--Applicability and Effective Dates of Select Provisions of the Final Rule
----------------------------------------------------------------------------------------------------------------
Preamble section Section title Effective date Applicability date
----------------------------------------------------------------------------------------------------------------
II.A.2....................... Enrollment Eligibility for ....................... June 1, 2015.
Individuals Not Lawfully
Present in the United States
(Sec. Sec. 417.2, 417.420,
417.422, 417.460, 422.1,
422.50, 422.74, 423.1, 423.30,
and 423.44).
II.A.5....................... Efficient Dispensing in January 1, 2016........
Long[dash]Term Care Facilities
and Other Changes (Sec.
423.154).
----------------------------------------------------------------------------------------------------------------

Table of Contents

I. Executive Summary and Background
A. Executive Summary
1. Purpose
2. Summary of the Major Provisions
a. Changes To Audit and Inspection Authority (Sec. Sec.
422.503(d)(2), 423.504(d)(2))
b. Enrollment Eligibility for Individuals Not Lawfully Present
in the United States (Sec. Sec. 417.2, 417.420, 417.422, 417.460,
422.1, 422.50, 422.74, 423.1, 423.30, 423.44)
c. Business Continuity for MA Organizations & PDP Sponsors
(Sec. Sec. 422.504(o) and 423.505(p))
d. Efficient Dispensing in Long Term Care Facilities and Other
Changes (Sec. 423.154)
3. Summary of Costs and Benefits
B. Background
1. General Overview and Regulatory History
2. Issuance of the Proposed Rule
3. Public Comments Received in Response to the Contract Year
2015 Policy and Technical Changes to the Medicare Advantage and the
Medicare Prescription Drug Benefit Programs Proposed Rule
II. Provisions of the Proposed Regulations
A. Clarifying Various Program Participation Requirements
1. Changes to Audit & Inspection Authority (Sec. Sec.
422.503(d)(2), 423.504(d)(2))
2. Enrollment Eligibility for Individuals Not Lawfully Present
in the United States (Sec. Sec. 417.2, 417.420, 417.422, 417.460,
422.1, 422.50, 422.74, 423.1, 423.30, 423.44)
3. Part D Notice of Changes (Sec. 423.128(g))
4. Business Continuity for MA Organizations & PDP Sponsors
(Sec. Sec. 422.504(o), 423.505(p))
5. Efficient Dispensing in Long Term Care Facilities and Other
Changes (Sec. 423.154)
6. Medicare Coverage Gap Discount Program and Employer Group
Waiver Plans (Sec. 423.2325)
7. Transfer of TrOOP Between PDP Sponsors Due To Enrollment
Changes During the Coverage Year (Sec. 423.464)
8. Expand Quality Improvement Program Regulations (Sec.
422.152)
B. Improving Payment Accuracy
1. Determination of Payments (Sec. 423.329)
2. Reopening (Sec. 423.346)
3. Payment Appeals (Sec. 423.350)
4. Payment Processes for Part D Sponsors (Sec. 423.2320)
5. Risk Adjustment Data Requirements--Proposal Regarding Annual
Deadline for MAO Submission of Final Risk Adjustment Data (Sec.
422.310 (g)(2)(ii))
C. Strengthening Beneficiary Protections
1. MA-PD Coordination Requirements for Drugs Covered Under Parts
A, B, and D (Sec. 422.112)
2. Good Cause Processes (Sec. Sec. 417.460, 422.74, 423.44)
3. MA Organizations' Extension of Adjudication Timeframes for
Organization Determinations and Reconsiderations (Sec. Sec.
422.568, 422.572, 422.590, 422.618, 422.619)
D. Strengthening Our Ability To Distinguish Stronger Applicants
for Part C and D Program Participation and To Remove Consistently
Poor Performers
1. Two-Year Prohibition When Organizations Terminate Their
Contracts (Sec. 422.502, Sec. 422.503, Sec. 422.506, Sec.
422.508, Sec. 422.512)
2. Withdrawal of Stand-Alone Prescription Drug Plan Bid Prior to
Contract Execution (Sec. 423.503)
3. Essential Operations Test Requirement for Part D (Sec.
423.503(a) and (c), Sec. 423.504(b)(10), Sec. 423.505(b)(28),
Sec. 423.509)
E. Implementing Other Technical Changes
1. Requirements for Urgently Needed Services (Sec. 422.113)
2. Agent and Broker Training and Testing Requirements
(Sec. Sec. 422.2274, 423.2274)
3. Deemed Approval of Marketing Materials (Sec. Sec. 422.2262,
422.2266, 423.2262, 423.2266)
4. Cross-Reference Change in the Part C Disclosure Requirements
(Sec. 422.111)
5. Managing Disclosure and Recusal in P&T Conflicts of Interest
(Sec. 423.120(b)(1))
6. Thirty-Six Month Coordination of Benefits (COB) Limit (Sec.
423.466(b))
7. Application and Calculation of Daily Cost-Sharing Rates
(Sec. 423.153)
8. Technical Change To Align Regulatory Requirements for
Delivery of Standardized Pharmacy Notice (Sec. 423.562)

[[Page 7913]]

9. MA Organization Responsibilities in Disasters and Emergencies
(Sec. 422.100)
10. Technical Changes To Align Part C and Part D Contract
Determination Appeal Provisions (Sec. Sec. 422.641, 422.644)
11. Technical Changes To Align Parts C and D Appeal Provisions
(Sec. Sec. 422.660, 423.650)
12. Technical Change to the Restrictions on Use of Information
Under Part D (Sec. 423.322)
13. Technical Changes to Regulation Text at Sec. 423.104--
Requirements Related to Qualified Prescription Drug Coverage
14. Technical Changes to Regulation Text at Sec. 423.100--
Definition of Supplemental Benefits
III. Collection of Information Requirements
A. ICRs Related to Eligibility of Enrollment for Individuals Not
Lawfully Present in the United States (Sec. Sec. 417.2, 417.420,
417.422, 417.460, 422.1, 422.50, 422.74, 423.1, 423.30, and 423.44)
B. ICRs Related to Good Cause Processes (Sec. Sec. 417.460,
422.74, 423.44)
C. ICRs Related To Expanding Quality Improvement Program
Regulations (Sec. 422.152)
D. ICRs Related To Changes to Audit and Inspection Authority
(Sec. Sec. 422.503(d)(2) and 423.504(d)(2))
E. ICRs Related to Business Continuity for MA Organizations and
PDP Sponsors (Sec. Sec. 422.504(o) and 423.505(p))
F. Submission of PRA-Related Comments
IV. Regulatory Impact Statement

Regulations Text

Acronyms

ADS Automatic Dispensing System
AHFS American Hospital Formulary Service
AHFS-DI American Hospital Formulary Service-Drug Information
AHRQ Agency for Health Care Research and Quality
ANOC Annual Notice of Change
AO Accrediting Organization
ALR Assisted Living Residence
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)
BLA Biologics License Application
BLS Bureau of Labor Statistics
CAHPS Consumer Assessment Health Providers Survey
CAP Corrective Action Plan
CCIP Chronic Care Improvement Program
CC/MCC Complication/Comorbidity and Major Complication/Comorbidity
CCS Certified Coding Specialist
CDC Centers for Disease Control
CGDP Coverage Gap Discount Program
CHIP Children's Health Insurance Programs
CMP Civil Money Penalty
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
DEA Drug Enforcement Administration
DIR Direct and Indirect Remuneration
DHS Department of Homeland Security
DME Durable Medical Equipment
DMEPOS Durable Medical Equipment, Prosthetic, Orthotics, and
Supplies
D-SNPs Dual Eligible SNPs
DOL U.S. Department of Labor
DUR Drug Utilization Review
EAJR Expedited Access to Judicial Review
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
FDR First-tier, Downstream, and Related Entities
FEHBP Federal Employees Health Benefits Plan
FFS Fee-For-Service
FIDE Fully-integrated Dual Eligible
FIDE SNPs Fully-integrated Dual Eligible Special Needs Plans
FMV Fair Market Value
FY Fiscal Year
GAO Government Accountability Office
HAC Hospital-Acquired Conditions
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
ICFs/IID Intermediate care facilities for the mentally retarded
ICL Initial Coverage Limit
ICR Information Collection Requirement
ID Identification
IMD Institutes for mental disease
IT Information Technology
I/T/U Pharmacies Indian Health Service, Tribes and Tribal
organizations, and urban Indian organizations (collectively referred
to as ``I/T/U'').
IVC Initial Validation Contractor
LCD Local Coverage Determination
LEP Late Enrollment Penalty
LIS Low-Income Subsidy
LPPO Local Preferred Provider Organization
LTC Long Term Care
MA Medicare Advantage
MAAA Member of the American Academy of Actuaries
MA-PD Medicare Advantage-Prescription Drug Plan
MCO Managed Care Organization
MIPPA Medicare Improvements for Patients and Providers Act of 2008
(Pub. L. 110-275)
MOC Medicare Options Compare
MOOP Maximum Out-of-Pocket
MPDPF Medicare Prescription Drug Plan Finder
MMA Medicare Prescription Drug, Improvement, and Modernization Act
of 2003 (Pub. L. 108-173)
MS-DRG Medicare Severity Diagnosis Related Group
MSA Metropolitan Statistical Area
MSAs Medical Savings Accounts
MSP Medicare Secondary Payer
MTM Medication Therapy Management
MTMP Medication Therapy Management Program
NAIC National Association of Insurance Commissioners
NCPDP National Council for Prescription Drug Programs
NCQA National Committee for Quality Assurance
NDA New Drug Application
NDC National Drug Code
NGC National Guideline Clearinghouse
NIH National Institutes of Health
NOMNC Notice of Medicare Non-Coverage
NPI National Provider Identifier
OES Occupational Employment Statistics
OIG Office of Inspector General
OMB Office of Management and Budget
OPM Office of Personnel Management
OTC Over the Counter
PACE Programs of the All-Inclusive Care for the Elderly
Part C Medicare Advantage
Part D Medicare Prescription Drug Benefit Program
Part D IRMAA Part D Income Related Monthly Adjustment Amount
PBM Pharmacy Benefit Manager
PDE Prescription Drug Event
PDP Prescription Drug Plan
PFFS Private Fee For Service Plan
POA Present on Admission (Indicator)
POS Point-of-Sale
PPO Preferred Provider Organization
PPS Prospective Payment System
P&T Pharmacy & Therapeutics
QRS Quality Review Study
PACE Programs of All Inclusive Care for the Elderly
PRWORA Personal Responsibility and Work Opportunity Reconciliation
Act of 1996
RADV Risk Adjustment Data Validation
RAC Recovery Audit Contractor
RAPS Risk Adjustment Payment System
RPPO Regional Preferred Provider Organization
RTO Return to Operations/Recovery Time Objective
SBA Small Business Association
SCORM Sharable Content Object Reference Model
SEP Special Enrollment Period
SHIP State Health Insurance Assistance Programs
SNF Skilled Nursing Facility
SNP Special Needs Plan
SNP MOC Special Needs Plan Model of Care
SPAP State Pharmaceutical Assistance Programs
SSA Social Security Administration
SSI Supplemental Security Income
T&C Terms and Conditions
TPA Third Party Administrator
TrOOP True Out-Of-Pocket
U&C Usual and Customary
UPIN Uniform Provider Identification Number

[[Page 7914]]

USP U.S. Pharmacopoeia
ZPIC Zone Program Integrity Contractor

I. Executive Summary and Background

A. Executive Summary

1. Purpose
The purpose of this final rule is to revise the Medicare Advantage
(MA) program (Part C) regulations and Medicare Prescription Drug
Benefit Program (Part D) regulations to implement statutory
requirements, improve program efficiencies, strengthen beneficiary
protections, clarify program requirements, improve payment accuracy,
and make various technical changes for contract year 2016.
2. Summary of the Major Provisions
a. Changes to Audit and Inspection Authority (Sec. Sec. 422.503(d)(2),
423.504(d)(2))
We proposed three changes to our audit and inspection authority.
Due to significant concerns raised during the public comment period, we
are finalizing only two of those three proposals. First, under section
6408 of the Affordable Care Act, new authority was provided to the
Secretary that now requires that each contract provide the right to
``timely'' inspection and audit.
We are revising both Sec. Sec. 422.503(d)(2) and 423.504(d)(2) to
insert the word ``timely'' at the end of both of the introductory
paragraphs.
We are also adding language to Sec. Sec. 422.503(d)(2) and
423.504(d)(2) that will allow us to require that a sponsoring
organization hire an independent auditor, working in accordance with
CMS specifications, to validate if the deficiencies that were found
during a CMS full or partial program audit have been corrected and
provide CMS with a copy of the audit findings.
The proposal to require MA organizations and Part D plan sponsors
to hire an independent auditor to conduct full or partial program
audits will not be finalized.
b. Enrollment Eligibility for Individuals Not Lawfully Present in the
United States (Sec. Sec. 417.2, 417.420, 417.422, 417.460, 422.1,
422.50, 422.74, 423.1, 423.30, 423.44)
After consideration of the public comments, we are finalizing the
policies mostly as proposed, with the exception of changes to the
regulation text at Sec. Sec. 417.422, 417.460, 422.50, 423.1, 423.3
and 423.44 to clarify that any individual not lawfully present is no
longer eligible to remain enrolled in a cost, MA, or Part D plan, to
establish the disenrollment effective date to be the first of the month
following notice by CMS of ineligibility, and to delete the term
``qualified alien.'' Further, we are redesignating the current text at
Sec. 417.460(b)(2)(iv) as paragraph (b)(2)(v) and finalizing the
provision establishing a lack of lawful presence as a basis for
disenrollment from a cost plan at paragraph (b)(2)(iv). This provision
is consistent with the Personal Responsibility and Work Opportunity
Reconciliation Act of 1996 (PRWORA) and with recommendations made by
the Office of the Inspector General (OIG) in its January 2013 and
October 2013 reports.
c. Business Continuity for MA Organizations & PDP Sponsors (Sec. Sec.
422.504(o) and 423.505(p))
To respond to concerns raised during the comment period, we revised
the regulation text by providing a 72, rather than 24 hour, restoration
time period for MA organizations and Part D sponsors after a systems
failure. We also revised text as necessary to make clear that we
require MA organizations and sponsors to ``plan to'' restore essential
functions within the 72-hour time period, rather than guarantee
complete restoration within the timeframe. Some commenters thought our
intent was to require continuous operations under all conditions, and
we revised language from the proposed regulation to make clear that
that was not the case in our final rule. Lastly commenters
distinguished between Part C and D operations and noted, for instance,
that provider payments are not a 24-hour critical function for MA plans
since payment is allowed to be made within 30 days and that health and
safety would not be put at risk by failure of Part C claims processing
and appeals processing. We removed language related to that requirement
for MA plans.
d. Efficient Dispensing in Long Term Care Facilities and Other Changes
(Sec. 423.154)
We are finalizing changes to the rule requiring efficient
dispensing to Medicare Part D enrollees in long term care (LTC)
facilities. Some Part D sponsors (or their pharmacy benefit managers)
implemented the short-cycle dispensing requirement by pro-rating
monthly dispensing fees, which penalize the offering and adoption of
more efficient LTC dispensing techniques compared to less efficient LTC
dispensing techniques. This is because when a medication is
discontinued before a month's supply has been dispensed, a pharmacy
that dispenses the maximum amount of the medication at a time permitted
under Sec. 423.154 (which is 14 days' supplies), collects more in
dispensing fees than a pharmacy that utilizes dispensing techniques
that result in less than maximum quantities being dispensed at a time.
In other words, a less efficient pharmacy collects more in dispensing
fees than a more efficient pharmacy. This is contrary to the Congress'
intent in enacting section 3310 of the Affordable Care Act, which is to
reduce medication waste. Therefore, we have finalized a prohibition on
payment arrangements that penalize the offering and adoption of more
efficient LTC dispensing techniques by prorating dispensing fees based
on days' supply or quantity dispensed. We have also finalized a
requirement to ensure that any difference in payment methodology among
LTC pharmacies incentivizes more efficient dispensing techniques. Other
changes to the rule requiring efficient dispensing to Medicare Part D
enrollees in LTC facilities are eliminating language that has been
misinterpreted as requiring the proration of dispensing fees and making
a technical change to the requirement that Part D sponsors report on
the nature and quantity of unused brand and generic drugs. We are not
finalizing an additional waiver for LTC pharmacies using restock and
reuse dispensing methodologies under certain conditions at this time.
3. Summary of Costs and Benefits

[[Page 7915]]

Table 2--Summary of Costs and Benefits
------------------------------------------------------------------------
Provision Total costs Transfers
------------------------------------------------------------------------
Changes to Audit and We estimate that
Inspection. this change would
require an annual
cost of $2 million
for the time and
effort for all MA
organizations or
Part D sponsors
with audit results
that reveal
noncompliance with
CMS requirements to
hire independent
auditors to
validate that
correction has
occurred. The total
cost for 2015-2019
is estimated to be
$10 million.
Eligibility of enrollment N/A................. We estimate that
for individuals not this change could
lawfully present in the U.S. save the MA program
up to $5 million in
2015, increasing to
$8 million in 2019
(total of $32
million over this
period), and could
save the Part D
program (includes
the Part D portion
of MA-PD plans) up
to $5 million in
2015, increasing to
$9 million in 2019
(total of $35
million over this
period).
Business Continuity We estimate that
Operations. this change would
require a first
year cost of $8
million in 2015,
for the time and
effort for affected
organizations to
comply with the
business continuity
requirements. In
subsequent years,
2016-2019, the cost
for maintaining the
business continuity
is estimated to be
$4 million. The
total cost over the
period 2015-2019 is
estimated to be $24
million.
------------------------------------------------------------------------

B. Background

1. General Overview and Regulatory History
The Balanced Budget Act of 1997 (BBA) (Pub. L. 105-33) created a
new ``Part C'' in the Medicare statute (sections 1851 through 1859 of
the Social Security Act (the Act)) which established what is now known
as the MA program. The Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 (MMA) (Pub. L. 108-173), enacted on December
8, 2003, added a new ``Part D'' to the Medicare statute (sections
1860D-1 through 42 of the Act) entitled the Medicare Prescription Drug
Benefit Program (Part D), and made significant changes to the existing
Part C program, which it named 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).
Since the inception of both Parts C and D, we have periodically
revised our regulations either to implement statutory directives or to
incorporate knowledge obtained through experience with both programs.
For instance, in the September 18, 2008 and January 12, 2009 Federal
Register (73 FR 54226 and 74 FR 1494, respectively), we issued Part C
and D regulations to implement provisions in the Medicare Improvement
for Patients and Providers Act (MIPPA) (Pub. L. 110-275). We
promulgated a separate interim final rule on January 16, 2009 (74 FR
2881) to address MIPPA provisions related to Part D plan formularies.
In the final rule that appeared in the April 15, 2010 Federal Register
(75 FR 19678), we made changes to the Part C and D regulations which
strengthened various program participation and exit requirements;
strengthened beneficiary protections; ensured that plan offerings to
beneficiaries included meaningful differences; improved plan payment
rules and processes; improved data collection for oversight and quality
assessment; implemented new policies; and clarified existing program
policy.
In a final rule that appeared in the April 15, 2011 Federal
Register (76 FR 21432), we continued our process of implementing
improvements in policy consistent with those included in the April 2010
final rule, and also implemented 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), as amended by the Health Care
and Education Reconciliation Act (Pub. L. 111-152) (collectively the
Affordable Care Act or ACA) added a number of new Medicare provisions
and modified many existing provisions. The Affordable Care Act included
significant reforms to both the private health insurance industry and
the Medicare and Medicaid programs. Provisions in the Affordable Care
Act concerning the Part C and D programs largely focused on beneficiary
protections, MA payments, and simplification of MA and Part D program
processes. These provisions affected implementation of our policies
regarding beneficiary cost-sharing, assessing bids for meaningful
differences, and ensuring that cost-sharing structures in a plan are
transparent to beneficiaries and not excessive. In the April 2011 final
rule, we revised regulations on a variety of issues based on the
Affordable Care Act and our experience in administering the MA and Part
D programs. The rule covered areas such as 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.
In a final rule that appeared in the April 12, 2012 Federal
Register (77 FR 22072 through 22175), we made several changes to the
Part C and Part D

[[Page 7916]]

programs required by statute, including the Affordable Care Act, and
made improvements to both programs through modifications reflecting
experience we have obtained administering the Part C and Part D
programs. Key provisions of that final rule implemented changes closing
the Part D coverage gap, or ``donut hole,'' for Medicare beneficiaries
who do not already receive low-income subsidies from us by establishing
the Medicare Coverage Gap Discount Program. We also included provisions
providing new benefit flexibility for fully-integrated dual eligible
special needs plans, clarifying coverage of durable medical equipment,
and combatting possible fraudulent activity by requiring Part D
sponsors to include an active and valid prescriber National Provider
Identifier on prescription drug event records.
2. Issuance of the Proposed Rule
In the proposed rule titled ``Contract Year 2015 Policy and
Technical Changes to the Medicare Advantage and the Medicare
Prescription Drug Benefit Programs,'' which appeared in the January 10,
2014 Federal Register (79 FR 1918), we proposed to revise the MA
program (Part C) regulations and Medicare Prescription Drug Benefit
Program (Part D) regulations to implement statutory requirements;
strengthen beneficiary protections; improve program efficiencies; and
clarify program requirements. The proposed rule also included several
provisions designed to improve payment accuracy.
3. Public Comments Received in Response to the Contract Year 2015
Policy and Technical Changes to the Medicare Advantage and the Medicare
Prescription Drug Benefit Programs Proposed Rule
We received approximately 7,600 timely pieces of correspondence
containing multiple comments on the CY 2015 proposed rule. The majority
of correspondence received was in reference to provisions that were
either finalized in the final rule that appeared in the Federal
Register on May 23, 2014 (79 FR 29844) (May 2014 final rule) or that
will not be finalized. While we are finalizing in whole or in part
approximately 30 of the provisions from the proposed rule in this final
rule, there remain a small number of provisions from the proposed rule
that were not finalized in the May 2014 final rule and that we are not
finalizing in this rule. These provisions are listed later in this
section in Table 2.
Public comments on the provisions finalized in this rule were
submitted between January 10, 2014 and March 7, 2014. We note that some
of the public comments were outside of the scope of the proposed rule
provisions that we are finalizing here. These out-of-scope public
comments are not addressed in this final rule. Summaries of the public
comments that are within the scope of the proposed rule and our
responses to those public comments are set forth in the various
sections of this final rule under the appropriate heading. However, we
note that in this final rule we are not addressing comments received
with respect to the provisions of the proposed rule that we are not
finalizing.

Table 2--Provisions Not Being Finalized
------------------------------------------------------------------------
Proposed Rule January 10, 2014
Federal Register (79 FR 1918), Topic
section
------------------------------------------------------------------------
Clarifying Various Program Participation Requirements
------------------------------------------------------------------------
III.A.2........................... Two[dash]year Limitation on
Submitting a New Bid in an Area
Where an MA has been Required to
Terminate a Low[dash]enrollment MA
Plan (Sec. 422.504(a)(19)).
III.A.9........................... Collections of Premiums and Cost
Sharing (Sec. 423.294).
III.A.12.......................... Separating the Annual Notice of
Change (ANOC) from the Evidence of
Coverage (EOC) (Sec.
422.111(a)(3) and 423.128(a)(3)).
III.A.14.......................... Exceptions to Drug Categories or
Classes of Clinical Concern (Sec.
423.120(b)(2)(vi)).
III.A.15.......................... Medication Therapy Management
Program (MTMP) under Part D (Sec.
423.153(d)(1)(v)(A))--outreach
strategies.
III.A.23.......................... Medicare Coverage Gap Discount
Program and Employer Group Waiver
Plans (Sec. 423.2325)--disclosure
requirement for Part D sponsors.
III.A.26.......................... Payments to PDP Plan Sponsors For
Qualified Prescription Drug
Coverage (Sec. 423.308) and
Payments to Sponsors of Retiree
Prescription Drug Plans (Sec.
423.882).
III.A.38.......................... Authorization of Expansion of
Automatic or Passive Enrollment
Non[dash]Renewing Dual Eligible
SNPs (D[dash]SNPs) to another
D[dash]SNP to Support Alignment
Procedures (Sec. 422.60).
------------------------------------------------------------------------
Strengthening Beneficiary Protections
------------------------------------------------------------------------
III.C.1........................... Providing High Quality Health Care
(Sec. 422.504(a)(3) and Sec.
423.505(b)(27)).
III.C.4........................... Definition of Organization
Determination (Sec. 422.566).
------------------------------------------------------------------------
Strengthening our Ability To Distinguish Stronger Applicants for Part C
and D Program Participation and To Remove Consistently Poor Performers
------------------------------------------------------------------------
III.D.4........................... Termination of the Contracts of
Medicare Advantage Organizations
Offering PDP for Failure for 3
Consecutive Years to Achieve 3
Stars on Both Part C and Part D
Summary Star Ratings in the Same
Contract Year (Sec. 422.510).
------------------------------------------------------------------------
Implementing Other Technical Changes
------------------------------------------------------------------------
III.E.2........................... Skilled Nursing Facility Stays (Sec.
Sec. 422.101 and 422.102).
------------------------------------------------------------------------

[[Page 7917]]

II. Provisions of the Proposed Regulations and Analysis of and
Responses to Public Comments

A. Clarifying Various Program Participation Requirements

1. Changes to Audit and Inspection Authority (Sec. Sec. 422.503(d)(2),
423.504(d)(2))
Sections 1857(d)(2)(A) and 1860D-12(b)(3)(C) of the Act specify
that each contract under these sections must state that CMS has the
right to audit and inspect the facilities and records of each
organization. We proposed three changes to our audit and inspection
authority. First, under section 6408 of the Affordable Care Act, new
authority was provided to the Secretary that now requires that each
contract provide the right to ``timely'' inspection and audit.
We proposed to revise both Sec. Sec. 422.503(d)(2) and
423.504(d)(2) to reflect this change. Specifically, we proposed to
insert the word ``timely'' at the end of both of the introductory
paragraphs for Sec. Sec. 422.503(d)(2) and 423.504(d)(2).
We also proposed to add language to Sec. Sec. 422.503(d)(2) and
423.504(d)(2) that will allow us to require an MA organization or Part
D plan sponsor to hire an independent auditor, working in accordance
with CMS specifications, to perform full or partial program audits to
determine compliance with CMS requirements and provide to CMS an
attestation affirming that the audit has been completed as required.
Lastly, we proposed to add language to Sec. Sec. 422.503(d)(2) and
423.504(d)(2) that would allow us to require that a sponsoring
organization hire an independent auditor, working in accordance with
CMS specifications, to validate if the deficiencies that were found
during a CMS full or partial program audit have been corrected and
provide CMS with a copy of the audit findings.
We received the following comments and our responses follow:
Comment: Some commenters requested that CMS define ``timely'' as it
is being added to Sec. 422.503(d)(2) and Sec. 423.504(d)(2) and that
CMS define the existing language from paragraph (2) in that same
section, specifically: ``when there is reasonable evidence for some
need for such inspection.''
Response: We are following the exact working of the statute in
adding the word ``timely'' to our current audit and inspection
authority. We believe that the Congress recognized that what would be
considered ``timely'' is based on a reasonableness standard that may
change based on the specific circumstances leading up to the audit. For
example, we currently give sponsors 4-weeks notice prior to the start
of a routine program audit and we do not envision this change altering
that practice. However, if we were to become aware of a situation where
beneficiaries' health or safety may be at risk based on a plan's poor
performance, we will reserve the right to request records or any needed
documentation in an expedited fashion. Therefore, we will not put
restrictions on the broadly stated statutory language and believe that
this is in line with the spirit and intent of the statutory change.
Similarly, the language in paragraph (2) in that same section is not a
change, but existing language from our regulations. Again, we believe
that the wording is appropriate and does not require additional
definition or explanation.
Comment: One commenter suggested we utilize the NCPDP audit
standard as a means of standardizing audit communications.
Response: We appreciate the commenter's suggestion and believe this
would be a more appropriate approach if our audits largely focused on
claim level audits between MA and Part D organizations and the
providers or entities they pay. However, program audits cover a wide
range of our program areas and corresponding programmatic requirements,
many of which go well beyond claim determinations. We have received
positive feedback from MA and Part D organizations in the past
regarding the level of detail and useful information and feedback in
our audit reports, which sponsors rely upon as they work towards
implementing any necessary corrective actions. By limiting the
communication to the codes and auditing standards used by NCPDP, we
believe that--(1) many of our findings would not be adequately covered
by these standards; and (2) they would not provide enough detail in
many cases to allow for an organization to undertake meaningful
correction.
Comment: A commenter suggested that CMS specify that the same
organization that performed the audit also perform the validation in
order to ensure consistency in interpretation and try to keep costs
down, or at the very least require at least one member from the
original audit team be a member of the validation team.
Response: We will not be finalizing the proposal requiring
organizations to hire an independent auditor to conduct full or partial
program audits, but we are finalizing the proposal that we may require
an organization to hire an independent auditor to validate correction
of audit deficiencies. We will consider the recommendation to include a
member from the original audit team in any validation activities
whether they be performed by CMS internally or by an independent
auditor hired by the MA or Part D organization at CMS' request.
Comment: Some commenters' requested if CMS would set a time limit
in which audits must be completed or conducted.
Response: We will not be finalizing the proposal requiring
organizations to hire an independent auditor to conduct full or partial
program audits, but we are finalizing our proposal that we may require
an organization to hire an independent auditor to validate correction
of audit deficiencies. We will establish a timeframe in subregulatory
guidance based on our current internal validation audit timeline.
However, we recognize that some correction activities require more time
than others, we will reserve the right to alter those timelines for
deficiencies that we believe--(1) a more immediate correction is
warranted due to the potential for beneficiary harm; or (2) require a
longer correction timeline due to the technical or difficult nature of
correction (for example, rebuilding or completely restructuring systems
infrastructure).
Comment: A commenter requested if CMS would pay for the cost to
hire an independent auditor.
Response: Our proposal was that an MA or Part D organization would
retain the independent auditing firm to conduct the audit, but that the
plan could account for the costs in their bid. However, we will not be
finalizing the proposal requiring organizations to hire an independent
auditor to conduct full or partial program audits, but we are
finalizing our proposal that we may require an organization to hire an
independent auditor to validate correction of audit deficiencies.
Comment: Some commenters requested that CMS cap fees that
independent audit firms would charge MA and Part D organizations to
perform program audits.
Response: If we decide to pursue this proposal in the future, we
will explore our ability to cap the costs of performing these audit
activities.
Comment: Many commenters suggested that instead of requiring MA and
Part D organizations to hire independent auditors to expand the number
of audits conducted each year that we look to the various other
compliance and monitoring activities the Agency engages in, which could
be used to better target audits or results could be utilized in lieu of
audit activities.

[[Page 7918]]

Response: We do utilize the data and information obtained about
sponsor performance to target our audit efforts as part of the overall
risk assessment used to select sponsors for audit. We have also
utilized data and information from our various monitoring efforts to
assist in determining if certain deficiencies discovered during an
audit may have been corrected (for example, if a sponsor had multiple
deficiencies in a program area that will at a later date be the subject
of a monitoring activity, we may use passing results from that
monitoring activity as proof of correction).
Comment: A commenter requested that CMS release the data driven
elements of the risk assessment and define a sponsor who is high risk.
Response: We believe that this comment is outside the scope of this
final rule. However, we use a variety of existing data points from
Medicare Star ratings, past performance and plan reported data, as a
few examples, to develop our risk assessment. We focus on metrics that
have the potential to affect beneficiary access to medications and
services, and also look for operational metrics that program experience
has demonstrated can cause contracting organizations to develop
performance problems in core program areas (that is, large increases in
enrollment over a short period of time). We do not release our risk
assessment in its entirety, but these are the areas we focus on when
conducting the analysis. Organizations should note that it is our goal
to audit all organizations in the MA and Part D program, and the risk
assessment is one way plans are selected for audit.
Comment: Some commenters raised concerns over their available
recourse if they disagreed with an independent auditor's findings,
given the impact on Medicare Star ratings and past performance.
Response: We will not be finalizing the proposal requiring
organizations to hire an independent auditor to conduct full or partial
program audits, but we are finalizing the proposal that we may require
an organization to hire an independent auditor to validate correction
of audit deficiencies. Validation results have no impact on Medicare
Star ratings or past performance. However, we stated in the proposal
that organizations would have an opportunity to rebut audit findings,
this would include during validation efforts, and CMS would be
reviewing both draft and final reports from the independent auditor.
Therefore, we would give organizations an avenue to dispute findings or
policy interpretations that organizations believed to be erroneous,
even in the more limited use of an independent auditor to validate
correction of deficiencies.
Comment: A commenter stated that our proposal did not clarify how
organizations hiring an independent auditor to conduct full or partial
program audits would affect or involve the Zone Program Integrity
Contractors (ZPICs) or the Recovery Audit Contractors (RACs).
Response: The proposal to utilize an independent auditor to conduct
full or partial program audits or validations has no impact on ZPICs or
RACs, which is why they are not mentioned in our proposal.
Comment: Several commenters suggested that CMS develop a core set
of SNP auditors regardless of whether or not we implement our
independent auditor proposal, given what the industry perceives as
inexperienced or inconsistent SNP findings amongst auditors, which many
SNPs believed would be aggravated if organizations were required to
retain an independent audit firm. Some suggested that SNP auditors
should be accredited by NCQA prior to being allowed to conduct SNP
audits.
Response: We believe that this is outside the scope of this
proposal, but we thank the commenter for their suggestion to continue
to strengthen the CMS MA and Part D audit program. We have conducted
additional training and continue to welcome feedback on all of our
audit processes and protocols. After the piloting of the SNP MOC
protocols in 2013, we conducted specialized feedback sessions with
organizations subject to SNP MOC audits and made changes to our
protocols, methods of evaluation and training of auditors based on the
industry's feedback. We welcome additional feedback and hope that
organizations will see continual improvements in our audit processes in
2014 and future years.
Comment: A commenter inquired if the independent auditor proposals
applied to PACE organizations.
Response: No, these proposals do not apply to PACE organizations.
These regulatory provisions do not apply to PACE plans because we are
only proposing changes to Parts 422 and 423 which govern MA, other
Managed care plans, and Part D organizations. PACE plans are governed
by the regulations in part 460. With respect to this change applying to
cost plans, we select sponsors for audit at their parent organization
level, and if they have an 1876 cost plan, that contract would be
included in our audit. Therefore, the parent organization may be
requested to hire an independent auditor to validate the correction of
their audit deficiencies. However, if an organization was a standalone
cost plan, with no MA or Part D contracts under parts 422 or 423, this
requirement would not apply to those organizations, as cost plans are
governed by part 417.
Comment: A commenter suggested that CMS develop and implement a
robust annual or biannual training program for independent auditors to
ensure that they were competent to perform program audits properly.
Response: We will not be finalizing the proposal requiring
organizations to hire an independent auditor to conduct full or partial
program audits, but we are finalizing the proposal that CMS may require
an organization to hire an independent auditor to validate correction
of audit deficiencies. We will consider this suggestion if we repropose
the larger full scale use of independent auditors to conduct full or
partial program audits in the future. We will also share whatever
materials we have developed and can provide technical assistance if we
request an organization to retain an independent auditor to validate
correction of audit deficiencies.
Comment: A commenter suggested that instead of requiring plans to
hire an independent auditor we require plans to conduct a robust
internal audit and share the results with CMS.
Response: We will not be finalizing the proposal requiring
organizations to hire an independent auditor to conduct full or partial
program audits, but we are finalizing the proposal that CMS may require
an organization to hire an independent auditor to validate correction
of audit deficiencies. We currently require organizations to conduct
internal auditing and monitoring as part of having an effective
compliance program, which we believe for purposes of a healthy and
robust compliance program, such activities are appropriate.
Comment: A commenter recommended that much like CMS' use of
independent auditors to conduct data validation audits, CMS should set
criteria regarding who can conduct program audits. For example, the
commenter suggested CMS clarify that organizations that currently
assist plans with operations, compliance or consulting are disqualified
from performing as independent auditors.
Response: We will not be finalizing the proposal requiring
organizations to hire an independent auditor to conduct full or partial
program audits, but we are finalizing the proposal that CMS may require
an organization to hire an independent auditor to validate

[[Page 7919]]

correction of audit deficiencies. We thank the commenter for their
suggestion with respect to whom a contracting organization may retain
to perform validation of correction of audit deficiencies. We will
consider including any key criteria regarding who can perform these
validations in subsequent subregulatory guidance.
Comment: A few commenters questioned whether CMS has the statutory
authority to require contracting organizations to retain an independent
auditor to conduct full or partial program audits. These commenters
raised many related issues, such as CMS trying to inappropriately
expand their appropriation by requiring contracting organizations to
bear the cost of hiring an audit firm to perform a function that the
Congress has tasked CMS with performing. Other commenters stated that
to the extent these funds expended by plans were later reimbursed by
CMS through the bid process, it could implicate the Anti-Deficiency
Act.
Response: We will not finalize the proposal requiring organizations
to hire an independent auditor to conduct full or partial program
audits, but we are finalizing the proposal that we may require an
organization to hire an independent auditor to validate correction of
audit deficiencies. We do not agree that our proposal allowing us the
option to request a plan sponsor to retain an independent auditor to
verify that deficiencies that we determined existed during our audit
have been corrected implicates the concerns that organizations
previously raised regarding our current appropriation or statutory
authority. The proposal simply mirrors our current authority where we
may require organizations under sanction to retain an independent
auditor to perform an independent review to validate that the
deficiencies upon which the sanction was based have been corrected and
are not likely to recur.
After consideration of all of the comments received, we are
finalizing our proposal to revise both Sec. Sec. 422.503(d)(2) and
423.504(d)(2) to insert the word ``timely'' at the end of both of the
introductory paragraphs for Sec. Sec. 422.503(d)(2) and 423.504(d)(2),
and our proposal to have the option to require contracting
organizations who were found to have deficiencies during a CMS program
audit to hire an independent auditor to validate correction of those
deficiencies.
However, based on the strong opposition and valid concerns raised
by contracting organizations, we have decided at this time not to
finalize our proposal to require plan sponsors to hire an independent
auditor no less than every 3 years to conduct full or partial program
audits.
2. Enrollment Eligibility for Individuals Not Lawfully Present in the
United States (Sec. Sec. 417.2, 417.420, 417.422, 417.460, 422.1,
422.50, 422.74, 423.1, 423.30, and 423.44)
a. Basic Enrollment Requirements
Sections 226 and 226A of the Act establish the conditions for
Medicare Part A entitlement for individuals who have attained age 65,
are disabled or have end stage renal disease (ESRD), and are entitled
to monthly Social Security benefits under section 202 of the Act;
individuals entitled to Part A under these sections do not have to pay
premiums for such coverage, and they may, but are not required to,
enroll in Medicare Part B. Section 1818 of the Act establishes the
conditions for Medicare enrollment for individuals who are not entitled
to Medicare Part A without a premium under sections 226 or 226A of the
Act. Individuals must have Part B (under section 1836 of the Act) and
must also meet citizenship or alien status requirements in order to
purchase Part A hospital insurance under section 1818 of the Act;
individuals covered under section 1836 of the Act must meet citizenship
or alien status requirements, in addition to other requirements, in
order to enroll in Part B if they are not entitled to premium-free
Medicare under sections 226 or 226A.
Sections 1851(a)(3)(B), 1860D 1(a)(3)(A), and 1876(a)(1)(A) of the
Act outline the eligibility requirements to enroll in MA (Part C),
Medicare prescription drug coverage (Part D), and Medicare cost plans.
To be eligible for MA, Part D, or cost plan coverage, individuals must
have active Medicare coverage. Specifically, to enroll in MA, an
individual must be entitled to benefits under Part A and be enrolled in
Part B; to enroll in Part D, an individual must be entitled to Part A
and/or enrolled in Part B; to enroll in a Medicare cost plan, an
individual must be enrolled in Part B (Part A entitlement is not
required).
b. Medicare Eligibility and Lawful Presence
Section 401 of the PRWORA, amended by section 5561 of the Balanced
Budget Act, limits the eligibility of individuals who are not qualified
aliens to receive benefits under certain federal programs, including
benefits under Title XVIII of the Act (Medicare); these provisions are
codified at 8 U.S.C. 1611 and 1641. In general pursuant to 8 U.S.C.
1611(a), an alien who is not a qualified alien is not eligible to
receive any federal public benefit. The Congress has established some
exceptions to this general rule. One exception, at 8 U.S.C. 1611(b)(3),
permits certain aliens to obtain Medicare benefits and applies to an
alien who is: (1) Lawfully present in the United States, as determined
by the Attorney General and (2) was authorized to be employed with
respect to wages attributable to employment, which were counted for the
purpose of determining Medicare entitlement under Part A \1\. An alien
who is eligible under this exception is able to receive any benefit
payable under Medicare. In contrast, an alien that is not lawfully
present in the United States is not eligible to receive benefits under
Medicare.
---------------------------------------------------------------------------

