[Federal Register: August 22, 2003 (Volume 68, Number 163)]
[Rules and Regulations]
[Page 50839-50859]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr22au03-19]
[[Page 50839]]
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Part II
Department of Health and Human Services
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Centers for Medicare and Medicaid Services
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42 CFR Parts 409, 417, and 422
Medicare Pragram; Modifications to Managed Care Rules; Final Rule
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Parts 409, 417, and 422
[CMS-4041-F]
RIN 0938-AK71
Medicare Program; Modifications to Managed Care Rules
AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.
ACTION: Final rule.
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SUMMARY: This final rule responds to comments that we received on a
proposed rule that was published in the Federal Register on October 25,
2002. It implements certain provisions relating to the Medicare+Choice
(M+C) program that were enacted in the Medicare, Medicaid, and SCHIP
Benefits Improvement and Protection (BIPA) Act of 2000. It also
addresses comments on, and makes revisions to, regulations that were
discussed in the October 2002 proposed rule that were based on M+C
program experience and feedback from M+C organizations.
EFFECTIVE DATES: This final rule is effective on September 22, 2003.
FOR FURTHER INFORMATION CONTACT: Tony Hausner, (410) 786-1093.
SUPPLEMENTARY INFORMATION:
I. Background
A. Balanced Budget Act of 1997
Section 4001 of the Balanced Budget Act of 1997 (BBA) (Pub. L. 105-
33), added sections 1851 through 1859 to the Social Security Act (the
Act) establishing a new Part C of the Medicare program, known as the
Medicare+Choice (M+C) program. Under section 1851(a)(1) of the Act,
every individual entitled to Medicare Part A and enrolled under Part B,
except for individuals with end-stage renal disease, could elect to
receive benefits either through the original Medicare fee-for-service
program or a M+C plan, if one was offered where he or she lived.
The primary goal of the M+C program was to provide Medicare
beneficiaries with a wider range of health plan choices through which
to obtain their Medicare benefits. The BBA authorized a variety of
private health plan options for beneficiaries, including both the
traditional managed care plans (such as those offered by health
maintenance organizations (HMOs)) that had been offered under section
1876 of the Act, and new options that were not previously authorized.
Three types of M+C plans were authorized under the new Part C, as
follows:
[sbull] M+C coordinated care plans, including HMO plans (with or
without point-of-service options), provider-sponsored organization
(PSO) plans, and preferred provider organization (PPO) plans.
[sbull] M+C medical savings account (MSA) plans (combinations of a
high-deductible M+C health insurance plan and a contribution to an M+C
MSA).
[sbull] M+C private fee-for-service plans.
B. Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 1999
The Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of
1999 (BBRA) (Pub. L. 106-113) amended the M+C provisions of the Act. In
a final rule that we published in the Federal Register on June 29, 2000
(65 FR 40170), we invited comments on many of the BBRA amendments. We
noted in the October 25, 2002, proposed rule that we would respond to
the comments relating to these BBRA provisions in this final rule.
We received comments from five organizations. Most of the comments
were supportive of the changes brought about by the BBRA amendments and
do not require our response. Most of the other comments addressed
provisions other than the BBRA amendments. Rather they focused on the
provisions of the final rules dealing with the BBA published on June
29, 2000. The following discussion responds to the comments made on
BBRA.
Comment: Two major organizations commented on risk adjustment. One
organization expressed concern that the collection of encounter data
from physicians would be burdensome to physicians. A second
organization indicated that they did not want to see a delay in
implementation of the risk adjustment schedule as contained in BBRA.
Response: Legislation has determined the specifics of the schedules
that CMS has implemented as to risk adjustment and the collection of
encounter data. Section 511(a) of the BBRA amended section 1853(a) of
the Act by providing for a risk adjustment transition schedule for
calendar years (CY) 2000 and 2001 that differed from the one that we
had provided as part of our risk adjustment methodology. The schedule
was again modified in the Medicare, Medicaid, and SCHIP Benefits
Improvement and Protection Act of 2000 (BIPA). Other BBRA provisions
were also changed by the BIPA.
The final rule published on March 22, 2002 revised the regulations
to reflect the changes to the BBRA provided in sections 502, 511, and
512 of the BIPA.
C. Medicare, Medicaid, and SCHIP Benefits Improvement and Protection
Act of 2000
The Medicare, Medicaid, and SCHIP Benefits Improvement and
Protection Act of 2000 (the BIPA) (Pub. L. 106-554), enacted December
21, 2000, further amended the M+C provisions of the Act. The final rule
published on March 22, 2002 amended the regulations to reflect changes
made by certain provisions of the BIPA, including those discussed in
section I.B of this preamble, that amended provisions enacted in the
BBRA. We published a proposed rule in the Federal Register on October
25, 2002 (67 FR 65672) that would revise M+C regulations to implement
sections 605, 606, 611, 612, 615, 617, 620, 621, and 623 of the BIPA.
In the October 2002 proposed rule, we also proposed modifying certain
M+C regulatory provisions in response to program experience and
feedback from M+C organizations.
D. Organization of the Preamble
The discussion of various policy issues in this final rule
corresponds with the discussion of regulatory revisions that were
presented in the October 2002 proposed rule. For the convenience of the
reader, the analysis of comments and our responses are integrated with
the discussion of each issue.
To accommodate the preamble's organization, we modified the
numbering scheme accordingly. For example, roman numeral II is now
Analysis of and Responses to Public Comments (instead of Provisions of
this Proposed Rule), roman numeral III is Provisions of this Final
Rule, and so forth.
We have also included a new section (II-A-10) discussing the fact
that this final rule makes revisions to the regulations text to reflect
changes to the statute made by section 616, which focuses on
eliminating health disparities in the M+C program. We have provided a
good cause statement for the inclusion of these revisions in this final
rule to waive the requirement for notice and comment. As in the case of
the revisions to the regulations made in the final rule published on
March 22, 2002, notice and comment are not necessary since these
revisions have no legal effect. Rather, they simply amend the text of
the regulations to reflect statutory provisions whose applicability is
[[Page 50841]]
unaffected by these changes in regulation text. Although we are still
sorting through implementation issues associated with this provision,
we wanted to ensure that Congressional intent on this issue is
reflected in M+C regulations.
In addition, we have made some minor revisions to Subpart O in an
attempt to clarify information concerning our sanction authority. These
changes do not add any new requirements, but serve to improve the
regulatory language to more clearly affect the intent of the existing
regulations (and statutory intent). We discuss these changes in the
preamble and have modified the regulations accordingly.
II. Analysis of and Responses to Public Comments
In addition to the Response to Comments made above in reference to
the BBRA, we received 10 letters containing over 100 specific comments.
Comment letters were received from trade associations that represent
providers and consumers, managed care organizations, and one
individual. Below is a list of the areas that generated the most
concern.
[sbull] Part 422 Subpart M--Grievances, Organization
Determinations, and Appeals
[sbull] Part 422 Subpart C--Benefits and Beneficiary Protections
[sbull] Part 422 Subpart B--Eligibility, Election, and Enrollment
[sbull] Part 417 Subpart L--Medicare Contract Requirements.
A. Medicare, Medicaid, and SCHIP Benefits Improvement and Protection
Act of 2000
1. Revision of Payment Rates for End-Stage Renal Disease (ESRD)
Patients Enrolled in Medicare+Choice Plans
Section 605(a) of the BIPA amended section 1853(a)(1)(B) of the Act
by requiring us to provide for appropriate adjustments to the M+C ESRD
payment rates, effective January 1, 2002, to reflect the demonstration
rate (including the risk adjustment methodology associated with the
demonstration rate) of the social health maintenance organization ESRD
capitation demonstration. This demonstration assessed whether it would
be feasible to allow Medicare ESRD patients of all ages to enroll in
M+C plans and to test risk-adjusted capitation payments for ESRD
beneficiaries.
Before January 1, 2002, M+C ESRD capitation payments were based on
State level base rates that were not risk-adjusted. The base payment
rates were based on a base year (1997) amount that represented 95
percent of projected State average fee-for-service costs, as determined
at that time.
Under section 605(c) of the BIPA, we were required to publish for
public comment a description of the adjustments we proposed to make in
accordance with section 605(a) of the BIPA. We published a proposed
notice on May 1, 2001 (66 FR 21770) soliciting comments on the proposed
adjustments. Section 605(c) of the BIPA further required us to publish
these adjustments in final form so that the amendment made by section
605(a) of the BIPA would be implemented consistent with section 605(b)
of the BIPA (which provided that the adjustments were to become
effective with payments made for January 2002). We published this final
notice in the Federal Register on October 1, 2001 (66 FR 49958). The
foregoing process was separate from this rulemaking. In the October
2002 proposed rule, however, we proposed revisions to Sec.
422.250(a)(2)(i)(B) to reflect our approach to implementing the
requirements of section 605(a) of the BIPA.
The new ESRD payment methodology set forth in the final notice
published on October 1, 2001--
[sbull] Increased the ESRD base payment rate for CY 2002 by 3
percent. We determined in the final notice that a 3 percent increase in
the base rate was the most appropriate proxy for 100 percent of the
estimated per capita fee-for-service expenditures for ESRD
beneficiaries, and the most appropriate way to reflect the
demonstration rates; and
[sbull] Adjusted State per capita rates by age and sex factors, in
order to reflect differences in costs among ESRD patients.
These adjustment factors and rates for CY 2002 for enrollees with
ESRD can be found on our Web site at http:www.cms.gov/stats/hmorates/aapccpg.htm#2002rates
.
For the purpose of M+C payment, ESRD beneficiaries include all
beneficiaries with ESRD, whether entitled to Medicare because of ESRD,
disability, or age. Under the new M+C ESRD payment methodology
published on October 1, 2001, rates would continue to include the costs
of beneficiaries with Medicare as Secondary Payer (MSP) status. (Costs
to Medicare of M+C ESRD enrollees with MSP status do not include
payments made by other primary payers such as employer group health
plans or other insurers.)
Several organizations commented on the revision of Sec.
422.250(a)(2)(i).
Comment: Several commenters believe that the proposed revision to
ESRD rates at Sec. 422.250(a)(2)(i) should include payments made by
primary payers other than Medicare, such as employer group health plans
or other insurers. Since the M+C ESRD rates include the costs of
beneficiaries with Medicare as Secondary Payer (MSP) status but exclude
payments made by other primary payers such as employer group health
plans or other insurers, the M+C ESRD rates are artificially low and do
not reflect the actual health care costs. Two commenters also contended
that the proposed payment methodology appears to be contrary to the
provisions set forth in section 605(a) of the BIPA, which requires us
to ``provide for appropriate adjustments to the M+C ESRD payment rates
* * * to reflect the demonstration rate of the social health
maintenance organization ESRD capitation demonstration.'' These
commenters refer to a statement in the proposed Notice that the
Demonstration rates were about 20 percent over rates paid outside the
Demonstration because beneficiaries with MSP were not allowed to enroll
in the Demonstration. The commenters conclude that the revisions to the
ESRD payment methodology will significantly decrease the payment rates
for M+C ESRD enrollees.
Response: As we stated in the October 1, 2001 final notice, we
recognize that MSP for M+C ESRD enrollees is an issue. We noted that we
would explore options within our payment system for addressing MSP
status while proceeding to implement in CY 2002 the 3 percent base rate
increase and the age and sex adjusters.
The ESRD Demonstration did not allow ESRD beneficiaries with MSP to
enroll, and thus these beneficiaries were excluded from calculation of
Demonstration payment rates. We are unable to exclude from the M+C
program any beneficiaries with MSP who develop ESRD. Thus, we had to
find a way to adapt the ESRD demonstration methodology to this
different population. The provision for ``adjustments'' to ``reflect''
the demonstration rates and methodology does not mean that we must
necessarily pay the same amount where the applicable circumstances, in
this case the presence of beneficiaries with MSP, are different.
To assess whether the proposed M+C ESRD payment rates would
increase or decrease payments to M+C organizations, the appropriate
comparison would be M+C ESRD rates in effect prior to 2002, not the
rates paid the ESRD Demonstration sites. The M+C
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ESRD rates in effect prior to CY 2002 included the costs of
beneficiaries with MSP, and we continued this approach. Two commenters
are not correct in stating that the proposed M+C ESRD payment rates
will significantly decrease payments to M+C organizations. In fact, the
base rates were increased 3 percent under the method effective CY 2002.
As we stated in the final notice, given current enrollment
restrictions, we estimate that the age- and sex-adjusted average ESRD
payment per beneficiary will result in a significant increase in
payments to M+C organizations for their ESRD enrollees.
Accordingly, we are retaining the language we proposed which
reflects the methodology we adopted through the 2001 notice process.
2. Permitting Premium Reductions as Additional Benefits Under
Medicare+Choice Plans
Section 606 of the BIPA amended section 1854(f)(1) of the Act to
permit M+C organizations to elect to reduce or eliminate standard Part
B premiums for their M+C Medicare enrollees, as an additional benefit,
if the M+C organization has an adjusted excess amount, as defined in
Sec. 422.312(a)(2), for that plan in a contract year, beginning in CY
2003. Under section 606 of the BIPA, M+C organizations can elect to
accept lower payments from us and apply 80 percent of the reduction to
reduce the standard Part B premiums of M+C beneficiaries enrolled in
that plan. The amount of the reduction in payments to the M+C
organizations may not exceed 125 percent of the Medicare standard Part
B premium rate set by us for that year, which is the amount that would
result in eliminating the average enrollee's liability for the Part B
premium entirely. The reduction must be applied uniformly to all
similarly situated enrollees of the M+C plan.
In addition, section 606 of the BIPA required that the list of
information made available to each enrollee electing an M+C plan must
also include a description of any reduction in the Part B premiums. We
proposed revising Sec. 422.2, Sec. 422.111(f), Sec. 422.250(a)(1),
and Sec. 422.312 to reflect these provisions in the regulations. We
received one comment in support of these regulations and are finalizing
them as proposed.
3. Payment of Additional Amounts for New Benefits Covered During a
Contract Term
Section 611 of the BIPA amended sections 1852(a)(5) and 1853(c)(7)
of the Act with the intent of limiting the financial impact on M+C
organizations of new coverage requirements adopted by the Congress.
Before the enactment of the BIPA, section 1852(a)(5) provided that if a
national coverage determination (NCD) of the Secretary which took
effect after M+C payment rates were announced for a particular year,
and that NCD would result in ``a significant change in the costs to a
Medicare+Choice organization,'' M+C organizations were not required to
cover them under their contracts, but the services were instead paid
for on a fee-for-service basis through our fiscal intermediaries or
carriers, until the next annual M+C payment announcement is made
following the coverage change. Under the pre-BIPA version of section
1853(c)(7) of the Act, if an NCD resulted in ``significant'' costs, we
were required to ``adjust appropriately'' capitation payments to
reflect the new costs.
