[Federal Register: January 28, 2005 (Volume 70, Number 18)]
[Rules and Regulations]
[Page 4587-4741]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr28ja05-29]
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Part III
Department of Health and Human Services
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Centers for Medicare & Medicaid Services
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42 CFR Parts 417 and 422
Medicare Program; Establishment of the Medicare Advantage Program;
Final Rule
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Parts 417 and 422
CMS-4069-F
RIN 0938-AN06
Medicare Program; Establishment of the Medicare Advantage Program
AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.
ACTION: Final rule.
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SUMMARY: This final rule implements provisions of the Social Security
Act (the Act) establishing and regulating the Medicare Advantage (MA)
program. The MA program was enacted in Title II of The Medicare
Prescription Drug, Improvement, and Modernization Act of 2003 (MMA)
(Pub. L. 108-173) on December 8, 2003. The MA program replaces the
Medicare+Choice (M+C) program established under Part C of title XVIII
of the Act, while retaining most key features of the M+C program.
The MA program attempts to broadly reform and expand the
availability of private health plan options to Medicare beneficiaries.
This final rule responds to public comments on a proposed rule
published on August 3, 2004 (FR 69 46866).
EFFECTIVE DATE: These regulations are effective March 22, 2005 except
for the following changes which will become effective on January 1,
2006: amendment of Sec. 417.600(b); removal of Sec. 417.602 through
Sec. 417.638; and amendments to Sec. 417.832(d); and Sec. 417.840.
FOR FURTHER INFORMATION CONTACT: Eligibility, Election, and
Enrollment--Lynn Orlosky, 410-786-9064 or Randy Brauer, (410) 786-1618.
Benefits and Beneficiary Protections--Frank Szeflinski, 303-844-
7119.
Quality Improvement Program--Tony Hausner, 410-786-1093.
Submission of Bids, Premiums, and Plan Approval--Anne Hornsby, 410-
786-1181.
Payments to MA Organizations--Anne Hornsby, 410-786-1181.
Special Rules for MA Regional Plans--Marty Abeln, 410-786-1032.
Contracts with MA Organizations--Mark Smith, 410-786 8015.
Beneficiary Appeals--Chris Gayhead, 410-786-6429.
General Information--410-786-1296.
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Table of Contents
I. Background
A. Medicare Prescription Drug, Improvement, and Modernization Act
of 2003
B. Relevant Legislation
1. Balanced Budget Act of 1997
2. Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of
1999 and the Medicare, Medicaid, and SCHIP Benefits Improvement and
Protection Act of 2000
3. Medicare Prescription Drug, Improvement, and Modernization Act
of 2003 (MMA)
C. Codification of Regulations
D. Organizational Overview of Part 422
II. Analysis of and Responses to Public Comments
A. Overview
1. Comments on the August 3, 2004 Proposed Rule
2. Organization of the Final Rule
B. General Comments
1. Administrative Procedure Act (APA) Issues
2. Other General Comments
III. Provisions of the Proposed Rule, Analysis of and Responses to
Comments on the Proposed Rule, and Final Decisions
IV. Provisions of the Final Rule
V. Collection of Information Requirements
VI. Regulatory Impact Analysis
Regulations Text
Acronyms
Because of the many terms to which we refer by acronym in this
final rule, we are listing the acronyms used and their corresponding
terms in alphabetical order below:
ABN Advance beneficiary notice
ACR Adjusted Community Rate
ACRP Adjusted Community Rate Proposal
ADL Activities of Daily Living
AHRQ Agency for Healthcare Research and
Quality
AI/AN American Indian and Alaska Native
ALJ Administrative law judge
APA Administrative Procedure Act
BBA Balanced Budget Act of 1997
BBRA Medicare, Medicaid and SCHIP [State
Children's Health Insurance
Program] Balanced Budget Refinement
Act of 1999, (Pub. L. 106-113)
BIPA Medicare, Medicaid, and SCHIP
Benefits Improvement and Protection
Act of 2000 (Pub L. 105-33)
CAH Critical Access Hospitals
CCPs Coordinated Care Plans
CMPs Competitive Medical Plans
CORF Comprehensive outpatient
rehabilitation facility
DSH Disproportionate Share Hospital
EGPH Employer and Union Group Health
Plans
EOC Evidence of coverage
ESRD End-Sage Renal Disease
FEHB Federal Employees Health Benefits
FFS Fee-for-Service plans
FI Fiscal Intermediaries
HCPP Health care prepayment plan
HHA Home health agency
HMO Health Maintenance Organizations
HOS Health Outcomes Survey
ICF/MR Intermediate Care Facilities for
Mentally Retarded
IHS Indian Health Service
IPA Independent Physician Association
ISAR Intra-Service Area Rate
I/T/U Indian Health Service, Tribal and
Urban Health Program
LEP Limited English Proficiency
LMRP Local Medical Review Policy
M+C Medicare+Choice
MA Medicare Advantage
MA-PD Medicare Advantage Prescription Drug
MAC Medicare Appeals Council
MCOs Managed Care Organizations
MMA Medicare Prescription Drug,
Improvement, and Modernization Act
of 2003
MSA Medical Savings Account
MYBE Mid-year Benefit Enhancement
OACT Office of the Actuary
OPM Office of Personnel Management
PACE Program All-Inclusive Care for the
Elderly
P4P Pay for Performance
PCP Primary Care Physician
PDP Prescription Drug Plan
PFFS Private Fee-For-Service
POS Point of Service
PPOs Preferred Provider Organizations
PSOs Provider Sponsored Organizations
QI Quality Improvement
QIO Quality Improvement Organization
RFB Religious Fraternal Benefit
SAE Service Area Expansion
SEP Special Election Period
SHIP State Health Insurance Programs
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SNF Skilled Nursing Facility
SNPs Special Needs Plans
I. Background
A. Medicare Prescription Drug, Improvement, and Modernization Act of
2003
The Medicare Prescription Drug, Improvement, and Modernization Act
of 2003 (MMA) (Pub. L. 108-173) was enacted on December 8, 2003. Title
II of the MMA makes important changes to the current Medicare+Choice
(M+C) program by replacing it with a new Medicare Advantage (MA)
program under Part C of Medicare. On August 3, 2004, we published a
proposed rule in the Federal Register (69 FR 46866) that set forth the
provisions that would implement Title II of the MMA. Beginning in 2006,
the MA program is designed to:
Provide for regional plans that may make private plan
options available to many more beneficiaries, especially those in rural
areas.
Expand the number and type of plans provided for, so that
beneficiaries can choose from Health Maintenance Organizations (HMOs),
Preferred Provider Organization (PPO) plans (the most popular type of
employer-sponsored plan), Fee-for-Service (FFS) plans, and Medical
Savings Account (MSA) plans, if available where the beneficiary lives.
Enrich the range of benefit choices available to enrollees
including improved prescription drug benefits, other benefits not
covered by original Medicare, and the opportunity to share in savings
where MA plans can deliver benefits at lower costs.
Provide incentives to plans, and add specialized plans to
coordinate and manage care in ways that comprehensively serve those
with complex and disabling diseases and conditions.
Use open season competition among MA plans to
improve service, improve benefits, invest in preventive care, and
hold costs down in ways that attract enrollees.
Enhance and stabilize payments to organizations, improve
program design, introduce new flexibility for plans, and reduce
impediments to plan participation.
Advance the goal of improving quality and increasing
efficiency in the overall health care system. Medicare is the
largest payer of health care in the world. Medicare can drive changes
in the entire health care system.
With these new and improved choices, Medicare beneficiaries, like
Federal employees and retirees in the Federal Employees Health Benefits
(FEHB) Program, will have the opportunity to obtain improved benefits,
improved services, and reduced costs. However, beneficiaries will still
be able to remain in traditional Medicare (referred to throughout as
``original'' Medicare), enhanced by the new Part D drug benefit. All
will have the opportunity to switch among plans, or to or from original
Medicare, during the annual election period (or ``open season'') in
November and December.
Over time, participating plans will be under continued competitive
pressure to improve their benefits, reduce their premiums and cost
sharing, and improve their networks and services, in order to gain or
retain enrollees. In addition, we expect plans to use integrated health
plan approaches such as disease prevention, disease management, and
other care coordination techniques. In doing so, integrated plans that
combine the original Parts A and B of Medicare and the new Part D drug
benefit and apply these innovative techniques must pass on savings that
may result from these care coordination techniques to the enrollee
through reduced premiums or additional benefits.
Beginning in 2006, payments for local and regional MA plans will be
based on competitive bids rather than administered pricing. MA
organizations will submit an annual aggregate bid amount for each MA
plan. An aggregate plan bid is based upon the MA organization's
determination of expected costs in the plan's service area for the
national average beneficiary for providing non-drug benefits (that is,
original Medicare (Part A and Part B) benefits), Part D basic
prescription drugs, and supplemental benefits if any (including
reductions in cost sharing). Our payment to an MA organization for an
MA plan's coverage of original Medicare benefits depends on the
relationship of the plan's basic A/B bid to the plan benchmark. For a
plan with a basic A/B bid below its benchmark, we will pay the MA
organization the basic A/B bid amount, adjusted by the individual
enrollee's risk factor, plus the rebate amount. (The rebate is 75
percent of the difference between the plan bid and benchmark, and is
used to provide mandatory supplemental benefits or reductions in Part B
or Part D premiums. The government retains the other 25 percent.) For a
plan with a bid equal to or above its benchmark, we will pay the MA
organization the plan benchmark, adjusted by the individual enrollee's
risk factor. In addition, we would pay the bid amount, if any, for Part
D basic coverage. The MMA also requires other adjustments to payments.
See the subpart G preamble for a discussion of the geographic Intra-
Service Area Rate (ISAR) adjustment and the government premium
adjustment (referred to in the MMA as the ``adjustment relating to risk
adjustment'').
We will be able to negotiate bid amounts with plans in a manner
similar to negotiations conducted by the Office of Personnel
Management(OPM) with FEHB plans. We will work with plans to ensure
benefit packages meet the needs of our population and that information
is made available to beneficiaries so that they can make decisions
about which plans best meet their needs.
Finally, in conjunction with the new drug benefit required under
Title I of MMA, which is addressed in separate rulemaking found in part
423, changes made in the MMA to the M+C program (now called the MA
program) are intended to bring about broad-based improvements to the
Medicare program's benefit structure, including improved prescription
drug coverage under the MA program. Organizations offering local and
regional coordinated care MA plans must offer at least one plan with
the Medicare prescription drug benefit or an actuarially equivalent
drug benefit.
In addition to the changes because of the MMA, we identified many
areas in the proposed rule where we believed we could prevent or reduce
unnecessary burden, duplication, or complexity either in interpreting
the new MMA provisions or in modifying existing rules to accommodate MA
reforms.
B. Relevant Legislation
1. 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
Medicare Part B, except for individuals with end-stage renal disease
(ESRD), could elect to receive benefits either through the original
Medicare program or an M+C plan, if one was offered where he or she
lived.
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
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us to contract with private organizations offering a variety of private
health plan options for beneficiaries, including both traditional
managed care plans (such as those offered by HMOs that had been offered
under section 1876 of the Act), and new options that were not
previously authorized. Four types of M+C plans were authorized under
the new Part C, as follows:
M+C coordinated care plans, including HMOs (with or
without point-of-service options (POS)), provider sponsored
organizations (PSOs), and PPOs.
M+C MSA plans (combinations of a high deductible M+C
health insurance plan and a contribution to an M+C MSA).
M+C private fee-for-service (PFFS) plans.
M+C religious and fraternal benefit (RFBs)plans.
The BBA changed the payment methodology to Medicare health plans
and initially afforded beneficiaries more choice of plans nationally.
However, payment rates grew modestly in relation to the costs health
plans incurred, resulting in fewer health plans participating in the
M+C program, decreased choice of plans available to beneficiaries, and
fewer extra benefits available to enrollees. Although there were large
payment increases in rural areas as a result of the BBA provisions,
access to Medicare coordinated care plans declined significantly in
rural areas after 1997.
To implement these changes, we published an interim final rule in
the Federal Register on June 26, 1998 (63 FR 34968); a final rule on
February 17, 1999 (64 FR 7968); and a final rule with comment on June
29, 2000 (65 FR 40170).
2. Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 1999
and the Medicare, Medicaid, and SCHIP Benefits Improvement and
Protection Act of 2000
The Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of
1999, Pub. L. 106-113 (BBRA) amended the M+C provisions of the BBA.
Many of these amendments were reflected in the June 29, 2000 final rule
with comment period. In addition, the Medicare, Medicaid, and SCHIP
Benefits Improvement and Protection Act of 2000, Pub. L. 106-554
(BIPA), enacted December 21, 2000, further amended the M+C provisions
of the BBA and BBRA. A final rule containing BIPA provisions was
published in the Federal Register on March 22, 2002 (67 FR 13278), as
well as on August 22, 2003 (68 FR 50855).
These laws enacted subsequent to the BBA made incremental changes
to M+C payments and provided financial incentives to plans to
participate in the M+C program. While these efforts helped stabilize
the M+C program, they did not generally improve plan participation in
the M+C program nor did they increase overall beneficiary enrollment or
access to plans in rural areas.
3. Medicare Prescription Drug, Improvement, and Modernization Act of
2003 (MMA)
The specific sections of Part C of the Social Security Act that
were impacted by the MMA are as follows:
Section 1851--Eligibility, election and enrollment.
Section 1852--Benefits and beneficiary protections.
Section 1853--Payments to MA organizations.
Section 1854--Premiums.
Section 1855--Organizational and financial requirements for MA
organizations.
Section 1856--Establishment of standards.
Section 1857--Application procedures and contracts with MA
organizations.
Section 1858--Special rules for MA regional plans [added by the
MMA].
Section 1859--Definitions; Miscellaneous provisions.
This final rule addresses the new MA provisions in Title II of MMA.
The requirement in 1858(a)(2)(D) of the Act to conduct a market survey
and analysis before establishing MA regions took place concurrent with
the publication of the MA proposed rules. The announcement of the
establishment of the MA and Prescription Drug Plan (PDP) regions
occurred on December 6, 2004. The regions may be found at http://cms.hhs.gov/medicarereform/mmaregions
.
Provisions of the MMA addressed in this final rule outside of Title
II of the MMA include Section 722--Medicare Advantage Quality
Improvement Program, of Title VII. Quality improvement provisions in
this final rule may be found under Subpart D--Quality Assurance.
C. Codification of Regulations
The final provisions set forth here are codified in 42 CFR Part
422, The Medicare Advantage Program.
The regulations for managed care organizations (MCOs) that contract
with CMS under cost contracts will continue to be located in 42 CFR
part 417, Health Maintenance Organizations, Competitive Medical Plans,
and Health Care Prepayment Plans.
D. Organizational Overview of Part 422
The MMA amended the existing provisions of the Medicare statute
found in Part C of Title XVIII, sections 1851 through 1859 of the Act,
and added a new section 1858 to the Act. This final rule covers a wide
range of topics included in the existing part 422, including
eligibility and enrollment, benefits and beneficiary protections,
payment, contracting requirements, and grievances and appeals. We have
generally retained the organization of the sections from part 422,
except for reordering subparts F and G to place the bidding and payment
provisions in sequential order.
Where the MMA did not amend existing statute, this final rule does
not set forth unchanged regulations text from the previous part 422.
Thus, this final rule contains only the necessary revisions to existing
part 422. In some subparts of part 422, the only changes are in
nomenclature, that is, the replacement of M+C references with MA
references. The regulations in that subpart H are not set forth in this
final rule. The subparts with substantive changes are as follows:
Subpart A--General provisions, establishment of the Medicare
Advantage Program, definitions, types of MA plans, and cost-sharing in
enrollment-related costs (user fees).
Subpart B--Requirements concerning beneficiary eligibility,
election, and enrollment and disenrollment procedures.
Subpart C--Requirements concerning benefits, access to services,
coverage determinations, and application of special benefit rules to
PPOs and regional plans.
Subpart D--Quality improvement program, chronic care improvement
program requirements, and quality improvement projects.
Subpart E--Relationships with providers.
Subpart F--Submission of bids, premiums, and related information
and plan approval.
Subpart G--Payments for MA organizations.
Subpart I--Organization compliance with State law and preemption by
Federal law.
Subpart J--Special rules for MA regional plans, including the
establishment of MA regions, stabilization fund, and risk sharing.
Subpart K--Application and contract requirements for MA
organizations.
Subpart L--Effect of change of ownership or leasing of facilities
during term of contract.
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Subpart M--Beneficiary grievances, organization determinations, and
appeals.
Subpart N--Medicare contract determinations and appeals.
Subpart O--Intermediate sanctions.
Each of these subparts is discussed below in section II of this
preamble.
II. Analysis of and Responses to Public Comments
A. Overview
1. Comments on the August 3, 2004 Proposed Rule
We received 186 items of correspondence containing more than a
thousand specific comments on the August 3, 2004 proposed rule.
Commenters included MCOs and other industry representatives,
representatives of physicians and other health care professionals,
beneficiary advocacy groups, representatives of hospital and other
providers, insurance companies, employers, States, accrediting and peer
review organizations, members of the Congress, Indian Health Service
(HIS), Indian Health Service, Tribal and Urban Health Programs (I/T/U),
American Indians and Alaska Natives (AI/AN), and others. Consistent
with the scope of the August 3, 2004 proposed rule, most of the
comments addressed multiple issues, often in great detail. We received
many comments expressing concerns unrelated to the proposed rule. Some
commenters expressed concerns about Medicare unrelated to the MA
program, while others addressed concerns about health care and health
insurance coverage unrelated to Medicare. Because of the volume of
comments we received in response to the August 3, 2004 proposed rule we
will be unable to address comments and concerns that are unrelated to
the proposed rule. Listed below are the six areas of the proposed
regulation that generated the most concern:
Bidding and Payment.
Access issues, including network adequacy and access
providers, including rural providers.
Specialized Medicare Advantage Plans.
Establishment of MA Regions.
Eligibility and enrollment issues, including disenrollment
for failure to pay cost sharing and lock in.
In addition, we received many comments on the proposed rule
relating to Part 417 for Health Maintenance Organizations; Competitive
Medical Plans, and Health Care Prepayment Plans that contract with CMS
under cost contracts. A discussion of those comments may be found
separately at that Part.
2. Organization of the Final Rule
In this final rule, we address all comments received on the
proposed rule. We are addressing issues according to the numerical
order of the relative regulation sections.
B. General Comments
1. Administrative Procedure Act (APA) Issues
We received several comments on various aspects of the rulemaking
process, as discussed below:
Comment: One commenter suggested that we waive the APA provision
that requires at least 30 days notice prior to a final regulation
becoming effective in order to allow applicants applying to become
specialized MA plans for special needs individuals, or ``SNPs,'' to
have the new requirements apply as soon as possible. The commenter made
this recommendation in the event that this final regulation was not
issued prior to the MMA statutory deadline for issuing a final
regulation for SNPs that was 1 year following the date of enactment, or
December 8, 2004.
Response: The first two categories of special needs individuals,
institutionalized persons and dual eligibles, were specified in the
statute, and we have already begun working with plans wishing to become
specialized MA plans for these categories of special needs individuals.
We discuss in subpart A below our approach to allowing for the
additional category of special needs individuals--those with severe or
disabling chronic conditions. This final rule will take effect March
22, 2005, except where otherwise noted. We do not believe it is
necessary to waive the 30-day notice period because it likely will take
longer than the 30-day period for a plan's application and approval
process to occur. However, we intend to work with applicants who wish
to offer specialized MA plans to ensure that the approval process is as
efficient and timely as possible.
Comment: We received a number of comments on the timing of the
regulation and the short timeframe between issuance of the final
regulation and preparation of applications and bids early in 2005 for
contract year 2006. One commenter stated that the time required to re-
contract with its commercial provider networks to ensure that the PPO
contracts contain the Medicare required language and rate structure
that are reflective of CMS reimbursements, is substantial. The
commenter indicated that it needed more time to build the system
infrastructure to support a new systems platform than would be required
for commercial enrollees. The commenters suggested that plans may have
to limit the number of regions in which they participate because of the
short timeframes between issuance of the regulation and the application
filing deadline.
Response: We agree that working within the statutory constraints of
the MMA, including the relatively short period of about 13 months
between enactment of the legislation and issuance of final regulations,
there is little time between issuance of the regulation and the
preparation of applications and bids in 2005 for contract year 2006.
With respect to the short time frame in applications and submission of
bids, please refer to the comments and responses related to bidding at
Sec. 422.254 and Sec. 422.502 related to application requirements.
Our goal beginning on the date of enactment of the MMA was to issue
final regulations as soon as possible so that prospective MA plans
would have the necessary information to be able to make business
decisions before bids are due mid 2005.
Comment: Several commenters recommended that CMS issue a final rule
with comment period prior to implementation of the final rules. The
commenters expressed concern that certain aspects of the proposed rule
that would impact rural providers have not been specified in sufficient
detail. One commenter recommended that CMS conduct a second notice of
proposed rulemaking incorporating changes from the first round of
comments and allowing for public comment on the additional details that
are currently under development, or issue the regulations on an interim
basis with a second comment period on the additional, important details
that are currently under development or that reflect decisions made
following this round of comments.
Response: Under the APA, we are required to provide the public with
the opportunity to review and comment upon proposed regulations. We
have done this through the publication of the August 3, 2004 proposed
rule and its corresponding comment period. We believe that allowing for
a second round of comments or publishing interim regulations would make
it difficult for MA organizations wishing to offer MA plans in 2006 to
prepare to meet the new requirements imposed by the MMA and implemented
by this final rule.
2. Other General Comments
Comment: A number of commenters stated that the final regulation
must
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address the unique state of AI/AN people and the Indian health program.
In particular, these comments raise concerns about the implications of
the proposed rules on the Indian health care delivery system. For
example, there is concern that the proposed rules will jeopardize
significant revenues the Indian health system now collects from
Medicaid for ``dual eligibles,'' that is, those individuals who are
eligible for both Medicare and Medicaid. They ask for substantial
modifications to the proposed rules to enable voluntary enrollment by
AI/AN populations in MA plans. Some of the suggested modifications
include: (1) encouraging MA enrollment by AI/AN by removing financial
barriers, such as waiving AI/AN cost sharing for all plans; (2)
ensuring that I/T/U Health Programs are held harmless financially, and
are fully reimbursed for covered services provided to AI/AN who enroll
in a MA plan.
Response: We appreciate the numerous comments that provided
information on unique health needs for the AI/AN populations. As noted
elsewhere, we are implementing the MMA statute through this rulemaking.
We do not have the flexibility to include language that would carve out
a subset of Medicare beneficiaries, such as AI/AN populations, if it is
not provided for in statutory language. Specific comments raised by the
AI/AN and I/T/U organizations will be addressed in the respective
subparts under which the comments were submitted. In general, however,
we believe that the newly created regional plans will create new
choices for the AI/AN populations, and that access to MA plans will be
improved. Similarly, because MA regional plans must reimburse for all
covered benefits in and out of network, IHS facilities may receive
reimbursement for out of network care provided to a regional MA plan
AI/AN beneficiary by that MA regional plan. Under provisions designed
to protect the Medicare program from fraud and abuse, a broad waiver of
beneficiary cost sharing of the type the commenter requests would not
be permitted. However, we make no statement regarding the applicability
of existing statutory and regulatory provisions that may allow for the
waiver of cost sharing in certain cases.
Comment: One commenter recommended that CMS develop and conduct
educational and informational activities on the differences in the
various MA options, particularly in areas where there are choices of
original Medicare, managed care plans, PPOs, MSAs and PPFs plans. The
commenter believes that there is a potential for confusion and error
for beneficiaries with so many choices.
Response: We agree that strong outreach to beneficiaries about
their new choices of MA plans, as well as the drug benefit, is critical
to the success of these new programs. We will be devoting more
resources to providing new information and education on the new plan
choices and drug benefit.
Comment: We received a number of general comments on specialized MA
plans for special needs individuals, sometimes referred to as ``SNPs''
or ``special needs plans''. Comments relating to definitions of SNPs
may be found in subpart A and comments on enrollment may be found in
subpart B below. Among the general comments was a suggestion to
disseminate a set of guiding principles for SNPs and further refine
them as experience increases. We also received a comment that network
adequacy for SNPs should be evaluated to ensure timely, accessible, and
appropriate care and that all necessary specialists are represented.
Further, it was suggested that the provider network should be broad
enough to ensure that vulnerable populations served have timely access
to all necessary specialists required to address special needs.
Additionally, several commenters stated that CMS should incorporate
into regulation the authority to waive or modify MA requirements that
conflict with the intent of the SNP provision. Finally, some commenters
requested that CMS provide guidance with regard to the States' role in
developing and approving SNPs for dual eligibles. It was recommended
that CMS give states maximum flexibility in using waiver authority to
integrate Medicare and Medicaid benefits for dual eligibles under SNP
programs. A commenter suggested that CMS consult with State Medicaid
agencies where Home and Community-based waivers are operating before
allowing these populations to be enrolled in SNPs because this could
add to the cost and complexity of providing services.
Response: We provided Interim Guidance for SNPs in the 2005 Call
Letter in June 2004 and will provide additional operational guidance
for SNPs after publication of the final rule. Interim guidance may be
obtained at http://www.cms.hhs.gov/healthplans/specialneedsplans/qaspecneeds06-23.pdf.
Consistent with current policy for network
adequacy for MA plans as found at Sec. 422.112, we will require that
MA organizations submit information about their provider network and
will review this information as part of the application and approval
process to ensure that timely, accessible, and appropriate care is
provided. We will be particularly interested in the availability of
care designed to address the needs of the enrolled special needs
population. While the MMA allows SNPs to limit enrollment to a defined
population, as described in Sec. 422.52, the law does not provide for
waiver of other MA requirements for SNPs. We encourage States and MA
plans to work cooperatively in developing programs to serve dual
eligibles and will help to coordinate these efforts where appropriate.
We believe that SNPs can be appropriate for care and services to those
in the community and lead to the coordination of the complex services
they need.
Finally, we note that program oversight is an essential government
function that is an integral component of implementing the MA program.
Throughout this rulemaking, we refer to government activity necessary
to implement this section, which includes program oversight authority.
III. Provisions of the Proposed Rule, Analysis of and Responses to
Comments on the Proposed Rule, and Final Decisions
Part 417--Health Maintenance Organizations, Competitive Medical
Plans, and Health Care Prepayment Plans
Subpart J-Qualifying Conditions for Medicare Contracts Extension of
Reasonable Cost Contracts (Sec. 417.402)
Authority for cost HMOs/CMPs (cost plans) was due to expire on
December 31, 2004. Section 234 of the MMA provides an initial extension
of cost plans through December 31, 2007. It also provides for a
continued extension of cost plans beyond December 31, 2007, under
specific conditions.
Effective for contract years beginning on or after January 1, 2008,
cost plans may be extended where there are fewer than two coordinated
care plan-model MA plans of the same type available to Medicare
beneficiaries in the same service area. Both of the ``competing'' MA
plans of the same type must meet minimum enrollment requirements for
the entire previous year in order to trigger mandatory cost plan non-
renewal or service area reduction. We interpreted the statute to
require cost plan service area reduction where there are two or more MA
plans of the same type meeting minimum enrollment requirements
competing for Medicare members in a portion of the cost plan's service
area. We asked for comment on our interpretation in the proposed rule
related to mandatory service area reductions, saying that an
alternative
[[Page 4593]]
reading of section 234 of the MMA might permit renewal of a cost plan
in all parts of its service area until there was competition from two
(or more) MA coordinated care plans throughout the cost plan's service
area. After reviewing comments and responding (below), we are adopting
the proposed policy as final.
At Sec. 417.402, we proposed to permit existing cost plans to
expand their service areas through September 1, 2006. Thereafter,
service area expansion applications by cost HMOs/CMPs will be initially
evaluated and accepted only when there are not two or more MA plans of
the same type meeting minimum enrollment requirements in the area in
which the cost plan proposes to expand. After reviewing comments and
responding (below), we are adopting the proposed policy as final.
We received the following comments on the proposed provisions for
subpart J of part 417 and have provided our responses:
Comment: Many commenters supported the non-renewal of cost HMOs/
CMPs as proposed in the proposed rule. These commenters made reference
to the statutory and Conference Committee Report language that
indicated the Congressional intent that cost plans are to be required
to operate under the same provisions as other private plans to the
extent other private plans are willing to enter the cost plan's service
area. Many other commenters objected to the partial non-renewal
proposal made in the proposed rule. Many stated that competition from
MA coordinated care plans was more likely in urban areas, where most
cost plan enrollment is concentrated. These commenters stated that even
where there is no MA coordinated care plan competition in rural areas,
the viability of a cost plan without an urban ``core'' would likely be
threatened. To the extent CMS non-renewed cost plans in urban areas,
the financial viability of the organization offering the cost plan
would be undermined in rural areas as well because of the loss of
economies of scale. Such a result would be contrary, these commenters
said, to an underlying concept of the MMA, which is to increase choices
for Medicare beneficiaries in rural areas. Finally, many of these
commenters stated that continuity of care would be needlessly lost for
members in urban areas enrolled in cost plans that were partly non-
renewed, because the members would be forced to change Medicare plans
and providers.
Response: We generally support the notion of continuity of care.
However, we believe that when competing MA coordinated care plans are
available in an area that will be non-renewed for a cost plan, non-
renewed cost members are able to continue to receive services from
current providers through either enrollment in one of the competing MA
coordinated care plans or by returning to FFS Medicare. We recognize
that when a cost plan is non-renewed in an urban area with MA
coordinated care plan competition, the financial viability of the cost
plan in rural areas without MA coordinated care plan competition may be
undermined. However, we believe that allowing a cost plan to continue
to compete for members in areas of MA competition would unfairly
undermine the financial viability of the competing MA coordinated care
plans. Therefore, we have not modified our regulation. We believe that
this interpretation is consistent with the statutory intent that cost
plans will not be permitted to compete for new members under different
provisions from those applicable to other private plans that have
entered the cost plan's service area.
Comment: Some commenters stated that the proposed regulation text
at Sec. 417.402(c)(1) and (2) did not specify what kind of ``year''
was meant--calendar year, 12 month period, or something else. All of
these commenters also recommended that CMS specify in regulation text
that the ``year'' referred to is a calendar year.
Response: We agree with this comment and have modified the
regulation text to specify that the ``year'' in question is a calendar
year. This is consistent with the statute, in that MA and cost plan
offerings are for calendar years. To the extent that competition has
been present for the entire previous calendar year, it should mean the
calendar year immediately prior to the year in which the cost plan will
be required to non-renew in a portion of its service area or have its
contract non-renewed.
Comment: Many commenters recommended that CMS distinguish between
the meaning of ``plan'' within the section 1876 cost program and the
meaning of ``plan'' within the MA program. Under the section 1876 cost
program, each CMS-contracting HMO/CMP is allowed to offer a single
Medicare cost ``plan''--see section 1876(c)(2)(A)(I) of the Act. On the
other hand, under the MA program, each CMS-contracting MA organization
is permitted to offer many MA ``plans''--see Sec. 422.4(b).
Response: We disagree with the commenters. Section 234 of the MMA
expressly provides that a cost contract may not be extended or renewed
for a service area if such service area during the previous year was
within the service area of two or more coordinated care plans of the
same type (that is, regional or local) that meet the relevant
enrollment requirements. Because a single MA organization may offer two
different MA coordinated care plans within a cost plan's service area,
a single MA organization can trigger the non-renewal of the cost
contract, if the other requirements of Section 1876(h)(5)(C)(ii) of the
Act are met.
Comment: Several commenters submitted comments stating that
specialized MA plans for special needs individuals (special needs plans
or SNPs) (defined at Sec. 422.2) should not count in the MA
coordinated care plan competition tests in Sec. 417.402(c)(1) through
(3), because they are not available to the general public and therefore
not a true test of the availability of MA coordinated care plans in the
service area of a cost plan.
Response: We agree with the commenter that the Congress intended to
permit cost plans to remain in place in an area until the enrollees in
that cost plan have at least two local or two regional MA plan options
to choose from in the area. Because in many cases cost enrollees would
not be eligible to enroll in a SNP, we do not believe that the
existence of a SNP in a service area should automatically count as an
option available in that service area. We note that the statute refers
to a cost plan's service area being within the ``service area'' of two
local or regional MA plans. The MA regulations at Sec. 422.2 define a
plan's service area as an area within which an MA-eligible individual
may enroll in a particular MA plan offered by an MA organization.
Although a SNP's service area is open to all individuals in the service
area who are in the special needs category served by the plan, it may
not be open generally to MA-eligible individuals (for example, if it is
a SNP that exclusively, rather than disproportionately, enrolls special
needs individuals). For this reason, we believe that a cost plan may
not be ``within the service area'' of a SNP, as this term is used in
the competition test, in some cases. We will therefore apply the
competition test on a case-by-case basis with respect to SNPs. If the
SNP is an option available to the cost plan's enrollees, and the SNP
meets the requirements of section 1876(h)(5)(C)(ii) of the Act and
Sec. 417.402(c), it will be taken into account in determining whether
the cost plan may be renewed. Similar considerations apply to MA plans
that exclusively enroll employer/labor group members under authority
provided in section 1857(i) of the Act
[[Page 4594]]
and Sec. 422.106(c) and (d). To the extent the employer/labor group MA
plan is available to the cost plan's enrollees, and the MA plan meets
the requirements of section 1876(h)(C)(ii) of the Act and Sec.
417.402(c), it will be taken into account in determining whether the
cost plan may be renewed. Thus, we will also apply the competition test
on a case-by-case basis with respect to employer/labor group MA plans.
Comment: One commenter suggested that implicit in the
``competition'' tests was the fact that the MA coordinated care plans
that caused the non-renewal in a portion of the service area, or that
caused the non-renewal of the cost plan in its entire service area,
would be available in the coming year. The commenter was concerned that
CMS might enforce this section of the cost regulations, even if one of
the MA plans used in establishing the ``competition'' threshold were
non-renewing or withdrawing from the service area in the year in which
enforcement would occur.
Response: Because such a result would be contrary to statutory
intent, CMS will not proceed with enforcement when fewer than two MA
coordinated care plans will be offered to Medicare beneficiaries in the
affected area at the time of enforcement.
Comment: One commenter asked CMS to state its clear intent in
regulatory text that we will allow cost plans to expand service areas
after September 1, 2006.
Response: As we said in the preamble of the proposed rule and
repeated in this preamble: ``We will permit existing cost plans to
expand their service areas through September 1, 2006. Thereafter,
service area expansion applications by cost HMOs/CMPs will be initially
evaluated and accepted only when there are not two or more MA plans of
the same type meeting minimum enrollment requirements in the area in
which the cost plan proposes to expand.'' We specifically included the
first sentence in regulation text at Sec. 417.402(b). However, service
area expansions are not guaranteed after that date. Please note that
the regulation text at Sec. 417.402(b) specifically authorizing
service area expansions through September 1, 2006, does not preclude
them thereafter. Additionally, the new language replaces identical
language in this section of the regulation (and which language first
appeared in section 634 of the Medicare, Medicaid, and SCHIP Benefits
Improvement and Protection Act of 2000 (BIPA)) which provided service
area expansion authority for cost plans through September 1, 2003. The
commenter should note that we have previously interpreted the language
in BIPA and in our regulations to be permissive in this area, rather
than proscriptive. We will continue to apply it permissively in this
area to the extent that the conditions for non-renewal under Section
1876(h)(5)(C) and Sec. 417.402(c) are not present.
Subpart Q--Beneficiary Appeals
Changes to subpart Q are addressed in the preamble discussion for
subpart M, which deals with appeals policy for MA plans, cost plans and
HCPPs.
A. Subpart A--General Provisions (Sec. 422.1)
1. Conforming Changes
Subpart A of the August 3, 2004 proposed rule set forth several
general and conforming changes dictated by MMA. Below is a summary of
the provisions in subpart A. (For a broader discussion of the
provisions, please refer to our proposed rule.) The provisions are as
follows:
Section Sec. 422.1 lists the statutory authority that is
implemented in part 422. In Sec. 422.1, we have added the new section
1858 of the Act that pertains to ``Special rule for MA Regional
Plans.''
We removed provisions relating to application requirements
and evaluation and determination procedures in Sec. 422.6 and Sec.
422.8 and added them to Sec. 422.501 and Sec. 422.502 of subpart K,
so that all application and contracting information is in one place.
We redesignated and amended Sec. 422.10 as Sec. 422.6
and amended newly redesignated Sec. 422.6. Section 422.6 (formerly
Sec. 422.10) described the user fees associated with the Medicare
Beneficiary Education and Information Campaign, required under section
1857(e)(2) of the Act.
2. Definitions (Sec. 422.2)
The majority of the proposed changes in subpart A concerned new,
revised, and obsolete definitions for the new MA Program in Sec.
422.2. The MMA required several new and broad definitions; ``MA
regional plans,'' ``specialized MA plans,'' ``ACR,'' ``Additional
benefits,'' ``Adjusted community rate,'' and ``M+C'' obsolete after
2006.
In proposed Sec. 422.2, we also revised several existing
definitions to make them consistent with the MMA statute. For example,
Mandatory supplemental benefits are redefined to incorporate language
reflecting that these benefits may be paid for through premiums and
cost sharing or through the application of a rebate, or both.
Therefore, mandatory supplemental benefits are defined as health care
services not covered by Medicare that an MA enrollee must purchase as
part of an MA plan. Benefits may include reductions in cost sharing for
benefits under the original Medicare FFS program, and are paid for in
the form of premiums and cost sharing, or by an application of the
beneficiary rebate rule in section 1854(b)(1)(C)(ii)(I) of the Act, or
both.
However, optional supplemental benefits retained the same
definition as under the M+C program as health services not covered by
Medicare that are purchased at the option of the MA enrollee and paid
for in full, directly by (or on behalf of) the Medicare enrollee, in
the form of premiums or cost-sharing. (Throughout the regulation, the
phrase ``supplemental benefits'' refers to both mandatory and optional
supplemental benefits.) The terms ``mandatory supplemental'' and
``optional supplemental'' are used when referring specifically to one
of the types of supplemental benefits.
We removed ``additional benefits'' from the definition of ``basic
benefits'' because MA plans will no longer offer additional benefits.
In addition, we replaced the word ``ACR'' process with the words
``annual bidding'' process in the definition of ``benefits'' to reflect
the new bidding process for submission and approval of benefits.
Finally, we revised the definition of ``service area'' to incorporate
the concept of the new MA regional plan's service area that consists of
an entire region.
Under section 1851(a)(2)(A) of the Act, two new types of
coordinated care plans were established; MA Regional plans, which are
regional PPO plans, and specialized MA plans for special needs
individuals, or SNPs. We defined an ``MA local area'' as a county or
other area specified by us because it is important to distinguish an MA
local area from an MA region. We defined an ``MA regional plan''
because it is a new type of coordinated care plan choice for
beneficiaries. While PPOs first became a choice for beneficiaries under
the BBA, they operated as ``local'' plans on a county (including multi-
county) or partial county basis. The MA regional plan functions like a
local PPO but must serve an entire region.
A regional MA plan's service area is one or more entire MA regions;
thus, we defined an ``MA regional plan'' as a private health plan that
operates as a PPO, but serves an entire CMS-designated region. Local
PPOs that may offer MA plans under the MA program, the regional PPOs
must have a network of contracting providers that have agreed to a
specific reimbursement for covered benefits that are offered by the MA
regional plan, and must also provide for reimbursement for all
[[Page 4595]]
covered benefits regardless of whether the covered benefits are
provided through the network providers or outside of the network.
We defined an ``MA local plan'' as one that is not an MA regional
plan. Also defined under part 422 are the ``Prescription Drug
Sponsor,'' ``PDP,'' and a ``MA Prescription Drug (MA-PD) plan.'' A
sponsor must be a private entity that meets our requirements and
standards. PDP sponsors may offer multiple plans throughout the country
or in a region, but sponsors must submit an individual bid for each
plan.
An MA-PD plan is an MA plan that also provides qualified
prescription drug coverage as found in Part D of the Act. An
organization offering a coordinated care MA plan must have an MA-PD
plan in each of the service areas in which it operates, as required
under section 1860D 21(a)(1) and (2) of Part D of the Act.
In section 1859(b)(6)(A) of the Act, specialized MA plans for
special needs individuals or SNPs are defined to be MA plans that
exclusively serve special needs individuals defined in section
1859(b)(6)(B) of the Act. The establishment of specialized MA plans
allows MA plans to exclusively enroll special needs individuals in MA
plans that have targeted clinical programs for these individuals.
Section 1859(b)(6)(B) of the Act identifies three types of special
needs individual as: (1) institutionalized individuals; (2) individuals
entitled to medical assistance under a State plan under Title XIX; and
(3) other individuals with severe or disabling chronic conditions as
the Secretary determines would benefit from enrollment in a SNP plan.
Comment: One commenter supported a broad definition that tracks
section 1859(b)(6) of the Act in order to provide CMS with the
flexibility needed to approve a wide range of proposals to meet the
unique needs of special populations and expand their choices.
Response: We agree with the commenter. We are providing general
guidelines in our regulations in order to maintain the flexibility to
approve a wide range of proposals, while also protecting the interests
of special needs beneficiaries.
The Secretary may also designate an MA plan as a specialized MA
plan for special needs individuals, ``SNP,'' if the plan
``disproportionately'' serves special needs individuals.
Comment: Several commenters responded to the question in the
proposed rule as to whether CMS should allow specialized MA plans that
disproportionately enroll special needs individuals, or
``disproportionate percentage'' plans and how they should be defined.
Most commenters supported including ``disproportionate percentage''
plans in the definition of SNPs. One of the reasons given was to allow
married beneficiaries, or children of special needs individuals, to
enroll in the same plan as the spouse or parent, even if only one
individual meets the definition of a special needs individual.
Many commenters suggested that CMS not establish detailed criteria
to define disproportionate percentage, particularly at the outset. It
was felt that enrollment thresholds might act as a barrier to plan
participation and limit choices available to Medicare beneficiaries.
Some commenters suggested that CMS identify ``exclusive'' and
``disproportionate'' plans at the time of each application. Some
commenters recommended that the criteria be national, not regional or
local.
Several commenters agreed that the criteria should be quantitative,
for example, an MA plan risk score in the upper quintile of all MA
plans, or a frailty score in the upper quintile of all MA plans as
measured by Activities of Daily Living (ADL) scores on the Health
Outcomes Survey (HOS).
Some commenters recommended that a ``disproportionate percentage''
SNP enroll fifty (50) percent or more special needs individuals.
Another commenter suggested that SNPs remain exclusive, but if plans
were able to enroll those without special needs, at least eighty-five
(85) percent of the plan's enrollees should be individuals with special
needs. Another commenter stated that requiring an upper limit of more
than seventy-five (75) percent of special needs individuals would be
problematic. One commenter believes that ``redesignated'' SNPs, that
is, regular MA plans that become SNPs, be allowed to continue enrolling
non-special needs individuals as long as overall enrollment contains a
higher proportion of special needs individuals than exist in the plan's
service area. One commenter suggested that--(1) an annual certification
and compliance process; (2) that new plans have a 3-year startup period
to attain the threshold, and (3) that CMS annually publish risk score
distributions. Another commenter recommended that non-exclusive plans
be defined as having a higher than average enrollment of one or more of
the special needs individuals groups as estimated for MA plans and/or
the FFS population.
Response: We agree that a special needs individual's family members
may want to join the same plan. We acknowledge that MA plans do not
have to be exclusive to provide quality specialized programs for
special needs individuals. We received a wide range of recommendations
for defining a ``disproportionate percentage'' SNP. We acknowledge that
there are numerous ways to define and identify disproportionate
percentage SNPs and agree with those commenters who felt the parameters
should not be overly restrictive, particularly at the outset. SNPs are
a new type of coordinated care plan and we believe that plans and CMS
might not anticipate all factors that should be considered in
determining an acceptable percentage. We also want to encourage plans
to develop programs to more effectively care for special needs
individuals. In order to ensure flexibility, and take into
consideration the experience gained by plans and CMS as SNPs mature, we
will define a ``disproportionate percentage'' SNP as one that enrolls a
greater proportion of the target group (dually eligible,
institutionalized, or those with a specified chronic illness or
disability) of special needs individuals than occur nationally in the
Medicare population based on data acceptable to CMS. We will provide
further guidance as to what data sources may be used to determine a
national percentage for a special needs group being targeted by the
disproportionate percentage plan. Under our authority as provided in
section 231(d) of the MMA, we are revising the definition of
specialized MA plan to include ``disproportionate percentage'' plans.
Comment: Several comments were received regarding how CMS should
identify those with severe or disabling chronic conditions that would
make them eligible for enrollment in a SNP. Several commenters
suggested using broad flexibility, reflecting the language in section
1858(b)(6) of the Act. Other commenters recommended that SNPs should
serve as laboratories for developing population-based management
protocols, not single-disease State management protocols for diagnoses
that could be well-served by a standard MA plan. Another commenter
recommended limiting enrollment to those with late-stage chronic
conditions, those with co-morbidities, adult disabled, and frail
elderly. Some commenters suggested basing the definition on conditions
for which alternate care delivery models, such as disease management
and evidence-based medicine, exist, and also take into consideration
conditions that are expensive and prevalent for
[[Page 4596]]
there to be savings and risk-management potential.
Commenters also recommended that conditions should be those
associated with recognized quality measures, so that CMS may carefully
monitor specialized MA plans. None of the commenters objected to
including those individuals who are not institutionalized but require
an equivalent level of care. ESRD, diabetes, congestive heart failure,
Alzheimer's and other dementias along with one or more other serious
conditions, HIV/AIDs, and frail elderly and adult disabled with
multiple chronic conditions requiring complex medical management were
among the specific conditions suggested for specialized MA plans.