\1\ This includes qualified aliens.
---------------------------------------------------------------------------

As a result, individuals meeting certain criteria are able to earn
qualified credits towards Social Security retirement benefits as
outlined in 8 U.S.C. 1631 (federal attribution of sponsor's income and
resources to alien) and 8 U.S.C. 1645 (Qualifying quarters). Such
individuals may earn the total number of qualified credits to be
eligible under the Act to receive retirement benefits under sections
226 and 226A of the Act. However, should such individuals be unlawfully
present in the United States, under PRWORA they are not eligible to
receive the Social Security benefits they have earned for as long as
they remain unlawfully present. When they are again lawfully present in
the United States, or live outside the United States, they would regain
eligibility to receive Social Security payments.
Similarly, when those not lawfully present become eligible for
Medicare based on age or disability under the Act, they would also
automatically be entitled under the Act to premium free Part A benefits
and be eligible under the Act to enroll in Part B during a valid
enrollment period. Furthermore, if these same individuals were
receiving Social Security retirement benefits 4 months prior to turning
65, or are in their 21st month of receiving Social Security disability
benefits, they would also automatically be enrolled into both Part A
and Part B, consistent with section 1837 of the Act and the enrollment
process outlined in Sec. 407.17. However, again under the PRWORA
limitations previously discussed, payments for Medicare benefits cannot
be made on behalf of these individuals as long as they are not lawfully
present in the United States. Only upon becoming lawfully present would
they become

[[Page 7920]]

eligible to receive the Medicare benefits to which they would otherwise
be entitled by paying into Social Security for the requisite number of
quarters or paying premiums.
We note that current regulations at Sec. Sec. 406.28 and 407.27
outline the reasons for loss of premium Part A and Part B enrollment,
and do not include the absence of lawful presence or citizenship as a
reason for loss of entitlement. Similarly, individuals who are entitled
to Part A and enrolled in Part B based on eligibility for Social
Security benefits currently may be enrolled in Medicare even if they
are not lawfully present in the United States. However, as previously
outlined, Medicare benefits are not payable for individuals who are not
lawfully present even if such individuals are enrolled in Medicare.
Thus, there is a distinction between being ``entitled to Part A'' or
``enrolled in Part B'' as provided for in the Act and being eligible to
receive the Part A and Part B benefits that ordinarily flow from such
entitlement and enrollment.
c. Alignment of MA, Part D, and Cost Plan Eligibility With Fee for
Service (FFS) Payment Exclusion Policy
In order to implement 8 U.S.C. 1611 and ensure that benefits are
not incorrectly paid for individuals who are present in the United
States unlawfully, the Social Security Administration (SSA) established
internal policies and procedures to suspend Social Security benefits
during periods in which individuals are not lawfully present in the
United States. Because Medicare entitlement flows from entitlement to
Social Security retirement and disability benefits, Medicare has also
implemented this provision through its own payment exclusion process.
Under Medicare's payment exclusion process, data on lawful presence
are transmitted to CMS from the Department of Homeland Security (DHS)
via regular data exchanges with SSA. Once the data are received by CMS,
lawful presence status is noted on an individual's record and is
retained in the FFS claims processing systems. As a result, payment of
Part A and Part B claims for non-citizens is denied where lawful
presence is not established on their record, and continues to be denied
until these individuals regain lawful presence status. Although payment
is being denied for claims, individuals who are entitled to Medicare
per section 226 of the Act, maintain Part A entitlement and remain
enrolled in Part B on Medicare's records as long as Part B premiums are
paid. Similarly, individuals who are enrolled in premium Part A or Part
B or both under sections 1818 and 1836 of the Act, maintain their
enrollment status as long as premiums are paid.
We proposed to align eligibility for enrollment in MA, Part D, and
cost plans (and resulting Medicare payments to plans and by plans that
would violate PRWORA) with the FFS payment exclusion policy to ensure
that Medicare is only paying for benefits and services rendered to
individuals who are eligible to receive them. These steps align with
the recommendations made by the Office of Inspector General (OIG) in
its January 2013 report (A-07-12-01116) \2\ regarding the need for CMS
to maintain adequate controls to detect and prevent improper payments
for Medicare services rendered to beneficiaries who are not lawfully
present. Accordingly, we proposed to revise the regulations to
establish U.S. citizenship and lawful presence as eligibility
requirements for enrollment in MA, Part D, and cost plans. Further, we
proposed that individuals who are not lawfully present in the United
States would be involuntarily disenrolled from MA, Part D, and cost
plans, based on the date on which they lose their lawful presence
status. Under our proposal, disenrollments would have been effective
the first of the month following the loss of lawful presence status,
and the disenrollment process would follow the process currently set
forth in the regulations for an individual who is no longer eligible to
be enrolled in a plan. Such disenrolled individuals would continue to
be considered entitled to Medicare Part A and (if enrolled) enrolled in
Part B coverage, provided they continue to pay premiums, as applicable,
but as noted payment of FFS claims would be denied based on unlawfully
present status.
---------------------------------------------------------------------------

\2\ Medicare Improperly Paid Providers Millions of Dollars for
Unlawfully Present Beneficiaries Who Received Services During 2009
Through 2011 (A-07-12-01116), available at https://oig.hhs.gov/oas/reports/region7/71201116.asp.
---------------------------------------------------------------------------

These proposed regulatory changes were intended to prevent an
individual known not to be lawfully present in the United States from
enrolling in a Part C, Part D, or cost plan and/or remaining enrolled
in such a plan, meaning that payments would not be made to plans or by
plans with respect to such individuals during that period. This policy
was intended to facilitate compliance with 8 U.S.C. 1611. We proposed
the following changes in the regulations to refine the eligibility
requirements for the MA and Part D programs and give MA and Part D
plans the ability to disenroll individuals who are not lawfully present
in the United States:
Sections 417.420, 417.422, 422.50, and 423.30 would be
amended to add lawful presence or United States citizenship as
eligibility criteria for enrollment in a cost, MA, or Part D plan.
Sections 417.460, 422.74, and 423.44 would be amended to
require the involuntary disenrollment of individuals from cost, MA or
Part D plans if they lose lawful presence status.
Conforming changes would be made to Sec. Sec. 417.2,
422.1, and 423.1 to outline the authority for the aforementioned
requirements, from 8 U.S.C. 1611 (Aliens who are not qualified aliens
ineligible for federal public benefits).
We received the following comments on our proposals:
Comment: Overall we received general support for our proposal. Many
commenters requested clarification about who would be responsible for
verifying eligibility based on lawful presence. A few of these
commenters stated specifically that CMS should verify this aspect of
eligibility and that plans should not be expected or permitted to
request proof of lawful presence from individuals. A commenter, who did
not agree with the proposed change, expressed concern that plans do not
have access to data to validate residency/lawful status for Medicare
beneficiaries and requested what source would be used for status
changes.
Response: We appreciate the support expressed by most commenters.
We agree that CMS would have to provide lawful presence information to
plans. In most cases, the DHS determines citizenship and lawful
presence status and that information is passed to SSA. SSA also has
mechanisms to address changes in lawful presence status reported by
beneficiaries themselves or other third parties. CMS receives the
lawful presence information from SSA after it completes its processes
related to such changes in status. Then, we will notify the plan if an
individual is not eligible for MA, Part D or cost plan enrollment based
on lawful presence and the plan must either deny the enrollment request
or process the involuntary disenrollment. Plans are not expected to
independently determine lawful presence when processing the enrollment
request, nor should they request proof of citizenship from the
beneficiary or include lawful presence as an element on the enrollment
form. We will notify plans of ineligibility due to unlawful presence,
through the same administrative mechanisms currently utilized to notify
plans about other

[[Page 7921]]

involuntary disenrollments. Additionally, we will be providing more
detailed information about the necessary processes and procedures in
subregulatory guidance.
Comment: A few commenters suggested that we amend the regulations
to require a notice for the beneficiaries if they are disenrolled for
absence or loss of lawful presence status. Other commenters suggested
revisions for the content of a disenrollment notice, specifically
suggesting that it contain pertinent information regarding loss of
eligibility for enrollment and related impacts to unlawfully present
individuals.
Response: Under existing processes at SSA, individuals are notified
of their potential change to lawful presence status and are provided an
opportunity to be heard in advance of any final changes in status in
SSA records (that is, before the information is transmitted to us \3\).
We believe that this process by SSA provides adequate notification to
the beneficiary and, at this time, CMS will not require an additional
notice from the plan at the time of disenrollment. This policy on
notification from the plan is similar to CMS processes and regulations
for other involuntary disenrollments based on information from CMS,\4\
but we will take into consideration the possibility of requiring notice
in future rulemaking.
---------------------------------------------------------------------------

\3\ Social Security Administration Program Operations Manual
System (POMS) RS 00204.010 Lawful Presence Payment Provisions and RS
00204.080 Postentitlement Suspension--Alien is no Longer Lawfully
Present.
\4\ Notices are required from the plans in cases of certain
disenrollments. See 42 CFR.417.430, 422.74(c), and 423.44(c).
---------------------------------------------------------------------------

In our existing subregulatory guidance, MA, Part D and cost plans
are strongly encouraged to send confirmation of disenrollment to
members even when it is not required. We agree that a notice regarding
the reason for involuntary disenrollment and the impact unlawful
presence status has on the payment of Medicare services would reinforce
the messages already provided by SSA, and CMS encourages plans to send
such notices in this situation. Sending a confirmation of disenrollment
would ensure that these beneficiaries understand the restrictions of
their Medicare coverage as they transfer to the FFS program. We
appreciate the suggested notice language provided by the commenters and
will consider it as we establish a model notice in Chapter 2 and
Chapter 17-Subchapter D of the Medicare Managed Care Manual and Chapter
3 of the Medicare Prescription Drug Benefit Manual.
Further, for instances where an unlawfully present individual is
denied enrollment into a MA, Part D, or cost plan due to ineligibility,
we currently require that the plan provide written notice of the
denial.\5\ We will consider the suggested language as we modify the
existing model denial notices in these subregulatory chapters.
---------------------------------------------------------------------------

\5\ Notices are required from the plans in cases of enrollment
denials. See 42 CFR 417.430(b)(3), 422.50(e)(3), and 423.32(d).
---------------------------------------------------------------------------

Comment: Several commenters expressed concern about the effective
date of disenrollment if it is based on the date of loss of lawful
presence status. Specifically, commenters suggested that involuntary
disenrollments be prospective because the plan provides coverage on the
reasonable assumption of eligibility to receive services. Further,
commenters were concerned about the recoupment of capitation payments
as a result of these retroactive disenrollments.
Response: In the proposed rule, we proposed that disenrollments
would be effective the first of the month following the loss of
eligibility to receive federal benefits because this is in line with
the statutory requirement that individuals not receive federal benefits
when they are not lawfully present in the United States. Operationally,
we did not believe it was feasible to maintain enrollment in a Part C,
Part D or cost plan for a period for which we would be required to
recoup capitations retroactively. Therefore, we proposed a procedural
mechanism to default enrollment for such individuals to Original
Medicare, where the FFS payment exclusion policy would be applied. Any
retroactive disenrollments would under our proposed approach result in
recoupment of payments, as supported by existing regulations in
Sec. Sec. 417.464(a)(1), 422.308(f)(1), 423.315(f) and 423.343(a),
which require CMS to retroactively adjust plan payments due to changes
in enrollment status. At the time we made this proposal, it was
consistent with the approach adopted under FFS Medicare, which also
made retroactive recoupments in cases in which someone receiving
Medicare benefits is determined not to have been eligible for them.
While we believed that this approach was the best way to implement
our obligation to comply with PRWORA, in considering comments received
on the proposal, we are reconsidering the issue of retroactive
disenrollment. First, while our proposal was consistent at the time it
was made with FFS policy on retroactive recoupments, we have revised
that policy, based on section 1870 of the Act, and are now denying
payments only prospectively. We are also aware of due process arguments
that may apply to retroactive recoupment. Because, under our systems,
retroactive disenrollment would automatically result in retroactive
recoupment, and we are reconsidering the issue of whether such
retroactive recoupment in the case of Part C, Part D and cost plans is
appropriate, we are not finalizing the retroactive aspect of our
proposal on disenrollment, and at this time are finalizing only the
prospective period of disenrollment provided for in the proposed rule.
We are moving forward with finalizing prospective disenrollment while
reconsidering the issue of retroactive enrollment because we believe
that prospective disenrollment should be put in place as soon as
possible, both to implement the prohibition on benefit payments to
individuals who are unlawfully present in the United States, and
minimize the period of any potential retroactive recoupment in the
event we decide at a future point to proceed with our original proposal
to disenroll individuals retroactively.
Therefore, we are finalizing text different from our original
proposal to make all disenrollments effective the first of the month
following the loss of eligibility to receive federal benefits (that is,
retroactively), and instead at this time will revise Sec. Sec.
417.460(j), 422.74(d)(8), and 423.44(d)(8) to provide that
disenrollments are effective the first of the month following notice by
CMS that the individual is ineligible. This adjustment will ensure that
CMS establishes the required mechanisms to permit prospective
enrollment into MA, Part D and cost plans only for individuals eligible
to receive Medicare benefits, and prospectively disenroll beneficiaries
currently enrolled in plans as of this provision's applicability date.
As discussed in the proposed rule, the OIG noted in a January 2013
report that CMS needed to increase efforts to detect and prevent
improper payments for Medicare services rendered to unlawfully present
beneficiaries. In a subsequent report published in October 2013 \6\,
the OIG specifically recommended that CMS develop and implement
controls to ensure that Medicare does not pay for prescription drugs
for unlawfully present beneficiaries and that CMS do so by

[[Page 7922]]

preventing enrollment of unlawfully present beneficiaries, disenrolling
any currently enrolled unlawfully present beneficiaries, and
automatically rejecting PDE records submitted by sponsors for
prescription drugs provided to this population. We believe that
prospective disenrollments address these recommendations, and serve as
an initial step in ensuring that payment is made for only individuals
eligible to receive services. As we move forward with implementation,
we will carefully consider enrollment retroactivity and resulting
recoupments, and if determined appropriate, propose changes or
additional regulations through future rulemaking.
---------------------------------------------------------------------------

\6\ Medicare Improperly Paid Providers Millions of Dollars for
Prescription Drugs Provided to Unlawfully Present Beneficiaries
During 2009 Through 2011 (A-07-12-006038) (https://oig.hhs.gov/oas/reports/region7/71206038.pdf).
---------------------------------------------------------------------------

Lastly, we believe it is important to note while CMS is dependent
upon the data received by the DHS through SSA, we ensure that the data
are passed to the plans within 24 hours of receipt via the Daily
Transaction Reply Report. In addition, we will work with these agencies
to explore options for receiving these data in the most efficient and
timely means possible.
Comment: A few commenters suggested that beneficiaries who are
involuntarily disenrolled due to unlawful presence should be entitled
to appeal their disenrollment.
Response: We thank these commenters for their suggestion to ensure
that affected individuals have the opportunity to appeal the reason for
their disenrollment from their plan. Currently, there is no right of
appeal associated with MA, Part D or cost plans eligibility or
enrollment, because enrollment in such plans is voluntary and
involuntary disenrollments are not considered initial determinations as
outlined in Sec. 405.924(a). We reiterate that individuals disenrolled
from MA, cost or Part D plans are defaulted to coverage under FFS
Medicare unless Parts A and B entitlement and enrollment ends under 42
CFR part 406, subpart B and Sec. Sec. 406.28 and 407.27. However,
individuals who are subject to involuntary disenrollment from these
plans due to lawful presence status are provided with due process prior
to any change in their status by SSA and exchange of any data to CMS
and loss of MA, Part D, or cost coverage (or denial of claims for an
individual enrolled in the FFS program).
These individuals are provided with advance notification in writing
of the possible status change and an opportunity to respond or submit
the necessary documentation to maintain a lawful presence status under
existing SSA processes.\7\ Following a status change to lawful presence
status by SSA, individuals are also provided an opportunity to appeal
the determination as outlined in 20 CFR 404.902. SSA has existing
processes to accept and review evidence from individuals who believe
that they are lawfully present and to update SSA's records. These
individuals, based on the date of regaining lawful presence status,
would then have the opportunity to re-enroll and, in certain cases of
government error, be reinstated into their former plans. As we prepare
for implementation of this rule, we intend to consider these issues
carefully to ensure beneficiaries are notified of the consequences to
Medicare coverage that flow from changes in lawful presence status.
---------------------------------------------------------------------------

\7\ Social Security Administration, Policy and Operations Manual
System (POMS): RS 00204.010. Lawful Presence Payment Provisions, GN
03001.005 Notice Requirements for Title II Due Process Actions, and
GN 03001.015 Notices Required Before And After Taking a Title II
Adverse Action.
---------------------------------------------------------------------------

Comment: A few commenters requested that CMS put in place a special
enrollment period (SEP) for individuals who are disenrolled from their
MA or Part D plan based on unlawful presence and then later regain
lawful presence status and wish to re-enroll in a Part D or MA plan. In
addition, commenters requested that if an individual is involuntarily
disenrolled from a Part D plan due to unlawful presence, and that
individual later regains lawful presence status, the individual should
not be subject to a late enrollment penalty (LEP) for the period of
time they did not have Part D (or other creditable) coverage.
Response: We appreciate the concern expressed by the commenters
about ensuring access to Medicare coverage and limiting financial
consequences after a beneficiary gains, or regains, lawful presence
status. Medicare beneficiaries may incur an LEP for Part D if there is
a continuous period of 63 days or more at any time after the end of the
individual's Part D initial enrollment period (IEP) during which they
were eligible for, but did not enroll in, a Medicare Part D plan and
were not covered under any creditable prescription drug coverage. If an
individual is disenrolled from a Part D plan because of loss of lawful
presence status, this is not considered a break in creditable
prescription drug coverage because the individual is not eligible for
Part D benefits during this time. Therefore, an LEP would not apply for
that period of time. If an individual regains lawful presence status
and, as a result, also regains Part C and/or Part D eligibility, the
individual does not get a new IEP, but we acknowledge that an SEP is
warranted to allow these individuals to enroll in an MA or Part D plan,
including a cost plan's optional supplemental Part D benefit, under
Sec. Sec. 422.62(b)(4) and 423.36(c)(8)(ii) if the individual is not
otherwise eligible for an SEP. The change in lawful presence status of
an individual necessary to trigger a change in eligibility under these
rules is extraordinary enough to justify the provision of a SEP under
the existing authority of Sec. Sec. 422.62(b)(4) and 423.36(c)(8)(ii),
even without the additional concern that late enrollment penalties
could be incurred by beneficiaries who are not able to enroll following
their regained eligibility for Part D coverage. The parameters of this
SEP will be outlined in subregulatory guidance. However, we note that
in this scenario if the newly eligible individual does not take
advantage of the SEP to enroll in a plan providing Part D coverage and
has no other creditable prescription drug coverage, the individual may
be subject to an LEP for any future Part D enrollment.
Comment: A few commenters provided feedback regarding the proposed
use of the term ``qualified alien'' in the proposed text at Sec. Sec.
417.422, 417.460, 422.50, 423.1, 423.3, and 423.44. Commenters
suggested changing it to more accurately reflect the lawful presence
eligibility requirements for Medicare benefits outlined in 8 CFR 1.3 so
that we are not restricting eligibility to only qualified noncitizens
to enroll in or maintain their benefits. The broader term ``lawfully
present'' for this purpose includes ``qualified aliens'' as well as
several other categories of non-citizens, whereas the proposed
terminology only included ``qualified aliens'' which is one of the
subcategories included in those lawfully present.
Response: We agree with the concern raised by commenters and are
finalizing the regulatory language at Sec. Sec. 417.422(h),
417.460(b)(2)(iv), 417.460(j), 422.50(a)(7), 422.74(b)(2)(v),
422.74(d)(8), 423.1(a)(3), 423.30(a)(1)(iii), 423.44(b)(2)(iv), and
423.44(d)(8) without references to qualified aliens; the final
regulatory language encompasses all individuals who are lawfully
present consistent with 8 CFR 1.3.
After consideration of the public comments received, we are
finalizing the policies and regulations text as proposed, with the
following exceptions:
At Sec. Sec. 417.422, 417.460, 422.50, 423.1, 423.3 and
423.44, we are deleting the term ``qualified alien.''

[[Page 7923]]

At Sec. Sec. 417.460(j), 422.74(d)(8), and 423.44(d)(8),
we are modifying the effective date of the involuntary disenrollment to
be the first of the month following notification by CMS.
At Sec. 417.460, we are redesignating paragraph
(b)(2)(iv) as paragraph (b)(2)(v) and finalizing the provision
establishing a lack of lawful presence as a basis for disenrollment
from a cost plan at paragraph (b)(2)(iv).
3. Part D Notice of Changes (Sec. 423.128(g))
Section 1860D-4(a) of the Act requires Part D sponsors to disclose
to beneficiaries information about their Part D drug plans in
standardized form. The Act further directs Part D sponsors to include,
as appropriate, information that MA organizations must disclose under
section 1852(c)(1) of the Act, which includes a detailed description of
benefits. (In guidance, we refer to the document containing this
information and delivered to beneficiaries as the Evidence of Coverage
(EOC).) To make informed decisions, enrollees need to understand how
their benefits, including premiums and cost sharing, would change from
one year to the next, should they reenroll in the same plan. (In
guidance, we refer to the documents containing this information and
delivered to beneficiaries as the Annual Notice of Change (ANOC).)
Enrollees also need to be aware of changes that may take place during
the course of the year as well. Part D regulations currently do not
include language found in the Part C regulations at Sec. 422.111(d)
requiring notice of changes to the plan to be provided to CMS for
review pursuant to procedures for marketing material review and to all
enrollees at least 15 days prior to the annual coordinated election
period. Given that guidance applicable to both programs discusses
notice of changes, we proposed to require, for Part D, delivery of an
ANOC.
Specifically, we proposed to adopt in Part D, with modifications,
the language contained in Sec. 422.111(d). As is the case with the MA
regulation, proposed Sec. 423.128(g) would require that Part D
sponsors submit their changes to us under the procedures contained in
subpart V of part 423, and, for those changes taking effect on January
1, provide a notice of changes to all enrollees 15 days before the
beginning of the annual election period. While part 422 requires a
minimum of 30 days notice before the effective date for all other
changes, we proposed at Sec. 423.128(g)(3) that Part D sponsors remain
subject to all other notice requirements specified elsewhere in the
Part D regulations. Our proposal reflected a programmatic difference
between Parts C and D: Under Part D it is not unusual for access to
drugs listed on a plan's formulary to change during the course of a
year. Changes can include changes to formulary status, tier placement,
and utilization management or other restrictions. It is vital that
beneficiaries currently taking a drug receive timely notice before such
changes take place in order that they can decide whether to, for
instance, change drugs or request an exception to cover the drug.
Accordingly, our regulations currently specify when sponsors must
provide notice of these kinds of changes. Our proposal to require the
delivery of an ANOC was not intended to disrupt or change those
existing notice requirements.
In the proposed rule, we also took the opportunity to comment on
the particular importance for Part D sponsors to provide notice in the
ANOC of any changes they are making that will affect the amount of cost
sharing that enrollees must pay for each drug belonging to a specific
tier. As has been articulated in guidance for several years, we expect
that sponsors will provide notice of such changes to all enrollees,
including enrollees moved to a consolidated plan. Generally, sponsors
compare information such as cost sharing for the same plan from one
year to the next in the ANOC. However, comparing information for the
same plan would not benefit individuals moved from one plan to another.
For instance, when a sponsor crosswalks members from a non-renewing
plan to a consolidated renewal plan from one year to the next, cost
sharing may change at the drug-tier level. An enrollee who previously
had zero cost sharing for all covered Part D drugs within the preferred
generic tier may find that the consolidated plan now requires copays
for drugs in that tier depending on how many months' supplies he or she
orders, and whether he or she obtains those drugs at a retail level
pharmacy or through mail order. We expect that enrollees will receive
ANOCs that clearly compare the non-renewed and consolidated plans'
copayments or coinsurance for all drugs within each tier.
We received the following comments on this proposal and our
response follows:
Comment: Commenters supported this proposal for informing
beneficiaries about their coverage options. Several pointed out that it
was important and appropriate for CMS to communicate cost-sharing
changes through the Part D ANOC in addition to formulary information.
One commenter urged us to perform ongoing monitoring of formulary
changes including cost sharing to ensure they are justified and
appropriately communicated to beneficiaries.
Response: We thank the commenters for the support. While we
appreciate the concerns about monitoring, we did not propose any
changes with respect to monitoring of formulary changes, and we decline
to address that issue in this final rule.
Comment: Several commenters observed that, while many Part D
sponsors already provide this annual notice under CMS guidance, they
thought it important that this requirement be made explicit through
rulemaking. In contrast, a commenter noted that developing a Part D
ANOC was not necessary because of information provided through other
material. Another commenter suggested that, if possible, Part D
information should be incorporated into the Part C ANOC to avoid the
potential for confusion, missing information, and duplicate costs.
Response: We thank the commenters for the support and can confirm
that our goal in revising Sec. 423.128(g) is to codify existing
guidance. Our existing model ANOC includes sections on both Parts C and
D, and CMS produces nine standardized model ANOCs and EOCs for all plan
types.
Comment: A commenter requested that CMS confirm that this provision
would merely codify existing guidance and would not necessitate any
changes in practice for Part D sponsors that already deliver ANOCs that
address plan changes consistent with existing CMS guidance.
Response: Section 423.128(g) will not affect current practice for
Part D sponsors that that already deliver ANOCs consistent with our
model notices.
Comment: A few commenters pointed out that finalizing this revision
would add costs due to increased printing and administration
requirements, with one commenter noting premiums could possibly
increase.
Response: We disagree. Because we did not propose here to change
existing practices, but rather only to codify existing guidance, we do
not believe the revision to Sec. 423.128(g) will increase costs.
Comment: A commenter suggested that MA organizations and Part D
sponsors be required to share ANOCs with LTC providers in plan networks
to enable them to better coordinate and support the beneficiaries in
making informed decisions when their health

[[Page 7924]]

conditions limit their ability to effectively communicate about their
coverage. Another commenter suggested that we add language to the Part
D ANOC advising beneficiaries for the future that it was important to
review the new contract year formulary.
Response: We appreciate these suggestions and will take them into
consideration for the future for our guidance on the model notices.
However we decline to accept the commenter's suggestion to add this to
the regulation text because, as previously noted, our proposal was
intended to codify existing guidance.
After review of the public comments received, we are finalizing
this provision as proposed without modification.
4. Business Continuity for MA Organizations and Part D Sponsors (Sec.
422.504(o) and Sec. 423.505(p))
A variety of events ranging from power outages to disasters and
warnings of disasters can disrupt normal business operations, and when
these events occur it is important that MA organizations and Part D
sponsors have a plan to ensure beneficiary access to health care
services and drugs. Sections 1852(d) and 1860D-4(b) of the Act,
respectively applicable to Parts C and D, establish access to services
and covered Part D drugs as a core beneficiary protection. After
Hurricane Sandy it became apparent that a few entities, particularly
those with operational centers and/or information technology (IT)
resources physically located in the affected areas, did not have
consistent continuity plans or back-up systems and processes to ensure
ongoing coordinated deployment of critical staff to alternate
locations.
Sections 1857(e)(1) and 1860D-12(b)(3)(D) of the Act authorize the
Secretary to adopt additional contract terms for, respectively, MA
organizations and Part D sponsors, including section 1876 cost
contracts and Programs of the All-Inclusive Care for the Elderly (PACE)
organizations that provide qualified prescription drug coverage, that
are not inconsistent with Parts C and D, respectively, of Title XVIII
of the Act, when the Secretary finds it necessary and appropriate.
While a limited number of beneficiaries were affected by problems on
the part of a small number of entities as a result of Hurricane Sandy,
we have a goal of consistent disaster response for plans within the
scope of our proposal. Therefore, we proposed that all MA organizations
and Part D sponsors limit the impact on beneficiaries of unavoidable
disruptions and establish a plan to ensure rapid restoration of
operations. The scope of our proposal included section 1876 cost
contract and PACE organizations that provide qualified prescription
drug coverage under Part D. We also proposed to add contract provisions
to require that MA organizations and Part D sponsors develop and
maintain business continuity plans in order to better anticipate the
types of disruptions that could occur and implement policies and
procedures to reduce interference with business operations. Our
proposal was based on a belief that such planning is appropriate and
necessary to better ensure that Medicare beneficiaries have access to
the care and coverage contemplated by the statute.
The proposed provisions, in Sec. Sec. 422.504(o)(1) and
423.505(p)(1), would require that every MA organization and Part D
sponsor develop, maintain, and implement a business continuity plan
that meets certain minimum standards. In Sec. Sec. 422.504(o)(1)(i)
and 423.505(p)(1)(i), we proposed that the business continuity plan
assess risks posed to critical business operations by disasters and
other disruptions to business as usual; in the preamble, we clarified
that our proposal would apply regardless whether the risks, disasters
or disruptions be natural, human, or environmental. In paragraph
(1)(ii) of Sec. Sec. 422.504(o) and 423.505(p), we proposed to require
MA organizations and Part D sponsors to mitigate those risks through a
variety of strategies, at a minimum by: (1) Identifying events
(triggers) that would activate the business continuity plan; (2)
developing contingency plans to maintain the availability and, as
applicable, the confidentiality of hard copy and electronic essential
records, including a disaster recovery plan for IT and beneficiary
communication systems; (3) establishing a chain of command, which would
better ensure that employees know the rules of succession; (4) creating
a communications plan that includes emergency capabilities and means to
communicate with employees and third parties; (5) establishing
procedures to address management of space and transfer of employee
functions; and (6) establishing a restoration plan with procedures to
transition back to normal operations. Finally, we also proposed, in
Sec. Sec. 422.504(o)(1)(ii)(G) and 423.505(p)(1)(ii)(G), that the
business continuity plan comply with all applicable federal, state, and
local laws. In light of the nature of the records an MA organization or
Part D sponsor would have in its possession, we proposed to emphasize
continuing compliance with the contingency plan requirements of the
Health Insurance Portability and Accountability Act of 1996 (HIPAA)
Security Rule (45 CFR parts 160 and 164, subparts A and C) by including
a cross-reference to those requirements in paragraph (1)(ii)(B)(2) of
each proposed regulation. These areas of responsibility are essential
to continuing the business operations that allow beneficiaries to
access health care services and covered Part D drugs.
To better ensure that a business continuity plan works as a
practical matter, we next proposed in Sec. Sec. 422.504(o)(1)(iii) and
(iv) and 423.505(p)(1)(iii) and (iv) to require that on an annual
basis, each MA organization and Part D sponsor test and revise the plan
as necessary, and train employees on their responsibilities under the
plan. Proposed Sec. Sec. 422.504(o)(1)(v) and 423.505(p)(1)(v) would
require that MA organizations and Part D sponsors keep records of their
business continuity plans that would be available to CMS upon request.
We stated our belief that the broad list of areas that we proposed
to cover as part of business continuity plans were not new to MA
organizations and Part D sponsors. We stated these topics typically
appear in standard business continuity plans and that we also were
building on some requirements that already existed under federal and
state laws. For instance, with respect to electronic protected health
information, health plans have long had to comply with the contingency
plan requirements found in the HIPAA Security Rule. We indicated our
goal was to provide a list broad enough to align with the business
contingency plans that we believed most, if not the vast majority, of
MA organizations and Part D sponsors already had in place.
In contrast to the aforementioned list of broad content
requirements, we stated that the need to protect beneficiary access
required a prescriptive approach for some functions. In proposed
Sec. Sec. 422.504(o)(2) and 423.505(p)(2), as part of the proposal
that essential functions must be restored within 24 hours of failure
(whether due to disaster, emergency, or other disruption), we
identified what we believed to be the minimum essential functions for
both MA and Part D plans: Benefit authorization, if authorization
requirements have not been waived, and claims adjudication and
processing; an exceptions and appeals process; and call center
operations. We stated that given the mandate of the Act to ensure
beneficiary access to health care and

[[Page 7925]]

covered Part D drugs and the inability of many beneficiaries to pay for
services or drugs without the Medicare benefit, we believed that the
operations listed in the proposed regulations were the most essential
operations because they directly supported the provision of Part C and
D benefits. We stated that they ensured immediate electronic
communication on the availability and extent of Part C and D benefits
and also provided support that makes it more likely that Medicare
benefits will be appropriately and timely provided (for example, by
providing telephone assistance to beneficiaries with questions on how
to obtain benefits and maintaining a forum in which beneficiaries can
challenge benefit denials). We observed that without real time
provision of Medicare benefits, beneficiaries might not pay for the
entire cost of the services or drugs and therefore go without necessary
treatment.
We also proposed a list of the operations that we believed were
essential operations that had to be restored in a rapid time frame. We
intended our proposed deadline of the proposed 24 hours to be the
outside limit and at that time articulated an expectation that MA
organizations and Part D sponsors restore operation of essential
functions as soon as possible but not later than 24 hours after they
fail or otherwise stop functioning as usual. We stated the clock would
begin running in cases of total failure (for example, a computer or
telecommunications system crashes or stops working after disruption of
the power supply) and also when significant problems occur (for
example, a central database is corrupted).
We stated that the need to ensure correct claims adjudication and
benefit administration of health care services and drugs is no less
acute during disasters or other emergencies, and that such disruptions
in one part of the country might disable MA organization and Part D
sponsor systems that affect enrollees in other regions. We noted that
beneficiaries in those unaffected areas who are denied health care or
drug benefits (that is, access to drugs or reimbursement for claims
paid out of pocket) before the disruption took place should not be
denied the right to immediately challenge those denials or to learn
timely the resolution of earlier challenges. As proposed, Sec. Sec.
422.504(o)(2)(i) and 423.505(p)(2)(i) identified benefit authorization
(if not waived) and claim adjudication and processing as essential
functions which had to be operational within 24 hours. Our proposal
required restoration of those operations for services rendered at a
hospital, clinic, provider office, or at the point of sale for Part D
covered drugs. We also stated in the proposed rule that this function
was essential for both MA and Part D plans.
In addition, we proposed standards specific to Part D sponsors in
Sec. 423.505(p)(2)(ii) and (iii) to ensure that a beneficiary who
presents at a pharmacy with an appropriate prescription for a covered
Part D drug during a disruption would be more likely to receive the
drug at the point of sale. The first three prongs under proposed Sec.
423.505(p)(2) classified as essential the following functions: (i)
Authorization, adjudication, and processing of pharmacy claims at the
point of sale; (ii) administration and tracking of enrollee's drug
benefits in real time, including automated coordination of benefits
with other payers; and (iii) provision of pharmacy technical
assistance. We noted these essential tasks entail numerous
subfunctions. For instance, we stated that Part D sponsors would need
to restore within the 24 hour return to operations (RTO) all computer
and other systems that meet all privacy and security requirements in
order to communicate to pharmacies information about topics including:
coverage under Part D and the specific plan; cost-sharing and
deductibles; any restrictions such as prior authorization, step
therapy, or quantity limit edits; and coordination of benefits from
other insurers and any low income subsidies. Additionally, we noted
that the sponsor would need to undertake a concurrent drug utilization
review (DUR) to address, for instance, safety issues, as well as
restore its pharmacy help desk to provide prompt answers to any
questions pharmacies might have. (For more detail on some of these
functions and sub-functions, as related to Part D, please see section
III. A.10, ``Requirement for Applicants or their Contracted First Tier,
Downstream, or Related Entities to Have Experience in the Part D
Program Providing Key Part D Functions'' of the May 23, 2014 final rule
(79 FR 29867)).
Proposed Sec. Sec. 422.504(o)(2)(ii) and 423.505(p)(2)(iv) each
classified as an essential operation an enrollee exceptions and appeals
process including coverage determinations. Under these proposed rules
we specified that, within 24 hours of failure, MA organizations and
Part D sponsors would need to restore all IT and workforce support
necessary to maintain the ``safety net'' that ensures beneficiaries the
rights to appeal or to seek a formulary exception.
Finally, for both MA organizations and Part D sponsors, we proposed
that the operation of the call center be an essential function which
must be restored within 24 hours. We stated that by classifying
operation of the call center as essential, proposed Sec. Sec.
422.504(o)(2)(iii) and 423.505(p)(2)(v) would ensure that beneficiaries
could receive the information necessary to find out where they need to
go to access benefits and learn about any special rules that might
apply (for example, whether pre-authorization requirements are waived
or beneficiaries can obtain benefits at out-of-network providers or
pharmacies). We stated that enabling a beneficiary who has just been
denied Part D coverage at his or her usual pharmacy to call immediately
and speak to a customer service representative while still standing in
that pharmacy could ensure that he or she obtained drugs appropriately
covered by his or her Part D plan before returning home or moving to a
safer area.
Furthermore, in the proposed rule we stated that because it might
be difficult during a disaster to get to a provider's office or a
pharmacy, we believed it was important that benefit authorization,
claims adjudication, and call center operations be restored within 24
hours after failure. While our proposed provisions required both MA
organizations and Part D sponsors to coordinate their workforce,
facilities, and IT and other systems support to meet a 24 hour RTO, in
the preamble to the proposed rule we noted our belief that the vast
majority of MA organizations and Part D sponsors already met, or would
be able to meet, this requirement with their current resources, based
on our knowledge of the industry and as evidenced by the lack of
widespread problems with MA organization and Part D operations after
recent natural disasters in different parts of the country. We observed
that MA organizations and Part D sponsors would not be required to take
any prescribed specific actions (for example, there was no requirement
for redundant systems located at certain distances apart) to meet these
standards. Rather, we stated that the proposed 24-hour RTO would allow
MA organizations and Part D sponsors the flexibility to continue to
seek their own disaster preparedness solutions (for instance, vendor
sites or functions spread across facilities).
We stated that our goal in proposing a contractual requirement for
business continuity plans was to better ensure beneficiary access to
health care services and Part D drugs during disasters and other
interruptions to