Section 611 of BIPA extended these provisions to changes in
coverage resulting from legislation, in addition to those resulting
from NCDs. We proposed revisions to Sec. 422.109 to reflect these
amendments. We received several comments on our proposed revised
regulations.
Comment: Several commenters expressed concern that people enrolled
in M+C organizations may not understand that new benefits or services
available as a result of a national coverage determination (NCD) or
legislative change in benefits may be paid in a different manner than
other covered benefits when we determine that the costs of NCDs or
legislative changes in benefits are ``significant.'' The commenters
suggested that we publicize when new coverage is available, require M+C
organizations to notify their members of the availability of the new
benefits or services, and require M+C organizations to notify their
members about the manner in which Medicare coverage and payment would
take place. It was recommended that the notification should include a
clear explanation of whether, and how much, the beneficiary might have
to pay for the benefit or service until it is included in the M+C
organization's capitation payment.
Response: We will continue to require M+C organizations to notify
plan members when there is an NCD. If the NCD meets the ``significant
cost'' threshold when the coverage is not included in the services, M+C
organizations must cover the NCD under their contract in exchange for a
monthly capitation payment. The M+C organization must notify plan
members that original Medicare fee-for-service cost-sharing rules
apply. M+C organizations are required to include an explanation of new
NCDs in their next regularly scheduled beneficiary communication. If
the new NCD or legislative change in benefits meets the ``significant
cost'' threshold per Sec. 422.109(a), the written explanation to
beneficiaries about the new coverage will include the fact that the
service will be paid in accordance with original Medicare payment rules
and will include information on financial liability enrollees will
have.
Comment: One commenter suggested that the final rule require M+C
organizations to provide a statement in their Summary of Benefits that
new Medicare benefits will be paid under traditional Medicare. It was
also suggested that an explanation of the method by which enrollees in
an M+C plan can access new benefits and services be included in the
model Evidence of Coverage.
Response: It would be misleading to state that any new Medicare
benefits would be paid under traditional Medicare rules. Unless new
benefits meet the ``significant'' cost threshold, the M+C organization
is required to cover them under its contract in exchange for its
capitation payment. As stated above, M+C organizations are already held
responsible for notifying enrollees of new coverage and of any cost
sharing liability related to a new service, if the new service meets
the ``significant cost'' threshold. Therefore, we do not believe it is
feasible or even necessary to include the notification with respect to
specific NCDs in the standardized Summary of Benefits or the annual
Evidence of Coverage, because NCDs can be effective at any time during
the year. We believe our current policy of having M+C organizations
inform enrollees of NCDs when they occur both protects beneficiaries
and prevents confusion.
Comment: One commenter suggested that we explain, in our program
memoranda on new benefits, the procedures for direct reimbursement by
the fiscal intermediary and the carrier in cases that meet the
``significant cost'' threshold and therefore are not covered by the M+C
organization.
Response: We will make every effort to provide the suggested
explanation in program memoranda on new benefits, if direct
reimbursement by fiscal intermediaries and carriers is required because
the new coverage meets the ``significant cost'' threshold. However,
because program memoranda about new benefits are sometimes released
independent of, and prior to, a determination that the new benefits
meet the ``significant cost'' threshold described in Sec. 422.109(a),
it is not always possible to include such an
[[Page 50843]]
explanation in these program memoranda.
Comment: One commenter requested that we clarify that enrollees in
an M+C plan are entitled to receive a new benefit if it is medically
necessary, and that the M+C organization is responsible for ensuring
access to, but not necessarily payment for, all new benefits.
Response: In accordance with section 1852 of the Act and
regulations at Sec. 422.101, M+C organizations must provide coverage
of all Medicare-covered benefits that are available to beneficiaries
residing in the plan's service area by furnishing, arranging for, or
making payment for the services.
If an NCD or legislative change in benefits does not meet the
``significant cost'' threshold described in Sec. 422.109(a), the M+C
organization is required to provide coverage of the NCD or legislative
change in benefits by furnishing, arranging for, or making payment for
the services as of the effective date stated in the NCD or specified in
the legislation. The M+C organization must also assume risk for the
costs of that service or benefit as of the effective date stated in the
NCD or specified in the legislation.
If an NCD or legislative change in benefits does meet the
``significant cost'' threshold described in Sec. 422.109(a), the M+C
organization must provide coverage of the NCD or legislative change in
benefits by furnishing or arranging for the NCD service or legislative
change in benefits. However, the M+C organization is not required to
pay or assume risk for the costs of that service or benefit until the
contract year for which payments are adjusted to take into account the
cost of the NCD service or legislative change in benefits. Medicare
fee-for-service payment for the service is in addition to the
capitation payment to the M+C organization and made directly by the
fiscal intermediary and carrier to the M+C organization (or its
designee, which may be the provider) in accordance with original
Medicare payment rules, methods, and requirements.
Comment: One commenter recommended that we include the total costs
resulting from all NCDs and legislative changes in benefits when making
the ``significant cost'' determination. The commenter suggested that,
if there is insufficient data for us to develop a reasonably reliable
cost estimate for any NCD or legislatively mandated coverage, we should
conclude that the costs for that new coverage have not been included in
current M+C rates and that Medicare fee-for-service payment should be
available for such coverage.
Response: We agree with the commenter's first point that several
NCDs or legislative changes in benefits that do not individually
trigger the existing regulatory definition of ``significant'' could
potentially impose a greater burden than a single change that meets
this definition. It would not be practical, however, to attempt to
aggregate the costs of NCDs or statutory coverage changes during the
``transition'' year governed by section 1852(a)(5) of the Act, before
capitation payments are ``adjust[ed] appropriately'' by us in the next
payment announcement as required under section 1853(c)(7) of the Act.
In part, this is because it would not be clear whether any aggregate
test has been met until the last NCD or legislative change in benefits
to be aggregated is issued. By that time, it would be too late to make
any adjustment with respect to the M+C organization's obligation to
cover earlier NCDs.
More importantly, the period prior to an adjustment in capitation
rates is by definition ``temporary'' and limited to a period of less
than 12 months. We believe that costs that may not be ``significant''
when the M+C organization knows they are being incurred for a temporary
period of a few months would become ``significant'' if left unaccounted
for in future payments indefinitely. Accordingly, we believe that it is
reasonable to adopt a different interpretation of ``significant'' for
purposes of deciding under section 1852(a)(5) of the Act whether to
make temporary fee-for-service payments than for purposes of deciding
whether, under section 1853(c)(7), to permanently ``adjust
appropriately'' capitation payments. Given the temporary nature of
partial year costs, we believe that the existing definition of
significant costs in Sec. 422.109(c) is appropriate for purposes of
deciding whether to pay for services on a fee-for-service basis until
an adjustment can be made to capitation payments. We believe that an
M+C organization could bear the cost of any individual NCD or
legislative change that does not meet this definition for the limited
period of time involved prior to an appropriate adjustment being made
to capitation rates.
However we believe that costs of NCDs and legislative changes that
may not be significant when only in place for a few months could, when
considered in the aggregate, be quite significant if left unaccounted
for indefinitely in future capitation payments. Thus, in response to
the commenters suggestion that the costs of NCDs and legislative
changes be aggregated, we are providing for a different definition of
``significant'' costs to be used for purposes of the determination as
to whether to make an adjustment under section 1853(c)(7) than applies
for purposes of whether to pay on a fee-for-service basis under section
1852(a)(5) of the Act. We have revised the definition of significant
cost (which was in Sec. 422.109(c), but is now in Sec. 422.109(a)) to
provide that, for purposes of determining whether to make an adjustment
under Sec. 422.256, the tests in the definition of ``significant
cost'' are applied to the aggregate costs of all NCDs and legislative
changes in benefits made in the contract year. Under this test, the
``average cost'' of every NCD and legislative change in benefits would
be added together. If the sum of all these average amounts exceeds the
threshold under Sec. 422.109(a)(1), then an adjustment to payment will
be made under Sec. 422.256 to reflect these costs. Alternatively, if
the costs of the NCDs and legislative changes in benefits, in the
aggregate, exceed the level set forth in Sec. 422.109(a)(2), an
adjustment to payment will be made under Sec. 422.256.
We note that even when the ``significant cost'' threshold has been
met under the existing definition, the current methodology for making
the adjustment required under section 1853(c)(7) of the Act does not
result in any adjustment in counties paid based on the minimum update
rate (the so-called ``2 percent minimum update'' counties). The annual
growth rate used to update M+C rates each year includes estimates of
expenditures for new mid-year benefits. However, according to section
1853(c) of the Act, our Office of the Actuary uses the annual growth
rate to update only the floor and blended rates, so the minimum 2
percent update rate does not reflect the costs of new benefits
effective in the middle of the previous payment year. The impact is
substantial because 64 percent of the 100 counties with the highest M+C
enrollment in 2002 received the minimum update rate in the last three
years, 2001 through 2003. The result is that M+C organizations have
paid for almost all new benefits out of capitation payments that do not
include payment for these new benefits.
We believe the Congress intended, in enacting section 1853(c)(7) of
the Act, that payments to M+C organizations be adjusted to reflect the
costs of new benefits when they are added through an NCD or legislative
change. Since this does not occur under the current approach in the
case of 2 percent counties, we are changing our method of making
adjustments under section
[[Page 50844]]
1853(c)(7) of the Act. When the costs of NCDs and statutory coverage
changes in a given year are determined to be ``significant'' under the
new definition described above, these costs will be included in an
``NCD adjustment factor'' that will be added to the county rates in
counties that will receive a 2 percent update. In other words, the 2
percent update will be applied to the newly adjusted rates. (The
assumption is that the floor and blended rates are appropriately
adjusted for new benefits because they are increased by the M+C growth
rate that includes NCD and legislative changes in benefits estimates.)
The ``NCD adjustment factor'' will be applied prospectively to the rate
calculation for the year following the year after the NCDs and
legislative benefit changes are effective. For example, NCDs and
legislative changes determined to be significant in 2003 will be
aggregated, and the ``NCD adjustment factor'' computed will be used to
adjust payments for 2005. We have modified Sec. 422.256(b) to codify
in regulation this additional NCD adjustment factor adjustment to the
M+C capitation rates.
Comment: One commenter supported the proposed rule and also asked
whether the term ``significant'' would be defined as currently provided
for in M+C regulations with a defined cost threshold.
Response: As discussed above, the proposed language at Sec.
422.109(a) defining ``significant cost'' as it relates to the decision
whether to make fee-for-service payment pursuant to section 1852(a)(5)
of the Act is being retained.
As discussed above we are revising Sec. 422.109 to provide that
this definition will be applied to NCDs and legislative changes in
benefits in the aggregate for purposes of the adjustments under Sec.
422.256
4. Restriction on Implementation of Significant New Regulatory
Requirements Midyear
Section 612 of the BIPA amended section 1856(b) of the Act to
prohibit us from imposing significant new regulatory requirements on an
M+C organization or plan, other than at the beginning of a calendar
year. Comments on this issue and our responses follow.
Comment: One commenter asked that we use the term ``requirements''
instead of ``regulations'' in Sec. 422.521. The commenter's reasoning
for suggesting the use of ``requirements'' was that most documents from
our agency that impose significant new cost or burdens are not in the
form of regulations but are in the form of memoranda, guidance, manual
chapters and the like.
Response: We agree with the commenter that requirements are often
imposed through vehicles other than regulations. Therefore, in response
to this comment, we are revising Sec. 422.521 to extend the
prohibition in section 612 of the BIPA to all requirements, not just
those imposed in regulations. We note that we had previously made this
commitment administratively.
Comment: One commenter requested that we define significant cost or
burden as it is used in Sec. 422.521. The commenter also suggested
that we base the definition on cost or operational assessments
conducted by us and by M+C organizations.
Response: We generally agree with the commenter and will explore
methods to better define the meaning of ``cost and burden'' as those
terms are used in Sec. 422.521. However, we are leaving the text of
Sec. 422.521 unchanged.
5. Election of Uniform Local Coverage Policy for a Medicare+Choice Plan
Covering Multiple Localities
Section 615 of the BIPA amended section 1852(a)(2) of the Act by
adding a section that allows M+C organizations to achieve greater
consistency of benefits for M+C plans covering multiple localities. In
providing Medicare covered benefits to its enrollees, each M+C
organization ordinarily must comply with, among other things, written
coverage decisions of local carriers and intermediaries with
jurisdiction for claims in the geographic area in which the services
are covered under the M+C plan. Some M+C organizations have plans that
cover a large area, either a State or multiple counties in a State.
Section 615 of the BIPA allows M+C organizations that offer a plan in a
geographic area to which more than one local coverage policy applies,
to uniformly apply the local coverage policy that is most advantageous
to M+C enrollees in the plan. We will make the final determination as
to which local coverage policy is most beneficial to M+C enrollees.
By electing to use this uniform coverage policy, M+C organizations
can benefit from economies of scale when printing and distributing
marketing materials and descriptions of benefits for their M+C plans.
This policy will also enable M+C organizations to standardize coverage
decisions and provider contracts across entire plans, rather than
having different policies apply in different geographic areas of the
same plan. We received three comments on our proposed revision.
Comment: Two commenters suggested that we apply the newly allowed
uniform coverage policy rule across all M+C plans offered by an M+C
organization and/or its subsidiaries. One commenter argued that such an
expansion of the rule would serve both consistency and uniformity, as
well as provide for significant cost-savings for multi-state M+C
organizations.
Response: Section 615 of the BIPA is clear in restricting our
authority to permit an M+C organization's election of a uniform local
coverage policy to a specific plan offered by an M+C organization. The
statute does not permit application of the uniform local coverage
policy across different plans offered by a single M+C organization and/
or its subsidiaries.
Comment: One commenter requested further guidance on the criteria
that we will use to determine the local coverage policy that is most
beneficial to M+C enrollees in a plan whose service area encompasses
more than one local coverage policy area. The commenter also suggested
allowing the M+C organization to identify the local coverage policy
that it believes would be most beneficial to its enrollees. The M+C
organization would notify us, providing justification for the local
medical review policy selected as the most beneficial to its enrollees.
If we did not disagree within 60 days of receipt of notice, the M+C
organization's proposal would be deemed approved.