Another commenter suggested that on an interim basis CMS restrict
the definition to those who are nursing home certifiable, as defined by
each State; ESRD patients; and those diagnosed with AIDs, and, in the
meantime, collect ADL data through the Health Outcomes Survey (HOS) and
use this measure in conjunction with Activities of Daily Living (ADL)
measures to identify high-risk groups. Other commenters suggested
additional detailed formulas for identifying groups eligible for
specialized MA plans.
Response: Because this is a new ``untested'' type of MA plan, we
are not setting forth in regulation a detailed definition of severe and
disabling chronic condition that might limit plan flexibility. We will
review and evaluate proposals for specialized MA plans that serve
severe or disabling chronic disease categories, including HIV/AIDs, on
a case-by-case basis. Among the criteria to be considered will be the
appropriateness of the target population, the existence of clinical
programs or special expertise to serve the target population, and
whether the proposal discriminates against ``sicker'' members of the
target population.
Other Comments on Sec. 422.2
We requested comments on Sec. 422.2 on the development of an HIV/
AIDS special needs plan that would address the special health needs,
including prescription drugs, of the Medicare-eligible population
living with HIV/AIDS.
We received several comments supportive of the development of an
HIV/AIDS special needs plan. Therefore, we will consider this type of
plan application to become a special needs plan for Medicare-eligible
individuals living with HIV/AIDs.
For purposes of specialized MA plans, we proposed to define
``institutionalized'' in the proposed rule as residing in a long-term
care facility for more than 90 days as determined by the presence of a
90-day assessment in the Minimum Data Set (MDS).
Comment: Several commenters suggested that the 90-day residence
requirement (as determined by a 90-day assessment in the minimum data
set) be modified. One commenter suggested determining institutional
status based on the discharge potential at admission. Another commenter
suggested changing the requirement to 30 days. One commenter did not
object to 90 days, but recommended changing the language to allow CMS
to approve exceptions in case the institution failed to perform the
assessment. In addition, one commenter suggested that
``institutionalized'' also include those residing in Intermediate Care
Facilities for the Mentally Retarded (ICF/MR). Several commenters
recommended that those living in the community while requiring an
institutional level of care be considered institutionalized.
Response: In response to comments, we are clarifying and broadening
the definition of institutionalized for purposes of defining a special
needs individual to take into consideration those with chronic mental
conditions and other chronic conditions. For purposes of defining a
special needs individual, ``institutionalized'' means residing in or
expected to reside in a long-term care facility which is a skilled
nursing facility (SNF) as defined in section 1819(a) of the Act; a
nursing facility (NF) as defined in section 1919(a) of the Act; a SNF/
NF; an intermediate care facility for the mentally retarded (ICF/MR) as
defined in section 1905(d) of the Act; or an inpatient psychiatric
facility as defined in section 1861(f) of the Act for 90 days or
longer.
A SNP may enroll special needs individuals prior to a 90-day stay
based on an assessment of the potential for a stay of that length as
long as the assessment is of a type approved by CMS.. For example, a
SNP for individuals with serious mental conditions may show us that the
State requires a plan of care or similar assessment prepared by a
health professional upon admission. We recognize that this definition
is not the same as the definition of ``institutionalized individual''
in 42 CFR Sec. 423.772. That provision is an income and resource-based
definition for the purpose of determining Part D premiums and cost-
sharing subsidies for low-income individuals. The term
``institutionalized'' as used for purposes of defining a special needs
individual under this Part is for the purpose of identifying a
vulnerable population that might benefit from enrollment into a SNP. We
also wish to clarify that our definition of institutionalized for
purposes of defining a special needs individual does not relate to the
MA payment methodology.
For purposes of SNPs, we may also consider as institutionalized
those individuals living in the community but requiring a level-of-care
equivalent to that of those individuals in the aforementioned long term
care facilities. We believe that 90 days is the most appropriate and
accurate timeframe for determining long-term residence in an
institution. We base this on information we collected showing that,
once a beneficiary is institutionalized for 90 or more days, it is less
likely that that individual will return to a community setting.
However, SNPs may enroll institutionalized beneficiaries based on a
CMS-approved assessment (as described in further operational guidance
following publication of this rule) showing the beneficiary is expected
to reside in the institution for 90 days or more. Given the latitude
provided under the disproportionate percentage criteria, we do not
think that the 90-day definition for institutionalized will adversely
affect specialized MA plans' ability to enroll eligible beneficiaries.
Comment: Several commenters supported the proposed approach to
require all specialized MA plans to provide Part D coverage.
Response: We agree with the commenters, especially in light of the
fact that special needs individuals in particular need access to
prescription drugs to manage and control their severe or disabling
chronic conditions. Therefore, we are including the Part D coverage
requirement for all specialized MA plans at Sec. 422.2 in the
definition of a specialized MA Plan.
Comment: One commenter recommended that CMS change the definition
of PDP as it is incorrect and not consistent with the Medicare
Prescription Drug Benefit Program proposed rule.
Response: We agree with the recommended change to the definitions
of PDP and PDP sponsor found at Sec. 422.2. To avoid any confusion, we
are revising the definitions in Title II to cross-reference the
definitions of PDP and PDP sponsor found in part 423, the Medicare
Prescription Drug Benefit.
Comment: Several commenters recommended that CMS make a revision to
the basic benefits definition found at Sec. 422.2 to add ``including
covered services received through an IHS
[[Page 4597]]
program.'' Other commenters recommended that CMS add to the special
needs individual definition ``AI/IN are exempt from mandatory
enrollment in Title XIX plans but would qualify for optional enrollment
in an AI/AN specialized need plan.''
Response: We do not believe there is a statutory basis in the MMA
to include non-covered Medicare services received through an IHS
program in the definition of basic benefits. We also do not believe it
is necessary to include a specific reference to Medicare covered
services provided through an IHS program in the definition of basic
benefits. If a service is a covered service, it is already included in
the definition. Therefore, we are not making the requested change.
Similarly, the MMA does not authorize us to revise the definition of
special needs individual as suggested. The statute defines special
needs individuals who are defined as those who are Medicaid,
institutionalized or those with severe or disabling chronic conditions.
Clearly, AI/AN individuals who fit any of those definitions could
choose to enroll in a specialized MA plan if one were offered in their
area. The suggested change to the definition of special needs
individuals to add optional enrollment in an AI/AN specialized MA plan
suggests that some AI/AN organizations may be interested in offering a
specialized MA plan. Under the statute, a specialized MA plan must be
open to all eligible Medicare beneficiaries who are within the class of
special needs individuals the plan serves. We see no statutory basis
for allowing a plan to limit enrollment only to AI/AN Medicare
beneficiaries. Conceptually, supplemental benefits could be offered in
the specialized MA plan to assist chronically ill enrollees to prevent
or treat illnesses that affect AI/AN populations and others enrolled in
the plan. As described at Sec. 422.501, a prospective SNP would need
to submit an application to CMS detailing its plan for treating those
with severe or disabling chronic conditions. Finally, we would note
that we are not adding language exempting AI/AN from mandatory
enrollment in Title XIX plans as it is not within the scope of this
rulemaking. We note however, that under sections 1115 and 1915(b) of
the Act, mandatory enrollment under Medicaid for such populations is
permitted.
Comment: Several commenters suggested that CMS add a new definition
to Sec. 422.2 to afford specialized MA plans the status of regional MA
plans for most purposes (including special rules and incentives
applicable to regional MA plans), without having to cover multiple
States. The commenters suggested that plans may be reluctant to take on
multiple State regions with enrollment limited to Medicaid eligibles in
the region.
Response: As described in section 1858(a)(1) of the Act and as
reflected in Sec. 422.455(a), a MA plan must cover an entire region,
including offering enrollment to all eligible Medicare beneficiaries
within that region whether the region is a single State or multiple
State area. Therefore, a special needs plan may receive the
stabilization fund payments and other incentives for its participation
as a regional plan only if the plan would comply with all requirements
in section 1858 of the Act applicable to Regional MA plans. This means,
that it would have to be open to enrollment for every member of the
special needs category in the entire region in question, meet access
standards for the individuals in all areas of the region, market to all
areas of the region, and offer uniform benefits and cost-sharing in all
areas of the region.
Comment: A commenter recommended that CMS revise the definition of
service area as found in Sec. 422.2. The commenter indicated that as
proposed, the language of Sec. 422.2 appears to have established a
lower standard for approval of regional PPO service areas. The
commenter recommended that CMS separately define service area
requirements for HMOs and PPOs and that the requirements for approval
of a PPO apply to both local and regional PPO plans alike.
The commenter also recommended that CMS consider the more flexible
design of a PPO and in turn allow for more flexibility with respect to
service area approval. The commenter understands that local PPOs are
not required to cover an entire region, but also indicated that it is
difficult even in small States to meet the availability and
accessibility requirements by the time the service area application is
due.
Response: We appreciated the comment to clarify this definition as
we found it had been improperly numbered and created some confusion.
Therefore, we have renumbered the sub-definitions and included language
that makes clear that we may consider whether the contracting provider
network meets the access and availability standards set forth in Sec.
422.112, for all MA coordinated care plans and network MA MSA plans. We
also have made technical corrections because the distinction between
non-network and network MSA plans is no longer applicable, as discussed
in further detail below. We believe this change will further reduce
confusion.
3. Types of MA Plans (Sec. 422.4)
The MA program is intended to provide beneficiaries access to a
wider array of private health plan choices than under the M+C program
and to increase the number of areas in which private health care
options are available to Medicare beneficiaries. Entities can contract
with us to provide five general categories or types of plans: (1) local
MA coordinated care plans; (2) MA MSA plans; (3) MA PFFS plans; (4)
regional PPO coordinated care plans; and (5) specialized MA coordinated
care plans.
In the August 3, 2004 proposed rule, we proposed to clarify that
the PPO definition that was in existence before (defined by the BBRA)
was solely for purposes of the application of the more limited quality
assurance requirements. For PPO-type plans that are offered by MA
organizations that are licensed or organized under State law as HMOs,
the quality assurance requirements that apply to all other coordinated
care plans in section 1852(e) of the Act also apply to those PPO-type
plans.
Effective January 1, 2006, MA organizations that offer MA local
plans that are PPOs will need to provide only for the collection,
analysis, and reporting of data that permit the measurement of health
outcomes and other indices of quality insofar as services are furnished
by providers that have contracted with the MA organization under those
PPO plans. However, a local PPO offered by an MA organization that is
licensed or organized under State law as an HMO will be required to
meet the normal data collection, analysis, and reporting requirements.
We proposed to modify the definition of PPOs in Sec. 422.4 to account
for this more limited interpretation of State licensure requirements
and modified headings in Sec. 422.152(b) and (e).
Under section 233 of the MMA, MA organizations are authorized to
offer MSA plans as a permanent option. MMA also eliminated the limits
imposed on MSA plans by the BBA, including a time limit on enrollment
and a limit on the number of beneficiaries who could enroll in the
plans, and exempted MSA plans from certain quality assurance
requirements that the BBA applied to ``network'' MSA plans.
To conform with MMA's changes to MSAs, we proposed to delete the
descriptions of the M+C network MSA plan and M+C non-network MSA plan
as different types of plans at
[[Page 4598]]
Sec. 422.4(a)(2)(ii), since the distinction between network and non-
network MSAs for the purpose of quality assurance requirements was no
longer applicable. As noted above, we are making similar changes to the
definition of service area at Sec. 422.2.
We are making a technical correction to the final MA regulation.
Our current regulations at Sec. 422.2 read ``Religious and Fraternal
Benefit (RFB) Society.'' We are amending the definition of ``Religious
and Fraternal Benefit (RFB) Society'' by removing the words ``Religious
and fraternal'' and adding the words ``Religious fraternal'' in their
place. We are making this change to the definition as it is potentially
confusing and is not consistent with the statutory definition of
``Religious Fraternal Benefit Society'' at section 1859(e)(3) of the
Social Security Act. We are also making a technical change to Sec.
422.4(a) to clarify that RFB Society plans may be any type of MA plan,
and are not restricted to being a type of coordinated care plan only,
as implied by the inclusion of ``RFBs'' exclusively in Sec.
422.4(a)(1)(iii). Thus, we are removing the reference to RFBs from that
section. We also are deleting the word ``network'' from the
parenthetical at the end of Sec. 422.4(a)(1)(iii) because the
distinction between network and non-network MSAs no longer applies.
Comment: Many commenters suggested that CMS more clearly coordinate
between the Medicare Prescription Drug Benefit Rule at part 423 and the
MA Program Rule at part 422.
Response: In response to this comment, we are making several
changes to clarify the interaction between Part C and Part D.
Specifically, we are clarifying the language at Sec. 422.4 on types of
MA plans and Part D prescription drug coverage. We are adding a new
paragraph (c), Rule for MA Plans' Part D Coverage. This paragraph
clarifies the requirements for MA coordinated care plans, MA MSAs, and
MA PFFS plans by stating that a coordinated care plan must offer
qualified Part D coverage meeting the requirements in Sec. 423.104 in
that plan or in another MA plan in that area. We also added language
that MSAs cannot offer drug coverage, other than that required under
Parts A and B of Title XVIII of the Act. Finally, we added language
that MA organizations offering PFFS plans can choose to offer qualified
Part D coverage meeting the requirement in Sec. 423.104 in that plan.
Comment: One commenter recommended that CMS clarify the language at
Sec. 422.4(a)(1)(v). The commenter wants to ensure that an
organization that wants to apply as a local HMO, but does not have an
HMO license in its State, but is otherwise licensed as a risk-bearing
entity in its State, will not be considered a PPO and thus subject to
the 2-year moratorium on local PPOs as found at section 221(a)(2) of
the MMA and proposed at Sec. 422.451.
Response: We do not believe that a clarification of Sec.
422.4(a)(1)(v) is required as Sec. 422.400 already provides that an MA
organization must be licensed under State law, or otherwise authorized
to operate under State law, as a risk-bearing entity (as defined in
Sec. 422.2) eligible to offer health insurance or health benefits
coverage in each State in which it offers one or more MA plans.
Therefore, an organization that wishes to apply as a local MA plan HMO
and has a State-risk bearing license would be considered an HMO and not
be considered as a local MA plan PPO nor subject to the PPO moratorium
described at Sec. 422.451. However, a plan would have to market itself
as an HMO or an HMO with a POS option. A plan could not market itself
as a PPO because of the potential for confusion.
Comment: Several commenters recommended that CMS include new
language in the final regulation that ensures that the type of denial
of covered services as described in the Government Accountability
Office (GAO) report entitled ``Medicare Demonstration PPOs: Financial
and Other Advantages for Plans, Few Advantages for Beneficiaries (GAO-
04-960)'' never happens again. One commenter, also referring to the GAO
report, expressed concern that the Agency is not effectively enforcing
current law, based on the recent GAO findings.
Response: In response to the GAO evaluation, we agreed to implement
the GAO recommendation for us to instruct Medicare PPO Demonstration
plan participants to remove impermissible restrictions on an enrollee's
access to providers for all covered plan benefits. We are committed to
assuring that local and regional PPOs provide reimbursement for all
covered benefits regardless of whether the benefits are provided within
the network of providers as found in Sec. 422.4(a)(1)(v).
Comment: Several commenters recommended that CMS require non-
contracted providers to accept Medicare fees as payment in full with no
balance billing to the beneficiary. The commenters believe that this
approach will protect beneficiaries from excessive payment liability
for out of network services.
Response: As discussed in further detail in subpart C of the
preamble to this final rule, there are several existing limitations on
balance billing that apply to protect Medicare beneficiaries regardless
of whether they are enrolled in an MA plan. Further, under existing
rules, beneficiaries may not be held liable for more than the amount of
out-of-network cost sharing for the service specified in the plan. For
these reasons, we do not believe the changes requested by the commenter
are necessary.
Comment: Several commenters supported the amendment found in the
proposed rule that clarifies that a plan licensed as an HMO may still
become a PPO under its HMO license as long as the State allows the HMO
to offer a PPO under its HMO license. However, the commenters suggested
that CMS revise Sec. 422.4(a)(1)(v) in the following two ways: (1)
clarify that PPOs may establish before authorization requirements for
services obtained out-of-network that would allow for a review based on
medical appropriateness; and (2) modify the provision to indicate that
PPOs are not obligated to make available out of network certain types
of programs, like health and wellness programs, for which no non-
network counterpart is available.
The commenters also recommended that CMS clarify that only original
Medicare benefits must be covered both in and out of network and that
covered benefits that are not part of original Medicare need not be
covered out of network. The commenters opposed CMS' requirement that
for 2005, PPO plans must offer all benefits both in and out of network.
The commenters stated that many plans in the private sector and in the
FEHB program limit out-of-network coverage for some services. The
commenters believe that requiring coverage of all non-original Medicare
benefits in and out of network implies that there is a standard
allowance or price reference upon which to base payments for these
services. The commenters also suggest that there are no balance billing
protections for the beneficiary who seeks care out of network. The
commenter expressed similar concerns around the Medicare drug benefit
and the lack of specificity regarding coverage of non-original Medicare
benefits. The commenter also believe that covering certain benefits out
of network (for example, disease management, 24-hour advice nurse
lines, and wellness programs) will pose a significant challenge.
Response: To respond to the first recommended change to Sec.
422.4(a)(1)(v)requesting that MA plans be allowed to impose pre-
authorization
[[Page 4599]]
requirements on out-of-network care by PPOs, section
1852(e)(3)(A)(iv)(II) of the Act states that a PPO plan must provide
for reimbursement for all covered benefits, regardless of whether the
benefits are provided within the plan's network of providers.
Similarly, section 1859(b)(4)(B) of the Act, which defines MA regional
PPOs, includes the same requirement to provide for reimbursement for
all covered benefits regardless of whether the benefits are provided
within the network of providers. These provisions indicate the
Congress's clear intent to ensure that PPOs provide coverage for all
plan-covered benefits both in and out of network. Further, although
other coordinated care plans may include mechanisms to control
utilization, such as referrals from gatekeepers for an enrollee to
receive services within the plan, the definition of PPO contained in
sections 1852(e)(3)(A)(iv) and 1859(b)(4)(b) of the Act indicates that
local and regional PPOs may not use similar mechanisms, such as pre-
authorization, to restrict enrollee access to out-of-network services.
However, there are several ways PPOs can appropriately seek to promote
the use of in-network services. For example, PPOs may encourage
beneficiaries to notify them before seeking care out of network, so
that care is coordinated in and out of network. PPO plans may offer
incentives to beneficiaries to provide notice of their intent to seek
out-of-network services by discounting out-of-network cost sharing when
beneficiaries provide notice before receiving services. Further, MA
organizations are required to have procedures for making determinations
of whether an enrollee is entitled to receive a health service and the
amount that the enrollee will be required to pay for the service. Thus,
a PPO plan enrollee and provider may seek an advance determination of
coverage before receiving the service, and we encourage PPO enrollees
to avail themselves of this option.
On the commenters' request to clarify in Sec. 422.4(a)(1)(v) that
only original Medicare benefits must be covered in and out of network,
we believe that the clear language in the statute at section
1859(b)(4)(B) of the Act relating to regional MA plans and section
1852(e)(3)(A)(iv)(II) of the Act relating to local PPOs, does not
permit us to limit the requirement that PPOs provide for reimbursement
for all plan-covered benefits both in and out of network. Therefore, we
are not modifying the definition of PPOs at Sec. 422.4(a)(1)(v).
However, to respond to some of the concerns raised in the comment, we
again note that plans can reduce the regular cost sharing for out-of-
network benefits for beneficiaries who voluntarily seek pre-
authorization for those benefits. As described by another response to
comment above, we disagree with the commenter that there are no balance
billing protections for beneficiaries. There are limitations on balance
billing to protect beneficiaries regardless of whether they are
involved in an MA plan or not. Finally, on the issue of benefits, such
as nurse advice lines, which plans believe should not be made available
out of network, we believe that as a practical matter, most of these
types of benefits will be unattainable out of network because they are
designed to be provided exclusively to plan members. Additional
discussion of these types of out-of-network benefits can be found in
the subpart C preamble.
Comment: Comments were received on Sec. 422.4(a)(1)(v). Several
commenters suggested that CMS address perceived inconsistencies in
licensing requirements for PPOs as compared to HMOs by confirming the
scope of State licensure requirements that apply to entities offering
MA PPO plans, as State licensing laws may restrict an HMO's ability to
offer a PPO plan.
Response: We do not believe there are inconsistencies. All MA plans
must be licensed by the State as a risk-bearing entity. State law
controls whether the MA organization is licensed or authorized to offer
the type of MA plan it proposes to offer. As we explained in the
preamble discussion in subpart A of the proposed rule, the fact that MA
organizations offering local PPOs that are (or are not) licensed as
HMOs is pertinent to the MA program solely for purposes of the
application of quality improvement standards in section 1852(e) of the
Act, and has no specific bearing on whether an MA organization has
State authority under applicable State law to offer an HMO or PPO under
the MA program. Whether an MA organization (licensed either as an HMO
or otherwise) can offer a specific type of MA plan continues to rest
upon whether the organization has State licensure or authority to offer
such a type of MA plan.
Comment: One commenter requested that CMS consider enabling the
PFFS model as an option under the regional preferred provider
organization structure. The PFFS model in the MA program enables
broader geographic coverage without the specific provider contracting
requirements. This option could expand participation in the regional
program by enhancing participation and access in rural areas without
specific provider contracting access requirements as is currently
available under the existing MA PFFS plans.
Response: Since a PFFS plan is not defined as a type of coordinated
care plan under section 1851(a)(2)(A)(i) of the Act, it would not be
possible to allow an MA organization to offer a PFFS plan as an MA
regional plan. Additionally, MA PFFS plans are defined at section
1859(b)(2) of the Act, while MA regional plans are defined at section
1859(b)(4) of the Act. The definitions are mutually exclusive.
Comment: A few commenters asked whether SNPs could be any type of
coordinated care plan.
Response: We believe that section 1851(a)(2)(A)(ii) of the Act
clearly states that SNPs can be any type of coordinated care plan.
4. Expansion of the Beneficiary Education and Information Campaign
``User Fees'' (Sec. 422.6, formerly Sec. 422.10)
The last section of subpart A contained regulations implementing
the user fees provided for in section 1857(e)(2) of the Act. MMA
expanded the user fee to include PDP sponsors as well as MA plans as
contributors. The expansion of the user fee recognizes the increased
Medicare beneficiary education activities that we would require around
the new prescription drug benefit.
As before, the user fee would pay for the ongoing costs of the
national beneficiary education campaign that includes developing and
disseminating print materials, the 1-800 telephone line, community
based outreach to support SHIPs, and other enrollment and information
activities required under section 1851 of the Act and counseling
assistance under section 4360 of the Omnibus Budget Reconciliation Act
of 1990 (Pub. L. 103-66).
As indicated in the proposed rule and in this final rule (Sec.
422.6), in fiscal year 2006 and thereafter, the MMA authorizes up to
$200,000,000, reduced by the fees collected from MA organizations and
PDP sponsors in that fiscal year. (The total amount is not indexed in
any way.) In each year, the total amount of collected user fees may not
exceed the estimated costs in the fiscal year for carrying out the
enrollment and dissemination of information activities in the MA and
Part D prescription drug programs or the applicable portions of
$200,000,000, whichever is less.
These user fee provisions establish the applicable aggregate
contribution portions for MA organizations and PDP
[[Page 4600]]
sponsors. The applicable portion of the user fee for MA organizations
will be based on the total proportion of expenditures for Medicare Part
C as well as for payments under Part D that are made to MA
organizations as a percent of Title XVIII expenditures. The PDP
sponsor's applicable portion is the estimate of the total proportion of
expenditures under Title XVIII that are attributable to expenditures
made to PDP sponsors for prescription drugs under Part D. The fees
charged to individual MA plans and PDP sponsors would continue to be
determined by CMS. These fees are calculated by a percent of plan's
revenue to avoid over-burdening smaller plans.
Comment: One commenter supported CMS' efforts to increase user fees
to support beneficiary education. The commenter recommended that CMS
collect the entire amount authorized under the statute and work with
the Congress to either index it or otherwise lift the cap if needed to
adequately inform beneficiaries about the new complexities with private
plans.
Response: The changes the commenter requested are beyond the scope
of this rulemaking. We do not intend for the user fee to be exclusively
for education on MA plans. We anticipate that the user fee will also be
used on the new Part D drug benefit, which we believe will consume a
large portion of the user fees, due to the newness of the benefit.
Comment: Two commenters believe that there is insufficient funding
of the SHIP program and recommended that CMS use a portion of the MA
and PDP user fees to support SHIPs.
Response: Early in the implementation of the M+C program, SHIPs
received some funding from the user fee. However, for the last several
years, SHIP funding has been a specific line item appropriation by the
Congress. We have some discretion regarding how the user fees are spent
in terms of beneficiary education, so it is possible for SHIPs to get
some of their funding from the user fee. However, decisions on how to
spend user fees are internal management decisions relating to resource
allocation, and therefore will not be included in this regulation.
Comment: One commenter recommended that beneficiary educational
materials be shared with Congressional committees of jurisdiction prior
to releasing them.
Response: The timelines for providing education materials are
limited. Although we do not intend to seek Congressional authorization
before the release of the education materials, the materials will
comply with the provisions of the statute and regulations, and we will
make every effort to ensure that they are useful to beneficiaries in
making their choices. CMS' Office of Legislation works closely with the
Congressional offices to ensure that they are aware of and have open
access to copies of various educational materials either before or in
the same timeframe as their constituents to help with education and
outreach activities.
Comment: One commenter expressed concern that the funds used to
educate beneficiaries may be more focused on explaining the array of
choices and not focused enough on encouraging beneficiaries to actually
make a choice. The commenter encouraged CMS to work directly with
experienced plans to conduct information campaigns that result in
significant Part D uptake rates for PDPs and MA-PDs. The commenter was
concerned that beneficiaries may be confused by the changes beginning
in 2006.
Response: We appreciate the commenter's suggestion for us to work
with experienced plans to conduct information campaigns that could
expand enrollment in MA-PDs and PDPs beginning in 2006 (especially in
light of the new options that will be available at that time). We
expect to engage a strong network of experienced plans, providers, and
other stakeholders and partners to provide input and feedback on
beneficiary education plans and to provide specific suggestions on ways
to communicate the changes that will occur in the MA program in 2006.
Comment: One commenter believes that CMS will require the
resources, both financial and human, to help beneficiaries make choices
about benefit and plan options that appropriately reflect their needs
and preferences. The commenter recommended that CMS bolster programs
such as one-on-one counseling, which beneficiaries prefer, and to
design beneficiary materials in formats that make information easy to
interpret and understand. The commenter also recommended that CMS
create information resources, such as the 1-800 number, but also help
beneficiaries understand the information that is being presented.
Response: We agree that we will have to continue to educate
beneficiaries on MA program changes in a way that helps the beneficiary
to understand the program and understand what type of Medicare plan
would best suit his or her individual health and financial needs. We
routinely test education and outreach products with beneficiaries
during development to ensure that they are broadly accessible and
understandable to the appropriate target audiences.
Comment: A commenter indicated that there are high costs to I/T/U
for MMA implementation costs related to outreach, education and
enrollment of an AI/AN individual. The commenter encouraged CMS to
acknowledge the need for funding that is specifically directed to local
I/T/U to support these activities where the work is done and where
bearing the costs is the most difficult. The commenter believes that
unlike other Medicare populations, AI/AN beneficiaries are unlikely to
enroll in MA plans without specific information from their I/T/U.
Response: We agree that education and outreach efforts should be
tailored to the needs of specific populations interested in enrolling
in MA plans, to the greatest extent possible. We will continue our
collaboration with the IHS and other partners to identify the most
effective ways to reach beneficiaries in the AI/AN population.
Subpart B--Eligibility, Election and Enrollment
We proposed generally to retain the same eligibility, election and
enrollment rules that currently apply to the Medicare Advantage
program. We received numerous comments on this subpart in response to
the August 2004 proposed rule. These comments and our responses are
presented below.
1. Eligibility to Elect an MA Plan (Sec. 422.50)
In this section, we specified the following:
Reference to an ``MA plan'' includes both MA local and MA
regional plans, unless specifically noted otherwise in the text.
We reserve the authority to allow additional optional
mechanisms for elections (for example, website enrollment) to provide a
more efficient and simplified election process for beneficiaries and
partner organizations.
Comment: Several commenters supported the proposal to retain the
authority to allow additional optional MA election mechanisms, stating
that this change will promote the development of more efficient and
simplified processes for beneficiaries. One commenter requested
clarification that any such alternate election mechanism would be
optional for individual MA organizations to use. Another commenter
supported the change, but stated that CMS should not mandate that MA
organizations accept electronic elections.
Response: The revision made to this section is intended only to
permit us to
[[Page 4601]]
approve alternate optional election mechanisms (in addition to paper
election forms) in the future. We anticipate that such mechanisms will
be available at the option of each MA organization. Furthermore, we
believe it is important to clarify that, as other election mechanisms
are approved and implemented, we do not intend to permit MA
organizations to require beneficiaries to use any such election
mechanism. We will require all MA organizations to establish a minimum
standard process, which, at this time, will be a paper process, and
will be made available to prospective enrollees and plan members in
conjunction with any optional election mechanism. In the future, as
technology evolves, another process may be a more appropriate minimum
standard. To ensure that these points are clear, we are amending Sec.
422.50(a)(5) to provide that beneficiaries may make elections by
completing an enrollment form or by completing another CMS-approved
election mechanism offered by the MA organization.
Comment: One commenter requested that CMS clarify the use of
alternate election mechanisms with respect to employer or union group
MA plans.
Response: Section 422.50 applies equally to all beneficiaries
making MA elections and therefore applies to those individuals making
an election to or from an MA plan sponsored by an employer or union as
well. Current processes already established in our manual guidance for
MA plans offered by employer or union groups are not changed by this
revision.
Subpart B--Eligibility, Election and Enrollment
2. Eligibility to Elect a Special Needs MA Plan (Sec. 422.52)
Section 231 of the MMA authorized the creation of a new type of MA
coordinated care plan, called a ``Specialized MA Plan for Special Needs
Individuals.'' These plans will be referred to throughout as SNPs.
We believe the new requirements regarding SNPs are primarily
intended to encourage more choices for certain populations by allowing
organizations that specialize in the treatment of beneficiaries with
particular needs to have MA contracts. These organizations could
provide and coordinate services for these individuals and would be
permitted to limit plan enrollment to such individuals, or to a certain
proportion of such individuals. This provision could encourage
organizations to develop new products in the marketplace by giving them
the opportunity to develop expertise in efficiently serving special
needs populations. Our overall policy goal will be to allow MA
organizations as much flexibility as possible (within defined
parameters), while maintaining beneficiary protections.
SNPs may restrict enrollment solely to those who are entitled to
Medicaid (dually eligible), institutionalized individuals who meet the
definition in Sec. 422.2, and/or beneficiaries who have a severe or
disabling condition, as defined by the Secretary in regulations.
Section 231 of the MMA also gives the Secretary the authority by
regulation to designate certain MA plans as SNPs if they
``disproportionately serve(s) special needs individuals.'' Special
needs individuals are defined in Sec. 422.2.
In the proposed rule, we asked for comment as to whether SNPs
should be allowed to exclusively enroll certain subgroups of those
categories of special needs individuals described in Sec. 422.52(b)(1)
and Sec. 422.52(b)(2) (dual eligible or institutionalized
beneficiaries) and, if so, what categories would be appropriate.
The MMA gave us the authority to waive section 1851(a)(3)(B) of the
Act, which precludes beneficiaries with ESRD from enrolling in MA
plans. In the proposed rule, we solicited comments as to whether we
should waive this section of the Act and whether beneficiaries with
ESRD should be considered to meet the requirement for special needs
status.
We also have the authority to apply to SNPs a provision under
section 1894(c)(4) of the Act that applies to enrollees in the Program
of All-Inclusive Care for the Elderly (PACE). This section provides for
deemed continued eligibility in certain situations. Specifically, it
allows an beneficiary enrolled in a PACE plan who no longer meets the
eligibility criteria, but who can reasonably be expected to, in the
absence of continued coverage under the PACE plan, meet the criteria of
the plan within a period of time not to exceed 6 months. In the
proposed rule, we proposed applying this provision to individuals
enrolled in SNPs who longer meet a plan's unique eligibility criteria,
who can reasonably expected to meet the plans criteria within a period
of time not to exceed 6 months.
In the proposed rule, we provided in Sec. 422.52(e) that
individuals who are enrolled in MA plans that are subsequently
designated as SNPs would be ``grandfathered,'' that is, allowed to
continue to be enrolled or choose to elect another MA plan during
appropriate election periods provided to all MA eligible individuals.
We proposed this based on the belief that the Congress did not intend
for individuals already enrolled in an MA plan to be involuntarily
disenrolled. However, we also invited comment on an alternative
approach wherein any non-special needs individuals in an MA plan that
is subsequently designated as an SNP would have to be involuntarily
disenrolled. In this situation, we proposed to establish, through
further operational guidance, an SEP for these individuals. Statutory
language also provided that a newly designated MA plan may restrict
future enrollment of individuals to those specialized individuals it
intends to serve.
We also indicated in the proposed rule that, if we did allow
``grandfathered'' members to remain in the SNP, we would distinguish
them from those individuals who join a new SNP and then lose their
special needs status on other than a temporary basis. Those special
needs individuals would be involuntarily disenrolled after losing their
special needs status (and after any period of deemed continued
eligibility, if appropriate) and receiving proper notice. SNPs that
exclusively enroll special needs individuals would be required to
inform individuals before their initial enrollment that they could only
remain enrolled in the plan for as long as they were considered special
needs individuals as defined by CMS.
Comment: One commenter felt that CMS should not allow SNPs to
exclusively enroll certain subgroups of dual eligible or
institutionalized beneficiaries. The commenter's rationale was that
requiring MA organizations to accept all dual eligibles into its
specialized MA plan would maintain the integrity of the dual-eligible
risk pool and prevent the offering of an SNP plan to those who are the
least poor (and presumably, most healthy) segment of duals. On the
other hand, several commenters suggested that CMS allow SNPs that would
enroll subgroups of dual eligibles if supported by a State Medicaid
agency. The vast majority of commenters supported allowing SNPs to
serve subsets of both the dual eligible and institutionalized
populations.
The most prevalent rationale for allowing subsets of dual eligibles
was to allow States to develop specialized Medicaid programs to
compliment Medicare coverage by SNPs. Most commenters described the
difficulties and complexities of serving all dual eligibles as
impediments and disincentives to developing a program to coordinate
Medicaid managed care programs with Medicare. If required to serve all
dual eligible beneficiaries, MA organizations would have to offer
[[Page 4602]]
Medicaid-covered benefits, such as long-term care, to individuals who
are not eligible for full Medicaid benefits. One commenter stated that
allowing subsets of dual eligibles would also facilitate transitioning
full dual eligibles from Medicaid prescription coverage to Medicare
Part D coverage in 2006. Another commenter suggested that CMS clarify
that plans must uniformly offer the same set of benefits to all classes
of dual eligibles as provided under the State's Medicaid program.
Several commenters recommended that CMS let the MA organization propose
eligibility criteria and then evaluate its plan, delivery systems, and
related programs, possibly modifying them as part of the review and
approval process. Some commenters noted the significant investment of
time and resources required to develop targeted clinical programs for
different subgroups with different, complex conditions.
Commenters also suggested allowing specific subsets, including full
benefit dual eligibles, the frail elderly, those who are nursing home
certifiable, children or adults with physical disabilities,
developmental disabilities or mental impairments, and community-based
or institutional individuals.
Two commenters recommended that CMS not include subsets of duals in
the third category of specialized MA plan eligibles, those with severe
or disabling conditions. The rationale given was that the identifying
characteristics of subsets of duals are not appropriately described
within the third category and these individuals should remain in the
second category.
Once commenter recommended allowing organizations to serve other
subgroups of Medicaid eligible and institutionalized if there is a
pervasive justification based on common characteristics of the
subgroup, that is, institutionalized beneficiaries in a specified
network of nursing homes.
Several commenters stated that adverse selection would be mitigated
by phase-in of risk adjustment because payment would take into
consideration the individual's disease category.
Response: Consistent with the majority of these comments, we do not
intend to adopt a regulation that would preclude MA organizations from
offering SNPs to appropriate subsets of the population in a plan
service area, including subsets within the SNP populations identified
in the statute. Thus, in the interest of facilitating the coordinated
delivery of Medicare and Medicaid services, we will consider requests
for SNPs that serve certain subsets of dual eligibles and
institutionalized individuals on a case-by-case basis. Subsets of those
two categories will be included in category one and category two
respectively, rather than in the third category of special needs
individuals, those with chronic or disabling conditions. In addition,
because of the unique nature of some plans serving the
institutionalized and dual eligibles, we will also consider subsets
based on common characteristics, such as a specific network of
facilities and Medicaid eligibility. We will provide further
operational guidance following publication of this rule.
Comment: The MMA allows for the enrollment of ESRD beneficiaries in
SNPs designed for this population. One commenter said that CMS should
delay enrollment of ESRD beneficiaries in MA plans until results of
CMS' capitated ESRD Disease Management demonstration are available. The
commenter also objected to allowing ESRD patients to enroll in managed
care because, in the commenter's view, managed care plans disrupt
existing relationships between patients and health care providers. The
commenter expressed concerns that an ESRD patient who drops or declines
Medigap insurance to join a managed care plan would permanently be
locked into the managed care plan and could not switch to Original
Medicare, since ESRD would make him/her ineligible for Medigap
coverage. The remainder of those commenting on permitting ESRD SNPs
supported the proposal.
Response: Individuals with ESRD may choose to receive care under an
MA plan for a variety of reasons, including coordination of care and
lower out-of-pocket costs. Anecdotal experience with the MA program has
shown that MA enrollees with ESRD generally remain enrolled in their
plan, or join another existing plan if the one in which they are
enrolled terminates. We believe that these beneficiaries should have
the option of enrolling in an MA plan, if they so desire. Therefore, we
will amend Sec. 422.50(a)(2) by adding language to allow SNPs to serve
ESRD individuals.
In order to mitigate the commenter's concerns, we would require
that, prior to enrollment in an MA SNP, the organization notify
potential enrollees that enrollment is fully optional and of the
potential impact that their enrollment could have on their Medigap
rights. In addition, MA Organizations will be required to provide clear
and accurate provider information for potential enrollees so they may
determine whether their current providers are part of the specialized
MA plan's network.
Comment: Many commenters supported the proposed approach at Sec.
422.52(e) to allow individuals already enrolled in an MA plan that we
subsequently designate as an SNP to remain enrolled or be allowed to
elect another other MA plan. Most of these commenters also recommended
that CMS allow for a Special Election Period (SEP) to facilitate
selecting a new MA plan or Original Medicare. Several commenters
remarked on the need to maintain adequate enrollment levels once an SNP
gains a new designation. None of the commenters supported the
alternative proposal under which non-special needs individuals would
have to be involuntarily disenrolled if their MA plan became an SNP.
Response: We will allow members of MA plans that are subsequently
``redesignated'' as SNPs to be ``grandfathered,'' that is, remain
enrolled in that plan indefinitely. These individuals may not be
involuntarily disenrolled on the basis of not meeting the definition of
special needs individual. However, once a grandfathered individual
voluntarily disenrolls from the SNP, he or she would not be eligible to
reenroll in that SNP unless he or she meets the definition of special
need individual. We will establish an SEP for these individuals for
exceptional circumstances in further operational guidance. An SNP that
chooses to exclusively enroll special needs individuals will not be
considered a ``disproportionate share'' SNP, as defined in Sec. 422.2,
on the basis of serving ``grandfathered'' members.
Comment: Many commenters supported not requiring plans to
involuntarily disenroll beneficiaries who lose their special needs plan
eligibility if it is reasonable to assume that they would again meet
the special needs eligibility criteria within a certain period as
determined by CMS. Some commenters stated that it is not uncommon for
beneficiaries to have temporary lapses in eligibility, particularly in
situations where a dual eligible loses Medicaid eligibility due to a
temporary change in financial circumstances or failure to provide
information for recertification. The commenters generally believed that
continued eligibility leads to continuity of care and improved clinical
outcomes. Two commenters requested an additional 6-month ``grace
period'' (commenter's terminology) for individuals who lose their
eligibility as well as retroactive payments for their care in the event
that eligibility is established retroactively.
[[Page 4603]]
One commenter recommended that CMS continue funding Part D and
other benefits for the entire ``30-day notice period'' (commenter's
terminology) regardless of an individual's eligibility to enroll in a
SNP.
One commenter requested continued eligibility for ``exclusive'' as
well as ``non-exclusive'' plans (commenter's terminology), including MA
plans that may temporarily fall below the required threshold for the
special needs designation.
Response: We believe that the Congress' goal was to encourage
continuity of care for these at-risk individuals and that a period of
deemed continued eligibility for a minimum of 30 days but no longer
than 6 months is reasonable for beneficiaries who are likely to regain
eligibility. The 6-month period is consistent with the PACE language at
Sec. 460.160, which provides that a participant may be deemed to
continue to be eligible if, in the absence of continued coverage, the
participant reasonably would be expected to meet the requirement within
the next 6 months. However, we will not include ``in the absence of
continued coverage'' in Sec. 422.52(d).
Our rationale is that this appears to reference ineligibility due
to a health condition that could deteriorate without plan membership.
In the case of an SNP for dual eligibles, a lapse in SNP eligibility
could be due to a lapse of Medicaid eligibility, and such eligibility
may be based on the beneficiary's financial circumstances, not his or
her health condition.
The MA organization may choose any length of time from 30 days
through 6 months for deemed continued eligibility as long as it applies
this period consistently among all members in its plan and fully
informs its members of this time period. Further guidance on applying
deemed eligibility will be provided in operational instructions
following publication of this regulation.
We believe that the ``30-day notice period'' referred to by one
commenter is from our interim guidance for SNPs, issued as part of its
2005 Call Letter. This guidance established a 30-day minimum timeframe
for continued eligibility for an SNP enrollee who loses his or her
special needs status. This individual is a member during the period of
deemed continued eligibility and until his or her disenrollment becomes
effective. Payments will continue on the enrollee's behalf until the
period of deemed continued eligibility ends and the enrollee is
involuntarily disenrolled. Retroactive payment will not be necessary in
these instances.
All SNPs, including ``disproportionate percentage'' SNPs, as
defined in Sec. 422.2, may apply the deemed eligibility provision.
Deemed eligibles would be counted toward the number of special needs
individuals enrolled in the SNP rather than toward the number of non-
special needs individuals.
Comment: Several commenters supported allowing SNPs to disenroll
enrollees who no longer meet the special needs eligibility criteria.
Two commenters wanted SNPs to have the choice of whether to continue to
provide Medicare services to individuals who lose special needs status.
Another commenter supported involuntary disenrollment for exclusive MA
SNPs only, stating that this requirement would hinder disproportionate
SNPs' ability to maintain enrollment at or above the regulatory
threshold.
Response: In our interim guidance and our proposed rule, we
interpreted the statutory phrase ``exclusively serves special needs
individuals'' to mean that the plan is exclusively marketed to special
needs individuals and exclusively enrolls special needs individuals.
This interpretation allowed us to permit existing non-special needs
enrollees to remain enrolled in an MA plan that changed its status to
an SNP.
Thus, under this definition, existing enrollees who did not enroll
when the plan was an SNP would not be affected by the plan definition,
and we do not believe they should be disenrolled. Moreover, the
existence of such enrollees does not preclude the plan from remaining a
plan that ``exclusively serves(that is, markets to and
enrolls) special needs individuals. As noted above, however, an
individual who enrolls in an SNP as a special needs enrollee is
different, since he or she would have no expectation of being enrolled
in that plan if he or she were not in the special needs category. The
case of an SNP that has never had non-SNP enrollees is also different,
as any enrollee that it markets to or enrolls would have to be a
special needs enrollee, if it is an ``exclusive'' plan.
In order to address these latter situations, we will add a new part
(iv) to Sec. 422.74(b)(2) to show that in these cases loss of special
needs status (and of deemed continued eligibility, if applicable) is a
basis for required disenrollment from an SNP that enrolls only special
needs individuals.
We have the authority to waive minimum enrollment requirements as
necessary. Therefore, we do not envision the minimum enrollment
requirements adversely affecting disproportionate share SNPs.
Comment: One commenter recommended that CMS allow MA SNPs to
charge an enrollee for benefits no longer covered by the State or
Federal cost-sharing arrangements and to terminate coverage for
nonpayment of premiums or cost sharing.
Response: An SNP is the same as any other MA plan with respect to
rules governing the charges that may be imposed on enrollees. Enrollees
may be charged for benefits that would not otherwise be covered by
Medicare. Under Sec. 422.74(d)(1), coverage may be terminated for a
failure to pay premiums. As discussed below in connection with
disenrollment for disruptive behavior, a failure to pay cost sharing is
not in itself a basis for disenrollment.
Comment: Two commenters asked for clarification of whether the
regulation refers to Special Needs Health Plans or the Special Needs
Health Options.
Response: The regulation refers to a ``Specialized MA plan for
special needs individuals'' (SNPs), as created by Section 231 of the
MMA.
3. Continuation of Enrollment for MA Local Plans (Sec. 422.54)
The MMA limits the offering of MA plan continuation areas to MA
local plans only and we made this conforming change at Sec. 422.54. We
received no comments on this section and adopted the conforming changes
as proposed.