[[Page 7926]]

regular business operations, and we viewed prior planning as essential
to achieving this goal. We specifically solicited comments regarding
which functions should be identified as essential operations and the
24-hour timeframe for RTO and stated that we would appreciate any
information unique to the role of MA organizations and Part D sponsors.
We received the following comments on these proposals and our
response follows:
Comment: Some commenters strongly supported the proposed provision
and noted that it was absolutely critical that MA organizations develop
and test business continuity plans to ensure that beneficiary needs are
met and commended CMS for its commitment to ensure beneficiary access
to Medicare benefits. A number of commenters specifically approved that
part of the proposed regulation that set forth minimum standards.
Additionally, several commenters, including some who did not support
the specific requirements of the proposed provision, agreed that there
was a need for ``robust'' business continuity plans.
Response: We thank those commenters who support the proposal in its
entirety or approved the general outline of minimum requirements, as
well as those who recognized there is a need for MA organizations and
Part D sponsors to have business continuity plans.
Comment: Noting that CMS acknowledged in the preamble there were
relatively few problems in the past, some commenters stated that
industry practices were adequate and questioned the need for detailed
provisions that classified certain functions as essential which had to
be restored within a 24-hour RTO deadline. A few commenters pointed to
the fact, also acknowledged by CMS in the preamble, that the
requirements overlapped with other existing federal, state, and local
requirements such as the HIPAA Security Rule and stated that they saw
no need for an additional layer of regulation. In contrast, another
commenter stated that developing a business continuity plan should not
be overly burdensome because the HIPAA Security Rule already requires
development of such a plan.
Response: We appreciate the fact that, as far as we are aware, only
a limited number of beneficiaries experienced problems as the result of
inadequate continuity planning in the wake of Hurricane Sandy. However,
there were some beneficiaries who were unable to access benefits, and
contingency planning might have prevented some of those problems.
Having a business continuity plan to prepare for business disruptions
is an established business practice; the fact that most MA
organizations and Part D sponsors successfully handled the disaster
does not excuse those entities that did not.
We do not believe that requiring a business continuity plan is
imposing an unnecessary level of regulation. However, we would like to
clarify that HIPAA requirements are distinct from our business
continuity provision. As we noted previously, with respect to
electronic protected health information, health plans have long had to
comply with the contingency plan requirements found in the HIPAA
Security Rule. Referencing this rule created no additional burden.
Comment: Commenters stated that the regulation was significantly
more detailed than necessary. While some commenters pointed to concerns
regarding paragraph (1) of Sec. Sec. 422.504(o) and 423.505(p) which
lists basic minimum requirements (addressed later in this section),
most commenters noted concern with paragraph (2) of Sec. Sec.
422.504(o) and 423.505(p) which identified as essential specific
functions and required that MA organizations and Part D sponsors
restore them within 24 hours of failure or loss of function.
The majority of commenters opposed the requirement that MA
organizations and Part D sponsors restore essential functions within 24
hours, with several stating this was not feasible. Many commenters
noted that because catastrophes are by their nature hard to predict,
out of the control of MA organizations and Part D sponsors, and result
in major disruptions that have the potential to last for weeks (for
instance, power outages), a 24-hour RTO deadline would hamper the
flexibility of MA organizations and Part D sponsors to prioritize. A
commenter suggested that we institute a ``force majeure'' clause to
provide relief for causes beyond the control of MA organizations and
Part D.
Commenters indicated that they generally agreed with CMS
that the emphasis should be on quickly getting care to those
beneficiaries who need it, and there was some consensus that providing
drugs and services at point-of-sale (POS) should remain an essential
function. Several commenters observed that, consistent with industry
standards, Part D sponsors were generally able to restore the systems
necessary to allow beneficiaries to obtain drugs within approximately
24 hours. For instance, a commenter identified benefit authorization,
claims adjudication, and pharmacy services as higher priorities. Some
commenters specifically identified call center services as time-
sensitive functions requiring a 24-hour recovery.
However, there was no clear consensus on the specific
functions that should be considered essential or even how to prioritize
among all of them. For instance, a commenter noted normal appeals would
fall into a longer category than 24 hours recovery, but that expedited
appeals might possibly fall within the 24 hour time line. Several
commenters suggested that different functions would require different
RTO time frames. Several commenters mentioned a 72-hour timeframe, with
one noting it restored functions less critical for health and safety
within 72, rather than 24, hours.
In evaluating essential functions, a number of commenters
distinguished between the Part C and D programs. Commenters observed,
for instance, that provider payments are not a 24-hour critical
function for MA plans since payment is allowed to be made within 30
days and that in a disaster or emergency MA organizations should not be
required to prioritize claims processing for services already rendered.
In contrast, a few commenters agreed that the 24-hour restoration
requirement could be applied to Part D point-of-sale claims that
require immediate adjudication.
Response: These commenters persuaded us that we need to build more
flexibility into our business continuity plan requirements for RTO for
essential functions and we are accordingly finalizing the regulation
with changes from our proposal. In paragraph (2) of Sec. Sec.
422.504(o) and 423.505(p), we are providing that MA organizations and
Part D sponsors must plan to restore essential functions within 72,
rather than 24, hours after any one of the essential functions fail or
otherwise stop functioning as usual. As discussed in more detail later
in this section, we also finalize regulation text to clarify that we
require MA organizations and sponsors to ``plan to'' restore essential
functions within the 72-hour time period, rather than guarantee
complete restoration within the time frame. Given the lack of a clear
consensus on how to prioritize all essential functions, we believe that
this will provide MA organizations and Part D sponsors with the
flexibility the commenters advocated, and still address our concerns
about planning to better ensure beneficiary access to the Medicare
benefit.
However, we underscore that although we are finalizing a more
flexible regulatory mandate, we expect that Part D sponsors will plan
for a 24-

[[Page 7927]]

hour RTO deadline for POS transactions. We are concerned that
beneficiaries who are not able to access their Part D drug coverage may
in fact suffer adverse health effects. Our decision not to explicitly
require a plan for a 24-hour restoration for POS drug transactions is
informed by the fact that commenters suggested that a 24-hour RTO for
POS transactions is an industry standard already generally met, and
that relatively few problems were reported in the aftermath of recent
disasters. We want to ensure that that track record not only continues
but improves. We will continue to closely monitor the timing of POS
transaction in the aftermath of disasters, emergencies, and other
disruptions and take any necessary actions. We also will revisit the
regulation if necessary.
We also agreed with commenters that there are distinctions between
the Part C and D programs relative to identifying what services are of
the highest priority for speedy restoration. For instance,
beneficiaries need to know whether they have Part D Medicare coverage
at the POS because usually they rely on the benefit to obtain
prescription drugs. For most beneficiaries, such claim denials may mean
they leave pharmacies without medications or pay out-of-pocket for
costs that are their plans' responsibility. In contrast, this is often
not the case for Part C health care services. Provision of Part C
services is not so closely tied to plan authorizations and a provider
may not bill the MA organization for services until days or weeks after
the service is furnished. Thus, because beneficiary health and safety
would not be put at risk by failure of Part C claims processing and
appeals processes, we agree with the commenters that those systems are
not essential functions to which the 72-hour timeframe would apply.
Furthermore, as finalized in section II.E.9. of this final rule (MA
Organization Responsibilities in Disasters and Emergencies (Sec.
422.100)), beneficiary access to health care services is protected in
the more limited circumstances of disasters and public health
emergencies and we believe that provision, in conjunction with Sec.
422.504(o)(2), ensures, to the extent possible, that beneficiaries
enrolled in MA organizations will have continued access to needed
health care services when there are disruptions to normal business
operations.
Accordingly we are finalizing Sec. 422.504(o)(2) to define as
essential services, for Part C purposes, benefit authorization (if not
waived) for services to be immediately furnished at a hospital, clinic,
provider office, or other place of service instead of the broader
requirement that was proposed. This final rule text would include
benefit authorization to the extent that members and providers contact
the MA organization to request such authorizations even when the MA
organization has waived that requirement.
Similarly, we agree that restoration of Part C claims processing
and appeals processes are not essential functions in that beneficiary
health and safety is not put at risk by a failure of those systems that
lasts for longer than 72 hours. We agree with the commenters that in a
disaster or emergency, MA organizations should not be required to
prioritize claims for services already rendered, but we do not want
beneficiaries to lose access to necessary treatment at provider
offices. Accordingly, for Part C, we are no longer characterizing
``Operation of an enrollee exceptions and appeals process including
coverage determinations'' as an essential function and are not
finalizing that part of our proposal for Sec. 422.504(o)(2).
Lastly, we agree with the commenters that characterized call center
services as high priorities for both Part C and Part D plans. In a
disaster or other emergency, normal procedures may be disrupted and
beneficiaries need to be able to find out how and where they can obtain
health care services and drugs by having contact with the plan.
In contrast, for Part D we plan to finalize Sec. 423.505(p)(2) as
proposed. We discussed the importance of the elements in more detail in
the preamble to the proposed rule, but would like to note here that a
beneficiary cannot obtain Part D coverage without benefits
authorization, adjudication, and processing of drug claims at the point
of sale. A pharmacy's inability to obtain, for instance, coordination
of benefits information may affect the beneficiary's ability to obtain
the drug as well; and pharmacy technical assistance is critical in case
the dispensing pharmacy has questions. We also believe the operation of
the enrollee exceptions and appeals process is essential--a beneficiary
who has been denied Part D coverage will want to resolve quickly any
issues so he or she can obtain the drug timely. Lastly, as previously
noted, we believe call center operations are essential.
Comment: A commenter suggested there was a need for more detail in
addition to that provided in the regulation as to exactly when the 24-
hour clock would start and that CMS would, for instance, need to
clarify if the clock would begin running when the disaster was declared
or when it occurred. Another commenter suggested the proposed 24-hour
RTO should begin running when the incident management team made the
determination of action or after a specified amount of time after the
disruption was reported.
Response: We believe that the language we proposed, namely that the
clock will start running ``after any of the essential functions fail or
otherwise stop functioning as usual,'' provides adequate direction to
MA organizations and Part D sponsors. We are finalizing a clearly
defined time period--72 hours (rather than the 24-hour time period
proposed)--in which MA organizations and Part D sponsors must plan to
restore essential operations. In contrast, we deliberately chose to
provide more flexibility to MA organizations and Part D sponsors to
determine the precise point at which the 72-hour clock starts running.
Essential functions could fail in an infinite variety of ways depending
on the circumstances and the systems and supports in place (for
instance, claims processing systems might fail in different ways than
operation of the exceptions and appeals process). We believe that MA
organizations and Part D sponsors are in the best position to both
learn about failures or disruptions in usual functions or the facts
that might potentially cause them and, in the aftermath of such
occurrences, gather as much information as possible internally and from
outside sources (such as first-tier, downstream and related entities
(FDRs) and local authorities and utilities). We will revisit this
regulation if problems arise in the future.
Comment: A couple of commenters expressed concern that the
requirement that MA organizations and Part D sponsors return functions
to ``normal'' operations would not permit them to utilize temporary
alternative workflows that could be more effective than normal business
operations in preserving member access to care.
Response: We disagree with this conclusion. Our proposal does not
require MA organizations and Part D sponsors to return immediately to
normal operations but rather, views that as an ultimate goal in an
ongoing transition process. Paragraph (1)(ii) of Sec. Sec. 422.504(o)
and 423.505(p) requires MA organizations and Part D sponsors to create
a mitigation strategy to ``prioritize the order in which to restore
[essential and] other functions to normal operations'', while paragraph
(1)(ii)(F) of Sec. Sec. 422.504(o) and 423.505(p) requires MA
organizations and Part D sponsors to ``[e]stablish a restoration plan
including procedures to transition to normal operations.''
Additionally, we do not define ``normal operations.'' In

[[Page 7928]]

fact, depending on the severity of a disaster or emergency, ``normal
operations'' certainly might not be operations performed exactly the
same as they were before the event. We do not prescribe when or how
normal functions are performed; an MA organization or Part D sponsor
may achieve a comparable level of performance (for example, in terms of
appeals being heard on a timely basis at the same rate as before the
disaster) and consider normal operations achieved even if different
personnel or offices now perform those functions. We view ``normal
operations'' as an operational level at which MA organizations and Part
D sponsors are able to administer the benefit correctly and fulfill
contract requirements.
Comment: A commenter stated that the proposed provisions were
inconsistent with Executive Order 13563 which requires that proposed
rules specify performance objectives rather than the behavior or manner
of compliance that regulated entities must adopt.
Response: We disagree with this commenter. The first part of our
proposed provisions simply lists basic areas that business continuity
plans must cover. We also view as performance objectives the list of
essential functions for which we require MA organizations and Part D
sponsors to plan a 72-hour RTO. As revised, the regulation requires
that each entity plan to restore those functions that directly support
the timely provision of Part C and D Medicare benefits to
beneficiaries. We leave it to the MA organizations and Part D sponsors
to determine the manner by which they plan to meet these requirements
timely after a failure occurs.
Comment: Commenters took issue with the costs associated with the
proposal. A number of commenters expressed concerns that we were
requiring continuous service which would give rise to enormous costs to
create systems redundancy, while several commenters were concerned
about the cost of testing IT systems on an annual basis.
Response: Although we believe the proposed regulation was clear in
paragraphs (1)(ii)(B)(1) of Sec. Sec. 422.504(o) and 423.505(p) that
we do not expect plans to be able to maintain continuous service under
all circumstances, we are revising both of these regulation paragraphs
in this final rule to clarify the language that we believe caused this
confusion. We are revising the language in the proposed paragraph (1)
of Sec. Sec. 422.504(o) and 423.505(p) to require MA organizations and
Part D sponsors to plan to restore business operations following
disruptions, rather than plan to continue business operations during
disruptions.
To clarify, we do not expect MA organizations and Part D sponsors
to prevent any disruptions on an absolute basis but rather to plan to
ensure operations are restored as best they can when business
operations fail. It is understood that disasters, emergencies, and
other events may cause severe disruptions outside of the control of MA
organizations and Part D sponsors; the reason we are requiring business
continuity plans is to ensure that MA organizations and Part D sponsors
are better equipped to handle those problems when they occur.
Additionally, proposed Sec. Sec. 422.504(o)(2) and 423.505(p)(2)
required that MA organizations and Part D sponsors ``restore''
essential functions within the specified timeframe, which we believe
raises the same concerns expressed by the commenter. We want to make it
clear that the actual restoration of essential functions within 72
hours is the goal of the business continuity plan, not a requirement
that is to be met in all circumstances. Accordingly, the regulation is
being finalized to require that MA organizations and Part D sponsors
plan to restore essential functions within the 72-hour time period. The
business continuity plan must be designed with this 72-hour period as a
deadline.
As to the commenters' concern about the cost of annual IT training,
paragraph (1)(iii) of Sec. Sec. 422.504(o) and 423.505(p) requires MA
organizations and Part D sponsors to test and update the business
operations continuity plan on at least an annual basis. This broad
description does not detail specific kinds of testing but relies upon
MA organizations and Part D sponsor discretion to adequately test and
update the business continuity plan. This would include determining
exactly what must be tested and how such testing must occur.
Comment: A commenter expressed concern that the rule would require
annual training for ``all'' employees, which might not be necessary
under all conditions.
Response: We agree that it is best left to MA organizations and
Part D sponsors to determine which employees would most appropriately
require annual training on the business continuity plan. We are
finalizing the regulations to require annual training of appropriate
employees rather than all employees, as well as making changes to make
the language applying to both Parts C and D consistent. Specifically,
we are removing the phrase ``all employees, including contract staff''
from Sec. 422.504(o)(1)(iv) and ``all new and existing employees''
from Sec. 423.505(p)(1)(iv), and replacing them both with
``appropriate employees''.
Comment: Several commenters suggested that our regulatory impact
analysis (RIA) significantly underestimated costs. Concerns were raised
about the high cost of creating systems' redundancy to avoid any
disruption of processing of claims; one commenter mentioned that the
requirement would necessitate spending millions of dollars. Another
commenter mentioned that many business continuity plans currently in
place for MA organizations and Part D sponsors would not meet
requirements such as the restoration of essential functions within 24
hours. A commenter was concerned that the estimate did not take into
account resources needed to ascertain the extent of damage and evaluate
options.
Response: We believe that the modifications, clarifications, and
comments discussed previously about this final rule address the vast
majority of concerns raised about the RIA. We are also well aware of
the major expense of creating redundant computer systems to ensure
there is no interruption in claims processing--and repeat that we are
not requiring MA organizations and Part D sponsors to absolutely ensure
that systems never fail or to build redundant systems to avoid any
potential failure. We are requiring that MA organizations and Part D
sponsors plan to avoid such system and other failures and, in the event
they do occur, to be prepared to recover essential functions within a
certain timeframe. We appreciate that while contracting organizations
may plan--even plan well--to avoid such disruptions and to recover from
them within 72 hours, there may be scenarios in which a return of
functionality for essential operations within the timeframe of
paragraph (2) of Sec. Sec. 422.504(o) and 423.505(p) is impossible .
We also believe that providing the greater flexibility to plan for a
72-hour, rather than 24-hour, RTO for MA organizations and Part D
sponsors should further alleviate concerns about high costs.
In this final rule, we also are revising the regulations to clarify
that we require annual training of ``appropriate'' rather than ``all''
employees. As noted earlier, our requirement for annual testing of the
business continuity plan does not specify exactly what must be tested
or how such testing must be conducted. As to the last comment, MA
organizations and Part D sponsors need to assess damages and evaluate
alternatives

[[Page 7929]]

regardless of whether they have business continuity plans.
Additionally, we have revised our cost estimates to account for
costs of what we believe will be, at most, minimal changes to existing
business continuity plans. We base this on: (1) The fact that we
believe most MA organizations and Part D sponsors with existing
business continuity plans already cover the same broad list of areas we
require in this rule; and (2) revisions to our rule that provide
flexibility that enables most MA organizations and Part D sponsors to
follow the same industry standards commenters suggested they currently
follow. (See section IV. Regulatory Impact Statement of this final
rule.)
Comment: A commenter stated that MA organizations and Part D
sponsors could incur potentially very large additional costs to come
into compliance with the new requirements which would amount to
unexpected expenses that would unfairly count against a plan's
administrative expenses on its medical loss ratio (MLR) calculation.
Response: Items that count as MLR are outside of the scope of this
final rule. However, we note that this final rule will apply to all MA
organizations and Part D sponsors and that we believe strongly that
planning for the least disruption to operations and better provision of
health care and drug benefits during disasters is an important function
for insurance companies, and that such work will also benefit the MA
organizations and Part D sponsors themselves.
Comment: Noting that they are confidential and contain blueprint
information on processes and supporting resources, a commenter
requested that rather than make business continuity plans available to
CMS upon request, that CMS require an in-camera review of certain
elements. In contrast, another commenter recommended that CMS review
such plans as part of the Medicare Part D application process as well
as via regular CMS compliance audits. A third requested whether there
would be an audit element that focuses on business continuity plans.
Response: We appreciate the commenter's concerns about
confidentiality. First, we would like to note that we are not requiring
MA organizations and Part D sponsors to submit these business
continuity plans and materials as a matter of course or to make such
plans publicly available. Furthermore, if we do request these
documents, we do not intend to voluntarily disclose them to any parties
outside of the government. Under the Freedom of Information Act (FOIA),
members of the public may request government records, which may include
documents submitted to us. MA organizations and Part D sponsors may
seek to protect their information from disclosure under FOIA by
claiming FOIA exemption 4 and taking the appropriate steps--including
labelling the information in question as ``confidential'' or
``proprietary.'' Furthermore, redaction of especially sensitive
information is sometimes an option, depending on what information CMS
needs and the nature of the information the organization seeks to
redact. We will consider both compliance and confidentiality needs as
we develop application and audit requirements related to this
provision.
Comment: A commenter requested that CMS require PACE and long term
care services and support providers (such as skilled nursing facilities
(SNFs) and assisted living residences (ALRs)) to create plans that deal
with natural and other disasters.
Response: As discussed in this final rule, the requirements in this
regulation that are applicable to Part D sponsors also apply to 1876
cost contracts and PACE organizations that provide qualified
prescription drug coverage. On December 27, 2013, we proposed
regulations on emergency preparedness requirements for Medicare and
Medicaid participating providers and suppliers (78 FR 79082). The
emergency preparedness requirements of that regulation would apply to
PACE organizations in their capacity as providers and, as we noted
earlier, the Part D proposed requirements apply to PACE organizations
to the extent they function as Part D sponsors.
Both that proposed rule and this finalized Part C and D rule have
the same goal of ensuring the least interruption to beneficiary health
care and drugs as a result of disasters and emergencies by requiring
entities to assess possible risks and lessen their impact through
planning. However, this final rule applies to the entities providing
coverage of the benefits (MA organizations and Part D sponsors), while
the other rule, ``Medicare and Medicaid Programs; Emergency
Preparedness Requirements for Medicare and Medicaid Participating
Providers and Suppliers'' would apply to entities directly providing
the services. Specifically, this Part C and D rule applies to MA
organizations and Part D sponsors to better ensure that beneficiaries
enrolled in their plans have access in a timely manner to the Medicare
covered items and services, supplemental benefits and prescription
drugs. In contrast, the emergency preparedness rule would apply to both
the Medicare and Medicaid programs and would require providers and
suppliers to be adequately prepared to meet the direct health care
needs of patients, residents, clients, and participants during
disasters and emergencies.
Comment: Commenters expressed concerns that the proposed regulation
did not take into account disparate circumstances. A commenter noted
that MA organizations and Part D sponsors typically were located in the
same area where members experiencing disasters or emergencies were
living, while other commenters suggested the requirement would
particularly burden smaller entities or entities with less experience
that might, for example, need to contract with third parties to meet
RTO obligations.
Response: We appreciate that different MA organizations and Part D
sponsors will face different challenges during disasters and
emergencies. However, we drafted broad areas of coverage to provide as
much flexibility as possible to different entities. Given that
emergencies and disasters are varied and unpredictable, we believe it
would not be prudent for CMS to try and create different requirements
based on different circumstances. We also believe that most of these
concerns about costs and sufficient flexibility have been addressed
through revisions or clarification of this proposed regulatory change.
Comment: A commenter stated that it was not aware of any reason
that there should be different standards for the protection of Medicare
beneficiaries during disasters than those generally applicable to the
rest of the population.
Response: The treatment of individuals who are not Medicare
beneficiaries is outside the scope of this regulation. However, we note
that we are the steward of the Federal Trust Fund with direct authority
over the Medicare program. Disasters, emergencies, and disruptions not
only can limit beneficiary access to Medicare benefits, but they pose
direct threats to the health of beneficiaries which in turn could
create greater needs for health care services and drugs. Our core
function is to ensure as best we can that beneficiaries are able to
access their Medicare benefits; we believe the requirement that MA
organizations and Part D sponsors establish business continuity plans
that better enable them to deal with disasters is central to achieving
this goal.

[[Page 7930]]

After consideration of the public comments received, we are
finalizing our business continuity proposal with the following
modifications as discussed and as follows:
In Sec. Sec. 422.504(o)(1) and 423.505(p)(1) we are
replacing the phrase ``ensure the continuation of business operations
during disruptions'' with the phrase ``ensure the restoration of
business operations following disruptions''.
In Sec. 422.504(o)(1)(iv) we are replacing the phrase
``all employees, including contract staff'' with the phrase
``appropriate employees''.
In Sec. 423.505(p)(1)(iv), we are replacing the phrase
``all new and existing employees'' with the phrase ``appropriate
employees''.
In Sec. Sec. 422.504(o)(2) andSec. 423.505(p)(2), we are
inserting the words ``plan to'' before the phrase ``restore essential
functions'' in order that it reads ``plan to restore essential
functions.'' We are also replacing the number ``24'' with ``72''.
In Sec. 422.504(o)(2)(i), we are replacing the phrase
``Benefit authorization (if not waived), adjudication, and processing
of health care claims for services furnished at a hospital, clinic,
provider office or other place of service'' with ``Benefit
authorization (if not waived) for services to be immediately furnished
at a hospital, clinic, provider office, or other place of service.''
We are removing proposed paragraph (ii) of Sec.
422.504(o)(2) (``Operation of an enrollee exceptions and appeals
process including coverage determinations.'') and renumbering proposed
paragraph (iii).
5. Efficient Dispensing in Long Term Care Facilities and Other Changes
(Sec. 423.154)
We proposed changes to the rule requiring efficient dispensing to
Medicare Part D enrollees in long term care (LTC) facilities. For
background, section 3310 of the Affordable Care Act amended the Act to
add a new paragraph (3) to section 1860D-4(c) of the Act. Section
1860D-4(c)(3) of the Act provides that the Secretary shall require
Medicare Part D sponsors of prescription drug plans to utilize
specific, uniform dispensing techniques, such as weekly, daily or
automated dose dispensing, when dispensing covered Part D drugs to
enrollees who reside in an LTC facility in order to reduce waste
associated with 30-day fills. The section states that the techniques
shall be determined by the Secretary in consultation with relevant
stakeholders.
After extensive consultation with stakeholders, in the April 15,
2011 Federal Register, we published a final rule entitled ``Medicare
Program; Changes to the Medicare Advantage and the Medicare
Prescription Drug Benefit Programs for Contract Year 2012 and Other
Changes'' (``April 15, 2011 final rule''), which governs the dispensing
of prescription drugs in LTC facilities under Part D plans. In
accordance with Sec. 423.154, Part D sponsors generally must require
their network pharmacies to dispense certain solid oral brand covered
Part D drugs in quantities of 14 days or less, unless an exemption
applies. As a clarification to the April 15, 2011 final rule, we
proposed in the January 2014 proposed rule the following specific
changes to the LTC short cycle dispensing requirements:
Add a prohibition on payment arrangements that penalize
the offering and adoption of more efficient LTC dispensing techniques
by prorating dispensing fees based on days' supply or quantity
dispensed, and a requirement to ensure that any difference in payment
methodology among LTC pharmacies incentivizes more efficient dispensing
techniques.
Eliminate language that has been misinterpreted as
requiring the proration of dispensing fees.
Incorporate an additional waiver for LTC pharmacies using
restock and reuse dispensing methodologies under certain conditions.
Make a technical change to eliminate the requirement that
Part D sponsors report on the nature and quantity of unused brand and
generic drugs.
After providing a summary of the current LTC short cycle dispensing
rule in the proposed rule, we addressed each proposed change in more
detail.
a. Prohibition on Payment Arrangements That Penalize the Offering and
Adoption of More Efficient LTC Dispensing Techniques (Sec. 423.154)
Our first proposed change was to add a paragraph to Sec. 423.154
prohibiting payment arrangements that penalize the offering and
adoption of more efficient LTC dispensing techniques by prorating
dispensing fees based on days' supply or quantity dispensed, and a
requirement to ensure that any difference in payment methodology among
long-term care pharmacies incentivizes more efficient dispensing
techniques. Certain dispensing fee payment arrangements, for example,
some proration arrangements, penalize the offering and adoption of more
efficient LTC dispensing. For instance, if a medication is discontinued
before a month's supply has been dispensed, a pharmacy that dispenses
the maximum amount of the medication at a time permitted under Sec.
423.154 (for example, 14 days), collects more in dispensing fees than a
pharmacy that utilizes dispensing techniques that result in less than
maximum quantities being dispensed at a time. In other words, the least
efficient pharmacy collects more in dispensing fees than a more
efficient pharmacy.
In the proposed rule, we provided the following example of two
pharmacies--one more efficient at dispensing than the other--to
illustrate our concern: A monthly $4.00 dispensing fee for a 30-days'
supply is prorated, and a medication is discontinued after 21 days. The
first pharmacy dispenses 14-days' supply at a time and receives
approximately $3.73 in total dispensing fees for a 28-days' supply
($0.1333 x 28), which results in 7 days' worth of medication waste. The
second pharmacy dispenses 3-days' supply at a time and receives
approximately $2.80 in dispensing fees for a 21-days' supply in total
($0.1333 x 21), which results in no medication waste.
We believe this example is contrary to the Congress' intent in
enacting section 3310 of the Affordable Care Act, which was to reduce
medication waste. In this example, the second pharmacy's more efficient
dispensing techniques results in less medication waste, but the
pharmacy itself receives less in dispensing fees than it would if it
had dispensed in 14-day increments, which result in more medication
waste. This approach creates a perverse incentive for LTC pharmacies to
adopt the least efficient dispensing technique, if available, which is
to dispense drugs in 14 days supplies. This encourages wasteful
dispensing to the Part D program.
Given the clear intent of the Affordable Care Act to reduce
wasteful dispensing in the LTC setting, we proposed to prohibit payment
arrangements that penalize the offering and adoption of more efficient
LTC dispensing techniques by adding a new requirement that would state
a Part D sponsor must not, or must require its intermediary contracting
organizations not to, penalize long term care facilities' choice of
more efficient uniform dispensing techniques by prorating dispensing
fees based on days' supply or quantity dispensed. We proposed that this
requirement would also state that a sponsor or its intermediary
contracting organizations must ensure that any difference in payment
methodology among LTC pharmacies incentivizes more efficient dispensing
techniques.

[[Page 7931]]

b. Misinterpretation of Language as Requiring the Proration of
Dispensing Fees (Sec. 423.154)
Our second proposed change to Sec. 423.154 was to eliminate
paragraph (e), which we believe has caused confusion. Section
423.154(e) currently states 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 not apply. The purpose of this language was to ensure that
sponsors did not assess multiple monthly copayments for each
incremental dispensing event in LTCs. We believe misinterpretation of
paragraph (e) may have prompted some sponsors to prorate dispensing
fees in a way that penalizes the offering and adoption of more
efficient LTC dispensing techniques, even though the current regulation
does not address dispensing fees.
Moreover, effective January 1, 2014, the daily cost-sharing rate
requirement in Sec. 423.153(b)(4)(i) applies whenever a prescription
is dispensed by a network pharmacy for less than a month's supply,
unless the drug is excepted, regardless of the setting in which the
drug is dispensed. In other words, the daily cost-sharing rate
requirement applies to brand drugs dispensed in LTC facilities to the
extent they must be dispensed in supplies less than 30 days under Sec.
423.154, and to generic drugs, to the extent a sponsor voluntarily
dispenses generic drugs in LTC facilities in supplies less than a
month's supply. Consequently, the requirement of Sec. 423.153(b)(4)(i)
makes Sec. 423.154(e) unnecessary, and we believe retaining both
provisions could cause further confusion. For these reasons, we
proposed to delete Sec. 423.154(e).
c. Additional Waiver for LTC Pharmacies Using Restock and Reuse
Dispensing Methodologies Under Certain Conditions (Sec. 423.154)
Our third proposed change to Sec. 423.154 was to waive the short-
cycle dispensing requirements for LTC pharmacies meeting certain
conditions. Currently, Sec. 423.154(c) waives the requirements for
pharmacies when they dispense brand name Part D drugs to enrollees
residing in intermediate care facilities for the mentally retarded and
institutes for mental disease, as well as for I/T/U pharmacies. We have
learned that some institutional pharmacies maintain custody of
medications within the LTC facilities through operating a closed
pharmacy within the facility, and as a result can ensure sufficient
quality control over these medications to return all unused medications
to stock for reuse that are eligible for return and reuse under
applicable law. This has led us to believe there is another category of
pharmacies, such as some on site pharmacies in veterans' homes, for
which a waiver from the LTC short-cycle dispensing requirement may be
appropriate, if they meet certain conditions that demonstrate that
applying the 14-day dispensing requirements in these instances would
not serve to reduce waste.
In light of this, we proposed to waive the requirements of Sec.
423.154(a) for an LTC pharmacy that exclusively uses the dispensing
technique of returning all unused medications to stock that can be
restocked under applicable law for reuse and rebating full credit for
the ingredient costs of the unused medication to the PDP sponsor. The
proposed waiver also would require that for those drugs that cannot be
returned for full credit and reuse under applicable law, such as
controlled substances, the pharmacy uses a dispensing methodology that
results in the delivery of no more than 14 days of a drug at a time. We
proposed that the waiver would apply on a uniform basis to all
similarly situated LTC pharmacies, but not to a pharmacy organization
that is contracted to use this technique at some, but not all, of its
pharmacies. Rather, the waiver would apply only to the qualifying
pharmacies themselves. We proposed that we would not require the
pharmacies to credit back any amount of the dispensing fee when the
pharmacies return a drug to stock for reuse, since the level of effort
for the pharmacies would not be expected to decrease. We stated that,
if anything, the level of effort would be increased, since the
pharmacies have to implement the appropriate internal controls for
inspection and return to inventory of the unused medication.
We further solicited comments on our proposal that to qualify for
the waiver, a pharmacy would have to dispense any drugs that cannot be
restocked under applicable law, such as controlled substances, in no
greater than 14-day supply increments. Our rationale in proposing this
condition to the waiver is that we do not want the waiver to
inadvertently result in large quantities of medications being dispensed
to Part D enrollees serviced by the pharmacies that would qualify for
the waiver because they cannot be restocked under applicable law.
d. Technical Change To Eliminate the Requirement That PDP Sponsors
Report on the Nature and Quantity of Unused Brand and Generic Drugs
(Sec. 423.154)
Finally, we proposed to make a technical change to Sec.
423.154(a)(2), which requires Part D sponsors 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, as well as on the nature and quantity of unused
brand and generic drugs dispensed by the pharmacy to enrollees residing
in an LTC facility. This latter reporting requirement is waived for
sponsors for drugs dispensed by pharmacies that dispense both brand and
generic drugs in no greater than 7-day increments.
In a memorandum titled, ``Modifications to the Drug Data Processing
System (DDPS) in Relation to Appropriate Dispensing of Prescription
Drugs in Long Term Care Facilities,'' issued by CMS on August 3, 2012,
we explained that we planned to use the PDE data in conjunction with
other CMS data (such as MDS) to determine the extent to which 14 day or
less dispensing to enrollees in LTC facilities reduces the amount of
unused drugs in LTC. We did this to lessen the burden on sponsors that
would be created by a separate reporting requirement. Therefore, it is
no longer necessary to waive the reporting requirement for any Part D
sponsor, because Part D sponsors comply with the requirement (in the
form and manner we specified in the previously-referenced memorandum)
via PDE submission. Thus, we proposed deleting the language in in Sec.
423.154(a)(2) that appeared to require separate reporting, to eliminate
any confusion.
We received the following comments on this proposal and our
responses follow:
Comment: Numerous commenters support the proposal to add a
prohibition on payment arrangements that penalize the offering and
adoption of more efficient LTC dispensing techniques by prorating
dispensing fees based on days' supply or quantity dispensed, and a
requirement to ensure that any difference in payment methodology among
long term care pharmacies incentivizes more efficient dispensing. Many
of these comments in particular supported CMS' view that there is not a
justifiable reason for proration of monthly dispensing fees since the
cost of dispensing is not directly related to the quantity dispensed.
These commenters asserted that proration of dispensing fees ignored