Response: We agree that clarification is needed for both the
criteria that we will use in evaluating the local coverage policies
that are most beneficial to M+C enrollees and the time frame within
which that evaluation will occur. Since the benefits covered by a plan
are essential to preparation of the adjusted community rate (ACR)
proposal related to that plan (see Sec. 422.306), an M+C organization
proposing to adopt a uniform coverage policy for a plan must notify us
60 days prior to the date the ACR proposal for that plan is due. We
believe that a 60-day window will permit us sufficient time to fully
evaluate the proposed uniform coverage policy election related to a
plan, and to notify the M+C organization of our decision, while still
allowing sufficient time for the M+C organization to prepare and submit
its ACR proposal in a timely manner. Therefore, we have added a new
section Sec. 422.101(b)(3)(i) which explains the time frame within
which an M+C organization must notify us of its intent to adopt a
uniform local coverage policy for a plan. In addition, we have added
Sec. 422.101(b)(3)(ii) which establishes the factors we will consider
to evaluate the local coverage policy that is most beneficial to M+C
enrollees. We, in turn, will notify the M+C
[[Page 50845]]
organization of our determination as to the most advantageous local
coverage policy. The statute is clear in requiring us ``to identify''
the most advantageous local coverage policy; we therefore do not
believe we could take the passive role of deeming approval through a
non-response. Additionally, a positive response from us ensures that
there can be no ambiguity as to which of the competing local coverage
policies actually applies to all enrollees of the plan.
6. Medicare+Choice Program Compatibility With Employer or Union Group
Health Plans
Section 617 of the BIPA amended section 1857 of the Act by adding a
new subsection (i), which provides us broad authority to waive or
modify requirements that hinder the design of, the offering of, or the
enrollment in M+C plans under contracts between M+C organizations and
employers, labor organizations, or the trustees of a fund established
to furnish benefits to an entity's employees.
Previously, M+C organizations that contracted with an employer
group or with a State Medicaid agency to provide benefits had to comply
with all requirements of the regulations found in part 422. The
authority in section 617 of the BIPA was first available for CY 2001.
We informed M+C organizations that, in order to facilitate the offering
of M+C plans under contracts with employers, labor organizations, or
the trustees of a benefits trust fund, upon receiving a written request
from an M+C organization, we have the option to waive or modify those
requirements in part 422 of the regulations that would hinder the
design of, the offering of, or the enrollment in an M+C plan. As
indicated in the proposed rule, after we have approved a request for a
waiver, the requesting M+C plan, and any other M+C organization, will
be able to use the waiver in developing their ACR proposal. Any M+C
plan using the waiver must include that information in the cover letter
of its ACR proposal submission to us. The waiver or modification will
take effect once the ACR proposal has been approved.
To date, we have approved the following three types of waivers
under the authority granted us in section 617 of the BIPA:
[sbull] Employer-Only Plans: We are allowing M+C organizations to
offer employer-only plans (that is, M+C plans not available to the
individual market). M+C organizations are not required to market these
plans to individuals. In addition, M+C organizations will not be
required to submit the marketing materials for employer-only plans for
our pre-review and approval.
[sbull] Actuarial Swaps: We are allowing M+C organizations to swap
benefits not covered by Medicare of approximately equal value when an
employer asks for a benefit package that differs from the package
offered by the M+C organization to the individual market.
[sbull] Actuarial Equivalence: We are allowing M+C organizations to
raise the co-payments for certain benefits but to provide a higher
benefit level or a modification to the premium charged, as long as
projected beneficiary liability was actuarially equivalent.
We received two substantive comments on the employer group waiver
provisions.
Comment: A commenter asked that we confirm whether our waiver
authority can be used in areas such as ACR proposals, and enrollment
and disenrollment processes (for example, the use of electronic
enrollment and disenrollment for employer group members). The commenter
also suggested that we revise the regulation to ensure that it is
flexible enough to accommodate such waivers, including clarification
that requests to use approved waivers that are not related to benefit
and rate proposals may be submitted at any time during the year.
Response: As noted above, Section 617 of the BIPA provides broad
authority for us to waive or modify requirements that hinder the design
of, the offering of, or the enrollment in M+C plans under contracts
between M+C organizations and employers or unions. Accordingly, under
this authority, we have broad discretion to approve employer group
waivers in all areas of the M+C program, including both enrollment and
disenrollment and benefit and rate proposals. We do not believe that
any change to the regulatory language implementing the waiver authority
is necessary. The regulatory language implementing this waiver
authority is consistent with the statutory language in section 1857(i)
of the Act, which provides us wide latitude to approve appropriate
waivers. In reviewing proposed waivers, we will balance the objective
of promoting M+C enrollment by employer group members with the need to
ensure that adequate protections are in place to ensure that employer
group members enrolled in M+C plans have access to the Medicare covered
benefits consistent with Medicare standards. Waiver requests by M+C
organizations may be submitted at any time of the year.
Comment: Another commenter asked for clarification of Sec.
422.106(a)(2) which states that employer group benefits that
``complement'' an M+C plan and the marketing materials associated with
those benefits are not subject to our approval. The commenter was not
clear as to what ``complement'' means in this context. The commenter
further notes that paragraph (a)(2) continues, ``M+C plan benefits
provided to enrollees of the employer * * * and the associated
marketing materials, are subject to CMS review and approval.''
According to the commenter, these two sentences within paragraph (a)(2)
are internally inconsistent and confusing, and the commenter suggested
that the benefit package of an employer-only M+C plan was subject to
our review and approval. The commenter also requested that we clarify
that employer group benefits or marketing materials will not be subject
to prior review as long as the M+C organization certifies, in its ACR,
that an employer-only M+C plan benefit package contains all Medicare-
covered items and services. The commenter also suggested that M+C
organizations should not be required to send copies of employer group-
marketing materials to us after printing.
Response: We agree that Sec. 422.106 (a)(1) and (a)(2) need to be
clarified. The purpose of Sec. 422.106(a)(2) is to highlight the fact
that the M+C regulations apply to those benefits that are included
under our approved M+C benefit package and that the regulations do not
apply to what are referred to in the regulation as ``complementary''
benefits. Complementary benefits are employer-sponsored benefits, which
are outside of the ACR proposal and are independently arranged by an
employer on behalf of its employer group members for the purpose of
enhancing the M+C benefit package. Therefore, we have modified Sec.
422.106(a)(2) to clarify that we do not regulate or approve employer-
sponsored benefits.
Employer group plans are required to provide an ACR proposal that
includes all Medicare Part A and Part B services. There are no
additional ``prior review'' requirements for approving the M+C benefit
package for employer group members. We have already approved a waiver
related to prior review of marketing material of employer-only plans.
However, all M+C organizations will continue to be required to send
informational copies of the employer-only plan's marketing materials to
our Regional Office that is the ``lead region.'' The employer group
waivers are posted at our website at the following web address: http://www.cms.hhs.gov/healthplans/employers/
.
[[Page 50846]]
7. Permitting End-Stage Renal Disease Beneficiaries To Enroll in
Another Medicare+Choice Plan if the Plan in Which They Are Enrolled Is
Terminated
Section 620 of the BIPA amended section 1851(a)(3)(B) of the Act to
permit beneficiaries with end-stage renal disease (ESRD) to enroll in
any other available M+C plan if the plan in which they are enrolled is
terminated or the M+C organization discontinues the plan in the area in
which the beneficiary lives. Before the BIPA, beneficiaries with ESRD
who were affected by an M+C plan termination were only able to elect
another plan offered by the same M+C organization or return to the
original Medicare fee-for-service program.
Under this provision, if the beneficiary enrolls in another M+C
plan, and that plan is subsequently terminated, he or she is able to
elect another M+C plan (offered by the same M+C organization or a
different organization) based upon that termination. This would be true
for any subsequent M+C plan terminations or discontinuations that
result in the enrollee's disenrollment. Thus, if the enrollee's plan is
subsequently terminated or discontinued, the individual would have
another opportunity to elect another M+C plan. The individual may use
this election immediately, or may do so during a subsequent election
period. Once the individual has made such an election, he or she may
not join another M+C plan offered by another M+C organization unless
his or her plan is terminated or discontinued. Thus, if the beneficiary
exhausts his or her one election, and then later seeks to disenroll
from the plan for reasons other than its termination, he or she may
only enroll in another M+C plan offered by the same M+C organization,
or return to original fee-for-service Medicare. If the beneficiary
returns to original Medicare, he or she will not be able to later
enroll in an M+C plan.
Comment: One commenter expressed concern that the preamble to the
proposed rule could be misconstrued to mean that a beneficiary who is
enrolled in an M+C plan and subsequently disenrolls from the plan for
reasons other than the plan's termination or discontinuation can return
to the original fee-for-service Medicare program and at some future
date reenroll in a different plan offered by the same M+C organization.
Response: As explained above, we are clarifying that a beneficiary
who elects another M+C plan as provided for under section 620 of the
BIPA and later decides to disenroll from the plan for reasons other
than its termination or discontinuation, may only elect another M+C
plan offered by the same M+C organization at the time he or she is
enrolled with that organization under some health plan it offers. In
the commenters example, the beneficiary has spent time in original fee-
for-service Medicare while not an enrollee with the organizations under
any option. Under this circumstance, the enrollee would not be eligible
to enroll in any M+C plan, including one offered by the M+C
organization with which he or she was formerly enrolled.
Comment: Several commenters requested clarification as to whether
or not the beneficiary had to elect a new M+C plan within a certain
time frame. One commenter supported the establishment of a time limit,
while others opposed any such time limit.
Response: In the preamble to the proposed rule, we indicated that
we do not interpret section 1851(a)(3)(B) of the Act to require an
enrollee to elect a new M+C plan immediately upon the termination or
discontinuation of the M+C plan in which he or she is enrolled. This is
based on section 620(b)(2) of the BIPA, which specifically extends this
provision to individuals who had been enrolled in terminating or
discontinued plans any time after December 31, 1998. In accordance with
this section, and section 620(a) of the BIPA, these individuals are
treated as M+C eligible individuals for purposes of electing to
continue enrollment in another M+C plan. Because the statute clearly
contemplates enrollment by individuals not currently enrolled in an M+C
plan, we believe that the phrase ``continue enrollment'' in section
620(a) of the BIPA does not necessarily mean ``continue without
interruption'' and, therefore, should not be time-limited. As stated
above, the beneficiary may use his or her election immediately upon the
plan's termination, or may use this election during a subsequent
election period.
8. Providing Choice for Skilled Nursing Facility Services Under the
Medicare+Choice Program
Section 621 of the BIPA amended section 1852 of the Act by adding a
new subsection (l). This new subsection ensures that an M+C
organization will give a Medicare beneficiary who is a resident of a
skilled nursing facility (SNF) the option of returning to his or her
``home SNF'' for post-hospital extended care services upon discharge
from a hospital when certain conditions are met.
The term ``home skilled nursing facility'' is defined as--
[sbull] The SNF in which the beneficiary resided at the time of
admission to the hospital;
[sbull] A SNF providing post-hospital extended care services
through a continuing care retirement community that provided residence
to the beneficiary at the time of admission to the hospital; or
[sbull] The SNF in which the spouse of the beneficiary is residing
at the time of discharge from the hospital.
In order for a home SNF to be offered under this section, the SNF
to which the beneficiary will be returned must either have a contract
with the M+C organization to provide post-hospital services or must
agree to accept substantially similar payment under the same terms and
conditions that apply to SNFs under contract with the M+C organization.
The coverage provided must be no less favorable to the beneficiary than
coverage of post-hospital services that are otherwise covered under the
M+C plan.
The requirement to return the beneficiary to his or her home SNF
would not apply if the applicable SNF is not qualified to provide
benefits under Medicare Part A to beneficiaries not enrolled in an M+C
plan. A SNF that is not contractually bound to do so could refuse to
accept an M+C beneficiary or impose conditions on the acceptance of the
beneficiary for post-hospital extended care services.
The requirements of this new subsection (l) first became applicable
under contracts entered into or renewed on or after December 20, 2000.
We received one comment relating to this provision.
Comment: The commenter expressed concern regarding potential
quality issues when a plan member uses the ``return home'' benefit to
enter a non-plan SNF. In addition, the commenter believes that this
provision ``binds'' the internal operations of an M+C organization and
could set a precedent for other areas of care in the future.
Response: We agree that an M+C organization does not have the same
ability to verify the quality of non-contract SNFs as it does contract
SNFs. For this reason, we will allow an M+C organization to advise
members who are obtaining services in a non-contract SNF under the
``return home'' benefit that the M+C plan cannot guarantee the quality
of care that members will receive in the non-contract SNF. However, we
also note that an M+C organization can only refer members to Medicare
certified SNFs. The ``return home'' SNF benefit was established
[[Page 50847]]
legislatively and, thus, does not set a precedent for other benefits of
this type unless the Congress extends the benefit to other benefits by
similar legislation.
9. Increased Civil Money Penalty for Medicare+Choice Organizations That
Terminate Contracts Mid-Year
Section 1857(g)(3) of the Act provides us with the authority to
impose intermediate sanctions, including civil money penalties, on M+C
organizations for the same reasons for which we can terminate an M+C
organization's contract. Section 1857(c)(2) of the Act provides that we
may, at any time, terminate an M+C organization's contract if we
determine that the M+C organization--
[sbull] Failed substantially to carry out the contract;
[sbull] Is carrying out the contract in a manner inconsistent with
the efficient and effective administration of the M+C program; or
[sbull] No longer substantially meets the applicable conditions of
the M+C program.
Section 623 of the BIPA amended section 1857(g)(3) of the Act by
providing us the authority to establish and levy separate and distinct
civil money penalties when we determine that an M+C organization has
failed to substantially carry out the terms of its contract based upon
the M+C organization's termination of its contract with us in a manner
other than that provided in the M+C contract and in Sec. 422.512.
Under section 1857(g)(3)(D) of the Act, in such cases, we may
impose a civil money penalty of ``$100,000 or such higher amount as the
Secretary may establish by regulation.'' We believe that the Congress
provided us with the authority to provide for a higher civil money
penalty amount than $100,000 in recognition of the fact that the
$100,000 specified in the Act may not provide an effective deterrent in
some instances to discourage M+C organizations from terminating their
contracts in a manner inconsistent with the procedures described in the
regulations. In developing regulations providing for a potentially
higher civil money penalty amount, it is appropriate for us to consider
the number of Medicare beneficiaries who could be adversely affected by
an M+C organization's decision to terminate its contract with us in a
manner that violates M+C rules.
Thus, we proposed to establish the amount of this civil money
penalty as either $250 per Medicare member enrolled in the terminated
M+C plan or plans at the time the M+C organization terminated its
contract with us, or $100,000, whichever is greater. We added the
``whichever is greater'' provision to discourage violations of the
contract termination provisions by M+C organizations with lower M+C
plan enrollment. In either instance, this new civil money penalty
represents a substantial increase over the current civil money penalty
of $25,000 for similar violations, and serves as an effective deterrent
against M+C contract terminations violations that could potentially
harm Medicare beneficiaries.