4. Enrollment in an MA MSA Plan (Sec. 422.56)
Section 233 amended the Act to eliminate the cap on the number of
individuals that may enroll in MA MSA plans removed the existing
deadline for enrolling in such a plan. Because this deadline had
already passed without anyone enrolling in an MSA plan, the original
MSA plan provisions had become a nullity. The effect of section 233 was
to make the authority to offer MSA plans permanent and unlimited. This
change is reflected at Sec. 422.56, along with new language allowing
the Secretary to permit enrollment in MSAs by enrollees of other
Federal. We included this language to reflect the fact that, under the
statute, such enrollment could be authorized contingent on the adoption
of new policies by the OPM.
Comment: Two commenters suggested deleting the language authorizing
the Secretary to permit enrollment in MSAs by enrollees of the Federal
programs specified. Both commenters contended that it was unlikely that
OPM would ever be able to certify that MSA enrollment would not raise
costs in the FEHB, Veterans' Administration, or
[[Page 4604]]
TRICARE programs and that, accordingly, the inclusion of this language
is unnecessary.
Response: The statute at section 1851(b)(2) provides for the
potential for such individuals to become eligible to enroll in an MSA
plan. Therefore, our clarification of Sec. 422.56(b) supporting this
provision is appropriate.
5. Election Process (Sec. 422.60)
In proposed Sec. 422.60, we set forth changes that would allow
other election and notice mechanisms other than paper forms or written
documents. We also clarified that MA organizations may submit requests
to restrict enrollment for capacity reasons to CMS at any time during
the year.
Comment: Two commenters supported the conforming revisions to Sec.
422.60 permitting us to approve alternate election mechanisms, as
discussed in the comments on proposed Sec. 422.50(a)(5). The
commenters also approved of the clarification to Sec. 422.60(b)
regarding requests for enrollment limits due to capacity reasons.
Response: We adopt these revisions as proposed.
Comment: One commenter suggested that CMS make further amendments
to the regulatory text to ensure that the current options we have
established for individuals to elect MA plans sponsored by employer or
union groups are retained, including the policy that documentation may
be retained by an employer or union group rather than the MA plan.
Response: As discussed above, we are confident that the proposed
revisions provide us with sufficient flexibility to foster innovative
election processes that use modern technology for all individuals, not
just employer or union groups. Therefore, it is not necessary to
reiterate that these alternative enrollment mechanisms are also
available to employers or union groups. We will continue to retain
current policy for employer or union group elections in our operational
guidance and as an option for MA organizations.
Comment: One commenter suggested that CMS require MA and MA-PD
plans to accept AI/AN enrollees even if a plan has received CMS
approval to close enrollment for capacity reasons.
Response: The ability to request a capacity limit is an important
element of the MA program that helps ensure that plan enrollees will
have sufficient access to needed providers and services. CMS' approval
of a capacity limit request indicates that we agree with the requesting
MA organization that its defined network of providers is sufficient to
deliver health care only to a limited number of plan members. Thus, we
do not permit the MA organization to enroll any individual beyond the
capacity limit of a given plan, and we do not believe it would be
appropriate to undermine this protection by waiving capacity limits for
the AI/AN population or any other group.
Comment: Two commenters requested that CMS modify the regulations
to more clearly allow for what the commenter referred to as ``passive
elections.''
Response: The elections to which the commenters are referring are
those in which an individual is informed that the process for making an
election of a particular plan is taking no action, while other options
are exercised by declaring an affirmative intent to elect that option.
CMS have limited such a process to situations when it can be reasonably
concluded that an individual will clearly want to enroll in the MA plan
offered by the same organization.
We do not believe that a regulatory change is needed to continue to
allow such elections. The revisions made to Sec. 422.50(a)(5) and the
conforming revisions to Sec. 422.60 provide us with appropriate
flexibility to define and approve MA election mechanisms, including
allowing such ``passive elections'' as described above in specific
limited circumstances.
6. Election of Coverage Under an MA Plan (Sec. 422.62)
Similar to the election periods in place in past years, the MA
Annual Coordinated Election Period will run from November 15 through
December 31 of each year. For 2006, the annual coordinated election
period is extended through May 15, 2006.
Based on our interpretation of the MMA, we proposed revising Sec.
422.62 to ensure that an individual who is newly eligible for MA has
the full opportunity to elect an MA plan as part of their Initial
Coverage Election Period. In developing the proposed rule, we
determined that the intent of the Congress was to provide for an
initial coverage election period for MA that ends on the later of the
day it would end under pre-MMA rules or the last day of the Medicare
Part B initial enrollment period. This approach extends an individual's
MA initial election period in some instances, and never reduces or
eliminates it.
Through 2005, the Open Enrollment Period extends throughout the
year, providing unlimited opportunities for MA eligible beneficiaries
to enroll in, disenroll from, and or change enrollment in an MA plan.
This change was reflected in Sec. 422.62(a)(3) of our proposed
regulations.
Section 1851(e)(2)(B)(1) of the Act was revised to establish that
the open enrollment period in 2006 will be the first 6 months of the
year. In addition, individuals who are newly eligible for MA in 2006
are provided an open enrollment period that consists of the first 6
months the individual is MA eligible, but cannot extend past December
31, 2006.
Under revised section 1851(e)(2)(C)(i) of the Act, the open
enrollment period for 2007 and subsequent years will be the first 3
months of each year. In addition, individuals who first become MA
eligible during 2007 and subsequent years will be provided an open
enrollment period that consists of the first 3 months the individual is
MA eligible, not to extend past December 31, 2006. Although this
specific period does not extend past December 31, 2006, it is important
to remember that all individuals will be provided a 3-month open
enrollment period from January through March 2007, as discussed in this
section.
Section 1851(e)(2)(C) of the Act limits a change of election made
during an open enrollment period in 2006 and later years to the same
type of plan in which the individual making the election is already
enrolled. Specifically, an individual in an MA plan that does not
provide drug coverage may change only to another similar MA plan, or to
original Medicare, but may not enroll in an MA plan that provides Part
D coverage, or enroll in a Part D plan. Similarly, an individual
enrolled in an MA plan that includes Part D coverage may enroll only in
another MA plan with Part D coverage, or change to original Medicare
coverage with an election of a Part D plan. As noted in the proposed
rule, we clarified a conflict between clause I and II of section
1851(e)(2)(C)(iii) of the Act. Clause (I) of section 1851(e)(2)(C)(iii)
states that an individual who is ``enrolled in an MA plan that does
provide qualified prescription drug coverage,'' may only elect a plan
that does not provide that coverage. A literal reading of this language
would be in direct conflict with clause (II) of that same section,
which says that an individual who is enrolled in an MA plan that
provides qualified prescription drug coverage may not enroll in an MA
plan that provides no Part D coverage.
This contradiction, plus (1) the fact that section
1851(e)(2)(C)(iii)(I) of the Act refers to a ``another'' MA plan that
``does not'' provide Part D coverage, (2) the fact that clause (I) is
contrasted with
[[Page 4605]]
clause (II) with the word ``or'', and (3) committee report language,
make it clear that the word ``not'' was inadvertently omitted from the
first clause of section 1851(e)(2)(C)(iii) of the Act.
Comment: Numerous commenters opposed the ``lock-in'', that is, the
statutory provisions that limit beneficiaries from choosing a different
type of coverage to certain times of the year. Several commenters
stated that these provisions severely limit the choice of
beneficiaries. Others commented that implementing lock-in under the MA
program at the initiation of the new Part D program would be confusing
to beneficiaries. Commenters also noted that such a provision would
have a negative impact on the MA organizations, by making it difficult
to maintain a dedicated sales staff and increasing the administrative
costs and burden of educating beneficiaries about both Part D and MA
changes.
Response: The provisions that limit the times in which an
individual may change his or her election were originally created by
the BBA, and were to become effective during 2002. However, because of
subsequent statutory changes, these provisions have never taken full
effect (except for a temporary period during 2002). These provisions
were modified by the MMA to incorporate the Part D prescription drug
benefit and the statute is clear on their applicability. Thus, we have
no authority to modify these requirements.
Comment: One commenter suggested that CMS develop appropriate
procedures to administer these election restrictions and inform
organizations as to what type of plan an individual is eligible to
elect (for example, an MA only or an MA-PD plan). Another commenter
recommended that the organization have access to information about
whether an individual is eligible to elect a certain plan, both in
advance of an enrollment application and upon receipt of an enrollment
application.
Response: We understand that we will need to maintain data history
of the number of times an individual has made an election during a
specific election period, as well as the type of plan an individual is
eligible to elect. Such information will be necessary in order to
determine whether an individual is eligible to elect an MA plan at a
given time. We will work with plans to establish a reliable process to
determine the eligibility of an individual based on these requirements.
Comment: Several commenters responded to the request for comments
on the provision that an enrollee may only change to the same type of
plan (either with drug coverage or without) during the open enrollment
period. Some commenters opposed the interpretation that restricts a
beneficiary from switching plans, even when life circumstances had
changed. Others supported the interpretation and indicated that such a
provision reinforced the overall integrity of the program. Others
believe that we need to maintain flexibility with employer-sponsored
plans.
Response: After review of the statutory provisions and the
comments, we believe that the Congress clearly intended that a
beneficiary may obtain or discontinue Part D coverage ONLY during the
annual coordinated election period that begins in November each year.
Notwithstanding SEPs established by the statute and in our regulations
and subsequent guidance, it is only during the Annual Coordinated
Election Period that all Medicare beneficiaries are free to elect among
all available options, whether original Medicare, MA plans, MA-PD plans
or PDPs. The statutory provisions governing Part D in 1860D-1 do not
provide for an open enrollment period that would allow beneficiaries to
elect the prescription drug benefit outside of the AEP. Permitting
beneficiaries to discontinue Part D coverage at any time during the
year, without a corresponding election period to enroll in such
coverage, could result in a gap in coverage that may result in a late
enrollment penalty. Therefore, we believe that it is appropriate to
interpret the statute to require that individuals may not make an
election that would result in adding or dropping prescription drug
coverage except during the annual election period.
Comment: One commenter recommended that CMS clarify how the annual
coordinated election period and the open enrollment period will be
administered in 2006, since these periods overlap from January 2006
through May 15, 2006.
Response: In 2006, we envision that the annual coordinated election
period will provide each individual with the ability to choose either
an MA plan or original Medicare, with or without drug coverage. The
open enrollment period will provide individuals the opportunity to
change their election from the MA program to original Medicare (or vice
versa), but not to obtain or discontinue drug coverage. We will provide
information about these election periods in beneficiary materials, such
as the Medicare & You Handbook.
Comment: A few commenters submitted comments regarding the special
election periods (SEPs), as described at Sec. 422.62(b). One commenter
asked if CMS expected to apply the SEPs established under the M+C
program to the MA program. Another commenter requested confirmation
that the current SEP for PACE enrollees (described in manual guidance)
would be applied to the MA program. One commenter suggested that CMS
consider an exception to the Open Enrollment Period for SNPs and for
individuals eligible for both Medicare and Medicaid.
In addition, a commenter asked CMS to consider the creation of an
SEP for beneficiaries in markets with MA market penetration rates below
20 percent; such an SEP would allow time for educating beneficiaries on
MA plans and how they operate. Many commenters submitted comments on
establishing SEPs for special needs plans. The commenters generally
approved of a permissive special election period policy to allow
special needs individuals to change plans at any time. Others believe
that the enrollment periods established in Sec. 422.62 do not provide
sufficient opportunity for beneficiaries to enroll in a special needs
plan.
Response: We have historically included in our regulations those
SEPs that have been specifically named in the statute, and established
SEPs for exceptional circumstances in our operational guidance. We will
review the SEPs in current MA guidance and consider their applicability
for the MA program in 2006, as well as consider new SEPs that may be
necessary to coordinate the new Part D program. We appreciate the
suggestions provided by the commenters and will consider these in
developing guidance following publication of the rule.
Comment: Several commenters addressed the AI/AN population and the
need to modify the regulations to allow AI/AN individuals to switch
between MA or MA-PD at various times rather than be limited to changing
only at certain times during the year.
Response: We recognize the need to coordinate between the IHS,
Tribe, or Tribal organization, or Urban Indian (I/T/U) programs. We
have the authority to recognize certain circumstances as exceptional
and provide special election periods. Providing such exceptions,
however, would not always benefit an individual, as we discussed in our
response to a previous comment under Sec. 422.50 regarding capacity
limits. Such limits are necessary to ensure that health plans have the
appropriate number of providers and are able to provide access to all
beneficiaries enrolled in their plan. As discussed in the previous
comment regarding
[[Page 4606]]
establishment of SEPs in operational guidance, we are not establishing
any non-statutory SEPs in the regulation, but retain the authority to
establish an SEP in the future under exceptional conditions. This same
policy applies to the AI/AN population.
7. Coordination of Enrollment and Disenrollment through MA
Organizations (Sec. 422.66)
In keeping with our proposed clarification at Sec. 422.50(a)(5)
regarding election mechanisms other than, and in addition to, paper
forms, we proposed conforming changes at Sec. 422.66. We also proposed
similar changes in Sec. 422.66(b) to provide for a more efficient
notice process, including eliminating the requirement for MA plans to
send a copy of the individual's disenrollment request back to the
individual.
Section 1860D-21(b) provides the Secretary with the authority to
implement default enrollment rules at 1851(c)(3)(A)(ii) for the MA-PD
program, which begins in 2006. This provision permits the establishment
of procedures whereby an individual currently enrolled in a health plan
offered by an MA organization at the time of his or her Initial
Coverage Election Period is deemed to have elected an MA-PD plan
offered by the organization if he or she does not elect to receive
coverage other than through that organization. In our proposed rule, we
discussed the requirement for individuals to make affirmative elections
upon becoming entitled to Medicare as provided under Sec. 422.66.
Affirmative elections may ensure that individuals have the ability to
remain with the organization that offers their health plan and protects
beneficiary choice by requiring an individual to make an affirmative
election. However, based upon comments received, we will revise the
regulatory language to retain the ability to allow for default
enrollment, as discussed in our responses below.
At Sec. 422.66(e) we also proposed to add language that
implemented new rules for continuing MA coverage for individuals
enrolled in MA plans as of December 31, 2005. Under section 1860D-
21(b)(2), individuals enrolled in an MA plan that, as of December 31,
2005, provides any prescription drug coverage would be deemed to be
enrolled in an MA-PD plan offered by that same organization as of
January 1, 2006. If an individual is enrolled with an MA organization
that offers more than one MA plan that includes drug coverage, and is
enrolled in one of those plans as of December 31, 2005, the individual
would be deemed to have elected to remain enrolled in that plan on
January 1, 2006 if it becomes an MA-PD plan on that date. An individual
enrolled in an MA-PD plan on December 31 of a year would be deemed to
elect to remain enrolled in that plan on January 1 of the following
year (that is, the next day).
Comment: Several comments were received regarding the revisions to
the disenrollment process described above. Several commenters supported
the change in language allowing optional mechanisms for disenrollment
elections. Several commenters also supported the elimination of the
requirement that organizations return a copy of the disenrollment
request to the individual.
Response: We received no opposing comments to these provisions and
adopt these provisions as proposed.
Comment: One commenter recommended that CMS clarify that MA plan
members who have selected prescription drug coverage as an optional
supplemental benefit, and are receiving such benefits as of December
31, 2005, will be deemed to have enrolled in an MA-PD plan.
Response: Individuals who are enrolled in an MA that offers any
prescription drug coverage, including coverage offered as an optional
supplemental benefit, as of December 31, 2005, will be deemed to have
enrolled into an MA-PD plan offered by that organization.
Comment: Several commenters stated that additional information is
needed to implement the deemed enrollment provision for MA enrollees
who do not make an affirmative election into an MA-PD plan. If the MA
organization offers more than one MA-PD plan, it is unclear into which
plan the individual will be deemed enrolled.
Response: We will provide further guidance to MA organizations on
this issue, as we do at the end of each contract year through our plan
``cross-walk'' guidance. Under this guidance, the existing policy,
under which the MA organization may designate the plan that is
``continuing'' into the next year, would apply to this situation.
Comment: Several commenters supported and opposed the
implementation of default enrollment rules as discussed at section
1851(c)(3)(A)(ii) of the Act for the MA-PD program.
Several commenters support implementing the default enrollment
provision and believe that it would simplify the enrollment process for
beneficiaries. They believe that such a process could be coupled with
advanced notice that would also give the member the opportunity to
``opt-out'' of the ``default'' enrollment. Other commenters stated that
the MA organization should have the option of applying ``default''
enrollment in certain situations, for example, with its employer group
members. Commenters stated that if the MA organization chose to
implement the option, each beneficiary would also be provided the
option to decline prior to enrollment.
Several commenters opposed default enrollment and supported
requiring an affirmative election by the beneficiary. These commenters
believe that a default enrollment process would be difficult and
confusing for beneficiaries. They do not believe that beneficiaries
should be ``defaulted'' into the same health plan that provided pre-
Medicare coverage. Many commenters recommended that MA plans obtain
accurate information from prospective enrollees through the affirmative
election process, and, without such a process, MA plans may not have
up-to-date information about the beneficiary. Finally, there are those
who neither support nor oppose the default enrollment process, but
instead suggest that we modify the regulatory language to allow us to
implement such a provision in the future.
Response: The commenters raise several good points regarding the
implications of default enrollment. The intent of default enrollment is
not to reduce beneficiary choice, but rather to ensure continuity of
care. At this time, we will retain the flexibility to implement this
provision through future instructions and guidance to MA organizations.
We do not envision mandating that organizations use default procedures,
but instead would give organizations the option of implementing such a
process for its enrollees. Any such process would require that advance
notice be provided to an individual, and that affected individuals have
the ability to ``opt out'' of such an enrollment. We believe that we
can achieve the same flexibility provided with respect to default
enrollment that exists at Sec. 422.60(b)(3)(c), which allows for
elections using alternative mechanisms. Thus, we have revised proposed
Sec. 422.66(d)(5) to allow us to offer default enrollment as an option
in the future, in a form and manner specified by CMS.
Comment: One commenter suggested that, rather than prohibit default
enrollment, CMS should develop a method to allow enrollees in an MA
plan with or without prescription drug coverage, who do not make an
election by December 31, 2005 to remain with their current MA
organization in an MA-PD plan. Another commenter assumed that CMS
intends that
[[Page 4607]]
individuals enrolled in an MA plan without drugs who do not make a plan
election into an MA-PD plan for January 1, 2006 will be defaulted into
original Medicare.
Response: The statute provides for an individual in an MA plan with
drug coverage on December 31, 2005, to be deemed enrolled in an MA-PD
plan as of January 1, 2006. However, the statute does not allow an
individual who is in an MA-only plan that continues in January 2006 to
be deemed to make an MA-PD election. The statute is clear that those
individuals will remain in an MA-only plan unless those individuals
take an action to elect an MA-PD plan. Pursuant to section 1861(b)(3)
of the Act, individuals may be deemed to have elected Original Medicare
only if the MA-only plan in which they are enrolled is terminated.
Thus, in general, we would not be defaulting MA plan members into
original Medicare.
Comment: Several commenters recommended that CMS coordinate the
enrollment of full benefit dual eligible individuals. A few commenters
suggested that CMS apply the default enrollment provisions for dual
eligible individuals who have not otherwise elected an MA-PD or PDP
into an MA-PD that is administered by an MA organization that operates
the Medicaid managed care organization in which the individual is
enrolled. Another commenter supports the inclusion of sufficient
flexibility in our regulations to enable us to develop solutions that
best meet the needs of beneficiaries and are coordinated with the MA
organizations.
Response: As discussed above, we will consider requests to adopt
such default enrollment processes only with respect to a newly-Medicare
eligible individual who is enrolled with an organization as a Medicaid
enrollee at the time he or she becomes eligible for Medicare. In such a
case, the individual could be considered by default to have elected
that organization for purposes of Medicare benefits upon the
individual's becoming eligible for Medicare. The default authority in
1851(c)(3)(A)(ii) of the Act would not, however, permit an individual
to be considered by default to have elected an MA-PD plan if he or she
was already a Medicare beneficiary and had elected not to receive
Medicare benefits through an MA organization. Therefore, we decline to
enroll by default existing full-benefit dual eligible individuals into
an MA-PD if they are currently in Original Medicare and only receive
Medicaid benefits through that organization. We will continue to
evaluate alternatives to facilitate enrollment in Part D for this
population.
Comment: Several commenters suggest that each MA plan that becomes
an MA-PD plan send a notice to their enrollees that the enrollees will
be automatically enrolled in the MA-PD plan unless they choose to
change plans. Further, it is suggested that CMS create a model letter
for this purpose.
Response: MA plans are required to send out notices in October of
every year to their members, also known as the annual notice of change
(ANOC). We will revise the language in the ANOC for MA plans to provide
to members in October 2005 in order to reflect this policy.
Comment: Several commenters recommend that CMS establish a default
enrollment process for AI/AN if a certain plan meets AI/AN needs.
Response: CMS recognizes the need to coordinate between the I/T/U
programs. Given the new regulatory language at Sec. 422.66(d)(5),
which allows us to offer default enrollment as an option to MA
organizations, we could consider requests by MA organizations to offer
default enrollment to the AI/AN population in the case of newly-
Medicare eligible individuals who are enrolled in a non-Medicare
product of an MA organization at the time they become Medicare
eligible.
8. Effective Dates of Coverage and Change of Coverage (Sec. 422.68)
To coordinate the effective date of elections with the 2006 special
annual coordinated election period (to be held November 15, 2005
through May 15, 2006), section 1851(f)(3) of the Act was amended by the
MMA to provide that the effective date of elections for the annual
coordinated election period does not apply during the 2006 special
annual election period, when enrollment will be effective on the first
day of the month following the month in which an election is made. We
proposed to revise Sec. 422.68(b) to provide for this coordination and
to make the effective date of elections in the annual coordinated
election period for 2006 that are made in 2006 (that is, from January 1
through May 15, 2006) the first day of the calendar month following the
month in which the election is made. We received no comments on this
section and adopted the proposed language as final.
9. Disenrollment by the MA Organization (Sec. 422.74)
Under the current regulations at Sec. 422.74(d)(1), MA plans are
required to provide, at a minimum, a 90-day grace period before
disenrolling individuals for failure to pay plan premiums. Thus, MA
plans must maintain enrollment for individuals who do not pay their
premiums for more than 90 days.
We proposed to provide greater flexibility to MA organizations by
replacing the 90-day grace period in Sec. 422.74(d)(1) with the long-
standing approach under Sec. 417.460(c)(1), which governs
disenrollment from HMOs with cost contracts under section 1876. Under
this proposal, we would instead specify that a disenrollment could be
effectuated no sooner than 1 month from the date the premium was due.
We have also proposed revisions to the regulations at Sec.
422.74(d)(2) regarding disenrollment of an individual for disruptive
behavior. Our goal was to create a more objective definition that is
based upon an individual's behavior, rather than upon the application
of such subjective terms as ``unruly,'' ``abusive,'' and
``uncooperative.'' We also recognized that, in revising this
definition, we needed to strike a balance that would ensure all
individuals are afforded protection from unwarranted disenrollment
actions while protecting the health and safety of all those concerned
including the individual. The best solution is to create a definition
of disruptive behavior based on objective criteria, ensure that MA
organizations make serious efforts to resolve problems with
beneficiaries who are disruptive, and to require MA organizations to
make ``reasonable accommodations'' for vulnerable beneficiaries,
including those with serious mental illness. Furthermore, we will
ensure that CMS staff with appropriate clinical or medical expertise
will be involved in the review of the MA organization's request before
we make a final decision. We will work with organizations that ask to
disenroll these individuals on a case-by-case basis to ensure that they
are not left without Part D coverage. We will also remove the provision
for an expedited disenrollment we had proposed and ensure that MA
organizations provide due process before disenrolling an individual.
Comment: Several commenters supported the proposed revisions to
Sec. 422.74(d)(1) regarding procedures for involuntary disenrollment
for failure to pay plan premiums. Other commenters opposed these
revisions as ``overly broad'' and felt the lack of a specific time
frame could be a disadvantage for plan enrollees.
Response: Our proposed changes to this section were intended to
provide flexibility for MA organizations in addressing the issue of
plan members who fail to pay required plan premiums. Under the existing
rule, MA organizations were obligated to provide
[[Page 4608]]
all plan benefits to an individual who has failed to pay required plan
premiums for a full 90-day period. This period often exceeded 90 days
because the notice requirements we imposed fell after the end of the
90-day period, but must still be met by the organization before the
individual could be disenrolled. Our experience and feedback from MA
organizations indicated that these requirements, while intended to
protect beneficiaries enrolled in MA plans, may instead artificially
inflate plan premiums because MA organizations are required to continue
to provide services to these beneficiaries for up to 4 months, even
though they have not paid the required plan premiums.
After reviewing the comments and feedback we received on the
proposed rule, we determined that it would be prudent to include a
minimum grace period in the revisions we are making to address this
issue. Therefore, we have revised this section to include a 1-month
grace period during which an enrollee who has failed to pay required
premiums must be notified of the impending disenrollment action and
afforded the opportunity to pay past due premiums in full or under
payment terms agreed upon by the beneficiary and the MA organization,
as the organization allows. This period will begin on the first day of
the month for which the premium was unpaid. For example, the grace
period for a March premium will begin March 1\st\ and, if the
organization does not receive payment by March 31\st\, the individual
will be disenrolled effective April 1\st\. We will provide specific
time frames for required notices in additional guidance to ensure
beneficiaries have adequate time to respond before disenrollment takes
effect. Since we are establishing this 1-month grace period as a
minimum requirement, MA organizations still have the option of
lengthening this period.
Comment: Three commenters suggested that CMS allow MA organizations
to ``move'' or ``default'' plan members who have failed to pay premiums
in one MA plan to another MA plan in the same organization that is
offered at a lower or no premium, so that beneficiaries do not suffer
an interruption in MA benefits.
Response: This suggestion is inconsistent with the statute. Section
1851(g)(3)(C)(i) of the Act clearly provides that individuals who are
disenrolled from an MA plan for failing to pay premiums are deemed to
have elected original Medicare.
Comment: Several commenters submitted comments on the proposed
revisions to Sec. 422.74(d)(2) concerning the disenrollment of
individuals who exhibit disruptive behavior. Some commenters supported
the proposed approach, noting that the inability to effectuate such
disenrollment has been an ongoing issue for MA plans. Other commenters
recommended that CMS further clarify the meaning of the term
``decision-making capacity,'' and one commenter in particular suggested
that CMS adopt a definition based on legal conservatorship.
Several commenters, on the other hand, expressed concern that the
expanded definition of disruptive behavior does not adequately protect
individuals whose behavior is induced by a mental illness, a medical
condition, or certain prescribed drugs. These commenters were concerned
about the loss of protection for individuals with diminished mental
capacity. Several commenters expressed concern that the definition of
disruptive behavior was overly subjective, particularly the use of
terms such as ``unruly'', ``abusive'' and ``uncooperative.''
Response: In the final rule, we aim to strike a balance between
allowing MA organizations to disenroll individuals who exhibit
disruptive behavior and creating adequate protections for individuals
who face involuntary disenrollment from a plan. Since the statute (at
section 1851(g)(3)(B)(ii) of the Act) permits an MA organization to
disenroll an individual who engages in disruptive behavior, we must
establish a process for allowing these types of disenrollments. At the
same time, we recognize that such a process must include adequate
safeguards for individuals whose disruptive behavior is due to mental
illness or a medical condition, especially in light of the crucial
importance of prescription drug therapy for these individuals. It is
also important to recognize that some prescription drug therapies may
well induce such behavior.
Therefore, we are revising our proposed definition of disruptive
behavior in Sec. 422.74(d)(2)(i) of the final rule to focus on the
behavior that substantially impairs the plan's ability to arrange or
provide care for the individual or other plan members. We recognized
that terms such as ``unruly'', ``abusive'', ``uncooperative'', as well
as an assessment of the enrollee's ``decision-making capacity'' are
subjective terms that make reviewing and approving such requests
difficult.
In addition, we agree with commenters that arranging or providing
care for individuals with mental illness, cognitive impairments such as
Alzheimer's disease or other dementias, and medical conditions and
treatments that may cause disruptive behavior warrants special
consideration. Therefore, we are revising Sec. 422.74(d)(2)(v) to also
require MA organizations to provide a ``reasonable accommodation'' to
individuals in such exceptional circumstances that we deem necessary.
Such accommodations could include providing the individual with a SEP
to choose another plan, or requiring the plan to maintain the
individual's enrollment until the end of the year, when the individual
could choose another plan. We will determine the type of accommodation
necessary after a case-by-case review of the needs of all parties
involved. This review will be conducted as part of CMS' existing review
and approval process required under Sec. 422.74(d)(2)(v). The
regulations (at Sec. 422.74(d)(2)(iii)), will continue to require that
that before an organization can request to disenroll a member for
disruptive behavior, it first must make a serious effort to resolve the
problems presented by the individual's behavior, including the use of
the organization's grievance procedures. The MA organization must then
document the individual's behavior, its own efforts to resolve the
problem, and the use or attempted use of its internal grievance
procedures.
We believe that these policies will achieve the twin goals of
permitting involuntary disenrollment when appropriate due to an
individual's disruptive behavior, while also establishing necessary
protections for beneficiaries in certain circumstances.
Comment: One commenter stated that the proposed rule denies
protection to individuals who comply with medical advice by trying an
on-formulary drug instead of the drug originally prescribed or by
seeing their primary care physician rather than a specialist and
subsequently experience an adverse reaction that triggered the
disruptive behavior. Another commenter believed that, in cases where an
individual is unstable, disruptive behavior could be related to
unsuccessful attempts to find the proper medication or due to a plan's
step therapy requirement.
Response: We agree with the commenter, and clarify in the final
rule at Sec. 422.74(d)(2)(i) that an individual's behavior cannot be
considered disruptive if such behavior is related to the use of medical
services or compliance (or non-compliance) with medical advice or
treatment. For example, an individual who chooses to disregard medical
advice, such as not heeding the advice to stop using tobacco products,
is not exhibiting disruptive behavior.
[[Page 4609]]
Comment: Several commenters supported the flexibility afforded by
allowing MA organizations to limit re-enrollment for individuals who
are disenrolled for disruptive behavior. One commenter however, opposed
the provision on the grounds that prohibiting an individual from re-
enrolling in a plan for a specified period could cause undue harm.
Response: In the proposed rule, we specified that, under Sec.
422.74(d)(2)(vi), an MA organization had the option to decline future
enrollment by an individual who had been disenrolled for disruptive
behavior. Although a prohibition on re-enrollment would still be
possible under this final rule, we are not leaving this matter to the
discretion of the MA organization. Instead, we are providing that an
organization must request any future conditions on re-enrollment with
their disenrollment request. We will then review each request on a
case-by-case basis, consistent with Sec. 422.75(d)(2)(v).
Comment: Several commenters submitted mix comments on the proposed
expedited disenrollment process. Some commenters felt that the
expedited process undermines the standards and requirements that are in
place to protect beneficiaries, while other commenters supported the
greater flexibility in cases where such behavior poses an immediate
threat of health or safety to others.
Response: We believe that all individuals facing involuntary
disenrollment for disruptive behavior must have sufficient opportunity,
as provided by the notice requirements, to change their behavior and/or
grieve the MA organization's decision to request involuntary
disenrollment from CMS. Although we recognize that threatening behavior
is a real, if rare, problem, we do not believe that expedited
disenrollment is the appropriate remedy. Rather, we would recommend
either a medical approach or, if warranted, a law enforcement solution
for truly threatening situations. Therefore we are removing this
provision from the final regulation.
Comment: One commenter recommended that the process for
disenrolling AI/AN from MA organizations that contract with the HIs, an
Indian Tribe or Tribal organization, or an I/T/U include direct
communication with the I/T/U entity with adequate documentation of and
steps taken to resolve the problem as well as adequate timelines.
Response: MA organizations have the statutory authority at Section
1851(g)(3)(B)(ii) of the Act to disenroll an individual from a plan if
the individual has engaged in disruptive behavior and are required to
provide sufficient notice to the individual in accordance with the
timeframes specified in manual instructions. Because an individual is
an enrollee of MA plan, the individual's relationship with the plan is
primary. The MA organization, not the health care provider, is
obligated to communicate with the individual or the individual's
authorized representative as defined under State law. We believe that a
provision requiring consultation with I/T/U entities would not be
within the scope of the authority in section 1851(g)(3)(B)(ii) of the
Act.
Comment: Several commenters submitted comments on whether
nonpayment of cost-sharing should constitute disruptive behavior. Many
commenters supported this interpretation, noting the negative impact
that non-payment of cost sharing has on an MA organization's ability to
provide or arrange for services for the individual. These commenters
generally recommended that CMS establish a clear and uniform process
for plans to follow. Another commenter suggested that such
disenrollments be permitted only for certain types of services that
represent significant portions of a member's overall cost-sharing
responsibility. One commenter suggested that CMS establish a threshold
of $2,000 of outstanding cost sharing, including two or more failures
to pay cost sharing.
Other commenters, however, opposed including nonpayment of cost
sharing as a basis for disenrollment. Some commenters stated that this
policy would be discriminatory, placing very ill patients with high
medical costs at a severe disadvantage and leading plans to cherry pick
healthier patients. Another commented that CMS needed to take into
account an individual who experiences a change in circumstances that
may affect his or her ability to pay cost sharing.
Several commenters raised questions about how CMS would treat low-
income individuals. Some commenters were supportive of a low-income
exception for such disenrollments, while other commenters noted the
administrative difficulty in applying the exception, since plans do not
have mechanisms in place to determine beneficiary income levels or
intervene on behalf on the enrollee with the provider.
Response: We appreciate the feedback provided on whether the
nonpayment of cost-sharing should constitute disruptive behavior. We
continue to believe that disenrollment for failure to pay cost-sharing
may be disruptive under certain circumstances. At the same time, we
believe that all the protections, such as notice requirements and case-
by-case CMS review, should apply in these situations. Thus, we are not
ruling out such disenrollment in certain cases, and we will consider
these comments in developing guidance for the disruptive behavior
provisions.
Comment: Other commenters recommended that CMS institute specific
protections for individuals facing involuntary disenrollment, including
an appeals process.
Response: Although we agree with the commenter that CMS should
establish a procedure for beneficiaries to dispute enrollment denials,
we do not believe that a formal appeals process is necessary. Instead,
we intend to address beneficiary complaints regarding enrollment in a
similar manner as we have done under the MA program. Under the MA
program, individuals are advised through their notice of denial of
enrollment that if they disagree with the decision, they may contact
the MA organization. We provide assistance to MA organizations to
handle beneficiary inquiries and complaints regarding enrollment
through staff assigned to each MA organization. We envision a similar
process being established under the PDP program.
10. Approval of Marketing Materials and Election Forms (Sec. 422.80)
We proposed to codify at Sec. 422.80(a)(3) the ``file-and- use''
program already in place. This provision recognizes an MA
organization's consistent compliance with marketing guidelines by
providing for streamlined approval of marketing materials submitted by
that organization. Organizations that have demonstrated to us that they
continually meet a specified standard of performance are allowed to
have certain types of marketing materials deemed to be approved by us
if they are not disapproved within 5 days of submission to us for prior
approval. In addition, the time frames under Sec. 422.80(e)(5) were
made consistent with those provided under Sec. 422.80(a)(1). Lastly,
we proposed clarifying changes to the discussion of prohibited
marketing activities for MA plans.
Comment: Several commenters submitted comments regarding the
``file-and-use'' provisions. Many commenters supported incorporating
this provision into the regulation and suggested that CMS consider even
further flexibility as plans transition to the new Part D benefit in
2006. One commenter in support of the provision did note,
[[Page 4610]]
however, that small plans are more affected by the process since these
plans submit fewer materials and a smaller number of errors impact
their ability to participate. This commenter recommended that CMS
consider this issue with regard to smaller organizations.
Many commenters opposed this provision and believe that the
provision weakens the marketing rules and that MA organizations have
not demonstrated that they deserve such a process. Given the new
upcoming options and diversity of plan benefits, many believe stronger
marketing requirements are needed. They were concerned that this
process would perpetuate the perceived inconsistency in the marketing
material approval process within CMS. Others were concerned that the
short timeframe for CMS to review and approve would result in
essentially CMS ``rubber stamping'' materials. One commenter suggested
that plans present all marketing materials at least 30 days before
proposed distribution.
Response: The ``file-and-use'' program streamlines the marketing
review process while assuring that beneficiaries marketing materials
are of a high quality and clarity. While we understand the concerns
raised by smaller organizations, this program was developed to be
available to those MA organizations that demonstrate they can
consistently achieve a high level of performance with respect to
producing accurate and clear marketing materials over a sustained
period of time, regardless of the size of the organization.
It is also important to note that there are marketing materials
that are not ``eligible'' to be considered under this program. Any
marketing materials that describe benefits, cost sharing or plan rules
are not eligible for the file-and-use status.
We retain the right to rescind file-and-use status from an MA
organization if the organization fails to meet the rigid standards of
compliance laid out in the file-and-use guidelines. We do not believe
that the beneficiary is at greater risk as a result of the file-and-use
program, but may actually benefit from being able to receive certain
educational and outreach materials in a timely manner.
In response to the commenters seeking greater marketing
flexibility, we also are providing in Sec. 422.80(a)(2) of this final
rule for organizations that are not currently eligible for the file-
and-use method to use this method with respect to materials that pose
the lowest risk of confusing or misleading beneficiaries. With respect
to these materials, any MA organization may follow the file-and-use
procedures if it certifies that it followed all applicable marketing
guidelines, or that it used, without modification, model language
specified by CMS.
Comment: One commenter expressed disappointment that CMS retained
the prohibition on door-to-door solicitation. The commenter did not
believe that retaining this ban was justified and the ban is outdated,
since it was added 20 years ago when this activity was more difficult
to monitor.
Response: We understand the need by MA plans to have additional
flexibility in developing their marketing strategies. The purpose of
this prohibition was to provide beneficiaries with appropriate
beneficiary protections. Some individuals may not welcome unsolicited
visits or may not be prepared to discuss their options, yet may feel
pressured to do so. Given the complexity of the new programs and the
upcoming limitations when individuals are able to make choices in their
coverage, as well as increased competition, we believe that prohibition
of door-to-door solicitation remains to be in the best interest of the
beneficiary.
Comment: One commenter did not believe the regulatory language
addressed the CMS timeline for review when materials are submitted
after CMS' initial 45-day review period. Current guidance allows for an
additional 45-day review period for CMS to review a document after it
has been resubmitted. The commenter recommends instituting a 10-day
review period for resubmitted materials.
Response: We appreciates this feedback and will take this under
further consideration.
Comment: One commenter supported the extension of file and use to
SNPs.
Response: Since SNPs are MA plans, all MA rules will apply to SNPs
unless otherwise provided by us. Therefore, SNPs will qualify to
participate in the file-and-use program provided the necessary
requirements are met.
Comment: Several comments requested clarification from CMS that
outreach workers employed by tribal and IHS facilities will continue to
be encouraged to provide information about Medicare alternatives to the
AI/AN elderly and this outreach would not fall under the prohibition
against door-to-door marketing.
Response: We appreciate these concerns and will work with Tribal
and IHS organizations to find solutions that both meet the needs of the
AI/AN population and satisfy the requirements of the MA program.
Subpart C--Benefits and Beneficiary Protections
In the areas of benefits and beneficiary protections, we proposed
regulatory reforms based on our program experience, as well as
provisions implementing new requirements in the MMA. We tried to
integrate new requirements in the MMA with existing regulations, while
at the same time removing impediments in the existing rules that have
tended to stifle innovation by M+C organizations. We believe our
proposals addressed the paramount task of ensuring that beneficiaries
continue to be fully informed and protected in their receipt of
essential health care services under the Medicare program.
The regulatory reforms we proposed included: (1) New beneficiary
protections related to receipt of covered health care services from
contracted providers; (2) revisions to the rules limiting beneficiary
cost sharing related to emergency episodes; (3) new rules affording
additional protections to MA regional plans enrollees; (4) incentives
for MA organizations to offer MA regional plans that would serve all
beneficiaries in all areas; (5) the elimination of administratively
burdensome requirements on MA organizations that are duplicative of
other activities already conducted by us; and (6) the elimination of a
number of unnecessary, duplicative, or overly burdensome access to care
provisions.
We received hundreds of comments on subpart C from approximately
150 commenters in response to our August 3, 2004 proposed rule. Below
we provide a brief summary of the proposed provisions and respond to
public comments. (For a broader discussion of the proposed provisions,
please refer to our proposed rule.)
1. General Requirements (Sec. 422.100)
MA MSAs are ``high deductible'' MA plans and are defined at section
1859(b)(3) of the Act. Until the deductible is met, the MA MSA enrollee
is generally responsible for payment for all covered services. Once the
MA MSA deductible is met, the MA organization offering the MSA plan is
responsible for payment of 100 percent of the expenses related to
covered services. In both cases, whether it is the enrollee or the MA
organization offering the MSA that assumes responsibility for payment,
providers and other entities are required to accept the amount that FFS
would have paid (including permitted beneficiary cost sharing) as
payment in full.
[[Page 4611]]
Section 233(c) of the MMA amended the Act to include enrollees in
MSA plans offered by an MA organization with MA coordinated care plans
as having protection from balance billing by noncontracting providers.
In our proposed rule, we stated that for covered services provided to
an MA MSA plan enrollee, a physician or other entity that does not have
a contract with an MA MSA plan must now accept as payment in full the
amount they could have collected had the individual not been enrolled
in the MA MSA plan.
In the proposed rule, we specified that:
The proposed provision applied to physicians and other
entities. (Note that ``providers of services,'' as defined in section
1861(u) of the Act, are similarly restricted from balance billing MA
MSA enrollees under section 1866(a)(1)(O) of the Act.)
In cases in which Medicare participating physicians do not
have an agreement with an MA organization in place governing the amount
of payment, they must accept the amount they would have received under
FFS Medicare as payment in full (including permitted beneficiary cost
sharing).
In cases in which Medicare non-participating physicians do
not have an agreement with an MA organization in place governing the
amount of payment, they also must accept the amount they would have
received under FFS Medicare as payment in full (including permitted
beneficiary cost sharing). (Medicare non-participating physicians are
permitted to accept assignment on a case by case basis. For non-
assigned claims, Medicare non-participating physicians are subject to
the ``limiting charge.'')
These FFS charge limits have always applied to the charges that
providers and other entities could impose when providing covered
services to enrollees in MA coordinated care plans and private FFS
plans, when there is no agreement with an MA organization in place
governing the payment amount. The MMA added the same protections for MA
MSA plan enrollees and we proposed conforming changes in subpart C and
at Sec. 422.214.
In addition to the new MA MSA ``charge'' protections, we proposed
amending Sec. 422.100 to provide for other changes for purposes of
administrative simplification and clarification:
We deleted the parenthetical ``(other than an M+C MSA
plan)'' from the first sentence of Sec. 422.100(b)(2) and replaced it
with ``(and an MA MSA plan, after the annual deductible in Sec.
422.103(d) has been met).''
We modified the reference to ``additional benefits'' in
Sec. 422.100(c), as those benefits are no longer applicable to MA
plans offered on or after January 1, 2006.
We removed Sec. 422.100(e) because it was duplicative,
and we made the necessary redesignation changes.
We removed the reference to operational policy letters in
Sec. 422.100(f).
We added ``or encourage disenrollment'' to Sec.
422.100(f)(2), after ``discourage enrollment,'' as one of the
prohibitions on the design of benefit packages.
Comment: One commenter recommended that CMS clarify whether the
proposed provider rules will now require providers accepting Medicare
assignment to limit their charges to 100 percent of Medicare allowable
costs for members of an MA MSA plan.
Response: The protections from physician balance billing that are
described in section 1848(g) of the Act apply to all Medicare
beneficiaries, including those enrolled in any type of MA plan. This
includes enrollees of MA MSA plans. This means that for a Medicare
participating physician, for instance, the billed charges cannot exceed
the Medicare participating fee schedule amount for a Medicare-covered
service. For Medicare non-participating physicians that do not accept
Medicare assignment in a specific case, the charges cannot exceed 115
percent of the Medicare non-participating fee schedule amount for a
Medicare-covered service.
Similarly, for providers of services, as defined at section 1861(u)
of the Act, the participation agreement with Medicare requires the
provider to accept the FFS payment amount as payment in full for
services provided to Medicare beneficiaries, including those enrolled
in any type of MA plan (see section 1866(a)(1)(O) of the Act).
Comment: A few commenters stated that CMS should clarify regulatory
language to require MA plans to include statutory add-on payments under
FFS Medicare to the noncontracting provider payments they are required
to make under Sec. 422.100(b)(2). Some commenters specifically
mentioned such add-on payments (for example, DSH, outliers, GME, and
IME payments) as part of the total payment amount that the provider
would have received under original Medicare, and also including the
balance billing permitted under Part A and Part B. Some commenters
specifically mentioned the ``special'' hospital category payments for
sole community hospitals, Medicare dependent hospitals, and critical
access hospitals. Another commenter recommended that CMS clarify this
``new'' provision and asked why CMS made a distinction between
providers of services, physicians, and other entities.
Response: This section of the regulation has been in place since
the original M+C interim final regulation was published on June 26,
1998. In our August3, 2004 proposed rule, we simply added the billing
protections for MA MSAs based on the amendment to section 1852(k)(1) of
the Act provided in section 233(c) of the MMA. Otherwise, the
distinction between providers of services, physicians, and other
entities is statutory and based on the fact that noncontracting
providers of services are required to accept Medicare payment rates
from MA organizations based on section 1866(a)(1)(O) of the Act, while
noncontracting physicians and other entities are required to accept
Medicare payment rates from MA organizations based on section 1852(k)
of the Act.