[[Page 7932]]

the clinical oversight and fixed costs for pharmacy professional
services for each dispense. These commenters acknowledged that prorated
professional fees have resulted in a perverse economic model that
encourages pharmacies to dispense the maximum allowable quantity of
drugs (for example, 14 days supplies) in each prescription drug event
transaction.
Other commenters opposed this proposal, stating that it would
increase costs by requiring a full dispensing fee with each dispensing
event in an LTC facility, and that since the LTC pharmacies determine
dispensing increments, this will incentivize them to select the system
that provides the highest number of dispensing fees. These commenters
also noted that the Affordable Care Act did not specify a new LTC
dispensing fee structure.
A commenter provided an illustrative example of prorated monthly
dispensing fees that may not penalize the offering and adoption of more
efficient LTC dispensing techniques. Specifically, the example
demonstrates how an increased dispensing fee with proration can create
appropriate incentives to reduce waste and cost in LTC facilities. The
example provided for a $10 base dispensing fee for a 30-day supply for
a pharmacy with technology that dispenses in 7-day increments and a
$4.00 base dispensing fee for a pharmacy that dispenses in 14-day
increments. Under this scenario, the more efficient pharmacy would
receive $2.31 for dispensing 7 days of medication ($10/30 = $0.33 x 7)
and the less efficient pharmacy would receive $1.82 ($4/30 = $0.13 x
14) for dispensing 14 days of medication. This commenter urged us to
allow for any dispensing structure where the daily dispensing fee
encourages all pharmacies, regardless of their size or negotiation
capabilities, to use the most efficient dispensing technologies.
Response: We thank the supportive commenters for their comments.
With respect to the commenters that opposed the proposal, we note that
the proposal did not require a full monthly dispensing fee with each
dispensing event, or any specific dispensing fee or methodology for
that matter. The intent of this rule is to prohibit dispensing fees
that penalize the offering and adoption of more efficient LTC
dispensing techniques by prorating dispensing fees based on days'
supply or quantity dispensed. This rule also adds a requirement to
ensure that any difference in payment methodology among long-term care
pharmacies incentivizes more efficient dispensing techniques.
With respect to the one commenter that pointed out that certain
prorated dispensing fees may not penalize the offering and adoption of
more efficient LTC dispensing techniques in certain instances, we take
no position at this time on whether specific dispensing fee
arrangements would be compliant with this rule. We reiterate that this
rule does not require a specific dispensing fee or methodology, but
rather, prohibits payment arrangements that penalize the offering and
adoption of more efficient LTC dispensing techniques by prorating
dispensing fees based on days' supply or quantity dispensed. In
addition, this rule requires that any difference in payment methodology
among LTC pharmacies incentivizes more efficient dispensing techniques.
Comment: A commenter stated that because its data shows 80 percent
of all LTC dispense claims are for generic medications, modifying
dispensing fees will not truly affect the use of short-cycle
methodology. This commenter requested that CMS provide any research
demonstrating the increased utilization of short-cycle fill in
dispensing in pharmacies whose dispensing fees did not change to a
prorated fee. Alternatively, this commenter requested CMS' observations
and supporting data demonstrating that a daily dispensing fee actively
discourages pharmacies from short-cycle filling medications.
Response: We do not believe the research and data requested are
necessary to finalizing this proposal. We believe it is self-evident
that proration of the same monthly dispensing fee based on days' supply
or quantity dispensed (which results in a type of daily dispensing fee
or rate) penalizes more efficient pharmacies relative to less efficient
ones--the more efficient pharmacy is reimbursed less per dispense
because it dispenses in smaller increments. Moreover, that prorated
dispensing fee decreases per dispense the more efficiently the pharmacy
dispenses.
Comment: A commenter stated that CMS confuses prorated dispensing
fees with daily dispensing fees that are not necessarily pro rata
adjustments of otherwise applicable dispensing fees.
Response: Our prohibition of proration that penalizes more
efficient dispensing would apply both to proration of a monthly
dispensing fee amount and proration determined by setting a daily rate
that is applied to the number of days dispensed. The intent is of our
rule is to prohibit payment arrangements that penalize the offering and
adoption of more efficient LTC dispensing techniques by prorating
dispensing fees based on days' supply or quantity dispensed, and to
require that any difference in payment methodology among LTC pharmacies
incentivizes more efficient dispensing techniques.
Comment: A commenter stated that PBMs have very little leverage in
negotiating cost effective strategies with LTC pharmacies on behalf of
Part D sponsors, as the LTC landscape is controlled by three very large
LTC pharmacy organizations that make up an estimated 80 percent of the
market share, and that in many cases, only one of them is the provider
of prescription medications in LTC facilities. This commenter further
stated that these LTC pharmacy organizations dictated the contractual
requirement to prorate dispensing fees, asserting that their member LTC
pharmacies needed compensation for every prescription fill.
Response: This rule prohibits payment arrangements that penalize
the offering and adoption of more efficient LTC dispensing techniques
by prorating dispensing fees based on days' supply or quantity
dispensed. For example, this rule prohibits payment arrangements that
penalize LTC dispensing techniques of less than 14 days supplies of
drugs at a time. This rule also requires that any difference in payment
methodology among LTC pharmacies incentivizes more efficient dispensing
techniques. For example, this rule requires that differences in payment
methodologies among LTC pharmacies incentivize dispensing techniques of
less than 14 days supplies of drugs at a time. If the prorated
dispensing fees by days' supply or quantity dispensed do not penalize
the offering of more efficient dispensing techniques by these LTC
pharmacies, and any difference in payment methodology relative to other
LTC pharmacies incentivizes more efficient dispensing techniques, then
this regulatory provision is not implicated.
Comment: Some commenters asserted that our proposal was a violation
of the non-interference clause and exceeded our delegated authority.
Response: We disagree. Section 1860D-4(c)(3) of the Act provides
that the Secretary shall require Medicare Part D sponsors of
prescription drug plans to utilize specific, uniform dispensing
techniques, such as weekly, daily, or automated dose dispensing, when
dispensing covered Part D drugs to enrollees who reside in a LTC
facility in order to reduce waste associated with 30-day fills. Thus,
the Congress gave the Secretary authority to regulate with respect to
reducing waste of covered Part D drugs in LTC facilities. Moreover,

[[Page 7933]]

this requirement does not dictate any specific dispensing fee amounts
or methodologies, but rather prohibits only those dispensing fees that
penalize more efficient dispensing and requires that any difference in
payment methodology among LTC pharmacies incentivizes more efficient
dispensing techniques. For the reasons stated previously, we believe
this is consistent with the statutory directive to reduce waste
associated with 30-day fills in LTC facilities.
Comment: A commenter stated the regulatory text was vague.
Response: We disagree. The policy reflected in the preamble and
regulatory text is clear--to prohibit the prorated LTC dispensing fees
in the Part D market today that are financially penalizing more
efficient LTC pharmacies. In addition, we believe the discussion in
this preamble, with examples provided, makes clear how sponsors must
not penalize more efficient dispensing techniques in LTC facilities by
prorating dispensing fees based on days' supply or quantity dispensed
and that any difference in payment methodologies among LTC pharmacies
must incentivize more efficient dispensing techniques. We have
deliberately struck a balance in drafting the regulatory text to be
specific enough to accomplish the policy goal without being so specific
as to dictate the particular dispensing fee arrangements that are
permissible.
Comment: A commenter requested whether this new requirement applies
to all payments to LTC pharmacies; whether it applies to all
prescriptions in LTC facilities or only to those subject to the short-
cycle dispensing methodology; and whether a Part D sponsor must prove
to each LTC pharmacy how its payment methodology incentivizes more
efficient dispensing techniques.
Response: The requirement in this final rule applies to payments to
pharmacies related to the dispensing of Part D drugs to residents in
LTC facilities, including those Part D drugs that are not subject to
the short-cycle dispensing requirement. As noted previously, this rule
does not address specific negotiations between Part D sponsors and
pharmacies.
Comment: One commenter stated that the regulatory text was
confusing and contained three negatives.
Response: We are moving the proposed language to Sec.
423.154(a)(2) and (3) and revising the regulation text. We believe this
will make the regulatory text less confusing. However, because we did
not propose to waive this requirement with respect to pharmacies when
they dispense Part D drugs to residents of intermediate care facilities
for the mentally retarded (ICFs/IID) and institutes for mental disease
(IMDs) and for I/T/U pharmacies, we are making conforming changes to
Sec. 423.154(c) to make clear that the requirements of paragraph
(a)(2) and (3) are not waived for with respect to these pharmacies.
Comment: A commenter stated that it was unnecessary for CMS to
memorialize the fact that the rule applies to contracting
intermediaries in addition to Part D sponsors in the regulatory text.
Response: We agree. The reference to ``intermediary contracting
organizations'' in the regulatory text is now unnecessary because we
are moving the requirement to Sec. 423.154(a)(2) and (3), as noted
just previously.
Based on all the comments received, we are finalizing our proposal
with the changes previously described in this section.
Comment: Some commenters supported the removal of the language in
Sec. 423,154(e) that CMS believes may have been misinterpreted as
requiring the proration of dispensing fee. A few commenters opposed
this proposal. One of these commenters that opposed this proposal
stated that plans did not interpret the provision as requiring the
proration of dispensing fees, but rather as permitting it.
Response: Based on the comments received, we are finalizing the
removal of this language from the current regulatory text. As noted
previously, this provision was intended to address cost sharing for
short-cycle dispensing in LTC facilities, but the daily cost-sharing
rate rule at Sec. 423.153(b)(iv)(i) now addresses cost-sharing when
less than a month's supply of a Part D drug is dispensed. Thus, this
regulatory text is no longer necessary. Moreover, we believe the
comments support our view that the language was confusing.
Comment: Several commenters supported CMS' proposal in principle
for an additional waiver from the short-cycle dispensing requirements
for certain LTC pharmacies that maintain custody of medications by
operating a closed pharmacy within the facility, but these commenters
expressed concerns about how the waiver would be implemented.
Specifically, these commenters pointed out that there is no current
transaction standard that accommodates transmitting a net quantity for
payment following the acceptance of a returned medication applied
against a quantity dispensed for ingredient cost credit, and that use
of an existing transaction to accomplish this would violate HIPAA.
These commenters stated that a new HIPAA standard transaction would be
required to support a waiver based on return and reuse billing.
Response: In the proposed regulation, while we used an industry
term of art ``restock and reuse,'' we did not intend to implicate a
billing standard that does not exist. This term, as used in the
industry, encompasses a billing system that modifies pharmacy claims as
unused medications are returned to stock. We are aware of the current
limitations of this particular system.
The type of pharmacy that would qualify for the waiver, as we
described in the proposed rule, is an institutional, on-site, closed
pharmacy, such as a pharmacy in a veteran's home, which maintains
custody of medications within the LTC facility, such that all unused
medications that are eligible under applicable law are restocked and
reused. In other words, such a pharmacy has such quality control over
medications in the LTC facility that it does not have to dispense in
14-day supplies or less in order to reduce waste. Such pharmacies may
use post-consumption billing, a reverse and rebill system, or some
other billing method to only charge a Part D sponsor for the
medications that are actually used.
Given the misunderstanding of our proposed additional waiver from
the LTC short-cycle dispensing rule, we are not finalizing it as this
time. We will consider proposing the waiver again in future rulemaking.
Comment: We received no comment on our proposal to delete language
in Sec. 423.154(a)(2) to eliminate any confusion about that there is a
separate reporting requirement.
Response: We are finalizing this deletion, except that we are
redesignating the remaining language in (a)(2) as (a)(4) in light of
the other changes previously described.
Comment: Some commenters requested a delay in the effective date of
this requirement until 2016, asserting that the requirement will
necessitate significant changes in adjudication and network contracting
logic to accommodate the replacement of prorated dispensing fees with
standard dispensing fees. One commenter requested clarification of the
effective date of this requirement.
Response: The effective date of this requirement is January 1,
2016.
6. Medicare Coverage Gap Discount Program and Employer Group Waiver
Plans (Sec. 423.2325)
Section 3301 of the Affordable Care Act, codified in section 1860D-
43 and 1860D-14A of the Act, established the

[[Page 7934]]

Medicare Coverage Gap Discount Program (Discount Program), beginning in
2011. Under the Discount Program, manufacturer discounts are made
available to applicable Medicare beneficiaries receiving applicable
covered Part D drugs while in the coverage gap. Section 1860D-
14A(c)(1)(A)(ii) of the Act requires the manufacturer discount to be
provided to beneficiaries at the point-of-sale. Employer Group Waiver
Plans (EGWPs) are customized employer-offered plans available
exclusively to employer/union health plan Part D eligible retirees and/
or their Part D eligible spouse and dependents. Section 423.458(c)(4)
requires sponsors offering EGWPs to comply with all Part D requirements
unless those requirements have been specifically waived or modified by
CMS using our authority under section 1860D-22(b) of the Act. The
Affordable Care Act did not exclude EGWP enrollees that otherwise meet
the definition of an applicable beneficiary (as defined in Sec.
423.100) from the Discount Program. Therefore, in order for an
applicable drug to be covered by EGWPs, it must be covered under a
manufacturer agreement, and the manufacturer must pay applicable
discounts for applicable beneficiaries as invoiced.
Beginning in 2014, all EGWP benefits beyond the parameters of the
defined standard benefit will be treated as non-Medicare Other Health
Insurance (OHI) that wraps around Part D. We excluded supplemental
coverage offered through EGWPs from the definition of Part D
supplemental benefits in Sec. 423.100 in our 2012 rulemaking. However,
as discussed in section II.E.14. of this final rule, the change was
erroneously not included in the CFR. Therefore, we are making a
technical change to rectify that problem. The change with respect to
EGWPs was made so that the discount amount could be consistently and
reliably determined. This was necessary to ensure that we can determine
that the discount is always calculated accurately since we do not
collect information on all EGWP retiree benefit arrangements to
determine actual supplemental benefits. Not only would collecting such
information be impractical, but we also believe instituting a
requirement to collect the specific information on all such benefits
would be so burdensome as to hinder the design of, the offering of, or
the enrollment in employer plans. Consequently, the discount
calculation is based upon the Part D Defined Standard benefit for all
EGWPs beginning in 2014. While we believed that our justification for
excluding any supplemental benefits offered through EGWPs from Part D
benefits clearly indicated that the basic EGWP Part D benefits would be
limited to Defined Standard benefit because that is the only way we can
determine that the discount is calculated accurately, we took the
opportunity to propose this specific requirement in Sec.
423.2325(h)(1) to remove any ambiguity.
Comment: Some commenters strongly urged CMS to revise the policy
established in our April 2012 rule that considers EGWP plan
supplemental benefits to be outside of Part D, and therefore OHI. These
commenters stated that treating EGWP benefits as OHI is inconsistent
with the statute as it does not, on its face appear to result in direct
reductions in beneficiary cost sharing. They state that since many EGWP
enrollees do not experience a coverage gap the discounts are not used
to offset beneficiary spending in the gap which is the original
statutory intent. A few commenters stated that the current policy has
led employer groups to migrate from Retiree Drug Subsidy plans to EGWPs
which is costly to the taxpayer.
Response: We did not propose any changes to our existing policy
with respect to EGWP supplemental benefits, and we decline to do so
now. For the reasons set forth in our April 2012 rulemaking, we believe
our current regulation is consistent with the statute. The purpose of
this final rule is solely to clarify that basic EGWP benefits are to be
based upon the Defined Standard benefit.
After considering the comments received, we are finalizing the
portion of the provision which proposed that Part D sponsors offering
employer group waiver plans must provide applicable discounts to EGWP
plans as determined consistent with the Defined Standard benefit,
except we are making a technical change to clarify that applicable
discounts are available only to applicable beneficiaries enrolled in
the EGWPs. We are not finalizing the proposed requirement that Part D
sponsors of EGWPs disclose to each employer group the projected and
actual manufacturer discount payments under the Discount Program
attributable to the employer group's enrollees, at least annually or
upon request.
7. Transfer of TrOOP Between PDP Sponsors Due to Enrollment Changes
During the Coverage Year (Sec. 423.464)
Sections 1860D-23 and 1860D-24 of the Act specify that requirements
for Part D sponsor coordination of benefits with State Pharmaceutical
Assistance Programs and other plans providing prescription drug
coverage, including treatment of expenses incurred by these payers
toward a beneficiary's out-of-pocket (TrOOP) threshold. Part D
coordination of benefit requirements are codified at Sec. 423.464,
which defines ``other prescription drug coverage'' for COB purposes to
include, among other entities, other Part D plans, and specifies Part D
plan requirements for determining when an enrollee has satisfied the
out-of-pocket threshold.
Related regulations at Sec. 423.104(d), codifying the requirements
in section 1860D-2(b) of the Act, require sponsors to track beneficiary
TrOOP and gross covered drug costs and correctly apply these costs to
the benefit limits to correctly position the beneficiary in the benefit
and provide the catastrophic level of coverage at the appropriate time.
When a beneficiary transfers enrollment between Part D plans during the
coverage year, the enrollee's gross covered drug costs and TrOOP must
be transferred between plans and applied by the subsequent plan in its
administration of the Part D benefit. The process for a prior plan to
report these TrOOP-related data and for the new plan of record to
receive, upload, and use the data position the beneficiary in the
correct phase of the benefit was initially manual.
In 2009, this process was replaced by an automated process for
TrOOP-related data transfer. Our guidance released in 2008 (HPMS
memorandum dated October 21, 2008 titled, ``Updated Part D Sponsor
Automated TrOOP Balance Transfer Operational Guidance'') described
sponsor implementation of the automated TrOOP balance transfer process
and reiterated sponsor requirements for data reporting by the prior
plan and use of the data for proper positioning of the beneficiary in
the benefit by the current plan. We have continued to specify these
requirements in subsequent updated versions of the guidance.
To ensure Part D benefits are correctly administered when a
beneficiary transfers enrollment during the coverage year, we proposed
to codify these requirements in federal regulations. Specifically, we
proposed to amend Sec. 423.464(f)(2) by adding a new paragraph (C)
requiring Part D sponsors to--
Report benefit accumulator data in real time in accordance
with the procedures established by CMS;
Accept in real-time data reported in accordance with CMS-
established procedures by any prior plans in which the beneficiary was
enrolled, or that paid claims on the beneficiary's behalf, during the
coverage year; and

[[Page 7935]]

Apply these costs promptly.
In our guidance on automated TrOOP balance transfer, we express our
expectation that sponsors successfully transfer accumulator data for
beneficiaries making enrollment changes during the coverage year in a
timely manner 100 percent of the time. Although sponsors may be
reporting and accepting these data in accordance with our expectations,
we have been informed that some sponsors may not be promptly loading
the data received into their systems so it is available for claims
processing. As a result, the beneficiary's previously incurred costs
and gross covered drug costs are not considered in the processing of
claims received by the new plan sponsor soon after the enrollment
change.
Comment: One commenter objected to the provision claiming it was
vague and ill-defined and requested we include additional detail in
lieu of deferring to sub-regulatory guidance.
Response: We disagree. The proposed regulatory text specifies the
requirements for sponsors to report, accept and apply accumulator data.
We believe the details of the transfer process are more appropriately
addressed in guidance because they are procedural, and retaining them
in guidance will preserve flexibility to adapt these procedures as the
need arises. CMS and the industry developed the automated data transfer
process in collaboration with National Council for Prescription Drug
Programs (NCPDP) and have continued to work collaboratively to refine
and improve the process. When a change in the transfer process is
agreed upon and substantive requirements are unaffected, use of
guidance permits us to issue updated instructions in a timely manner.
Comment: Three commenters expressed support for the provision.
Response: We appreciate the support for this provision and are
adopting this provision as proposed with a minor change. That is, we
are redesignating the current paragraph (B) in Sec.
423.464(f)(2)(i)(B) as (C) and adding this provision as paragraph (B)
to more logically sequence the requirements.
8. Expand Quality Improvement Program Regulations (Sec. 422.152)
Section 1852(e) of the Act requires MA organizations to have an
ongoing quality improvement program for the purpose of improving the
quality of care provided to enrollees.
We proposed revising paragraph (a) of Sec. 422.152 in order to
codify our recent expansion of the quality improvement program policies
and revising paragraph (c) of Sec. 422.152 to codify our recently
expanded chronic care improvement program policies. The proposed
revisions to these paragraphs more accurately reflect current quality
care improvement program policies and requirements.
Additionally, paragraph (g) of Sec. 422.152 lists quality
improvement program requirements that are specific to special needs
plans (SNPs). We proposed revising paragraph (g) to clarify that the
requirements listed there are in addition to program requirements
listed in paragraphs (a) and (f) of Sec. 422.152 and are not instead
of the regular quality improvement program requirements.
Finally, we proposed to delete paragraph (h)(2) of Sec. 422.152 as
it pertains to contract year 2010 and is no longer relevant.
We received the following comments and our responses are as
follows:
Comment: We received several comments that supported Sec. 422.152
overall and CMS efforts to implement policies that ensure high quality
health care for enrollees.
Response: We thank the commenters for their support.
Comment: One commenter requested clarification as to what exactly
has changed under Sec. 422.152(c), ``Chronic care improvement program
requirements,'' as it appears to expand only one requirement and
reorder the others.
Response: Our proposal, and the finalized rule here, revises
paragraphs (c)(1)(ii) to add a requirement for the MA organization to
evaluate participant outcomes (such as changes in health status), and
add paragraphs (c)(1)(iii), (c)(1)(iv), and (c)(2). Paragraph
(c)(1)(iii) requires performance assessments that use quality
indicators that are objective, clearly and unambiguously defined, and
based on current clinical knowledge or research, and (c)(1)(iv)
requires systematic and ongoing follow-up on the effects of the chronic
care improvement program. Finally, new paragraph (c)(2) requires that
the organization report to CMS on the results of each chronic care
program. The proposed changes also included reorganization of the
section to parallel requirements in paragraph (d), ``Quality
improvement projects.''
Comment: One commenter requested whether recent changes to the SNP
Model of Care (MOC) requirements would be the vehicle for evaluating
compliance in relation to the effectiveness of a plan's Model of Care.
Response: This comment is outside the scope of the proposed changes
to this provision because we did not propose, and are not finalizing in
this rule, any changes to the SNP MOC requirements. Information about
the MOC and associated requirements can be found in Chapter 5 of the
Medicare Managed Care Manual.
Comment: One commenter requested clarification on the additional
quality improvement program requirements for SNP plans.
Comment: The changes made to this provision do not create any new
quality improvement program requirements for SNPs. The changes are to
clarify the requirement that SNPs must comply with the requirements
under paragraph (g) as well as those in paragraphs (a) through (f). The
SNP-specific requirements in paragraph (g) do not replace the
requirements in paragraphs (a) through (f), which apply to all plans,
including SNPs.
Comment: A commenter requested whether Quality Improvement Project
and Chronic Care Improvement Program results will be included in Star
Rating measurements in the near future.
Response: This comment is outside the scope of the proposed changes
to this provision as we did not propose, and are not finalizing in this
rule, any Star Rating measures in connection with the quality
improvement program requirement.
Comment: A commenter expressed opposition to expanded quality
improvement requirements as a whole because MA organizations respond to
such requirements by setting unrealistic targets for physicians. The
commenter added that compliance must often be at 100 percent for a
physician to qualify for a payment incentive.
Response: Our proposal codifies our recent expansion of the quality
improvement program policies and revises paragraph (c) of Sec. 422.152
to codify our recently expanded chronic care improvement program
policies. The proposed revisions to these paragraphs more accurately
reflect current quality care improvement program policies and
requirements that are already in practice. While we understand the
commenter's concern, we do not agree that codifying requirements that
are already in practice will place any further burden on MA
organizations and thus tangentially increase the burden on physicians.
Additionally, while we understand that our recent expansion of our
quality improvement program policies may have impacted MA organizations
and, in turn, providers, the requirements do not specify any provider
requirements or address payment incentives of any type. MA
organizations and providers remain free to contract and make agreements
on

[[Page 7936]]

these topics without CMS interference, thus MA organizations have
flexibility when shaping their provider processes, policies, and
overall framework.
Comment: A commenter stated that CMS's guidance with respect to
Quality Improvement Projects and Chronic Care Improvement Programs for
SNP plans has been unclear.
Response: Our proposal, and this final rule, revises paragraph (g)
to clarify that the requirements listed there are in addition to
program requirements listed in paragraphs (a) and (f) of Sec. 422.152
and are not in lieu of the quality improvement program requirements
presented in paragraphs (a) and (f). We believe the revisions to the
regulation clarify that Quality Improvement Project and Chronic Care
Improvement Program requirements are the same for SNP and non-SNP
plans.
After consideration of the public comments received, we are
finalizing the proposed codification and clarification of our Quality
Improvement Program regulation at Sec. 422.152 without modification.

B. Improving Payment Accuracy

1. Determination of Payments (Sec. 423.329)
In the January 2014 proposed rule, we proposed a technical change
to Sec. 423.329(d) to correctly describe the low-income cost-sharing
subsidy payment amount as it is intended by statute and has been
implemented and described in interpretive guidance by CMS. That amount
had been defined in the regulation as the amount described in Sec.
423.782. However, Sec. 423.782 refers to the cost sharing paid by the
beneficiary, not the cost-sharing subsidy paid on behalf of the low-
income subsidy-eligible individual. The low-income cost-sharing subsidy
amount is correctly described in Chapter 13 of our Medicare
Prescription Drug Benefit Manual, Premium and Cost Sharing Subsidies
for Low Income Individuals ((Rev. 13, 07-29-11), at https://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/Downloads/Chapter13.pdf). As we stated in the proposed rule, under the basic
benefit defined at Sec. 423.100, the low-income cost-sharing subsidy
payment amount is the difference between the Part D cost sharing for a
non-LIS beneficiary under the Part D plan and the statutory cost-
sharing for the LIS-eligible beneficiary. Under an enhanced alternative
plan described at Sec. 423.104(f), the cost-sharing subsidy applies to
the beneficiary liability after the plan's supplemental benefit is
applied. We proposed to amend Sec. 423.329(d) consistent with this
guidance.
We also explained in our proposed rule that pursuant to Sec.
423.2305, any coverage or financial assistance other than basic
prescription drug coverage, as defined in Sec. 423.100, offered by an
employer group health or waiver plan is considered ``other health or
prescription drug coverage.'' This definition applied to all of
Medicare Part D. (See the April 12, 2012 final rule titled ``Medicare
Program; Changes to the Medicare Advantage and the Medicare
Prescription Drug Benefit Programs for Contract Year 2013 and Other
Changes'' (77 FR 22082)). Therefore, the subsidy amount received by an
employer group health or waiver plan is the subsidy amount received by
a Part D plan offering defined standard coverage, as defined in Sec.
423.100.
Based on the preceding, we proposed to amend Sec. 423.329(d) by
deleting the reference to Sec. Sec. 423.782 and amending 423.329(d) to
define the low-income cost-sharing subsidy payment amount on behalf of
a low-income subsidy-eligible individual enrolled in a Part D plan for
a coverage year as the difference between the cost sharing for a non
low-income subsidy eligible beneficiary under the Part D plan and the
statutory cost sharing for a low-income subsidy-eligible beneficiary.
In order to clarify that enhanced alternative benefits apply prior
to determining the low-income cost-sharing subsidy payment amount, we
clarify in this preamble and in the final regulation text that the low-
income cost-sharing subsidy payment amount is the difference between
the cost sharing (not the ``Part D cost sharing,'' as proposed) for a
non-LIS beneficiary under the Part D plan and the statutory cost
sharing for the LIS-eligible beneficiary.
We received no comments on this proposal and are finalizing with a
minor modification, as discussed previously.
2. Reopening (Sec. 423.346)
We proposed to amend the reopening provisions such that we may
perform one reopening within 5 years after the date of the notice of
the initial payment determination to the Part D sponsors. We also
proposed to amend the provision to accommodate reopening the Coverage
Gap Discount Reconciliation described at Sec. 423.2320(b).
As we stated in the proposed rule, we had originally patterned the
reopening provisions after the Medicare claims reopening regulations
found in part 405, but now with a better understanding of the need for
reopening a payment determination, we proposed to modify our regulation
at Sec. 423.346 to align with our experience. We stated that our
experience indicates to us that we will likely have to perform a
reopening of the initial payment determination for every contract year,
and we proposed to remove the current timeframes for a reopening
described in Sec. 423.346(a)(1) through (a)(3), remove paragraph (b)
describing ``good cause'' referred to in paragraph (a)(2), modify
paragraph (c) to eliminate the reference to ``good cause,'' and amend
paragraph (a) such that CMS may reopen one time within 5-years of
notice of the initial payment determination.
As stated in the proposed rule, we believe that data stability will
occur within 5 years of the notice of the initial payment
determination. Within 5-years of the notice of the initial payment
determination, additional prescription drug event (PDE) data or PDE
adjustments associated with coordination of benefits will be submitted
by Part D sponsors consistent with the timeframe described at Sec.
423.466(b). We know that audits and other post reconciliation oversight
activity often take place more than 5-years from notice of the initial
payment determination. However, in light of the overpayment provision
at section 6402(a) of the Affordable Care Act, which established
section 1128J(d) of the Act and that we proposed to codify at Sec.
423.360, we stated that we do not believe that it is necessary to
reopen a payment reconciliation after that 5-year period, and that we
believe it is not necessary to reopen a reconsidered payment
determination. Therefore, we proposed to amend Sec. 423.346(a) such
that we will only reopen the initial payment determination and will not
reopen a reconsidered payment determination.
With respect to determining whether to reopen a contract year, we
stated that we will consider a number of issues, including, but not
limited to, whether the contract has terminated and received a final
settlement. We stated that we will not approve a request to reopen for
a contract that has terminated and received a final settlement. We also
stated that when we performed a reopening on our own initiative,
contracts that have been terminated and settled will not be included in
the reopening.
In addition, we proposed to establish a reopening provision for the
Coverage Gap Discount Reconciliation for the same reasons and under the
same authority that we established a reopening provision for the Part D
payment reconciliation process described in our January 28, 2005 final

[[Page 7937]]

rule titled, ``Medicare Program; Medicare Prescription Drug Benefit''
(70 FR 4316). We noted that in a Health Plan Management System (HPMS)
memorandum dated April 30, 2010, we stated that the final reconciled
discount program payments are subject to the reopening provision in
Sec. 423.346. Due to the invoicing process that continues to occur
after the reconciliation process, we do not anticipate the need to
reopen the Coverage Gap Discount Reconciliation. However, we want to
leave open the option to reopen if unforeseen events result in
underpayments or overpayments to Part D sponsors. Therefore, we
proposed to amend Sec. 423.346 to accommodate reopening a Coverage Gap
Discount Reconciliation.
Based on the preceding, we proposed to revise Sec. 423.346 by
removing the phrase ``or reconsidered'' from paragraph (a), amending
paragraph (a) to account for the proposed timing of the Part D
reopening, removing paragraphs (a)(1) through (3) and (b)(1) through
(3); adding a new paragraph (b) to accommodate a Coverage Gap Discount
Reconciliation reopening; and revising paragraph (c) to eliminate the
reference to ``good cause.''
We received the following comments and our responses follow:
Comment: A commenter stated that the past 6 years indicate that
unforeseen issues arise and require multiple reopenings to address them
properly. A commenter recommended that CMS relax the proposed
regulation and not unnecessarily restrict CMS's ability to conduct more
than one reopening. A commenter supported the goal of one reopening per
contract year, but recommended that CMS set a threshold, such as a
dollar amount, to restrict reopenings while preserving an appropriate
amount of flexibility in the regulation to accommodate circumstances
with a degree of materiality.
Response: We agree with the commenter that multiple reopenings may
be necessary. We know from experience that there are unforeseen
circumstances that require us to do multiple global or targeted
reopenings for a contract year. Target reopenings include reopening for
a specific plan type (for example, PACE organizations) or for specific
contracts or parent organizations. For this reason and also due to
potential conflicts between the 5-year time frame of this proposed
provision and the 6-year look-back period associated with the
overpayment provision recently codified at Sec. 423.360 (see 79 FR
29847), we are not finalizing the proposal to reopen one time within 5
years after the date of the notice of the initial determination to the
Part D sponsors.
Our proposal to do one reopening within 5 years after the date of
the notice of the initial determination may create difficulties for
Part D sponsors to return overpayments that they identify and are
required to report and return under Sec. 423.360. Section 423.360
creates a 6-year look-back period at Sec. 423.360(f). In accordance
with Sec. 423.360(f), a Part D sponsor must report and return any
overpayment identified within the 6 most recent completed payment
years. In our May 23, 2014 final rule, (79 FR 29843), we stated that
CMS would recover plan-identified overpayment amounts through routine
processing. For Part D, that means that if an overpayment is
discovered, the Part D sponsor may fulfill its obligation to return the
overpayment by requesting a reopening and submitting corrected data
prior to CMS conducting the reopening. (For more information, see 79 FR
29923). To the extent possible, we want to allow for overpayments to be
recovered through routine payment processes through the entire 6-year
look-back period. The decision not to finalize our proposal to conduct
one reopening within a 5-year period gives the Part D sponsor more
flexibility to return overpayments and CMS more flexibility to collect
overpayments through routine payment processes. Therefore, we are not
finalizing the proposed provision that CMS will reopen one time within
5 years after the date of the notice of the initial determination to
the Part D sponsors.
We note that we agree with the commenter that making the decision
whether to reopen could be based on a dollar amount threshold. We
currently consider several factors, including dollar amount, to
determine whether to do a reopening. However, the decision of whether
or not to do a reopening beyond the initial global reopening will be
decided based on factors specific to the circumstance. For that reason,
we will not codify a threshold or any other list of factors that would
give rise to multiple reopenings.
Comment: A few commenters disagreed with our approach to do one
global reopening. A commenter stated that unfocused reopenings would
place a great burden on Part D sponsors, particularly when looking back
as much as 5 years, and recommended that the current rule, requiring
``good cause'' for a reopening after 1 year after the final payment
determination, remain in place. A commenter also considered the
possibility of extending the timeframe beyond the current 4 years to 5
years for reopening with cause.
Response: Although we are not finalizing the proposed provision
that we will reopen one time within 5 years after the date of the
notice of the initial determination to the Part D sponsors, we disagree
with the commenter's statement that unfocused reopenings will place a
great burden on Part D sponsors. We conduct reopenings after we see
stability in the PDE and DIR data. We track the number of PDEs that we
receive for each contract year on a weekly basis. We know that the Part
D sponsors and their contracted pharmacy benefit managers (PBMs) submit
significant amounts of data after the Part D payment reconciliation
cut-off date. The data continues to be submitted well after 1 year of
the notice of the initial payment determination. Given the volume of
new data that we receive after the notice of the initial payment
determination, we believe that it is necessary to conduct at least 1
global reopening for every contract year in order to accurately
reconcile the prospective payment made to Part D sponsors with the
corresponding actual costs reported by the Part D sponsor on the PDEs.
In addition, and subsequent to our decision not to finalize the
proposal that CMS perform one reopening within 5 year of the notice of
the initial payment determination, we are not finalizing our proposal
to remove the current timeframes for a reopening described in Sec.
423.346 (a)(1) through (a)(3), remove paragraph (b) describing good
cause referred to in paragraph (a)(2), or modify paragraph (c) to
eliminate the reference to ``good cause.'' In other words, Part D plan
payment reopenings will continue to be conducted as described at the
current regulation at Sec. 423.346.
Comment: A commenter stated that experience would suggest that over
the years since the Part D program's inception, we have all improved in
our efforts at the reconciliation and reopening of the Part D financial
books, and therefore, encouraged CMS to enforce a shorter reopening
timeframe after plan year initial closure. Specifically, the commenter
recommended that CMS decrease the amount of time that plan years remain
not finally reconciled to 4 years, not 5 years. This commenter
encouraged a shorter time frame than 5 years, because from financial
and compliance perspectives, this commenter thought that it would be
beneficial to have a true final ``closure'' of the plan year earlier
rather than later, to reduce uncertainty and risk.