We received one comment on this change in civil money penalties.
Comment: The commenter seeks affirmation that we will not impose
civil money penalties when the mid-year termination is caused by an
event that is not within the control of the M+C organization (for
example, substantial loss of network capability).
Response: We will not create an exception to waive the civil money
penalties at Sec. 422.758(b) because an M+C organization is
experiencing network problems. If an M+C organization loses network
capacity during the year, we expect that the M+C organization will
establish new provider contracts or pay for services on a fee-for-
service basis. There may be situations that require us to terminate a
contract mid-year. For example, we have used our immediate termination
authority at Sec. 422.510(a)(5) to protect beneficiary access to
health care when an M+C organization experiences financial difficulties
so severe that access to health care is endangered. Section 623 of the
BIPA was not written to permit us to levy a civil money penalty if we,
not the M+C organization, take the termination action. The law was
designed to prohibit M+C organizations from inappropriately ending
their contractual commitments without our consent.
10. Eliminating Health Disparities in Medicare+Choice Program
Section 616 of the BIPA amended section 1852(e) of the Act by
requiring that an M+C organization's Quality Assurance Program have a
separate focus on racial and ethnic minorities. This provision was not
included in the October 2002 proposed rule because we had not developed
any policies to propose. Although we are still evaluating
implementation issues, we are adding a new paragraph (4) to Sec.
422.152(f) to reflect this BIPA provision. Prior notice and comment is
not necessary in the case of this change, because merely adding the
statutory requirements to the regulations text has no legal effect. We
have included a good cause statement below for waiving prior notice and
comment with respect to this change.
B. Skilled Nursing Facility Care Under Medicare+Choice
Under section 1814(a)(2)(B) of the Act, the Medicare extended care
skilled nursing facility (SNF) benefit covers skilled nursing care or
other skilled rehabilitation services that the beneficiary requires on
a daily basis and that are only available in a SNF on an inpatient
basis.
Generally, we will only cover this benefit following a hospital
stay of not less than 3 days. Under section 1812(f) of the Act,
however, we may authorize coverage of SNF care without a prior hospital
stay if two conditions are met. First, the coverage of these services
must not result in any increase in Medicare program payments, and
second, the coverage must not alter the acute care nature of the
benefit.
We have determined that these conditions are met in the case of SNF
services furnished by an M+C organization that covers SNF services.
Accordingly, we proposed changes in the regulations to reflect this
determination, specifically, adding a new Sec. 409.20(c)(4), revising
Sec. 409.30(b) and Sec. 409.31(b), and adding a new Sec. 422.101(c).
Several organizations, representing both providers and consumers,
stated that they agreed with our proposed changes.
Comment: One commenter recommended that we clarify that after
voluntarily disenrolling from the M+C program, the beneficiary may
receive Part A SNF care if he or she meets the skilled level of care
requirement.
Response: The commenter is correct that under this final rule, Part
A SNF care would be covered for an individual who meets the skilled
level of care requirement if he or she voluntarily disenrolls from a
M+C program that was covering the care without a prior 3-day hospital
stay. We believe that Sec. 409.30(b)(2)(ii) makes this sufficiently
clear that no further clarification is needed.
Comment: A major organization recommended that we clarify that when
a beneficiary converts from a M+C stay in a SNF to a fee-for-service
stay, a new 100 day period begins, unless the prior days under M+C were
skilled care.
Response: We agree with this recommendation. If skilled care is
provided to the beneficiary while he or she is enrolled in the M+C
organization, then this time period counts towards the 100 days. If it
is unknown whether or not skilled care is provided or the care
[[Page 50848]]
is unskilled, then the 100 days starts when the fee-for-service stay
begins. We will clarify this provision in the Intermediary Manual.
Comment: Two commenters proposed that the waiver of the 3-day
hospital requirement for SNF care also be applied to cost contractors
(health maintenance organizations and competitive medical plans) under
section 1876 of the Act. One commenter argued ``* * * that expanding
the provision to cost contractors will result in a substantial
reduction in Medicare costs for inpatient hospitalization. These
savings will more than counterbalance any increases in SNF costs. We
believe that inpatient admissions may occur when perhaps the more
appropriate level of care is in a skilled nursing facility. We believe
that allowing an exception to the three-day prior hospitalization
requirement will result in net savings to the Medicare program.''
Another commenter noted that, ``Organizations participating in the
Medicare program as cost plans are structured in the same manner as M+C
organizations and have the same inherent incentives for the provision
of quality care in the most appropriate setting. Since this structure
promotes similar patterns of practice regardless of the type of
Medicare contract, we believe that the criteria described above would
be met if this policy were applied to cost plans.''
Response: M+C organizations are paid on a capitated basis, so they
have an incentive to contain costs. However, cost contractors under
section 1876 of the Act do not have such an incentive. We have no
evidence to indicate that they would reduce hospital admissions if we
were to waive the 3-day prior hospital stay requirement. Therefore, we
have decided not to accept this recommendation at this time.
C. Disenrollment by the M+C Organization
Section 422.74(d)(4) provides that, except where continuation of
enrollment under Sec. 422.54 applies, an individual must be
disenrolled from an M+C plan if he or she is out of the service area
for over 6 months. The proposed rule included a revision to Sec.
422.74(d)(4) creating an exception to this 6-month rule for ``visitor''
or ``traveler'' type programs. Under the proposed exception, M+C
organizations could continue to offer extended ``visitor'' or
``traveler'' programs to members who have been out of the service area
for up to 12 months, provided that the plan included the full range of
services available to other members. M+C organizations offering these
programs may limit their availability to certain areas and may impose
restrictions on obtaining benefits, except for urgent, emergent, and
post-stabilization care, and renal dialysis. These organizations do not
have to disenroll members in these extended programs who remain out of
the service area for up to 12 months. However, those M+C organizations
without this program must continue to disenroll members once they have
been out of the service area for more than 6 months. We received one
comment supporting this change, and are adopting it as proposed.
D. Reporting Requirements for Physician Incentive Plans
Section 1852(j)(4)(A)(iii) of the Act requires M+C organizations to
provide us with descriptive information regarding their physician
incentive plans (PIP) sufficient to permit us to determine whether the
plan is in compliance with the applicable requirements. The current
regulations interpreted this provision to require that an M+C
organization submit the CMS PIP Disclosure Form (OMB No. 0938-0700) to
us with its contract application and annually thereafter. We are
changing the reporting requirement to allow M+C organizations to
maintain the required PIP information in their files and submit that
information to us upon request. Several commenters agreed with this
change.
Comment: A commenter requested that we provide clear guidance on
what information managed care organizations should maintain in their
files.
Response: Section 417.479(h)(3) and Sec. 422.210(b) provide
details on the information that should be maintained in either the
contractor or subcontractor files for purposes of responding to
inquiries from beneficiaries. Since there will no longer be routine
reporting of PIP information to us, the cost-contracting health
maintenance organizations/competitive medical plans and M+C
organizations should simply maintain sufficient information ``...to
permit CMS to determine whether the plan is in compliance with the
applicable requirements,'' should we request it.
Comment: A commenter requested that, under the cost program, two
types of entities, health maintenance organizations and competitive
medical plans, are eligible for contracting. The proposal omits a
reference to competitive medical plans.
Response: We will revise the regulation to cover competitive
medical plans.
Comment: A commenter suggested that the instructions for amending
Sec. 417.479(h) appear incorrect. The disclosure to beneficiaries
provision is in paragraph (h)(3), not (h)(2). Thus, we should replace
paragraph (h)(1) and (h)(2) with the new (h)(1). Then paragraph (h)(3)
would be designated (h)(2).
Response: The commenter is correct in noting an inconsistency in
our proposed revision. Therefore, Sec. 417.479(h)(1) will remain as
written in the proposed regulation, with the addition of a reference to
competitive medical plans, as noted above. Section 417.479(h)(2) will
be revised to include only the rules on pooling of patients. Finally,
Sec. 417.479(h)(3), related to disclosure to Medicare beneficiaries,
will remain as part of the regulation with a minor, editorial change.
E. M+C Appeals Process
1. Defining Who Can Request Organization Determinations
Currently, the M+C regulations at Sec. 422.566(c) specify that any
of the parties listed in Sec. 422.574 can request an M+C organization
determination. It has come to our attention that, in some cases, the
use of this cross-reference has been misconstrued to mean that, in
order to request an organization determination on behalf of an
enrollee, an affiliated provider would need to be an authorized
representative, and a non-affiliated provider would need to be an
assignee. Although we discussed this issue in our June 29, 2000 final
rule (65 FR 40282), some confusion has continued.
We have always intended for requests for organization
determinations to be more inclusive than requests for appeals. To
clarify this point, we have eliminated the existing cross-reference to
Sec. 422.574 and we are listing those who may request an M+C
organization determination under Sec. 422.566(c). Determination
requests may be made by--
[sbull] The enrollee (including his or her authorized
representative);
[sbull] Any provider that furnished, or intends to furnish,
services to the enrollee; or
[sbull] The legal representative of a deceased enrollee's estate.
The fact that an individual or entity may request an organization
determination does not necessarily entitle that individual or entity
the right to request an appeal, unless the conditions for party status
under Sec. 422.574 are met.
Comment: We received two comments regarding who can request an
[[Page 50849]]
organization determination under Sec. 422.566(c). One commenter
supported the elimination of the cross-reference with the provision
that only treating or attending providers involved with the enrollee's
health care should be allowed to request organization determinations.
Another commenter believed that in an effort to discourage
inappropriate use of the process, providers should only be allowed to
make requests for organization determinations with the full knowledge
and agreement of the enrollee. The commenter recommended that we
establish this distinction in the preamble or regulation, and, if an
enrollee indicates that a requested organization determination is
inconsistent with his or her wishes, then the M+C organization should
be able to cease action on the request.
Response: We believe that the text, ``any provider that furnishes,
or intends to furnish, services to the enrollee,'' already addresses
the commenter's concern that the provider requesting an organization
determination be involved with the enrollee's health care. Because
enrollees in some M+C plans are free to seek care from providers within
or outside of the M+C organization's network and all enrollees may go
out of network for emergency and certain other services, we believe it
is appropriate to use the all-inclusive term ``any,'' instead of
``treating,'' to describe the providers furnishing, or intending to
furnish, services to enrollees.
We agree with the second commenter that providers should request
organization determinations only with the full knowledge and agreement
of enrollees. This is particularly important for unaffiliated providers
that might seek payment for services already furnished to enrollees. In
addition, an M+C organization may cease action on a provider's request
for an organization determination that is inconsistent with an
enrollee's wishes.
2. Effectuation Times When M+C Organizations File Appeals
The current regulations at Sec. 422.618 and Sec. 422.619
establish effectuation times when an M+C organization's denial of
coverage or payment is overturned, either through its own
reconsideration process or by an independent outside entity. Effectuate
means to authorize, pay for, or provide coverage. The M+C organization
may not appeal the independent outside entity's decision. Section
422.618 also requires that, if the independent outside entity's
determination is reversed (in whole or in part) by an administrative
law judge (ALJ), or at a higher level of appeal, the M+C organization
must pay for, authorize, or provide the service under dispute as
expeditiously as the enrollee's health condition requires, but no later
than 60 calendar days from the date the M+C organization receives
notice reversing the determination. In these situations, the M+C
organization, like an enrollee, has 60 days to appeal.
The ambiguity in the current regulations, which require
effectuation of a determination within 60 days, but also permit further
appeal within the same time frame, results in confusion. To reconcile
these two regulatory provisions, we proposed to revise the rules so
that M+C organizations may await the outcome of a Departmental Appeals
Board (the Board) review before effectuating a decision of an ALJ. This
change would serve to balance the M+C organization's right to appeal
with the need to ensure that an enrollee would not be faced with a
potentially large debt in the event that the Board overturns the ALJ
after the service has been furnished to the enrollee.
In Sec. 422.618(c), we proposed to retain, as the general rule,
the 60-day effectuation requirement for reversals by an ALJ or higher
level of appeal. This is because we did not want to effectively negate
the M+C organization's 60-day right to request an appeal to the Board
or higher level. However, our expectation was that M+C organizations
would not take the maximum 60 days to effectuate a decision they do not
intend to appeal. We proposed to redesignate the current Sec.
422.618(c), as Sec. 422.618(c)(1) and provide that the 60-day deadline
for effectuation was the ``general rule.'' We then proposed to add a
new Sec. 422.618(c)(2) which would allow for an exception to the 60-
day standard if the M+C organization decided to request a Board review
consistent with Sec. 422.608. We proposed to allow the M+C
organization to await the outcome of the Board review before it pays
for, authorizes, or provides the service under dispute. Under the
provision, we would require an M+C organization that files an appeal
with the Board concurrently to send a copy of its request and any
accompanying documents to the enrollee. Additionally, in the proposed
rule, the M+C organization was required to notify the independent
review entity of the requested appeal.
Consistent with this change, we also proposed to revise Sec.
422.619(c) with regard to effectuating expedited reconsidered
determinations. As in standard appeals, we proposed to allow an
exception for the M+C organization to await the outcome of the Board's
review before the M+C organization authorizes or provides the service
under dispute. Additionally, an M+C organization that files an appeal
with the Board would be required concurrently to send a copy of its
request and any accompanying documents to the enrollee, as well as
notifying the independent review entity of the requested appeal.
Comment: Some commenters believe that the 60-day time frame for an
M+C organization to decide whether to appeal (and ultimately pay for or
provide a service) is too long. One commenter suggested that the time
frame to allow an M+C organization to appeal to the Departmental
Appeals Board (DAB) should be reduced to 30 days. Another commenter
believes that M+C organizations generally know well before 60 days
whether they intend to appeal an administrative law judge's (ALJ's)
decision. Instead, an M+C organization more likely would need a 60-day
time frame to gather evidence in support of an appeal. The commenter
argued that, since enrollees already wait a long time for ALJ
decisions, enrollees should not be made to wait another 60 days to
receive care.
Other commenters supported our attempt to reconcile the provisions
that, on the one hand, allow an M+C organization the right to appeal an
ALJ's decision, but, on the other hand, require the M+C organization to
effectuate the decision before a final DAB decision. One commenter
supported a 60-day, rather than a 72-hour, effectuation time frame for
expedited reviews.