Additionally, we believe our regulation already requires FFS ``add-
on'' payments (including those to both providers of services,
physicians, and other entities), because they are generally considered
part of the FFS payment that an MA organization must make to
noncontracting providers, physicians, and other entities for covered
services. However, an MA organization is not required to include IME
and GME payments to noncontracting hospital providers to the extent the
hospital providers receive IME and GME payments for MA plan enrollees
directly from the fiscal intermediary (see Sec. 422.214(b)). The
fiscal intermediary's direct payments to hospitals of IME and GME
amounts for MA enrollees are based on sections 1886(d)(11) and
1886(h)(3)(D) of the Act, respectively. Finally, Sec. 422.100(b)(2)
references the balance billing permitted under Part A and Part B of
Medicare, which represents the maximum required payment due from the MA
organization, less applicable MA enrollee cost sharing.
Comment: Several commenters recommended that CMS adopt blanket
policies that would require MA and MA-PD plans to pay I/T/U facilities
that serve AI/AN in a special manner. Among other proposals, these
commenters suggested that CMS require MA organizations to waive cost
sharing for AI/AN and that CMS require MA organizations to pay the
``full IHS Medicaid'' rate to I/T/U facilities, or that we establish
other special payment methodologies related to MA reimbursement to I/T/
U facilities.
Response: We are implementing the MMA statute through this
rulemaking. The MMA did not provide for special
[[Page 4612]]
treatment under the MA program for AI/AN beneficiaries. For this
reason, we do not see a statutory basis to apply different rules to a
subset of Medicare beneficiaries, such as AI/AN populations. In
general, however, we believe that MA regional plans will create new
choices for beneficiaries, including AI/AN populations, and that access
to MA plans will be improved. Similarly, because MA regional plans must
reimburse for all covered benefits in and out of network, IHS
facilities may receive reimbursement for out-of-network care provided
to an MA regional plan AI/AN enrollee that they may otherwise not have
been entitled to under the M+C program. However, the rate of
reimbursement actually paid to an I/T/U facility for an AI/AN enrollee
will vary based on the type of plan, type of service, and the plan-
required level of enrollee cost sharing. For instance, for emergency
department services, an MA plan enrollee's cost sharing would be
limited to $50 and the MA organization (regardless of plan type) would
be responsible for payment of the rest of the billed amount, up to the
full Medicare rate. Similarly, an I/T/U, for an AI/AN MA PPO enrollee,
could expect MA organization reimbursement for routine covered services
provided to such an enrollee, although the amount of reimbursement
directly provided by the MA organization would be limited to the full
Medicare rate, less applicable enrollee cost sharing.
Finally, a broad waiver of beneficiary cost sharing of the type the
commenters requested would not be permitted under provisions designed
to protect the Medicare program from fraud and abuse. However, existing
statutory and regulatory provisions may allow for the waiver of cost
sharing in certain cases.
Comment: One commenter suggested that CMS require pre-approval
before permitting an MA organization to adopt a local coverage
determination for an MA regional plan under Sec. 422.101(b)(4). This
commenter also suggested that CMS require public comment on the choice
of local coverage determination by an MA organization for either a
local MA plan under Sec. 422.101(b)(3) or an MA regional plan under
Sec. 422.101(b)(4).
Response: We do not interpret the statute at section 1858(g) to
require CMS pre-approval of the local coverage determination an MA
organization sponsoring an MA regional plan selects to apply to all
enrollees of the MA regional plan. The statutory provision also does
not include a requirement for public notice, but rather allows the MA
organization to elect to have a local coverage determination apply to
all enrollees of the MA regional plan. The MA organization must comply
with applicable statutory and regulatory requirements in making such
election, including the requirement, discussed below, that all local
coverage determinations of the contractor selected by the MA
organization be applied to the MA regional plan's enrollees.
Comment: One commenter recommended that CMS clarify whether or not
MA organizations are required to provide all Medicare covered benefits
in the MA plans they offer to Medicare beneficiaries. This commenter
had specific concerns related to outpatient occupational therapy and
whether a home visit by an occupational therapist to evaluate for
safety and function post stroke, for instance, is a Medicare benefit
that MA organizations have to offer enrollees of MA plans.
Response: Occupational therapy is a Medicare-covered outpatient
benefit under section 1861(s)(2)(D) of the Act. Under section 1852(a)
of the Act, an MA organization must provide all benefits under the
original Medicare FFS program option. Therefore, MA plans must cover
all services covered under Medicare Parts A and B.
Comment: One commenter stated that CMS is directed to ``replace''
Medicare carriers and fiscal intermediaries with Medicare
Administrative Contractors (MACs) by section 911 of the MMA. The
commenter asked what impact such a ``replacement'' would have on MA
plans, which will likely cover larger areas than current FFS
contractors.
Response: Transition from Medicare carrier and fiscal intermediary
contractors to MACs is to occur between 2005 and 2011. We have modified
the regulatory language in Sec. 422.101(b)(3) to account for the
transition to MACs by removing specific reference to Medicare carriers
and fiscal intermediaries. We expect the impact this ``replacement''
will have on MA plans related to this section of the regulation will be
insignificant. To the extent MACs will cover larger geographic areas
than current FFS contractors, and to the extent MACs will apply local
coverage determinations across those larger geographic areas, the
opportunity for MA organizations to elect to apply uniform coverage
rules in Sec. 422.101(b)(3) or (b)(4) will also be likely to decline.
2. Requirements Relating to Basic Benefits (Sec. 422.101)
Section 221 of the MMA added a new section 1858(g) to the Act that
provided for a special rule related to the way local coverage
determinations (for example, ``local medical review policies,'' or
``LMRPs'') will be applied by MA regional plans. MA regional plans are
permitted to elect any one of the local coverage determinations that
applies to original Medicare FFS beneficiaries in any part of an MA
region to apply to its enrollees in all parts of the MA region. Based
on our interpretation of the statute, we proposed at Sec.
422.101(b)(4) that an MA regional plan, if it chooses this option, must
elect a single FFS contractor's local coverage determination that it
will apply to all members of an MA regional plan. The MA organization
would not be permitted to select local coverage policies from more than
one FFS contractor that it would apply to all members of an MA regional
plan.
Comment: A number of commenters recommended that CMS clarify the
proposed language in Sec. 422.101(b)(4). Some commenters recommended
that CMS ensure that the understanding comported with ``the common
understanding'' that regional plans can select coverage determinations
issued by different intermediaries and carriers within the region. Some
commenters also suggested that CMS extend the same flexibility to local
MA plans. Others suggested that CMS allow MA organizations that
sponsored multiple local MA plans to apply one FFS contractor's
coverage determinations to its entire MA population.
Response: We disagree with the commenters who have requested the
ability to select coverage determinations of multiple intermediaries or
carriers within a region. As we stated in the proposed rule, our
interpretation of section 1858(g) of the Act is that an MA regional
plan exercising this option must elect a single FFS contractor group of
local coverage determinations or policies that it will apply to all
members of an MA regional plan and that an MA regional plan may not
select local coverage policies from more than one FFS contractor. We
are adopting this interpretation in the final rule.
The reason for this interpretation is two-fold. First, to the
extent that local carrier and intermediary medical directors apply
uniform experience to a broad range of coverage policies, it would be
inappropriate to allow selection of a specific coverage policy from one
carrier medical director and a different coverage policy on a different
medical item or service from another carrier medical director. Second,
to the extent that local carrier and intermediary coverage policies are
generally statements of non-coverage, restricted coverage, or
conditions for receipt of a specific health care item or service, it
would be inappropriate to
[[Page 4613]]
allow an MA regional plan to adopt coverage policies issued by more
than one carrier or intermediary. This interpretation would permit MA
regional plans to deny coverage for what would otherwise be Medicare-
covered services at a frequency and under conditions that no individual
FFS beneficiary would ever face. For example, carrier ``X'' might have
decided that Medicare coverage was not available for ``A'' in a local
coverage area. Carrier ``Y'' might have decided that Medicare coverage
was not available for ``B'' in a local area. In such a situation, were
we to permit an MA regional plan to adopt the coverage policies of both
carrier X and carrier Y, an MA plan enrollee of that regional plan
would not have coverage for either A or B, while original FFS enrollees
residing in carrier X's service area would have coverage for B, and
those residing in carrier Y's service area would have coverage for A.
Therefore, to emphasize these points and to correct the apparently
common misunderstanding mentioned in the comment, we are modifying the
language in Sec. 422.101(b)(4). Further, the statutory language will
not permit an extension to local MA plans of the requirement we are
codifying in regulation at Sec. 422.101(b)(4). Local MA plans whose
service areas encompass more than one local coverage policy area will
continue to be required to follow rules previously established for them
in Sec. 422.101(b)(3) based on statutory authority at section
1852(a)(2)(C) of the Act.
Finally, we respond to the commenters that asked whether an MA
organization could apply a single FFS contractor's coverage
determinations to its entire MA population and across local MA plans.
Such a policy would not be in accord with the statute, which is
specific as to both local and MA regional plans. The selection of a
uniform coverage determination policy for both MA local and regional
plans is available only at the plan level.
Comment: A commenter recommended that CMS revise the regulation at
Sec. 422.101(b)(4) in order to permit MA organizations that offer MA
regional plans in more than one MA region to apply local coverage
policies across regional boundaries.
Response: We are interpreting section 1858(g) of the Act as
generally preventing such an interpretation or revision to the
regulation. The statute specifically allows MA regional plans to apply
coverage policies only from 'any part of such region.'' It would only
be where one FFS contractor had a uniform coverage policy that
straddled two regions, and where an MA organization offered MA regional
plans in both of those regions, that such a result would be possible.
Comment: A commenter recommended that CMS allow an MA organization
offering multiple local MA plans to apply the rule in Sec.
422.101(b)(3) across MA local plans, or if local MA plans could adopt
the new rule in Sec. 422.101(b)(4) related to MA regional plans.
Response: The specific language at section 1851(a)(2)(C) of the Act
is clear in not permitting such an interpretation or revision to the
regulation. The statute specifically allows an MA organization
sponsoring a local MA plan to apply the coverage determination most
beneficial to enrollees from the service area of that local MA plan to
all enrollees of that local MA plan, and subjects that to pre-CMS
review before implementation.
Comment: A number of commenters pointed out the difficulty
noncontracting providers will have ascertaining the local coverage
policy that will apply to a specific MA regional plan enrollee. Some
commenters suggested that CMS require MA regional plans to notify both
enrollees and potential noncontracting providers of the LMRP that will
apply to specific MA regional plan enrollees. Others stated that
providers are most familiar with LMRPs that apply in the area in which
they primarily practice medicine or provide services and that it will
be difficult, if not impossible, to know whether a specific service
will be covered for a specific MA regional plan enrollee when LMRPs are
applied from different, and possibly remote, geographic areas. Some
commenters pointed out the potential impact this would have on MA
regional plan enrollees who could incur financial liability for
services that are otherwise Medicare-covered in the geographic location
in which they are provided. Many commenters stated that the problems
related to knowing what LMRP applies to a specific MA regional plan
enrollee are compounded by the fact that MA regional plan enrollees, as
MA PPO enrollees, have the right to access all covered benefits (albeit
at potentially higher cost sharing) from out-of-network providers.
Response: We have added a new paragraph to the regulation at Sec.
422.101(b)(5) that will require MA organizations that elect to apply
local coverage policies uniformly across a local MA plan's service
area, or across an MA regional plan's service area, to inform enrollees
and potential providers, including through the Internet, of the
applicable local coverage policy that applies to the MA plan enrollees.
This means that MA organizations choosing to avail themselves of the
option of applying uniform LMRPs to a local or regional MA plan must
create a web site upon which to post links to or copies of the
applicable LMRPs. We believe that this requirement will not create a
significant burden on MA organizations and will provide convenient
access for both providers and enrollees to such information. We are
also making a conforming change to Sec. 422.111(f)(11) that requires
MA organizations to notify providers through the Internet that such an
election has occurred and what local coverage policy will apply to MA
plan members.
We proposed to add a new Sec. 422.101(d) to provide for new cost-
sharing requirements mandated by MMA related to MA regional plans.
There were three specific requirements:
1. MA regional plans, to the extent they apply deductibles, are
required to have only a single deductible related to combined Medicare
Part A and Part B services. Applicability of the single deductible may
be differential for specific in-network services and may also be waived
for preventative services or other items and services.
2. MA regional plans are required to have a catastrophic limit on
beneficiary out-of-pocket expenditures for in-network benefits under
the original Medicare FFS program.
3. MA regional plans are required to have a total catastrophic
limit on beneficiary out-of-pocket expenditures for in-network and out-
of-network benefits under the original Medicare FFS program. (This
total out-of-pocket catastrophic limit, which would apply to both in-
network and out-of-network benefits under original Medicare, could be
higher than the in-network catastrophic limit, but may not increase the
limit applicable to in network services.)
MA regional plans would be responsible for tracking these
beneficiary out-of-pocket limits and for notifying members when they
have been met. We also proposed to require MA regional plans to track
and limit incurred rather than paid out-of-pocket expenses.
Comment: Many commenters recommended that CMS explain the
significance of requiring MA regional plans to track ``incurred''
rather than paid expenses related to the deductible and caps on
beneficiary cost sharing.
Response: There are two reasons for requiring MA regional plans to
track incurred rather than paid beneficiary cost-sharing expenses. The
first is that
[[Page 4614]]
we foresee a potential for disputes arising between providers and MA
organizations related to the ``full'' reimbursement the MA organization
will owe, once a cap had been met. If ``full'' reimbursement were not
required until cost sharing had been paid (rather than incurred), then
disputes might arise over what amount a beneficiary had actually paid
in cost sharing, and when. Administratively, it is more feasible and
less burdensome for plans to track incurred cost-sharing amounts than
amounts actually paid, if for no other reason than the latter would
require a feedback mechanism to the MA organization whenever an
enrollee makes a payment of cost sharing. Second, it is possible that
in many instances a beneficiary will be unable to pay full cost sharing
for a service at the time of service. Many MA organizations, for
instance, require inpatient hospital copays of more than $100 per day,
even when in-network hospitals are used. Beneficiaries might need to
pay cost sharing to providers over a period of time. Such delays in the
actual payment of cost sharing should not affect the MA organization's
responsibility for timely payment of claims.
Comment: A number of commenters recommended that CMS require MA
organizations to make deductible and out-of-pocket information readily
available to providers to facilitate billing at the time of service.
Some commenters suggested requiring MA organizations to send notices of
additional financial liability to enrollees on a monthly basis. Others
suggested requiring that a standardized notice be used to ensure
consistent reporting across all plans. Commenters also suggested
requiring MA organizations to post enrollee deductible and catastrophic
cap information on the Internet, so providers could easily and quickly
determine enrollee liability at the time of service.
In addition, commenters suggested that CMS require MA organizations
offering MA regional plans to provide information on deductible and
out-of-pocket limits related to specific MA regional plan enrollees to
hospitals, similar to the method by which hospitals are notified of
Medicare beneficiary eligibility and Part A deductible status under the
original FFS system. Others suggested that we require MA organizations
offering MA regional plans to supply deductible and catastrophic cap
information when health care providers and/or hospitals notify the MA
organization that an MA plan member has presented for services.
Response: In response to these comments, we have modified Sec.
422.101(d)(4) to indicate that notification to providers of enrollee
status related to a deductible (if any) and catastrophic caps is also
required. To the extent an MA regional plan enrollee is not aware of
his or her deductible and/or cap status, the enrollee or a provider
should have reasonable access to such information at the time of
service.
Comment: A number of commenters recommended that CMS add a special
provision for AI/AN to Sec. 422.101(d) that would have the affect of
requiring all MA regional plans to provide ``full reimbursement'' to
all I/T/U facilities that treated enrollees of that MA regional plan.
Response: The MMA did not provide for special treatment under the
MA program for AI/AN beneficiaries. For this reason, we do not see a
statutory basis to apply different rules to a subset of Medicare
beneficiaries, such as AI/AN populations.
Comment: A commenter generally supported the requirement at Sec.
422.101(d)(4) that MA regional plans will be responsible for tracking
the incurred beneficiary cost sharing related to the deductible and the
catastrophic caps on beneficiary out-of-pocket expenses. The commenter
expressed disappointment that a specific dollar amount or limit had not
been set related to the caps on out-of-pocket expenses in Sec.
422.101(d)(2) and (d)(3). The commenter also asked that we provide a
definition of ``incurred'' costs that ensures that all cost sharing,
whether paid by the beneficiary, or on his or her behalf, is counted
and tracked.
Response: We did not establish maximum deductible or cap-levels in
regulation, since the statute does not set such limits. We interpret
the statute to allow for flexibility in plan design, within the
constraints of statutory language, to promote competition. However,
under our authority at section 1852(b) of the Act to disallow the
offering of an MA plan where we determine that the plan design or its
benefits are likely to substantially discourage enrollment by certain
MA eligible individuals, we will review deductible and cap-levels to
ensure that they do not substantially discourage enrollment.
Additionally, as required by section 1854(e)(4) of the Act, beginning
in 2006 (and for all MA plans other than MSA plans), the actuarial
value of the deductible, coinsurance, and copayments applicable on
average to individuals enrolled in an MA plan related to benefits under
the original Medicare program may not exceed the actuarial value of the
deductibles, coinsurance, and copayments that would be applicable on
average to FFS Medicare enrollees related to benefits under the
original Medicare program. As provided for in statute at section
1852(a)(1)(B)(ii) and in our regulation at Sec. 422.101(e)(2), while
the catastrophic limit on in-network receipt of benefits under the
original Medicare program applies to the overall cost-sharing limit
that an MA regional plan can impose per Sec. 422.256(b)(3), the out-
of-network catastrophic limit is not likewise constrained.
Finally and related to the tracking of incurred costs, we will
require MA regional plans to track incurred as opposed to paid enrollee
cost sharing. We will require MA regional plans to provide
reimbursement to providers for covered services once the deductible or
caps have been incurred regardless of who has actually paid the cost
sharing, or for that matter, regardless of whether the deductible or
other cost sharing has been paid at all. An MA organization with
financial liability to reimburse a provider for covered services may
not delay reimbursement until an enrollee first pays deductible or
cost-sharing amounts.
The MMA also added a new section 1859(b)(4) to the Act requiring MA
regional plans to provide reimbursement for all covered benefits,
regardless of whether the benefits are provided within or outside of
the network of contracted providers. As PPOs, MA regional plans are
permitted to impose differential cost sharing related to non-emergency
services received from non-network providers. To the extent
differential cost sharing is part of the benefit package, the MA
regional plan will generally be responsible for its portion of payment
to a non-network provider, and the enrollee will be responsible for the
remainder, up to the limits discussed above. We accommodated these
requirements in the proposed rule at Sec. 422.101(e).
MA PPO Benefits
We received many comments on Sec. 422.101(d) and (e) related to
the benefits and cost-sharing protections enrollees in MA regional
plans can expect to receive. We also received comments specifically
related to the definition of MA PPOs provided at Sec. 422.4(a)(1)(v),
which we responded to in the subpart A preamble above. Because of the
interaction of the statutory and regulatory definitions of PPO (for
both local MA plans and MA regional plans, which are offered as PPOs),
and the benefits they must provide, we address a number of comments
related to MA PPO benefits
[[Page 4615]]
in this section of the preamble that have a close bearing on the
definition of MA PPOs.
As we stated in the subpart A preamble of the August 3, 2004
proposed rule: ``Section 520(a)(3) of the Medicare, Medicaid and SCHIP
Balanced Budget Refinement Act of 1999 (BBRA) added section
1852(e)(2)(D) of the Act and defined PPO plans under the MA program for
purposes of quality assurance requirements. As we discussed in the
preamble to the final rule with comment period titled, ``Medicare
Program; Medicare+Choice,'' published on June 29, 2000 (65 FR 41070),
the definition of PPOs at section 1852(e)(2)(D) of the Act was
explicitly for purposes of applying quality assurance requirements in
1852(e)(2)(B) of the Act and was limited in its applicability to
paragraph (2) of section 1852(e) of the Act. Before the enactment of
the BBRA, PPOs had been treated under the M+C statute and regulations
in the same manner as all other M+C coordinated care plans for purposes
of applying quality assurance requirements. In the June 29, 2000 final
rule with comment period, we incorporated this new definition into the
M+C regulations at Sec. 422.4 and by revising Sec. 422.152.
The PPO plan definition added by section 520 of the BBRA included
three elements, they were as follows: (1) has a network of providers
that have agreed to a contractually specified reimbursement for covered
benefits with the organization offering the plan; (2) provides for
reimbursement for all covered benefits regardless of whether those
benefits are provided within the network of providers; and (3) is
offered by an organization that is not licensed or organized under
State law as a health maintenance organization.
Because the definition of PPO plan in section 1852(e)(2)(D) of the
Act only applies for the limited purpose of eligibility for PPO quality
improvement requirements, we do not believe that the limitations in
this definition should have been set forth in a generally applicable
definition of PPO plan in Sec. 422.4, as is currently the case. We
propose to clarify in regulation that it is solely for purposes of the
application of the more limited quality assurance requirements in
section 1852(e)(2)(B) of the Act that PPOs must be offered by MA
organizations that are not licensed or organized under State law as a
HMO. For PPO-type plans that are offered by MA organizations that are
licensed or organized under State law as HMOs, the quality assurance
requirements that apply to all other coordinated care plans in section
1852(e) of the Act also apply to those PPO type plans.''
Based on this better interpretation of section 520(a)(3) of the
BBRA, we proposed to modify the third element (related to State
licensure) of the definition of MA PPO plan at Sec. 422.4 to read as
follows: ``A PPO plan is a plan that has a network of providers that
have agreed to a contractually specified reimbursement for covered
benefits with the organization offering the plan; provides for
reimbursement for all covered benefits regardless of whether the
benefits are provided within the network of providers; and, only for
purposes of quality assurance requirements in Sec. 422.152(e), is
offered by an organization that is not licensed under State law as an
HMO.''
We also proposed to define MA regional plan at Sec. 422.2 based on
the definition in section 1859(b)(4) of the Act, which was added by
section 221(b) of the MMA. The first and second elements of the
definition of MA regional plan at section 1859(b)(4)(A) and (B) of the
Act are identical to the first two elements of the definition of MA PPO
plan at sections 1852(e)(3)(A)(iv)(I) and (II) of the Act , which was
added by section 722(a) of the MMA. Note that the definition of MA PPO
plan in section 1852(e)(3)(A)(iv)(I) of the Act is identical the
definition of MA PPO plan that had appeared at section 1852(e)(2)(D) of
the Act, as added by section 520(a)(3) of the BBRA. Therefore, the
statute requires that both local MA PPOs and MA regional plans (which
are offered as PPOs) must provide reimbursement for all covered
benefits regardless of whether such benefits are provided within the
network of providers.
Comment: Although some commenters supported, as a beneficiary
protection, the fact that MA regional plans are required to provide
reimbursement for all covered benefits, regardless of whether those
benefits are provided within or outside the network of contracted
providers. Many commenters suggested that statutory language requiring
PPOs to provide reimbursement for all covered benefits should simply
mean that PPOs need to provide out-of-network coverage for Medicare
Part A and Part B services. The commenters also stated that they
believe the statute never intended out-of-network coverage to apply to
supplemental benefits, which are not part of the original Medicare
benefit package.
Response: We disagree. The placement of the definition and other
requirements related to MA regional plans in the MMA is instructive in
this regard. As we noted earlier, section 221(b) of the MMA added the
definition of MA regional plan, which includes the second element of
the definition, ``that provides for reimbursement for all covered
benefits regardless of whether such benefits are provided within such
network of providers,'' at section 1859(b)(4)(B) of the Act. Section
221(c) of the MMA establishes ``Rules for MA Regional Plans'' by
inserting a new section 1858 into the Act. In both, section 1858(b)(1)
of the Act related to the single deductible that MA regional plans are
permitted to apply, and section 1858(b)(2) of the Act related to the
catastrophic limits that MA regional plans must apply, the statute is
clear in stating that only ``benefits under the original Medicare FFS
program'' are included. Where the intent is to limit application of MA
plan requirements to only benefits under the original Medicare program
(Parts A and B), the statute states such a limitation. Because no such
limitation appears in either section 1852(e)(3)(A)(iv) of the Act,
related to all PPOs, nor in section 1859(b)(4) of the Act, related to
MA regional plans, we cannot apply such a limitation in the
regulations.
Comment: Several commenters stated that benefits such as gym,
eyewear, dental discounts, discounts on hearing aids, massage,
acupuncture, weight control programs, or health-related magazines are
unavailable out-of-network because as a practical matter, such benefits
and discounts are negotiated and offered to MA organizations primarily
in consideration of the guaranteed volume the exclusive service
provider believes it will receive. Many commenters stated that, to the
extent such discounted benefits are available from out-of-network
service providers, the basis for the negotiated discount (guaranteed
volume) becomes null and void.
One commenter stated that discount arrangements such as these,
which secure a larger volume of business for the entity providing the
discount, provide financial profits and are a common business model not
limited to the world of health insurance. The commenter also stated
that in these arrangements, there is typically no payment by the plan,
and no cost sharing by the enrollee.
Response: Although we fully support discounts and volume purchasing
where appropriate, it is important to note that discounts are not
benefits under the MA program unless they meet the definition of
``benefits'' contained in the regulations. The definition of MA
benefits is found at Sec. 422.2 and reads as
[[Page 4616]]
follows: ``Benefits are health care services that are intended to
maintain or improve the health status of enrollees, for which the MA
organization incurs a cost or liability under an MA plan (not solely an
administrative processing cost). Benefits are submitted and approved
through the annual bidding process.'' Note that unless an MA
organization actually pays for a health care item or service, the item
or service is not a ``benefit'' of the MA plan. Therefore, negotiated
discounts for services for which the plan incurs no cost or liability
are not MA benefits, and are not subject to the requirement that PPOs
provide reimbursement for all benefits, whether or not they are
provided within the network of providers. That said, it is important to
note that we have termed these types of negotiated discounts ``value
added items and services,'' which are discussed in Chapter 3
(Marketing) of the CMS Medicare Managed Care Manual.
Comment: Some commenters stated that MA organizations frequently
subcapitate ancillary provider networks (such as dental providers) and
that such subcapitated arrangements make it difficult for the MA
organization to provide reimbursement for all benefits, in- and out-of-
network.
Response: The statute is clear that all MA organizations offering
PPOs (local and regional) must provide reimbursement for all plan
benefits in- and out-of-network. A number of MA organizations
subcapitate Independent Practice Associations (IPAs), Physician-
Hospital Organizations (PHOs), and similar subnetworks of providers,
for most (or all) original Medicare Part B and/or Part A services. Such
subcapitation arrangements are permitted within the MA program, subject
to Sec. 422.208 (the physician incentive plan requirements and
limitations) and other statutory and regulatory provisions. However, to
the extent an MA organization wants to offer a PPO (either local or
regional), it will also need to make arrangements for providing
reimbursement for all out-of-network benefits in such a subcapitated
environment, or it will need to make arrangements with its subcapitated
contractors for providing reimbursement for out-of-network benefits
directly. Two points need to be made. First, the cost sharing that an
enrollee will be required to pay when obtaining covered benefits out-
of-network can be higher than the cost sharing that applies when
services are obtained in-network. Second, to the extent that
subcapitated arrangements make the provision of reimbursement for all
benefits out-of-network impractical, an MA organization might consider
offering an HMOPOS product, where out-of-network coverage and
reimbursement can be limited in a number of ways.
Comment: Commenters stated that it would be impossible for plans to
provide reimbursement for out-of-network receipt of benefits such as
24-hour nurse hotline services or disease management services.
Response: These services are not likely to be available from out-
of-network providers because of the unique nature of the services and
the integration between the plan and the service provider necessary for
the delivery of such services. To illustrate, a provider of in-network
disease management services to a plan's enrollees is likely to need
access to plan and patient information in order to provide services to
enrollees. An out-of-network disease management services provider would
not have such access, and so would be unlikely to be able to provide
the service out-of-network. Finally, to the extent that such services
are available without cost sharing from in-network providers, the
imposition of cost sharing of any amount for their receipt out-of-
network should deter virtually all enrollees from seeking them out-of-
network.
Comment: Some commenters pointed out the difficulty inherent in
requiring MA-PDs that are offered as PPOs to provide reimbursement for
mail-order drugs or Part D (prescription drug) benefits received by
enrollees from out-of-network providers.
Response: As a practical matter, an MA PPO plan that offers Part D
coverage as an MA-PD will need to provide out-of-network coverage of
Part D drugs consistent with the requirements of the Part D program and
the regulations at part 423.
Comment: A commenter stated that further complications might arise
were CMS to interpret ancillary services (for example, dental and
eyewear) as being services subject to the catastrophic limit on out-of-
pocket expenses. The concern was that once an enrollee has met the out-
of-network cap, cost sharing would no longer act as a deterrent to the
unrestricted and ``free'' access by PPO enrollees to these benefits
from out-of-network providers.
Response: The statute and our implementing regulations at Sec.
422.101(d)(2) and (d)(3) are clear in limiting application of the
catastrophic caps to Part A and Part B benefits. To the extent dental
or eyewear benefits of an MA PPO plan are not also original Medicare
benefits, cost sharing can continue to apply, even after the out-of-
network additional catastrophic limit in Sec. 422.101(d)(3) has been
met.
Comment: A number of commenters recommended that we revise the
proposed rule to clarify that MA regional plans may establish prior
authorization requirements for services obtained out-of-network and
that both MA regional plans and local PPOs should be permitted to offer
certain services only through network providers, where, for instance,
the services have unique characteristics. The commenters stated that
private sector PPO benefits are commonly offered in this manner.
Therefore, the commenters believe that by providing this flexibility,
CMS would allow the offering of MA PPO plans and benefits in a
comparable manner to those generally available to consumers, and that
this will make it possible for them to continue to offer certain
services that add value for beneficiaries.
Response: Although we support the offering of added value to
beneficiaries where possible, as we have previously discussed, there is
a clear statutory requirement that all covered benefits of an MA PPO
plan (regional or local) must be available out-of-network. The statute
provides a definition of PPO that may not, in all respects, conform
with business models that might be present (or even prevalent) in the
commercial sector. Unlike plans serving commercial populations, the
Medicare program is primarily intended to serve aged and vulnerable
beneficiary populations. Therefore, the dynamics of the MA program may
not match those in the commercial market. Also, for all MA plans they
offer, MA organizations are required to follow FFS coverage rules
related to items and services covered under FFS Medicare. Although MA
organizations are permitted to adopt a single local coverage policy
that will apply to all enrollees in an MA plan, in accordance with
Sec. 422.101(b), MA organizations are not permitted to impose a more
stringent test related to medical necessity determinations for
Medicare-covered services than the one that applies under the FFS
program.
For items and services not covered by Medicare that the MA
organization provides under section 1852(a)(3) of the Act, similar
considerations apply. In other words, to the extent and under the
conditions that a non-Medicare supplemental benefit would be available
to a plan enrollee within the network of providers, such a service
would also need to be available to an MA PPO enrollee out-of-network.
That is not to say that differential cost sharing cannot be applied to
out-of-network receipt of covered services, nor does it mean that
[[Page 4617]]
out-of-network cost sharing cannot be differentially applied to
specific services or types of services. We believe that MA
organizations offering MA PPOs (both local and regional) can accomplish
their business strategies while still working within the statute.
For instance, an MA PPO can warn enrollees that to the extent that
an item or service is not a covered benefit of the plan, the enrollee
would be required to pay the full cost of the service. This warning
might have the desired effect of encouraging the enrollee to call the
MA plan before seeking care out-of-network, as a means of ensuring that
a specific item or service is actually a covered benefit of the plan.
Similarly, for specific services for which the plan has established
substantial out-of-network cost sharing, the enrollee can be encouraged
to contact the plan for pre-authorization that would reduce cost
sharing. For instance, for out-of-network receipt of a specific
inpatient hospital service the normal cost sharing might be 40 percent
of charges. To the extent an enrollee or provider calls and receives
plan pre-authorization for a specific out-of-network hospitalization of
this type, the MA plan might reduce enrollee liability to 20 percent
(or less) of charges. MA PPOs must be able to provide coverage and
medical necessity determinations to enrollees (and providers) before
the enrollee receives out-of-network services. This will act as a
beneficiary protection.
A prudent enrollee will have reason to ensure that such services
are medically necessary and covered by the plan before self-referring
to out-of-network providers. Similarly, a prudent provider will have a
means of ensuring that plan coverage will be provided. However, the
idea that a gatekeeper must provide a referral or that an MA plan must
pre-authorize a service before it will be covered at all, or that such
a referral or plan pre-authorization is a necessary condition for
receipt of any medically necessary out-of-network plan covered service
is not in accord with the statutory language pertaining to MA PPOs.
Our belief is that the statute precludes requiring a medical
necessity determination, a plan pre-certification or pre-authorization,
or a coverage decision before receiving a covered service out-of-
network. As long as an MA PPO enrollee is willing to pay the higher
cost sharing associated with out-of-network care, there can be no
additional barrier to receipt of plan covered benefits. If an MA
organization offering an MA PPO is particularly concerned with over-
utilization or inappropriate utilization of services (or of a
particular service) out-of-network, the organization has the authority
to impose relatively high out-of-network cost sharing overall, or
related to a specific service. Also note that to the extent a referral
or plan pre-authorization has been provided for in-network care, the
enrollee has the right to use the referral or plan pre-authorization
for receipt of the same care out-of-network (with applicable out-of-
network cost sharing).
Comment: A commenter recommended that CMS offer alternative
regional PPO product designs, which the commenter called ``Performance
Risk PPOs.'' The commenter included a proposal that would, offer plan
incentives for higher quality, better customer service and benefits,
improved outcomes and program savings, and penalize plans that do not
perform well on these measures. The commenter explained that such a
model would offer a range of out-of-network benefits, but not all
Medicare-covered services would be available out-of-network. In
addition, the commenter stated that although referrals would not be
required for accessing out-of-network care, pre-certification might be
required.
Response: Under the definitions of regional PPO contained in the
MMA, the MA regional plan must provide for reimbursement for all
covered benefits, regardless of whether such benefits are provided
within the plan's network of providers. Therefore, a plan of the type
that the commenter proposes would not meet the statutory definition of
MA regional plan. Further, as we have stated above, plan pre-
certification or pre-authorization may not be a necessary condition for
receipt of out-of-network covered services.
3. Supplemental Benefits (Sec. 422.102)
In the August 3, 2004 proposed rule, we stated that an MA plan
could reduce cost sharing below the actuarial value specified in
section 1854(e)(4)(B) of the Act as a mandatory supplemental benefit.
Beginning in 2006, an MA plan can reduce the cost sharing that applies
to plan members below the actuarial value of the cost sharing that
would apply to those members if they were enrolled in the original
Medicare program. This amount is not just the limit on the amount of
cost sharing that an enrollee can be charged in the plan's bid for
Medicare Part A and Part B services (and for which and when such plan
cost sharing exceeds FFS cost sharing, a supplemental premium is
necessary), but it also expresses the value of the bid-based cost
sharing when the bid is below the benchmark. When we reference section
1854(e)(2)(B) of the Act in Sec. 422.102(a)(4), we are referring to
the latter value, not the former. This reduction in cost sharing can be
included as a mandatory supplemental benefit and was proposed at Sec.
422.102(a)(4).
We also proposed the following conforming changes to Sec. 422.102:
We removed the reference to ``additional benefits,'' as
those benefits are no longer applicable to MA plans offered on or after
January 1, 2006.
We removed the reference to operational policy letters
(OPLs) in Sec. 422.102(a)(3), as guidelines related to benefits that
had been contained in OPLs have been incorporated into regulation, into
the Medicare Managed Care Manual, or into other instructions.
We received no comments on this section, so we finalize it as
proposed.
4. Benefits Under an MA MSA Plan (Sec. 422.103)
For clarification purposes, we proposed to remove the extraneous
word ``under'' from paragraph (a) of Sec. 422.103.
We received no comments on this section, so we finalize it as
proposed.
5. Special Rules for Self-Referral and Point of Service Option (Sec.
422.105)
``Point of Service'' (POS) is an option in some plans that allows
enrollees to obtain non-network services, with the plan providing some
limited level of reimbursement for such services. To clarify an issue
that has created confusion for both beneficiaries and MA organizations,
we proposed to clarify at Sec. 422.105 that if an MA organization does
not offer a POS benefit to members of a plan (or if it offers a POS
benefit as an optional supplemental benefit and the member has not
selected that benefit), the member cannot be financially liable for
more than the normal in-plan cost sharing for covered items or services
from contracted providers.
We stated that we believed that indemnifying the Medicare member in
such a situation conforms with normal industry practice and also
clarified our long-standing policy that members cannot be held
financially liable when contracting providers fail to follow or adhere
to plan referral or pre-authorization policies before providing covered
services. If a plan member insisted on receiving what would otherwise
be covered services from a contracted provider (but for the lack of a
referral or plan pre-authorization), then the contracted provider would
be required to inform the member that those services would not be
covered under the plan. We proposed to require
[[Page 4618]]
the provider to document the medical record as to why the services are
medically necessary but not available through the plan.
In addition, an MA regional plan might choose to provide for a POS-
LIKE benefit where beneficiary cost sharing would be less than it would
otherwise be for non-network provider services, but where it still
might be greater than it would be for in-network provider services, if
an enrollee follows pre-authorization, pre-certification, or pre-
notification rules before receiving out-of-network services. Note that
such pre-authorization, pre-certification, or pre-notification cannot
be a necessary condition for receipt of, or required MA plan
reimbursement for, out-of-network covered services by a PPO enrollee;
however, it can act as a financial incentive (by lowering the normal
out-of-network cost sharing that would otherwise apply) to an enrollee
to voluntarily participate.
In this final rule, the title of this section is being changed to
emphasize the fact that it contains not only rules related to POS
options or benefits, but that it also contains a rule related to
enrollee self-referral to plan contracted providers in all MA plans.
Comment: Many commenters recommended that we clarify the meaning of
the introductory statement proposed to Sec. 422.105(a). Other
commenters suggested that the statement was misplaced, because the
proposed regulation would apply to plans with and without POS
offerings. Others commenters stated that in plans in which a POS option
was provided as a mandatory supplemental benefit, the introductory
statement we proposed to add would have no effect and would therefore
be confusing.
Response: We agree with the comments regarding potential confusion
and have renamed the title of this section of the regulation and
reorganized it to indicate that it covers not only POS offerings, but
that it also applies to all situations in which an MA plan member self-
refers to a plan-contracting provider, whether or not a POS benefit is
involved.
Comment: One commenter stated that while some types of services may
not be covered under any circumstances, other services might not be
covered by an MA plan because they are not medically necessary or
appropriate for the enrollee. The commenter suggested that CMS clarify
the applicability of the introductory statement to circumstances in
which a service does not meet coverage criteria based on medical
necessity.
Response: Many commenters responded to our request for comment in
the subpart M preamble of the August 3, 2004 proposed rule related to
whether or not we should permit or require (and under what
circumstances) advance beneficiary notices (ABNs) to be issued by
network or non-network providers to MA plan enrollees. Many of the
commenters opposed such a requirement as being overly intrusive on the
patient and doctor relationship and other commenters supported it as
being a valid and necessary beneficiary protection. We address the
specific comments related to ABNs in the subpart M preamble of this
rule.
Although we decided not to incorporate an ABN requirement into the
MA program at this time, we believe that there is an important
beneficiary protection at stake, especially in light of the projected
growth in MA PPO enrollment due to the advent of the MA regional plan
program. MA organizations have a responsibility to ensure that
contracting physicians and providers know whether specific items and
services are covered in the MA plan in which their patients are
enrolled. If a network physician provides a service or directs an MA
beneficiary to another provider to receive a plan covered service
without following the plan's internal procedures (such as obtaining the
appropriate plan pre-authorization), then the beneficiary should not be
penalized to the extent the physician did not follow plan rules. MA
plan enrollees cannot be held to a higher standard than plan
contracting providers. To the extent a contracting provider performs a
service or refers a patient for health care services that an enrollee
reasonably believes would be covered services of the plan, then an MA
plan enrollee cannot be liable for more than applicable plan cost
sharing for those services. To the extent an MA organization does not
properly inform contracted providers, or to the extent an MA contracted
provider does not properly enforce referral procedures, then to that
same extent, an MA plan enrollee cannot be held financially liable for
the organization's or provider's failure. Under its contract with the
MA organization, a provider is contractually bound to look solely to
the MA organization for reimbursement for covered services (see Sec.
422.502(g)(1) and Sec. 422.502(i)(3)). Similarly, MA organizations are
required to communicate clear and consistent coverage guidelines and
medical management procedures to contracting physicians (see Sec.
422.202(b)).
Comment: Some commenters recommended that CMS be more flexible and
not require the network contracted physician or provider to document
the medical record as to why the items or services were medically
necessary but not available through the plan. These commenters
suggested that it was inflexible to require that such documentation
appear only in the medical record.
Response: We agree with this comment that it was overly
proscriptive to require that such documentation could only appear in
the medical record and will permit flexibility regarding where such
information is documented. We have added language at the end of Sec.
422.105(a) that does not specify where such documentation must reside.
Comment: A few commenters asked us to clarify the issue of the
provider's ability to bill the beneficiary, if all actions specified in
Sec. 422.105(a) have taken place. Commenters stated that the
clarification should specify the conditions under which they are
permitted to bill a beneficiary. One commenter asked whether the rules
established in this section of the regulation also apply to hospitals
and other types of contracted providers.
Response: The intent of our revision to Sec. 422.105 is to clarify
a beneficiary protection and not necessarily to clarify under what
conditions an MA-contracting provider may or may not bill an MA plan
enrollee. As mentioned above, all contracting providers are bound to
look solely to the MA organization for reimbursement for services
covered under the MA plan in which a Medicare beneficiary is enrolled.
To the extent an MA-contracting provider provides a non-covered service
to an MA enrollee, then payment for such a service is not generally
within the regulatory purview of the MA program.
However, where the enrollee is notified in advance by the
contracted provider that a service will not be covered unless the
beneficiary receives a referral or takes some other action, and that
notification is documented, and the beneficiary receives the service
without obtaining the referral or taking the necessary action, then the
enrollee can be billed and may be held financially liable for the
service. Additionally, even if a beneficiary is informed (either
verbally or in writing) that a specific service will not be covered by
the MA plan in which the beneficiary is enrolled, that beneficiary is
entitled to appeal such a determination, whether or not the service is
actually provided after such notification. Finally, Sec. 422.105(a)
applies to all contracted providers, including physicians, hospitals,
and other provider types.
[[Page 4619]]
Comment: One commenter suggested that CMS was proposing an odd and
fundamentally misguided rule governing members of MA plans who self-
refer. Another commenter stated that the requirement was unnecessary,
inflexible, and burdensome for contracted providers. The first
commenter stated that the proposed rule contradicted fundamental
managed care principles and that the proposed rule would shift payment
responsibility from the self-referring member to the contracted
provider and/or the MA organization.
The first commenter asserted that enrollees who self-refer should
be required to pay the entire cost of the service and should not be
rewarded by having to pay only the normal, in-network cost sharing. The
second commenter stated that both contracting providers and MA plan
enrollees are well aware when there is a requirement to secure a
referral from a PCP before receipt of specialty care. Finally, both
commenters stated that the proposed rule was flawed by not
contemplating, or providing exceptions for, situations in which the
service is not covered by the MA plan in which the individual is
enrolled, or situations in which the service is not medically
necessary.
Response: We do not agree. The language in Sec. 422.105 states
that only covered items and services are subject to the regulatory
provision. Covered plan services do not include services that are
inappropriate or not medically necessary for a specific individual in a
specific situation. The intent of the regulatory provision is to limit
patient liability in situations where a contracted provider provides a
covered service, but for which certain technical, non-medical
conditions of coverage have not been met.
Although we agree that the enrollee should not be ``rewarded'' for
failing to follow proper plan pre-authorization or referral procedures,
we also believe that the contracted provider and the MA organization
also should not be ``rewarded'' by shifting financial responsibility to
the enrollee for covered services that are actually the financial
responsibility of the MA organization. The contracting provider is, or
should be, aware of the MA plan's technical requirements for referral
and/or plan pre-authorization related to covered services. If the
contracted provider believes the covered service is medically
necessary, then the contracted provider needs to explain the plan
referral/pre-authorization process and should consider assisting the
enrollee in obtaining necessary plan pre-service documentation.
Finally, the contracted provider needs to inform the enrollee in
instances when a service will not be covered unless the enrollee
obtains a referral or plan pre-authorization and in which that enrollee
will have full financial liability absent such referral or pre-
authorization.
6. Coordination of Benefits With Employer Group Health Plans and
Medicaid (Sec. 422.106)
Section 222(j) of the MMA revised section 1857(i) of the Act in
order to facilitate employer sponsorship of MA plans. The MMA allowed
us to waive or modify requirements that hinder the design of, the
offering of, or the enrollment in an MA plan offered directly by an
employer, a labor organization, or the trustees of a fund 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 labor organizations. Section 222(j) of the MMA further stated that
such an employer-labor organization sponsored MA plan may restrict
enrollment to individuals who are beneficiaries and participants in
such a plan. We proposed a new Sec. 422.106(d) to account for this new
statutory authority. (The August 3, 2004 proposed rule also contained a
number of clarifying, conforming, and editorial changes to this
section.)
Comment: One commenter recommended that CMS use the authority
provided in section 1857(i)(2) of the Act to waive requirements related
to MA regional plans. The commenter wanted to know if CMS would permit
employer/labor sponsored MA plans that have been created for the sole
enrollment of the sponsors' own employees, retirees, or members to
participate in the MA regional plan stabilization fund or in risk-
sharing through risk corridors, both described in regulation at Sec.