[[Page 7938]]

Response: We agree with the commenter that experience suggests that
we have all improved our efforts at reconciliations and reopenings. We
are also sympathetic to the Part D sponsors' desires to ``close'' a
plan year. However, we are not finalizing the proposal that CMS will
reopen one time within 5 years after the date of the notice of the
initial determination to the Part D sponsors. As previously stated, we
believe that the proposal, if finalized, may create difficulties for
Part D sponsors to return overpayments that they identify and are
required to report and return under Sec. 423.360.
Comment: A commenter requested that CMS consider setting a time
period for when global reopenings occur, so that the industry has some
clarity and predictability around timing of the reopenings. This
commenter thought that knowing when a reopening is expected would make
planning for Part D sponsors and CMS much easier and more efficient.
Response: Although we are not finalizing the proposal to reopen one
time within 5 years after the date of the notice of the initial payment
determination to the Part D sponsors, we agree with the commenter that
setting a time period for when global reopenings occur would provide
clarity and predictability around timing of the reopenings. As our
experience and efficiencies improve, we expect that the reopenings will
fall into a predictable, yearly schedule. Based upon recent historical
experience, we anticipate beginning the global reopening process for a
benefit year 4 years after releasing the initial reconciliation
reports. We, at our discretion, may conduct reopenings after this time
to rectify overpayments or unexpected issues resulting from the initial
reopening.
After consideration of the public comments we received, we are not
finalizing the proposal that we will reopen one time within 5 years
after the date of the notice of the initial payment determination to
the Part D sponsors. Consequently, we are not finalizing our proposal
to remove the current timeframes for a reopening described in Sec.
423.346 (a)(1) through (a)(3), remove paragraphs (b) describing good
cause referred to in paragraph (a)(2), or modify paragraph (c) to
eliminate the reference to ``good cause.''
We did not receive specific comments on our proposal to modify
Sec. 423.346 to accommodate the Coverage Gap Discount Reconciliation.
We proposed that, similar to the Part D plan payment reopening, the
reopening for the Coverage Gap Discount would be conducted one time in
a 5-year period. For the same reasons previously stated for the Part D
plan payment reopening, we are not finalizing that the Coverage Gap
Discount reopening be conducted once in a 5-year period. However,
consistent with that proposal, we are incorporating the Coverage Gap
Discount reopening into the reopening process described at Sec.
423.346. Therefore, we finalize the Coverage Gap Discount
Reconciliation reopening by modifying Sec. 423.346(a) by adding the
phrase ``or the Coverage Gap Discount Reconciliation (as described at
Sec. 423.2320(b))'' to the end of the introductory paragraph.
3. Payment Appeals (Sec. 423.350)
In our proposed rule, we proposed to revise Sec. 423.350 to
accommodate a Coverage Gap Discount Reconciliation appeals process
under the same authority with which we established the Part D payment
appeals process under section 1860D-15(d)(1) of the Act. Consistent
with the Part D payment appeals process currently described at Sec.
423.350, the proposed changes establish an appeals process where the
final reconciliation of the interim Coverage Gap Discount Program
(CGDP) payments may be subject to appeal. Consistent with the Part D
payment appeals process, we also proposed to amend Sec. 423.350(a)(2)
to include information that is submitted and reconciled under Sec.
423.2320(b) is final and may not be appealed nor may the appeals
process be used to submit new information after the submission of
information necessary to determine retroactive adjustments and
reconciliations. Also consistent with the Part D payment appeals
process, we proposed that the request for a reconsideration of the
Coverage Gap Discount Reconciliation must be filed within 15 days from
the date of the final payment, which is the date of the final
reconciled payment made under Sec. 423.2320(b).
Based on the preceding, we proposed to revise Sec. 423.350 by
adding a new paragraph (a)(1)(v) to allow for an appeal of a reconciled
coverage gap payment under Sec. 423.2320(b), by revising paragraph
(a)(2) to indicate that the payment information submitted to CMS and
reconciled under Sec. 423.2320(b) is final and may not be appealed,
and by adding a new paragraph (b)(1)(iv) to define the timeframe for
appealing the final reconciled payment under Sec. 423.2320(b).
We received the following comment and our response follows:
Comment: A few commenters requested that CMS extend the proposed
15-day deadline to file a request for reconsideration to 30 days due to
the complexity of the CGDP. A commenter noted that 30 days would be
more consistent with the existing plan-to-plan process. Another
commenter stated that the15-day deadline would result in more
``defensive'' appeal from plans attempting to protect their interest in
payments prior to the expiration of the appeal period, even where the
subject plan may not yet, at this time of appeal, conclude that any
payment discrepancies were in fact the result of methodological errors.
A commenter believed that the proposed 15-day deadline would increase
the administrative burden for CMS in processing unnecessary appeals and
impair the efficient use of plan resources, which raises overall plan
administrative costs.
Response: We decline to modify Sec. 423.350(b)(1) to extend the
proposed 15-day deadline to file a request for reconsideration to 30
days for the CGDP. We believe that some commenters may think that the
appeals process under Sec. 423.350 is broader than it actually is.
Section 423.350 describes the appeals process for the Part D payment
reconciliation and, as we proposed, the Coverage Gap Discount
Reconciliation. An appeal can be filed if a Part D sponsor believes
that CMS did not correctly apply its stated payment methodology. An
appeal for any other reason will be dismissed. If a sponsor identifies
a data discrepancy, the sponsor would not file an appeal but would file
a reopening request under Sec. 423.346.
The Part D sponsors are in possession of the same data CMS uses to
determine the Coverage Gap Discount Reconciliation. The Part D sponsors
will have the data in advance of the reconciliation and can validate
the data prior to the reconciliation. Therefore, we believe that the
proposed 15-day deadline is an adequate time for a Part D sponsor to
determine whether CMS has correctly applied its stated payment
methodology and, if necessary, file a request for reconsideration.
After consideration of the public comments we received, we are
finalizing Sec. 423.350 as proposed.
4. Payment Processes for Part D Sponsors (Sec. 423.2320)
In our proposed rule, we proposed to amend Sec. 423.2320 such that
we will assume financial liability for the applicable discount by
covering the costs of the quarterly invoices that go unpaid by a
bankrupt manufacturer at the time of the Coverage Gap Discount
Reconciliation described at

[[Page 7939]]

Sec. 423.2320(b). This will ensure that the Part D sponsors have the
funds available to advance the gap discounts at the point of sale, as
required under section 1860D-14A(c)(1)(A)(ii) of the Act. We also
stated that we would file a proof of claim with the bankruptcy court to
recover costs from the bankrupt manufacturer. We proposed that we would
implement our policy by adjusting the Coverage Gap Discount
Reconciliation for manufacturer discount amounts as they are reported
on PDEs submitted by the submission deadline for the Part D
reconciliation.
Based on the preceding, we proposed to add a new paragraph (c) to
Sec. 423.2320 to describe a process for accounting for quarterly
invoiced amounts that go unpaid by a bankrupt manufacturer.
We received the following comment and our response follows:
Comment: Commenters strongly supported our proposal. One commenter
requested that CMS expand upon the section to include scenarios other
than bankruptcy.
Response: We appreciate the support expressed for our proposal.
However, we will not be expanding Sec. 423.2320(c) to include
scenarios other than bankruptcy. We will cover the costs of unpaid
quarterly invoices only in the event that a manufacturer becomes
bankrupt and fails to pay the invoices. As stated in the proposed rule,
if a manufacturer becomes bankrupt, we are concerned that a court will
modify or reduce the amount of the civil money penalties (CMPs),
rendering the CMPs ineffective for covering the cost of the invoices
and leaving the Part D sponsor in the position of having to cover the
costs of the gap discount. In all other scenarios, CMPs, described at
Sec. 423.2340, will cover the cost of the unpaid invoices.
In light of the comment that we received recommending that we
expand our proposal to include scenarios other than bankruptcy, we
clarify that this provision will apply only to adjust for quarterly
invoices that go unpaid after the manufacturer has declared bankruptcy.
As previously stated, in all other cases, CMPs will cover the costs of
unpaid quarterly invoices.
Also, consistent with our proposal to adjust the Coverage Gap
Discount Reconciliation amount of each of the affected Part D sponsors
to account for the total unpaid quarterly invoiced amount owed to each
of the Part D sponsors in the contract year being reconciled, we
clarify in the regulation that we will only adjust the Coverage Gap
Discount Reconciliation amount for unpaid quarterly invoices used for
that particular Coverage Gap Reconciliation. Use of a particular set of
quarterly invoices in a Coverage Gap Discount Reconciliation is
consistent with our current process, and we are not modifying that
process for the purposes of this provision. Therefore, we clarify that
we will not adjust the Coverage Gap Reconciliation amount for unpaid
quarterly invoices that are not specifically used in that contract
year's Coverage Gap Reconciliation.
After consideration of the public comments we received, we are
finalizing Sec. 423.2320(c) as proposed, with the minor clarifications
discussed.
5. Risk Adjustment Data Requirements (Sec. 422.310)
In addition to the provisions addressed in the May 23, 2014 final
rule (79 FR 29847),\8\ we proposed to align Sec. 422.310 regarding
submission of risk adjustment data with Sec. 422.326 by making a
change in paragraph (g); specifically, we proposed the deletion of the
January 31 deadline in paragraph (g)(2)(ii) and replacing it with the
statement that CMS will announce the deadline by which final risk
adjustment data must be submitted to CMS or its contractor. This would
allow the risk adjustment data submission deadline to also function as
the Part C applicable reconciliation date for purposes of Sec. 422.326
on overpayment rules because Sec. 422.326(a) refers to the annual
final deadline for risk adjustment data submission as a date
``announced by CMS each year.''
---------------------------------------------------------------------------

\8\ We proposed three amendments to Sec. 422.310 in our January
10, 2014 proposed rule. In the May 23, 2014 final rule, we finalized
one proposal, stated that we would not finalize the second proposal,
and would finalize the third proposal at a later time. (See the May
23, 2014 final rule (79 FR 29848, 29925, and 29926). The third
proposal is addressed in this final rule.
---------------------------------------------------------------------------

In response to the January 10, 2014 proposed rule, we received
approximately six pieces of correspondence from organizations and
individuals regarding this specific proposal to replace the January 31
deadline with a date announced annually by CMS. We received the
following public comments and our responses follow.
Comment: A few commenters supported CMS' proposal to remove the
current date of January 31 as the annual final risk adjustment data
submission deadline and replace it with the provision that CMS will
announce the deadline annually, with the proviso that CMS' timing of
this annual deadline always allow sufficient opportunity for
organizations to make final data submissions. Several other commenters
stated their concern about this proposed change in deadline, including
a concern that CMS might announce a deadline earlier than January 31 in
some years. These commenters requested that CMS clarify that the annual
deadline would never be before January 31, and a few commenters
suggested that the regulation state that the deadline is January 31 but
may be extended. Finally, a few commenters requested that CMS not
change the January 31 date to a floating date, in order to allow
operational stability.
Response: Our goal for eliminating January 31 as the final risk
adjustment data submission deadline was to align this deadline at Sec.
422.310(g)(2)(ii) with the overpayment provisions in Sec. 422.326, so
that the final risk adjustment data submission deadline would also
function as the Part C applicable reconciliation date set forth in the
overpayment provisions. As noted in the proposed rule, in order to
align with the overpayment provisions, each year we expect to announce
a date that would accommodate the current subregulatory guidance that
MA organizations review the monthly enrollment and payment reports they
receive from CMS within 45 days of the availability of the reports. We
make these reports available to MA organizations each month according
to an operational schedule that we release each year. Therefore, we
expect to announce a final risk adjustment data submission deadline
that falls on or just after the conclusion of this 45-day period for
the January payment, which would be about 6 weeks after the end of the
payment year, and no earlier than the current January 31 deadline.
We do not expect the date of the annual final risk adjustment data
submission deadline to vary much from year to year but we believe that
providing flexibility in the regulation text is necessary to
accommodate the operational routines of our systems.
In response to comments, we are finalizing our provision at Sec.
422.310(g)(ii) with modification, stating that the final risk
adjustment data submission deadline will be announced by CMS each year
and will be no earlier than January 31.

C. Strengthening Beneficiary Protections

1. MA-PD Coordination Requirements for Drugs Covered Under Parts A, B,
and D (Sec. 422.112)
Under Sec. 422.112(b) of the MA program regulations, coordinated
care plans must ensure continuity of care and integration of services
through arrangements with contracted providers. We believe that an
important aspect of

[[Page 7940]]

this coordination is ensuring that all needed services, including drug
therapies, are provided in a timely manner. Certain drug classes,
including certain infusion agents, oral anticancer therapies, oral
anti-emetics, immunosuppressants, and injectables, may be covered by
Part D only when coverage under Parts A or B is not available. Because
coverage of these drugs cannot generally be determined based solely on
the drug, plan formularies often apply prior authorization criteria
before claims can be paid at the point-of-sale (POS). Additionally,
when an MA-PD plan issues an adverse Part D coverage determination
because they have determined the drug is covered under Parts A or B, we
expect MA-PD plans to ensure the drug is provided under the Parts A and
B basic benefit.
In the January 2014 proposed rule, we proposed to add a new
paragraph (b)(7)(i) to Sec. 422.112 to require MA-PDs to establish and
maintain a process to ensure that appropriate payment is assigned at
the POS. In the preamble, we characterized this as a proposal to
require MA-PDs to establish adequate messaging and processing standards
with network pharmacies to achieve this goal.
We also proposed to add a new paragraph (b)(7)(ii) to Sec. 422.112
to require that MA-PD plans issue the determination and authorize or
provide the benefit under the applicable part (A, B or D)--which would
require the MA-PD plan to proactively coordinate their enrollees'
prescription drug coverage under Parts A, B and D--in order to ensure
that enrollees receive Medicare covered prescription drugs as
expeditiously as the enrollee's health condition requires. We stated in
the preamble that if a denial under Part D is based on the existence of
coverage under Parts A or B, the MA-PD plan should authorize or provide
the drug under that other benefit without requiring the enrollee to
make a subsequent request for coverage under that other benefit. Such
determinations about the coverage of the drug would have to be provided
in accordance with part 422, subpart M and part 423, subpart M, when a
party requests a coverage determination.
We received the following comments on this proposal and our
responses follow:
Comment: Beneficiary advocacy groups, some health plans, and
pharmacy groups expressed their support for our proposal to strengthen
coordination of benefit requirements applicable to MA-PD plans. Those
commenters believe that requiring more appropriate messaging at the POS
would decrease enrollees' confusion and serve to improve coordination
of benefits.
One commenter urged CMS to adopt a policy to treat presentation of
a prescription at the pharmacy counter by an enrollee as a request for
a Part D coverage determination and the response from the plan as an
initial coverage determination, giving the enrollee access to the
appeals process. The commenter stated it is especially important for
claims rejected at the POS under Part D because coverage may be
available under Part A or Part B from the same MA entity, to be treated
as a request for a coverage determination to avoid delays in access.
Another commenter stated that CMS' longstanding policy that
presentation of a prescription at the pharmacy counter is not
considered a request for a coverage determination may seem like CMS is
requiring the enrollee to request an initial coverage determination
twice, contrary to our statement in the proposed rule that enrollees
should not have to make an initial request more than once. Furthermore,
the comment states that many, if not most, plans do not choose to treat
presentation of a prescription as a request for a coverage
determination because the pharmacy is not a representative of the plan
trained to accept such requests on the plan's behalf, including
collecting all the necessary information from the enrollee, conveying
it to the plan within the required timeframe, and documenting its
activities in this regard.
Response: We appreciate the commenters' support for our proposal,
but would like to clarify that we are not requiring MA-PDs to pay at
the POS for all drugs that might be covered under Parts A, B or D in
all circumstances, nor are we requiring plans to treat a POS claim
transaction as a request for a coverage determination. As we have
stated since the inception of the Part D program, neither the
presentation of a prescription at the pharmacy, nor a POS claim
transaction constitutes a coverage determination or a request for a
coverage determination by the plan. If a rejected claim cannot be
resolved at the POS, the Part D plan is required to transmit a code to
the network pharmacy instructing the pharmacy to provide the enrollee
with the standardized pharmacy notice that advises the enrollee of the
right to request a coverage determination from the plan. A coverage
determination request must be made directly to the Part D plan by the
enrollee, the enrollee's representative, or the prescriber. Pharmacy
staff does not have all of the information necessary to make a coverage
determination on behalf of the plan.
Comment: A commenter requested that CMS clarify that it does not
prevent pharmacies from accessing readily available information to
assist with appropriate payment determinations at the POS.
Response: We would like to clarify that we do not prohibit
pharmacies from using or transmitting to the MA-PD plan readily
available information for purposes of determining appropriate payment
at POS. This final rule does not change the guidance contained at
section 20.2.2 of Chapter 6 of the Medicare Prescription Drug Benefit
Manual, (Rev 10, 2-19-10), with respect to readily available
information accessed by the pharmacy. The MA-PD plan will have met
appropriate due diligence standards under Part D and the regulations
implemented via this final rule without further contacting a physician
if necessary and sufficient information is provided on the
prescription, and the contracted pharmacy is able to communicate this
information to the sponsor to assist in assigning appropriate payment
at the POS.
Comment: A few commenters requested that CMS extend this proposal
to out-of-network pharmacies.
Response: We disagree with these commenters. Plans do not have an
established relationship with out of network pharmacies and, therefore,
applying this proposal to them would be impractical.
Comment: Most commenters expressed strong support regarding CMS'
proposal to coordinate Parts A, B, and D drug coverage during the
coverage determination process.
Response: We thank commenters for their support. We will continue
to work with stakeholders to explore program enhancements that may be
more uniquely suited for plans that offer both Parts A, B and D
benefits. We are exploring the possibility for future subregulatory
guidance on this topic.
Comment: Several commenters suggested that CMS work with the
Congress to simplify Medicare drug coverage by establishing clearer and
simpler rules such as covering all prescription drugs under Part D
instead of having coverage also under Parts A and B. Furthermore, a
commenter urged CMS to consider using its regulatory authority to
achieve some simplification by, for example, covering exclusively under
Part D all drugs that are currently covered under Part D in the vast
majority of cases.
Response: We appreciate commenters' desire for simpler coverage
policies for

[[Page 7941]]

Medicare-covered prescription drugs. However, as recognized in the
comments, statutory changes would be needed to simplify coverage and
payment rules, which is outside the scope of this rulemaking. We will
evaluate what appropriate simplifications we may be able to make using
current regulatory authority.
Comment: Many commenters stated that although they are supportive
of CMS' intention to ensure that beneficiaries are able to obtain their
prescriptions without the inconvenience and delays that are due to
differences in the coverage rules for drugs under Parts A, B, and D,
there are going to be circumstances that require the enrollee or
someone on the enrollee's behalf to request a coverage determination
from the MA-PD. They suggested that CMS revise the proposed rule
language to recognize that ``timely'' adjudication might not, and often
cannot, occur at the POS because information that is essential to
determining whether a drug is covered under Parts A or B often is not
available at the POS and must be obtained from the prescriber and
sometimes an organization determination also is required from the MA-
PD. Pharmacy groups say they follow up with prescribers and MA-PDs, but
delays are inevitable when those steps have to be taken.
Response: As indicated in the proposed rule, our intention is to
add proposed Sec. 422.112(b)(7)(i) to our regulatory provisions in an
effort to improve at the POS the care continuity and coordination
between Part D drug benefits and Parts A and B drug benefits
administered by the MA-PD, not to establish a requirement that
pharmacies be responsible for making coverage determinations. Although
plans have the discretion to treat POS transactions as coverage
determinations, it is our understanding that network pharmacies do not
receive all of the information needed to act on behalf of hundreds of
Part D sponsors in making robust coverage determinations and generating
the required denial notice with detailed formulary information and
appeal rights. Additionally, the current HIPAA transaction standards do
not support the type and volume of information that would be necessary
to treat POS rejections as adverse coverage determinations.
We realize that there will be circumstances in which the
information necessary to determine whether a drug that is not covered
under Part D would be covered under Parts A or B will not be available
at the POS. In those cases, enrollees will receive the standardized
pharmacy notice that explains the right to contact the plan for a
coverage determination. However, we do believe that MA-PDs, by working
with their network pharmacies and prescribers, are capable of a high
degree of coordination and continuity. Through those collaborative
efforts, the network pharmacy can often acquire information needed to
obtain an edit override from the plan or otherwise ensure that the
claim can be processed and paid at the POS.
Comment: Some commenters suggested that CMS adopt use of specific
prior authorization codes, increased interoperability across electronic
systems, and changes to Medicare's Common Working File (CWF) in order
to make drug coverage determinations possible at the POS and decrease
billing errors.
Response: We appreciate those suggestions and expect that MA-PDs
and their network pharmacies will explore enhancements to their systems
to improve communications and otherwise streamline their processes in
order to ensure timely and accurate processing of POS transactions. We
welcome suggestions for appropriate approaches that would support such
improvements but decline to adopt rules to that effect at this time.
Comment: A few commenters stated that CMS' proposal to have plans
pay for a drug and subsequently chase the responsible party for
reimbursement would be inefficient and costly.
Response: We clarify for those commenters that neither our proposed
nor this final rule include any provision that will require MA-PDs to
pay for or cover a drug for an enrollee when another payor is
responsible for that payment, or when a payment determination cannot be
made at the POS. We agree that a ``pay and chase'' policy would not be
efficient, and is not always in the best interest of the enrollee. As
we discussed in the proposed rule, implementing a requirement to
authorize all claims at the POS may interfere with medically
appropriate pre-authorization requirements and may trigger
retrospective enrollee liability depending on the difference in
enrollee cost-sharing for coverage under Parts A, B, and D,
retrospective TROOP adjustments and Part D reconciliation (79 FR 2009).
We are finalizing the proposal to require MA-PDs to coordinate with
their network pharmacies and prescribers to improve existing processes
and develop new ones in order to ensure that enrollees receive their
Medicare-covered prescribed medications, without delay, when they
present at the network pharmacy.
After considering the comments, we are revising Sec.
422.112(b)(7)(i) by deleting the reference to ``claims adjudication''
so there is a clearer distinction between the POS requirements
addressed in paragraph (b)(7)(i) from the coverage determination
requirements referenced in paragraph (b)(7)(ii). We are finalizing
paragraph (b)(7)(i) to state that MA-PD plans must establish and
maintain a process to ensure timely and accurate POS transactions.
Compliance with this requirement may be achieved using adequate
messaging and other procedures with network pharmacies to ensure care
continuity and coordination at the POS between Part D drug benefits and
Parts A or B drug benefits administered by the MA-PD.
When processing a coverage determination for a prescription drug
that may be covered under Parts A, B or D, if the MA-PD determines, as
part of the coverage determination process, that the requested drug is
not covered under Part D, it must then evaluate whether the drug in
question is covered under Parts A or B. The MA-PD is responsible for
providing a clear explanation of its decision, including the decision
to cover the requested drug under a different benefit and how to obtain
the drug (for example, instructions to take the plan decision notice to
the pharmacy to obtain the requested drug) in the Part D standardized
denial notice. We expect to work with stakeholders to explore program
enhancements that may be more uniquely suited for plans that offer both
Parts A, B, and D benefits. We are finalizing, as proposed, Sec.
422.112(b)(7)(ii) and are exploring possibilities for future
subregulatory guidance on this topic.
2. Good Cause Processes (Sec. Sec. 417.460, 422.74 and 423.44)
Section 1851(g)(3)(B)(i) of the Act provides that MA organizations
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 establish
regulations related to enrollment, disenrollment, and termination for
Part D plan sponsors that are similar to those established for MA
organizations under section 1851 of the Act. In addition, section
1860D-13(a)(7) of the Act mandates that the premiums paid by
individuals with higher incomes be increased by the applicable Part D
income related monthly adjustment amount (Part D IRMAA), for the months
in which they

[[Page 7942]]

are enrolled in Part D coverage. Consistent with these sections of the
Act, subpart B in both the Part C and Part D regulations sets forth
requirements with respect to involuntary disenrollment procedures at
Sec. 422.74 and Sec. 423.44, respectively. An MA or Part D plan that
chooses to disenroll beneficiaries for failure to pay premiums must be
able to demonstrate that it made a reasonable effort to collect the
unpaid amounts by notifying the beneficiary of the delinquency,
providing the beneficiary a period of no less than 2 months in which to
resolve the delinquency, and advising the beneficiary of the
termination of coverage if the amounts owed are not paid by the end of
the grace period.
In addition, current regulations at Sec. 417.460(c) specify that a
cost plan, specifically a health maintenance organization (HMO) or
competitive medical plan may disenroll a member who fails to pay
premiums or other charges imposed by the plan for deductible and
coinsurance amounts. With the exception of the grace period, the
procedural requirements for cost plans to disenroll a member for
failure to pay premiums are similar to those for MA and Part D plans.
The cost plan must demonstrate that it made reasonable efforts to
collect the unpaid amount and sent the enrollee written notice of the
pending disenrollment at least 20 days before the disenrollment
effective date.
In the April 2011 final rule (76 FR 21432), we amended both the
Parts C and D regulations at Sec. 422.74(d)(1)(v), Sec. 423.44(d)(1),
and Sec. 423.44(e)(3) regarding involuntary disenrollment for
nonpayment of premiums or Part D IRMAA to allow for reinstatement of
the beneficiary's enrollment into the plan for good cause. In the April
2012 final rule (77 FR 22071), we extended the policy of reinstatement
for good cause to include beneficiaries enrolled in cost plans in Sec.
417.460(c)(3), thus aligning the cost plan reinstatement provision with
the MA and PDP provisions. These good cause provisions authorize us to
reinstate a disenrolled individual's enrollment without an interruption
in coverage in certain circumstances where the non-payment was due to
circumstances that the individual could not reasonably foresee or could
not control, such as an unexpected hospitalization. Since its
inception, the process of accepting, reviewing, and processing
beneficiary requests for reinstatement for good cause has been carried
out exclusively by CMS. However, we have received feedback from plans
on ways to improve the good cause process and make it more efficient
for both the plans and CMS. Based on this feedback, we updated Chapter
2 of the Medicare Managed Care Manual and Chapter 3 of the Medicare
Prescription Drug Benefit Manual to clarify the language of the notice
provided to beneficiaries, and the process and timing of receiving
payments during the extended grace period in connection with Sec.
417.460(c)(3), Sec. 422.74(d)(1)(v), and Sec. 423.44(d)(1)(vi). In
addition, we updated the Complaints Tracking Module (CTM) Standard
Operating Procedures (SOP) to permit plans to transfer requests for
reinstatement for good cause to CMS.
In light of ongoing feedback, in the January 2014 proposed rule we
proposed to amend Sec. 417.460(c)(3), Sec. 422.74(d)(1)(v), and Sec.
423.44(d)(1)(vi) to permit an entity acting on behalf of CMS to
effectuate reinstatements when good cause criteria are met. This
proposal would allow us to designate another entity, including a plan
(MA organization, Part D sponsor, or entity offering a cost plan) to
carry out portions or all of the good cause process. While we
envisioned an expanded role for plans to accept incoming requests for
reinstatement directly from former enrollees, which would allow them to
be more responsive to their current and former members, we stated that
ensuring objectivity in the review of these cases and equity among
beneficiaries regarding the determination of good cause was critically
important. Accordingly, we indicated that we would establish
operational policy and processes in subregulatory guidance to set
parameters for the application of the good cause standard, including
the submission to us of certain cases for review to ensure that plans
remain impartial and equitable in their assessment and treatment of
former members who have been disenrolled for nonpayment of premiums.
These changes would be accompanied by the development of an oversight
protocol for any activities assigned to a designee that are currently
carried out by CMS.
In addition, we proposed a technical change to the language in
Sec. 417.460 to clarify that good cause protections for enrollees in
cost plans apply to instances where there was a failure to pay either
plan premiums or other charges.
We received the following comments and our responses follow:
Comment: Commenters expressed both support for and opposition to
our proposal to allow an entity acting on behalf of CMS to effectuate
reinstatements when it is determined that good cause criteria are met.
Several commenters agreed that plans or an independent contractor could
perform this function if provided appropriate guidance and that this
new process could produce efficiencies that would be advantageous to
beneficiaries, plans and CMS. Other commenters believed that only CMS
or an independent contractor would have the knowledge and impartiality
to consider these cases appropriately. In addition, a few commenters
expressed concerns with the quality of work currently performed by
plans and CMS contractors and did not believe that their current
performance warranted an increase in responsibility.
Response: We thank commenters for their feedback in response to
this proposal. We continue to believe that with proper guidelines,
instructions and oversight, entities to which we assign this activity
could review and process good cause requests in an appropriate manner.
Given the feedback we have received since establishing the good cause
review process handled exclusively by us, we have learned that some
good cause reinstatement requests could be resolved more efficiently by
plans since they can readily access a former enrollee's premium billing
and payment history, and as such, are well positioned to more easily
resolve disenrollment disputes that are erroneously being treated, at
least initially, as good cause requests.
We fully understand that impartiality would be a key concern if
this function is performed by plans. That is why we noted in the
January 2014 proposed rule that if we were to exercise the authority we
proposed to include in these regulations, an oversight protocol would
be developed and CMS would retain the right to review cases to ensure
that determinations made by a CMS designee are in line with our
guidance.
Comment: Under the assumption that plans would be given the
responsibility to perform good cause reviews, a few commenters had
questions about the plans' scope of responsibility. Specifically, a
commenter questioned whether plans would be permitted to refer a case
to CMS for review and decision. Another commenter questioned whether
plans would be able to opt out of this work if they did not want to
take on the burden or costs related to this activity. Lastly, a
commenter questioned whether or not beneficiaries would be able to
appeal the plan's decision.
Response: In the event we assign the good cause process to plans,
the expectation would be that they perform the work from start to
finish (that is, intake, research, decision, notification,

[[Page 7943]]

and effectuation). We would provide guidance regarding these activities
in our enrollment manuals (Chapter 2 and Chapter 17, Subchapter D, of
the Medicare Managed Care Manual and Chapter 3 of the Medicare
Prescription Drug Benefit Manual) and, as part of the designation, we
would retain the authority to review both favorable and unfavorable
decisions to ensure that results are fair and sound. In addition, as
mentioned previously, we would develop an oversight protocol to ensure
that plans are compliant with our guidelines. As with other MA and Part
D policies, we realize that sometimes plans need feedback or guidance
from us to address certain unique issues. That would continue to be the
case for good cause reviews, but the expectation would be that once we
assign this process to plans, they would develop their own internal
processes for reviews, based on our guidance, and carry out the
majority of this workload without involving us.
Beneficiaries do not currently have the right to appeal good cause
determinations. Ultimately our goal is to streamline the good cause
review process and make it easier for all parties (beneficiaries,
plans, and CMS) to navigate. As such, we believe that the key to any
successful delegation of this work to the plans would be providing
clear and complete guidance to plans, but not adding another layer of
review to the process.
Finally, should we conclude that plans are appropriate entities to
perform good cause reviews, we would assign this function to all plans,
and under the revisions to the regulations being finalized here, we
would require plans to accept this additional responsibility.
Specifically, we are finalizing the revisions to the applicable
regulations to provide that a third party to which CMS has assigned
this responsibility, such as an entity offering a cost plan, a MA
organization, or a Part D plan sponsor, may reinstate an enrollee based
upon the good cause showing. We believe it would be more complicated
operationally, and confusing to beneficiaries, if we did not implement
a uniform process for handling requests for reinstatement.
Comment: A commenter expressed support for the proposed revision to
include language regarding a cost plan enrollee's ability to request
reinstatement for good cause not only for failure to pay premiums, but
also for nonpayment of ``other charges'' including deductibles and
cost-sharing.
Response: We thank the commenter for their support for this
regulatory change and for confirmation of the need to expand this
beneficiary protection to cost plan enrollees.
After careful consideration of these comments, we are finalizing
the proposed amendments to the regulations with modifications to
clarify that the third party to which CMS may assign this
responsibility may be an MA organization, a Part D sponsor or an entity
offering a cost plan.
3. MA Organizations' Extension of Adjudication Timeframes for
Organization Determinations and Reconsiderations (Sec. 422.568, Sec.
422.572, Sec. 422.590, Sec. 422.618, Sec. 422.619)
Sections 1852(g)(1)(A) and 1852(g)(2) of the Act respectively
require MA organizations to make all organization determinations on a
timely basis, and to provide for reconsideration, or review, of
organization determinations within a timeframe specified by the
Secretary, but no later than 60 days from the date of receipt of the
request for reconsideration. Section 1852(g)(3)(B) of the Act requires
MA organizations to maintain procedures for expediting organization
determinations and reconsiderations when a physician's request
indicates that applying the standard timeframe could seriously
jeopardize the life or health of the enrollee or the enrollee's ability
to regain maximum function or when, in the case of an enrollee's
request, the MA organization makes such a determination on its own. In
expedited cases, the MA organization generally must issue its decision
no later than 72 hours from receipt of the request. Section
1852(g)(3)(B)(iii) of the Act permits the Secretary to extend this 72-
hour decision-making timeframe in certain cases.
Our existing regulations at 42 CFR part 422, subpart M, codify the
procedures MA organizations must follow in issuing standard and
expedited organization determinations and reconsiderations, including
setting forth the required adjudication timeframes and the
circumstances under which plans are permitted to extend those
timeframes.
As we stated in the proposed rule (79 FR 2011), we believe the
current language that permits extension of the adjudication timeframes
set forth in Sec. 422.568(b), Sec. 422.572(b), Sec. 422.590(a)(1),
and Sec. 422.590(d)(2) is being interpreted more broadly than we
intended and that MA organizations are regularly invoking extensions of
the adjudication timeframes for organization determinations and
reconsiderations. Based on information ascertained during recent MA
program audits, we have seen circumstances in which MA organizations
are routinely and inappropriately invoking the 14-day extension in
cases where the plan: (1) Lacks adequate internal controls to ensure
coverage requests are reviewed and adjudicated within the required
regulatory timeframe; and (2) is awaiting receipt of supporting
clinical documentation from one of its contract providers.
Routinely invoking an extension of the applicable adjudication
timeframe is counter to the intent of the statutory and regulatory
requirements for timely determinations that emphasize the health needs
of the beneficiary in determining the appropriate adjudication
timeframe. Extensions that are not affirmatively requested by the
enrollee should be permitted only in limited circumstances, and only if
the extension is in the enrollee's interest. MA organizations are
required by regulation to render all coverage decisions as
expeditiously as the enrollee's health condition requires. When plans
choose to subject an item or service to a prior authorization
requirement, we expect them to have the resources to process those
requests in a timely manner.
In the proposed rule, we suggested revising these regulatory
provisions to clarify our intended standard for when it is appropriate
for an MA organization to extend an adjudication timeframe.
Specifically, we proposed the following changes:
At Sec. 422.568(b), Sec. 422.572(b), and Sec.
422.590(e), to add new text and to restructure the regulation
paragraphs for clarity.
At Sec. 422.568(b)(1)(ii), Sec. 422.572(b)(1)(ii), and
Sec. 422.590(e)(1)(ii), to clarify that an extension may be justified
and in the enrollee's interest due to the need to obtain additional
medical information, which may result in changing the MA organization's
denial of coverage of an item or service only from a non-contract
provider.
At new Sec. 422.568(b)(1)(iii), Sec. 422.572(b)(1)(iii),
and Sec. 422.590(e)(1)(iii), to clarify that an extension of the
adjudication timeframe may be permitted when the extension is justified
due to extraordinary, exigent or other non-routine circumstances, and
it is in the enrollee's interest.
To make corresponding technical edits to subpart M to
improve clarity in our guidance related to extensions and to remove
duplicative language (that is, to remove Sec. 422.590(d)(2) and add a
new Sec. 422.590(e), to update cross references in Sec. 422.618(a)(1)
and Sec. 422.619(a), to make changes within Sec. 422.568(b), Sec.
422.572(b), and Sec. 422.590(d) to ensure

[[Page 7944]]

consistency in the structure and language of these provisions).
We received the following comments on this proposal and our
responses follow:
Comment: Several commenters expressed general agreement that
extensions to adjudication timeframes for organization determinations
and reconsiderations should not be invoked routinely. Some commenters
expressed strong support for this proposal and stated that it would
reduce inappropriate delays in coverage decision-making and, therefore,
reduce current delays in access to needed care that result from more
routine use of extensions.
Response: We appreciate the support expressed by these commenters.
The clarifications we proposed reinforce longstanding statutory and
regulatory program requirements for timely decision-making that
emphasize the beneficiary's health condition and the urgency of the
requested item or service.
Comment: A few commenters who did not support the proposal stated
that both contract and noncontract providers are not always responsive
to plan requests for clinical information. A commenter further stated
that MA organizations should not be penalized for delays resulting from
third parties' failure to provide documentation necessary for a timely
coverage decision. Another commenter added that it is not realistic to
expect contract providers to produce complete medical documentation in
response to every coverage request, and that it is not reasonable to
expect provider contracting to ensure that full documentation is
produced without the need for extensions. Because of those concerns,
these commenters did not believe MA organizations should be restricted
from using extensions on the basis of the provider's contracting
status.
Response: We have considered contract providers as agents of the MA
organization offering the plan, and we believe it is reasonable to
expect MA organizations to use provider contracting to establish a wide
range of expectations for network providers to ensure compliance with
program rules, including timely receipt of relevant clinical
documentation. MA organizations remain responsible for compliance with
MA rules and requirements, even when using contractors or other
entities to fulfill those responsibilities. (For more detailed
information, see Sec. 422.504(i)). We expect the contract terms
between MA organizations and their contract providers to properly
incentivize contract providers, as necessary, to produce requested
clinical records in a timely manner.
We appreciate that health care providers working with managed care
plans must navigate a complex and changing health care environment and
routinely contract with multiple plans. However, we do not agree that
these challenges should prevent MA organizations from rendering
coverage decisions that are completed as expeditiously as the
enrollee's health condition requires. The contractual arrangement with
network providers is an important tool plans can use to ensure
compliance with these beneficiary protections.
We expect plans to promptly solicit and obtain contract providers'
clinical documentation when an enrollee requests coverage of an item or
service. When the case file contains incomplete information, we expect
plans to work diligently with contract providers to cure the defect
while adhering to the requirement to issue all decisions as
expeditiously as the enrollee's health condition requires. As stated
previously and described in more detail later in this final rule, the
new regulation text at Sec. 422.568(b)(1)(iii), Sec.
422.572(b)(1)(iii) and Sec. 422.590(e)(1)(iii) clarifies that
extensions are permitted--regardless of provider contracting status--if
necessary clinical documentation is not readily available due to
extraordinary, exigent or other non-routine circumstances.
We believe that plans can mitigate overuse of extensions by
correcting other common compliance problems. For example, plans often
receive audit findings for failure to conduct timely or sufficient
outreach to providers to obtain necessary clinical information during
the coverage determination process. Ensuring reasonable and diligent
provider outreach will improve the plan's ability to issue timely
decisions based on consideration of complete clinical information.
We expect plans to make reasonable, timely, and diligent efforts to
obtain medical records from both contract and non-contract providers
without having to extend the adjudication timeframe. However, we agree
with the commenters that MA organizations have little control over a
non-contract provider who does not respond to the plan's requests for
documentation. For this reason, we are clarifying at Sec.
422.568(b)(1)(ii), Sec. 422.572(b)(1)(ii) and Sec. 422.590(e)(1)(ii)
that extensions are permitted when the plan is seeking clinical
information from a noncontract provider, as long as the extension is in
the enrollee's best interest. While we acknowledge this limitation, we
nevertheless expect plans to make reasonable efforts to obtain
necessary information from noncontract providers in a manner which
affords the enrollee a timely decision.
We believe our proposed changes strike the appropriate balance
between minimizing the burden on MA plans and providers (both contract
and non-contract) and protecting enrollees' statutory right to timely
decisions and to timely access to the appeals process.
Comment: A few commenters disagreed with our proposal because they
believed that CMS was eliminating all extensions.
Response: It appears that these commenters misunderstood our
proposed change. This change will not eliminate extensions. Extensions
of up to 14 days will continue to exist for both standard and expedited
requests for organization determinations and reconsiderations. As we
stated in the proposed rule, we proposed these changes to clarify our
existing intent that extensions at the MA organization's behest should
only be taken on a limited basis and only when they are in the
enrollee's interest.
Comment: Several commenters--both supportive and not supportive of
CMS' proposal--noted that consideration of complete clinical
documentation during the coverage decision process is in the best
interest of the enrollee. Some of those commenters who disagreed with
our proposal also stated that use of extensions to obtain missing
clinical information when the plan is seeking that information is,
therefore, also in the best interest of the enrollee. Likewise, some of
these commenters expressed a belief that not taking an extension would
be detrimental to enrollees by resulting in increased denials and
delays in access to care.
Response: While we agree that it is in the best interest of an
enrollee that the MA organization reviews complete clinical information
when adjudicating a coverage request, we disagree with the commenters
that use of extensions is in the best interest of the enrollee when
such extensions are taken in the absence of extraordinary, exigent, or
other non-routine circumstances. Section 1852(d) of the Act requires
reasonably prompt access to medically necessary services--including
compliance with provider network adequacy requirements established at
Sec. 422.112 of the regulations--and section 1852(g) of the Act
requires timely coverage decisions that emphasize the health needs of
the beneficiary in determining the appropriate adjudication timeframe.
We do not believe that complete consideration of clinical documentation

[[Page 7945]]

and adjudication within the established timeframes are mutually
exclusive activities. We established MA adjudication timeframes with
strong support from stakeholders, including the managed care industry,
and physician groups. (For a more detailed discussion, see the June 29,
2000 Federal Register (65 FR 40278)). Therefore, we do not believe that
our proposed changes will cause a delay in access to care since MA
organizations should be able to obtain the necessary information and
render a decision within the established timeframes.
The new regulatory provisions at Sec. 422.568(b)(1)(iii), Sec.
422.572(b)(1)(iii) and Sec. 422.590(e)(1)(iii) permits MA plans to
invoke an extension in limited circumstances where timely receipt of
necessary clinical information is not possible, for example, if a
provider's office is flooded and additional time is needed to reach the
provider and/or to obtain off-site or electronic records that would
support a favorable coverage decision. We recognize that these
extraordinary, exigent or other non-routine circumstances may arise
regardless of whether the provider(s) involved has a contract with the
plan; therefore, these extensions are not restricted to noncontract
providers.
Comment: A commenter recommended that, instead of finalizing this
proposal, CMS should use its existing oversight authority to take
compliance or enforcement action against the MA organizations that over
utilize extensions of adjudication timeframes.
Response: We agree with this commenter that imposing corrective
action on MA organizations that are routinely noncompliant with
required decision-making timeframes is an appropriate use of CMS'
oversight authority, but we disagree that this should be done in lieu
of our proposed changes. Based on recent program experience, we believe
our intended restrictions from the original adoption of these rules on
the use of extensions are broadly misinterpreted and that our proposed
changes to clarify our policy will enhance beneficiary protections by
reducing inappropriate delays in access to care and access to the
appeals process.
Relying on compliance and enforcement authority alone is not a
sufficient response to identification of a broadly misinterpreted
policy. By clarifying our intent that extensions are appropriate only
in a limited set of circumstances, we aim to assist MA plans in their
development of operational policies and procedures related to
processing coverage decisions and, ultimately, to meet our goal of
overall program compliance in the absence of corrective action and the
beneficiary risks that may come with it.
After consideration of the comments received on this proposal, and
for the reasons noted in our January 2014 proposed rule, we are
finalizing without modification the proposal to clarify that an
extension to an adjudication timeframe for organization determinations
and reconsiderations should be permitted only in limited circumstances.