Response: Currently, Sec. 422.618(c)(1) and Sec. 422.619(c)(1)
require an M+C organization to pay for, authorize, or provide the
service under dispute as expeditiously as the enrollee's health
condition requires, but no later than 60 calendar days from the date
that the M+C organization receives a decision reversing a
determination. Section 422.608 also provides for an appeal by the M+C
organization within the same 60-day time period that effectuation must
occur. While we appreciate the commenters' concerns that 60 days seems
like a long time for M+C organizations to appeal, we believe that we
should allow M+C organizations the same 60-day time frame afforded to
other parties when they file appeals. Thus, we will maintain the
current 60-day standard at Sec. 422.608 for all parties seeking review
by the DAB.
We recognize that an enrollee may encounter a delay in obtaining a
service if an M+C organization appeals; however, both the DAB and the
ALJ hearing offices have procedures to screen cases and to give
priority to pre-service denial cases, including immediate assignment
and resolution of
[[Page 50850]]
cases involving imminent health risks. Thus, as proposed, we are adding
Sec. 422.618(c)(2) and Sec. 422.619(c)(2) to allow for an exception
to the 60-day effectuation standard when an M+C organization requests
DAB review. An M+C organization may await the outcome of the DAB's
review before it pays for, authorizes or provides the service under
dispute.
Comment: One commenter was concerned with our statement that ``* *
* the M+C organization would have to meet the medical exigency standard
for providing or authorizing services as expeditiously as the
enrollee's health condition requires regardless of the 60-day time
frame.'' The commenter interpreted this statement to mean that a M+C
organization that intends to appeal an ALJ decision would still have to
apply the medical exigency standard, and provide services if warranted
under this standard notwithstanding the filing of a DAB appeal. The
commenter thought that this would undercut the exception to the
effectuation time frames and undermine a M+C organization's right under
both the appeals process and, though it is not clear to us why, the
Administrative Procedure Act (APA). Instead, the commenter recommends
that we permit the exception to the effectuation rule under all
circumstances, and promulgate an expedited review process for the DAB
to follow in medically exigent cases. Another commenter urged us to
monitor whether M+C organizations take the maximum 60 days to implement
a decision that they do not intend to appeal.
Response: The section of the proposed rule that the commenter
references is a discussion about our reason for maintaining a 60-day
effectuation requirement for expedited appeals, as opposed to 72 hours.
We wanted to make clear that, despite our intention to maintain the 60-
day requirement, M+C organizations still would be held to the medical
exigency standard if they did not intend to pursue an appeal of an ALJ
decision. In other words, just because we had retained the 60-day time-
frame for appealing, this did not mean that an M+C organization could
take 60 days to effectuate if it was not pursuing an appeal. Rather, in
this instance, it must authorize or provide the service under dispute
as expeditiously as the enrollee's health condition requires, but no
later than 60 calendar days from the date it receives notice reversing
the determination.
We agree with the commenter, however, that when a M+C organization
is appealing the ALJ decision, it should not be required to effectuate
the ALJ decision, and would not apply the medical exigency standard
until it was time to effectuate a decision from the DAB. We also agree
with the commenter that the DAB should expedite cases in which there is
a medical exigency, and inform the commenter that the DAB has
procedures in place to do so. Finally, with respect to monitoring, we
agree that M+C organizations should be monitored to see whether they
are delaying effectuation 60 days in cases in which they are not
appealing the ALJ decision.
Comment: Some commenters were pleased with our proposal that M+C
organizations notify enrollees and the independent review entity (IRE)
in the event of an appeal to the DAB. They believed that such
notification would enable enrollees to file evidence, arguments or
legal memoranda to the DAB in support of an ALJ decision.
Response: We agree with the commenters and are retaining this
proposal which requires a M+C organization to concurrently send a copy
of its appeal request and the accompanying documents to the enrollee
and the IRE at Sec. 422.618(c)(2) and Sec. 422.619(c)(2) in this
final rule.
Comment: One commenter recommended that we apply an exception to
the effectuation provision for cases in which the M+C organization
intends to dispute determinations made by the IRE.
Response: The regulations only provide for appeals by M+C
organizations at the ALJ level or higher. The only way for an M+C
organization to ``challenge'' the IRE's decision is to request a
reopening in accordance with Sec. 422.616. A reopening is an
administrative action outside of the realm of the appeals process and
we do not believe that delaying effectuation under these circumstances
is warranted.
F. Requiring Health Care Prepayment Plans (HCPPs) and Remaining Cost
Plans To Follow the M+C Appeals Process
In the proposed rule, we solicited comments on whether HCPPs and
the remaining cost plans should follow the M+C appeals and grievance
processes under subpart M of part 422. We have not included these
provisions in this final regulation, because we need more time to
analyze the comments and evaluate implementation issues.
G. Technical Clarifications
1. Grace Period for Late Premium Payments
We are making a technical change to address concerns that M+C
organizations have raised concerning the starting date for the 90-day
grace period for late premium payments. Section 422.74(d)(1)(ii)
provides that an M+C organization may disenroll a Medicare beneficiary
when the organization has not received payment within 90 days after it
has sent a written notice of nonpayment to the individual. Several M+C
organizations requested that the 90-day grace period start on the day
the premium payment was due, rather than the day the notice was sent.
Since the notice has to be provided within 20 days of the premium due
date, starting the grace period on the premium due date would ensure
that the beneficiary has at least 70 days following receipt of the
notice to pay the premium and avoid disenrollment. We believe that this
constitutes an appropriate grace period and proposed to change the
regulation accordingly. We received one comment supporting this change
and are adopting it as proposed.
2. Payment for Hospice Care
In the proposed rule, we proposed to clarify information concerning
changes in M+C payments when an individual has elected hospice care.
Specifically, we proposed to revise Sec. 422.266(d) to make clear
that when enrollees of M+C plans elect to receive hospice care under
Sec. 418.24, we will not make any payment for the hospice care to the
M+C plan beginning with the next month's payment after the election,
except for the portion of the payment applicable to additional
benefits, as described in Sec. 422.312. Currently, the regulation
refers to capitation payments being reduced to this amount which
produces the same result. However, this language was changed from the
language that applies to health maintenance organizations and
competitive medical plans, and we believe the latter language makes the
policy clearer.
We received no comments on this change and have revised Sec.
422.266(c) to reflect this clarification.
3. Clarification of Subpart O to Effectuate Statutory Intent
We are making minor changes to Subpart O in an attempt to clarify
information regarding our sanction authority. These changes do not add
any new requirements. They serve to improve the wording of certain
areas to more clearly reflect statutory intent.
Section 1857(g)(1) of the Act contemplates violations that are
generally considered ``fraud and abuse.'' This section further states,
``* * * the Secretary may provide, in addition to
[[Page 50851]]
any other remedies authorized by law, for any of the remedies described
in paragraph (2) * * * .'' Because the OIG has the traditional
authority to investigate fraud complaints, the regulation should ensure
that it is understood that the OIG stands in the place of ``the
Secretary'' when civil money penalties are imposed for such violations.
We (CMS) would have authority for other intermediate sanctions under
M+C. Currently, Sec. 422.752(a) states, ``For the violations listed
below, CMS may impose any of the sanctions specified in Sec. 422.750 *
* *.'' Any of the sanctions presupposes that we may freeze marketing,
enrollment, payment and impose civil money penalties. This stands in
contrast to the statutory intent and it clearly contrasts with Sec.
422.756(f)(2) where, in discussing civil money penalties, the
regulation currently reads, ``In the case of a violation described in
Sec. 422.752(a) * * * in accordance with 42 CFR parts 1003 and 1005,
the OIG may impose CMPs on M+C organizations * * *'' We are changing
Sec. 422.752(a) to clarify when the OIG has the sole authority to
impose civil money penalties.
Section 422.756(f)(3) references the OIG's regulations at parts
1003 and 1005. This cross-reference creates confusion without further
clarification. The civil money penalty provisions included in the OIG's
regulations at parts 1003 and 1005 implement section 1876 of the Act,
not the M+C program under the BBA. We are proposing a regulatory change
to eliminate any reference to part 1003 for information about which
level of civil money penalty might apply.
Section 422.758 states that civil money penalties can be $25,000 or
$10,000 per each determination. According to the statute at section
1857(g) of the Act, the actual amount could be lower. For example,
section 1857(g)(3)(A) of the Act states that we may impose civil money
penalties ``of not more than $25,000.'' The same applies to Sec.
422.758(b), which references ``up to $10,000'' not ``$10,000.'' Section
422.750 states that the OIG can impose civil money penalties ranging
from $10,000 to $100,000. Section 1128A of the Act continually uses the
``up to'' language. We are revising the regulatory language to clarify
statutory intent.
4. Correcting a Cross-Reference in Subpart E (Relationships With
Providers)
In Sec. 422.202(a)(4), a change is needed to correct a cross-
reference. Specifically, the text ``must conform to the rules in Sec.
422.204(c)'' is being revised to read ``must conform to the rules in
Sec. 422.202(d).'' (Sec. 422.204(c) does not exist.)
III. Provisions of This Final Rule
The provisions of this final rule are as follows:
[sbull] In Sec. 409.20, we added paragraph (c)(4) to define the
term ``post-hospital SNF care'' to include SNF care that does not
follow a hospital stay if the beneficiary is enrolled in an M+C plan.
[sbull] In Sec. 409.30, we revised paragraph (b)(2) to add an
exception to the preadmission requirements for enrollees of M+C
organization plans.
[sbull] In Sec. 409.31, we added paragraph (b)(2)(iii) to add a
condition to the level of care requirements which states that, for an
M+C enrollee, a physician has determined that a direct admission to a
SNF without an inpatient hospital stay would be medically appropriate.
[sbull] In Sec. 417.479, we revised paragraph (h) to modify the
reporting requirements concerning physician incentive plans.
[sbull] In Sec. 422.2, we revised the definition of additional
benefits to include a reduction in the Medicare beneficiary's standard
Part B premium.
[sbull] In Sec. 422.50, we revised paragraph (a)(2) to include a
new condition in the exception that a beneficiary with ESRD is not
eligible to elect an M+C plan. An individual with ESRD whose enrollment
in an M+C plan is discontinued because we or the M+C organization
terminated the organization's contract for the plan, is now eligible to
elect another M+C plan, if the original enrollment was terminated after
December 31, 1998.
[sbull] In Sec. 422.74, we revised paragraph (d)(1)(ii) to reflect
that an M+C organization may only disenroll a Medicare enrollee when
the organization has not received payment within 90 days after the date
the premium payment was due.
[sbull] In Sec. 422.74, we revised paragraph (d)(4) to allow M+C
organizations to operate ``visitor'' or ``traveler'' programs that
provide benefits beyond urgent and emergent care to their enrollees who
are out of the service area for more than 6 months but less than 12
months.
[sbull] In Sec. 422.101, we revised paragraph (b)(3) to reflect
the provisions in section 1852(a)(2)(C) of the Act that permit M+C
organizations with plans that cover large areas encompassing more than
one local coverage policy area to elect to have the local coverage
policy for the part of the area that is the most beneficial to the M+C
enrollees apply to all M+C enrollees in the plan. his policy allows M+C
organizations to standardize coverage decisions and provider contracts
across the entire plan, rather than having different policies apply to
different geographic areas of the same plan.
[sbull] In Sec. 422.101, we added paragraph (c) to include in the
requirements relating to Medicare covered benefits the option to
provide for coverage as a Medicare benefit post-hospital SNF care in
the absence of a prior hospital stay.
[sbull] In Sec. 422.106, we added new paragraph (c) to reflect the
provisions in section 1857(i) of the Act that permits us to grant a
waiver or modification of requirements in part 422 that hinder the
design of, the offering of, or the enrollment in, M+C plans under
contracts between M+C organizations and employers, labor organizations,
or the trustees of benefits funds.
[sbull] In Sec. 422.109, we revised the definition of
``significant cost'' (which was in Sec. 422.109(c), but is now in
Sec. 422.109(a)) to provide that, for purposes of determining whether
to make an adjustment under Sec. 422.256, the tests in definition of
``significant cost'' are applied to the aggregate costs of all NCDs and
legislative changes in benefits made in the contract year. Under this
test, the ``average cost'' of every NCD and legislative change in
benefits would be added together. If the sum of all these average
amounts exceeds the threshold under Sec. 422.109(a)(1), then an
adjustment to payment will be made under Sec. 422.256 to reflect these
costs. Alternatively, if the costs of the NCDs and legislative changes
in benefits, in the aggregate, exceed the level set forth in Sec.
422.109(a)(2), an adjustment to payment will be made under Sec.
422.526. We also added language to explain that an NCD or legislative
change in benefits that does not meet the ``significant cost''
threshold must be provided, and paid for, by the M+C organization as of
the effective date of the NCD or legislative change in benefits.
[sbull] In Sec. 422.111, we added paragraph (f)(8)(iii) to add any
reduction in Part B premiums to the list of information that must be
disclosed to each enrollee electing an M+C plan.
[sbull] We added Sec. 422.133 to contain the new requirement that
M+C organizations return residents of SNFs to their home SNF for post-
hospital extended care services after discharge from a hospital. This
new section contains the definition of home SNF, the requirements for
return to the home SNF, and the exceptions to the general rule.
[sbull] In Sec. 422.152(f), we added section (4) to reflect the
requirement that M+C organizations' Quality Assurance Programs have a
separate focus on racial and ethnic minorities.
[[Page 50852]]
[sbull] In Sec. 422.202(a)(4), we corrected a cross-reference.
[sbull] In Sec. 422.210, we revised paragraph (a) to reflect
changes to the reporting requirements concerning physician incentive
plans.
[sbull] In Sec. 422.250, we revised paragraph (a)(1) to reflect
that, beginning with the initial payment for CY 2003, monthly payments
to M+C organizations may be reduced by the amount described in new
Sec. 422.312(d) for the reduction of the beneficiary's standard Part B
premium.
[sbull] In Sec. 422.250, we also revised paragraph (a)(2) to
redesignate paragraph (a)(2)(i)(B) as (a)(2)(i)(C) and to add new
paragraph (a)(2)(i)(B) to reflect that, when we establish ESRD rates,
we will apply appropriate adjustments, including risk adjustment
factors.
[sbull] In Sec. 422.256, we revised paragraph (b) to reflect that
we will make appropriate payment adjustments for new benefits covered
during a contract term due to NCDs and legislative changes in benefits
that result in a significant increase in costs to M+C organizations,
based on an analysis by our chief actuary. We also revised this section
to reflect that we will apply a ``NCD adjustment factor'' in
calculating rates for counties receiving the two percent minimum
update. This factor will represent the percent of total Medicare cost
attributed to the aggregate costs of all NCDs and legislative changes
in benefits in the previous year.
[sbull] In Sec. 422.266, we revised paragraph (c) to clarify that
when enrollees of M+C plans elect to receive hospice care under Sec.