422.458. The commenter was concerned that these special ``incentive''
payments for organizations sponsoring MA regional plans were primarily
intended to foster the growth of MA regional plans for the enrollment
of all eligible Medicare beneficiaries, and that it would be
inappropriate to make such special payments to organizations offering
plans that are only available for enrollment to employer/labor group
members.
Response: We agree and have exercised this discretion under section
1857(i) of the Act to waive program requirements that facilitate
employer/labor group enrollment. For instance, we have waived the
requirement that MA organizations offer MA plans for enrollment to all
Medicare Part A and Part B enrollees, and have allowed MA organizations
to create plans that exclusively enroll employer/labor group members.
We will continue to do so. However, we will not waive the ``general''
enrollment requirement that MA plans enroll all MA eligible individuals
(see section 1851(a)(1)(A) of the Act) for either MA organizations or
for employer/labor MA plan sponsors, if these entities seek to offer an
MA regional plan solely to employer/labor group members.
Comment: The same commenter asked whether specialized MA plans for
special needs individuals could be offered as MA regional plans.
Response: The statute is clear in saying that specialized MA plans
for special needs individuals can be offered as any type of MA
coordinated care plan (see section 1851(a)(2)(A)(ii) of the Act). MA
regional plans are a type of MA coordinated care plan (see section
1851(a)(2)(A)(i) of the Act).
Comment: One commenter asked whether CMS would exercise the waiver
authority under section 1857(i) of the Act in order to allow MA
organizations to offer non-actuarially equivalent prescription drug
coverage to MA plan enrollees who do not purchase Part D.
Response: We will not. Section 1860D-21(a)(1)(B)(ii) of the Act
states that MA organizations may not offer prescription drug coverage
(other than that required under Parts A and B of Medicare) to an MA
plan enrollee unless it is qualified Part D prescription drug coverage.
Comment: One commenter asked if CMS would use the waiver authority
to provide for special enrollment or conversion of enrollment rules for
Medicaid beneficiaries enrolled in special needs plans, similar to what
CMS have provided for employer/labor group members.
Response: As previously stated, we have waived the requirement that
MA organizations offer MA plans for enrollment to all Medicare Part A
and Part B enrollees, and have allowed MA organizations to create plans
that exclusively enroll employer/labor group members. The authority for
such waivers is contained in section 1857(i) of the Act and does not
apply to individuals entitled to Medicaid. Note that section 1857(i) of
the Act waiver authority is exclusive in its application to employees
or former employees of an employer, or members or former members of a
union, or a combination thereof. Waivers for individuals entitled to
Medicaid are not provided for under the waiver authority in section
1857(i) of the Act. SNPs for Medicaid eligibles are authorized in
section 231 of the
[[Page 4620]]
MMA. Finally, note that Sec. 422.106(a) and (b) do not discuss
employer/labor groups in the context of section 1857(i) waiver
authority. Regulations related to employer/labor group waiver authority
are exclusively discussed in Sec. 422.106(c) and (d).
Comment: A number of commenters asked whether CMS would apply the
new waiver authority in section 222(j)(2) of the MMA to AI/AN
beneficiaries. The commenters stated that such a waiver might permit I/
T/Us to sponsor MA plans exclusively designed for AI/AN beneficiaries.
Response: Section 222(j)(2) of the MMA added a new paragraph to the
Act at section 1857(i)(2). This new provision created the opportunity
for directly-sponsored employer/labor group MA plans. Section 1857(i)
of the Act waiver authority is exclusive in its application to
employees or former employees of an employer, or members or former
members of a union, or a combination thereof. Waivers for AI/AN
beneficiaries are not provided for under the waiver authority provided
in section 1857(i) of the Act.
Comment: One commenter, in relation to a comment on Sec.
422422.560 through Sec. 422.626 (subpart M), recommended that CMS
include benefits that are separately negotiated between the MA
organization and an employer/labor group in the benefits governed by
the MA regulations and therefore subject to the MA appeals and
grievance processes.
Response: This comment has been addressed at greater length in the
subpart M preamble. However, it is important to note that for purposes
of subpart C, separately negotiated benefits between MA organizations
and employer groups, labor organizations, and Medicaid (and as
discussed in Sec. 422.106(a)(a) and (b)) are not part of any MA plan.
Such employer/labor/Medicaid benefits are discussed only in terms of
the fact that they complement the benefits of an MA plan.
Comment: A commenter requested CMS to clarify that employer groups
or labor organizations that become MA organizations may retain the
services of entities to assist in the development and operation of the
employer-sponsored MA plan. The commenter asked CMS to implement the
waiver authority under Section 1857(i)(2) of the Act in a way that does
not inadvertently hinder the efficient operation of support services
for employer groups and labor organizations.
Response: We agree with the commenter that our waiver authority
under 1857(i)(2) of the Act should be applied to allow employers and
labor organizations to offer MA plans through arrangements with
entities (such as existing MA organizations) that will facilitate the
offering and efficient operation of such MA plans. We have revised
Sec. 422.106(d) to clarify this point and to clarify that, as provided
in section 1857(i)(2) of the Act, we may exercise this authority on our
own initiative as well as upon written request from an applicant. In
each case, as specified in Sec. 422.106(d)(3), our waivers and
modifications will apply to all similarly situated MA plans.
Comment: A few commenters asked for specific waivers. Some
commenters recommended waivers already provided, such as a waiver that
would allow MA organizations to create separate MA plans solely for
employer/labor group members.
Response: As we have done in the past, we will continue to provide
specifics on approved waivers in guidance and in direct communication
with waiver recipients, rather than in formal rulemaking.
7. Medicare Secondary Payer (MSP) Procedures (Sec. 422.108)
Section 232 of MMA amended section 1856(b)(3) of the Act to remove
all ambiguity related to State authority over the MA program. The
Congressional intent is now unambiguous in prohibiting States from
exercising authority over MA plans in any area other than State
licensing laws and State laws relating to plan solvency. We proposed to
amend Sec. 422.108(f) to remove language that suggests States can
limit the amount an MA organization can recover from liable third
parties under Medicare secondary payer procedures.
We received no comments on this section, so we finalize it as
proposed.
8. Effect of National Coverage Determinations (NCDs) (Sec. 422.109)
Section 1853(c)(7) of the Act requires us to ``adjust'' MA payments
when a national coverage determination (NCD) or legislative change in
benefits will result in a significant increase in costs to MA
organizations sponsoring MA plans. We historically interpreted what
constituted ``significant'' costs in regulation at Sec. 422.109, where
the costs of a coverage change are considered ``significant'' if either
the average cost of providing the service exceeds a specified
threshold, or the total cost for providing the service exceeds an
aggregate cost threshold.
In a final rule published in the Federal Register on August 22,
2003 (68 FR 50839), we amended Sec. 422.109 to refine the definition
of ``significant'' cost to include a new test. By adding a new
paragraph at the end of Sec. 422.109(a)(2), we provided that, for
purposes of determining whether to make an additional payment
adjustment under Sec. 422.256, the tests for reaching the
``significant'' cost threshold were to include the aggregate costs of
all NCDs and legislative changes in benefits made in the prior calendar
year.
Under that new test, the ``average cost'' of every NCD and
legislative change in benefits for the contract year would have been
added together. If the sum of these average amounts exceeded the
threshold under Sec. 422.109(a)(l), then an adjustment to payment
would have been made in the following contract year under Sec. 422.256
to reflect this ``significant'' cost. Alternatively, if the costs of
the NCDs and legislative changes in benefits, in the aggregate,
exceeded the level set forth in Sec. 422.109(a)(2), an adjustment to
payment would also have been made under Sec. 422.256 on that basis.
Among the reasons for the above change was that even when the
``significant'' cost threshold had been met under the existing
definition, the methodology then employed for making a payment
adjustment under section 1853(c)(7) of the Act did not result in an
adjustment in the capitation rate in those counties with the
``minimum'' update rate (the ``2 percent minimum update'' counties paid
under section 1853(c)(l)(C) of the Act.) In accordance with section
1853(c) of the Act, the CMS Office of the Actuary (OACT) used the
annual growth rate to update only the floor and blended rates, so the
``minimum'' 2 percent update rate, which was 102 percent of the prior
year's rate, did not reflect the costs of new benefits effective in the
middle of the previous payment year. Therefore, we decided that
payments in counties in which payment was based on the ``minimum'' 2
percent update rate were not appropriately adjusted to reflect new
coverage costs as required by section 1853(c)(7) of the Act.
The MMA changed the ``minimum'' percentage payment prong of the
former M+C payment methodology by adding a new basis for a minimum
update. The ``minimum'' percentage increase rate is changed, effective
January 2004, as follows: Instead of being set at 102 percent of the
prior year's rate, the minimum increase rate will now be the greater of
102 percent of the prior year's rate, or the annual MA growth
percentage. This means that under the MMA payment methodology, the
minimum percentage increase will now reflect the cost of mid-year NCDs
and legislative changes in benefits. These
[[Page 4621]]
costs are now automatically built into the annual MA growth percentage
and will no longer require an additional adjustment under Sec.
422.256.
As a result of these MMA changes to the MA payment methodology we
proposed in the August 3, 2004 proposed rule to remove the portion of
Sec. 422.109(a)(2) after Sec. 422.254(f).
We also proposed clarifying language in Sec. 422.254(f) and Sec.
422.109(c)(3).
We received no comments on this section, so we finalize it as
proposed.
9. Discrimination Against Beneficiaries Prohibited (Sec. 422.110)
We proposed to correct Sec. 422.110(b) to bring it into
conformance with Sec. 422.50(a)(3)(ii). Specifically, we proposed to
modify the language of Sec. 422.110(b) to state that if an MA
organization chose to apply the rule in Sec. 422.50(a)(3)(ii), and
allowed individuals who are enrolled in a health plan at the time of
first entitlement to Medicare, but residing outside the MA plan's
service area to remain enrolled, the MA plan must also allow this for
individuals with ESRD.
We also proposed to remove Sec. 422.110(c), since it is
duplicative of a requirement now appearing in Sec. 422.502(h).
We received no comments on this section, so we finalize it as
proposed.
10. Disclosure Requirements (Sec. 422.111)
Section 1851(d)(2)(A) of the Act and Sec. 422.111(d)(2) establish
disclosure requirements. MA plans must provide notice to plan members
of impending changes to plan benefits, premiums, and copays in the
coming year so that plan members will be in the best position to make
an informed choice on continued enrollment in or disenrollment from
that plan. We proposed to amend this section to reflect that notice
must be provided at least 2 weeks before the Annual Coordinated
Election Period commences, instead of listing a specific date in order
to provide flexibility in the event that the beginning date of the
Annual Coordinated Election Period changes in the future.
We also proposed to remove Sec. 422.111(f)(4), as the requirement
to provide information on Medigap and Medicare Select plans is a
Secretarial responsibility under section 1851(d)(2)(A)(i) and (d)(3)(D)
of the Act and is to occur as part of the ``open season notification''
required by section 1851(d)(2)(A) of the Act.
In addition to an ``open season'' notification, information on
Medigap and Medicare Select is available year-round from the Federally
funded SHIP and the 1-800 MEDICARE telephone number. Both the local
SHIP and the 1-800 MEDICARE telephone numbers are prominently displayed
in MA plan literature. In addition, we stated that we would continue to
require MA plans to publicize the availability of information on
Medigap, Medicare Select, and other MA plans through appropriate CMS
information channels (for example, http://www.Medicare.gov, 1-800-MEDICARE).
This not only would remove an unnecessary administrative burden, but
also would ensure that reliable, accurate, and complete information is
made available to those seeking it.
To accomplish the above proposed changes, we proposed conforming
organizational changes to Sec. 422.111. We also proposed the following
disclosure requirement changes:
We removed the requirement that MAs and MSAs provide
comparative information related to other MA plans.
To prevent what might otherwise be the unreasonable result
that MA regional or national plans would be required to provide
comprehensive lists of contracting providers to all enrollees, we
modified paragraph (b)(3). (We specifically proposed to require MA
organizations, however, to provide information on contracted providers
in other parts of the plan's service area upon request in Sec.
422.111(f)(10). Note that we changed the specific wording of this
paragraph to more plainly express our intent and in response to
comments, as described in further detail below.)
We modified paragraph (b)(3) to read: ``The number, mix,
and distribution (addresses) of providers from whom enrollees may
reasonably be expected to obtain services;
We added a new paragraph (f)(10), which reads: ``The
names, addresses, and phone numbers of contracted providers from whom
the enrollee may obtain in-network coverage in other parts of the
service area.''
At Sec. 422.111(b)(11), we proposed to require MA
regional plans to provide members an annual description (at the time of
enrollment and annually thereafter) of the catastrophic stop-loss
coverage and single deductible (if any) applicable under the plan.
We changed the existing paragraph (f)(11) (the new
paragraph (f)(9)) related to supplemental benefits.
We also said that we were considering a requirement that
all MA organizations sponsoring MA plans would be required to maintain
plan-specific information on Internet web sites. We discuss this in
more detail below.
In Sec. 422.112(a)(1)(ii), we provide an ``exception'' to the
requirement in Sec. 422.112(a)(1) related to contracted provider
networks in MA regional plans. We received a number of comments on this
``exception'' and address them later in this section of the preamble.
We also explain later in this preamble why we are establishing a new
beneficiary notification requirement related to enrollees of MA
regional plans in Sec. 422.111(b)(3)(ii). This new MA regional plan
notification requirement is intended to parallel a similar OPM
requirement imposed on the FEHB Blue Cross and Blue Shield Basic Option
plan, which addresses similar circumstances and situations encountered
by Federal employees and annuitants when seeking health care.
We have added a new paragraph to the regulation at Sec.
422.101(b)(5) that will require MA organizations that elect to apply
local coverage policies uniformly across a local MA plan's service
area, or across an MA regional plan's service area, to inform enrollees
and potential providers of the applicable local coverage policy that
applies to the MA plan enrollees. We make conforming changes to Sec.
422.111.
Comment: A commenter recommended that CMS explicitly state in the
disclosure requirements related to MA plans that there were additional
disclosure requirements under Part D with which MA-PD plans would also
need to comply.
Response: We accept this comment. Although such a requirement is
implicit in Sec. 422.111(a)(2), where we require MA plans to disclose
the ``benefits offered under the plan,'' we will explicitly state the
requirement at Sec. 422.111(a)(2). To the extent an MA plan offers
Part D to its MA enrollees as an MA-PD plan, it will also be required
to follow the disclosure requirements in Sec. 423.128 related to the
disclosure of its Part D offering.
Comment: A commenter recommended that CMS more directly address the
``free access'' MA enrollees have to Medicare hospice services and the
fact that MA enrollees have the right to continue to receive non-
hospice services, unrelated to the terminal illness, from the MA plan.
The commenter wanted to ensure that MA enrollees knew that they could
continue to receive from the MA plan non-hospice services unrelated to
the terminal illness, as long as enrollees remain members of the plan.
Response: We do not believe a specific disclosure requirement of
the type the commenter requests is necessary because our existing
regulations already require disclosure of Medicare hospice
availability, rules related to receipt of care, and financial
responsibility, in Sec. 422.111(b)(2)(iii) and
[[Page 4622]]
Sec. 422.320(a) (formerly codified at Sec. 422.266(a)). Otherwise,
because non-hospice benefits of an MA plan continue to be available
after hospice election and while an individual remains enrolled in an
MA plan, such availability must be disclosed under Sec. 422.111(b)(2).
Comment: Several commenters recommended that CMS require MA
organizations to inform beneficiaries about their benefits or
restrictions on those benefits. For example, one commenter suggested
providing information on the average number and type of home health
visits per episode that were covered by an MA plan during the prior
year and beneficiaries' average cost sharing; the names of home health
providers in the plan's network and the number of years the provider
has operated as a Medicare home health agency.
Response: We agree that disclosure of MA plan benefits continues to
be an important feature that permits beneficiaries to make informed
decisions on enrollment. As previously stated, MA plans are obligated
to disclose information on benefits, including applicable conditions
and limitations on their receipt, the plan premiums, and the cost
sharing related to specific benefits when obtained both in- and out-of-
network. We also require MA organizations to disclose information on
the number, mix, and distribution (including addresses) of providers
from whom enrollees may obtain services. These disclosure requirements
are described in regulation at Sec. 422.111 and have not materially
changed. Although MA plans are not required to specify the average
number of visits or types of visits per episode from the prior year, as
the comment suggests, the plans are required to provide all covered
home health services, which include, at a minimum, the Medicare FFS
level of benefits. We will not require MA plans to specify the number
of years a home health agency has operated, nor the other specifics
that the comment suggests because this would impose an additional
burden upon plans that we think in unnecessary in light of the existing
ways in which beneficiaries can obtain such information.
The requirement that a plan disclose the name(s) and address(es) of
the contracting home health agency or agencies is already set forth in
our regulations at Sec. 422.111(b)(3), redesignated as subparagraph
(i). The additional information about which the commenter suggests
requiring disclosure may be available, upon request, from either the MA
plan or through a direct request to the contracting home health agency
or agencies.
Comment: Several commenters noted the deletion of the word
``written'' from the first sentence of Sec. 422.111(e). One commenter
stated that removing the word might allow an MA organization to meet
this disclosure requirement by simply posting information on its web
site.
Response: The deletion of the word ``written'' was unintentional.
We have reinserted it in the regulations text at Sec. 422.111(e). We
will continue to require MA organizations to make a good faith effort
to notify members in writing of changes in provider networks.
Comment: A commenter recommended that we convey the language in
Sec. 422.111(f)(10). The commenter asked if the intent of paragraph
(f)(10) was to complement the requirement in Sec. 422.111(b)(3)(i)
that routine disclosure of contracting providers was limited to those
from whom an enrollee would ``reasonably be expected to obtain
services.'' The commenter suggested that the language in paragraph
(f)(10) was imprecise, if that was our intent, since it required
disclosure, upon request, of other providers ``in other areas,''
although we may have actually meant to convey the disclosure, upon
request, of contracted providers ``in other parts of the service
area.''
Response: We agree with this comment and have corrected the
language in Sec. 422.111(f)(10). Our intent was to make information on
the availability of other contracted providers in other parts of the
service area of the MA plan available to plan enrollees upon request,
to the extent such information was not provided at the time of
enrollment, because of the large geographic area encompassed within the
service area of the MA plan.
Comment: Some commenters opposed the deletion of Sec.
422.111(f)(7)(i) through (iv) that eliminates the requirement that MA
PFFS and MSAs plans provide comparative information related to other MA
plans that are available in the geographic area in which the PFFS and
MSAs plans are offered. These commenters stated that potential MA
enrollees should be able to easily see how these plans compare to other
MA plans and original FFS Medicare.
Response: We agree that individuals considering enrollment in an MA
MSA or PFFS plan should have comparative information regarding their
choices for receiving Medicare coverage. All MA plans, including MA MSA
and PFFS plans, must continue providing comparative information on FFS
Medicare through pre-enrollment materials including the Summary of
Benefits. The Summary of Benefits contains a matrix that provides a
comprehensive comparison of the benefits of an MA plan with the
benefits of original FFS Medicare. As we discussed in the August 3,
2004 proposed rule, we believe that the Medicare and You Handbook in
conjunction with other CMS information channels (such as the 1-800
MEDICARE call center and direct beneficiary counseling provided through
federal SHIP grants to the states) provides the best opportunity for
Medicare beneficiaries considering MA plan enrollment to receive clear,
impartial, and complete information on the choices available to them.
Therefore, we will delete these requirements, as they represent an
unnecessary administrative burden on MA MSA and PFFS plans.
Comment: Some commenters suggested including a provision in Sec.
422.111(e) that would allow AI/AN to switch to another MA plan whenever
there is a change to the provider network of the MA plan in which the
AI/AN is enrolled.
Response: We cannot accommodate this request because there is no
statutory basis for differentiating between AI/AN and non-AI/AN
beneficiaries. However, to the extent that conditions in Sec.
422.62(b), where special election periods are discussed, are present
for any MA plan enrollee, the opportunity to switch plans or to return
to original FFS Medicare is available.
Comment: One commenter recommended that CMS remove the annual
requirement for distribution of network provider directories. The
commenter stated that for a vast majority of enrollees, the provider
directory is not referenced and the information could more reasonably
be made available on an ``as requested'' basis after initial provision
upon enrollment.
Response: Under section 1852(c)(1)(C) of the Act, MA organizations
are required to provide annually, in clear, accurate and standardized
form, detailed information about the number, mix and distribution of
plan providers. We have interpreted this requirement in regulations to
include annual disclosure of plan providers' addresses.
Comment: Most commenters supported the new language in Sec.
422.111(b)(3)(i). A few commenters recommended that CMS define or
explain the statement, ``MA organizations would be responsible for
providing the number, mix and addresses ``of providers from whom
[[Page 4623]]
enrollees may reasonably be expected to obtain services.'' One
commenter suggested that the language was unclear, subject to broad
interpretation and would result in confusion and an inconsistent
application by MA organizations.
Response: We believe that the standard of ``reasonable'' disclosure
of network providers is both appropriate and sufficiently clear within
our current regulatory standards. We believe that MA organizations are
in the best position to determine what would be ``reasonable'' in this
context, based on service usage and community patterns of care. In
order to preserve flexibility for MA organizations to provide
information appropriate to the needs of their enrollees, we do not
intend to change the proposed language in Sec. 422.111.
Comment: A number of commenters recommended that CMS apply special
disclosure requirements to AI/AN beneficiaries, stating that such
special disclosure requirements should include a right by AI/AN
beneficiaries to select another MA plan at any time without penalty.
Response: We cannot accommodate this request because there is no
statutory basis for differentiating between AI/AN and non-AI/AN
beneficiaries.
Internet
In the August 3, 2004 proposed rule, we asked for comments on
whether or not we should require all MA organizations for all MA plans
they offer to set up an Internet web site that would make basic MA plan
information and materials available to interested Medicare
beneficiaries and other parties. The basic information and materials
could include the Evidence of Coverage, the Summary of Benefits, and
information (names, addresses, phone numbers, specialty) on the network
of contracted providers. Those Internet materials and information would
duplicate materials already produced in print format and made available
by MA organizations relative to the MA plans they offer.
Comment: Many commenters stated that it would be difficult for
providers to know whether an MA organization had chosen to adopt one of
the uniform coverage policies in Sec. 422.101(b)(3), related to local
MA plans, or Sec. 422.101(b)(4)--related to MA regional plans.
Response: As we discuss at more length earlier in this preamble
related to Sec. 422.101(b)(3) and (b)(4), we agree with this comment
and therefore have added a requirement at Sec. 422.111(f)(11) that MA
organizations must make uniform coverage policies related to an MA plan
readily available to members and providers, including through the
Internet.
Comment: Many commenters were supportive of the proposed
requirement that all MA organizations provide basic materials, such as
the Evidence of Coverage, Summary of Benefits, and information (names,
addresses, phone numbers, specialty) on the network of contracted
providers. Some commenters suggested that CMS not be overly
prescriptive in the requirements for what MA organizations post to a
web site. Some suggested that the provision of information over the
Internet should relieve MA organizations of their responsibility to
provide identical information to enrollees in hard-copy format. One
commenter suggested that CMS make plan enrollees ``opt-in,'' if they
want plan information sent to their homes.
Other commenters stated that most Medicare beneficiaries do not
have access to the Internet, and that regardless of whether an MA
organization provides plan information electronically, we should
continue to require MA organizations to send enrollees required
information through the mail. One commenter stated that it did not want
its member handbook or Evidence of Coverage to appear on the Internet.
The commenter stated that it would prefer to have the documents
available only to members. Other commenters stated that requiring an MA
organization to duplicate materials such as the Evidence of Coverage or
the Summary of Benefits on the Internet would be administratively
redundant, costly, and burdensome to maintain. One commenter suggested
leaving the decision on an Internet web site to the discretion of the
MA organization. This commenter stated that although it supports use of
the Internet, MA organizations should not be required to post specific
documents to the Internet, since they are already provided to enrollees
in hard copy.
Response: Based on these comments, we will be as flexible as
possible, while still ensuring that beneficiaries receive the
information necessary to make informed choices. We will require MA
organizations exercising options under Sec. 422.101(b)(3) or (b)(4) to
communicate, via the Internet and through other means, the fact that a
specific local coverage determination is in effect for its plan
members. We have placed this requirement at Sec. 422.111(f)(11). Use
of the Internet in this way will ensure that potential providers have
access to plan coverage information to the extent that it differs from
the Medicare coverage policy in the geographic area in which the
provider is actually treating an MA plan enrollee. Similarly, we will
require MA organizations that have Internet web sites to post the
Evidence of Coverage, the Summary of Benefits, and information on the
network of contracted providers at Sec. 422.111(f)(12). Because we
apply this requirement only to organizations that otherwise maintain
Internet web sites, we do not believe that such a requirement is overly
burdensome or that it will entail a significant administrative effort.
In addition, because the Evidence of Coverage and the Summary of
Benefits do not change during the course of a calendar year,
maintaining or updating the information in them will be a once-a-year
activity, which will coincide with the update of the hard copy version
of these documents. Updating of the provider directory might entail
additional administrative effort; however, to the extent that MA
organizations are already required to update provider information in
written materials, we do not believe that extending this requirement to
an electronic version of the same document would entail a great deal of
additional administrative effort.
In response to the commenters that asked if the use of Internet
versions of required documents would eliminate (or mitigate) the
requirement for hard copy documents, we have added a final sentence to
Sec. 422.111(f)(12) that states that we will maintain our current
requirement that MA organizations provide to enrollees written, hard
copy materials providing information at the time of enrollment and
annually thereafter as required by Sec. 422.112(a) and (b). Most
Medicare beneficiaries do not routinely use the Internet. To the extent
they do and do not wish to receive hard copy plan materials, they can
and will indicate such a preference. In response to commenters who did
not believe it appropriate to post plan materials to the Internet, we
respond that we believe it is an important feature of beneficiary
choice to be fully informed regarding the benefits and features of an
MA plan before enrollment. Plan materials, including the Evidence of
Coverage, the Summary of Benefits, and a list of contracting providers
are essential pre-enrollment materials that allow Medicare
beneficiaries an opportunity to compare MA plans and to make an
informed decision on enrollment.
11. Access to Services (Sec. 422.112)
There are no new access standards for MA regional plans, and
existing MA standards will generally apply. We
[[Page 4624]]
reviewed our existing regulatory requirements related to network
adequacy and proposed to remove some that are either duplicative or, in
our view, overly onerous. We stated we expected competition to be the
best method for ensuring network adequacy, as enrollees will favor and
enroll in plans with more extensive networks and tend to avoid those
without. Furthermore, Medicare beneficiaries can always choose to
remain enrolled in the original Medicare FFS program.
We proposed to remove or modify some the requirements from Sec.
422.112 of the regulation, none of which were required by statute, and
some of which became unnecessary as they were replaced or superseded by
requirements in the MMA:
We proposed to delete Sec. 422.112(a)(4), because we
believed it would be redundant to suggest a specific approach to
quality improvement activities in the context of, and as a means of
ensuring, enrollee access to care. After reviewing and responding to
comments (below), we will implement as proposed and delete Sec.
422.112(a)(4).
We proposed to remove the written standards requirements
in Sec. 422.112(a)(7) since they were duplicative of other provisions
in the regulation. Based on a comment we received, we will not delete
the requirement.
In the final rule we make editorial corrections to Sec. 422.112(a)
heading and introductory text to remove reference to ``network M+C MSA
plans'' and ``additional'' services, neither of which terms have
relevance in the MA program.
Comment: We received a few comments related to our proposal to
remove requirements in Sec. 422.112(a)(7). One commenter asked us to
articulate what tools, other than written standards, an MA plan should
use to ensure adequate access to medically necessary health care items
and services. Other commenters objected to removal of written
standards.
Response: Written standards are simply one aspect of an MA
coordinated care plan's guarantee of access to care. Such written
standards do not, in and of themselves, constitute a sufficient
guarantee of access to care. To the extent that written standards are
not enforced, they guarantee little. However, we agree with the
commenters and believe that the requirement for written standards will,
at the very least, prompt plans to affirmatively address and
memorialize how they intend to provide access to care. In light of the
comments we received and upon further consideration, we will retain the
requirement for written access standards in Sec. 422.112(a)(7).
Comment: One commenter recommended that CMS modify the rules to
create waivers that would allow ESRD patients to be referred to
nephrologists, dialysis centers, or vascular surgeons who are out-of-
network if the patient prefers another physician or center, or if the
referring nephrologist believes that the vascular access outcomes would
be better with the out-of-network surgeon. The commenter also suggested
allowing self-referrals to specialists, such as allowing ESRD patients
to self-refer to nephrologists, dialysis centers, or vascular surgeons
who were out-of-network. Another commenter suggested including certain
benefits in the MA benefit package, such as medical nutrition therapy
(MNT) benefits for diabetes and renal diseases.
Response: To respond to the first comment on the provision of
benefits to ESRD beneficiaries out-of-network, PPOs are a type of
coordinated care plan, as described in Sec. 422.4(a)(1)(iii), that are
required to provide reimbursement for all covered benefits regardless
of whether they are provided in- or out-of-network. Therefore, a
beneficiary with ESRD who is enrolled in an MA PPO plan may go out-of-
network for all covered services, albeit with a potentially higher
cost-sharing liability. Coordinated care plans are permitted to use
mechanisms to control utilization, such as requiring referrals from a
``gatekeeper'' PCP, before an enrollee can receive in-network specialty
services at in-network cost sharing levels, as codified in regulations
at Sec. 422.4(a)(1)(ii)and Sec. 422.112(a)(2). Therefore, access to a
specialist at in-network cost-sharing levels can generally be limited
to contracted providers in coordinated care plans. When an individual
beneficiary chooses a coordinated care plan, information is available
about the availability of providers, including specialists, and under
what conditions they are available in-network. Information on the
routine availability of out-of-network care (either because the plan is
an HMOPOS or a PPO, for instance) is also provided at the time of
enrollment and annually thereafter. On the second point related to
requiring MNT benefits for diabetes and renal diseases in MA plans, we
remind the commenter that all MA plans are required to include all
Medicare FFS benefits in their MA plan benefit packages.
Comment: One commenter recommended that CMS require all MA plans to
include podiatric physicians in their networks to ensure that the
necessary and vital services provided by these physicians continue to
be available to patients. The commenter stated that Sec. 422.205(a)
prohibits MA organizations from discriminating against providers on the
basis of license or certification.
Response: We do not see a basis for requiring MA organizations to
contract with a specific provider type. As the commenter stated, our
existing regulations prohibit discrimination on the basis of license or
certification. Further, our existing regulations, as amended in this
final rule, require MA organizations to ensure that covered services
are available and accessible within an MA plan's network consistent
with applicable access standards. However, Sec. 422.205(b), which is
not being amended in this rule, allows MA organizations to refuse to
grant participation to health care professionals in excess of the
number necessary to meet the needs of an MA plan's enrollees (with the
exception of PFFS plans).
Comment: One commenter agreed that the requirements in Sec.
422.112(a)(4) are duplicative of the proposed chronic care improvement
requirements in Sec. 422.152(c), and therefore generally agreed that
it should be deleted. However, the commenter also stated that deletion
of requirements at Sec. 422.112(a)(4) should be made contingent on our
addition of a requirement in Sec. 422.152(c) that chronic care
improvement programs be based on objective and evidence-based criteria,
such as clinical practice guidelines.
Response: We address comments related to Sec. 422.152(c) in the
subpart D section of the preamble (below). Because chronic care
improvement programs will be regulated under the provisions in subpart
D of the 42 CFR part 422, we believe it remains appropriate to delete
regulatory requirements concerning complex or serious medical
conditions from Sec. 422.112(a)(4).
Comment: One commenter asked whether access to covered MA plan
services can be denied, if the MA plan enrollee does not pay plan
required cost sharing at the time of service.
Response: The MA organization's responsibility for provision of
plan covered services supersedes the member's responsibility for
payment of cost sharing at the time of service. Therefore, the MA
organization cannot deny provision of a medically necessary covered
service for want of the payment of applicable cost sharing at the time
of service.
[[Page 4625]]
Comment: One commenter stated that CMS should add a provision in
the regulation that would apply section 1861(s)(2)(H) of the Act to MA
plans offered by MA organizations.
Response: We do not agree. Both section 1861(s)(2)(H)(i) and (ii)
of the Act are specific in their applicability to contracts under
section 1876 of the Act. Contracts with MA organizations for MA plans
are under section 1857 of the Act.
Continuity of Care
Section 422.112(b) requires all MA organizations for all MA plans
they offer to ensure continuity of care through integration of health
care services. Additional requirements in Sec. 422.112(b)(1) through
(b)(6) require specific methods by which MA organizations are to ensure
an effective continuity and integration of health care services.
Although all of the enumerated services and processes are clearly
desirable, it is not as clear that the responsibility for them is
appropriately or reasonably placed on organizations whose business is
primarily insurance coverage. Although it may be reasonable to expect
coordinated care plans to undertake these coordination, continuity, and
integration requirements, it is less clear that MA PFFS plans, MSAs,
and (to a lesser extent) local PPO plans and MA regional plans (which
will be offered as PPOs) should also be expected to. One might argue
that continuity of care rules cannot apply in the same manner to MA
plans in which the enrollee is free to choose his or her own providers
without restraint, such as MSAs and PFFS plans. We stated that we were
considering eliminating most of the requirements in Sec. 422.112(b)
for MSAs and PFFS plans. We also stated that we were considering
eliminating or modifying many of the requirements in Sec. 422.112(b)
for local PPOs and regional MA plans. Finally, we stated that we were
considering the continued appropriateness of these continuity of care
standards for all other coordinated care plans. We specifically
welcomed input on the extent to which requirements similar to those in
Sec. 422.112(b)(1) through (b)(6) are established for commercial
health insurers offering HMOs, PPOs or indemnity plans.
Based on comments we received, we will continue to apply existing
continuity of care requirements in Sec. 422.112(b)(1) through (b)(6),
but we will limit their scope of applicability to coordinated care
plans and then only to the services provided and coordinated by
contracted, network providers.
Comment: Many commenters provided input on this issue. A large
number of commenters stated that continuity of care and integration of
services is a key aspect of managed care. To the extent the original
FFS Medicare program has been perceived to be deficient in this aspect
of health care delivery, many commenters believe that CMS should ensure
that a similar ``failure'' in managed care is not allowed. A number of
commenters supported the removal of continuity of care requirements
related to MA MSA and PFFS plans in recognition of the fact that these
types of MA plans are primarily in the business of paying claims and
not in the business of coordinating health care through contracted
networks of health care providers. Other commenters stated that it was
especially for MA plans that did not have contracted provider networks,
such as PFFS plans or MSA plans, that continuity of care requirements
were most needed.
Some commenters agreed with CMS proposal to eliminate and/or reduce
continuity of care requirements for open network MA plans, such as PFFS
plans and PPO plans. Other commenters suggested removing all continuity
of care requirements for all MA plans, saying that such requirements
were duplicative of QI program activities required under section
1852(e) of the Act.
Response: Based on the comments, and because PPOs operate as both
coordinated care plans and ``open network'' plans at the same time, we
will modify this portion of the regulation. We will specify in Sec.
422.112(b) that the enumerated coordination of care requirements in
Sec. 422.112(b)(1) through (6) are applicable only to coordinated care
plans. We will also limit applicability of coordination of care
requirements to only contracting, in-network providers, thus limiting
applicability for MA PPOs to only those services provided by contracted
providers. We believe such an approach strikes the appropriate balance
between the need for coordination and continuity of care and the burden
associated with seeking to undertake such activities in the absence of
contractual relationships with providers.
Finally, we do not agree that continuity of care requirements are
duplicative of QI program activities required under section 1852(e) of
the Act. QI activities will generally and primarily be focused on
individuals with multiple or severe chronic conditions. Access to an
initial health assessment, on the other hand, as provided in Sec.
422.112(b)(4)(i), should include all enrollees of an MA coordinated
care plan, and not only those with multiple or severe chronic
conditions.
Comment: A few commenters stated that CMS appeared to be deleting a
paragraph (i) from paragraph (b)(4) in the regulations text at Sec.
422.112, but had no corresponding discussion in the preamble of the
proposed rule.
Response: We thank the commenters for identifying this oversight
and have corrected the regulations text related to Sec. 422.112(b)(4)
to show that none of the subparagraphs is to be deleted and that
renumbering is unnecessary.
Access ``Exception'' for MA Regional Plans
The MMA created a special access rule for MA regional plans in the
form of an ``essential hospital'' payment. Section 1858(h) of the Act
and implementing regulations related to ``essential hospitals'' are
discussed in greater detail later in this section of the preamble.
We noted that in attempting to create region-wide networks, MA
regional plans will be forced to bargain with hospitals that may be the
only hospital (or the only hospital with a particular service or
services) in a broad area. We believed that such a hospital would have
a ``monopoly power'' in negotiating with plans that are, in effect,
forced to contract with it in order to secure an adequate network of
contracted providers with which to serve anticipated Medicare
enrollees. The MMA attempted to partly address this situation through a
provision that would make limited funds available to supplement
payments to such ``essential hospitals.'' We proposed an additional
special access requirement that also would only apply to MA regional
plans at Sec. 422.112(a)(1)(ii).
In Sec. 422.112(a)(1)(ii), we proposed an ``exception'' to the
normal access requirements that would otherwise apply to MA regional
plans by adding language that provided for a relaxation of
comprehensive network adequacy requirements, but only to the extent
that beneficiaries were not put ``at risk'' for high cost sharing
related to services received from non network providers. We believed
that flexibility did not need to apply on a plan-wide basis, but rather
could be applied in a county or a portion of a region where, for
example, the MA regional plan was unable to secure contracts with an
adequate number of a specific type of provider or providers to satisfy
our comprehensive network adequacy requirements that
[[Page 4626]]
would otherwise apply to coordinated care plan models.
We considered two forms of beneficiary cost sharing. One was the
cost sharing related to a specific item or service--for instance, a
hospital coinsurance charge. Another was the ``catastrophic limits''
that MA regional plans must apply to original Medicare FFS benefits. MA
regional plans are required to provide reimbursement for all covered
benefits regardless of whether those benefits are received from network
providers (see section 1859(b)(4)(B) of the Act and the new Sec.
422.101(e)(1)). MA regional plans are also required to apply a
catastrophic out-of-pocket limit on beneficiary cost sharing for
covered in-network services and another on all covered services (in and
out-of-network). See section 1858(b)(2)(B) of the Act and the new Sec.
422.101(d)(2) and (d)(3).
We proposed to permit MA regional plans with lower out-of-network
cost sharing to have less robust networks of contracted providers and
to permit MA regional plans with more robust networks of contracted
providers to impose higher cost sharing charges for out-of-network
services. This was because to the extent the plans' networks were
robust, we would not expect beneficiary access to be unduly limited by
higher cost-sharing requirements when care was sought from non-network
providers. However, for plans with less robust networks, we proposed to
limit the plans' ability to impose higher cost-sharing requirements for
out-of-network care. We believed that higher cost-sharing requirements
imposed by plans with limited provider networks could unduly limit
access and that more equitable cost-sharing requirements would serve as
a safety valve to ensure that beneficiary access is not compromised. We
discussed various methods for testing the robustness of MA regional
plan provider networks. Along similar lines, we would require MA
regional plans with a less robust network of contracted providers to
have ``catastrophic limits'' on out-of-pocket expenditures for in-
network and for all services that are closer in value. For plans with
more robust contracted networks, we would allow the in-network and
total ``catastrophic limits'' to differ to a greater degree.
Based on the comments we received and which we respond to (below),
we will not be prescribing specific levels of cost sharing based on
robustness of contracted provider networks. Rather, we will require MA
organizations sponsoring MA regional plans to ensure enrollees have
access to in-network levels of cost sharing for covered services. We
will require MA organizations sponsoring MA regional plans to reduce
cost sharing to in-network levels for the receipt of out-of-network
services in cases in which covered services cannot be readily obtained
from contracted, network providers.
In this part of the preamble of the proposed rule we also discussed
the OPM requirement imposed on the FEHB Blue Cross and Blue Shield
Basic Option plan, which addresses similar circumstances and situations
encountered by Federal employees and annuitants when seeking health
care. We stated that the ``exception'' process related to access to
care requirements for MA regional plans might require the MA regional
plan enrollee to contact the sponsoring MA organization when seeking a
specific service that is not otherwise available from a contracted
provider. We are adopting that proposal. We will require MA
organizations sponsoring MA regional plans to designate a non-
contracted provider from whom (or from which) the enrollee can obtain
covered services at network cost-sharing levels, to the extent that
such services are not available and accessible from a contracted,
network provider. Alternatively, the MA organization can allow the
enrollee to seek the service from any qualified provider and guarantee
that in-network cost sharing limits will apply. We have established a
new beneficiary notification requirement related to enrollees of MA
regional plans in Sec. 422.111(b)(3)(ii). We add this requirement to
ensure that the access ``exception'' in Sec. 422.112(a)(1)(ii) does
not disadvantage beneficiaries seeking in-network care.
Comment: Several commenters were received on this proposed
provision. Many of the commenters suggested that the ``exception''
should also apply to all local MA coordinated care plans, or even all
local MA plans, while others suggested limiting it to local and MA
regional PPOs.
Response: Local MA plans of all types have discretion to limit
their service areas based on their network of contracted providers.
Unlike local MA plans, MA regional plans are required, as a condition
of offering an MA regional plan, to include the entire geographic area
of an MA region in the service area of the plan. In some ways, the
``exception'' we provide at Sec. 422.112(a)(1)(ii) for MA regional
plans is comparable to the ``partial county'' provision provided for
local MA plans in the service area definition at Sec. 422.2. Under
Sec. 422.2, we permit an MA organization to contract with CMS for a
local MA plan where the organization has a contracted network in only a
portion of a county and when such a ``partial county'' is necessary,
nondiscriminatory, in the best interests of the beneficiaries and where
other conditions are met. We will also permit MA organizations to
contract with CMS for an MA regional plan where beneficiaries are not
put ``at risk'' even though the MA organization does not have contracts
with robust networks of providers throughout the MA region. For these
reasons, it is both inappropriate and unnecessary to provide such an
``exception'' for local MA plans.
Comment: Other commenters were opposed to allowing an ``exception''
to the normal access to care requirements to any MA coordinated care
plan, including MA regional plans. One commenter suggested limiting the
``exception'' to only an initial start-up period, the first contract
year, for instance even for MA regional plans.
Response: As noted above, we believe the ``exception'' we proposed
for MA regional plan access to care requirements is essential to foster
the growth of the MA regional plan program, a goal consistent with the
Congressional intent in creating the program. We are concerned that in
the absence of this ``exception,'' the provisions we discuss below
related to beneficiary access to ``essential hospitals'' would not be
sufficient to allow MA regional plans to meet access to care
requirements for coordinated care plans.
The ``exception'' we provide at Sec. 422.112(a)(1)(ii) is
necessary because ``essential hospitals'' will not be contracting with
MA organizations for MA regional plan members, but will be a necessary
part of the MA regional plan's network in order for the MA regional
plan to meet the applicable provider access requirements under section
1852 of the Act. Section 422.112(a)(1)(ii) acknowledges that some
providers, such as ``essential hospitals,'' will not have a contract,
but will be considered part of the network because they will be
providers at which beneficiaries can seek care at in-network cost
sharing levels. We do not believe it is appropriate to limit the
``exception'' to an initial start-up period, particularly because the
``essential hospital'' provision is not so limited. On the other hand,
we agree that it would be appropriate to annually evaluate the
``subsection d'' hospitals that have been designated as ``essential
hospitals'' by MA regional plans to ensure that the
[[Page 4627]]
conditions that permitted such designation continue to exist.
Therefore, we have added a requirement at Sec. 422.112(c)(7) under
which we will evaluate the continued applicability of ``essential
hospital'' status on an annual basis at the time of annual contract
renewal. Please see below for a more extensive discussion of
``essential hospitals.''
Comment: A few commenters suggested that CMS subject MA
organizations offering MA regional plans to review by external entities
and the general public to ensure that MA regional plans meet community
access standards.
Response: We do not believe a mandatory external review of network
adequacy is appropriate because the delay and burden associated with
such a process could negate the competitive and market forces that the
Congress intended should apply in the regional MA program. Ultimately,
such a result could have the very effect the commenters are seeking to
avoid, an adverse impact on beneficiary access. Section 1852(e)(4) of
the Act provides for a private accreditation organization's external
review of MA organizations in specific areas, including access to
services. Nothing in section 1852(e)(4) can be construed as imposing
mandatory external review on an MA organization of the type the
commenters propose. Otherwise, the time frame between an organization's
submission of an application for an MA contract year and CMS' approval
or denial of that application would be too short to permit sufficient
time for a formal, public comment period.
Comment: Many commenters expressed concern that CMS seemed to be
relaxing the community access standards with the ``exception'' process
we provided for MA regional plans in Sec. 422.112(a)(1)(ii). Some
commenters stated that to the extent CMS will pay MA regional plans
more through various mechanisms, such as the ``stabilization'' fund,
risk corridors in 2006 and 2007, and the new MA payment formula,
therefore CMS also has reason to hold them to the same access standards
to which CMS holds local MA plans. Other commenters supported the
``exception'' process and suggested that it be extended to local MA
PPOs.
Response: As we have previously said, we will not permit local MA
coordinated care plans to take advantage of the ``exception'' process
in Sec. 422.112(a)(1)(ii). The exception process is necessary
precisely because we will require MA regional plans to meet community
access standards. We explained in the proposed rule that to the extent
an MA regional plan is unable to secure contracts with specific
providers in specific areas of an MA region, beneficiaries would
nonetheless be protected from excessive out-of-network cost sharing. In
other words, it is exactly because we will continue to enforce
community access standards that we will require MA regional plans to
reduce cost sharing to in-network levels where covered services cannot
be readily obtained from contracted, network providers. We establish a
new beneficiary notification requirement related to enrollees of MA
regional plans in Sec. 422.111(b)(3)(ii) to reinforce this concept.