D. Strengthening Our Ability To Distinguish Stronger Applicants for
Part C and D Program Participation and To Remove Consistently Poor
Performers

1. Two-Year Prohibition When Organizations Terminate Their Contracts
(Sec. Sec. 422.502, 422.503, 422.506, 422.508, and 422.512)
Section 1857(c)(4)(A) of the Act prohibits organizations from re-
entering the MA program in the event that a previous contract with the
organization was terminated at the request of the organization within
the preceding 2-year period, except in circumstances that warrant
special consideration.
We proposed to amend the text of the regulations implementing these
provisions to maintain consistency in their application and harmony
with our policy. Specifically, we proposed to amend the regulations at
Sec. Sec. 422.502(b)(3), 422.506(a)(4), and 422.512(e)(1) to
explicitly apply the 2-year prohibition to applications for service
area expansions in addition to applications for new contracts. These
changes to Sec. Sec. 422.502(b)(3), 422.506(a)(4), and 422.512(e)(1)
would make the text of these regulations consistent with the text at
Sec. Sec. 422.503(b)(7) and 422.508(c) with regard to the 2-year
prohibition imposed as a condition of a mutual termination of an MA
contract.
We also proposed to amend our policy on the current application of
regulations implementing the 2-year prohibition to avoid unnecessarily
narrowing the scope of the 2-year prohibition or precluding us from
preventing poor performing MA organizations from reentering the MA
program. We proposed to interpret Sec. Sec. 422.503(b)(6) and
422.503(b)(7) as authorizing denials of new contracts and service area
expansions, consistent with the proposed text for Sec. Sec. 422.502,
422.506 and 422.512, regardless of the contract type, product type, or
service area of the previous nonrenewal. We further proposed adding a
sentence to paragraphs (c) and (d) of Sec. 422.508 to make it clear
that a mutual termination of a MA contract would result in a ban on all
contract types and service area expansions.
We received the following comments on this proposal and our
responses follow:
Comment: A commenter supported the proposal, stating that it will
prevent poor performing organizations from re-entering the program
through another product type of extension of an existing service area.
Response: We thank the commenter for this support.
Comment: A commenter supported CMS's interpretation of the 2-year
prohibition rule to voluntary nonrenewals and mutual terminations and
CMS's efforts to ensure poor performing MA organizations do not re-
enter the marketplace.
Response: We thank the commenter for this support.
Comment: A commenter requested that CMS consider only applying the
2-year prohibition to the legal entity level, rather than applying the
2-year prohibition to the parent organization level, as this would be
an overly broad application which could affect multiple legal entities
and numerous contracts.
Response: We currently apply the 2-year prohibition at the legal
entity level and will continue to do so.
We are finalizing the amendments to Sec. Sec. 422.502(b)(3),
422.506(a)(4), 422.508(c) and 422.512(e) as proposed. Although we
discussed the amendments to Sec. 422.508(c) and Sec. 422.508(d) in
the preamble to the January 6, 2014 proposed rule, we inadvertently
omitted the proposed amendments to Sec. Sec. 422.508(c) and 422.508(d)
from the proposed regulation text. We are including the revision to
Sec. 422.508(c) in this final rule. We are not finalizing the proposed
amendment to Sec. 422.508(d) as upon further consideration we believe
that this amendment is not appropriate. We are also amending Sec.
422.506(a)(4) by removing the word ``special'' before ``circumstances
warranting special consideration'' in order to maintain consistency
with the regulation text at Sec. 422.503(b)(6), Sec. 422.508(c) and
Sec. 422.512(e), as we do not differentiate between circumstances
warranting special consideration and special circumstances warranting
special consideration in our administration of these regulations. We
believe the use of ``special'' in Sec. 422.506(a)(4) is redundant and
its removal does not affect our interpretation of the provision and its
inclusion potentially leads to ambiguity in Sec. 422.506(a)(4). We are
also finalizing, without modification, our proposal regarding the
interpretation of

[[Page 7946]]

related regulations that implement the 2-year prohibition. We clarify
here that the 2-year prohibition, for purposes of Sec. Sec. 422.502,
422.506, 422.508, and 422.512, is applied at the legal entity level. We
are further clarifying that the 2-year ban is applicable for the 2
contract years following the year in which the non-renewal or
termination of an organization's contract is effective. For example, if
an organization does not renew its contract for an effective date of
December 31, 2015 then we would not enter into a contract with the
organization for contract years 2016 and 2017 unless there are
circumstances that warrant special consideration. The organization can
apply to contract with us in contract year 2017 to operate in contract
year 2018. Likewise, if an organization enters a mutual termination for
a contract with CMS midyear during 2015, then we will not enter into a
contract with the organization for contract years 2016 and 2017 absent
circumstances warranting special consideration, but the organization
can apply to contract with us in 2017 to operate in contract year 2018.
We understand there are a variety of reasons that an organization may
decide to terminate or to renew a contract, and subsequently want to
re-enter the program. We will consider these circumstances on a case-
by-case basis.
2. Withdrawal of Stand-Alone Prescription Drug Plan Bid Prior to
Contract Execution (Sec. 423.503)
Occasionally, organizations new to Part D that have qualified for a
Medicare PDP sponsor contract withdraw their bids after we have
announced the low-income subsidy (LIS) benchmark but prior to executing
the contract for the coming plan year. These withdrawals interfere with
our administration of the Part D program, in particular the auto-
assignment of LIS beneficiaries. To address this problem, we proposed
to adopt regulatory provisions that would impose a 2-year application
ban on organizations not yet under contract with us as PDP sponsors
that withdraw their applications and bids after we have issued our
approvals. We made this proposal under our authority at section 1860D-
12(b)(3)(D) of the Act to adopt additional contract terms, including
the conditions under which we would enter into contracts, not
inconsistent with the Part D statute.
In February of each year, we solicit applications from
organizations seeking to qualify to enter into a contract to offer
stand-alone PDPs in the upcoming plan year. These organizations, along
with current PDP sponsors who wish to continue participating in the
Part D program, submit bids in June for our review and approval. We
review these applications and bids with the expectation that, upon
approval, the organizations would enter into PDP sponsor contracts with
us in September to provide the Part D benefit for the plan year
starting the following January.
As part of the annual bid review, we calculate the LIS benchmark
for each PDP Region based on the bids for basic PDPs submitted annually
by current PDP sponsors that will operate in that region in the coming
year. Sponsors whose monthly premiums fall at or below the benchmark in
a region receive auto enrollments from us of LIS eligible beneficiaries
in those regions. We normally announce the LIS benchmark in late July
or early August.
In recent years, some organizations have withdrawn their
applications and bids following the announcement of the LIS benchmark.
Because these organizations withdrew prior to executing a contract, and
we cannot compel them to sign the contract, they are not subject to our
compliance or oversight authority, and nothing in our current
regulations prevents these applicants from withdrawing their
applications late enough in the process to cause significant
disruption. In contrast, when an existing PDP sponsor withdraws its
bid, we treat such an action as an election by the PDP sponsor to non-
renew its contract in that PDP Region, which renders the sponsor
ineligible to submit another application for 2 years, under our
regulations at Sec. 423.507(a)(3). We proposed to make a regulatory
change to ensure equal treatment between new applicants and existing
PDP plan sponsors, which would allow us to maintain an accurate
depiction of the contracting landscape. Specifically, we proposed to
amend Sec. 423.503 by adding paragraph (d) which would impose a 2-year
Part D application ban on organizations approved by CMS as qualified to
enter into stand-alone PDP sponsor contracts but which elect, after our
announcement of the LIS benchmark, not to enter into such contract and
withdraw their PDP bids. This proposed regulatory change, in effect,
would subject a withdrawing applicant to the same penalty we may apply
to an organization already under contract that elects to terminate or
not renew its PDP contract.
It is critical that we have an accurate portrayal of the number and
type of plan benefit packages that would be available to beneficiaries
in every PDP Region, especially during the end of the summer when much
of the bid review, both the formulary and actuarial components, has
been completed. During this period, we need to confirm that there is
the required minimum number of plans available in each PDP region. We
also need accurate plan information at the end of the summer so that we
can meet the production deadlines associated with the annual election
period, including publication of the Medicare & You handbook as well as
updating the Medicare Plan Finder Web site and our payment and
enrollment systems. An applicant that withdraws its application late in
the process alters the contracting landscape, potentially disrupting
preparations we have already made, including those related to the auto
assignment of LIS beneficiaries, for the upcoming plan year. In
adopting the proposed regulatory authority, we would place a reasonable
limit on prospective PDP sponsors' option to withdraw bids and
applications without penalty. By imposing consequences on applicants
that withdraw their bids following the announcement of the LIS
benchmark, we also would discourage any ``gaming'' of the bid review
and auto assignment processes (for example, by participating in the bid
review process until it learns that it will not qualify for auto-
assignments) that can occur when applicants opt out of participation in
the PDP at the last minute.
We received the following comments and our response follows:
Comment: A number of commenters expressed support for CMS'
proposal.
Response: We appreciate the commenters' support of our proposal.
We received only supportive comments for this proposal; therefore,
we are finalizing this provision without modification.
3. Essential Operations Test Requirement for Part D (Sec. Sec.
423.503(a) and (c), 423.504(b)(10), 423.505(b)(28), and 423.509)
We proposed to create, through regulation, an essential operations
test, which will be a new step in the application and contracting
process with newly contracted entities operating as stand-alone PDP
sponsors or MA organizations offering Part D plans (MA-PDs). This step
will be administered to ``newly contracted entities.'' We used the term
``newly contracted entity'' in the proposed rule and in this final rule
to describe an organization that has entered or applied to enter into a
Part D contract with us for the first time for the upcoming plan year,
and neither it, nor another subsidiary of the organization's parent
organization, is offering Part D benefits during the current benefit
year. This

[[Page 7947]]

would include organizations that are offering EGWPs for the first time.
Existing plan sponsors or new sponsors that are subsidiaries of a
parent company that currently operates a Part D plan through another
subsidiary would not be subject to the proposed essential operations
test.
The essential operations test will allow us to test whether an
organization's arrangements appear likely to allow the organization to
effectively administer its contract. We proposed to require
organizations to pass an essential operations test either-- (1) as a
qualification to contract, with failure to pass the test nullifying our
approval of the application; or (2) after contract execution as a
contract requirement but prior to the start of the benefit year, with a
failure to pass the test triggering an immediate contract termination
under Sec. 423.509.
Pursuant to section 1860D-12(b)(3)(D) of the Act, which
incorporates by reference section 1857(e)(1) of the Act, we have the
authority to add contract provisions that are necessary and appropriate
to carry out the Part D program; section 1860D-11(b) of the Act
provides authority for the collection of additional information as part
of the bid as we may require to carry out the Part D program. Based on
this authority we proposed adding Sec. 423.504(b)(10) and Sec.
423.505(b)(28) to include passing an ``essential operations test'' as a
condition to enter into and a term of the Part D contract.
Additionally, pursuant to our authority at section 1860D-12(b)(3)(B)
and (b)(3)(F) of the Act (which incorporate by reference section
1857(c)(2) and (h) of the Act, respectively, to apply to the Part D
program), the current regulations at Sec. 423.509(a) and (b)(2)(i),
authorize immediate termination of contracts with Medicare Part D plan
sponsors in certain circumstances. We believe that immediate
termination would be authorized under the standard of section
1857(h)(2) of the Act because the inability of a plan sponsor to ensure
future members' access their drug benefit, as evidenced by failure to
pass the essential operations test, would constitute an imminent and
serious risk to beneficiary health and safety. We proposed adding Sec.
423.509(a)(4)(xii) and revising Sec. 423.509(b)(2)(i)(C) to subpart K
to reflect this new cause for immediate termination. Additionally, we
proposed to explicitly include the essential operations test as a means
to evaluate Part D applicants in Sec. 423.503(a)(1) and to add Sec.
423.503(c)(4) to subpart K to establish failure of an essential
operations test as grounds for nullifying our approval of the
application notice.
Given that the heart of the Part D benefit is the sponsor's ability
to process claims for prescription drugs in real time, we proposed the
essential operations test and associated regulatory changes because of
our experience with certain newly contracted entities in the Part D
program that experienced significant operational difficulties at the
start of the benefit year as a result of their inexperience
administering Part D benefits. To prevent the recurrence of this
problem and ensure that new sponsors are prepared to and actually can
deliver Part D benefits at an acceptable level, starting with the 2015
contract year application cycle, we proposed that we may require newly
contracted entities to pass an essential operations test conducted by
us beginning in the fall of 2014. In response to the later anticipated
date of the finalization of this provision, we expect to adjust our
proposed timing and begin requiring newly contracted entities to pass
an essential operations test with the 2016 contract year application
cycle.
The essential operations test for newly contracted entities will
entail testing of sponsors' command of Part D benefit administration
rules and systems related to these areas. Initially, the testing will
consist of scenario testing with sponsors' key staff to show us that
they have a firm grasp of the Part D policies and essential operations.
The test will be able to verify whether an applicant's administrative
and management arrangements, as attested to in its application, are
sufficient for the applicant to carry out functions listed in Sec.
423.504(b)(4)(ii) such as furnishing prescription drug services and
implementing utilization management programs.
Provided we have the resources, in the future, the test will likely
become significantly more sophisticated and involve live testing of
sponsors' systems with test data. The more involved test would also
likely include testing the processes related to enrollment such as MARx
communication and processing; LIS processing and determinations;
coverage determinations, appeals, and grievances (CDAG) processing; and
real-time coordination of benefits data exchange and processing. For
instance, the sponsor would need to demonstrate the ability to pay test
claims correctly in real-time consistent with its CMS-approved benefit
packages (including formulary) and the Part D transition fill policy.
a. Failing Essential Operations Test as Cause for Immediate Termination
Once a sponsor signs its contract, it is obligated to perform all
of the required functions to support the benefits described in the
contract even though the sponsor does not start offering benefits until
January 1. If we find that, based on the results of the essential
operations test, a sponsor does not have the requisite systems and
processes in place to offer Part D benefits in real time, our proposal
was to consider this cause for immediate termination of the sponsor's
Part D contract in order to protect beneficiaries from harm at the
start of the contract year.
In accordance with section 1857(h)(2) of the Act (incorporated by
reference into PDP by section 1860D-12(b)(3)(F) of the Act), we have
the authority to immediately terminate a contract with a sponsor
(without notice and opportunity for a hearing) when a delay in
termination would pose an imminent and serious risk to the health of
beneficiaries enrolled in the sponsor's plans. Also, under Sec. Sec.
423.509(b)(2)(i) and 423.652(b)(2), unlike standard CMS terminations,
the effective date of an immediate termination is not stayed when the
sponsor requests a hearing under Sec. 423.650(a)(2). Because
enrollment and accurate benefit administration through real time claims
processing are so fundamental to the delivery of the Part D benefit, if
a sponsor fails to demonstrate to us that it can perform these
essential operations, we would view this as a substantial failure to
meet the Part D contract requirements on the following grounds: (1)
Evidence that the sponsor was carrying out the contract in a manner
that was inconsistent with the effective and efficient administration
of the plan; and (2) evidence that the sponsor did not substantially
meet the applicable conditions set out in the Part D regulations which
would ultimately justify, depending upon timing of the test, our
termination of a contract consistent with Sec. 423.509(a)(1) through
(3) based on the sponsor's failure to meet our proposed contract terms
at Sec. 423.504(b)(10) and Sec. 423.505(b)(28). We believe that a
newly contracted entity's failure to demonstrate certain critical
capabilities and failing the essential operations test represents a
substantial failure to carry out its Part D contract. Such a failure
poses an unacceptable risk to the new sponsor's future members' access
to Part D drugs, which would constitute an imminent and serious risk to
beneficiary health and safety, justifying our immediate termination of
the sponsor's contract.

[[Page 7948]]

For MA organizations that must offer Part D benefits pursuant to Sec.
423.104(f)(3)(i), failing the test would support the termination of the
organization's Part D addendum as well as its MA contract under Sec.
422.510(a)(3) because the inability to offer Part D benefits means that
the organization no longer meets the applicable conditions associated
with offering Part C benefits.
b. Failing Essential Operations Test as Failure of a Qualification to
Contract and Grounds for Nullification of Approval
If an organization fails an essential operations test we conducted
prior to contract signature, we proposed that no termination would be
necessary and that we would nullify our previous conditional approval
of the organization's Part D contract qualification application. We
proposed to explicitly include the essential operations test as a
qualification to contract at Sec. 423.503(a)(1) to authorize our use
of the test and any information learned in the course of the essential
operations test in making the contract determination.
We would view failure of the essential operations test as evidence
that the applicant is not qualified to contract with us. As a result,
we would nullify our approval based on determining the entity is not
qualified. Successful applicants receive a conditional approval at the
end of May of their Part D application in accordance with Sec.
423.503(c)(1). The letter informs applicants that the conditional
approval is based on the information contained in their application,
and if we subsequently determined that any of the information was
inaccurate or that qualification requirements are not met, we would
withdraw the approval of the application. Through that notice, we
preserve the right to nullify our approval. If that occurs, we would
not provide the appeal rights described in part 423, subpart N to
applicants that have their approval nullified based on failing the
essential operations test because an appeals process started at that
point could not be completed by the September 1 deadline imposed by
Sec. 423.650(c) for contracts to be effective on January 1 of the
following year.
We received the following comments and our response follows:
Comment: Most commenters strongly supported CMS' proposals.
Response: We appreciate the support for these proposals.
Comment: Several commenters requested that CMS elaborate on the
content of the essential operations test.
Response: Our plan is to initially offer the essential operations
test in scenario format rather than in real time. Scenario format means
that we will provide the applicant or newly contracted sponsor with
written scenarios or stories about fictional beneficiaries. The
scenarios will describe the characteristics of the beneficiary such as
plan enrollment, LIS level, prior drug claims data, prior authorization
criteria information, application date, and any other details necessary
for answering our questions. The questions would pertain to topics such
as determining the correct effective date of coverage; the appropriate
timeframes for specific notifications; drug dispensing formats and
requirements; drug coverage and costs; coverage determination process;
coordination of benefits; and demonstrating knowledge of new
requirements for the upcoming year. The real time test, which may also
be combined with scenario tests, would involve electronic data
exchanges between CMS and the new organization and/or its PBM, claims
processor, enrollment processor, and any other entity contracted with
the new organization to carry out key Part D functions.
Comment: Several commenters expressed concern that CMS would expect
the new organization to demonstrate full system readiness in September.
Other commenters provided information about the development schedule
that their organizations follow for the upcoming benefit year.
Response: It is not our expectation that a new organization would
have all systems ready to implement the Part D benefit in September. We
appreciated the information regarding the development schedule, and we
will use the information to inform, in part, our expectations of system
readiness when we administer a real time test.
Comment: Several commenters requested that CMS provide new
organizations with information about the system requirements of the
essential operations test no later than May of each year.
Response: We are aware that new organizations would need time to
ensure that the proper infrastructure is in place for real time
communication and electronic data exchange with CMS (and our
contractors). Therefore, within sufficient time to allow it to make
necessary arrangements prior to the test, we will inform the new
organization of the types of data files that we will send or exchange.
We are unlikely to provide this information before the end of May
because, at that time, new organizations will have not yet submitted
bids. The essential operations test criteria may be developed based
upon areas of concern we identify during the application, bid, and
formulary review processes; therefore, in May we may not be certain of
the test contents and parameters.
Comment: Several commenters suggested that CMS complete the
essential operations test before November 1 due to the heavy workload
in the last quarter of the year.
Response: We are aware of the heavy workload at the end of the year
created by the annual election period and preparations for the start of
the new benefit year. We will try to complete essential operations
tests prior to November 1.
Comment: A commenter, a current Part D sponsor, was concerned that
this provision would apply to existing or experienced sponsors.
Response: We clarify that this provision would not apply to
existing sponsors. Rather, as stated at Sec. 423.503(c)(4)(ii), the
essential operations test will only be required of new organizations
that do not have any Part D experience or a subsidiary/parent
relationship with an experienced organization. If the new
organization's parent company currently has other subsidiary
organizations that are already offering Part D plans, then the new
organization would not be subject to the essential operations test.
We note that the proposed provisions of Sec. Sec. 423.504(b)(10)
and 423.505(b)(28) each began with the phrase, ``Effective contract
year 2015,''. This language, originally published in January 2014 as
part of a proposal that at the time was expected to be made final in
the middle of 2014, has since become outdated and therefore has been
deleted from the final version of the rule. The proposed language was
intended to make clear that even though the rule was expected to be
finalized during the CY 2015 application review cycle we would apply
the essential operations test to eligible applicants during that cycle.
These provisions are now being made final after the period during which
CY 2015 essential operations tests would have been conducted (that is,
the fall of 2014). They will also be finalized well in advance of the
start of the CY 2016 application cycle in late February 2015, so there
is no need to provide a special signal to CY 2016 applicants that they
may be subject to the essential operations test other than through the
publication of this final rule.
We also note that we are finalizing with modification the proposed
provision of Sec. 423.505(b)(28). We are finalizing this provision as

[[Page 7949]]

Sec. 423.505(b)(27), instead of Sec. 423.505(b)(28).
In summary, given the support for this proposal, we are finalizing
these provisions with only the technical modifications described
previously.

E. Implementing Other Technical Changes

1. Requirements for Urgently Needed Services (Sec. 422.113)

Many MA plans have responded to the need to provide urgently needed
services outside of the network's business hours, for example, during
the weekend or at night, by contracting with clinics that have hours of
operation well beyond those of traditional physicians' offices to
furnish services to their enrollees when the plan network is not
available.
To better align the regulations with current practices regarding
access to urgently needed care services, we proposed to revise the
regulation by removing the phrase ``under extraordinary and unusual
circumstances'' from the definition of ``urgently needed services'' at
Sec. 422.113(b)(1)(iii). The revised regulatory language would ensure
that enrollees have access to out-of-network facilities in non-
extraordinary circumstances.
We received the following comments on this proposal and our
response follows:
Comment: Several commenters supported the policy because it
provides improved access to enrollees.
Response: We thank these commenters for their support.
Comment: A commenter stated that CMS' proposed revision would be
burdensome on plans and would not improve health care to enrollees.
Response: In the January 10, 2014 proposed rule, we noted that many
plans already contract with clinics that operate 24 hours/day, 7 days/
week (24/7) to address the needs of enrollees who need care on weekends
or after normal business hours (79 FR 2018). We also noted that there
are a small number of appeals each year from enrollees who sought care
out-of-network on weekends or after normal business hours and were
denied coverage.
We do not believe our proposal adds any burden to health plans. Our
proposed revision to the regulation aligns it with current practices
for provision of urgently needed services and our intent that enrollees
have access to needed care. In fact, we believe that plans could
realize savings by making urgently needed services available in
settings that are more appropriate to the enrollees' needs than more
costly hospital emergency departments.
Comment: A commenter expressed concern that the proposed regulatory
language does not specify the circumstances under which the
organization's provider network is temporarily unavailable or
inaccessible and that, as a result, enrollees might frequently leave
the network to obtain care.
Response: Circumstances under which the organization's provider
network is temporarily unavailable or inaccessible would largely
include weekends or after normal business hours, which we believe is
clearly understood from the discussion in the notice of proposed
rulemaking. If more extreme situations, such as a natural disaster,
result in the network being temporarily unavailable, this rule would
apply in those situations as well.
Comment: A commenter requested greater clarification of the
definition of urgently needed services.
Response: The definition of urgently needed services, provided at
Sec. 422.113(b)(1)(iii), presents several specific requirements for a
service to be classified as urgently needed. Additional clarification
of the definition of urgently needed services may be found in the
preamble to the June 29, 2000 final rule establishing the
Medicare+Choice program (65 FR 40198 and 40199). We believe this
definition, as modified by the removal of the phrase ``extraordinary
and unusual circumstances,'' is sufficient.
After review of the public comments received, we are finalizing the
proposed revision to Sec. 422.113 without modification.
2. Agent and Broker Training and Testing Requirements (Sec. Sec.
422.2274 and 423.2274)
We proposed to revise Sec. Sec. 422.2274(b) and (c) and 423.2274
(b) and (c) to accomplish the following: (i) Remove CMS-endorsed or
approved training and testing as an option; (ii) require that agents
and brokers be trained annually on Medicare rules and regulations and
details specific to the plan products they intend to sell; and (iii)
require annual training to ensure appropriate knowledge and
understanding of Medicare rules and specific plan products. Pursuant to
our authority under sections 1851(h)(2), 1860D-1(b)(1)(B)(vi),
1851(j)(2)(E), and 1860D-4(l)(2) of the Act, we previously codified
agent and broker training and testing requirements at Sec. Sec.
422.2274 (b) and (c) and 423.2274 (b) and (c) to require all agents and
brokers selling Medicare products be trained and tested annually
through a CMS-endorsed or approved training program, or as specified by
us, on Medicare rules and regulations specific to the plan products
they intend to sell.
As we noted in the preamble to the proposed rule, since the
training and testing requirements were implemented, we have embarked on
various activities to improve and ensure the efficacy of training and
testing. We also noted that, through our monitoring efforts, plans are
complying with the annual guidance and providing an adequate level of
detailed information. Furthermore, our ability to nationally
accommodate agents and brokers through various training and testing
modules creates a significant burden. We also noted in the preamble to
the proposed rule that our ability to maintain consistency with
endorsing other entities that would facilitate the training and testing
and oversee these entities is limited.
We also proposed that the provisions for ``Reducing the Burden of
the Compliance Program Training Requirements'' (Sec. Sec.
422.503(b)(4)(vi)(C) and 423.504(b)(4)(vi)(C)) require a standardized
compliance training program and that, under those provisions, MA
organizations and Part D sponsors would not be permitted to develop and
implement plan specific training materials or supplemental materials.
The requirement in this section is exclusive for agent and broker
marketing activities under the MA and Part D program.
We received the following comments and our response follows:
Comment: A commenter supported the provision. However, the
commenter requested clarification as to whether CMS will continue to
provide annual guidance on training and testing requirements for agents
and brokers.
Response: We appreciate the commenter's support and will continue
to provide annual guidance on the training and testing requirements.
Comment: A commenter stated that the provision assigns
responsibility for the annual agent/broker training to the MA
organization, which is an operational burden and additional cost.
Response: We disagree. Since MA organizations and Part D sponsors
currently facilitate the agent broker training and testing or contract
with a third party, our proposal would not create an operational burden
or cost.
Comment: A few commenters stated that this provision potentially
conflicts with the proposed requirement under Sec. 422.503 that MA
organizations and Part D sponsors use only CMS training for general
compliance. A commenter requested clarification on how the first

[[Page 7950]]

tier, downstream, and related entities' standardized training applies
to agents and brokers.
Response: We believe that this provision does not conflict with the
proposed provision in Sec. 422.503. The provision in this section is
specific to marketing activities for MA organizations and Part D
sponsors.
After review of the public comment received on this proposed
provision, we are finalizing this provision without modification.
3. Deemed Approval of Marketing Materials (Sec. Sec. 422.2262,
422.2266, 423.2262, and 423.2266)
In the January 10, 2014 proposed rule, we proposed to move the
substance of the current requirements in Sec. Sec. 422.2266 and
423.2266 to 422.2262(a)(2) and 423.2262(a)(2), respectively. As
previously noted, Sec. Sec. 422.2266 and 423.2266 provide the
regulatory requirements for materials that are deemed approved. These
requirements are part of the review and distribution process of
marketing materials. Therefore, the provisions were moved to align with
the requirements in Sec. Sec. 422.2262 and 423.2262. Additionally, we
proposed reserving Sec. Sec. 422.2266 and 423.2266 to further clarify
the requirements for deemed materials by revising them to state that,
if CMS does not approve or disapprove marketing materials within the
specified review timeframe, the materials will be deemed approved.
Deemed approved means that an MA organization or Part D sponsor may use
the material. We believe that this change clarifies the present
regulatory requirement for deemed marketing materials.
We received several comments regarding this provision, and our
responses follow.
Comment: Several commenters supported this provision. However, a
few commenters did request clarification, while others emphasized the
importance of streamlining the review and approval process for FIDE
SNPs. A commenter also stated that CMS, Medicaid, and the plans should
work closer to benefit enrollees.
Response: We thank the commenters for supporting our proposal to
revise this provision. In response to the request for further
clarification, we will consider including additional guidance in the
Medicare Marketing Guidelines as that is the appropriate vehicle for
providing detail on the requirements. We also appreciate the concerns
with streamlining the review and approval process for FIDE SNPs;
however, the comment is outside the scope of this rule.
Comment: A commenter opposed this provision on the grounds that MA
organizations are expanding and offering more plan offerings with
higher penetration rates in certain counties and regions. The commenter
also stated that CMS is responsible for ensuring that marketing
practices and materials are carefully monitored.
Response: While we appreciate the commenter's concern, we do not
believe that the expansion of plan offerings will have an impact on
this provision. Since this provision has been in existence, our
analysis of deemed materials has shown that very few marketing
materials have been approved through this process. Furthermore, we have
protocols in place to monitor marketing materials, including materials
that are deemed approved. We note in the Medicare Marketing Guidelines
that we may require an MA organization or Part D sponsor to change any
previously approved marketing materials if found to be inaccurate,
altered or otherwise noncompliant.
After review of the public comments received on this proposal, we
are finalizing this proposed provision without modification.
4. Cross-Reference Change in the Part C Disclosure Requirements (Sec.
422.111)
In the January 10, 2014 proposed rule, we proposed a technical
correction to Sec. 422.111(d)(1) to reflect the correct cross
reference for procedures that MA organizations must follow when
submitting changes to their rules for review. Section 422.111(d)(1)
currently references Sec. 422.80, which was removed when the marketing
requirements were moved to subpart V, Medicare Marketing Requirements.
We noted previously that subpart V, Medicare Marketing Requirements,
was published in the September 18, 2008, final rule (73 FR 54208).
We received no comments on our proposal and therefore are
finalizing this provision without modification.
5. Managing Disclosure and Recusal in P&T Conflicts of Interest:
Formulary Development and Revision by a Pharmacy and Therapeutics
Committee Under Part D (Sec. 423.120(b)(1))
Section 1860D-4(b)(3)(A)(ii) of the Act requires Part D sponsors
who use formularies to include on their P&T committees at least one
practicing physician and at least one practicing pharmacist, each of
whom is independent and free of conflict with respect to the sponsor
and the plan and who has expertise in the care of elderly or disabled
persons. In our August 3, 2004 proposed rule (69 FR 46659), we proposed
to interpret ``independent and free of conflict'' to mean that such P&T
committee members could have no stake, financial or otherwise, in
formulary determinations. In our January 28, 2005 final rule (70 FR
4256), we adopted this interpretation, and clarified that we would
consider a P&T committee member not to be free of conflict of interest
if he or she had any direct or indirect financial interest in any
entity--including Part D plans and pharmaceutical manufacturers--that
would benefit from decisions regarding plan formularies.
In a recent report (``Gaps in Oversight of Conflicts Of Interest in
Medicare Prescription Drug Decisions,'' OEI-05-10-00450), the HHS OIG
recommended improvements in our requirements for Part D plan P&T
committees. Specifically, the OIG report recommended that we establish
minimum standards to ensure that these committees have clearly
articulated and objective processes to determine whether disclosed
financial interests are conflicts and to manage recusals due to
conflicts of interests. The OIG report also suggested that we tell
sponsors that they need to designate an objective party, such as a
compliance officer, to flag and enforce the necessary recusals. In
other words, the identification and evaluation of whether a disclosed
financial interest represents a conflict of interest should be made by
a knowledgeable and accountable representative of the sponsor's
organization, such as the compliance officer, and not solely by the P&T
committee members themselves. We concurred that P&T committees should
have clearly articulated and objective processes to determine whether
disclosed financial interests are conflicts, and to manage recusals
arising from any such conflicts. Therefore, we proposed to revise our
regulations at Sec. 423.120(b)(1) to renumber the existing provisions
and add a new paragraph (b)(1)(iv) to require that the sponsor's P&T
committee clearly articulates and documents processes to determine that
the requirements under paragraphs (b)(1)(i) through (iii) have been
met, including the determination by an objective party of whether
disclosed financial interests are conflicts of interest and the
management of any recusals due to such conflicts.
We also solicited comment on the pros and cons of defining PBMs as
entities that could benefit from formulary decisions from which one
practicing physician and one practicing pharmacist on the P&T committee
must be free of conflict of interest.

[[Page 7951]]

We received the following comments and our response follows:
Comment: A commenter noted that the current CMS formulary review
process provides the necessary protections to beneficiaries and ensures
that formularies are developed and managed in accordance with best
practices. This commenter also pointed out that since the P&T committee
members do not generally provide their services for free, it is
standard practice that the PBM compensates the committee members for
their committee-related activities; thereby, providing a financial
conflict of interest. The commenter believes that without this
financial compensation it would be difficult to engage qualified
clinicians for the committee.
Response: While the compensation that P & T committee members
receive from PBMs for performing committee-related activities could be
seen as a potential conflict of interest, this practice is widely known
and generally accepted as necessary to engage the most qualified
clinicians. Moreover, we agree with the commenter that the current CMS
formulary review process provides the necessary protections to
beneficiaries and ensures that formularies are developed and managed in
accordance with best practices. We have devoted extensive resources to
the oversight of plan formularies and the audit of P&T committee
proceedings to ensure that they comply with industry best practices and
ensure beneficiaries' access to clinically appropriate therapies. As
discussed more fully in the January 10, 2014 proposed rule (79 FR
2019), we believe that our current formulary review process confers
appropriate protections to beneficiaries from any potential adverse
effects of conflicts of interest.
The OIG report recommended that the P & T committee should have
clearly articulated and objective processes to determine if disclosed
financial interests are conflicts, and to manage any recusals if
conflicts are found. We concur with this recommendation and proposed to
revise our formulary requirements pertaining to the development and
revision by a P & T committee at Sec. 423.120(b)(1) to make it clear
that the Part D sponsor must establish these processes. In our response
to the OIG report, we noted that statutory and regulatory provisions
(section 1860D-4(b)(3) of the Act and 42 CFR 423.120(b)) indicate that
it is the plan's responsibility to meet the formulary requirements;
which include the development of these processes.
Comment: Several commenters supported CMS' proposal that P&T
committee processes must be clearly articulated, documented, and
enforced by an objective party. However, a commenter requested that CMS
better define the term ``objective party'' to include a knowledgeable
and accountable person at the PBM.
Response: We agree with the commenter and clarify that the
objective party may be a representative of the PBM, as long as that
representative is not also a member of the sponsor's P&T committee. The
objective party should be someone not on the P & T committee, and may
include a representative from the PBM that is not on the P & T
committee.
Comment: A commenter pointed out that while the proposed recusal
process is logical, it is duplicative and the current P&T policy is
sufficient for dealing with conflicts of interest.
Response: We disagree with the commenter and concurred with the OIG
report's recommendation (as discussed in the January 2014 proposed
rule) that P&T committees should have clearly articulated and objective
processes to determine conflicts of interest and manage any recusals.
We are implementing these requirements on the recommendation of OIG.
These requirements are supplemental to the beneficiary protections
outlined in existing P&T policy, which does not address recusal and
only provides that committee members should sign a conflict of interest
statement revealing economic or other relationships with entities
affected by drug coverage decisions that could influence committee
decisions.
After review of the comments received, we are finalizing this
provision without modification.
6. Thirty-Six Month Coordination of Benefits (COB) Limit (Sec.
423.466(b))
In our April 15, 2010 final rule (75 FR 19819), we exercised our
authority under sections 1860D-23 and 1860D-24 of the Act to impose a
timeframe on the coordination of benefits between Part D sponsors and
other payers including State Pharmaceutical Assistance Programs
(SPAPs), other providers of prescription drug coverage, or other
payers. In the April 15, 2010 final rule, we explained our approach to
determining the 3-year timeframe, including the benefits derived from
its establishment.
We stated in our regulation at Sec. 423.466(b) that, Part D
sponsors must coordinate benefits with SPAPs, other entities providing
prescription drug coverage, beneficiaries, and others paying on the
beneficiaries' behalf for a period not to exceed 3 years from the date
on which the prescription for a covered Part D drug was filled. The
phrase ``a period not to exceed 3 years'' has caused confusion among
some sponsors, who interpreted this to mean that the coordination of
benefits period could be shorter than 3 years and have consequently
imposed tighter timeframes for coordination of benefits.
To clarify the requirement and avoid further confusion, we proposed
to remove from the regulation the phrase ``not to exceed,'' and add the
word ``of.'' This would clarify that sponsors must employ a
coordination of benefits period of 3 years, and would remove any
uncertainty about whether they may impose a shorter coordination of
benefits period.
We also proposed to revise the heading of Sec. 423.466 to
reference claims adjustments, which are addressed in Sec. 423.466(a).
Comment: A commenter indicated the proposed change was an
appropriate modification.
Response: We appreciate the support for this provision.
Comment: A few commenters suggested we define the date on which the
3-year COB limit begins as the date the drug is dispensed or the first
date of service.
Response: The regulation already specifies the 36-month period
begins on the date the prescription for a covered Part D drug was
filled. However, we note the date of fill as referenced in the
regulation is synonymous with the NCPDP date of service (Field # 401-
D1) included in HIPAA standard transactions, such as the billing
transaction, and required on the Part D prescription drug event record.
After review of the public comments received in response to this
proposal, we are finalizing the provision as proposed.
7. Application and Calculation of Daily Cost-Sharing Rates (Sec.
423.153)
We proposed technical changes to the daily cost-sharing rate
regulation to clarify the application and calculation of daily cost-
sharing rates and cost sharing under the regulations. Section
423.153(b)(4)(i) requires sponsors to establish and apply a daily cost-
sharing rate whenever a prescription is dispensed by a network pharmacy
for less than a 30-days' supply, unless the drug is excepted in the
regulation. Currently, under Sec. 423.100, in cases when a copayment
is applicable, ``daily cost-sharing rate'' is defined as the monthly
copayment under the enrollee's Part D plan, divided by 30 or 31 and
rounded to the nearest lower dollar amount, if any, or to another
amount,