418.24, we will not make any payment for the hospice care to the M+C
plan beginning with the next month's payment after the election, except
for the portion of the payment applicable to additional benefits, as
described in Sec. 422.312.
[sbull] In Sec. 422.312, we redesignated paragraph (d) as
paragraph (e) and added new paragraph (d) to reflect that an M+C
organization may apply adjusted excess amounts to additional benefits
and accept lower payments from us, which would allow a reduction of
standard Part B premiums for its enrollees. The reduction in standard
Part B premiums could not equal more than 80 percent of the reduction
in payments to the M+C organization and the payment reduction could not
exceed 125 percent of the standard Part B premium. In addition, the
reduction in premium would have to be applied uniformly to all
similarly situated enrollees.
[sbull] We added new Sec. 422.521 to indicate that we will not
implement, other than at the beginning of a calendar year, requirements
that would impose new cost or burden on M+C organizations or plans,
unless a different effective date is required by statute.
[sbull] In Sec. 422.566, we revised paragraph (c) to delete the
cross-reference to Sec. 422.574 and to delineate who can request an
organization determination.
[sbull] In Sec. 422.618, we revised paragraph (c) to add an
effectuation exception when the M+C organization files an appeal with
the DAB in the case of a standard reconsidered determination.
[sbull] In Sec. 422.619, we revised paragraph (c) to add an
effectuation exception when the M+C organization files an appeal with
the DAB in the case of an expedited reconsidered determination.
[sbull] In Sec. 422.758, we revised paragraph (b) to include the
new maximum amount of the civil money penalties that we would impose on
M+C organizations that terminate their contracts in a manner other than
that described in Sec. 422.512. The new penalty amount will be
$100,000 or $250 per Medicare enrollee from the terminated plan or
plans, whichever is greater.
IV. Waiver of Proposed Rulemaking
We ordinarily publish a notice of proposed rulemaking in the
Federal Register and invite public comment on revisions to regulations.
The notice of proposed rulemaking includes a reference to the legal
authority under which the rule is proposed, and the terms and
substances of the proposed rule or a description of the subjects and
issues involved. We followed this procedure with respect to all but one
of the regulatory revisions made in this final rule. As noted above,
the proposed rule did not include the revision to Sec. 422.152(f) that
we are making in this final rule that adds a new paragraph (4)
reflecting the provisions of section 616 of the BIPA. The requirement
that we issue regulations in proposed form for public comment can be
waived, however, if an agency finds good cause that notice and comment
procedures are impracticable, unnecessary, or contrary to the public
interest, and it incorporates a statement of the finding and its
reasons in the rule issued.
We find that publishing the new paragraph (4) in Sec. 422.152(f)
in proposed form is unnecessary, because this provision only revises
the regulations text to reflect the provisions of section 616 of the
BIPA, and has no legal effect. These provisions were enacted by the
Congress, and took effect on the date mandated by the legislation
without regard to whether they are reflected in conforming changes to
the regulation text. In the new Sec. 422.152(f)(4), we merely have
revised the regulation text to reflect section 616. Therefore, we do
not believe that publishing a notice of proposed rulemaking is
necessary and we find good cause to waive the notice of proposed
rulemaking and to issue this final rule.
V. Collection of Information Requirements
Under the Paperwork Reduction Act of 1995 (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. In
order 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:
[sbull] The need for the information collection and its usefulness
in carrying out the proper functions of our agency.
[sbull] The accuracy of our estimate of the information collection
burden.
[sbull] The quality, utility, and clarity of the information to be
collected.
[sbull] Recommendations to minimize the information collection
burden on the affected public, including automated collection
techniques.
Section 417.479(h)--Physician Incentive Plans. In this final rule,
we require HMOs to provide us, upon request, information concerning its
physician incentive plans. HMOs are also required to provide this
information to any Medicare beneficiary who requests it. While this
requirement is subject to the PRA, the burden associated with this
requirement is captured in approved collection 0938-0700.
Section 422.50(a)(2)--In this final rule, this section states that
an individual who develops end-stage renal disease while enrolled in an
M+C plan or in a health plan offered by an M+C organization is eligible
to elect an M+C plan offered by that organization. Also, an individual
with end-stage renal disease whose enrollment in an M+C plan is
terminated or discontinued after December 31, 1998 because we or the
M+C organization terminated the M+C organization's contract for the
plan or discontinued the plan in the area in which the individual
resides is eligible to elect another M+C plan. An individual who elects
an M+C plan under paragraph (a)(2)(ii) of this section may elect
another M+C plan if the plan elected under paragraph (a)(2)(ii) also is
terminated or discontinued in the area in which the individual resides.
[[Page 50853]]
The burden associated with this requirement is the time and effort
for the individual to submit a new election form. While this section is
subject to the PRA, this burden is currently captured in approved
collection 0938-0753.
Section 422.74(d)(4)(i)--In the final rule, this section states
that unless continuation of enrollment is elected under Sec. 422.54,
the M+C organization must disenroll an individual if the M+C
organization establishes, on the basis of a written statement from the
individual or other evidence acceptable to us, that the individual has
permanently moved.
This section requires that the individual must prepare and provide
a written statement to the M+C organization that he or she has
permanently moved. While this requirement is subject to the PRA, the
burden associated with this requirement is captured in approved
collection 0938-0753.
Section 422.106(c)(1)--M+C organizations may request, in writing, a
waiver or modification of those requirements in part 422 that hinder
the design of, the offering of, or the enrollment in, M+C plans under
contracts between M+C organizations and employers, labor organizations,
or the trustees of benefits funds.
We believe that the burden associated with this requirement is
minimal. We anticipate approximately 100 requests for waivers or
modifications submitted on an annual basis and that it will take
approximately 2 hours to prepare each request. The total annual burden
associated with this requirement is estimated to be 200 hours.
Section 422.106(c)(2)--In this final rule, this section states that
approved waivers or modifications under this paragraph may be used by
any M+C organization on developing its ACR proposal. Any M+C
organization using a waiver or modification must include that
information in the cover letter of its ACR proposal submission.
The burden associated with this requirement is the time and effort
for the M+C organization to include the information in the cover letter
of its ACR proposal submission. Although this requirement is subject to
the PRA, the burden is minimal; therefore, the burden is captured in
the analysis for Sec. 422.106(c)(1).
Section 422.111(f)(8)(iii)--In this final rule, this section has
been revised to add any reduction in Part B premiums to the list of
information that must be disclosed to each enrollee electing an M+C
plan.
The burden associated with this requirement is the time and effort
for the M+C organization to disclose information to each enrollee
electing an M+C plan. Although this requirement is subject to the PRA,
the burden associated with this requirement is captured in approved
collection 0938-0778.
Section 422.152(f)(4)--We have added this section to reflect the
statutory provision of requiring M+C organizations' quality assurance
programs to have a separate focus on racial and ethnic minorities. We
estimate that it will take each M+C organization approximately 2 hours
to add a separate focus on racial and ethnic minorities to its quality
assurance program. Since there are approximately 150 M+C organizations,
we estimate the annual burden associated with this requirement to be
approximately 300 hours.
Section 422.210(a)(1)--In the final rule, this section states that
each M+C organization must provide to us upon request, descriptive
information about its physician incentive plan in sufficient detail to
enable us to determine whether that plan complies with the requirements
of Sec. 422.208.
This section requires the M+C organization to prepare and submit,
upon request, descriptive information to us. While this requirement is
subject to the PRA, the burden associated with this requirement is
captured in approved collection 0938-0700.
Section 422.266(a)--In this final rule, an M+C organization that
has a contract under subpart K of this part must inform each Medicare
enrollee eligible to select hospice care under Sec. 418.24 of this
chapter about the availability of hospice care (in a manner that
objectively presents all available hospice providers, including a
statement of any ownership interest in a hospice held by the M+C
organization or a related entity).
While this requirement is subject to the PRA, the burden associated
with it is captured in approved collection 0938-0753.
In summary, the total burden hours for this proposed rule is
calculated to be 500 hours. The breakdown is as follows:
Sec. 417.479(h)--burden captured in 0938-0700
Sec. 422.50(a)(2)--burden captured in 0938-0753
Sec. 422.74(d)(4)(i)--burden captured in 0938-0753
Sec. 422.106(c)(1)--200 hours
Sec. 422.106(c)(2)--burden captured in 422.106(c)(1)
Sec. 422.111(f)(8)(iii)--burden captured in 0938-0753
Sec. 422.152(f)(4)--300 hours
Sec. 422.210(a)(1)--burden captured in 0938-0700
Sec. 422.266(a)--burden captured in 0938-0753
0938-0700 is approved for 450 hours and expires on April 30, 2004 and
0938-0753 is approved for 2,120,006 hours and expires on October 31,
2005.
VI. Regulatory Impact Statement
A. Overall Impact
We have examined the impacts of this final rule as required by
Executive Order 12866 (September 1993, Regulatory Planning and Review)
and the Regulatory Flexibility Act (RFA) (September 16, 1980, Pub. L.
96-354). Executive Order 12866 directs 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 annually).
This final rule, which changes M+C regulations in accordance with
provisions set forth in the BIPA, is not a major rule with economically
significant effects as defined in Title 5, U.S.C. section 804(2) and is
not an economically significant rule under Executive Order 12866. This
final rule will result in increases in total expenditures of less than
$100 million per year.
The budgetary impact of section 605 of the BIPA, which mandated
revised ESRD payments, was estimated to be $270 million over the 5
years between FY 2002 to FY 2006, based on the FY 2002 President's
budget. These payments are in the current baseline and have no impact
on the budget. In addition, these provisions have already been
implemented through our 2002 annual payment notice. The additional cash
expenditures for these M+C ESRD beneficiaries under this provision of
the BIPA affected those M+C organizations that enrolled the
approximately 18,000 ESRD beneficiaries in their plans. Additional
expenditures for this provision have been incorporated into the M+C
payment rates from CY 2002 forward.
This estimate assumed continuation of the current restrictions on
enrollment in the M+C program for ESRD beneficiaries. This estimate
also included the impact of adjusting for age and sex and the impact of
raising the ESRD base rates by 3 percent. We estimate that the change
in policy for
[[Page 50854]]
NCDs in this rule adds approximately $48 million per year to the
Federal budget.
The RFA requires agencies to analyze options for regulatory relief
of small businesses. For purposes of the RFA, small entities include
small businesses, nonprofit organizations, and government agencies.
Most hospitals and most other providers and suppliers are small
entities, either by nonprofit status, or by having revenues of between
$6 million and $29 million or less annually. (For details, see the
Small Business Administration publication that sets forth size
standards for health care industries at 65 FR 69432.) Individuals and
States are not included in the definition of small entities.
For purposes of the RFA, most managed care organizations are not
considered to be small entities. We estimate that fewer than 5 out of
177 M+C organization contractors have annual revenues of $7.5 million
or less. Approximately 35 percent of M+C organization contractors have
tax-exempt status, and thus, for purposes of the RFA, are considered to
be small entities. We have examined the economic impact of this final
rule on M+C organizations, including those that are tax-exempt, and,
therefore, small entities. We find that overall the economic impact is
positive, due to the revised ESRD rates mandated by section 605 of the
BIPA, which are generating an increase in payments; the increase in
payments due to the revised policy on NCDs, and the reductions in
regulatory burden due to the premium reductions in section 606, the
waivers of M+C rules specified in section 606 for employers and related
organizations, the waiver of the 3 day hospital stay for SNF
admissions, and the reduction of the physician incentive reporting
requirements. Therefore, we certify that this final rule will not have
a significant impact on a substantial number of small businesses. The
data available do not allow us to determine the distributional effects
of this increase. We have not considered alternatives to lessen the
economic impact or regulatory burden of this final rule because the
regulatory burden is reduced and payment to the plans is increased by
this rule. The major change between the proposed and final rule is the
method for computing a significant national coverage determination.
This change will have a net benefit to M+C organizations. We certify
that this final rule will not have a significant impact on a
substantial number of small entities.
In addition, section 1102(b) of the Act requires us to prepare a
regulatory impact analysis if a final rule has a significant impact on
the operations of a substantial number of small rural hospitals. This
analysis must conform to the provisions of section 604 of the RFA. For
purposes of section 1102(b) of the Act, we define a small rural
hospital as a hospital that is located outside of a Metropolitan
Statistical Area (MSA) and has fewer than 100 beds. Almost 2 percent of
M+C enrollees reside in payment areas outside MSAs. Because information
on the payment terms in contracts between M+C organizations and their
providers is not available, data are not available on the level of this
economic impact.
B. The Unfunded Mandates Act
Section 202 of the Unfunded Mandates Reform Act of 1998 (UMRA)
requires that agencies assess anticipated costs and benefits before
issuing any rule that may result in an expenditure in any 1 year by
State, local, or tribal governments, in the aggregate, or by the
private sector, of $110 million. We have determined, and we certify
that this final rule has no consequential effect on State, local, or
tribal governments.
C. Federalism
Executive Order 13132 establishes certain requirements that an
agency must meet when it promulgates a proposed or final rule that
imposes substantial direct requirement costs on State and local
governments, preempts State law, or otherwise has Federalism
implications. This final rule will impose no direct requirement costs
on State and local government, will not preempt State law, or have any
Federalism implications.
In accordance with the provisions of Executive Order 12866, this
proposed rule was reviewed by the Office of Management and Budget.
List of Subjects
42 CFR Part 409
Health facilities, Medicare.
42 CFR Part 417
Administrative practice and procedure, Grants 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+Choice, Penalties, Privacy,
Provider-sponsored organizations (PSO), Reporting and recordkeeping
requirements.
0
For the reasons set forth in the preamble, the Centers for Medicare &
Medicaid Services amends 42 CFR chapter IV as set forth below:
PART 409--HOSPITAL INSURANCE BENEFITS
0
1. The authority citation for part 409 continues to read as follows:
Authority: Secs. 1102 and 1871 of the Social Security Act (42
U.S.C. 1302 and 1395hh).
Subpart C--Posthospital SNF Care
0
2. In Sec. 409.20, the following amendments are made as set forth
below:
0
a. Paragraph (c)(3) is revised.
0
b. Paragraph (c)(4) is added.
Sec. 409.20 Coverage of services.
* * * * *
(c) * * *
(3) The term swing-bed hospital includes a CAH with swing-bed
approval under subpart F of part 485 of this chapter.
(4) The term post-hospital SNF care includes SNF care that does not
follow a hospital stay when the beneficiary is enrolled in a plan, as
defined in Sec. 422.4 of this chapter, offered by a Medicare+Choice
(M+C) organization, that includes the benefits described in Sec.