Comment: Some commenters stated that CMS should require hospitals
to treat MA regional plan enrollees when they are offered the Medicare
FFS payment rate that is payable under section 1886 of the Act by an MA
regional plan, as long as in-network cost sharing levels are applied to
enrollees that seek care at such non-contracting hospitals. One
commenter stated that sole community hospitals, or hospitals serving
medically underserved areas or non-urban areas should be required to
treat MA regional plan enrollees if they refused to contract for FFS
rates. One commenter recommended that CMS reevaluate the non-
discrimination obligation of hospitals under the Medicare program and
suggested that CMS establish a policy that would promote access to
services at hospitals participating in the Medicare program on the same
basis for all Medicare beneficiaries, regardless of whether they are MA
enrollees or receiving coverage under the Medicare FFS program. One
commenter recommended that CMS develop further regulations that would
require providers to treat MA patients in all cases, even for elective
services.
Response: We do not necessarily agree that we should establish a
policy that would require Medicare participating hospitals to treat MA
enrollees or to contract with MA organizations under specific terms or
conditions. Were we to establish a specific price relative to FFS
inpatient hospital payment rates as a baseline that would compel a
hospital to treat MA plan enrollees, for instance, we would also be
administering inpatient hospital pricing. We do not believe that a
requirement to treat for an administered price is consistent with the
overall intent of the MMA to increase plan choices for Medicare
beneficiaries through competitive market forces. However, we
acknowledge that MA provider contracting, especially in areas where
there are few available providers, is a concern. We will continue to
evaluate our current authorities outside of the MMA as a means of
ensuring reasonable access at reasonable prices to medical services for
all Medicare enrollees, including those electing to receive their
coverage through an MA plan.
Comment: Some commenters stated that the ``exception'' CMS proposed
in Sec. 422.112(a)(1)(ii) would tend to put providers at a
disadvantage vis-[agrave]-vis MA regional plans. The commenters stated
that MA regional plans would offer reimbursement rates below FFS rates
and as such, unilaterally dictate the terms of the contract. The
commenters stated that this would be unfair to physicians and other
providers. The commenters also stated that this would create an unfair
playing field, especially because MA regional plan enrollees in such an
area would then be required to go out-of-network at higher cost sharing
levels, to receive covered medically necessary care.
Response: We disagree. MA regional plans will be required to make
all covered services available at in-network cost sharing levels, even
if an MA regional plan fails to reach mutually agreeable contracting
terms with a specific provider or group of providers. In other words,
MA regional plan enrollees will have access to medically necessary
covered health services at in-network cost sharing levels. The MA
regional plan must meet the access requirements either through
contracted providers or through the ``exception'' process discussed
above. Because section 1852(a)(2) of the Act requires MA organizations
that use a contracted network to pay non-contracting providers at the
Medicare FFS rate, once the MA regional plan enrollee pays in-network
cost sharing, the MA organization will be financially responsible for
the rest.
Comment: One commenter stated that CMS should adopt URAC, NCQA or
JACHO standards related to MA PPO network adequacy requirements and
privacy of beneficiary information requirements. The commenter stated
that for network adequacy requirements and privacy requirements, as for
all other federal regulatory requirements, to the extent that any
accreditation standard of any of the three accrediting bodies applies
to the same activity, compliance should be deemed for the PPO to be in
compliance with the federal requirement.
Response: We do not necessarily agree. Under section 1852(e)(4) of
the Act, when a private accrediting organization applies and enforces
certain enumerated requirements that meet or exceed CMS standards, CMS
can deem that an MA plan has met such
[[Page 4628]]
requirements. These enumerated requirements include access requirements
under section 1852(d) of the Act and confidentiality requirements under
section 1852(h) of the Act. To the extent the one of the three named
parties has applied to CMS and been approved in accordance with
statutory and regulatory requirements to be a private accrediting
organization for external review of PPO access and/or confidentiality
requirements, then deeming would be permissible. Note, however, that
this deeming mechanism applies only for the purposes of CMS'
enforcement of this regulation and neither CMS' enforcement of the
regulation nor accreditation by an accrediting body supersedes the
jurisdiction of the HHS Office for Civil Rights to enforce the HIPAA
privacy rule.
Comment: One commenter asked whether the access ``exception'' in
Sec. 422.112(a)(1)(ii) for MA regional plans would preempt State
licensing laws related to HMO access requirements.
Response: MA regional plans are offered as PPOs and not HMOs. We
responded to a similar inquiry in the June 2000 M+C final rule with
comment (65 FR 40257). An entity does not have to have a commercial
license of the same type of MA plan it seeks to offer under the MA
program. Rather, the entity must demonstrate that it is authorized by
the State to assume the risk involved in offering the type of plan it
wishes to offer. Thus, an entity that is licensed by the State to
assume risk commercially as an HMO would need to demonstrate that it is
authorized by the State to offer a PPO product. The access standards
that would apply to such an MA product would be the MA PPO access
standards.
Comment: Two commenters stated that CMS should rely on MA regional
plans to demonstrate access to covered services throughout their
service areas at in-network cost sharing amounts and that should CMS
continue to review cost sharing levels to ensure that they are not
discriminatory.
Response: We agree with this comment and will continue to review
cost sharing levels as a means of ensuring beneficiary access to care
and that cost sharing is not discriminatory. When we evaluate access to
care for an MA regional plan that relies, in part, on the ``exception''
in Sec. 422.112(a)(1)(ii), we will evaluate the means by which the MA
regional plan proposes to ensure that access requirements are met. Such
means might include the designation of ``essential hospitals'' in
accordance with Sec. 422.112(c), the designation of other
noncontracting providers from which an MA plan enrollee can obtain
covered plan services at in-network cost sharing levels (including the
catastrophic limit described in Sec. 422.101(d)(2)) in a timely
manner, and the manner in which MA regional plan enrollees will be
notified as to how they can secure in-network cost sharing when covered
services are not readily available from contracted providers, in
accordance with Sec. 422.111(b)(3)(ii).
Unlike local coordinated care plans, such as MA local HMOs and MA
local PPOs, where we have historically required comprehensive
contracted networks of providers as a condition for meeting our access
requirements, we will allow MA regional plans to contract with CMS with
less robust networks of contracted providers. As long as an entity
proposing to offer an MA regional plan pays noncontracted providers at
the Medicare FFS rate, and as long as they can guarantee access through
such payment to non-contracting providers, and as long as they limit
enrollee cost sharing liability to in-network levels, then we will
contract with such an entity for an MA regional plan as long as other
non-access requirements are met.
Comment: One commenter stated that the ``exception'' at Sec.
422.112(a)(1)(ii) is not in the best interest of beneficiaries and that
neither the preamble nor the regulation text in the proposed rule said
how promptly an MA regional plan would be required to respond to a
request for access to non-network sources of care, or the basis upon
which such a request could be denied, or the penalty to the MA regional
plan for not acting in a timely manner on such a request, or finally,
what recourse the member would have if a denial or non-response from
the MA regional plan occurred.
Response: An MA regional plan would be required to provide
assurances of reasonable response times, if it proposed to use the
``exception'' in Sec. 422.112(a)(1)(ii) in such a manner. Reasonable
response times proposed by the MA regional plan would need to be
consistent with community patterns of care. Where a routine or follow-
up specialist visit might ordinarily be available within 30 days, an MA
regional plan would be expected to respond in such a manner that the MA
regional plan enrollee could secure covered specialist services within
a similar time frame. Similarly, as part of the MA plan's disclosure to
both CMS and an MA regional plan enrollee, we would require a full
explanation of the denial process (where services are readily available
from contracting providers, for instance) and the appeal process the
enrollee should follow in cases of disagreement. The potential penalty
to the MA regional plan for not acting in a timely manner on such a
request is explained in our current regulation at Sec. 422.750 and
Sec. 422.758 for a violation of Sec. 422.752(a)(1) and Sec.
422.510(a)(10), respectively.
Essential Hospitals
We proposed at Sec. 422.112(c) that if an MA organization
certifies that it was unable to reach an agreement with an ``essential
hospital,'' under specific circumstances we are authorized to pay
additional amounts to that hospital from the Federal Hospital Insurance
Trust Fund. This additional payment to the ``essential hospital'' is in
addition to and does not affect the normal monthly MA payment that we
would make to the MA organization. The MA organization must provide
assurances that it will make payment to the hospital for inpatient
hospital services in an amount not less than the amount that would be
payable under section 1886 of the Act and the ``essential hospital''
must demonstrate to our satisfaction that the amounts normally payable
under section 1886 of the Act are less than the hospital's costs for
providing services to MA regional plan enrollees.
Comment: A number of general comments were received on potential
contracting difficulties between rural providers and health plans. On
the one hand, several commenters were concerned that MA organizations
offering MA regional plans would not make a ``good faith'' effort to
contract with hospitals, especially hospitals located in rural areas.
On the other hand, several commenters suggested that MA organizations
offering MA regional plans in areas with limited competition could be
``held up'' for non-competitive or predatory payment rates as a
condition of securing a contract with a specific provider. The
commenters on both sides recommended various solutions, such as
mandating the method by which MA organizations offering MA regional
plans could show they have made a ``good faith'' effort to contract
with providers.
Response: In response to comments that an MA regional plan should
be required to show that it made a ``good faith'' effort to contract
with an ``essential hospital,'' we added a requirement at Sec.
422.112(c)(3) that the MA regional plan will need to establish its
``good faith'' effort by showing that the designated hospital refused
to contract after it was offered a payment rate no less than the amount
the
[[Page 4629]]
hospital would receive under section 1886(d) of the Act.
We agree that in certain rural areas, difficulties may arise in
obtaining contracts that will satisfy the providers or the health
plans, or both. However, we do not have the statutory authority to
mandate contracts between MA plans or providers, or to intervene in
contract negotiations. Section 1854(a)(6)(B)(iii) of the Act prohibits
us from intruding in the contractual relationships between MA
organizations and health care providers. This prohibition is intended
to ensure that free market conditions continue to promote competition
and efficiency in the MA program. We believe that it is clear that the
Congress provided incentives for MA regional plans in the form of
additional payments through the stabilization fund and risk sharing in
2006 and 2007, neither of which is provided for local MA plans.
Additionally, the Congress also provided for payments for
noncontracting acute care hospitals that provide inpatient hospital
services to MA regional plan enrollees through the ``essential
hospitals'' authority. As stated previously, we believe competition
will be the best method of ensuring network adequacy because enrollees
will favor and enroll in plans with more extensive networks and tend to
avoid those without. Competition will also allow the more efficient
health care providers to offer discounted rates to MA organizations,
which will, in turn be able to pass these savings on to enrollees in
the form of additional health care items and services or reduced
premiums.
Finally, we believe enrollees will be attracted to MA organizations
that contract with efficient providers, because costs will be lower.
Clearly, the competitive forces are more complex than we can address in
this forum. We have been careful not to disturb the new competitive
balance created by the MMA related to MA regional plans.
Our access standards are found at Sec. 422.112, Sec. 422.114, and
in other sections of subpart C of the MA regulation. These standards
must be met before an MA organization will be allowed to offer an MA
plan in an area. Continuing compliance with these requirements is an
essential condition of maintaining an MA contract. For instance, CMS
has the authority, provided at Sec. 422.502(a)(3)(ii) and Sec.
422.512(a), to deny an application or to terminate a contract if an MA
organization fails to establish or maintain adequate access to care for
Medicare beneficiaries. In order to meet access standards, MA
organizations offering coordinated care plans will generally need to
secure contracts that they have negotiated with health care providers.
This will require an effort by both parties to ensure a choice of
health plans with strong provider networks that will be available to
all beneficiaries, including those residing in rural areas.
Comment: One commenter stated that in the State in which it
operates, the contracts it has with hospitals for all lines of business
(Medicare, Medicaid, and commercial) cause it to pay more on the
Medicare side, that cost-shifting occurs from its Medicare line of
business to its commercial line of business. The commenter expressed
concern that to the extent the ``essential hospital'' provision permits
an MA regional plan to ``deem'' a hospital into the MA regional plan's
network, that it provides an unfair competitive advantage to MA
regional plans. The commenter also suggested permitting hospitals to
select a single Medicare contractor (section 1876 cost, MA local or
regional plan) with which to contract, and through such a contract
``immunize'' itself from all other MA regional plans' attempts to
designate it as an ``essential hospital.''
Response: We do not believe it would be appropriate or reasonable
to so allow a hospital to ``immunize'' itself from designation as an
``essential hospital'' by any MA regional plan. To the extent we
accepted or adopted such an interpretation, we would also be nullifying
the very intent of the ``essential hospital'' statutory provision. The
intent of this provision is, simply put, to ensure access to hospital
care for regional MA plan enrollees. The opening clause of section
1858(h)(1) of the Act is instructive in this regard: ``For purposes of
enabling MA organizations that offer MA regional plans to meet
applicable provider access requirements under section 1852 with respect
to such plans.'' Additionally, as we provide for in regulation at Sec.
422.112(c), before a hospital can be designated as an ``essential
hospital'' by an MA regional plan, there must be a showing by
convincing evidence that such a hospital is uniquely able satisfy the
access requirements for the MA regional plan. If we were to limit
designation of a specific hospital as an ``essential hospital'' to the
first PPO in an MA region, we would also likely limit MA regional plan
competition in all MA regions with rural areas to a single MA regional
plan per region. Such a result clearly was not the intent of the
statute.
In addition, the ``essential hospital'' provision partly addresses
hospital financing issues, to the extent that we will pay additional
costs to ``essential hospitals,'' up to the amount provided in statute
at section 1858(h)(3) of the Act. Thus, the MA organization would not
bear these additional costs for MA regional plan enrollees.
Comment: One commenter asked for clarification on how payment will
work under the ``essential hospital'' provision. While the statute is
clear, the commenter stated, that the additional payment is limited to
inpatient services, it is unclear to the commenter whether add-ons such
as medical education or disproportionate share payments will also be
made to ``essential hospitals.'' The commenter recommended that CMS
encourage or even require plans to provide additional reimbursement to
include these amounts, which are available under inpatient PPS, to
qualifying hospitals because they would be available if the beneficiary
were enrolled in FFS Medicare.
Response: IME and GME payments will continue to be made by the
Medicare fiscal intermediaries (FIs) to all appropriate hospitals for
all Medicare beneficiaries (including MA plan enrollees).
Disproportionate Share Hospital (DSH) payments are part of the normal
FFS reimbursement amount and will be the responsibility of the MA
regional plan, to the extent it is making a payment under Sec.
422.100(d)(2), because, by definition, ``essential hospitals'' are
defined as noncontracting hospitals per section 1858(h)(1) of the Act.
In our regulation at Sec. 422.112(c), we clarify that ``essential
hospitals'' are always noncontracting with the specific MA regional
plan involved.
Comment: Some commenters suggested that to the extent an MA
regional plan offers to pay a hospital no less than the amount that
would be payable to the hospital under section 1886 of the Act, that
CMS consider this to be evidence that the MA regional plan has made a
``good faith'' effort to contract with the hospital.
Response: We agree with the commenters and have established the FFS
payment level as the baseline for MA regional MA plans in establishing
that they have made a ``good faith'' effort to contract with an
``essential hospital'' at Sec. 422.112(c)(3).
Comment: Many commenters recommended that CMS specify in regulation
exactly how the ``essential hospital'' provision will work and whether
or not (and how) it would apply to critical access hospitals (CAHs).
Other commenters cautioned CMS not to disrupt the competitive balance
between MA organizations and hospitals related to MA plan contracting.
Many commenters also recommended that CMS clearly explain
[[Page 4630]]
that CAHs are not ``essential hospitals'' as defined in the MMA. Other
commenters stated that CAHs are indeed essential providers and have
been designated as such under the FFS Medicare program. Some commenters
suggested requiring MA regional plans to pay CAHs the ``interim''
Medicare rate in effect at the time the service was furnished.
In addition, one commenter stated that such an ``interim'' payment
rate would put parties at risk that such a payment would be more (or
less) than actual costs. The commenter also suggested that CMS devise a
means of ensuring that MA regional plans are properly advised on the
``interim'' payment rate, should CMS accept the commenter's proposal.
Still other commenters stated that CMS should not permit MA
organizations to bargain in ``bad faith'' with hospitals. However,
other commenters stated that CMS should not permit hospitals to bargain
in ``bad faith'' with MA organizations. In general, all expressed
concern and cautioned CMS not to upset the delicate balance of
competition and pointed to the scarce resources and fragile financial
condition of health care delivery in rural areas.
Generally, CMS was asked not to undermine the already precarious
condition of rural providers, including rural health clinics, CAHs and
others, while at the same time we were encouraged to increase the
availability of MA plans in rural areas. One commenter recommended that
CMS put in a ``hold harmless'' or ``cost-reimbursement'' requirement
for insurers that contract with critical access hospitals. The
commenter was concerned that as more Medicare beneficiaries opt for
participation in private insurance plans, unless CAHs receive adequate
funding for the services they provide, their continued existence (and
consequently continued access to medical care for the beneficiaries
they serve) will be greatly jeopardized. Another commenter suggested
that CMS require MA plans to provide reimbursement to CAHs using a
cost-based methodology similar to that required under FFS Medicare.
Another commenter stated that as more Medicare beneficiaries enroll
in MA plans that do not contract with CAHs, the marginal costs (per
Medicare beneficiary) at CAHs will rise and so, consequently, will
Medicare payments per FFS beneficiary to CAHs. A few commenters
suggested extending the ``essential hospital'' payment to local MA
plans. Other commenters called on CMS to require MA plans to pay claims
from noncontracting providers in a ``timely'' manner and under the same
rules that apply to original FFS claims processors, the Medicare
carriers and intermediaries.
In addition, several commenters expressed confusion with the
following sentence from the subpart C preamble to the August 3, 2004
proposed rule: ``In a specific case, the actual payment to an
'essential hospital' from the Federal Hospital Insurance Trust Fund
would be the sum of the difference between the amount that would have
been paid to the hospital under section 1886 of the Act and the amount
of payment that would'' have been paid for those services had the
``essential hospital'' been a critical access hospital.''
Response: We will address the last comment first. We need to
clarify that the quoted sentence from the subpart C preamble of the
August 3, 2004 proposed rule simply echoes the statutory language at
section 1858(h)(2)(A) of the Act. The intent of the statutory
``essential hospital'' provision and the implementing regulation at
Sec. 422.112(c) is to provide an additional payment to the ``essential
hospital'' of up to 101 percent of its actual costs for providing
inpatient services to a specific MA regional plan enrollee. In other
words, there was never an intent to designate or allow a CAH to become
an ``essential hospital'' for purposes of the MA regional plan program.
The definition of ``essential hospital'' in the statute prevents such
an outcome. Section 1858(h)(4) of the Act is clear in defining an
``essential hospital'' as a ``subsection (d) hospital,'' as that term
is defined at section 1886(d)(1)(B) of the Act. CAHs are not included
in this definition and therefore can never be ``essential hospitals''
for purposes of an MA regional plan offered by an MA organization.
In Sec. 422.112(c)(1), we are clear in limiting the applicability
of the ``essential hospital'' provision in a similar manner to only
hospitals defined in section 1886(d) of the Act, and thus excluding
CAHs. We have addressed concerns related to maintaining a ``competitive
balance'' previously in our responses in this section of the preamble.
We cannot intrude in the contracting relationships between MA
organizations and providers because the statute prohibits us from doing
so at section 1854(a)(6)(B)(iii) of the Act. Additionally, to the
extent the statute provides the additional ``essential hospital''
payment only for inpatient hospital services provided by 1886(d)
hospitals to MA regional plan enrollees, we cannot extend its
applicability to local MA plans of any type.
Comment: One commenter suggested that CMS maintain a comprehensive
and accessible database of Medicare FFS reimbursement rates for all
providers and allow MA plans access to the database so they would be
better equipped to make the correct and full payment to out-of-network
providers. The commenter also stated that there should be penalties or
sanctions for plans that habitually under-pay out-of-network
noncontracting providers. The commenter also suggested that CMS require
MA organizations to follow FFS timely payment rules, including accrual
of interest when claims are not paid in a timely manner. Some
commenters stated that the additional difficulties inherent in paying
CAHs timely and correctly, explaining that CAHs are paid on a ``cost
plus'' basis.
Response: We provide public access to the FFS fee schedules and
reimbursement rates. We also assists MA organizations in pricing claims
for out-of-network providers by making ``Grouper/Pricer'' software and
other Medicare claims'' pricing tools available to them. However, with
payment rates and computations varying by provider type, locality,
provider ID, and service, and with the potential that an MA plan
enrollee might access covered emergency services in any part of the
United States, the task of correctly applying fee schedules that are
generally updated on a quarterly basis can be daunting. When one
considers the low volume of such claims that an MA organization would
expect to receive and the administrative effort involved in correctly
pricing them, one begins to understand that simply making such data and
systems available to MA organizations does not ensure that correct
payment calculations will always occur. We already have the authority
to apply penalties and sanctions to MA plans that habitually fail to
pay out-of-network noncontracting providers in a timely manner (see,
for instance, Sec. 422.520). MA organizations are required to follow
the same timely payment requirements related to con-contracting
provider claims, including interest penalties, that apply to FFS
carriers and intermediaries.
Although MA organizations are required to pay noncontracting
providers the amount that would otherwise be payable under original
Medicare (Sec. 422.100(b)(2), and although Medicare providers are
required to accept from noncontracting MA organizations the amount
original Medicare would have made (Sec. 422.214), the amount original
Medicare pays to CAHs is paid on a periodic interim
[[Page 4631]]
basis, is cost-based, and is subject to cost settlement. Additionally,
section 405(c) of the MMA provides for development of alternative
timing methods for the periodic interim payments already made to CAHs
for inpatient services. This provision will further complicate the
computation of amounts due CAHs under Medicare and will represent an
additional administrative burden on MA organizations offering MA
regional plans that will need to pay noncontracting CAHs based on a
number of unique and changing factors. Similarly, to the extent CAHs
are located in areas served by MA regional plans, they would
potentially suffer a disruption in the normal cash-flow provided for
them through periodic interim payments in the Act, even were MA
regional plans able to provide correct reimbursement amounts in a
timely manner. Although timely reimbursement for claims received from
noncontracting providers by MA organizations is already required (see
Sec. 422.520(a), the timely claims-payment standard (claims must be
paid within 30 or 60 days, depending on whether they are clean claims),
is not a substitute for the guaranteed cash-flow related to periodic
interim payments made by the Medicare FFS intermediary to CAHs.
Additionally, to the extent CAHs settle costs with CMS related to
services they provide to Medicare beneficiaries, MA organization
computation of payments due CAHs is further complicated, because of the
potential difference between the Medicare interim payment and the final
settlement.
In light of the special status provided to CAHs in section 1820 of
the Act and implementing regulations, and in recognition of the unique
status of CAHs related to access to care for FFS beneficiaries, we also
note a special concern for them related to the MA program and
specifically to MA regional plans. While we are constrained by the non-
interference clause in section 1854(a)(6)(B)(iii) of the Act from
requiring MA organizations to contract with CAHs, or from requiring
contracts voluntarily entered into with CAHs to specify the level or
manner of reimbursement, we will increase our level of monitoring of
CAHs. For instance, we might review MA regional plan payment to non-
contracting CAHs during our routine biennial monitoring visits. We will
use our authority in section 1857(f)(2) of the Act when needed to
ensure MA organization compliance with existing non-contractor timely
payment requirements. We do not interpret the statute to permit CMS
enforcement of contracts voluntarily entered in to by MA organizations
and health care providers. Although our regulations require that all MA
organization contracts with providers and suppliers contain a prompt
payment provision (see Sec. 422.520(b)), details of such prompt
payment provisions and enforcement thereof would be as specified in the
contract.
Comment: One commenter requested clarification regarding the
``essential hospital'' payment from the HI Trust Fund. The ``essential
hospital'' must demonstrate that the amount of the MA plan payment is
less than the cost of providing services to MA regional plan enrollees.
The commenter asked whether this additional payment is equivalent to
the full PPS rate, or to cost (which may be greater than the PPS rate),
or cost plus one percent (because of the reference to CAHs at section
1858(h)(2)(A)) of the Act. The commenter also recommended that CMS
provide guidance on how the hospital will demonstrate it is eligible
for an ``essential hospital'' payment. The commenter is concerned that
the procedures that we establish not be too cumbersome so that the
additional reimbursement is not sufficient to compensate for the
reporting effort.
Response: The ``essential hospital'' will need to establish that
its actual costs for providing inpatient care to a specific MA regional
plan enrollee actually exceeded the amount that is normally paid under
FFS Medicare. The amount normally paid under FFS Medicare is the PPS
payment normally made to the ``subsection d'' hospital under Part A of
the Act for similar inpatient hospital services provided to an original
FFS Medicare beneficiary. As we have already discussed in this part of
the preamble related to Sec. 422.100, the normal PPS payment (less the
amounts paid by the fiscal intermediary under sections 1886(d)(11) and
1886(h)(3)(D) of the Act) will be the responsibility of the MA
organization sponsoring the MA regional plan in which the beneficiary
is enrolled. Thus, after the normal FFS amount has been paid to the
``essential hospital,'' the ``essential hospital'' can seek additional
funding from CMS for up to 101 percent of the inpatient costs it
actually incurred in treating a specific MA regional plan enrollee. The
availability of funds to make such an additional payment to ``essential
hospitals'' is limited by section 1858(h)(3) of the Act. We have
clarified in the regulatory text in Sec. 422.112(c)(6) that we will
pay from funds appropriated in section 1858(h)(3) of the Act until such
funds are exhausted. In other words, we will pay based on the order in
which claims from ``essential hospitals'' are received. Finally, we
have prescribed in regulation the method through which an ``essential
hospital'' will establish that its costs for treating a specific MA
regional plan enrollee exceeded the normal PPS payment amount. We will
use the principles of reasonable cost reimbursement in part 412 of this
chapter to determine whether costs in a specific case exceed the normal
PPS payment amount in an individual case. To the extent an ``essential
hospital'' can show, using methods of reasonable cost reimbursement,
that the amount it reasonably expended in its treatment of an MA
regional plan enrollee exceeded the normal PPS reimbursement amount for
inpatient services, then CMS will make an additional payment to the
``essential hospital,'' limited by the statutorily appropriated amount
in section 1858(h)(3). The statute initially authorizes $25,000,000 in
2006 and increases the annual amount available for ``essential
hospital'' payments in subsequent years by the market basket percentage
increase as defined in section 1886(b)(3)(B)(iii) of the Act.
Comment: One commenter recommended that CMS eliminate ambiguity and
to clearly define which types of hospitals are eligible for ``essential
hospital'' designation.
Response: Our regulation indicates that any ``subsection (d)''
hospital can qualify as an ``essential hospital.'' The regulation
mirrors the statute in this respect. Note that ``subsection (d)''
hospitals are defined in statute at section 1886(d)(1)(B) of the Act
and refer to hospitals paid under a ``prospective'' (PPS) method. We
have added language to Sec. 422.112(c)(1) to clarify this issue. Also
note that we have further defined ``essential hospital'' in regulation
text at Sec. 422.112(a)(4) as one where there is no competing Medicare
participating hospital in the area to which MA regional plan enrollees
could reasonably be referred for inpatient hospital care. We believe MA
organizations are in the best position to determine what is
``reasonable'' in this context, based on service usage and community
patterns of care. However, we will evaluate such claims based on
standards that will include: an evaluation of the ownership and control
of other hospitals in the area; the normal patterns of community
access; the physical proximity of other inpatient facilities; the
referral patterns to inpatient facilities in the area; and other
factors pertinent to the analysis.
Comment: A number of commenters recommended that CMS apply special
rules to I/T/U hospitals so that all hospitals operated by I/T/U or the
[[Page 4632]]
Indian Health Service would be considered ``essential hospitals.''
Response: We cannot accommodate this request because there is no
statutory basis for including all hospitals operated by Tribes or the
Indian Health Service as ``essential hospitals.'' Section 1858(h) of
the Act is explicit in defining ``essential hospitals'' as subsection
(d) hospitals as defined in section 1886(d) of the Act. To the extent a
Tribal or IHS hospital is designated by an MA regional plan under
section 1858(h)(1) of the Act and to the extent all other conditions in
section 1858(h) of the Act are present, then such a hospital can be an
``essential hospital.''
Comment: Some commenters recommended that CMS establish rules for
``essential hospitals'' that would require them to participate in the
utilization management, discharge planning or quality improvement
programs of the MA plans of the enrollees they treat.
Response: We will not separately establish such requirements
related to ``essential hospitals.'' As ``subsection d'' hospitals,
``essential hospitals'' are already required to meet quality assurance,
discharge planning and utilization management standards applicable to
Medicare participating hospitals.
Comment: One commenter asked who would be responsible for the
``essential hospital'' payment, once the annual allocation specified in
section 1858(h)(3) of the Act has been exhausted.
Response: In response to this comment, we have clarified this
section of the regulation to say that once ``essential hospital''
payments exceed the limit prescribed in statute in a calendar year, no
additional ``essential hospital'' payment will be due from any party.
The statute is clear in allocating up to $25,000,000 for calendar year
2006 and a similar amount, adjusted for inflation, in subsequent years.
We will make appropriate payments from the Part A Trust Fund on a
``first come-first served'' basis. We have specified these requirements
in regulation at Sec. 422.112(c)(6). Once the amount authorized in
statute has been exhausted in a calendar year, no additional
``essential hospital'' payment is due nor can one be made by us for
inpatient hospital services received by an MA regional plan enrollee in
that calendar year.
Comment: One commenter asked if the in-network cost sharing
requirement would still apply to services received in an ``essential
hospital,'' even after the ``essential hospital'' allocation has been
exhausted.
Response: To the extent an ``essential hospital'' is needed to meet
the access requirements in Sec. 422.112, we have added a requirement
at Sec. 422.112(c)(7) that in-network cost sharing applies to covered
inpatient services received by an MA regional plan enrollee in an
``essential hospital.'' This is consistent with the ``exception'' in
Sec. 422.112(a)(1)(ii) and the beneficiary notification requirement in
Sec. 422.111(b)(3)(ii). The requirement for an MA regional plan to
provide, or reimburse for, medically necessary inpatient hospital care
(and to limit member liability to in-network cost sharing levels when
reimbursing an ``essential hospital'') is independent of the
``essential hospital'' payment provision. Section 422.112(c)(7), where
cost sharing is limited to in-network amounts for covered inpatient
care reimbursed to an ``essential hospital'' by an MA organization for
an MA regional plan member, applies even when Sec. 422.112(c)(6) does
not. Even if no ``essential hospital'' payment is due per Sec.
422.112(c)(6) because conditions in Sec. 422.112(c)(5) are not met
(rather than due to exhaustion of the ``essential hospital'' annual
allocation), in-network cost sharing for covered inpatient services at
an ``essential hospital'' is still required. In other words, once a
hospital is designated as an ``essential hospital'' by the plan, in-
network cost sharing applies regardless of whether an ``essential
hospital'' payment is due or paid.
Comment: One commenter said that to the extent the ``exception'' in
422.112(a)(1)(ii) is used, that not only normal per service in-network
cost sharing should apply to services so obtained, but also that the
in-network catastrophic limit on Medicare A/B services in Sec.
422.101(d)(2) should also apply.
Response: We agree and reference the in-network catastrophic cost
sharing limit in Sec. 422.101(d)(2) as an additional limit on MA
regional plan enrollee cost sharing liability in Sec. 422.112(c)(7)
when covered inpatient care is received at an ``essential hospital.''
Comment: One commenter asked whether we would permit or require MA
regional plans to list ``essential hospitals'' in their provider
directories. The commenter said that allowing an MA regional plan to so
list ``essential hospitals'' would be inappropriate because such
marketing would provide the hospitals with an advantage that should
only accrue to contracting providers. We received a number of comments
from other parties that objected to the listing of ``essential
hospitals'' in MA regional plan provider directories on the basis that
such a listing would provide the MA regional plan with an advantage
that should only accrue to MA regional plans that actually have the
``essential hospital'' under contract.
Response: While we generally concur with both commenters that
neither party is entitled to an undue advantage, MA regional plans are
required to provide enrolled members a provider directory on an annual
basis in accordance with Sec. 422.111(a)(3). Note that as part of that
requirement a description of any out-of-network coverage is also
required. So, while it would not be permitted to list ``essential
hospitals'' in an MA regional plan's provider directory as if they were
contracting providers, it is also true that a description of their
status as ``essential hospitals'' would be required.
12. Special Rules For Ambulance Services, Emergency Services, and
Urgently Needed Services, and Maintenance and Post-Stabilization Care
Services (Sec. 422.113)
We proposed to modify Sec. 422.113(b)(2)(v) to clarify that the
$50 limit for ``emergency services'' applies only to the emergency
department, and that while the limit on cost-sharing for ``post-
stabilization'' care at Sec. 422.113(c)(2)(iv) continues to apply, its
application would always begin upon inpatient admission. Thus,
emergency cost-sharing limits would shift from being tied to the type
of service (emergency services) to being tied to the site of service
(emergency department). We believe that making this clarification
retained cost-sharing limits for both emergency services and post-
stabilization care, while eliminating the unanticipated complexities
and administrative burden previously associated with this section of
the regulation.
Comment: A number of comments supported the clarification that the
$50 limit on cost sharing for emergency services applied only to
emergency department services. Commenters supported the notion that
once an MA enrollee is admitted to a hospital, normal hospital cost-
sharing levels apply, even if the inpatient admission originates from
the emergency department. On the other hand, many commenters
recommended that CMS reexamine the $50 limit itself. Some commenters
recommended that CMS set the limit higher (at $75, $100 or higher) and
other commenters recommended that CMS index the emergency department
cost-sharing limit for inflation.
Response: We believe that the $50 limit on cost sharing for
emergency
[[Page 4633]]
department services continues to provide the appropriate financial
disincentive to MA plan enrollees not to frivolously use emergency
rooms in non-emergency situations. For instance, there is no MA plan
currently imposing cost sharing for in-network physician office visits
that approach $50. Similarly, MA organizations are permitted to deny
emergency department services as medically unnecessary, to the extent
that the member can be shown to have acted in ``bad faith'' or not as a
``prudent layperson'' in presenting at an emergency room for non-
emergency services.
Finally, we do not set forth in regulation the maximum amount an MA
organization can impose in cost sharing for receipt of urgently needed
services. Because we have restricted the applicability of the $50 limit
on enrollee cost sharing to emergency department services, we believe
we have appropriately balanced the financial interests of MA
organizations and MA plan enrollees requiring emergency services.
13. Access to Services Under an MA Private Fee-For-Service Plan (Sec.
422.114)
Section 211(j) of the MMA allows MA PFFS plans to charge higher co-
pays to members who receive services outside of a PFFS plan's
contracted network. This provision does not apply to PFFS plans that
meet access requirements solely through ``deemed'' networks as defined
in Sec. 422.114(a)(2)(i). We proposed to add a new paragraph (c) to
account for section 211(j) of the MMA.
We received no comments on this section, so we finalize as
proposed.
14. Return to Home Skilled Nursing Facility (Sec. 422.133)
We proposed to extend the provisions in Sec. 422.133 (Return to
home skilled nursing facility) to SNF services provided in cases in
which an MA organization elects, as permitted under Sec. 422.101(c),
to provide Medicare covered SNF care in the absence of a prior
qualifying hospital stay. In such an instance, we proposed to require
that an individual who would be eligible under section 1852(l) of the
Act for admission to a ``home SNF'' upon discharge from a hospital
stay, would nonetheless retain his or her right to receive ``home SNF''
benefits in the absence of such a hospital stay.
We proposed to deem that a hospital discharge has always occurred
before an admission for SNF services, and therefore provide all MA
enrollees full rights to the ``home SNF'' benefit.
We received no comments on this section, so we finalize as
proposed.
Subpart D--Quality Improvement Program
1. Overview
The MMA amended section 1852(e) of the Act in a number of
significant ways that will affect how MA organizations pursue their
quality improvement activities. Below we summarize the proposed
provisions and respond to the public comments. (For a more in-depth
discussion of the provisions, please refer to the preamble to the
proposed rule.)
Quality Improvement Program (Sec. 422.152)
To reflect the Congressional intent to refocus the section on
quality improvement, rather than quality assurance, we changed the
heading of Sec. 422.152 to ``Quality improvement program.'' Proposed
Sec. 422.152 specified that each plan (except MA PFFS and MSA plans)
offered by an MA organization must have an ongoing quality improvement
program and that a chronic care program must be a part of this program.
We believe that the broad requirements in proposed Sec. 422.152(d)
for QI projects did not present an undue burden for MA organizations,
as these organizations have significant experience in carrying out such
projects under the current Sec. 422.152(d) requirements that we
believe are more prescriptive than those we proposed in the August 2004
proposed rule.
Our previous quality improvement requirements for M+C coordinated
care plans focused on attaining improvement in specific clinical topics
and included specific performance measures for improvement. As a result
of the MMA amendments, we proposed that MA organizations have the
flexibility to shape their QI efforts to the needs of their enrolled
population. In addition, we continue, based on our interpretation of
section 1852(e)(3)(B)(i) of the Act, to require MA coordinated care
plans to collect, analyze, and report their performance using
measurements outlined by us or to participate in surveys administered
by us (for example, HEDIS, HOS, and/or CAHPS).
Proposed Sec. 422.152(b)(4) would require MA local PPO plans that
are offered by an organization that is licensed or organized under
State law as a HMO, to follow the same quality improvement requirements
as other MA coordinated care plans.
A. General Comments
Comment: A number of commenters made a variety of general comments
about the proposed rule. These comments include: (1) require that plans
disseminate educational materials to beneficiaries; (2) require that
all plans review all problems that come to their attention; (3) CMS
should recommend that plans seek Quality Improvement Organization (QIO)
technical assistance; (4) require plans to have physician advisory
committees, and that these committees advise CMS on performance
measures; and (5) CMS should begin to provide information on MA quality
starting in 2006.
Response: MA plans are responsible for ensuring that beneficiaries
are fully informed of the benefits covered under the contract as part
of its marketing material, evidence of coverage, and summary of
benefits. We do not have any requirements that plans conduct
educational programs. While the dissemination of educational materials
may be worthwhile in improving health outcomes, we do not believe it
should be mandatory. Most plans already provide QI, for example, in
marketing materials. Furthermore, we post HEDIS and CAHPS data on the
http://www.Medicare.gov web site. To the extent an MA plan decides to furnish
educational materials to its enrollees, the plan is responsible for the
type of information it wishes to furnish, and it is in the best
position to determine which information is most appropriate for the
enrolled population.
We agree with the commenter that plans should review all problems
that are brought to their attention. Depending on the nature, extent,
and substance of the problems, an MA plan may implement immediate
corrective action, or may need to implement more systemic changes to
address the identified problem.
We agree with the commenters and encourage plans to seek technical
assistance from QIOs. Plans should review the current scope of work to
determine the areas for which the QIOs can provide assistance; a draft
outline of the 8th scope of work is available on our web site. Plans
that seek QIO assistance will receive it on both Part C and Part D
services.
We disagree with the commenters that propose that we require
physician advisory committees. We do not believe this is necessary
because most plans already have Medical Director committees that advise
plans on QI measures. Moreover, at the national level, we have a
physician advisory
[[Page 4634]]
committee. These bodies should ensure an appropriate level of physician
input.
We agree with the commenters with respect to our providing
information on quality measures. HEDIS and CAHPS data are already on
our website (http://www.Medicare.gov), and the data has been available for
several years
Comment: Several commenters stated that CMS should include PFFS and
MSAs in all of the QI requirements. However, there were also commenters
that supported the exclusion of these plans.
Response: Because section 722(a) of the MMA specifically exempts
these types of plans from the majority of QI requirements, we have
excluded them from the same requirements in the regulations. These
plans, however, must meet the following requirements: maintain health
information systems; ensure information from providers is reliable and
complete; make all collected information available to us' conduct
quality reviews; and take corrective action for all problems that come
to their attention.
Comment: Several commenters have recommended that we provide
payment incentives to MA plans for providing better quality care, also
known as pay for performance (P4P).
Response: We agree with the commenters concerning the merits of
P4P. We are very interested in this approach and believe that we should
pay not just for providing a service but for results. P4P should
stimulate care that is efficient and effective for every patient while
eliminating waste. We are currently working on four P4P demonstration
projects. These are as follows:
The Premier Hospital Quality Incentive Demonstration
The Premier Hospital Quality Incentive Demonstration is a 3-year
project that will recognize and provide financial rewards to hospitals
that demonstrate high quality performance in a number of areas of acute
care. The demonstration involves a CMS partnership with Premier Inc., a
nationwide organization of not-for-profit hospitals, and will reward
participating top performing hospitals by increasing their payment for
Medicare patients. Through the Premier Hospital Quality Incentive
Demonstration, we aim to see a significant improvement in the quality
of inpatient care by awarding bonus payments to hospitals for high
quality in several clinical areas, and by reporting extensive quality
data on our web site. Participation in the demonstration is voluntary
and open to hospitals in the Premier Perspective system as of March 31,
2003.
Section 646--Medicare Health Care Quality Demonstration Program.
The MMA mandates a 5-year demonstration program to examine factors
that encourage the delivery of improved patient care quality, including
financial incentives, appropriate use of best practice guidelines,
examination of service variation and outcomes measurement, shared
decision making between providers and patients, appropriate use of
culturally and ethnically sensitive care, and related financial effects
associated with these factors. In the demonstration, Medicare may
provide benefits not otherwise covered, but may not deny services that
are otherwise covered against the wishes of beneficiaries. The
demonstration is required to be budget neutral.
Section 649--Medicare Care Management Performance Demonstration.
The MMA mandates a 3-year demonstration program where physicians
will be paid to adopt and use health information technology and
evidence-based outcome measures to promote continuity of care,
stabilize medical conditions, prevent or minimize acute exacerbations
of chronic conditions, and reduce adverse health outcomes. The statute
limits the program to four sites meeting eligibility criteria. Payment
can vary based on performance; however total payments must be budget
neutral. QIOs could help enroll physicians, evaluate their performance,
and provide technical assistance.
The Physician Group Practice (PGP) Demonstration.
The PGP Demonstration rewards physicians for improving the quality
and efficiency of health care services delivered to Medicare FFS
beneficiaries. Mandated by Section 412 of the Benefits Improvement and
Protection Act of 2000, the PGP Demonstration seeks to encourage
coordination of Part A and Part B services, reward physicians for
improving health outcomes, and promote efficiency through investment in
administrative structure and process. Under the 3-year demonstration,
physician groups will be paid on a FFS basis and may earn a bonus from
savings derived from improvements in patient management. Annual
performance targets will be established for each participating
physician group equal to the average Part A and Part B expenditures of
beneficiaries assigned to the group during a base period, adjusted for
health status and expenditure growth.
We are also paying close attention to P4P for managed care plans.
We are aware that MEDPAC has developed proposals along these lines in
its June 2004 report. Furthermore, many private sector organizations
are sponsoring such projects. See, for example, a compendium developed
by The Leapfrog Group (http://www.leapfroggroup.org). In addition, the Agency
for Healthcare Research and Quality (AHRQ) has sponsored an evidence
based report entitled ``Strategies to Support Quality-based Purchasing:
A Review of the Evidence,'' published in fall 2004, which includes
managed care plans. Finally, we have a contract with the Institute of
Medicine to study P4P, which will also address managed care.
B. Measures
This portion of the discussion addresses measures for all MA plans.
A specific discussion of measures for PPOs appears below.
Comment: Several commenters stated that CMS should include measure
reporting requirements in regulations.
Response: Based on past experience, we disagree with the commenters
recommending that we include specific measure reporting systems in the
regulation. We believe it is a better approach to provide specific
guidance through the Medicare managed care manual rather than including
specific requirements in the regulation. In this way, we have the
flexibility to implement appropriate changes in the measure systems and
individual measures in a more timely manner. The industry and
accreditation organizations, are constantly making changes to these
reporting systems. Thus, having more flexibility to change measures as
well as add and delete measurements systems allows us to be more
responsive to the state of the art as to measurement systems.
Comment: A commenter stated that performance assessment data is
outdated and that CMS should not use HOS to rank plans because there is
no benchmark.
Response: We disagree with the commenter. HEDIS, CAHPS, and HOS are
updated on a regular basis. We recognize that there are no benchmarks
currently available and therefore use relative ranking in the
performance assessment data system. Benchmarks also refer to standards
or minimum performance levels.
Comment: A commenter stated that CMS should use a standardized core
set
[[Page 4635]]
of performance measures, clinical and non-clinical that are applied to
all MA plans. The commenter suggested that CMS not require MA plans to
demonstrate that QI program size and scope are proportionate to plan
size.
Response: In general, we agree with the commenter that a
standardized set of measures should be used across all plan types
because it allows the greatest comparison among plans. The one
exception as discussed later, is that we have decided to allow some
variation in the early stages of the PPO program as compared to the HMO
program. As also noted, MMA specifies a different set of requirements
for PFFS plans and MSAs.
Comment: One commenter stated that CMS should compare quality
measures of MA plans to those for the FFS Medicare program.
Response: On the http://www.Medicare.gov website, we provide consumer
assessment data from CAHPS on FFS Medicare and the MA plans, as well as
a comparison of an Original Medicare rate (on State and national
levels) compared to the MA health plan rates on the HEDIS measure--
Access to Ambulatory Health Services.
Comment: A commenter suggested that CMS reduce the burden on plans
by reducing the number of measures or by conducting HEDIS by telephone.