[[Page 7952]]

but in no event to an amount that would require the enrollee to pay
more for a month's supply of the prescription than would otherwise be
the case. We proposed to replace the numbers with the phrase ``the
number of days in the approved month's supply for the drug dispensed''
to address how Part D sponsors that have other days' supplies as their
month's supplies are to calculate daily cost-sharing rates.
Also, under our existing definition of ``daily cost-sharing rate''
in Sec. 423.100, as noted previously, and with respect to copayments,
the daily copayment cannot be an amount that would require the enrollee
to pay more for a month's supply of the prescription than would
otherwise be the case. In other words, rounding up is not permitted
under the current definition of ``daily cost-sharing rate'' and this
has been another cause of confusion for some Part D sponsors. While our
original intention was to prohibit significant increases in cost
sharing, such as charging the full 30-day copay for both the trial
supply and any subsequent refill of a medication, the current
limitation on any increase in cost sharing over the 30-day supply
amount has reportedly led to unnecessarily complicated programming, as
well as proration of other amounts on the claim, such as the dispensing
fees. Therefore, we proposed to replace the language ``lower dollar
amount, if any, or to another amount,'' with ``the nearest cent.'' We
believe this language better conveys the concept of rounding, while
realizing this language allows Part D sponsors to round daily cost-
sharing rates up or down to the nearest 2 decimal places.
We also proposed other technical changes to the daily cost-sharing
rate regulation at Sec. 423.153(b)(4)(i) to improve the regulation's
clarity. First, we proposed to consolidate the language of Sec.
423.153(b)(4)(i)(A) into Sec. 423.153(b)(4)(i) and to consolidate
Sec. 423.153(b)(4)(i)(B)(1) and (2) into a new paragraph Sec.
423.153(b)(4)(ii). Second, we proposed that the language in Sec.
423.153(b)(4)(i) that addresses the application of the daily cost-
sharing rate in the case of a monthly copayment be revised for clarity,
and moved to a new paragraph (b)(4)(iii)(A). This paragraph states that
in the case of a drug that would incur a copayment, the Part D sponsor
must apply cost-sharing as calculated by multiplying the applicable
daily cost sharing rate by the days' supply actually dispensed when the
beneficiary receives less than a 30-days' supply. Third, we proposed
that Sec. 423.153(b)(4)(iii)(B) states that, in the case of a drug
that would incur a coinsurance percentage, the Part D sponsor must
apply the coinsurance percentage for the drug to the days' supply
actually dispensed. We note that this means, with respect to dispensing
fees, that the enrollee's portion of additional dispensing fees for the
incremental supply is calculated by application of this percentage.
These technical clarifications should assist sponsors in correctly
setting, calculating, and applying daily cost-sharing rates in the
retail and LTC settings whenever a prescription is dispensed by a
network pharmacy for less than a 30-days' supply, unless the drug is
excepted in the regulation. The proposal solicited comments on whether
sponsors needed additional guidance surrounding the rounding
methodology.
We received the following comments and our responses follow:
Comment: We received several comments in support of our proposal to
clarify the daily cost sharing rule.
Response: We thank the commenters for their supportive comments on
our proposal.
Comment: A commenter requesting that the application of the daily
cost-sharing rule should be consistent with the changes CMS proposed to
the definition of the ``daily cost-sharing rate.'' In other words, the
commenter recommended that the daily cost-sharing rule apply whenever
less than the approved month's supply is dispensed; rather than,
whenever less than a 30-day supply is dispensed. The commenter
highlighted that this change would ensure beneficiaries are not
required to pay more than they otherwise would have. This is consistent
with CMS' intent that even when the member does receive the remainder
of a month's supply, the total payment not exceed the 1-month's cost
sharing, except by a nominal rounding amount. This commenter provided
the following example: A plan's approved month's supply is 34 days, and
the applicable copayment is $30. If a member first obtains a 30-day
supply and then a 4-day supply, under the current regulatory language,
which provides that the daily cost-sharing rule applies when a covered
Part D drug is dispensed for a supply less than 30 days, the member
would pay $30 for the first supply since it is not for ``less than 30
days'' and then $3.52 (4 x $0.88) for the second supply, for a total of
$33.52. However, if the daily cost-sharing rule applied whenever less
than the approved month's supply is dispensed, the member would pay
$26.40 (30 x $0.88) for the first supply and $3.52 (4 x $0.88) for the
second, for a total of $29.92.
Response: We were persuaded by the comments that this suggested
change is necessary to avoid confusion with the technical change that
we proposed, by making the terminology consistent with the regulatory
text. Therefore, we are making the following change to the final
regulatory text: Replace ``30 days'' with ``approved month's supply''
in Sec. 423.153(b)(4)(i) and (iii).
Comment: Several commenters indicated that CMS guidance is needed
regarding the rounding methodology.
Response: We will provide additional rounding guidance, if needed,
after publication of this final rule.
Based on comments received, we are finalizing this proposal as
proposed and with the following modification: replacing ``30 days''
with ``approved month's supply'' where applicable in Sec.
423.153(b)(4)(i) and (iii).
8. Technical Change To Align Regulatory Requirements for Delivery of
the Standardized Pharmacy Notice (Sec. 423.562)
The current regulations at Sec. 423.562(a)(3) require Part D plan
sponsors to make arrangements with their network pharmacies to
distribute notices instructing enrollees how to contact their plans to
obtain a coverage determination or request an exception. This is
accomplished through delivery of a standardized notice, CMS-10147--
``Medicare Prescription Drug Coverage and Your Rights'' (``pharmacy
notice''). Section 423.562(a)(3) cross-references Sec.
423.128(b)(7)(iii), added in our April 2011 final rule (76 FR 21432),
which requires plans to have a system in place that transmits codes to
network pharmacies so the pharmacy is notified to deliver the pharmacy
notice at the POS in designated circumstances where the prescription
cannot be filled as written.
Pursuant to the 2011 regulatory change, we issued subsequent
guidance (HPMS memoranda dated October 14, 2011 (``Revised Standardized
Pharmacy Notice'') and December 27, 2012 (``Revised Guidance for
Distribution of Standardized Pharmacy Notice'')) which clarifies that
distribution of the pharmacy notice is required upon receipt of certain
transaction responses indicating that the claim is not covered by Part
D, as well as revised manual guidance in Chapter 18, section 40.3.1 of
the Medicare Prescription Drug Benefit Manual related to
operationalization of this requirement specific to a variety of
specialty pharmacy settings.
In practice, we have never based distribution of or referral to the
pharmacy notice on whether or not the

[[Page 7953]]

enrollee disagrees with information provided by the pharmacist, but
rather on whether the drug in question can be provided under Part D and
whether the enrollee is able to obtain coverage for the drug at the
pharmacy counter. Because the existing regulation text at Sec.
423.562(a)(3) ties delivery of the pharmacy notice to the enrollee's
disagreement with information provided by the pharmacist, we proposed
to remove this reference.
This proposed technical change would not alter the circumstances
under which the pharmacy notice must be delivered to an enrollee and
will align the regulation and the operational requirements for
distribution of the pharmacy notice. In addition, this proposed change
would be consistent with both the current OMB-approved instructions
regarding the pharmacy notice and current CMS manual guidance.
We do not prohibit distribution of the pharmacy notice in any
circumstance, so pharmacies may choose to also provide a copy of the
notice in circumstances where the enrollee disagrees with the
information provided (for example, if the enrollee believes they are
being charged an incorrect cost-sharing amount), but the notice is not
required under the standards established in Sec. 423.128(b)(7)(iii).
Provision of the pharmacy notice is not a prerequisite for an enrollee
to request a coverage determination or access the appeals process.
Similarly, a plan sponsor's failure to comply with the requirements of
Sec. 423.128(b)(7)(iii) or Sec. 423.562(a)(3) does not in any way
limit an enrollee's right to request a coverage determination or
appeal.
We received no comments on this proposal and therefore are
finalizing the proposed revision to this provision without
modification.
9. MA Organization Responsibilities in Disasters and Emergencies (Sec.
422.100)
We proposed to add paragraph (m) to Sec. 422.100 to codify and
further clarify an MA organization's responsibilities when health plan
services are affected by public health emergencies or disasters in
order to ensure that beneficiaries continue to have access to care in
situations in which normal business operations are disrupted due to
public health emergencies or disasters and enable out-of-network
providers to be informed of the terms of payment for furnishing
services to affected enrollees during public health emergencies or
disasters.
The proposed new paragraph would require MA organizations to ensure
access, at in-network cost sharing, to covered services even when
furnished by noncontracted providers when disruption in the service
area impedes enrollees' ability to access contracted providers and/or
contracted providers' ability to provide needed services. The new
paragraph also provides the basis for determining the beginning and end
of a disaster or emergency, and requires that the organization annually
post on its Web site and notify enrollees and contracted providers of
its disaster and emergency policies.
We received the following comments on this proposal and our
response follows:
Comment: A commenter requested clarification of whether this
proposed requirement applies if plan service delivery is not affected
even though in a declared disaster area.
Response: Generally, a disaster creates multiple disruptions. For
example, although provider offices may be operating as usual,
transportation, electricity and phone service may be disrupted.
Consequently, the proposed requirements would apply to all MA plans
from the time the disaster is declared and continue to apply until the
end of the disaster, as described in the proposed paragraph (m)(3).
Comment: Several commenters stated that the proposed revision
should only apply to emergency and urgently needed services that are
sought during a public health emergency or disaster.
Response: To the extent possible, we expect MA plans to provide
continued and uninterrupted access to all health care services covered
by the plan, whether routine or unforeseen. Disruption to a plan's
network does not relieve an MA plan from fulfilling its contractual
obligation to furnish all covered services to enrollees, even if it
must do so by covering services furnished to its enrollees by
noncontracted providers.
Comment: A commenter suggested that reduced out-of-network cost
sharing be required only if contracted providers are unavailable or not
accessible.
Response: Availability of networks depends on several factors--the
status of provider offices, transportation, phone service, electric
service, etc.--which may be impacted to varying degrees during a
disaster. The primary goal during a disaster is the provision of
continued and uninterrupted access of health care to all enrollees. To
achieve this goal, enrollees must be allowed to obtain medically
necessary plan-covered services without prior approval, at in-network
cost sharing, from qualified providers, even if those providers are
out-of-network.
Comment: A commenter stated that CMS should reconsider how this
proposed regulation may manipulate enrollee incentives, reduce access
for enrollees that need services more urgently and increase costs to MA
organizations and the MA program.
Response: We recognize that disasters can create unavoidable
disruptions and increased costs for MA organizations. Our primary goal
during a disaster is the provision of continued and uninterrupted
access to medically necessary plan-covered services for all enrollees.
Our intention is to facilitate achievement of this goal by ensuring
that plans facilitate increased access to providers from whom enrollees
in the disaster area may seek high quality services at in-network cost
sharing. We do not believe that these temporary and unusual episodes of
increased access will incentivize enrollees in a negative way or result
in significant cost increases for affected MA organizations.
After review of the public comments received on this proposal, we
are finalizing the proposed provisions with modification. To provide
for greater readability, we are finalizing paragraph (m)(1)(iii) with
slight revisions to the text from the proposed version.
10. Technical Changes To Align Part C and Part D Contract Determination
Appeal Provisions (Sec. Sec. 422.641 and 422.644)
Sections 1857(h) and 1860D-12(b)(3)(F) of the Act describe the
procedures for termination for both MA organizations and Part D Plan
sponsors, respectively. These statutory provisions provide a
contracting organization with an opportunity for a hearing before its
contract is terminated. Appeal procedures were established under
sections 1856(b)(2) and 1860D-12(b)(3) of the Act for both Part C and
Part D sponsors, respectively. Sections 422.641 and 423.641 list the
types of Part C and Part D contract determinations that may be
appealed.
a. Technical Change (Sec. 422.641)
Currently in Sec. 422.641, the contract termination is discussed
in paragraph (b) and contract non-renewal is discussed in (c).
Conversely, in Sec. 423.641 the contract terminations are discussed in
paragraph (c) and contract non-renewal is discussed in (b). Therefore,
we proposed to align Sec. 423.641 with the current list order for (b)
and (c) in the contract determinations section at Sec. 422.641.

[[Page 7954]]

b. Technical Changes (Sec. 422.644(a) and (b))
Sections 1857(h)(1)(B) and 1860D-12(b)(3)(F) of the Act describe
the procedures for contract terminations for both MA organizations and
Part D sponsors, respectively. In Sec. 423.642(a) we specify that the
notice is based upon a contract determination made ``under Sec.
423.641.'' Therefore, since Part C and Part D language should be
consistent, the same reference should be made in the corresponding Part
C Sec. 422.644(a). To remedy this, we proposed to insert ``under Sec.
422.641'' into Sec. 422.644(a) for Part C contract determinations.
In addition, the Part D plan sponsor language in Sec. 423.642(b)
states ``(b) The notice specifies the--(1) Reasons for the
determination; and''. The corresponding Part C language in Sec.
422.644(b) states that ``(b) The notice specifies--(1) The reasons for
the determination; and''. We proposed to change Sec. 422.644(b) by
moving the word ``the'' and revising it to read ``(b) The notice
specifies the--(1) Reasons for the determination; and''.
We received no comments on this proposal and therefore are
finalizing these changes without modification.
11. Technical Changes To Align Parts C and D Appeal Provisions
(Sec. Sec. 422.660 and 423.650)
Sections 1857(h)(1)(B) and 1860D-12(b)(3)(F) of the Act provide
organizations with an opportunity for a hearing before its contract is
terminated in the Part C and Part D programs, respectively. Appeal
procedures were established under section 1856(b)(2) of the Act for
both MA organizations and Part D plan sponsors.
We proposed to replace the term ``under'' with the phrase ``in
accordance with'' in Sec. 422.660(a)(2), Sec. 422.660(a)(3), and
Sec. 423.650(a)(2). We proposed to replace the word ``and'' with
``through'' in Sec. 423.560(a)(4) to ensure consistency between Sec.
422.660(a)(4) and Sec. 423.650(a)(4). In addition, we proposed to
modify Sec. 422.660(b)(4) and Sec. 423.650(b)(4) to add the language
``Sec. 422.752(a) through (b)'' and ``Sec. 423.752(a) through (b)'',
respectively, to refer the reader to the applicable regulations for
intermediate sanctions.
We received no comments on this proposal and therefore are
finalizing this provision without modification.
12. Technical Change to the Restrictions on Use of Information Under
Part D (Sec. 423.322)
We proposed a technical change to Sec. 423.322 due to section
6402(b)(1) of the Affordable Care Act which amended section 1860D-
15(f)(2) of the Act. For background, most of the payment provisions for
the Part D program are found in section 1860D-15 of the Act, and as
originally enacted, both subsections (d) and (f) authorized the
Secretary to collect any information needed to carry out this section
but also stated that information disclosed or obtained pursuant to
section 1860D-15 of the Act may be used by officers, employees, and
contractors of HHS only for the purposes of, and to the extent
necessary in, carrying out section 1860D-15 of the Act.
Section 6402(b)(1) of the Affordable Care Act amended section
1860D-15(f)(2) of the Act to relax the limitation on the use of
information that is disclosed or obtained under section 1860D-15 of the
Act. Specifically, the Affordable Care Act removed the word ``only''
from subsection (f)(2)(A) and added a new subsection (ii) which states
that information disclosed or obtained under section 1860D-15 of the
Act may be used by officers, employees, and contractors of HHS for the
purposes of, and to the extent necessary, in conducting oversight,
evaluation, and enforcement under this title. Section 6402(b)(1) of the
Affordable Care Act also added a new subsection (B) which states that
information disclosed or obtained pursuant to section 1860D-15 of the
Act may be used by the Attorney General and the Comptroller General of
the United States for the purposes of, and to the extent necessary in,
carrying out health oversight activities. Thus, the Affordable Care Act
considerably broadened the purposes for which HHS, its contractors, and
the Attorney General and Comptroller General may use such information.
However, we note, that the Affordable Care Act did not change the
existing restriction on the use of information under subsection (d).
In light of the Affordable Care Act amendment to section 1860D-
15(f) of the Act, we proposed to make conforming changes to Sec.
423.322.
We received no comments regarding this proposal and are finalizing
the proposed amendments to this provision without modification.
13. Technical Changes to Requirements Related to Qualified Prescription
Drug Coverage (Sec. 423.104)
In the April 15, 2010 Federal Register (75 FR 19711), we finalized
new requirements at Sec. 423.104 related to qualified prescription
drug coverage. At that time, we codified a new paragraph, Sec.
423.104(d)(2)(iii) stating that tiered cost sharing under (d)(2)(ii) of
the same paragraph may not exceed levels annually determined by CMS to
be discriminatory. In the April 15, 2011 Federal Register (76 FR
21432), the language at (d)(2)(iii) was inadvertently removed when
making other revisions to Sec. 423.104.
To reinstate the language that was removed, we are including a
technical change to add this language back to Sec. 423.104. This
technical correction does not represent a change in policy.
14. Technical Changes to the Definition of Supplemental Benefits (Sec.
423.100)
In the April 12, 2012 Federal Register (77 FR 22169), we revised
the definition of supplemental benefits at Sec. 423.100 by defining
supplemental benefits as benefits offered by Part D plans, other than
employer group health or waiver plans, that meet the requirements of
Sec. 423.104(f)(1)(ii). We subsequently issued a correction notice in
the June 1 2012 Federal Register (77 FR 32407) with unrelated changes
that inadvertently resulted in the revised definition not being
included in the CFR.
To address this omission, we are issuing a technical change at this
time to include the definition of supplemental benefits finalized in
the April 12, 2012 Federal Register (77 FR 22169). This technical
correction does not represent a change in policy.

III. Collection of Information Requirements

Under the Paperwork Reduction Act of 1995 (hereafter, ``PRA''), we
are required to provide 30-day 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. To fairly evaluate whether an information collection
should be approved by OMB, section 3506(c)(2)(A) of the PRA 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.
In the January 10, 2014, proposed rule (79 FR 1917) we solicited
public comment on each of the following provisions that contained
information collection requirements (ICRs).

[[Page 7955]]

A. ICRs Related to Eligibility of Enrollment for Individuals Not
Lawfully Present in the United States (Sec. Sec. 417.2, 417.420,
417.422, 417.460, 422.1, 422.50, 422.74, 423.1, 423.30, and 423.44)

As amended here sections 417.2, 417.420, 417.422, 417.460, 422.1,
422.50, 422.74, 423.1, 423.30, and 423.44 set out the eligibility
requirement of citizenship or lawful presence to enroll in MA, Part D,
and cost plans. To implement these provisions, we will: (1) Relay data
regarding an individual's lawful presence status to plans through the
MARx system so that the plans will be aware of an individual's
eligibility when requesting enrollment; and (2) notify plans of loss of
eligibility for current members based on unlawful presence status. In
this final rule, we explicitly direct MA organizations, Part D
sponsors, and entities offering cost plans not to request or solicit
information about lawful presence from Medicare beneficiaries in
connection with this rule as CMS will provide the necessary
information. This data is already available to us; thus no new data
will be collected.
We received no comments on the proposed ICR assessment.
Consequently, we are finalizing that assessment without modification.

B. ICRs Related to Good Cause Processes (Sec. Sec. 417.460, 422.74,
and 423.44)

Sections 417.460, 422.74, and 423.44 establish the ability for us
to designate an entity other than CMS to implement the good cause
process. If we assign the good cause process to entities operating a
cost plan, MA organization, or a Part D sponsor, the plan would already
have the enrollment data necessary to make the determinations required
by the process. In addition, the former enrollee is already required by
the applicable regulations to provide a credible statement to establish
good cause for the failure to make timely payments. Thus no additional
data will be collected by the plan. However, if we designate plans to
implement good cause processes, there would be additional burden to
each plan. The burden would consist of completing the operational
process, such as--(1) responding to requests for reinstatement from
former members; (2) gathering the attestation from the individual
regarding his or her reason for not paying the plan premiums within the
grace period; (3) making the determination as to whether the individual
meets the good cause criteria; and (4) maintaining the case notes and
documentation to support its determination should it need to be
reviewed. As plans already provide customer service to their current
and past members, we estimate 30 minutes for each reinstatement
request. According to the most recent wage data provided by the Bureau
of Labor Statistics (BLS) for May 2013, the mean hourly wage for the
category of ``Customer Service Representatives''--which we believe,
considering the common point of entry for all issues at the plan, is
the most appropriate category is $16.04/hr. With fringe benefits and
overhead, the rate is $23.74/hr. It is calculated that the cost for 30
minutes would be $11.87. Not all plans disenroll for nonpayment of
premiums. However, for those who do implement this voluntary policy, it
results in an average of 20,000 disenrollments each month. In response,
we receive an average of 698 requests for reinstatement per month. The
plan representative cost of $11.87 for each case is multiplied by 698
cases. Therefore, under the revised regulations, handling of these
requests would result in a total monthly cost of $8,285 (or $99,423 and
4,188 hours, annually) for all plans in the MA, Part D, and cost plan
programs. The requirements and burden will be submitted to OMB under
control number 0938--New (CMS-10544).
We received no comments on the proposed ICR assessment.
Consequently, we are finalizing this assessment with only a minor
modification in order to reflect the updated 2013 wage data.

C. ICRs Related To Expanding Quality Improvement Program Regulations
(Sec. 422.152)

We explained in the proposed rule that we do not believe this
provision would impose any new or revised collection requirements or
burden because it codifies a submission process that currently applies
for quality improvement program information. PRA approval is current
under OMB control number 0938-1023 (CMS-10209).
We received no comments on the ICRs for this proposal and are
finalizing these provisions without modification.

D. ICRs Related To Changes to Audit and Inspection Authority
(Sec. Sec. 422.503(d)(2) and 423.504(d)(2))

In Sec. Sec. 422.503(d)(2) and 423.504(d)(2), MA organizations and
Part D sponsors are required to hire an independent auditor to perform
validation exercises to confirm correction of deficiencies found during
an audit. We currently conduct these validation exercises and collect
data associated with these activities under OMB control number 0938-
1000 (CMS-10191). We believe the provision will not impose any
additional burden on MA organizations or Part D sponsors.

E. ICRs Related to Business Continuity for MA Organizations and PDP
Sponsors (Sec. Sec. 422.504(o) and 423.505(p))

This provision requires MA organizations and Part D sponsors to
develop, maintain, and implement business continuity plans that meet
certain minimum standards. The proposed provision was modified due to
public comment. Specifically, in this final rule MA organizations and
Part D sponsors plan to restore essential operations within 72, rather
than 24, hours of a failure. While the cost estimates are set out under
this rule's Regulatory Impact Analysis, the PRA-related burden will be
made available for public comment through a separate Federal Register
notice under OMB control number 0938-0964 (CMS-10141).

F. Submission of PRA-Related Comments

We have submitted a copy of this rule to OMB for its review of the
rule's information collection and recordkeeping requirements. These
requirements are not effective until they have been approved by OMB.
To obtain copies of the supporting statement and any related forms
for the paperwork collections referenced above, access CMS' Web site at
https://www.cms.hhs.gov/PaperworkReductionActof1995; email your request,
including your address, phone number, OMB number, and CMS document
identifier, to Paperwork@cms.hhs.gov; or call the Reports Clearance
Office at 410-786-1326.
When commenting on the stated information collections, please
reference the document identifier or OMB control number. To be assured
consideration, comments and recommendations must be received by the OMB
desk officer via one of the following transmissions: Mail: OMB, Office
of Information and Regulatory Affairs, Attention: CMS Desk Officer,
Fax: (202) 395-5806, OR Email: OIRA_submission@omb.eop.gov.
PRA-related comments must be received on/by March 16, 2015.

IV. Regulatory Impact Statement

We examined the impact of this final 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

[[Page 7956]]

(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). A
regulatory impact analysis (RIA) must be prepared for major rules with
economically significant effects ($100 million or more in any 1 year).
We determined that this final rule does not reach the threshold for
being considered economically significant, and thus, is not considered
a major rule. There are five provisions with non-measurable impact:
Efficient dispensing, requirements for drugs covered under Part D, two-
year prohibition when organizations terminate their contract,
requirements for urgently needed services, and MA organization
responsibilities in disasters and emergencies.
Some of these provisions do not impose new requirements or costs
but rather, clarify the necessary actions to meet existing regulatory
requirements, and therefore, are expected to have no impact. Other
provisions reflect widespread industry practices or would only impact a
few plans and therefore are expected to have no, or minimal, impact.
There are three provisions with measurable impacts: Citizenship or
lawful presence; audit and inspection authority; and business
continuity operations. We discuss these three provisions as follows.
Citizenship or Lawful Presence. This final rule adds ``citizenship
or lawful presence'' as an eligibility requirement to enroll and remain
enrolled in MA, Part D, and section 1876 cost contracts to comply with
section 401 of the Personal Responsibility and Work Opportunity Act,
which mandates that aliens who are not lawfully present in the United
States are not eligible to receive any federal benefit, including
Medicare.
As indicated in the proposed rule of January 10, 2014 (79 FR 1918),
based on estimates reflecting scoring by the CMS Office of the Actuary
and 2012 lawful presence data provided by the SSA, this provision has
an anticipated savings of $67 million over 5 years.
We estimate 10 million dollars expected savings for 2015 consisting
of $5 million savings for Medicare Advantage (MA) and $5 million
savings for Part D. These savings increase annually and by 2019, we
estimate $17 million savings consisting of $8 million for MA and $9
million for Part D.
Audit and Inspection Authority. This rule finalizes some, but not
all, proposed changes to the audit and inspection authority included in
the proposed rule. We proposed two changes to Sec. Sec. 422.503(d)(2)
and 423.504(d)(2) that would allow CMS to require sponsors (MA
organizations and Part D sponsors) to hire an independent auditor to
conduct full or partial program audits of the sponsors' operational
areas and/or correction validation exercises. Under the first proposal,
each MA organization and/or Part D sponsor would have been required to
hire an independent auditor to perform a full or partial program audit
at least every 3 years. However, due to public comment, we are not
finalizing this proposal.
We also proposed to revise our regulations to permit CMS to require
MA organizations or Part D sponsors with audit results that reveal
noncompliance with CMS requirements to hire an independent auditor to
validate that correction has occurred. With our existing resources we
currently conduct approximately 30 audits per year.
We received numerous comments indicating that our initial estimate
was not accurate and considerably lower than the sponsors' actual
costs. Based on the public comments, we revaluated our methods of
estimating the sponsor costs associated with procuring an independent
auditor to conduct validations and as a result we decreased: (1) The
number of organizations that may be subject to a validation each year;
and (2) the number of team members likely required to perform the
validation exercise; and increased: (3) The estimated total cost per
hour for the audit team. The estimate for 23 sponsors is closer to the
maximum number of sponsors that would be expected to hire an
independent auditor to validate correction of audit deficiencies that
we identified. As additional organizations are subject to a CMS program
audit or utilize CMS' audit protocols to perform their own internal
auditing, we expect that the performance of these organizations and the
industry in general will improve; this in turn will reduce the
likelihood that an organization would need to hire an independent
auditor to validate correction of audit deficiencies. Therefore, we
expect the total number of organizations that may be required to hire
an independent auditor to validate correction of audit deficiencies
will decline over time.
While some sponsor audit findings can be validated through means
other than a full-scale validation audit, we have found several
organizations with significant performance deficiencies. We estimate
that approximately 75 percent of the 30 organizations we audit per year
(23 organizations) may be requested to retain an independent auditor to
validate correction of their audit deficiencies.
Under these circumstances we estimated that the independent auditor
hired would need to have a team consisting of the following
professionals:
Formulary and Benefits Administration--pharmacist, a
senior claims analyst, and a senior auditor.
Coverage Determinations, Part D Appeals, Part D
Grievances--physician, pharmacist and senior auditor.
Organization Determinations, Part C Appeals, Part C
Grievances--physician, nurse practitioner, and senior auditor.
Compliance Program effectiveness--two senior auditors.
Special Needs Plan Model of Care (SNP MOC)
implementation--nurse practitioner and senior auditor.
We used 2013 wage statistics supplied by the Bureau of Labor and
Statistics, along with benefit and overhead included to develop
estimates of direct wages. The estimated total cost per hour for each
audit team is $1,202.00. A team of 13 professionals (listed previously)
is necessary for the performance of each validation effort. The
estimated total number of hours the team will need to perform the
validation per sponsor is 80. The total cost per sponsor to procure and
support the independent audit team is therefore: 80 (hours) x $1,202.00
= $96,160.00. The validation costs will be allowable costs in the
plan's bid. Under existing regulations, the estimated total annual
burden related to the time and effort for sponsors to perform the
validation is $2,211,680.00 (23 sponsors x $96,160.00 per sponsor).
Since only 30 sponsors are audited per year and only those with the
most serious findings would likely be subjected to hiring an
independent auditor to conduct validation, the cost per sponsor per
year is $2,211,680 / 193 (unique parent organizations) = $11,459 per
year. The number 193 represents the 193 unique parent organizations as
of June 2014. This figure includes all coordinated care plans (CCPs),
private fee for service (PFFS) plans, section

[[Page 7957]]

1876 Medicare cost plans whose parent organizations also have an MA or
Part D plan, stand-alone prescription drug plans (PDPs), and employer
group waiver plans (800 series). Sponsors will be allowed to account
for this cost in their bid.
Business Continuity. Commenters in general took issue with the
costs associated with the proposal for Business Continuity for MA
organizations and Part D Sponsors (Sec. Sec. 422.504(o) and
423.505(p)). Several commenters suggested that our RIA significantly
underestimated costs because requiring MA organizations and Part D
sponsors to restore essential functions within 24 hours would
necessitate systems redundancy. Other commenters were concerned about
the cost of testing IT systems on an annual basis; another commenter
questioned the need to train ``all'' employees.
As detailed in section II.A.4. of this final rule (Business
Continuity for MA organizations and Part D Sponsors (Sec. Sec.
422.504(o) and 423.505(p)), we believe that the modifications to
regulatory text that we are finalizing in this final rule, as well as
clarifications provided in our responses (for instance, we are not
requiring systems redundancy), address the vast majority of concerns
raised about the RIA.
Business continuity plans are well established in the business
community, and we believe that most MA organizations and Part D
sponsors already have business continuity plans in place which cover
the basic proposed subject areas. We still estimate that 5 percent of
MA organizations and Part D sponsors do not have business continuity
plans, but are updating our estimates from our proposed rule to reflect
the most recent data available. For 2015, there are 568 MA
organizations and Part D sponsors, resulting in an estimated 28 (5
percent x 568) affected entities. More recent May 2013 wage data from
the BLS OES sets the hourly rate for an emergency management director,
General Medical and Surgical Hospitals, at $36.90. We now estimate the
first year burden of a full time emergency management director to help
design the plan to be 58,240 hours (28 entities x 2,080 hours). The
estimated cost associated with such an expert is the estimated number
of hours multiplied by the estimated hourly rate of $36.90, plus 100
percent for fringe benefits and overhead, which equals a first year
estimated cost of $4,298,112.
In subsequent years, the estimated burden associated with this
requirement will be the cost of an emergency management director
working on a part time basis for an ongoing burden of 29,120 hours (28
entities x 1,040 hours). The estimated cost associated with such an
expert would be the estimated number of hours multiplied by the
estimated hourly rate of $36.90 plus 100 percent for fringe benefits
and overhead, which equals an estimated annual cost of $2,149,056 for
subsequent years.
Additionally, as discussed in section II.A.4. of this final rule,
we agree with the commenters that the regulation may require some
changes, which we believe are minimal, to existing business continuity
plans and are adding estimates to cover those costs. We estimate that
an additional 10 percent of the 568 contracting entities, or about 57
entities, will be affected by this requirement. This means the
estimated first year burden of a part time emergency management
director to conform the existing business continuity plans will be
59,280 hours (57 entities x 1,040 hours). The estimated cost associated
with such an expert is the estimated number of hours multiplied by the
estimated hourly rate of $36.90 plus 100 percent for fringe benefits
and overhead, which equals a first year estimated cost of $4,373,864.
In subsequent years, we estimate the burden associated with this
requirement for MA organizations and Part D sponsors that are
continuing to conform their business continuity plans with our
regulation will decrease, for an ongoing burden of 29,640 hours (57
entities x 520 hours). The estimated cost associated with such an
expert is the estimated number of hours multiplied by the estimated
hourly rate of $36.90 plus 100 percent for fringe benefits and
overhead, which equals a first year cost of $2,187,432.
Lastly, as previously discussed in our summary of the proposed
effects, we believe that savings that we cannot capture will be
realized by this regulation, especially for those MA organizations and
Part D sponsors that do not currently have business continuity plans in
place. Business continuity planning helps to protect resources and
minimize losses. If as a consequence, MA organizations and Part D
sponsors, that currently do not have these plans in place, provide
Medicare benefits more efficiently after disasters and disruptions,
this could result in fewer risks to beneficiary health.
Our analyses of the three provisions with measurable impact--
unlawful presence, audit and inspection authority and business
continuity operations--show that aggregate savings over 5 years is $33
million. Estimated savings for 2015 is $0 million and the savings
increase annually to $11 million for 2019. Consequently, the savings do
not reach the $100 million threshold and therefore this final rule is
not a major rule.
The Regulatory Flexibility Analysis (RFA), as amended, requires
agencies to analyze options for regulatory relief of small businesses,
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 health insurance industry was examined in depth in the RIA
prepared for the proposed rule on establishment of the MA program (69
FR 46866, August 3, 2004). It was determined, in that analysis, that
there were few, if any, ``insurance firms,'' including HMOs that fell
below the size thresholds for ``small'' business established by the
Small Business Administration (SBA). We assume that the ``insurance
firms'' are synonymous with health plans that conduct standard
transactions with other covered entities and are, therefore, the
entities that will have costs associated with the new requirements
finalized in this rule. At the time the analysis for the MA program was
conducted, the market for health insurance was and remains, dominated
by a handful of firms with substantial market share.
However, we estimate that the costs of this rule on ``small''
health plans do not approach the amounts necessary to be a
``significant economic impact'' on firms with revenues of tens of
millions of dollars. Therefore, this rule would not have a significant
economic impact on a substantial number of small entities.
In addition, section 1102(b) of the Act requires us to prepare a
regulatory analysis for any rule or regulation proposed under Title
XVIII, Title XIX, or Part B of the Act that may have significant impact
on the operations of a substantial number of small rural hospitals. 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 2014, that threshold is approximately $141

[[Page 7958]]

million. This final rule is not expected to reach this spending
threshold.
Executive Order 13132 establishes certain requirements that an
agency must meet when it promulgates a proposed rule (and subsequent
final rule) that imposes substantial direct requirement costs on state
and local governments, preempts state law, or otherwise has federalism
implications. Since this rule does not impose any substantial costs on
state or local governments, the requirements of Executive Order 13132
are not applicable.
In accordance with the provisions of Executive Order 12866, this
rule was reviewed by the Office of Management and Budget.

List of Subjects

42 CFR Part 417

Administrative practice and procedure, Grant programs-health,
Health care, Health insurance, Health maintenance organizations (HMO),
Loan programs-health, Medicare, Reporting and recordkeeping
requirements.

42 CFR Part 422

Administrative practice and procedure, Health facilities, Health
maintenance organizations (HMO), Medicare, Penalties, Privacy,
Reporting and recordkeeping requirements.

42 CFR Part 423

Administrative practice and procedure, Emergency medical services,
Health facilities, Health maintenance organizations (HMO), Health
professionals, Medicare, Penalties, Privacy, Reporting and
recordkeeping requirements.

For the reasons set forth in the preamble, the Centers for Medicare
& Medicaid Services amends 42 CFR Chapter IV as follows:

PART 417--HEALTH MAINTENANCE ORGANIZATION, COMPETITIVE MEDICAL
PLANS, AND HEALTH CARE PREPAYMENT PLANS

0
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.

0
2. Amend Sec. 417.2 by revising paragraph (b) to read as follows:

Sec. 417.2 Basis and scope.

* * * * *
(b) Subparts G through R of this part set forth the rules for
Medicare contracts with, and payment to, HMOs and competitive medical
plans (CMPs) under section 1876 of the Act and 8 U.S.C. 1611.
* * * * *

Sec. 417.420 [Amended]

0
3. Amend Sec. 417.420, paragraph (a) by removing the phrase
``Individuals who are entitled to'' and adding in its place the phrase
``Eligible individuals who are entitled to''.

0
4. Amend Sec. 417.422 as follows:
0
a. In the introductory text, by removing the phrase ``any individual
who--'' and adding in its place the phrase ``any individual who meets
all of the following:''
0
b. In paragraphs (a) through (e), by removing the ``;'' and adding in
its place ``.''.
0
c. In paragraph (f), by removing the ``; and'' and adding in its place
``.''.
0
d. Adding paragraph (h).
The addition reads as follows:

Sec. 417.422 Eligibility to enroll in an HMO or CMP.

* * * * *
(h) Is a United States citizen or an individual who is lawfully
present in the United States as determined in 8 CFR 1.3.

0
5. Amend Sec. 417.460 as follows:
0
a. In paragraph (b)(2)(i) by removing ``.'' and adding in its place
``;''.
0
b. In paragraph (b)(2)(iii) by removing ``; or'' and adding in its
place ``;''.
0
c. Redesignating paragraph (b)(2)(iv) as paragraph (b)(2)(v).
0
d. Adding a new paragraph (b)(2)(iv).
0
e. In paragraph (b)(3), by removing the cross-reference ``paragraphs
(c) through (i)'' and adding in its place the cross-reference
``paragraphs (c) through (j)''.
0
f. By revising paragraph (c)(3).
0
g. In paragraph (c)(4), by removing the phrase ``non-payment of
premiums.'' and adding in its place the phrase ``non-payment of
premiums or other charges.''
0
h. By adding paragraph (j).
The revisions and the additions read as follows:

Sec. 417.460 Disenrollment of beneficiaries by an HMO or CMP.

* * * * *
(b) * * *
(2) * * *
(iv) Is not lawfully present in the United States; or
* * * * *
(c) * * *
(3) Good cause and reinstatement. When an individual is disenrolled
for failure to pay premiums or other charges imposed by the HMO or CMP
for deductible and coinsurance amounts for which the enrollee is
liable, CMS (or a third party to which CMS has assigned this
responsibility, such as an HMO or CMP) may reinstate enrollment in the
plan, without interruption of coverage, if the individual shows good
cause for failure to pay and pays all overdue premiums or other charges
within 3 calendar months after the disenrollment date. The individual
must establish by a credible statement that failure to pay premiums or
other charges was due to circumstances for which the individual had no
control, or which the individual could not reasonably have been
expected to foresee.
* * * * *
(j) Enrollee is not lawfully present in the United States.
Disenrollment is effective the first day of the month following notice
by CMS that the individual is ineligible in accordance with Sec.
417.422(h).

PART 422--MEDICARE ADVANTAGE PROGRAM

0
6. 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).

0
7. Amend Sec. 422.1 by revising paragraph (a) to read as follows:

Sec. 422.1 Basis and scope.

(a) Basis. This part is based on the indicated provisions of the
following:
(1) The following provisions of the Act:
(i) 1128J(d)--Reporting and Returning of Overpayments.
(ii) 1851--Eligibility, election, and enrollment.
(iii) 1852--Benefits and beneficiary protections.
(iv) 1853--Payments to Medicare Advantage (MA) organizations.
(v) 1854--Premiums.
(vi) 1855--Organization, licensure, and solvency of MA
organizations.
(vii) 1856--Standards.
(viii) 1857--Contract requirements.
(ix) 1858--Special rules for MA Regional Plans.
(x) 1859--Definitions; enrollment restriction for certain MA plans.
(2) 8 U.S.C. 1611--Aliens who are not qualified aliens ineligible
for Federal public benefits.
* * * * *

0
8. Amend Sec. 422.50 as follows:
0
a. In paragraph (a) introductory text, by removing the phrase '' if he
or she--'' and adding in its place the phrase ``if he or she meets all
of the following:''
0
b. In paragraphs (a)(1) and (4), by removing ``;'' and adding in its
place ``.''.

[[Page 7959]]

0
c. In paragraph (a)(5), by removing ``; and'' and adding in its place
``.''.
0
d. By adding paragraph (a)(7).
The addition reads as follows:

Sec. 422.50 Eligibility to elect an MA plan.

* * * * *
(a) * * *
(7) Is a United States citizen or is lawfully present in the United
States as determined in 8 CFR 1.3.
* * * * *

0
9. Amend Sec. 422.74 as follows:
0
a. By adding paragraph (b)(2)(v).
0
b. By revising paragraph (d)(1)(v).
0
c. By adding paragraph (d)(8).
The additions and revision read as follows:

Sec. 422.74 Disenrollment by the MA organization.