422.101(c) of this chapter.
Subpart D--Requirements for Coverage of Posthospital SNF Care
0
3. In Sec. 409.30, paragraph (b)(2) is revised to read as follows:
Sec. 409.30 Basic requirements.
* * * * *
(b) * * *
(2) The following exceptions apply--
(i) A beneficiary for whom posthospital SNF care would not be
medically appropriate within 30 days after discharge from the hospital
or CAH, or a beneficiary enrolled in a Medicare+Choice (M+C) plan, may
be admitted at the time it would be medically appropriate to begin an
active course of treatment.
(ii) If, upon admission to the SNF, the beneficiary was enrolled in
an M+C plan, as defined in Sec. 422.4 of this chapter, offering the
benefits described in Sec. 422.101(c) of this chapter, the beneficiary
will be considered to have met the requirements described in paragraphs
(a) and (b) of this section, and also in Sec. 409.31(b)(2), for the
duration of the SNF stay.
0
4. In Sec. 409.31 paragraph (b)(2)(ii) is revised, and a new paragraph
(b)(2)(iii) is added to read as follows:
[[Page 50855]]
Sec. 409.31 Level of care requirement.
* * * * *
(b) * * *
(2) * * *
(ii) Which arose while the beneficiary was receiving care in a SNF
or swing-bed hospital or inpatient CAH services; or
(iii) For which, for an M+C enrollee described in Sec.
409.20(c)(4), a physician has determined that a direct admission to a
SNF without an inpatient hospital or inpatient CAH stay would be
medically appropriate.
* * * * *
PART 417--HEALTH MAINTENANCE ORGANIZATIONS, COMPETITIVE MEDICAL
PLANS, AND HEALTH CARE PREPAYMENT PLANS
0
5. 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.
Subpart L--Medicare Contract Requirements
Sec. 417.479 [Amended]
0
6. In Sec. 417.479, the following amendments are made as follows:
0
a. In paragraph (g)(2)(ii), the reference in the second sentence to
``(h)(1)(v)'' is removed and ``(h)(2)'' is inserted in its place.
0
b. The heading for paragraph (h) is revised.
0
c. Paragraph (h)(1) is revised.
0
d. Paragraph (h)(2) is revised.
0
e. The introductory text to paragraph (h)(3) is revised.
Sec. 417.479 Requirements for physician incentive plans.
* * * * *
(h) Disclosure and other requirements for organizations with
physician incentive plans. (1) Disclosure to CMS. Each health
maintenance organization or competitive medical plan must provide to
CMS information concerning its physician incentive plans as requested.
(2) Pooling of patients. Pooling of patients is permitted only if--
(i) It is otherwise consistent with the relevant contracts governing
the compensation arrangements for the physician or physician group;
(ii) The physician or physician group is at risk for referral
services with respect to each of the categories of patients being
pooled;
(iii) The terms of the compensation arrangements permit the
physician or physician group to spread the risk across the categories
of patients being pooled;
(iv) The distribution of payments to physicians from the risk pool
is not calculated separately by patient category; and
(v) The terms of the risk borne by the physicians or physician
group are comparable for all categories of patients being pooled.
(3) Disclosure to Medicare beneficiaries. Each health maintenance
organization or competitive medical plan must provide the following
information to any Medicare beneficiary who requests it:
* * * * *
PART 422--MEDICARE+CHOICE PROGRAM
0
7. The authority citation for part 422 continues to read as follows:
Authority: Secs. 1102 and 1871 of the Social Security Act (42
U.S.C. 1302 and 1395hh).
Subpart A--General Provisions
0
8. In Sec. 422.2, the introductory text is republished, and the
definition of Additional benefits is revised to read as follows:
Sec. 422.2 Definitions.
As used in this part--
* * * * *
Additional benefits are health care services not covered by
Medicare, reductions in premiums or cost-sharing for Medicare covered
services, and reductions in the Medicare beneficiary's standard Part B
premium, funded from adjusted excess amounts as calculated in the ACR.
* * * * *
Subpart B--Eligibility, Election, and Enrollment
0
9. In Sec. 422.50, paragraph (a)(2) is revised to read as follows:
Sec. 422.50 Eligibility to elect an M+C plan.
(a) * * *
(2) Has not been medically determined to have end-stage renal
disease, except that--
(i) An individual who develops end-stage renal disease while
enrolled in an M+C plan or in a health plan offered by the M+C
organization is eligible to elect an M+C plan offered by that
organization; and
(ii) An individual with end-stage renal disease whose enrollment in
an M+C plan was terminated or discontinued after December 31, 1998,
because CMS or the M+C organization terminated the M+C organization's
contract for the plan or discontinued the plan in the area in which the
individual resides, is eligible to elect another M+C plan. If the plan
so elected is later terminated or discontinued in the area in which the
individual resides, he or she may elect another M+C plan.
* * * * *
0
10. In Sec. 422.74, the following amendments are made as set forth
below:
0
a. Paragraph (d)(1)(ii) is revised.
0
b. Paragraph (d)(4) is revised.
Sec. 422.74 Disenrollment by the M+C organization.
* * * * *
(d) * * *
(1) * * *
(ii) The M+C organization has not received payment within 90 days
after the date the premium was due.
* * * * *
(d) * * *
(4) Individual no longer resides in the M+C plan's service area.
(i) Basis for disenrollment. Unless continuation of enrollment is
elected under Sec. 422.54, the M+C organization must disenroll an
individual if the M+C organization establishes, on the basis of a
written statement from the individual or other evidence acceptable to
CMS, that the individual has permanently moved--
(A) Out of the M+C plan's service area; or
(B) From the residence in which the individual resided at the time
of enrollment in the M+C plan to an area outside the M+C plan's service
area, for those individuals who enrolled in the M+C plan under the
eligibility requirements at Sec. 422.50(a)(3)(ii) or (a)(4).
(ii) Special rule. If the individual has not moved from the M+C
plan's service area (or residence, as described in paragraph
(d)(4)(i)(B) of this section), but has left the service area (or
residence) for more than 6 months, the M+C organization must disenroll
the individual from the plan, unless the exception in paragraph
(d)(4)(iii) of this section applies.
(iii) Exception. If the M+C plan covers services other than
emergent, urgent, maintenance and poststabilization, and renal dialysis
services (as described in Sec. 422.100(b)(1)(iv) and Sec. 422.113)
when the individual is out of the service area for a period of
consecutive days longer than 6 months but less than 12 months, but
within the United States (as defined in Sec. 400.200 of this chapter),
the M+C organization may elect to offer to the individual the option of
remaining enrolled in the M+C plan if--
(A) The individual is disenrolled on the first day of the 13th
month after the
[[Page 50856]]
individual left the service area (or residence, if paragraph
(d)(4)(i)(B) of this section applies);
(B) The individual understands and accepts any restrictions imposed
by the M+C plan on obtaining these services while absent from the M+C
plan's service area for the extended period; and
(C) The M+C organization makes this option available to all
Medicare enrollees who are absent for an extended period from the M+C
plan's service area. However, M+C organizations may limit this option
to enrollees who travel to certain areas, as defined by the M+C
organization, and who receive services from qualified providers who
directly provide, arrange for, or pay for health care.
(iv) Notice of disenrollment. The M+C organization must give the
individual a written notice of the disenrollment that meets the
requirements set forth in paragraph (c) of this section.
* * * * *
Subpart C--Benefits and Beneficiary Protections
0
11. In Sec. 422.101, the following amendments are made as follows:
0
a. Paragraph (b)(3) is revised.
0
b. Paragraph (c) is added.
Sec. 422.101 Requirements relating to basic benefits.
* * * * *
(b) * * *
(3) Written coverage decisions of local carriers and intermediaries
with jurisdiction for claims in the geographic area in which services
are covered under the M+C organization. If an M+C organization covers
geographic areas encompassing more than one local coverage policy area,
the M+C organization may elect to uniformly apply to plan enrollees in
all areas the coverage policy that is the most beneficial to M+C
enrollees. M+C organizations that elect this option must notify CMS
before selecting the area that has local coverage policies that are
most beneficial to M+C enrollees as follows:
(i) An M+C organization electing to adopt a uniform local coverage
policy for a plan or plans must notify CMS at least 60 days before the
date specified in Sec. 422.306(a), which is 60 days before the date
adjusted community rate proposals are due for the subsequent year. Such
notice must identify the plan or plans and service area or services
areas to which the uniform local coverage policy or policies will
apply, the competing local coverage policies involved, and a
justification explaining why the selected local coverage policy or
policies are most beneficial to M+C enrollees.
(ii) CMS will review notices provided under paragraph (b)(3)(i) of
this section, evaluate the selected local coverage policy or policies
based on such factors as cost, access, geographic distribution of
enrollees, and health status of enrollees, and notify the M+C
organization of its approval or denial of the selected uniform local
coverage policy or policies.
(c) M+C organizations may elect to furnish, as part of their
Medicare covered benefits, coverage of posthospital SNF care as
described in subparts C and D of this part, in the absence of the prior
qualifying hospital stay that would otherwise be required for coverage
of this care.
0
12. In Sec. 422.106, the following amendments are made as follows:
0
a. The section heading is revised.
0
b. Paragraphs (a) introductory text, (a)(1), and (a)(2) are revised.
0
c. Paragraph (b) introductory text is revised.
0
d. A new paragraph (c) is added.
Sec. 422.106 Coordination of benefits with employer or union group
health plans and Medicaid.
(a) General rule. If an M+C organization contracts with an
employer, labor organization, or the trustees of a fund established by
one or more employers or labor organizations that cover enrollees in an
M+C plan, or contracts with a State Medicaid agency to provide Medicaid
benefits to individuals who are eligible for both Medicare and
Medicaid, and who are enrolled in an M+C plan, the enrollees must be
provided the same benefits as all other enrollees in the M+C plan, with
the employer, labor organization, fund trustees, or Medicaid benefits
supplementing the M+C plan benefits. Jurisdiction regulating benefits
under these circumstances is as follows:
(1) All requirements of this part that apply to the M+C program
apply to the M+C plan coverage and benefits provided to enrollees
eligible for benefits under an employer, labor organization, trustees
of a fund established by one or more employers or labor organizations,
or Medicaid contract.
(2) Employer benefits that complement an M+C plan, which are not
part of the M+C plan, are not subject to review or approval by CMS.
* * * * *
(b) Examples. Permissible employer, labor organization, benefit
fund trustee, or Medicaid plan benefits include the following:
* * * * *
(c) Waiver or modification. (1) M+C organizations may request, in
writing, from CMS, a waiver or modification of those requirements in
this part that hinder the design of, the offering of, or the enrollment
in, M+C plans under contracts between M+C organizations and employers,
labor organizations, or the trustees of funds established by one or
more employers or labor organizations to furnish benefits to the
entity's employees, former employees, or members or former members of
the labor organizations.
(2) Approved waivers or modifications under this paragraph may be
used by any M+C organization in developing its Adjusted Community Rate
(ACR) proposal. Any M+C organization using a waiver or modification
must include that information in the cover letter of its ACR proposal
submission.
0
13. Section 422.109 is revised to read as follows:
Sec. 422.109 Effect of national coverage determinations (NCDs) and
legislative changes in benefits.
(a) Definitions. The term significant cost, as it relates to a
particular NCD or legislative change in benefits, means either of the
following:
(1) The average cost of furnishing a single service exceeds a cost
threshold that--
(i) For calendar years 1998 and 1999, is $100,000; and
(ii) For calendar year 2000 and subsequent calendar years, is the
preceding year's dollar threshold adjusted to reflect the national per
capita growth percentage described in Sec. 422.254(b).
(2) The estimated cost of all Medicare services furnished as a
result of a particular NCD or legislative change in benefits represents
at least 0.1 percent of the national standardized annual capitation
rate, as described in Sec. 422.254(f), multiplied by the total number
of Medicare beneficiaries for the applicable calendar year. For
purposes of Sec. 422.256 only, this test is applied to all NCDs or
legislative changes in benefits, in the aggregate, for a given year. If
the sum of the average cost of each NCD or legislative change in
benefits exceeds the amount in paragraph (a)(1) of this section, or the
aggregate costs of all NCDs and legislative changes for a year exceeds
the percentage in paragraph (a)(2) of this section, the costs are
considered ``significant.''
(b) General rule. If CMS determines and announces that an
individual NCD or legislative change in benefits meets the criteria for
significant cost described
[[Page 50857]]
in paragraph (a) of this section, a M+C organization is not required to
assume risk for the costs of that service or benefit until the contract
year for which payments are appropriately adjusted to take into account
the cost of the NCD service or legislative change in benefits. If CMS
determines that an NCD or legislative change in benefits does not meet
the ``significant cost'' threshold described in Sec. 422.109(a), the
M+C organization is required to provide coverage for the NCD or
legislative change in benefits and assume risk for the costs of that
service or benefit as of the effective date stated in the NCD or
specified in the legislation.
(c) Before payment adjustments become effective. Before the
contract year that payment adjustments that take into account the
significant cost of the NCD service or legislative change in benefits
become effective, the service or benefit is not included in the M+C
organization's contract with CMS, and is not a covered benefit under
the contract. The following rules apply to these services or benefits:
(1) Medicare payment for the service or benefit is made directly by
the fiscal intermediary and carrier to the provider furnishing the
service or benefit in accordance with original Medicare payment rules,
methods, and requirements.
(2) Costs for NCD services or legislative changes in benefits for
which CMS intermediaries and carriers will not make payment and are the
responsibility of the M+C organization are--
(i) Services necessary to diagnose a condition covered by the NCD
or legislative changes in benefits;
(ii) Most services furnished as follow-up care to the NCD service
or legislative change in benefits;
(iii) Any service that is already a Medicare-covered service and
included in the annual M+C capitation rate or previously adjusted
payments; and
(iv) Any service, including the costs of the NCD service or
legislative change in benefits, to the extent the M+C organization is
already obligated to cover it as an additional benefit under Sec.
422.312 or supplemental benefit under Sec. 422.102.
(3) Costs for significant cost NCD services or legislative changes
in benefits for which CMS fiscal intermediaries and carriers will make
payment are--
(i) Costs relating directly to the provision of services related to
the NCD or legislative change in benefits that were noncovered services
before the issuance of the NCD or legislative change in benefits; and
(ii) A service that is not included in the M+C capitation payment
rate.
(4) Beneficiaries are liable for any applicable coinsurance
amounts.