Response: We agree that it is important to minimize the MA plans'
reporting burden and do so by using data submission tools, systems, and
processes that are consistent with HEDIS reporting for the plan's
commercial lines of business.
We believe that it is not appropriate, however, to collect HEDIS
measures by phone because information collected by phone is less
reliable.
C. Special Needs Plans (SNPs)
Comment: Many commenters suggested that CMS develop special
measures for specialized MA plans for SNPs. Several commenters
suggested that CMS use the ACOVE measures developed by Rand. They
further suggested that quality oversight should take into account the
populations being served by the SNP. In addition, they suggested that
CMS should ensure that SNPs have comprehensive and coordinated care.
Response: We agree with the commenters and have already indicated
to several demonstration plans that have institutionalized populations
and are converting to SNPs that HEDIS and HOS will not be required.
Instead we will work with them to identify measures that are similar to
the national nursing home quality measures reported on the Nursing Home
Compare website at http://www.medicare.gov and the CHSRA quality indicators,
both of which are derived from the Minimum Data Set (MDS). SNPs for
dual eligibles will be required to meet the requirements of other MA
plans. We are also willing to explore special measures with other types
of SNPs.
We are certainly open to considering the ACOVE measures and will
explore their feasibility. As to other aspects of quality oversight, we
will apply the same basic types of quality requirements for all MA
plans but take into account beneficiary needs for SNPs. As to
comprehensive and coordinated care, SNPs will need to meet chronic care
improvement program (CCIP) requirements.
Comment: A commenter recommended that SNPs should not serve
dialysis patients. The commenter stated that CMS cannot monitor the
quality of care provided to dialysis patients in managed care plans
because dialysis providers do not bill Medicare for services to MA
beneficiaries, thus, the ESRD Clinical Performance Measures data, which
are extracted from billing information, are not available.
Response: We appreciate the concerns expressed by the commenter and
will definitely take them into consideration. We anticipate that will
be able to collect the data. However, at this time, we have not
determined with certainty that we can and share the commenter's concern
that we not approve the plans unless we can collect the data. In
Subpart A of this preamble, we indicate that we are not setting forth a
detailed definition of severe and disabling chronic condition for
purposes of the definition of special needs individuals, and we will
review and evaluate SNP proposals on a case-by-case basis. This
evaluation will take into consideration whether we can collect
sufficient quality of care monitoring data.
D. Report to the Congress
Comment: Some commenters expressed concern that CMS could not add
measures without issuing a Report to the Congress as required under
Section 1852(e)(3)(A). They suggested that because of several of the
unique populations that might be served in SNPs, that CMS extend the
Report to the Congress, and that CMS form an expert panel, enhance
clinical knowledge on high risk populations, disseminate best
practices, enhance coordination care, and refine payment to support
outcomes.
Response: As indicated in the proposed rule, we interpret that this
requirement does not prevent us from making changes within each of the
existing measurement systems, such as HEDIS. Further, although we need
to submit a Report to the Congress to add new systems, we do not
interpret this to mean that we need the Congressional approval before
we proceed to implement new systems.
E. Types of performance measures
Comment: A commenter suggested that CMS develop clearly defined,
nationally recognized quality measures based on objective criteria for
all facets of the Medicare program to truly achieve the MMA's goal of
offering Medicare beneficiaries a meaningful choice. It is feasible
that the measures be based on pharmaceutical information, medical
claims, and other routine administrative information already easily
accessible across the Medicare program.
Response: We will be pursuing the development of the measures and
will take into consideration the commenter's suggestion.
2. Chronic Care Improvement Program Requirements (Sec. 422.152(c))
At proposed Sec. 422.152(c), we would require that MA plans
develop criteria for a chronic care improvement program. The criteria
must-
Include methods for identifying MA enrollees with multiple
or sufficiently severe chronic conditions who would benefit from
participating in a chronic care improvement program; and
Provide mechanisms for monitoring MA enrollees that are
participating in the chronic care improvement program.
Comment: A commenter recommended that CMS use the standard
definition of disease management adopted by the Disease Management
Association of America (DMAA) for the CCIP. The commenter also
recommended that the CCIP be population based and that CMS focus on
congestive heart failure (CHF), diabetes, and chronic obstructive
pulmonary disease (COPD). They further suggested that CCIPs be
accredited, and be evaluated on clinical quality, beneficiary and
provider satisfaction, and impact on cost. Other commenters recommended
that CMS provide maximum flexibility for plans as to these
requirements. A commenter suggested that plans can identify patients
from claims, self-reports, by providers, socio-economic data primarily
using existing measures, for example, HEDIS to monitor plus other
evidence-based measures. A commenter also suggested plans should use
clinical variables, for example, weight, use of ACE inhibitors, health
and functional status, emergency room and hospital
[[Page 4636]]
use, satisfaction, total costs, as measures for CCIP.
Response: We certainly encourage plans to consider the definition
provided by Disease Management Association of America (DMAA), as well
as the other aspects of the programs developed by DMAA. However, we
believe it is premature to provide more prescriptive requirements. We
will look for information on the CCIP pilot under section 721 of the
MMA as well as the early stages of the MA plans' implementation of this
section 722 CCIP to shape guidance for this component of the program.
3. QI Projects (Sec. 422.152(d))
While we proposed to delete many of the prescriptive requirements
for QI projects that appeared in Sec. 422.152(d), we still retained
the basic requirements of the projects including the collection,
analysis, and reporting of data. We believed, though, that MA plans
should have the ability to select topic areas and proposed deleting the
requirements of including the entire relevant population and having to
do both national and statewide projects.
In proposed Sec. 422.152(d)(1), we would require that QI projects
be initiatives that include the entire organization and focus on
clinical and non clinical areas. The projects would need to follow the
current quality improvement process. We retained the provisions that QI
projects must measure performance, and the interventions must be
system-wide and include the establishment or alteration of practice
guidelines. In addition, we propose to require that the projects focus
on improving performance for the Medicare population and involve
systemic and periodic follow-up on the effect of the interventions. To
ensure that the measures (or quality indicators) used in QI projects
are reliable and relevant for improving the health care and services
furnished to MA enrollees, we proposed in Sec. 422.152(d)(2) to
require that the quality indicators be objective, clearly and
unambiguously defined, and based on current clinical knowledge or
health services research. The measures must also be capable of
measuring outcomes, such as changes in health status, functional
status, and enrollee satisfaction, or valid proxies of those outcomes.
Likewise, we proposed in Sec. 422.152(d)(3)to require that the data
used in an MA plan's QI projects be valid and reliable and based on
systemic ongoing collection and analysis of information. We also
proposed in Sec. 422.152(d)(4) that the interventions achieve
demonstrable improvement.
Finally, in Sec. 422.152(d)(5), we proposed to retain the
requirement that MA plans report the status and results of their
projects when requested by us. We believe that this reporting and
review burden would be much smaller than the process used in the M+C
program. We intend to provide further guidance on the reporting
requirements later.
Comment: A commenter stated that QI should involve more than
measure, intervene, and remeasure. The commenter also stated that it
should set performance expectations, collect and analyze data, identify
undesirable events, develop interventions, collect data to monitor
improvement, and require that all plans meet the same QI requirements.
Response: We agree that all HMOS and PPOs should have to meet the
same basic requirements as to QI projects, and the regulation requires
this. However, although we will encourage plans to adopt the
commenter's other recommended steps, we do not believe that it is
necessary to build them into mandatory requirements. The requirements
that we have already specified should be sufficient, and to add
additional requirements will create unnecessary burden.
A. National projects
Comment: A commenter requested that CMS provide guidance to plans
on the meaning of 'encouraging' physicians to participate in quality
improvement initiatives. The commenter also proposed that CMS provide
plans with the flexibility to design and conduct QI projects based on
topics relevant to the plan's population. However, the commenter stated
that CMS should continue to provide suggestions and examples of topics
for QI projects that are relevant to the Medicare population. The
commenter also suggested that CMS should provide guidance regarding
meaning of ``sustained improvement,'' and consider evaluating clinical
and non-clinical performance improvement using HEDIS and CAHPS 3.0H
results.
Response: As to encouraging physicians to participate in QI
projects, we recommend plans to coordinate their efforts with their
providers. Some possible options are that the plans will send letters
to their providers encouraging participation or pay them a bonus. This
will be up to the plans. As indicated, we will provide suggestions as
to topics for plan consideration and guidance on these topics. We will
give further consideration to the suggestion of using HEDIS and CAHPS
for evaluating QI projects.
Comment: Some commenters recommended that CMS require plans to
participate in national projects.
Response: The MMA specifically deleted the requirement for national
projects. We interpret the Congress's deletion of this requirement as
an indication of its intent that participation in national projects not
be required. Therefore, we are not requiring the projects, and we
believe the best alternative is to encourage plans to participate
voluntarily in our proposed national projects.
B. Racial-ethnic QI projects
Comment: Some commenters opposed elimination of the racial-ethnic
QI projects, while one commenter supported its removal.
Response: The MMA specifically eliminated this requirement. Again,
we interpret the Congress's deletion of this requirement as indicating
its intent that plans not be required to pursue these types of
projects. However, we encourage plans to consider pursuing such
projects voluntarily. We have a current racial-ethnic national project
that started in 2003 and will not be completed until 2005. We will
share results of this project when it is completed. Lovelace Clinic
Foundation was selected by us to develop two cultural competency guides
through an AHRQ Integrated Delivery System Network Funding task order.
The first manual, ``Providing Oral Linguistic Services: A Guide for
Managed Care Plans,'' provides a practical step-by-step process for the
improvement of oral language services to patients with limited English
proficiency (LEP). The second manual, ``Planning Culturally and
Linguistically Appropriate Services: A Guide for Managed Care Plans,''
assists health plans in assessing the ethnically diverse populations
they may serve, and assessing the cultural competency of the managed
care plan. Lovelace recently completed a report ``Evaluation of
Usefulness of CLAS Guides to M+CO Plans'' which is available from AHRQ.
C. Performance levels
Comment: A commenter suggested that CMS set guidelines on the
minimum percent of enrollees that are identified and managed. Others
opposed the removal of requirements as to minimum performance levels,
sustained improvement, and clinical-nonclinical requirements and
external review.
Response: We retain our view from the proposed rule that plans
should select topics areas that best meet their needs rather than being
required to select both clinical and nonclinical
[[Continued on page 4637]]
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]
[[pp. 4637-4686]] Medicare Program; Establishment of the Medicare Advantage Program
[[Continued from page 4636]]
[[Page 4637]]
topics. We do not believe that it is appropriate for us to specify
minimum percent identified and minimum performance level. In the
preamble discussion to Sec. 422.152(d), we proposed not to define
demonstrable improvement, but indicated that we would look for some
movement in the quality indicator in an upward or downward direction as
appropriate.
MMA eliminated the requirement that MA organizations contract with
QIOs (external review organizations) to review appeals. However, QIOs
are still involved in all appeals that they currently conduct such as
hospital and nursing home discharges. Elimination of this requirement
just means that the MA plans do not need to contract with the QIOs or
other external review organizations.
D. Project selection
Comment: A commenter suggested that CMS require all plans to
participate in QI projects, as long as the projects are based on data
to which the plan has reasonable access. When developing QI and data
collection requirements, the commenter suggested consideration of the
plan's experience in conducting the activities. Further, the commenter
recommended using a standardized core set of performance measures,
clinical and non-clinical that are applied to all Medicare Advantage
plans. Commenters also stated that CMS should not require MA plans to
demonstrate that QI program size and scope are proportionate to plan
size.
Response: We believe that plans should take these suggestions into
consideration, but we are not requiring them. We agree that we should
not require MA plans to demonstrate that QI program size and scope are
proportionate to plan size. To do so will place unnecessary
restrictions on plans and would be inconsistent with what we understand
to be the Congressional intent to allow for more flexibility in this
area.
4. Requirements for MA Regional Plans and MA Local Plans
Section 1852(e)(3)(A)(ii) of the Act provided for us to establish
separate regulatory requirements for MA regional plans relating to the
collection, analysis, and reporting of data that permit the measurement
of health outcomes and other indices of quality. Section
1852(e)(3)(A)(ii) of the Act further provided that these requirements
for MA regional plans could not exceed the requirements established for
MA local plans that are PPO plans.
In Sec. 422.152(e)(1), we proposed a definition for the term
``local PPO plan'' as used in this section. The other requirements in
this paragraph were the requirements that apply to PPOs under current
regulations.
In Sec. 422.152(f), we retained the provisions that address health
information systems, QI program review, and remedial action. MA
organizations will be required, for all the MA plans they offer, to
maintain a health information system that collects, analyzes, and
integrates the data necessary to implement their QI program. The
organization will also be required to ensure that the information it
receives from providers of services is reliable and complete. In
addition, for each plan, there must be in effect a process for formal
evaluation, at least annually, of the impact and effectiveness of its
quality improvement program.
Finally, for each plan it offers, we proposed that an MA
organization will be required to correct all problems that come to its
attention through internal surveillance, complaints, or other
mechanisms. As noted above, as a result of MMA we also made conforming
changes to remove the provision that each MA organization's quality
assurance program include a separate focus on racial and ethnic
minorities and the requirement that for each plan it operated the MA
organization would have an agreement with an external quality review
and improvement organization.
The MMA provided that all the part D (Voluntary Prescription Drug
Benefit) requirements are to be included as among those that could be
deemed to be met through accreditation, and we accordingly proposed to
add this provision to the list of deemable requirements in Sec.
422.156(b).
Comment: Many commenters recommended that CMS use the same metrics
across plan types. Others commenters recommended that CMS develop
future plans to make PPOs comparable to HMOs. They suggested that CMS
convene key stakeholders to develop measures. They further suggested
that CMS set goals and timetables for implementing the same measures
across plan types.
Response: For the most part, we will have uniform reporting
requirements for HMOs and PPOs. For instance, we will require both
types of plans to submit HEDIS and HOS data. Further, we will
administer the CAHPS survey to both types of plans. The HEDIS measures
will differ between the two plan types, as PPOs will not be required to
submit HEDIS measures that require medical record review, because they
have difficulty obtaining medical records from out-of-network
providers. However, for PPOs, many of the HEDIS measures are available
from administrative records. We are working with NCQA and other
experts, MA organizations and other stakeholders to identify which
HEDIS measures are most appropriate for quality performance measurement
in PPO plans.
We held an open door forum on December 10, 2004, to receive input
from the public on the HEDIS measures for PPOs. We expect to publish a
final set of measures for field testing in January 2005. Materials from
the open door forum can be found at http://www.cms.hhs.gov/healthplans/performance/.
We expect to field test these measures in the Spring
2005, and we expect to finalize them in Fall 2005. In addition, we
expect to disseminate the final list of measures for reporting, with
detailed instructions, in the MA Manual in Fall 2005. In the near
future, we expect that additional HEDIS measures that require PPOs to
capture and submit data from medical records will also be required for
reporting. We desire to measure performance and compare plans on as
many dimensions of care as possible, so we plan to move progressively
toward having all relevant HEDIS measures reported while allowing PPOs
the opportunity to develop the capacity to collect information that
requires medical record review.
After we implement NCQA's recommendations on HEDIS measures for
PPOs, we will make an assessment of the possibility of making HEDIS
reporting even more comparable between HMOs and PPOs
5. Deeming Sec. 422.154
We did not have a discussion on deeming in the preamble nor
proposed changes to the regulation text. Nevertheless, we did receive
comments on this section and are responding to those comments.
Comment: Commenters suggested that CMS allow the American
Association of PPOs (AAPPO) to be an Accreditation Organization (AO)and
that CMS allow disease management associations to be AOs.
Response: Any organization that wants approval as an AO for PPOs
must meet our AO requirements for PPOs.
Subpart E--Relationships with Providers (Sec. 422.210)
The MMA made very limited changes to existing MA program
requirements concerning MA organization relationships with providers.
Since these aspects of the program have
[[Page 4638]]
worked well, we generally proposed to keep the existing provisions of
subpart E as they were. The only exceptions, are modifications to the
physician incentive plan requirements to reflect changes made by MMA to
section 1852(j)(4) of the Act.
Below is a summary of the proposed provisions in this subpart that
were proposed in the August 3, 2004 proposed rule:
We proposed to remove Sec. 422.208(h) that required that,
where a physician incentive plan places physicians at substantial
financial risk, M+C organizations conduct ``periodic surveys of both
individuals enrolled and individuals previously enrolled with the
organization to determine the degree of access of such individuals to
services provided by the organization and satisfaction with the quality
of such services.''
We proposed to revise Sec. 422.210 to eliminate the
requirement that information on physician incentive plans be disclosed
to CMS.
Comment: A commenter supported the changes made to the reporting
requirements in the August 22, 2003 final rule (68 FR 50855). Other
commenters requested that CMS require plans to submit assurances that
they are in compliance with the requirements.
Response: The MMA specifically requires that MA plans provide
assurances to us that they are in compliance with the physician
incentive plan requirements. We specified this requirement in the
regulation text of the proposed rule at Sec. 422.210 and have retained
it in this final rule. Further details on the assurances will be
provided in subsequent guidance. As noted in the preamble of the
proposed rule, the reporting requirement had already been eliminated in
a final rule published on August 22, 2003 (68 FR 50855). The assurances
required by MMA are a new requirement that helps to ensure that plans
are meeting the various regulatory requirements of the physician
incentive plan section. Plans must provide information on their
physician incentive plans when requested by us.
Subpart F--Submission of Bids, Premiums, and Related Information and
Plan Approval
Under the current MA regulations, subpart F addresses payments to
MA organizations, and subpart G discusses beneficiary premiums and cost
sharing. Given the substantial revisions that the MMA makes to pricing
and payment rules for MA organizations, we proposed to generally
replace these subparts in their entirety. Subpart F will cover
provisions addressing bid submissions and our review of bids and
subpart G will describe the methodology and process for CMS' payment to
MA organizations.
This subpart addresses provisions related not only to submission,
review, and approval of bids, but also ``bid-to-benchmark''
comparisons, including how local and regional benchmark amounts are
determined and how beneficiary premiums and savings are calculated; how
beneficiary savings are used for beneficiary rebates and Government
savings; the various premium payment options available to
beneficiaries; and the options for distributing the beneficiary portion
of the rebate.
We received 60 comments on subpart F in response to the August 2004
proposed rule. Below we provide a summary of the provisions of this
subpart and respond to comments. (For a broader discussion of the
provisions, please refer to the proposed rule.)
1. Basis and scope (Sec. 422.250)
Proposed Sec. 422.250 set forth the basis and scope of the revised
subpart F, noting that it was based largely on section 1854 of the Act,
but included provisions from sections 1853 and 1858 of the Act. Section
422.250 indicated that subpart F addressed the bidding methodology upon
which MA payments will be based beginning in 2006 and provisions for
CMS' negotiation and approval of organizations' bids.
2. Terminology (Sec. 422.252)
The proposed definitions throughout both subparts F and G were
intended to reflect the statutory definitions they implement in a
simplified manner. The following terms were defined in proposed Sec.
422.252:
The ``annual MA capitation rate'' is the county rate. As
set forth at section 1853(c)(1) of the Act, capitation rates are called
``MA local area'' rates, and references throughout the MMA to
capitation rates are to county rates (or in the case of end-stage renal
disease (ESRD) enrollees, to State rates).
``MA-PD plan,'' means an MA local or regional plan that
offers prescription drug coverage under Part D of Title XVIII of the
Act.
``Unadjusted MA statutory non-drug monthly bid amount'' is
defined as the plan's estimate of its monthly required revenue to
provide coverage of original Medicare Part A and Part B benefits.
``Monthly aggregate bid amount'' is defined as the total
monthly plan bid for coverage of an MA eligible beneficiary with a
nationally average risk profile. This bid is composed of: the
unadjusted MA statutory non-drug monthly bid amount (also called the
``basic A/B bid''); an amount for coverage of basic prescription drug
benefits under Part D (if applicable), and an amount for provision of
supplemental benefits, if any.
``Plan basic cost sharing'' means cost sharing that would
be charged by a plan for benefits under the original Medicare FFS
program option before any reductions resulting from mandatory
supplemental benefits.
``Unadjusted MA area-specific non-drug monthly benchmark
amount'' is defined, for local MA plans serving one county, as the
county capitation rate. For local MA plans serving multiple counties,
it is the weighted average of county rates in a plan's service area,
where the weights are the plan's projected enrollment per county.
``Unadjusted MA region-specific non-drug monthly benchmark
amount'' is the sum of two components: the statutory component and the
plan bid component.
``MA monthly basic beneficiary premium'' is the amount
that an MA plan (other than an MSA plan) charges an enrollee for
original Medicare benefits if its basic A/B bid is above the benchmark.
``MA monthly prescription drug beneficiary premium'' is
the base beneficiary premium, adjusted to reflect differences between
the plan bid and the national average bid, less the amount of rebate
the MA-PD plan elects to apply toward a reduction of the base
beneficiary premium, as described in proposed Sec. 422.266(b).
``MA monthly supplemental beneficiary premium'' is the
portion of the plan bid attributable to mandatory and/or optional
supplemental health care benefits described in Sec. 422.102, less any
rebate applied to a mandatory supplemental benefit under Sec.
422.266(b)(2).
``MA monthly MSA premium'' is the amount of the plan
premium for coverage of benefits under the original Medicare program
through an MSA plan, as described in proposed Sec. 422.254(e).
As a result of our policy decision on the geographic ISAR
adjustment, presented in the G preamble discussion of Sec. 422.308(d),
we are making a clarifying change to the definition of MA local area at
Sec. 422.252.
3. Submission of Bids (Sec. 422.254)
General rule. The MMA amended section 1854 of the Act to replace
the adjusted community rate (ACR) proposal system currently in effect
under the MA program with a bid
[[Page 4639]]
submission process. Proposed Sec. 422.254(a) implemented section
1854(a)(1)(A) by requiring that no later than the first Monday in June,
MA organizations must submit bids for each MA plan that they intend to
offer in the following year (other than MSA plans, which have separate
requirements), beginning for contract year 2006. Plan bids would be
required to meet the requirements specified at proposed Sec.
422.254(b), and bid submissions would be required to include the
information listed in proposed Sec. 422.254(c).
Under the previous M+C program, we permitted M+C organizations to
offer new plans mid-year and to offer mid-year benefit enhancements to
existing benefit packages. However, in order to maintain the integrity
of the annual bidding process mandated in statute, we proposed that it
is no longer appropriate to allow MA organizations to enter the program
with a new plan mid-year (including service area expansions) or to
offer mid-year enhancements to an existing plan (which essentially
represents a redefinition of revenue needs, that is, a new bid).
Program of All Inclusive-Care for the Elderly (PACE) organizations
and the MMA bidding methodology. We proposed to exempt PACE
organizations from the Title II bidding process, so payments for PACE
plans would be based on MA capitation rates. However, this exemption
does not apply to Part D drug coverage for PACE enrollees. PACE plans
will be required to submit bids for providing Part D drug benefits
(although PACE bids will not be included in the national average
monthly bid amount), as indicated in Sec. 423.279(a).
ESRD enrollees. Section 1853(a)(1)(H) of the Act gives us the
authority to determine if ESRD MA enrollees should be included in the
MMA bidding process. We proposed at Sec. 422.254(a)(2) that ESRD
enrollees be fully incorporated into the plan's aggregate bid for
contract year 2007 and succeeding years. For 2006, we proposed three
options for pricing Part C benefits for ESRD beneficiaries: exclude
ESRD costs from the basic A/B bid and the supplemental bid pertaining
to Parts A and B benefits; exclude ESRD costs from the basic A/B bid
but include them in the supplemental bid for A/B benefits; and fully
include End Stage Renal Disease (ESRD) costs in the plan bid. We
invited comments on specific proposed approaches. (We noted that ESRD
costs must be included in the Part D bid at the outset, including the
Part D supplemental bid amount.)
We noted that regardless of whether or not ESRD enrollee costs are
included in the plan bid, ESRD enrollees would be subject to the same
premium and cost sharing as other plan enrollees under the uniformity
of premiums provision in Sec. 422.262(c). That is, if ESRD enrollees
were excluded from the plan bid, the rebate (or basic beneficiary
premium, for a plan with the bid above the benchmark) would be
determined based on costs for non-ESRD enrollees. ESRD enrollees would
be subject to cost sharing and premium amounts based on estimated non-
ESRD enrollee costs. Finally, we stated in the proposed rule that if
the policy chosen were to exclude ESRD enrollees from the 2006 bids,
for any plan offering a Part B premium reduction to MA plan enrollees,
the amount of this reduction also would be subtracted from the payment
for each ESRD enrollee.
Comment: Two commenters disagreed with any limitation on mid-year
plan entry (including service area expansions) and mid-year benefit
enhancement (MYBEs). One of these commenters asked if CMS' proposal
were implementing statute. Another commenter stated that new mid-year
plans should be allowed in a market if no other competitors existed in
the market. One commenter acknowledged that an issue may exist with
offering Part D benefits in any mid-year plan due to the formula used
to calculate beneficiary premiums, but recommended that plans that do
not offer Part D benefits should be allowed to enter at any time. This
commenter added that nothing in the legislative history of the MMA
supports CMS' position to limit mid-year plan entry and enhancements.
Several commenters did not state an objection to the restriction on
new mid-year plan entry, but believed service area expansions (SAEs)
should be allowed, to expand the availability of MA plans to Medicare
beneficiaries. Finally, a number of commenters expressed concern that
any restriction on offering mid-year plans, including SAEs, would
undermine the ability of MA organizations to negotiate with employers
or unions.
Response: We believe that the MMA both supports and requires the
annual contracting methodology and the elimination of new mid-year
plans, mid-year service area expansions and mid-year benefit
enhancements (with exceptions that are listed below). We will require
that organizations make their MA bid submissions once a year in June.
We are retaining in regulation the language from the current MA
regulations at Sec. 422.306(a)(2), which states that if the submission
is not complete, timely, or accurate, CMS has the authority to impose
sanctions under subpart O of this part or may choose not to renew the
contract.
We are doing as much as possible to support a competitive bidding
process by removing uncertainty that would lead to inefficient bids,
through mechanisms such as the design of the Intra-Service Area Rate
(ISAR) adjustment, our models for risk adjustment of payments, and our
policy on what plan expenditures we will include in risk sharing with
regional plans, which by law must serve all of an MA region. (See the
discussion on rebatable integrated benefits in subpart J.)
We do not believe that we should reduce the kind of ``uncertainty''
that comes from not knowing what products competitors will offer. This
type of uncertainty should be a feature of a competitive bidding
system. An annual plan bidding and entry process supports competitive
bidding by ensuring an equal playing-field for all organizations. For
example, MA organizations should not be able to design new plan benefit
packages open to all beneficiaries in new service areas with post hoc
knowledge of the regional MA benchmarks and national average drug bid.
However, after consideration of the public comments, we have
identified certain exceptions to the end of flow contracting under the
bidding methodology. (Mid-year plan entry is discussed in this comment,
and MYBEs are discussed in the following comment.)
Mid-year plan entry. In general, we will not allow mid-year entry
of new MA organizations, and new contracts with MA organizations for MA
plans will be effective only on January 1 of each year beginning on
January 1, 2006. In general, current MA organizations may not offer new
plans mid-year, either in a current or new service area. We will still
allow for applications to be submitted throughout the year, and we will
make an eligibility determination in time for the next required bid
submittal date.
However, we do not wish to discourage new plan offerings in areas
where there are no MA options for beneficiaries. We also wish to
support a competitive bidding process, as explained above. Therefore we
will allow certain exceptions to the policy prohibiting new mid-year
plans.
MA plans. The Part D bid is based on a national average of plan
bids for the year, and the regional plan A/B benchmark is partly based
on the average of regional plan bids for the region for the year.
Accordingly, to
[[Page 4640]]
ensure an equal playing-field for all organizations and maintain the
integrity of the Part D and MA regional benchmarks, we cannot approve
mid-year regional MA plans because the regional benchmarks are
established during bid review. We can only make the following
exceptions for local plans. We may approve a local mid-year MA plan
whose Part D bid is not included in the national average bid (that is,
PFFS and cost plans offering Part D benefits, and special needs plans),
if the plan will be offered in counties where there are no other PDPs
(except fallback plans) or MA-PD plans. We could also approve a local
mid-year MA plan that does not offer Part D benefits, if the plan is
offered in an area with no other MA competitors. We believe that
allowing mid-year plans could reduce the incentive to bid
competitively, so we will carefully review applications.
PACE plans. New PACE organizations will be allowed to offer a PACE
plan mid-year. As noted elsewhere in this preamble, PACE plans are
governed by section 1894 of the Act. Under section 1894 of the Act,
PACE plans must serve individuals who are ``nursing home certifiable,''
that is, require the level of care required under the State Medicaid
plan for coverage of nursing facility services, and PACE plans have
coverage requirements that differ from the coverage requirements for MA
and MA-PD plans. Given the statutory requirements for defining the
PACE-eligible individual, the PACE review and approval process is an
extended process that requires intensive coordination with States and
CMS. For this reason, new PACE plans will be exempt from the
restriction on new-mid year plans, in order to promote coordination of
Part C and Part D benefits with the benefits PACE plans are required to
offer under section 1894 of the Act.
Employer/union group health plans. EGHPs not open to general
enrollment will be allowed to offer new mid-year plans. Group health
plans not open to general enrollment include both the ``800-series''
employer-only plan and group plans where we directly contract with the
employer/union offering an MA product. However, an MA plan that enrolls
both individual beneficiaries and employer/union members (in other
words, a plan open to general enrollment) will be subject to the rule
not allowing new mid-year plans (except under limited circumstances).
As we have done in the past, we will publish separate guidance on
employer/union group health plans.
Comment: Several commenters recommended that allowing mid-year
benefit enhancements (MYBEs) would not affect the integrity of the
bidding process, at least for original Medicare benefits. One commenter
stated that plans sometimes find during the year that their benefit
designs contain a problematic component, and seek to make mid-year
changes. For example, an organization could discover that a plan co-
payment for a preventive service was the source of widespread enrollee
dissatisfaction that the plan would like to address, or the
organization could learn mid-year that the cost assumptions for a
particular benefit may have been higher than actual costs proved to be,
and the plan would like to enrich the benefits to account for the lower
costs. The commenters believe that retaining the flexibility to make
mid-year changes to adjust for the circumstances could be quite
beneficial to enrollees and could be done in a way to protect the
integrity of the bidding process. This commenter recommended that we
not allow MYBEs during the first quarter of the calendar year to remove
the incentive to manipulate the process by bidding in June with the
intention of making later mid-year enhancements to improve the package.
Finally, several commenters requested that MYBEs be allowed for
employer group plans, because MA organizations need the flexibility to
enter into contracts with employer groups at any time during the year
because employer groups may have plan years that differ from Medicare's
calendar year cycle.
Response: We believe that in order to maintain the integrity of the
bidding process, it is no longer appropriate to allow MA organizations
to offer MYBEs at any time during the contract year, as they would be a
de facto adjustment to the benefit packages for which bids were
submitted earlier in the year. However, in response to public comments,
we have designed an MYBE policy that we believe allows beneficiaries to
receive the advantage of mid-year enhancements of non-drug benefits
while protecting the integrity of the bidding process by reducing the
incentive to overbid in June. The general rule is that we will allow
MYBEs to non-drug benefits only under the following circumstances: (1)
An MYBE can be effective no earlier than July 1 of the contract year,
and no later than September 1 of the contract year; (2) MA
organizations cannot submit MYBE applications later than July 31 of the
contract year; and (3) 25 percent of the value of the MYBE will be
retained by the government. The MA organization would submit, for each
plan or segment, a revised bid and any supporting documentation related
to the enhancement, including information on where the revenue
requirements were overstated in the annual June bid submission. We will
consider whether there is a current year MYBE request when analyzing a
plan's bid for the following year. Continuing current practice, we will
release guidance on the revised MYBE bid submission, including what
types of non-drug MYBEs will be allowed and what documentation is
required, in the annual Call Letter.
We consider this an interim policy for the initial years of the
competitive bidding system (when drug benefit and regional plan pricing
will be new terrain). We will review whether there is a continuing need
for this policy.
We will allow the following exceptions to this policy of restricted
MYBEs:
PACE plans will be allowed to offer MYBEs to non-drug benefits on a
flow basis (unrestricted MYBEs), given the special nature of these
plans and for the reasons specified above with respect to the ability
of these plans to contract on a flow basis. (Under sections
1894(b)(1)(A) and 1934(b)(1)(A) of the Act, PACE plans are required to
offer enrollees a package of benefits tailored to individual needs, as
determined by the PACE interdisciplinary team. Because PACE enrollees
may receive additional services at any point in the contract year, we
note that an enrollee's access to additional benefits mid-year is in
compliance with existing PACE statutory requirements and therefore in a
technical sense is not the same as a mid-year expansion of benefits for
MA plans.)
Employer and union group health plans. We recognize that employers
and unions offering group health plans through an MA organization may
operate on different bidding and negotiation timelines. Employer and
union group health plans not open to general enrollment will be allowed
to offer MYBEs on a flow basis. This includes both the ``800-series''
employer-only plan and the new type of employer and union plan, where
we directly contract with the employer and union offering an MA
product. As noted above, consistent with past practice, we will publish
separate guidance on employer/union group health plans.
However, an MA plan will be subject to the restricted MYBE rule if
it is a plan that enrolls both individuals and employer and union
members, that is, a plan open to general enrollment. (``Plan'' in this
context refers to the benefit offering of an MA organization
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under an MA contract. MA organizations may offer multiple ``plans'' in
a service area under one MA contract, including a mix of plans open to
any Medicare beneficiary and plans open only to Medicare beneficiaries
covered under an employer/union retiree plan.). Employers would still
be free to enhance benefits mid-year for the part of the package that
is a ``wrap-around'' to the MA plan and that is only available to
employer and union members. However, it should be noted that ``wrap-
around'' benefits are not technically part of the MA plan.
Comment: Several commenters were concerned that the MA bidding
process is inappropriate for Special Needs Plans (SNPs), given the
unique elements involved in managing the care of high risk and high
cost beneficiaries. They compared SNPs to PACE organizations, which we
are excluding from the Part A and B bidding process. They also
indicated that the MMA explicitly excludes SNPs from the calculation of
the Part D national average premium, and stated that this exclusion
should be extended to bidding for Part A and B benefits. These
commenters are concerned that including SNPs in the bidding process
could affect participation rates by plans, thereby limiting access for
beneficiaries to these types of plans. A few commenters also suggested
that we could use a separate Part A and B benchmark for SNPs in
recognition of the expanded benefits offered the enrollees in SNPs.
Response: First, the comparison of PACE plans to SNPs is not
accurate from a statutory perspective, because PACE plans are governed
by section 1894 of the Act, which is separate from the statute
governing the MA program. The fact that PACE plans are governed by a
separate statutory authority gives us the discretion to exempt PACE
plans from the MA bidding process. However, SNPs are created under the
MA statute, at section 1859(a)(6) of the Act. SNPs are coordinated care
plans, per section 1851(a)(2)(A)(ii) of the Act. SNPs are governed by
the payment provisions that apply to all coordinated care plans in the
MA program. Section 1854(a)(6) of the Act requires all MA plans (other
than MSA plans) to submit aggregate bids: a basic A/B bid, a
prescription drug bid if applicable, and a supplemental bid, if any.
Therefore, SNPs cannot be excluded from the bidding process. Moreover,
SNP are paid under section 1853 of the Act, the same provision as other
MA plans.
If the commenter is referring to Medicaid benefits when referring
to the expanded benefits offered by SNP plans, we would like to
emphasize that the basic A/B bid is only for coverage of original
Medicare benefits.
Comment: Several commenters stated that the actuarially equivalent
cost-sharing requirement will cause difficulty for SNPs serving dual
eligibles because the cost-sharing payments made by State Medicaid
agencies on behalf of dual eligibles are not required to equal the full
Medicare cost-sharing amount.
Response: SNPs serving dual eligibles must show in their bids a
level of cost sharing that is actuarially equivalent to the level of
cost sharing charged to these beneficiaries under the original Medicare
program option.
Comment: Several commenters asked whether and how the MA bidding
methodology would apply to demonstration plans, including but not
limited to those serving dual eligibles.
Response: The application of MA bidding rules to demonstration
plans depends on the specific demonstration authority. Decisions about
which demonstrations will be expected to submit bids will be announced
in the Advance Notice of Methodological Changes for 2006 MA Payment
Rates, which we expect to publish February 18, 2005 on our website at
http://www.cms.hhs.gov/healthplans/rates/default.asp.
Comment: Many commenters recommended that we exclude the costs for
MA enrollees with ESRD from the bidding methodology for 2006, both for
the Part A and B bids and the supplemental bids. Commenters stated that
MA organizations would have inadequate experience with the new ESRD
payment methodology to submit sound bids in June 2005. A delay in
including these services in the bid is also desirable to these
commenters because it removes an added degree of complexity from the
bidding process at a time when MA organizations are initially becoming
familiar with the new and otherwise complicated requirements. One
commenter also stated that ESRD enrollee costs should be omitted from
both the basic A/B bid and supplemental benefits bid because payment
for ESRD MA enrollees is based on a different risk adjustment
methodology such that the meaning of ``1.0'' is different for ESRD than
non-ESRD enrollees. The commenter added that MA plans are paid for ESRD
enrollees in accord with a different ``rate book'' that is based upon
state rates rather than county rates.
Response: The MMA amended section 1853(a)(1)(H) of the Act to state
that we ``may apply'' the competitive bidding methodology to MA
enrollees with ESRD, with appropriate adjustments made through
application of the ESRD risk adjustment methodology. Since publication
of the proposed rule, we have modeled bidding and payments under the
new system, and have developed a way to apply the bidding method to
ESRD enrollees. This ``merged bid'' method addresses commenters'
concern that the ``1.0'' national average beneficiary does not mean the
same under the non-ESRD and ESRD risk adjustment models. Our method
involves converting non-ESRD and ESRD beneficiary risk scores (which
are based on different risk adjustment models) into a common metric so
that all costs for projected enrollees can be combined into a weighted
average per capita benchmark and a weighted average basic A/B bid.
Therefore, beginning contract year 2007, we will require that MA
organizations include costs for ESRD enrollees in their plan bids. As
discussed above, ESRD enrollees must be subject to the same premium and
cost sharing as other plan enrollees under the uniformity of premiums
provision in Sec. 422.262(c), for both original Medicare benefits and
supplemental benefits. For this reason, we believe that the estimated
costs for all enrollees should be included in plan bids. We will
explain the ``merged bid'' method in the 2006 Call Letter for 2007
contracts and in the 2006 Instructions for Completing the 2007 MA Plan
Bid Form.
However, we have concluded that we will not implement the merged
bid method for incorporating ESRD beneficiary costs into plan bids for
the 2006 contract year, because of the transition blend requirement for
payments to aged and disabled MA enrollees. While 25 percent of aged/
disabled MA payments must be based on the demographic model and 75
percent of payments on the risk adjustment model, 100 percent of ESRD
payments must be based on the risk adjustment model. Under the bidding
methodology, the transition payment blend must be reflected in the bid,
since plans are paid either their bid (plus rebate) or part of their
bid (benchmark, with the remainder of the bid coming from beneficiary
basic premiums). We concluded, therefore, that exclusion of ESRD costs
from plan bids for 2006 would reduce complexity in what will be an
unfamiliar bidding process. Guidance on excluding ESRD costs from the
2006 bid will be provided in the 2005 Instructions for Completing the
2006 MA Plan Bid Form. See the subpart G preamble for information on
payments for ESRD enrollees.
Comment: Several commenters recommended that we consider further
delaying inclusion of costs for ESRD
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enrollees in the basic A/B bid and supplemental bids in years beyond
2006.
Response: We believe that, beginning in contract year 2007, it will
be feasible to implement a merged bid methodology for MA plans where
non-ESRD and ESRD costs are appropriately weighted together into a
single bid because 100 percent of MA bids and payments can be based on
the CMS-HCC risk adjustment models. Moreover, the uniformity
requirement means that it is to the MA organization's advantage to
include ESRD enrollees in its bid. ESRD enrollees would be subject to
the cost-sharing rules and premium amounts based on the plan's
estimated non-ESRD enrollee costs. For example, if plan bids are
calculated based only on lower-cost non-ESRD enrollees, MA
organizations would have their supplemental premium under-funded
because ESRD beneficiaries are likely to use more of certain
supplemental benefits such as cost-sharing reductions and drug
coverage. A significant financial impact may result from plan pricing
based only on unit costs for services and expected utilization for the
plan's non-ESRD enrollees.
Bid requirements
Proposed Sec. 422.254(a) and (b) implement sections 1854(a)(1)(A)
and 1854(a)(6)(A) of the Act, which set forth requirements for plan
bids. MA organizations must submit an aggregate monthly bid amount for
each MA plan the organization intends to offer. We proposed that each
bid submission for an MA plan represents the MA organization's estimate
of its average monthly estimated required revenue to provide coverage
in the service area of the plan for an MA eligible beneficiary with a
nationally average risk profile; that is, the aggregate bid is a
standardized bid. This aggregate bid is the sum of several amounts the
plan estimates are its revenue requirements: (1) the ``unadjusted MA
statutory non-drug monthly bid,'' to provide original Medicare benefits
(which we also call the ``basic A/B bid''); (2) the amount to provide
basic prescription drug coverage; and/or (3) the amount to provide
supplemental coverage, if any.
We proposed at Sec. 422.254(b)(2) that each bid would be for a
uniform benefit package for the service area (or service area segment,
if applicable, for local plans). Plan premiums and all applicable cost
sharing would also be uniform.
We stated in proposed Sec. 422.254(b)(3) that the bid submission
contain all estimated required revenue, including administrative costs
and return on investment (profit or retained earnings). We stated that
a determination that supplemental benefits are appropriately priced is
essential for the integrity of the bidding process. A plan could
overstate its revenue needs for covered services with the intention of
maximizing those payments while under-pricing supplemental benefits to
make the offering attractive to enrollees. To prevent this kind of
strategy, we indicated that the accurate pricing of Part A, Part B, and
Part D benefits and supplemental benefits will have equal importance in
the bid review process. We will verify the reasonableness of these
projections as part of the bid review process (in the same way that we
will verify the reasonableness of plans' projections of enrollment
numbers and enrollment mix for an optional supplemental product).
Supplemental benefits
We proposed at Sec. 422.254(b)(3) that when estimating required
revenue, a plan will include adjustments for the effect that providing
any non-Medicare benefit has on utilization. We proposed that this
requirement would apply to both mandatory and optional supplemental
benefits. In both the Title I and Title II proposed rules, we took the
position that the basic portion of the bid should represent basic
benefits only; it should not reflect the utilization impact on basic
benefits induced by the presence in the benefit package of supplemental
or enhanced benefits. We proposed that this utilization impact should
be included in the pricing of supplemental benefits (Title II) or the
enhanced portion of the bid (Title I). We took this position to ensure
the integrity of the bid. In other words, when a plan offers a benefit
package that includes reductions in cost sharing, the pricing of such a
mandatory supplemental benefit would include not only the cost of
``buying down'' the cost sharing (that is, the estimated revenue needed
to cover the amounts enrollees would have otherwise paid as cost
sharing), but also the cost of financing the expenditures associated
with the additional utilization resulting from offering the cost-
sharing benefits.
We also proposed to exercise our authority under section 1856(b) of
the Act to establish a rule prohibiting MA organizations from offering,
as optional supplemental benefits, reductions in Part A, Part B, and
Part D cost sharing, or enhancements to Medicare Parts A and B
benefits. Under the rule, MA organizations will still be permitted to
offer non-Medicare benefits, for example, dental and optical services
as optional supplemental benefits.
We stated in proposed Sec. 422.254(b)(4) that the bid amount is
for plan payments only but must be based on plan assumptions about the
amount of estimated revenue required from enrollee cost sharing. The
estimate of plan basic cost-sharing for plan basic benefits must
reflect the requirement that the level of cost sharing MA plans charge
to enrollees must be actuarially equivalent to the level of cost
sharing (deductible, copayments, or coinsurance) charged to
beneficiaries under the original Medicare program option.
Comment: A number of commenters disagreed with CMS' proposal that
MA organizations develop a supplemental bid reflecting the effects on
utilization of Part A and B services of providing non-Medicare covered
benefits. First, most commenters stated that the benchmark, which is
the maximum amount we will pay for coverage of Part A and B benefits,
reflects Medicare FFS costs. Medicare carriers and intermediaries make
payments for Medicare Part A and B services based on fee schedules
without regard to whether the beneficiaries have supplemental coverage.
According to the commenters, because most Medicare beneficiaries have
some form of private or governmental supplemental coverage that has an
impact on these costs, the MA benchmark also reflects this impact. The
commenters believe that because ``induced demand'' is already accounted
for in the benchmark, requiring plans to shift these costs to the
supplemental benefit package would result in a misalignment of the
relationship between the basic A/B bid and the benchmark.
Second, several commenters recommended that allocation of costs to
the supplemental bid may have a tangible effect on the MA organization
and on beneficiaries. To the extent that the MA plan's Part A and B bid
is below the benchmark, moving these costs from the basic A/B bid to
the supplemental bid increases the amount of savings, and increases the
supplemental premium by the same amount. However, because we retain 25
percent of the savings, the rebate dollars will not fund 100 percent of
the increase in the supplemental premium attributable to these costs.
Thus, the proposed policy is likely to produce an increase in the
aggregate beneficiary premium. In contrast, if utilization is included
in the basic portion of the bid, basic bids will be higher and bid and
premiums for supplemental benefits will be lower.