* * * * *
(b) * * *
(2) * * *
(v) The individual is not lawfully present in the United States.
* * * * *
(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 (or a third party to which CMS has assigned this responsibility,
such as an MA organization) may reinstate enrollment in the MA plan,
without interruption of coverage, if the individual--
(A) Shows good cause for failure to pay within the initial grace
period; and
(B) Pays all overdue premiums within 3 calendar months after the
disenrollment date; and
(C) Establishes 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.
* * * * *
(8) Enrollee is not lawfully present in the United States.
Disenrollment is effective the first day of the month following notice
by CMS that the individual is ineligible in accordance with Sec.
417.422(h) of this chapter.
* * * * *

0
10. Amend Sec. 422.100 by adding paragraph (m) to read as follows:

Sec. 422.100 General requirements.

* * * * *
(m) Special requirements during a disaster or emergency. (1) When a
state of disaster is declared as described in paragraph (m)(2) of this
section, an MA organization offering an MA plan must, until one of the
conditions described in paragraph (m)(3) of this section occurs, ensure
access to benefits in the following manner:
(i) Cover Medicare Parts A and B services and supplemental Part C
plan benefits furnished at non-contracted facilities subject to Sec.
422.204(b)(3).
(ii) Waive, in full, requirements for gatekeeper referrals where
applicable.
(iii) Provide the same cost-sharing for the enrollee as if the
service or benefit had been furnished at a plan-contracted facility.
(iv) Make changes that benefit the enrollee effective immediately
without the 30-day notification requirement at Sec. 422.111(d)(3).
(2) Declarations of disasters. A declaration of disaster will
identify the geographic area affected by the event and may be made as
one of the following:
(i) Presidential declaration of a disaster or emergency under the
either of the following:
(A) Stafford Act.
(B) National Emergencies Act.
(ii)(A) Secretarial declaration of a public health emergency under
section 319 of the Public Health Service Act.
(B) If the President has declared a disaster as described in
paragraph (m)(2)(i) or (ii) of this section, then the Secretary may
also authorize waivers or modifications under section 1135 of the Act.
(iii) Declaration by the Governor of a State or Protectorate.
(3) End of the disaster. The public health emergency or state of
disaster ends when any of the following occur:
(i) The source that declared the public health emergency or state
of disaster declares an end.
(ii) The CMS declares an end of the public health emergency or
state of disaster.
(iii) Thirty days have elapsed since the declaration of the public
health emergency or state of disaster and no end date was identified in
paragraph (m)(3)(i) or (ii) of this section.
(4) MA plans unable to operate. An MA plan that cannot resume
normal operations by the end of the public health emergency or state of
disaster must notify CMS.
(5) Disclosure. In addition to other requirements of annual
disclosure under Sec. 422.111, an organization must do all of the
following:
(i) Indicate the terms and conditions of payment during the public
health emergency or disaster for non-contracted providers furnishing
benefits to plan enrollees residing in the state-of-disaster area.
(ii) Annually notify enrollees of the information listed in
paragraphs (m)(1) through (3) and (m)(5) of this section.
(iii) Provide the information described in paragraphs (m)(1), (2),
(3), and (4)(i) of this section on its Web site.

0
11. Amend Sec. 422.111 by revising paragraph (d)(1) to read as
follows:

Sec. 422.111 Disclosure requirements.

* * * * *
(d) * * *
(1) Submit the changes for CMS review under procedures of subpart V
of this part.
* * * * *

0
12. Amend Sec. 422.112 by adding paragraph (b)(7) to read as follows:

Sec. 422.112 Access to services.

* * * * *
(b) * * *
(7) With respect to drugs for which payment as so prescribed and
dispensed or administered to an individual may be available under Part
A or Part B, or under Part D, MA-PD plans must coordinate all benefits
administered by the plan and--
(i) Establish and maintain a process to ensure timely and accurate
point-of-sale transactions; and
(ii) Issue the determination and authorize or provide the benefit
under Part A or Part B or as a benefit under Part D as expeditiously as
the enrollee's health condition requires, in accordance with the
requirements of subpart M of this part and subpart M of part 423 of
this chapter, as appropriate, when a party requests a coverage
determination.
* * * * *
0
13. Amend Sec. 422.113 by revising paragraph (b)(1)(iii) introductory
text to read as follows:

Sec. 422.113 Special rules for ambulance services, emergency and
urgently needed services, and maintenance and post-stabilization care
services.

* * * * *
(b) * * *
(1) * * *
(iii) Urgently needed services means covered services that are not
emergency services as defined in this section, provided when an
enrollee is temporarily absent from the MA plan's service (or, if
applicable, continuation) area (or provided when the enrollee is in the
service or continuation area but the organization's provider network is
temporarily unavailable or inaccessible) when the services are
medically necessary and immediately required--
* * * * *

0
14. Amend Sec. 422.152 as follows:
0
a. Revising paragraph (a) introductory text.

[[Page 7960]]

0
b. Redesignating paragraphs (a)(1) through (3) as paragraphs (a)(2)
through (4), respectively.
0
c. Adding new paragraph (a)(1).
0
d. In newly redesignated (a)(2), by removing the ``;'' and adding a
``.''.
0
e. In newly redesignated (a)(3), by removing the ``; and'' and adding a
``.''.
0
f. Revising paragraph (c).
0
g. Revising paragraph (g) introductory text.
0
h. Revising paragraph (h).
The revisions and addition read as follows:

Sec. 422.152 Quality improvement program.

(a) General rule. Each MA organization that offers one or more MA
plan must have, for each plan, an ongoing quality improvement program
that meets applicable requirements of this section for the service it
furnishes to its MA enrollees. As part of its ongoing quality
improvement program, a plan must do all of the following:
(1) Create a quality improvement program plan that sufficiently
outlines the elements of the plan's quality improvement program.
* * * * *
(c) Chronic care improvement program requirements. (1) Develop
criteria for a chronic care improvement program. These criteria must
include the following:
(i) Methods for identifying MA enrollees with multiple or
sufficiently severe chronic conditions that would benefit from
participating in a chronic care improvement program.
(ii) Mechanisms for monitoring MA enrollees that are participating
in the chronic improvement program and evaluating participant outcomes
such as changes in health status.
(iii) Performance assessments that use quality indicators that are
objective, clearly and unambiguously defined, and based on current
clinical knowledge or research.
(iv) Systematic and ongoing follow-up on the effect of the program.
(2) The organization must report the status and results of each
program to CMS as requested.
* * * * *
(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),
as defined under Sec. 422.101(f), to CMS for NCQA evaluation and
approval, in accordance with CMS guidance. In addition to the
requirements under paragraphs (a) and (f) of this section, a SNP must
conduct a quality improvement program that does the following:
* * * * *
(h) Requirements for MA private-fee-for-service plans and Medicare
medical savings account plans. MA PFFS and MSA plans are subject to the
requirement that may not exceed the requirement specified in Sec.
422.152(e).

0
15. Amend Sec. 422.310 by revising paragraph (g)(2)(ii) to read as
follows:

Sec. 422.310 Risk adjustment data.

* * * * *
(g) * * *
(2) * * *
(ii) After the final risk adjustment data submission deadline,
which is a date announced by CMS that is no earlier than January 31 of
the year following the payment year, an MA organization can submit data
to correct overpayments but cannot submit diagnoses for additional
payment.
* * * * *

Sec. 422.502 [Amended]

0
16. Amend Sec. 422.502(b)(3) by removing the phrase ``CMS may deny an
application based on the applicant's'' and adding in its place the
phrase ``CMS may deny an application for a new contract or service area
expansion based on the applicant's''.

0
17. Amend Sec. 422.503 by adding paragraph (d)(2)(iv) to read as
follows:

Sec. 422.503 General provisions.

* * * * *
(d) * * *
(2) * * *
(iv) CMS may require that the MA organization hire an independent
auditor to provide CMS with additional information to determine if
deficiencies found during an audit or inspection have been corrected
and are not likely to recur. The independent auditor must work in
accordance with CMS specifications and must be willing to attest that a
complete and full independent review has been performed.
* * * * *

0
18. Amend Sec. 422.504 by adding paragraph (o) to read as follows:

Sec. 422.504 Contract provisions.

* * * * *
(o) Business continuity. (1) The MA organization agrees to develop,
maintain, and implement a business continuity plan containing policies
and procedures to ensure the restoration of business operations
following disruptions to business operations which would include
natural or man-made disasters, system failures, emergencies, and other
similar circumstances and the threat of such occurrences. To meet the
requirement, the business continuity plan must, at a minimum, include
the following:
(i) Risk assessment. Identify threats and vulnerabilities that
might affect business operations.
(ii) Mitigation strategy. Design strategies to mitigate hazards.
Identify essential functions in addition to those specified in
paragraph (o)(2) of this section and prioritize the order in which to
restore all other functions to normal operations. At a minimum, each MA
organization must do the following:
(A) Identify specific events that will activate the business
continuity plan.
(B) Develop a contingency plan to maintain, during any business
disruption, the availability and, as applicable, confidentiality of
communication systems and essential records in all forms (including
electronic and paper copies). The contingency plan must do the
following:
(1) Ensure that during any business disruption the following
systems will operate continuously or, should they fail, be restored to
operational capacity on a timely basis:
(i) Information technology (IT) systems including those supporting
claims processing at point of service.
(ii) Provider and enrollee communication systems including
telephone, Web site, and email.
(2) With respect to electronic protected health information, comply
with the contingency plan requirements of the Health Insurance
Portability and Accountability Act of 1996 Security Regulations at 45
CFR parts 160 and 164, subparts A and C.
(C) Establish a chain of command.
(D) Establish a business communication plan that includes emergency
capabilities and procedures to contact and communicate with the
following:
(1) Employees.
(2) First tier, downstream, and related entities.
(3) Other third parties (including pharmacies, providers,
suppliers, and government and emergency management officials).
(E) Establish employee and facility management plans to ensure that
essential operations and job responsibilities can be assumed by other
employees or moved to alternate sites as necessary.
(F) Establish a restoration plan including procedures to transition
to normal operations.
(G) Comply with all applicable Federal, State, and local laws.

[[Page 7961]]

(iii) Testing and revision. On at least an annual basis, test and
update the business operations continuity plan to ensure the following:
(A) That it can be implemented in emergency situations.
(B) That employees understand how it is to be executed.
(iv) Training. On at least an annual basis, educate appropriate
employees about the business continuity plan and their own respective
roles.
(v) Records. (A) Develop and maintain records documenting the
elements of the business continuity plan described in paragraphs
(o)(1)(i) through (iv) of this section.
(B) Make the information specified in paragraph (o)(1)(v)(A) of
this section available to CMS upon request.
(2) Restoration of essential functions. Every MA organization must
plan to restore essential functions within 72 hours after any of the
essential functions fail or otherwise stop functioning as usual. In
addition to any essential functions that the MA organization identifies
under paragraph (o)(1)(ii) of this section, for purposes of this
paragraph (o)(2) of the section essential functions include, at a
minimum, the following:
(i) Benefit authorization (if not waived) for services to be
immediately furnished at a hospital, clinic, provider office, or other
place of service.
(ii) Operation of call center customer services.

0
19. Amend Sec. 422.506 by revising paragraph (a)(4) to read as
follows:

Sec. 422.506 Nonrenewal of contract.

(a) * * *
(4) If an MA organization does not renew a contract under paragraph
(a) of this section, CMS may deny an application for a new contract or
a service area expansion from the MA organization for 2 years unless
there are circumstances that warrant special consideration, as
determined by CMS. This prohibition may apply regardless of the product
type, contract type or service area of the previous contract.
* * * * *

0
20. Amend Sec. 422.508 by revising paragraph (c) to read as follows:

Sec. 422.508 Modification or termination of contract by mutual
consent.

* * * * *
(c) Agreement to limit new MA applications. As a condition of the
consent to a mutual termination CMS will require, as a provision of the
termination agreement language prohibiting the MA organization from
applying for new contracts or service area expansions for a period of 2
years, absent circumstances warranting special consideration. This
prohibition may apply regardless of the product type, contract type or
service area of the previous contract.
* * * * *

0
21. Amend Sec. 422.512 by revising paragraph (e)(1) to read as
follows:

Sec. 422.512 Termination of contract by the MA organization.

* * * * *
(e) * * *
(1) CMS may deny an application for a new contract or a service
area expansion from an MA organization that has terminated its contract
within the preceding 2 years unless there are circumstances that
warrant special consideration, as determined by CMS. This prohibition
may apply regardless of the contract type, product type, or service
area of the previous contract.
* * * * *

0
22. Amend Sec. 422.568 by revising paragraph (b) to read as follows:

Sec. 422.568 Standard timeframes and notice requirements for
organization determinations.

* * * * *
(b) Timeframe for requests for service. Except as provided in
paragraph (b)(1) of this section, when a party has made a request for a
service, the MA organization must notify the enrollee of its
determination as expeditiously as the enrollee's health condition
requires, but no later than 14 calendar days after the date the
organization receives the request for a standard organization
determination.
(1) Extensions. The MA organization may extend the timeframe by up
to 14 calendar days if--
(i) The enrollee requests the extension;
(ii) The extension is justified and in the enrollee's interest due
to the need for additional medical evidence from a noncontract provider
that may change an MA organization's decision to deny an item or
service; or
(iii) The extension is justified due to extraordinary, exigent, or
other non-routine circumstances and is in the enrollee's interest.
(2) Notice of extension. When the MA organization extends the
timeframe, it must notify the enrollee in writing of the reasons for
the delay, and inform the enrollee of the right to file an expedited
grievance if he or she disagrees with the MA organization's decision to
grant an extension. The MA organization must notify the enrollee of its
determination as expeditiously as the enrollee's health condition
requires, but no later than upon expiration of the extension.
* * * * *

0
23. Amend Sec. 422.572 by revising paragraph (b) to read as follows:

Sec. 422.572 Timeframes and notice requirements for expedited
organization determinations.

* * * * *
(b) Extensions. (1) The MA organization may extend the 72-hour
deadline by up to 14 calendar days if--
(i) The enrollee requests the extension;
(ii) The extension is justified and in the enrollee's interest due
to the need for additional medical evidence from a noncontract provider
that may change an MA organization's decision to deny an item or
service; or
(iii) The extension is justified due to extraordinary, exigent, or
other nonroutine circumstances and is in the enrollee's interest.
(2) Notice of extension. When the MA organization extends the
deadline, it must notify the enrollee in writing of the reasons for the
delay and inform the enrollee of the right to file an expedited
grievance if he or she disagrees with the MA organization's decision to
grant an extension. The MA organization must notify the enrollee of its
determination as expeditiously as the enrollee's health condition
requires, but no later than upon expiration of the extension.
* * * * *

0
24. Amend Sec. 422.590 as follows:
0
a. By revising paragraph (a)(1).
0
b. In paragraph (d)(1), by removing the cross reference ``paragraph
(d)(2) of this section'' and adding in its place the cross-reference
``paragraph (e) of this section''.
0
c. By removing paragraph (d)(2).
0
d. By redesignating paragraphs (d)(3) through (5) as paragraphs (d)(2)
through (4), respectively.
0
e. By redesignating paragraphs (e) through (g) as paragraphs (f)
through (h), respectively;
0
f. By adding paragraph (e).
The addition and revision read as follows:

Sec. 422.590 Timeframes and responsibility for reconsiderations.

(a) * * *
(1) Except as provided in paragraph (e) of this section, if the MA
organization makes a reconsidered determination that is completely
favorable to the enrollee, the MA organization must issue the
determination (and effectuate it in accordance with Sec. 422.618(a))
as expeditiously as the enrollee's health condition requires, but no
later than 30

[[Page 7962]]

calendar days from the date it receives the request for a standard
reconsideration.
* * * * *
(e) Extensions. (1) As described in paragraphs (e)(1)(i) through
(iii) of this section, the MA organization may extend the standard or
expedited reconsideration deadline by up to 14 calendar days if--
(i) The enrollee requests the extension; or
(ii) The extension is justified and in the enrollee's interest due
to the need for additional medical evidence from a noncontract provider
that may change an MA organization's decision to deny an item or
service; or
(iii) The extension is justified due to extraordinary, exigent or
other non-routine circumstances and is in the enrollee's interest.
(2) Notice of extension. When the MA organization extends the
deadline, it must notify the enrollee in writing of the reasons for the
delay and inform the enrollee of the right to file an expedited
grievance if he or she disagrees with the MA organization's decision to
grant an extension. The MA organization must notify the enrollee of its
determination as expeditiously as the enrollee's health condition
requires, but no later than upon expiration of the extension.
* * * * *

Sec. 422.618 [Amended]

0
25. In Sec. 422.618, amend paragraph (a)(1) by removing the cross-
reference ``Sec. 422.590(a)(1)'' and adding in its place the cross-
reference ``Sec. 422.590(e)''.

Sec. 422.619 [Amended]

0
26. In Sec. 422.619, amend paragraph (a) by removing the cross-
reference ``Sec. 422.590(d)(2)'' and adding in its place the cross-
reference ``Sec. 422.590(e)''.

0
27. Amend Sec. 422.641 by revising paragraphs (b) and (c) to read as
follows:

Sec. 422.641 Contract determinations.

* * * * *
(b) A determination not to authorize a renewal of a contract with
an MA organization in accordance with Sec. 422.506(b).
(c) A determination to terminate a contract with an MA organization
in accordance with Sec. 422.510(a).
* * * * *

0
28. Amend Sec. 422.644 by revising paragraphs (a), (b)(1), and (c)(1)
to read as follows:

Sec. 422.644 Notice of contract determination.

* * * * *
(a) When CMS makes a contract determination under Sec. 422.641, it
gives the MA organization written notice.
(b) * * *
(1) Reasons for the determination; and
* * * * *
(c) * * *
(1) General rule. Except as provided in paragraph (c)(2) of this
section, CMS mails notice to the MA organization 45 calendar days
before the anticipated effective date of the termination.
* * * * *

0
29. Amend Sec. 422.660 by revising paragraphs (a)(2) and (3) and
(b)(4) to read as follows:

Sec. 422.660 Right to a hearing, burden of proof, standard of proof,
and standards of review.

(a) * * *
(2) An MA organization whose contract has been terminated in
accordance with Sec. 422.510.
(3) An MA organization whose contract has not been renewed in
accordance with Sec. 422.506.
* * * * *
(b) * * *
(4) During a hearing to review the imposition of an intermediate
sanction as described at Sec. 422.750, the MA organization has the
burden of proving by a preponderance of the evidence that CMS'
determination was inconsistent with the requirements of Sec.
422.752(a) and (b).
* * * * *

0
30. Amend Sec. 422.2262 by adding paragraph (a)(2) to read as follows:

Sec. 422.2262 Review and distribution of marketing materials.

(a) * * *
(2) If CMS does not approve or disapprove marketing materials
within the specified review timeframe, the materials will be deemed
approved. Deemed approved means that the MA organization may use the
material.
* * * * *

Sec. 422.2266 [Removed and Reserved]

0
31. Section 422.2266 is removed and reserved.

0
32. Amend Sec. 422.2274 by revising paragraphs (c) and (d) to read as
follows:

Sec. 422.2274 Broker and agent requirements.

* * * * *
(c) Annual training. The MA organization must ensure that all
agents and brokers selling Medicare products are trained annually on
the following:
(1) Medicare rules and regulations.
(2) Details specific to the plan products they intend to sell.
(d) Annual testing. It must ensure that all agents and brokers
selling Medicare products are tested annually, to ensure the following:
(1) Appropriate knowledge and understanding of Medicare rules and
regulations.
(2) Details specific to the plan products they intend to sell.
* * * * *

PART 423--VOLUNTARY MEDICARE PRESCRIPTION DRUG BENEFIT

0
33. The authority citation for part 423 continues to read as follows:

Authority: Sections 1102, 1106, 1860D-1 through 1860D-42, and
1871 of the Social Security Act (42 U.S.C. 1302, 1306, 1395w-101
through 1395w-152, and 1395hh).

0
34. Amend Sec. 423.1 by adding paragraph (a)(3) to read as follows:

Sec. 423.1 Basis and scope.

(a) * * *
(3) Section 1611 of Title 8 of the United States Code regarding
individuals who are not lawfully present and ineligible for Federal
public benefits.
* * * * *

0
35. Amend Sec. 423.30 as follows:
0
a. In paragraph (a)(1) introductory text, by removing the phrase ``if
he or she:'' and adding in its place the phrase ``if he or she does all
of the following:''.
0
b. In paragraph (a)(1)(i), by removing ``; and'' and adding in its
place ``.''.
0
c. By adding paragraph (a)(1)(iii).
The addition reads as follows:

Sec. 423.30 Eligibility and enrollment.

(a) * * *
(1) * * *
(iii) Is a United States citizen or is lawfully present in the
United States as determined in 8 CFR 1.3.
* * * * *

0
36. Amend Sec. 423.44 as follows:
0
a. Adding paragraph (b)(2)(vi).
0
b. Revising paragraph (d)(1)(vi).
0
c. Adding paragraph (d)(8).
The additions and revision read as follows:

Sec. 423.44 Involuntary disenrollment from Part D coverage.

* * * * *
(b) * * *
(2) * * *
(vi) The individual is not lawfully present in the United States.
* * * * *
(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 (or a third party to which CMS has assigned this responsibility,
such as a Part D sponsor) may reinstate enrollment in the PDP,

[[Page 7963]]

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.
* * * * *
(8) Individual is not lawfully present in the United States.
Disenrollment is effective the first day of the month following notice
by CMS that the individual is ineligible in accordance with Sec.
423.30(a)(1)(iii).
* * * * *

0
37. Amend Sec. 423.100 by revising the definitions of ``Daily cost-
sharing rate'' and ``Supplemental benefits'' to read as follows:

Sec. 423.100 Definitions.

* * * * *
Daily cost-sharing rate means, as applicable, the established--
(1) Monthly copayment under the enrollee's Part D plan, divided by
the number of days in the approved month's supply for the drug
dispensed and rounded to the nearest cent; or
(2) Coinsurance percentage under the enrollee's Part D plan.
* * * * *
Supplemental benefits means benefits offered by Part D plans, other
than employer group health or waiver plans, that meet the requirements
of Sec. 423.104(f)(1)(ii).
* * * * *

0
38. Amend Sec. 423.104 by adding paragraph (d)(2)(iii) to read as
follows:

Sec. 423.104 Requirements related to qualified prescription drug
coverage.

* * * * *
(d) * * *
(2) * * *
(iii) Tiered cost sharing under paragraph (d)(2)(ii) of this
section may not exceed levels annually determined by CMS to be
discriminatory.
* * * * *
0
39. Amend Sec. 423.120 by redesignating paragraphs (b)(1)(iv) through
(x) as paragraphs (b)(1)(v) through (xi), respectively, and adding
paragraph (b)(1)(iv) to read as follows:

Sec. 423.120 Access to covered Part D drugs.

* * * * *
(b) * * *
(1) * * *
(iv) Clearly articulates and documents processes to determine that
the requirements under paragraphs (b)(1)(i) through (iii) of this
section have been met, including the determination by an objective
party of whether disclosed financial interests are conflicts of
interest and the management of any recusals due to such conflicts.
* * * * *
0
40. Amend Sec. 423.128 by adding paragraph (g) to read as follows:

Sec. 423.128 Dissemination of Part D information.

* * * * *
(g) Changes in rules. If a Part D sponsor intends to change its
rules for a Part D plan, it must do all of the following:
(1) Submit the changes for CMS review under the procedures of
Subpart V of this part.
(2) For changes that take effect on January 1, notify all enrollees
at least 15 days before the beginning of the Annual Coordinated
Election Period as defined in section 1860D-1(b)(1)(B) of the Act.
(3) Provide notice of all other changes in accordance with notice
requirements as specified in this part.
0
41. Amend Sec. 423.153 by revising paragraph (b)(4) to read as
follows:

Sec. 423.153 Drug utilization management, quality assurance, and
medication therapy management programs (MTMPs).

* * * * *
(b) * * *
(4)(i) Daily cost sharing rate. Subject to paragraph (b)(4)(ii) of
this section, establishes a daily cost-sharing rate (as defined in
Sec. 423.100) and applies it to a prescription presented to a network
pharmacy for a covered Part D drug that is dispensed for a supply less
than the approved month's supply, if the drug is in the form of a solid
oral dose and may be dispensed for less than the approved month's
supply under applicable law.
(ii) Exceptions. The requirements of paragraph (b)(4)(i) of this
section do not apply to either of the following:
(A) Solid oral doses of antibiotics.
(B) 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.
(iii) Cost-sharing--(A) Copayments. In the case of a drug that
would incur a copayment, the Part D sponsor must apply cost-sharing as
calculated by multiplying the applicable daily cost-sharing rate by the
days' supply actually dispensed when the beneficiary receives less than
the approved month's supply.
(B) Coinsurance. In the case of a drug that would incur a
coinsurance percentage, the Part D sponsor must apply the coinsurance
percentage for the drug to the days' supply actually dispensed.
* * * * *

0
42. Amend Sec. 423.154 as follows:
0
a. By redesignating paragraph (a)(2) as paragraph (a)(4).
0
b. By adding paragraphs (a)(2) and (3).
0
c. By revising newly designated paragraph (a)(4).
0
d. By revising paragraph (c).
0
e. By removing paragraph (e).
0
f. By redesignating paragraph (f) as paragraph (e).
The revisions and addition read as follows:

Sec. 423.154 Appropriate dispensing of prescription drugs in long-
term care facilities under PDPs and MA-PD plans.

(a) * * *
(2) Not penalize long-term care facilities' choice of more
efficient uniform dispensing techniques described in paragraph
(a)(1)(ii) of this section by prorating dispensing fees based on days'
supply or quantity dispensed.
(3) Ensure that any difference in payment methodology among long-
term care pharmacies incentivizes more efficient dispensing techniques.
(4) 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.
* * * * *
(c) Waivers. CMS waives the requirements under paragraph (a) of
this section, except paragraphs (a)(2) and (3), for pharmacies when
they service intermediate care facilities for the mentally retarded
(ICFs/IID) and institutes for mental disease (IMDs) as defined in Sec.
435.1010 and for I/T/U pharmacies (as defined in Sec. 423.100).
* * * * *

0
43. Amend Sec. 423.322 by revising paragraph (b) to read as follows:

Sec. 423.322 Requirement for disclosure of information.

* * * * *
(b) Restrictions on use of information. (1) Officers, employees,
and contractors of the Department of Health and Human Services may use
the information disclosed or obtained in accordance with the provisions
of this subpart for the purposes of, and to the extent necessary--
(i) In carrying out this subpart, including, but not limited to,
determination of payments, and payment-related oversight and program
integrity activities.

[[Page 7964]]

(ii) In conducting oversight, evaluation, and enforcement under
Title XVIII of the Act.
(2) The United States Attorney General and the Comptroller General
of the United States may use the information disclosed or obtained in
accordance with the provisions of this subpart for purposes of, and to
the extent necessary in, carrying out health oversight activities.
(3) The restrictions described in paragraphs (b)(1) and (2) of this
section do not limit either of the following:
(i) OIG's authority to fulfill the Inspector General's
responsibilities in accordance with applicable Federal law.
(ii) CMS' ability to use data regarding drug claims in accordance
with section 1848(m) of the Act.

Sec. 423.329 [Amended]

0
44. Amend Sec. 423.329(d)(1), by removing the phrase ``the amount
described in Sec. 423.782.'' and adding in its place the phrase ``the
difference between the cost sharing for a non-low-income subsidy
eligible beneficiary under the Part D plan and the statutory cost
sharing for a low-income subsidy eligible beneficiary.''

Sec. 423.346 [Amended]

0
45. Amend Sec. 423.346(a) introductory text by removing the phrase
``as described in Sec. 423.336)--'' and adding in its place the phrase
``as described in Sec. 423.336) or the Coverage Gap Discount
Reconciliation (as described at Sec. 423.2320(b))--'' .

0
46. Amend Sec. 423.350 as follows:
0
a. In paragraph (a)(1)(iii), by removing ``; or'' and adding in its
place ``.''.
0
b. In paragraph (a)(1)(iv), by removing '').'' adding in its place
``.''.
0
c. By adding paragraph (a)(1)(v).
0
d. By revising paragraph (a)(2).
0
e. By adding paragraph (b)(1)(iv).
The additions and revision read as follows:

Sec. 423.350 Payment appeals.

(a) * * *
(1) * * *
(v) The reconciled coverage gap discount payment under Sec.
423.2320(b).
(2) Payment information not subject to appeal. Payment information
submitted to CMS under Sec. 423.322 and reconciled under Sec. 423.343
or submitted and reconciled under Sec. 423.2320(b) is final and may
not be appealed nor may the appeals process be used to submit new
information after the submission of information necessary to determine
retroactive adjustments and reconciliations.
(b) * * *
(1) * * *
(iv) For the Coverage Gap Discount Program, the date of the final
reconciled payment under Sec. 423.2320(b).
* * * * *

0
47. Amend Sec. 423.464 by redesignating paragraph (f)(2)(i)(B) as
paragraph (f)(2)(i)(C) and adding paragraph (f)(2)(i)(B) to read as
follows:

Sec. 423.464 Coordination of benefits with other providers of
prescription drug coverage.

* * * * *
(f) * * *
(2) * * *
(i) * * *
(B) Report, accept and apply benefit accumulator data in a
timeframe and manner determined by CMS.
* * * * *

0
48. Amend Sec. 423.466 by revising the section heading and, in
paragraph (b), removing the phrase ``a period not to exceed 3 years''
and adding in its place the phrase ``a period of 3 years'' to read as
follows:

Sec. 423.466 Timeframes for coordination of benefits and claims
adjustments.

* * * * *

0
49. Amend Sec. 423.503 by revising paragraph (a)(1) and adding
paragraphs (c)(4) and (d) to read as follows:

Sec. 423.503 Evaluation and determination procedures for applications
to be determined qualified to act as a sponsor.

(a) * * *
(1) With the exception of evaluations conducted under paragraph (b)
of this section, CMS evaluates an entity's application solely on the
basis of information contained in the application itself and any
additional information that CMS obtains through on-site visits and any
essential operations test.
* * * * *
(c) * * *
(4) Nullification of approval of application. If CMS discovers
through any means that an applicant is not qualified to contract based
on information gained subsequent to application approval (for example,
failure of an essential operations test, absence of required employees,
etc.), CMS gives the applicant written notice indicating that the
approval issued under paragraph (c)(1) of this section is nullified and
the applicant no longer qualifies to contract as a Part D plan sponsor.
(i) This determination is not subject to the appeals provisions in
subpart N of this part.
(ii) This provision only applies to applicants that have not
previously entered into a Part D contract with CMS and neither it, nor
another subsidiary of the applicant's parent organization, is offering
Part D benefits during the current year.
(d) Withdrawal of application and bid in a previous year. An
applicant that withdraws its application and corresponding bid after
the release of the low-income subsidy benchmark is not eligible to be
approved as a Part D plan sponsor for the 2 succeeding annual
contracting cycles.

0
50. Amend Sec. 423.504 by adding paragraphs (b)(10) and (d)(2)(iv) to
read as follows:

Sec. 423.504 General provisions.

* * * * *
(b) * * *
(10) Pass an essential operations test prior to the start of the
benefit year. This provision only applies to new sponsors that have not
previously entered into a Part D contract with CMS when neither it, nor
another subsidiary of the applicant's parent organization, is offering
Part D benefits during the current year.
* * * * *
(d) * * *
(2) * * *
(iv) CMS may require that the Part D Plan sponsor hire an
independent auditor to provide CMS with additional information to
determine if deficiencies found during an audit or inspection have been
corrected and are not likely to recur. The independent auditor must
work in accordance with CMS specifications and must be willing to
attest that a complete and full independent review has been performed.
* * * * *

0
51. Amend Sec. 423.505 by adding paragraphs (b)(27) and (p) to read as
follows:

Sec. 423.505 Contact provisions.

* * * * *
(b) * * *
(27) Pass an essential operations test prior to the start of the
benefit year. This provision only applies to new sponsors that have not
previously entered into a Part D contract with CMS and neither it, nor
another subsidiary of the applicant's parent organization, is offering
Part D benefits during the current year.
* * * * *
(p) Business continuity. (1) The Part D sponsor agrees to develop,
maintain, and implement a business continuity plan containing policies
and procedures to ensure the restoration of business operations
following disruptions to business operations during disruptions to
business operations which would

[[Page 7965]]

include natural or man-made disasters, system failures, emergencies,
and other similar circumstances and the threat of such occurrences. To
meet the requirement, the business continuity plan must, at a minimum,
include the following:
(i) Risk assessment. Identify threats and vulnerabilities that
might affect business operations.
(ii) Mitigation strategy. Design strategies to mitigate hazards.
Identify essential functions in addition to those specified in
paragraph (p)(2) of this section and prioritize the order in which to
restore all other functions to normal operations. At a minimum, each
Part D sponsor must do the following:
(A) Identify specific events that will activate the business
continuity plan.
(B) Develop a contingency plan to maintain, during any business
disruption, the availability and, as applicable, confidentiality of
communication systems and essential records in all forms (including
electronic and paper copies). The contingency plan must do the
following:
(1) Ensure that during any business disruption the following
systems will operate continuously or, should they fail, be restored to
operational capacity on a timely basis:
(i) Information technology (IT) systems including those supporting
claims processing at point of service.
(ii) Provider and enrollee communication systems including
telephone, Web site, and email.
(2) With respect to electronic protected health information, comply
with the contingency plan requirements of the Health Insurance
Portability and Accountability Act of 1996 Security Regulations at 45
CFR parts 160 and 164, subparts A and C.
(C) Establish a chain of command.
(D) Establish a business communication plan that includes emergency
capabilities and procedures to contact and communicate with the
following:
(1) Employees.
(2) First tier, downstream, and related entities.
(3) Other third parties (including pharmacies, providers,
suppliers, and government and emergency management officials).
(E) Establish employee and facility management plans to ensure that
essential operations and job responsibilities can be assumed by other
employees or moved to alternate sites as necessary or both.
(F) Establish a restoration plan including procedures to transition
to normal operations.
(G) Comply with all applicable Federal, State, and local laws.
(iii) Testing and revision. On at least an annual basis, test and
update the business operations continuity plan to ensure the following:
(A) That it can be implemented in emergency situations.
(B) That employees understand how it is to be executed.
(iv) Training. On at least an annual basis, educate appropriate
employees about the business continuity plan and their own respective
roles.
(v) Records. (A) Develop and maintain records documenting the
elements of the business continuity plan described in paragraph
(p)(1)(i) through (iv) of this section.
(B) Make the information specified in paragraph (p)(1)(v)(A) of
this section available to CMS upon request.
(2) Restoration of essential functions. Every Part D sponsor must
plan to restore essential functions within 72 hours after any of the
essential functions fail or otherwise stop functioning as usual. In
addition to any essential functions that the Part D sponsor identifies
under paragraph (p)(1)(ii) of this section, for purposes of this
paragraph (p)(2) of this section essential functions include at a
minimum, the following:
(i) Benefit authorization (if not waived), adjudication, and
processing of prescription drug claims at the point of sale.
(ii) Administration and tracking of enrollees' drug benefits in
real time, including automated coordination of benefits with other
payers.
(iii) Provision of pharmacy technical assistance.
(iv) Operation of an enrollee exceptions and appeals process
including coverage determinations.
(v) Operation of call center customer services.

0
52. Amend Sec. 423.509 by adding paragraph (a)(4)(xii) and revising
paragraph (b)(2)(i)(C) to read as follows:

Sec. 423.509 Termination of a contract by CMS.

(a) * * *
(4) * * *
(xii) Failure of an essential operations test before the start of
the benefit year by an organization that has entered into a Part D
contract with CMS when neither it, nor another subsidiary of the
organization's parent organization, is offering Part D benefits during
the current year.
(b) * * *
(2) * * *
(i) * * *
(C) The contract is being terminated based on the grounds specified
in paragraphs (a)(4)(i) and (xii) of this section.
* * * * *

Sec. 423.562 [Amended]

0
53. Amend Sec. 423.562(a)(3) by removing the phrase ``request an
exception if they disagree with the information provided by the
pharmacist.'' and adding in its place the phrase ``request an
exception.''.

Sec. 423.650 [Amended]

0
54. Amend Sec. 423.650 as follows:
0
a. In paragraph (a)(2), by removing the term ``under'' and adding in
its place the phrase ``in accordance with''.
0
b. In paragraph (a)(4), by removing the cross-reference ``Sec.
423.752(a) and (b) of this part'' and adding in its place the cross-
reference ``Sec. 423.752(a) through (b)''.
0
55. Amend Sec. 423.2262 by adding paragraph (a)(2) to read as follows:

Sec. 423.2262 Review and distribution of marketing materials.

(a) * * *
(2) If CMS does not approve or does not disapprove marketing
materials within the specified review timeframe, the materials are
deemed approved and the Part D sponsor may use the material.
* * * * *

Sec. 423.2266 [Removed and Reserved]

0
56. Section 423.2266 is removed and reserved.

0
57. Amend Sec. 423.2274 by revising paragraphs (c) and (d) to read as
follows:

Sec. 423.2274 Broker and agent requirements.

* * * * *
(c) Annual training. The Part D sponsor must ensure that all agents
and brokers selling Medicare products are trained annually on the
following:
(1) Medicare rules and regulations.
(2) Details specific to the plan products they intend to sell.
(d) Annual testing. The Part D sponsor must ensure that all agents
and brokers selling Medicare products are tested annually, to ensure
the following:
(1) Appropriate knowledge and understanding of Medicare rules and
regulations.
(2) Details specific to the plan products they intend to sell.
* * * * *

0
58. Amend Sec. 423.2320 by adding paragraph (c) to read as follows:

Sec. 423.2320 Payment processes for Part D sponsors.

* * * * *
(c) Manufacturer bankruptcy. In the event that a manufacturer
declares

[[Page 7966]]

bankruptcy, as described in Title 11 of the United States Code, and as
a result of the bankruptcy, does not pay the quarterly invoices
described in Sec. 423.2315(b)(10) used for a particular contract
year's Coverage Gap Discount Reconciliation described in paragraph (b)
of this section, CMS adjusts the Coverage Gap Discount Reconciliation
amount of each of the affected Part D sponsors to account for the total
unpaid quarterly invoiced amount owed to each of the Part D sponsors
for that particular contract year being reconciled.

0
59. Amend Sec. 423.2325 by adding paragraph (h) to read as follows:

Sec. 423.2325 Provision of applicable discounts.

* * * * *
(h) Treatment of employer group waiver plans. As of 2014, Part D
sponsors offering employer group waiver plans must provide applicable
discounts to applicable beneficiaries who are employer group waiver
plan enrollees as determined consistent with the defined standard
benefit.

Dated: December 18, 2014.
Marilyn Tavenner,
Administrator, Centers for Medicare & Medicaid Services.
Approved: February 4, 2015.
Sylvia M. Burwell,
Secretary, Department of Health and Human Services.
[FR Doc. 2015-02671 Filed 2-6-15; 4:15 pm]
BILLING CODE 4120-01-P

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