(d) After payment adjustments become effective. For the contract
year in which payment adjustments that take into account the
significant cost of the NCD service or legislative change in benefits
are in effect, the service or benefit is included in the M+C
organization's contract with CMS, and is a covered benefit under the
contract. Subject to all applicable rules under this part, the M+C
organization must furnish, arrange, or pay for the NCD service or
legislative change in benefits. M+C organizations may establish
separate plan rules for these services and benefits, subject to CMS
review and approval. CMS may, at its discretion, issue overriding
instructions limiting or revising the M+C plan rules, depending on the
specific NCD or legislative change in benefits. For these services or
benefits, the Medicare enrollee will be responsible for M+C plan cost
sharing, as approved by CMS or unless otherwise instructed by CMS.
0
14. In Sec. 422.111, a new paragraph (f)(8)(iii) is added to read as
follows:
Sec. 422.111 Disclosure requirements.
* * * * *
(f) * * *
(8) * * *
(iii) The reduction in Part B premiums, if any.
* * * * *
0
15. A new Sec. 422.133 is added to subpart C to read as follows:
Sec. 422.133 Return to home skilled nursing facility.
(a) General rule. M+C plans must provide coverage of posthospital
extended care services to Medicare enrollees through a home skilled
nursing facility if the enrollee elects to receive the coverage through
the home skilled nursing facility, and if the home skilled nursing
facility either has a contract with the M+C organization or agrees to
accept substantially similar payment under the same terms and
conditions that apply to similar skilled nursing facilities that
contract with the M+C organization.
(b) Definitions. In this subpart, home skilled nursing facility
means--
(1) The skilled nursing facility in which the enrollee resided at
the time of admission to the hospital preceding the receipt of
posthospital extended care services;
(2) A skilled nursing facility that is providing posthospital
extended care services through a continuing care retirement community
in which the M+C plan enrollee was a resident at the time of admission
to the hospital. A continuing care retirement community is an
arrangement under which housing and health-related services are
provided (or arranged) through an organization for the enrollee under
an agreement that is effective for the life of the enrollee or for a
specified period; or
(3) The skilled nursing facility in which the spouse of the
enrollee is residing at the time of discharge from the hospital.
(c) Coverage no less favorable. The posthospital extended care
scope of services, cost-sharing, and access to coverage provided by the
home skilled nursing facility must be no less favorable to the enrollee
than posthospital extended care services coverage that would be
provided to the enrollee by a skilled nursing facility that would be
otherwise covered under the M+C plan.
(d) Exceptions. The requirement to allow an M+C plan enrollee to
elect to return to the home skilled nursing facility for posthospital
extended care services after discharge from the hospital does not do
the following:
(1) Require coverage through a skilled nursing facility that is not
otherwise qualified to provide benefits under Part A for Medicare
beneficiaries not enrolled in the M+C plan.
(2) Prevent a skilled nursing facility from refusing to accept, or
imposing conditions on the acceptance of, an enrollee for the receipt
of posthospital extended care services.
Subpart D--Quality Assurance
0
16. In Sec. 422.152, a new paragraph (f)(4) is added to read as
follows:
Sec. 422.152 Quality assessment and performance improvement program.
* * * * *
(f) * * *
(4) Focus on racial and ethnic minorities. The M+C organization's
Quality Assurance program must include a separate focus on racial and
ethnic minorities.
Subpart E--Relationships With Providers
0
17. In Sec. 422.202, paragraph (a)(4) is revised to read as follows:
Sec. 422.202 Participation procedures.
(a) * * *
(4) A process for appealing adverse participation procedures,
including the right of physicians to present information and their
views on the decision. In the case of termination or suspension of a
provider contract by the
[[Page 50858]]
M+C organization, this process must conform to the rules in Sec.
422.202(d).
0
18. In Sec. 422.210, paragraph (a) and the introductory text to
paragraph (b) are revised to read as follows:
Sec. 422.210 Disclosure of physician incentive plans.
(a) Disclosure to CMS. Each M+C organization must provide to CMS
information concerning its physician incentive plans as requested.
(b) Disclosure to Medicare beneficiaries. Each M+C organization
must provide the following information to any Medicare beneficiary who
requests it:
* * * * *
Subpart F--Payments to Medicare+Choice Organizations
0
19. In Sec. 422.250, the following amendments are made as follows:
0
a. Paragraph (a)(1) is revised.
0
b. Paragraph (a)(2)(i)(B) is redesignated as (a)(2)(i)(C).
0
c. A new paragraph (a)(2)(i)(B) is added.
Sec. 422.250 General provisions.
(a) Monthly payments--(1) General rule. (i) Except as provided in
paragraphs (a)(2) or (f) of this section, CMS makes advance monthly
payments equal to 1/12th of the annual M+C capitation rate for the
payment area described in paragraph (c) of this section adjusted for
such demographic risk factors as an individual's age, disability
status, sex, institutional status, and other factors as it determines
to be appropriate to ensure actuarial equivalence.
(ii) Effective January 1, 2000, CMS adjusts for health status as
provided in Sec. 422.256(c). When the new risk adjustment is
implemented, 1/12th of the annual capitation rate for the payment area
described in paragraph (c) of this section will be adjusted by the risk
adjustment methodology under Sec. 422.256(d).
(iii) Effective January 1, 2003, monthly payments may be reduced by
the adjusted excess amount, as described in Sec. 422.312(a)(2), and 80
percent of the reduction in monthly payments used to reduce the
Medicare beneficiary's Part B premium, up to a total of 125 percent of
Part B premium amount.
(2) * * *
(i) * * *
(B) CMS applies appropriate adjustments when establishing the
rates, including risk adjustment factors. CMS also establishes annual
changes in capitation rates using the methodology described in Sec.
422.252. Effective 2002, a special adjustment is made to increase ESRD
rates to 100 percent of estimated per capita fee-for-service
expenditures and rates are adjusted for age and sex. In subsequent
years, rates are adjusted for age, sex, and other factors, if
appropriate.
* * * * *
0
20. In Sec. 422.256, paragraph (b) is revised to read as follows:
Sec. 422.256 Adjustments to capitation rates and aggregate payments.
* * * * *
(b) Adjustment for national coverage determination (NCD) services
and legislative changes in benefits. If CMS determines that the cost of
furnishing an NCD service or legislative change in benefits is
significant, as defined in Sec. 422.109, CMS will adjust capitation
rates or make other payment adjustments, to account for the cost of the
service or legislative change in benefits. Until the new capitation
rates are in effect, the M+C organization will be paid for the
significant cost NCD service or legislative change in benefits on a
fee-for-service basis as provided under Sec. 422.109(b). The Office of
the Actuary in CMS will apply a new NCD adjustment factor each year
that reflects significant costs of NCDs and legislative changes in
benefits for coverage effective in the second prior year. The new NCD
adjustment factor will be applied to the 2 percent minimum update rate
described in Sec. 422.252(c).
* * * * *
0
21. In Sec. 422.266, the following amendments are made as follows:
0
a. Paragraph (a) introductory text is revised.
0
b. Paragraph (c) is revised.
Sec. 422.266 Special rules for hospice care.
(a) Information. An M+C organization that has a contract under
subpart K of this part must inform each Medicare enrollee eligible to
select hospice care under Sec. 418.24 of this chapter about the
availability of hospice care (in a manner that objectively presents all
available hospice providers, including a statement of any ownership
interest in a hospice held by the M+C organization or a related entity)
if--
* * * * *
(c) Payment. (1) No payment is made to an M+C organization on
behalf of a Medicare enrollee who has elected hospice care under Sec.
418.24 of this chapter except for the portion of the payment applicable
to the additional benefits described in Sec. 422.312. This no-payment
rule is effective from the first day of the month following the month
of election to receive hospice care, until the first day of the month
following the month in which the election is terminated.
(2) During the time the hospice election is in effect, CMS's
monthly capitation payment to the M+C organization is reduced to an
amount equal to the adjusted excess amount determined under Sec.
422.312. In addition, CMS pays through the original Medicare program
(subject to the usual rules of payment)--
(i) The hospice program for hospice care furnished to the Medicare
enrollee; and
(ii) The M+C organization, provider, or supplier for other
Medicare-covered services to the enrollee.
Subpart G--Premiums and Cost-Sharing
0
22. In Sec. 422.312, the following amendments are made as follows:
0
a. Paragraph (d) is redesignated as paragraph (e).
0
b. A new paragraph (d) is added.
Sec. 422.312 Requirement for additional benefits.
* * * * *
(d) Reduction in payments. As of January 1, 2003, as a part of
providing additional benefits under paragraph (b) of this section, if
there is an adjusted excess amount for the plan it offers, the M+C
organization--
(1) May elect to receive a reduction (not to exceed 125 percent of
the standard Part B premium amount) in its payments under Sec.
422.250(a)(1), 80 percent of which will be applied to reduce the Part B
premiums of its Medicare enrollees; and
(2) Must apply the reduction uniformly to all similarly situated
enrollees of the M+C plan.
* * * * *
Subpart K--Contracts With Medicare+Choice Organizations
0
23. A new Sec. 422.521 is added as set forth below:
Sec. 422.521 Effective date of new significant regulatory
requirements.
CMS will not implement, other than at the beginning of a calendar
year, requirements under this part that impose a new significant cost
or burden on M+C organizations or plans, unless a different effective
date is required by statute.
Subpart M--Grievances, Organization Determinations and Appeals
0
24. In Sec. 422.566, paragraph (c) is revised to read as set forth
below:
[[Page 50859]]
Sec. 422.566 Organization determinations.
* * * * *
(c) Who can request an organization determination. (1) Those
individuals or entities who can request an organization determination
are--
(i) The enrollee (including his or her authorized representative);
(ii) Any provider that furnishes, or intends to furnish, services
to the enrollee; or
(iii) The legal representative of a deceased enrollee's estate.
(2) Those who can request an expedited determination are--
(i) An enrollee (including his or her authorized representative);
or
(ii) A physician (regardless of whether the physician is affiliated
with the M+C organization).
0
25. In Sec. 422.618, paragraph (c) is revised to read as set forth
below:
Sec. 422.618 How an M+C organization must effectuate standard
reconsidered determinations or decisions.
* * * * *
(c) Reversals other than by the M+C organization or the independent
outside entity.--(1) General rule. If the independent outside entity's
determination is reversed in whole or in part by the ALJ, or at a
higher level of appeal, the M+C organization must pay for, authorize,
or provide the service under dispute as expeditiously as the enrollee's
health condition requires, but no later than 60 calendar days from the
date it receives notice reversing the determination. The M+C
organization must inform the independent outside entity that the
organization has effectuated the decision or that it has appealed the
decision.
(2) Effectuation exception when the M+C organization files an
appeal with the Departmental Appeals Board. If the M+C organization
requests Departmental Appeals Board (the Board) review consistent with
Sec. 422.608, the M+C organization may await the outcome of the review
before it pays for, authorizes, or provides the service under dispute.
A M+C organization that files an appeal with the Board must
concurrently send a copy of its appeal request and any accompanying
documents to the enrollee and must notify the independent outside
entity that it has requested an appeal.
0
26. In Sec. 422.619, paragraph (c) is revised to read as set forth
below:
Sec. 422.619 How a M+C organization must effectuate expedited
reconsidered determinations.
* * * * *
(c) Reversals other than by the M+C organization or the independent
outside entity.--(1) General rule. If the independent outside entity's
expedited determination is reversed in whole or in part by the ALJ, or
at a higher level of appeal, the M+C organization must authorize or
provide the service under dispute as expeditiously as the enrollee's
health condition requires, but no later than 60 days from the date it
receives notice reversing the determination. The M+C organization must
inform the independent outside entity that the organization has
effectuated the decision.
(2) Effectuation exception when the M+C organization files an
appeal with the Departmental Appeals Board. If the M+C organization
requests Departmental Appeals Board (the Board) review consistent with
Sec. 422.608, the M+C organization may await the outcome of the review
before it authorizes or provides the service under dispute. A M+C
organization that files an appeal with the Board must concurrently send
a copy of its appeal request and any accompanying documents to the
enrollee and must notify the independent outside entity that it has
requested an appeal.
Subpart O--Intermediate Sanctions
0
27. In Sec. 422.756, the following amendments are made as set forth
below:
0
a. Paragraph (f)(2) is revised.
0
b. Paragraph (f)(3) is revised.
Sec. 422.756 Procedures for imposing sanctions.
* * * * *
(f) * * *
(2) In the case of a violation described in paragraph (a) of Sec.
422.752, or a determination under paragraph (b) of Sec. 422.752 based
upon a violation under Sec. 422.510(a)(4) (involving fraudulent or
abusive activities), in accordance with the provisions of part 1005 of
this title, the OIG may impose civil money penalties on the M+C
organization in accordance with part 1005 of this title in addition to,
or in place of, the sanctions that CMS may impose under paragraph (c)
of this section.
(3) In the case of a determination under paragraph (b) of Sec.
422.752 other than a determination based upon a violation under Sec.
422.510(a)(4), in accordance with the provisions of part 1005 of this
title, CMS may impose civil money penalties on the M+C organization in
the amounts specified in Sec. 422.758 in addition to, or in place of,
the sanctions that CMS may impose under paragraph (c) of this section.
0
28. In Sec. 422.758, the following amendments are made as set forth
below:
0
a. The introductory text is designated as paragraph (a) introductory
text.
0
b. Paragraph (a) is redesignated as paragraph (a)(1) and is revised.
0
c. Paragraph (b) is redesignated as paragraph (a)(2) and is revised.
0
d. A new paragraph (b) is added.
Sec. 422.758 Maximum amount of civil money penalties imposed by CMS.
(a) * * *
(1) For the violations listed below, CMS may impose the sanctions
specified in Sec. 422.750(a)(2), (a)(3), or (a)(4) on any M+C
organization that has a contract in effect. The M+C organization may
also be subject to other applicable remedies available under law.
(2) For each week that a deficiency remains uncorrected after the
week in which the M+C organization receives CMS's notice of the
determination--up to $10,000.
(b) If CMS makes a determination under Sec. 422.752(b) and Sec.
422.756(f)(3), based on a determination under Sec. 422.510(a)(1) that
an M+C organization has terminated its contract with CMS in a manner
other than described under Sec. 422.512--$250 per Medicare enrollee
from the terminated M+C plan or plans at the time the M+C organization
terminated its contract, or $100,000, whichever is greater.
(Catalog of Federal Domestic Assistance Program No. 93.773,
Medicare--Hospital Insurance; and Program No. 93.774, Medicare--
Supplementary Medical Insurance Program)
Dated: April 3, 2003.
Thomas A. Scully,
Administrator, Centers for Medicare & Medicaid Services.
Dated: June 3, 2003.
Tommy G. Thompson,
Secretary.
[FR Doc. 03-20995 Filed 8-13-03; 3:19 pm]
BILLING CODE 4120-01-P