Third, commenters also were concerned that there are no existing
standards to evaluate the effect that
[[Page 4643]]
providing non-Medicare benefits has on utilization and therefore on
premiums and competition. For example, one commenter noted that
frequently there are multiple impacts from a single benefit change. For
example, lower primary care physician (PCP) copays may drive higher
utilization among primary care physicians; however, it may also help
result in lower specialist, hospital and prescription drug utilization.
Several commenters concluded that it would be impossible to apply this
requirement uniformly and therefore equitably.
One commenter noted another barrier to uniform application of this
requirement: a large portion of an MA plan's enrollment will have
supplemental coverage through a source other than the MA organization
(for example, Medicaid, other government programs, employee benefit
plans, Medigap plans), and these incremental, additional costs will
necessarily be reflected in the level of the basic A/B bid. Therefore,
this requirement would result in an uneven playing field among
competitors. Finally, another commenter asked where plans will obtain
data to make these adjustments and whether additional adjustments would
be needed for potential adverse selection.
Response: We believe that the pricing of the supplemental benefit
is critical to the integrity of the bidding process. For this reason,
we proposed that when a plan offers a benefit package that includes
reductions in A/B cost sharing, the price of the supplemental benefit
would include not only the cost of ``buying down'' the cost sharing
(that is, the estimated revenue needed to cover the amounts enrollees
would have otherwise paid as cost sharing), but also the cost of
financing the expenditures associated with the additional utilization
resulting from offering the cost sharing benefits. We believe it was
important to align pricing policies for medical benefits (in the MA
rule) and drug benefits (in the Part D rule).
We recognize, however, that it can be very difficult to disentangle
the effects of induced utilization from the effect of plan management
of utilization of medical benefits. For Parts A and B benefits, the
effect of induced demand may be insignificant. For example, it is
reasonable to recommend that there is no induced demand for hospital
services or skilled nursing facility (SNF) (additional hospital
admissions) because of plan utilization management of those services.
Thus, it is unlikely that a change in cost sharing (up or down) would
create or reduce utilization of hospital or SNF services. On the Part B
side, induced demand here may also be quite limited due to plan
utilization management. In contrast to Part A and B benefits, there is
likely to be induced demand for Part D benefits, especially for those
individuals who will be receiving new coverage. Also, there is likely
to be some induced demand if supplemental benefit options are provided
that reduce the initial deductible or fill in part of the what is
lacking in the standard Part D package. We further recognize that there
are no universal actuarial standards for separating these effects.
Therefore, after discussion of the public comments and further
analysis, at this time we will not require that the non-drug portion of
the supplemental bid be adjusted to include expenditures associated
with induced demand for Medicare-covered benefits resulting from
offering cost sharing reductions.
Therefore, in this final rule, we are deleting the sentence at
proposed Sec. 422.254(b)(3) that plan assumptions about revenue
requirements must include adjustments for the utilization effects of
non-drug cost sharing reductions. As we indicate in responses to
comments below, we will not implement this aspect of estimating revenue
requirements for the Part A and B benefits through rule making.
However, we have the authority to refine guidance in the future on how
MA organizations should estimate their revenue requirements under Sec.
422.254(b). For the Part D benefit, the bid amount must reflect an
adjustment for the effect that providing alternative prescription drug
coverage (rather than defined standard drug coverage) has on drug
utilization. Costs associated with any increased utilization must be
included in the price of the drug portion of the supplemental bid for
MA-PD plans. (See proposed Sec. 423.265(d)(2) and the discussion in
the F preamble of August 3, 2004 proposed rule for the Medicare
prescription drug benefit.
As discussed below, we intend to analyze the effects of induced
demand in the near future and will review this policy.
Comment: One commenter suggested that we delay implementation of
this requirement concerning pricing induced demand in the supplemental
package for a period of 2 years (until 2008) for both regional PPO and
local plans. Another commenter was concerned about the short timeframe
for a 2006 implementation of this proposal and made the following
suggestions for implementation: (1) we develop a standard data set or
set of utilization assumptions and distributions with which to quantify
the utilization impact; and (2) plans should have the option of using
those assumptions in their bid or plan-specific assumptions that are
actuarially justified.
Response: As indicated above, we are withdrawing our proposal.
However, we believe that improvements can be made in the accuracy of
pricing supplemental benefits. We intend to conduct analysis in the
near future using accumulated bidding and payment data, because we
believe that over time it is possible to develop factors for the MA
program that could be applied to estimate the cost of induced demand.
Comment: Some commenters stated that this requirement, coupled with
the actuarially equivalent cost sharing requirement at section
1852(a)(1)(A), would cause particular difficulty for Special Needs
plans (SNPs). Attribution of ``induced demand'' costs to the A/B
benefit package would increase the cost of the bid and reduce potential
savings, and shifting these costs to the supplemental benefit package
would result in increased premium costs for SNP beneficiaries, because
SNP cost structures may limit opportunities for rebates. Limited
rebates also could result in cost shifting to plans or, in the case of
duals, to States that cover cost-sharing amounts.
Response: As noted above, we are withdrawing this proposal. This
withdrawal applies to all MA plans, including SNPs.
Comment: Two commenters disagreed with our proposed rule
prohibiting MA organizations from offering, as optional supplemental
benefits, reductions in Part A, Part B, and Part D cost sharing, or
enhancements to Medicare Parts A and B benefits. One commenter
requested that we continue to permit the flexibility of offering
reductions of Parts A, B, and D cost sharing as optional supplemental
benefits, because offering separate plans requires separate bids,
system enhancement, and modification of enrollment and eligibility
procedures. The other commenter requested that we make an exception to
this rule for employer group plans.
Response: First, under Part D, optional supplemental benefits do
not exist. Under Sec. 423.265(c), we are requiring that enhanced
alternative coverage be a uniform package for all enrollees. Second, in
terms of Part A and Part B benefits, we would exclude from this
requirement employer and union group health plans that are not open to
general enrollment, which includes both the ``800-series'' employer-
only plan and the new type of employer and union plan, where we
directly contract with the employer and/or union offering an MA
product.
[[Page 4644]]
However, an MA plan that enrolls both individuals and employer and
union group health plan members (in other words, a plan open to general
enrollment) would be subject to the restricted optional supplemental
policy. Employers would still be free to fund ``wrap-around'' optional
supplemental benefits that would be only available to employer/union
members. The ``wrap-around'' benefits are not technically part of the
MA plan.
MA organizations would still be able to provide choice by offering
multiple plans within the same service area that have different
mandatory supplemental benefits. Many MA organizations take this route
today.
Comment: Several commenters support the proposed policy that MA
bidders submit a single bid amount in 2006 based on the blending of the
demographic and risk adjustment payments as required under Sec.
422.308(c)(2)(ii)(B). The reasons cited are the administrative and
analytic complexity of developing two bids to be compared against two
different benchmarks.
Response: We will provide instructions for determining a blended
bid, in the Instructions for Completing the MA Plan Bid Form.
Information regarding payments based on blended bids will be provided
in the Advance Notice of Methodological Changes for MA Payment Rates.
Actuarial equivalence
In the August 2004 proposed rule, we discussed at length how to
implement the requirement at Sec. 422.254(b)(4) to determine an
actuarially equivalent amount of cost sharing. MA plans must provide
Medicare-covered benefits to enrollees. The MMA amended section
1852(a)(1)(B) of the Act to include the term ``benefits under the
original Medicare FFS program option,'' which are defined as those
items and services (other than hospice care) for which benefits are
available under Parts A and B to individuals entitled to benefits under
Part A and enrolled under Part B, with cost-sharing for those services
as required under Parts A and B or an actuarially equivalent level of
cost-sharing as determined in this part.'' (Cost sharing refers to
service-specific cost sharing for Part A and Part B benefits; it does
not include a beneficiary premium.)
First, we discussed the current approach, the national uniform
dollar amount. The MMA provision on determining whether a rebate is
applicable is similar to a provision that continues to apply to MA
plans through 2005, dealing with the determination of ``excess
amounts'' used to fund extra benefits. Before 2006, when Medicare
payments (based on administratively-set amounts) exceed the revenue a
plan needs for providing the Medicare benefit, the plan must ``return''
the excess amount to enrollees in the form of extra benefits (or cost
sharing reductions). An excess amount exists if CMS' average capitation
payment for the plan exceeds the adjusted community rate, taking into
account cost sharing for Medicare services that is the responsibility
of the enrollees. Through 2005, all plans are required to use a uniform
national figure that we provide as the amount to be subtracted from
their computed revenue needs for the Medicare benefit package to
determine the excess amount. The uniform national dollar amount
represents our projection of the monthly actuarial value of Medicare
coinsurance and deductibles (that is, the amount, on average, of cost-
sharing expenses beneficiaries incur in receiving Medicare services
across the nation).
We recognized that this approach does not adequately recognize
geographic variations in cost sharing, cost differences among private
health plans, and utilization and price differences between private
plans and FFS Medicare. It distorts the statement of revenue needs of a
plan. If a plan operates in a high-cost area, the national actuarial
value of cost sharing may understate cost sharing in the area, while in
low cost areas, cost sharing is overstated.
We proposed several alternative approaches to defining an
actuarially equivalent amount of cost sharing for the basic A/B bid
amount: (1) localized uniform dollar amount; (2) plan-specific
approach; and (3) proportional approach. In this final rule, we also
make a clarifying change to Sec. 422.254(c)(5) to reflect the
statutory requirement.
Localized uniform dollar amount
We would publish localized (for example, county-level or MSA-level)
cost-sharing values, and an MA organizations would determine its basic
A/B bid for a plan by subtracting the appropriate geographically
weighted average of these cost sharing values for the plan's service
area from the plan's stated revenue needs. The local cost sharing
values would be based on actual per-beneficiary FFS cost sharing,
projected to the contract year and standardized to a 1.0 risk score.
Plan-specific approach
The MA organization would use its own pricing and utilization
assumptions to determine a basic A/B bid for its plan, as if the plan
were offering Medicare-only benefits under Medicare cost sharing rules
or an actuarially equivalent structure. A cost-sharing structure would
be actuarially equivalent if the projected average cost sharing as
percent of the sum of average cost sharing and projected average plan
payout equals the percentage using Medicare's cost-sharing rules, based
on the projected experience of the same group and using the same
pricing assumptions. The average amount of cost sharing and the average
plan revenue requirements for the assumed basic A/B package would then
be adjusted to reflect cost-sharing and plan requirements based on an
enrollee with a national average risk profile. The adjusted plan
revenue requirements would serve as the organization's basic A/B bid.
Proportional approach (including national, regional, or local
proportions)
Actuarial equivalence under this approach would be met if the ratio
of a plan's cost sharing amount for the basic A/B bid to the total cost
of plan benefits equals this proportion under original Medicare. For
example, if the national average actuarial value of cost sharing under
original Medicare in a year were 16.8 percent of the total (value of
cost sharing plus value of benefits, using the actual 1999 figure for
Medicare), then an MA plan would have to offer a basic A/B bid based
upon a plan basic cost-sharing amount that is 16.8 percent of total
costs. We would announce the projected percentage of total expenditures
that represent cost sharing in the same way that we currently announce
the national average actuarial value of Medicare cost sharing as part
of the rate announcement for private health plans. To address the issue
of geographic variation in cost sharing, we proposed regional or local
proportions over national proportions. While a fixed national
proportion recognizes variation in expenditures at the health plan
level, even within FFS Medicare there is significant variation by area
in the cost-sharing proportion, for example, for Part A ranging from 13
to 20 percent in 1999 (compared to the national average of 16.8
percent).
We further proposed breaking regional or local proportions into
service-specific proportions of cost sharing applied to the different
categories of expenditures health plans would have (for example, Part A
versus Part B, or further disaggregated into inpatient, SNF, home
health, physician, and/or outpatient).
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We received a number of comments on the issue of actuarial
equivalence, revealing a range of opinion. A few commenters recommended
the local uniform dollar amount method, several recommended the plan-
specific method, and some preferred the proportional method. Some
commenters did not specify a choice but recognized the importance of
accounting for regional variation in costs, with some expressing
concern about the plan-specific method.
Comment: One commenter stated that CMS should retain the current
uniform absolute dollar method. However, the commenter believes that
CMS should adjust from national to local dollar amounts. The commenter
believes that this aspect of the program, which is familiar to the
industry, should remain constant given substantial changes to plan
reimbursement under the MA program and the introduction of competitive
bidding. The commenter also recommended that the plan-specific approach
creates the possibility that the projections will be inaccurate and
result in unfair cost-sharing burdens on members and hospitals. Thus,
the proportional method may suffer from the same flaw, as it also
relies on plan pricing assumptions.
The plan-specific method drew the most commentary from those in
favor of and those opposed to this approach. Several commenters felt
the plan-specific method would be the most precise because it was based
on each plan's own utilization and pricing estimates, reflects the
different mix of services in managed care versus FFS Medicare, and
would be most administratively efficient since it is based on data
readily available.
Several commenters objected to the plan-specific method. One
commenter felt this approach would allow MA organizations to use
unreasonable assumptions, and another commenter objected because it
would disadvantage organizations that tightly manage care and/or have
more efficient provider networks. Commenters objecting to the plan-
specific approach supported beneficiary cost-sharing rules that require
the same dollar amount of cost sharing across all affected plans in a
local geographic area rather than any method that would allow variation
by plan.
Response: There are two basic principles behind Section
1852(a)(1)(B) of the Act. First, the MA program must reflect a feature
of the Medicare program, that a certain share of the cost of covered
care is to be borne by beneficiaries (or third parties paying on behalf
of beneficiaries), and not the government. Therefore the MA enrollee's
share of costs will not be financed by government funds in the bidding
system, unless rebate dollars are available. Second, for competitive
bidding, the determination of whether a rebate (bid below benchmark) or
a premium (bid above benchmark) is applicable to a plan must be based
on an ``apples-to-apples'' comparison of the same set of benefits (Part
A and Part B benefits) reflecting a specific cost-sharing structure.
Section 1852(a)(1)(B) of the Act affects how MA organizations
develop their basic A/B bids. It does not determine what a plan's
actual cost-sharing structure will be, because a plan can have an
actuarial value of cost sharing that is less than that under original
Medicare.
However, actual average per-member-per-month (PMPM) cost sharing
under any plan offered by an organization cannot exceed the actuarial
value of the FFS average. (This limit on actual in-plan cost sharing is
a continuation of the pre-existing M+C provision except that, unlike
the earlier M+C provision, the limit on the cost sharing does not
include the premium.) Also excluded from this limit, and excluded from
the Part A and Part B cost-sharing computation in the bid, is any cost
sharing for Part A and Part B benefits that enrollees of MA regional
plans obtain from non-network providers (because section
1852(a)(1)(B)(ii) of the Act specifically excludes out-of-network cost
sharing (section 1858(b)(2)) from the determination of the
``actuarially equivalent level of cost-sharing with respect to benefits
under the original Medicare fee-for-service program option''). We have
made a change to Sec. 422.254(b)(4) to conform the regulation to the
statutory provision.
After further analysis, we do not support the use of localized
dollar amounts. This approach shares a key problem with the national
uniform dollar amount. An average absolute dollar amount would be too
small for some plans in a local area or region (leading to shortfalls
in rebates that could otherwise be used to fund supplemental benefits),
yet too large for other plans (leading to bids lower than a plan's
estimated revenue requirements). In either case, the distortion we are
seeking to minimize would remain.
We believe the proportional approach is the best approach, based on
local proportions that are service-specific. This approach supports the
MMA goal of making ``apples to apples'' comparisons among basic A/B
bids, which creates a level playing field because all MA organizations
in a market area must apply the same standards.
This approach has the advantage over the local uniform dollar
amount because plan pricing assumptions are built into the total value
of the benefit package. Also, plans that efficiently manage care would
be disadvantaged by local uniform dollar amounts because these amounts
would overstate cost-sharing revenue, thus lowering the plan bid and
resulting in larger rebates than the plan could actually ``afford.''
We believe the proportional approach is more straightforward to
understand and implement than the plan-specific approach, which is
crucial in the context of a bidding methodology that must build in
several complex adjustments (for example, the geographic ISAR
adjustment). The plan specific method is more precise (in that it
reflects not only plan pricing but also plan utilization assumptions)
but it is the most complicated method because it requires organizations
to figure out the utilization effects of a cost-sharing structure they
likely will not use in order to determine how plan payout and member
cost sharing would change if the package were based on original
Medicare cost sharing.
Comment: Several commenters requested that we consider using, for
each local area or region, proportions by service category. The
commenters believe that this refinement would yield proportions more
closely reflecting the cost sharing associated with the mix of services
used in these areas and could, therefore, result in a more accurate
projection of the actuarially equivalent costs sharing in each
geographic area.
Response: We agree with the commenters and intend to incorporate
service-specific categories in the bid pricing tool. We are considering
the following approach. Each year the Office of Actuary (OACT) would
publish five proportions for each county representing average FFS cost-
sharing: Part A inpatient hospitalization; Part A SNF; Parts A & B home
health; Part B outpatient facility; Part B, all other. We will provide
guidance on the proportional method and details on the service
proportions in the Instructions for Completing the MA Plan Bid Form.
Comment: Two commenters also suggested that we allow MA
organizations to choose whether to use the plan-specific or
proportional method.
Response: We do not support the idea of allowing MA organizations
to choose which method to use when estimating their MA bids. This would
create further complexity in a complex bidding process. For example, it
could create
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confusion in bidding because each method could interact differently
with the other rate and payment adjustments required under the MMA. It
also would make it difficult for us to apply consistent standards in
our bid review process. We want to set a single standard that applies
to all MA organizations because we believe that is the intent of the
statute and it ensures everyone is subject to the same rules.
Comment: Several commenters recommended that if we select the
proportional method, the proportions should be established for each
local area or region and also disaggregated by service category (for
example, inpatient hospital cost sharing versus physician cost
sharing). This refinement would yield proportions that will more
closely reflect the cost sharing associated with the mix of services
used in these areas and could, therefore, result in a more accurate
projection of the actuarially equivalent costs sharing in each
geographic area. If we select the proportional method, one commenter
stated opposition to the development of proportions based on
assumptions of how health plan enrollees generally use services,
because it would be difficult for us to develop a distribution of
services that would be consistent with the experience and practices of
individual plans.
Response: We agree that further disaggregation of local or regional
proportions by service category would result in proportions that are
more accurate. See the discussion above for our proposed approach.
Details on the method and the proportions for 2006 will be published in
the Advance Notice of Methodological Changes for MA Payment Rates,
which we expect to be released on February 18, 2005 on the CMS website
at http://www.cms.hhs.gov/healthplans/rates/default.asp
Information required
Proposed Sec. Sec. 422.254(c) and (d) would implement section
1854(a)(6)(A) of the Act by setting out the information MA
organizations must submit for coordinated care plans and PFFS plans.
Proposed Sec. 422.254(e) specified information that must be submitted
for MSA plans.
Proposed Sec. 422.254(c) established that, in addition to
submitting an aggregate bid amount, MA organizations must submit the
proportions of the aggregate bid attributable to coverage of Part A and
Part B benefits, Part D basic benefits, and supplemental coverage. They
must also identify the plan type, projected enrollment, any capacity
limits, the actuarial bases for determining the bid amounts and
proportions, information on the plan's cost sharing, including the
actuarial value of deductibles, coinsurance, and co-payments, and
information required to calculate risk corridors for regional plans for
2006 and 2007. Additional information required on drug coverage was
proposed at Sec. 423.265, which implements section 1860D-11(b) of the
Act.
In the final rule, we added Sec. 422.254(c)(9) to address
information requirements for the geographic Intra-Service Area Rate
(ISAR) adjustment. See the G preamble discussion of Sec. 422.308(d)
regarding our policy decision on the geographic ISAR adjustment.
Under proposed Sec. 422.254(d), for MA organizations required to
provide a monthly rebate because the plan bid is less than the plan
benchmark, the organization must submit information to us about how
this rebate would be allocated across the statutorily mandated options
specified at Sec. 422.266(b). All rebate dollars must be applied to a
mandatory supplemental benefit.
Since MA regional plans may serve multiple regions, and each region
is a separate service area, section 1854(a)(1)(C) of the Act requires
us to encourage the offering of regional plans by developing procedures
to allow MA organizations to file consolidated information for multi-
region MA plans (including national plans). We believe our new bid
pricing tool will capture MA pricing information in an efficient manner
and reduce filing burden for all MA organizations, including those
offering national plans. Much of the supporting documentation required
for the Adjusted Community Rate Proposal (ACRP) will no longer be
required. Specifically, we will no longer collect commercial pricing
and corporate financial data, and the number of cost-sharing categories
has been reduced. In addition, the electronic bid form includes data
elements that were filed paper format for the ACRP process, for
example, actuarial utilization and cost data, trends in medical
expenses, and non-medical expense projections. We are committed to
working with organizations to reduce duplicative information in the
application, bidding, and contracting process. For example, we would
expect that a single legal organization offering an MA regional plan in
more than one region would submit much the same legal and
organizational information for all regions, with the main differences
being the provider networks. We expect the application process to be an
area where paperwork burden can be reduced. Ideas for consolidating
regional filings that are under development include a master contract,
a single actuarial certification covering multiple bids, and
consolidated supporting exhibits across regional bids where there are
common elements (for example, the development of manual rates). We will
continue to identify ways to consolidated filing as the program
develops.
In addition, we will apply the projected revenue and medical
expense values (including administrative expenses) captured by the MA
bid pricing tool to calculate the risk corridor amounts used to
determine risk-sharing payment adjustments for regional MA plans for
contract years 2006 and 2007. See the subpart J preamble for the
discussion of risk sharing on costs of providing original Medicare
benefits and rebatable integrated benefits. See the Advance Notice of
Methodological Changes for Medicare Advantage Payment Rates for
guidance on information to submit for determination of risk sharing
payments.
Finally, section 1854(a)(6)(A)(iii) of the Act gives us the
authority to require information in addition to that listed above to
allow us to verify the actuarial bases for plan bids. We expect to use
the authority given us under this provision in two ways. First, our
review of an organization's bid submissions may identify problems that
would trigger our request for additional, more detailed information
(for example, data the MA organization used on average utilization and
pricing to model the expected distribution of costs in the plan bid).
We would not want to require such detail for every plan bid in the
initial submission, and we are confident that forthcoming bid
submission guidance (in the annual Instructions for Completing the MA
Plan Bid Form) will limit the occurrences of our requests for
additional data. Second, as we did with the ACRP tool for the M+C
program, we expect to make annual updates to the bid pricing tool. The
updates may or may not involve changes to the information required to
verify actuarial bases of the bid. We will announce the updates in the
annual Call Letter.
Special rules for MSA plans
Proposed Sec. 422.254(e)(2) would implement sections 1854(a)(3)
and 1854(b)(2)(D) of the Act by indicating that bids are not required
for MA MSA plans. That is, MA organizations will not complete the bid
pricing tool developed for non-MSA plans. However, for MSA plans MA
organizations must file a bid submission with information on coverage,
the
[[Page 4647]]
enrollment capacity, the monthly MSA premium amount, which is the
amount of revenue the plan requires to offer original Medicare benefits
(analogous to the basic A/B bid for other MA plans). MA organizations
must also submit the amount of the MSA deductible, and the beneficiary
supplemental premium, if any. MSA plans are prohibited from offering
Part D coverage (although MSA enrollees may choose to enroll in a
prescription drug plan).
Comment: One commenter recommended that we consider allowing MA
organizations to subsidize the Part D premium for dual eligible
beneficiaries with revenue from the medical benefits part of the MA-PD
plan.
Response: We believe the commenter's phrase ``the medical benefits
part'' is referring to Part A and B benefits. MA organizations offering
the Part D benefit may fund a reduction in the Part D premium with
rebate dollars, pursuant to section 1854(b)(1)(C)(ii)(II) of the Act,
and as proposed at Sec. 422.266(b)(2). However, the resulting premium
amount must be uniform for all members of the plan, in accordance with
section 1854(c) of the Act. A plan may not offer an additional premium
reduction only to a subset of members (for example, dual eligible
beneficiaries).
Comment: One commenter asked that we clarify the ``enrollment
assumptions data requirement,'' that is, how these assumptions will be
used in computations and how errors in them will be corrected over
time. The commenter believes that our assumption about a plan's
enrollment mix will be a critical competitive factor in determining how
rebate dollars are used to buy mandatory supplemental benefits and/or
how beneficiary premiums for mandatory supplemental benefits are set.
Our oversight on this issue will be vital to ensure a level playing
field.
Response: See the discussion in the subpart G preamble on the
geographic Intra-Service Area Rate (ISAR) adjustment, which takes into
account the difference between the distribution of enrollment across
counties in the plan's service area assumed in the plan's bid and the
actual geographic mix of enrollment at the time payment is made. Also,
we will release detailed guidance on the bidding methodology in the
Instructions for Completing the MA Plan Bid Form and the Call Letter.
Information on the payment methodology, including the ISAR adjustment,
will be provided in the Advance Notice of Methodological Changes for
Medicare Advantage Payment Rates, published annually on our website at
http://www.cms.hhs.gov/healthplans/rates/default.asp.
Comment: Several commenters supported development of procedures for
MA organizations to file consolidated bid information for multi-
regional plans, including national plans, and believe that this will
facilitate the offering of regional plans.
Response: In light of the statutory mandate to allow consolidated
bids for multi-regional plans, we are committed to allowing bid
consolidation where appropriate. However, in order to maintain the
integrity of the bid submission and review process, section
1854(a)(1)(A) of the Act requires MA organizations to submit a bid for
each MA region. However, we believe our new bid pricing tool will
capture MA pricing information in an efficient manner and reduce filing
burden for all MA organizations, including those offering national
plans. See the discussion above for examples of burden reduction in the
new bid pricing tool.
Comment: A few commenters recommended that we establish streamlined
documentation requirements for MA organizations to follow in supporting
the actuarial basis of their bids. The commenter requested that these
requirements strike a balance between providing us with sufficient
information to review the bid and ensuring that MA organizations are
not burdened with onerous requirements.
Response: We support the commenters' position that the requirements
built into the new bid pricing tool and supporting documentation should
be thorough enough to allow a fair and accurate review of bids but
should avoid undue burden. See the discussion above regarding the new
bid pricing tool MA organizations will use for bid submission. Most of
the supporting documentation required for the ACRP will no longer be
required. For example, we will no longer collect commercial pricing and
corporate financial data, and the number of cost-sharing categories has
been reduced.
Comment: Several commenters are interested in having bid formats,
documentation requirements for submission and criteria for actuarial
substantiation as early as possible to assist in the bid preparation
and to minimize the uncertainty in dealing with employer retiree groups
and other contractors, including providers. One commenter stated that
our negotiation and approval process will be completed later than most
plans' rate quotes to employer retiree groups for the following
contract year. To the extent that MA organizations must negotiate
changes to retiree premiums, benefit packages and our payments after
these organizations have provided rate quotes to employer groups, this
destabilizes the MA organization's relationship with, and reduces its
appeal to, employer groups. The commenter indicated that early and
clear expectations of plans' documentation requirements for submission
would help to minimize this.
Response: We have been working hard to develop all aspects of the
new bidding methodology to ease the transition for all parties. In
December 2004, we released for public comment drafts of the drug and
non-drug bid pricing tools that will, with the plan benefit package,
constitute the annual June bid submission, with the intention of
developing the new program. We do recognize the special circumstances
surrounding the offering of employer and union group health plans
(EGHPs), and as noted above, we will release separate guidance
regarding EGHPs.
Comment: One commenter strongly objected to the proposed regulatory
requirement that MA organizations that have Part B-only enrollees
submit a separate bid for these enrollees. Some MA organizations have
only a handful of these members and the cost of preparing a separate
bid is very substantial. The commenter recommended that we identify a
means for bidding organizations to submit their Part B-only enrollee
bid in conjunction with another bid. The commenter recommended this
approach so that MA organizations are relieved of the administrative
burdens of submitting two bids for their enrollee population while the
underlying objectives of the bid process are still accomplished.
Response: The requirement at Sec. 422.254(f) is substantially the
same language as the previous Sec. 422.310(a)(3) for the M+C program.
Preparation of a separate adjusted community rate (ACR) for Part B-only
enrollees is a long-standing policy, and we do not see a basis for
changing the existing policy. We have made editorial changes to the
text at Sec. 422.254(f) to conform it to the previous Sec.
422.310(a)(3).
There are two types of Part B-only enrollees: current members of
employer or union group health plans and Part B-only enrollees
``grandfathered'' from pre-1999 risk contracts. Since 1998, only those
beneficiaries who are members of employer or union groups have been
allowed to elect a Part B-only plan. However, section 1876(k)(2) of the
Act created ``grandfathered'' Part B-only enrollees by permitting a
Part B-only beneficiary enrolled with an
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organization under a section 1876 risk contract on December 31, 1998 to
continue enrollment with that organization if that organization had
entered into an M+C contract effective January 1, 1999.
Our operational policy has recognized that the number of
``grandfathered'' beneficiaries has been decreasing over time, and in
the past we have provided guidance on grandfathered enrollees in the
annual Call Letter, including an option to simplify rate filing. Call
Letters from prior years with guidance on grandfathered Part B-only
enrollees can be found on our website at http://www.cms.hhs.gov/healthplans/acr/.
We will continue to provide guidance regarding this
policy in the Call Letter.
Comment: A number of commenters asked questions about the
procedures for bidding. For example, a few commenters asked how we will
define administrative expenses in the bid pricing tool, and whether the
definitions will be the same for Part C and Part D. Other examples are
whether we would allow rounding of premiums after adjustments to the
allocation of rebate dollars, and how MSA plans could provide risk
adjustment data for payment.
Response: As in the past, we will address questions on the
procedural details of bidding in the Instructions for Completing the MA
Plan Bid Form and the Call Letter.
4. Negotiation and Approval of Bids (Sec. 422.256)
Authority to review and negotiate bids
The provisions in proposed Sec. 422.256 would implement section
1854(a)(6)(B) of the Act, which provided us with the authority to
negotiate the monthly aggregate bid amount and the proportions of the
aggregate bid attributable to basic benefits, supplemental benefits,
and prescription drug benefits. The MMA grants us the authority to
negotiate bids that is ``similar to'' the statutory authority given the
Office of Personnel Management (OPM) to negotiate with respect to
health benefits plans under the FEHBP program.
Chapter 89 of Title 5 gives OPM broad discretion to negotiate
prices and levels of benefits. We believe that the Congress used
``similar to'' in the statute to recognize the differences between the
FEHBP and the MA program. For example, the OPM authority applies to
negotiating the level of plan benefits, while MA plans must offer, at a
minimum, benefits covered under the original Medicare program, which
are defined in law. Also, the authority to negotiate payment rates
would seem to be limited for the MA program by other provisions of the
MMA (for example, statutory formulas for determining benchmarks,
premium and rebate amounts, and payments to plans.)
However, MA plans are able to modify the cost sharing for Medicare
Parts A and B benefits via supplemental benefits. We have the authority
to negotiate the level of the supplemental benefits as part of ensuring
that the bid is not discriminatory, as described in section 1852(b)(1)
of the Act and implemented at proposed Sec. 422.100(f)(2) and Sec.
422.110. Further, in situations where we have questions about the
assumptions used for a plan bid, we have the authority to negotiate
with the MA organization regarding the appropriate assumptions and the
resulting rebate and/or supplemental premiums, to ensure that the
supplemental bid reasonably and equitably reflects revenue
requirements.
Noninterference
As proposed under Sec. 422.256(a)(2) and in accordance with
section 1854(a)(6)(B)(iii) of the Act, we do not have the authority to
require--(1) any MA organization to contract with a particular
hospital, physician, or other entity or individual to furnish items and
services under the Act; or (2) a particular price structure for payment
under a contract to the extent consistent with our authority. Also, as
under current law, we do not have the authority to review or negotiate
bids for PFFS plans or any amounts submitted by MSA plans.
Standards of bid review
Proposed Sec. 422.256(b) implements section 1854(a)(6)(B)(ii) and
(iii) and section 1854(e)(4) of the Act, which together established
three standards for our review of bids. First, the bid and proportions
must be supported by the actuarial bases, which we determine based on
information provided by the MA organization.
Second, the bid amount and proportions must reasonably and
equitably reflect the plan's revenue requirements for providing the
benefit package, as the term revenue requirements is used for purposes
of section 1302(8) of the Public Health Service Act. We interpreted
this reference to mean that the Congress intends for a plan bid to
reflect the plan's estimated required revenue in providing coverage
(including any profit or retained earnings), and not other factors such
as the relative lack of competition in the plan's market area or the
level of annual capitation rates and benchmarks in the service area.
Third, proposed Sec. 422.256(b)(3) implemented section 1854(e)(4)
of the Act by providing for a limitation on applicable cost-sharing for
coordinated care and PFFS plans: the actuarial value of plan cost
sharing ``applicable on average'' to plan enrollees cannot exceed the
actuarial value of cost sharing ``applicable...on average'' under
original Medicare. We interpreted ``applicable'' to mean the level of
cost-sharing in effect after any reductions to the level of cost
sharing that a plan can make by offering a mandatory supplemental
benefit, as specified under section 1852(a)(1)(B) of the Act. That is,
we apply this third standard of review, as specified under section
1854(e)(4) of the Act, in light of both the basic A/B bid and the
application of any rebate toward reduced cost sharing of Medicare Parts
A and B benefits included in the supplemental bid.
We clarified that proposed Sec. 422.254(b)(4), which implements
the requirement in section 1852(a)(1)(B)(i) of the Act), that the
actuarial value of MA plan cost sharing for Medicare Part A and Part B
benefits assumed in constructing the basic A/B bid must equal the
actuarial value of original Medicare cost sharing, would affect how MA
organizations develop their basic A/B bids. In contrast, the cap on
actual enrollee cost-sharing liability for Medicare Parts A and B
benefits is established at proposed Sec. 422.256(b)(3), which
implements the requirement in section 1854(e)(4) of the Act. Before
2006, the sum of applicable plan cost sharing for Part A and Part B
services, and any cost sharing for Part A and Part B services that was
collected as revenue in the form of a premium or portion of a premium,
could not exceed the actuarial value of cost sharing in fee-for-service
Medicare (section 1854(e)(1) of the Act). As of 2006, any Medicare cost
sharing included in a premium (as well as any cost sharing that is
``bought down'' through the use of rebate dollars) is not counted
towards the limit (section 1854(e)(4)of the Act).
We further clarified that, under the new bidding methodology, an MA
organization cannot substitute a basic beneficiary premium for some
portion of cost sharing under original Medicare. Section
1854(b)(2)(A)(i) of the Act (proposed at Sec. 422.262(a)(1)) mandated
that for plans with bids less than benchmarks, the premium for original
Medicare benefits must be zero. Our understanding is that Congressional
intent was to have the basic A/B bid be for a standardized package.
This means MA organizations able to offer plans
[[Page 4649]]
with Medicare-covered benefits at a lower cost to the beneficiary than
the benchmark will have a plan with zero premium for coverage of
benefits under original Medicare.
However, any MA organization can choose to structure the benefit
package with a mandatory supplemental benefit that includes a reduction
in Medicare Part A and B cost sharing. The premium for this
supplemental package, as well as the Part D or Part B premium, can be
offset by any rebates for which the plan is eligible. Thus, the
aggregate bid would consist of: (1) a basic A/B bid amount for benefits
available for either zero premium or a basic premium depending on
whether the plan's bid is above or below the benchmark; (2) a mandatory
supplemental bid amount for benefits available for a premium or no
premium depending on the plan's use of rebates (and an optional
supplemental benefit if offered); and (3) a drug bid amount for basic
benefits, also available at a premium or no premium depending on use of
rebates.
Finally, we clarified that, under the MMA, an MA organization is no
longer permitted to reduce the basic beneficiary premium amounts for
original Medicare benefits by taking a negative adjustment on
additional revenue, as was permitted under the M+C program in the ACRP
process. In accordance with section 1854(a)(6)(B)(ii) of the Act, plan
bids must reasonably and equitably reflect plan expected revenue
requirements. MA organizations cannot submit plan bids that understate
their revenue requirements for the basic A/B bid. When the basic A/B
bid amount exceeds the benchmark amount, the difference is required to
be charged as a basic beneficiary premium. If an MA organization were
able to waive the plan's basic beneficiary premium, this would suggest
that the MA organization had overstated the plan's expected revenue
requirements for basic benefits. In essence, we do not have the
authority under the statute to allow MA organizations to waive basic
beneficiary premiums for plans with basic A/B bids greater than
benchmarks.
Comment: Several commenters requested clarification on how we would
interpret the bid review standard that the bid amounts and proportions
must ``reasonably and equitably'' reflect the MA plan's revenue
requirements for providing the benefit package. Two commenters
suggested that we should ensure that adequate flexibility is maintained
throughout the bid review and approval process in order to allow MA
organizations to pursue legitimate business strategies that promote the
availability of viable choices for beneficiaries. One commenter
recommended that we consider in its bid review process whether an
organization is in a start-up phase and the intensity of the
marketplace competition facing the plan. Another commenter suggested
that in reviewing the revenue requirements of the plan, we should take
into account that a variety of factors may affect anticipated rates of
return for MA plans. For example, a new MA organization may reasonably
anticipate budget deficits during its early years of operation in order
to offer competitive plans while its fixed costs are high in relation
to the number of enrollees and its enrollment and revenues grow toward
break even. In addition, due to differing marketplace dynamics and
other factors, the rates of return may differ for different products.
The commenter acknowledged our concern about the integrity of bids from
plans lacking competition in their service area, but stated strong
opposition to any requirement we may consider that would force plans to
have similar ``rates of return'' on Medicare and non-Medicare products
as a way to measure bid accuracy. Also, the commenters cautioned
against having standards that would skew actual bid amounts in order to
avoid the appearance of not operating with maximum efficiency.
Response: In the August 2004 proposed rule, we stated that we
believe the Congress used the phrase ``similar to'' in section
1854(a)(6)(B)(i) of the Act (which states that our authority to
negotiate bids is similar to OPM's statutory authority to negotiate
concerning health plans) to signal an understanding that the FEHBP and
MA programs are not identical, but have some similarities. We gave two
examples of differences between the programs: (1) MA plans must offer
original Medicare benefits, which are defined in law; and (2) the
formulas for determining MA rates are established in law. We then gave
an example of an area where the OPM-like authority to negotiate bid
amounts would be relevant to the MA program: pricing of supplemental
bids. We then discussed the three proposed standards of bid review: (1)
bids and proportions must be supported by actuarial bases; (2) bids and
proportions must reasonably and equitably reflect the plan's revenue
requirements for providing the benefit package; and (3) the standard at
section 1854(e)(4) of the Act (implemented at proposed 422.256(b)(3))
has been met, which limits enrollees' liability for cost sharing.
In addition to review of bid amounts and proportions under these
three standards, we also are mandated to review other aspects of the
annual bid submission. We must ensure that all benefits are covered,
per the requirements at section 1852(a) of the Act. Section 1852(b)(1)
of the Act requires us to review the plan benefit design, particularly
the structure of premiums, deductibles, copayments, and coinsurance
charged to beneficiaries to ensure it is not discriminatory, as
implemented at Sec. 422.110.
With regard to review of bid amounts, we will respond to the
commenters' questions by discussing the statutory bases on which we
formulated the first two bid review requirements. The first bid review
standard, that bids be supported by actuarial bases, is mandated in two
places in section 1854(a)(6)(B) of the Act. The first phrase of section
1854(a)(6)(B)(i) of the Act states that subject to the noninterference
clause and the exception for PFFS plans, the Secretary has the
authority to negotiate bid amounts and proportions under subparagraph
(A), including supplemental benefits. Section 1854(a)(6)(A) of the Act
(the subparagraph (A) reference), which specifies what information MA
organizations should submit with their annual bid submission, includes
the requirement that MA organizations submit information demonstrating
the actuarial basis for determining the monthly aggregate bid amount.
In addition, section 1854(a)(6)(B)(ii) of the Act states that the
Secretary can only accept bids if they are supported by the actuarial
bases provided under subparagraph (A).
Therefore, under the first review standard we may negotiate whether
or not to accept a bid based on our determination that the MA
organization submitted sufficient actuarial bases and that the
actuarial bases support the submitted bid amounts and proportions. The
specific elements for which we will require actuarial bases are not
listed as part of the regulatory text, and are incorporated into the
bid pricing tool. However, we expect MA organizations to submit the
actuarial bases for medical costs and administrative costs (including
return on investment) for all components of a plan's aggregate bid (the
basic A/B bid, the bid for basic prescription drug coverage, and bids
for mandatory and optional supplemental benefits). We will examine the
actuarial analyses to ensure that bids have been prepared in accordance
with our actuarial guidelines, and properly certified.
[[Page 4650]]
The second bid review standard states that bids must reasonably and
equitably reflect plan costs. This is also mandated in two places in
section 1854(a)(6)(B) of the Act. The latter part of the sentence at
section 1854(a)(6)(B)(i) of the Act states that when exercising the
requirement to negotiate regarding bid amounts, the Secretary shall
have authority similar to the authority the Director of OPM has under
Chapter 89 of Title 5 to negotiate with respect to health benefits
under the FEHBP program. In addition, section 1854(a)(6)(B)(ii) of the
Act states that the Secretary can only accept bids if they reasonably
and equitably reflect the revenue requirements (as used for purposes of
section 1302(8) of the Public Health Service Act).
We look to the FEHBP standard in 5 USC 8902(i) to interpret our
authority to review bids in a manner similar to OPM's statutory
authority. Section 8902(i) gives OPM the authority to require that
rates should reasonably and equitably reflect the cost of the benefit
provided. We see this provision as imposing upon us the responsibility
to evaluate the appropriateness of the overall bid amount and each
portion of the aggregate bid. Specifically, we intend to evaluate the
reasonableness and appropriateness of the actuarial assumptions made
for the aggregate bid. We would examine bids to determine whether the
revenue requirements for coverage offered by the plan are reasonable,
including examination of administrative costs and return on investment
(profit) for reasonableness. (For a discussion of how we will evaluate
the reasonableness and accurateness of the prescription drug bid, see
subpart F of the preamble in the final rule for the Medicare
prescription drug benefit.)
There is no cap on administrative costs under Part C (or Part D)
that is similar to the cap in effect for FEHBP experience-rated plans.
We assume that competition among plans will generally assure reasonable
bids. The Congress, however, did not leave the determination of rates
entirely to market forces. We are required to determine that the
reasonable and equitable test is met and we are given negotiating
authority to assure this result. The initial review of MA bid
submissions will focus, in part, on low and high cost outliers, and on
bids in areas with little competition. It should be noted however, that
bid outliers are not necessarily inappropriate, nor are bids within the
measure of central tendency automatically correct. Indeed, an outlier
bid may be reasonable and appropriate after additional review and
explanation while an ``average'' bid could be based on incorrect
actuarial assumptions. In summary, all bids will be reviewed for their
reasonableness, whether the bids include outliers or not.
A plan bid submission may meet the first review standard (because
there is sufficient actuarial information and it supports the submitted
bid amounts), but not meet the second review standard because a bid
amount does not reasonably and accurately reflect plan costs.
Finally, the commenters requested that our interpretation of the
``reasonable and equitable'' standard allow enough flexibility for MA
organizations to pursue legitimate business strategies. ``Flexibility''
seems to have different meaning for different commenters. We want to
clarify that we do not intend to measure bid accuracy by forcing bids
for Medicare products to have the same rates of return as non-Medicare
products. We do not believe that cross-product line comparisons would
be appropriate at this time.
However, we do believe that it would be appropriate to develop
criteria for review among Medicare products, such as the following for
employer group health plans (EGHPs). We will release separate guidance
for EGHP plans.
Comment: Two commenters proposed that the standards of bid review
in proposed Sec. 422.256(b), which they see as focusing on the
statutory criteria, should be applied to review not only of the basic
A/B bid and non-drug portion of the supplemental bid (if any), but also
to the Part D basic bid and supplemental drug bid (if any). The
commenters' concern is that, although the statutory basis for review
and negotiation of bids is the same in Part C and Part D, the
discussion in the Part D proposed rule includes broader language
suggesting that we may challenge Part D bids with administrative costs
(including rates of return) that are higher than those of other
sponsors or MA-PD plans. In general, the commenters opposed standards
that could lead us to require that MA organizations reduce their bids
due to perceptions that their MA products could be operated more
efficiently.
Response: See subpart F preamble in the final rule for the Medicare
prescription drug benefit, which clarifies that we are not adopting any
of the OPM regulations at this time, and we will not apply the FEHBP
concept of a Similarly Sized Subscriber Group (SSSG) to review of Part
D bids. We believe the preamble discussions on bid review in the final
rules for Parts C and D are more clearly aligned.
Comment: One commenter recommended that we revise the language at
Sec. 422.256(b)(2) ``as the term revenue requirements is used in
section 1302(8) of the Public Health Service Act'' to read ``as the
term revenue requirements is used for purposes of section 1302(8) of
the Public Health Service Act.'' This tracks the statutory language. In
addition, the commenter recommended that we explain in the preamble
that the reference to ``revenue requirements'' does not indirectly
require that MA organizations need to use the adjusted community rate
methodology, which is found in that section of the Public Health
Service Act.
Response: We agree with the commenter and have revised the proposed
language at Sec. 422.256(b)(2).
Comment: One commenter asked us to clarify that under the MMA
bidding methodology, MA organizations will no longer need to include
information about commercial pricing.
Response: For the purpose of bid submission, organizations will not
be required to submit information about their commercial pricing
experiences for purposes of trending. However, it should be noted that
we are still statutorily mandated to audit a proportion of MA
organizations. Within the scope of an audit, we believe that it is
appropriate to request and review an MA organization's allocation of
costs between its Medicare and commercial products in order to ensure
that a disproportionate share of the expenses is not allocated to the
MA line of business.
Comment: One commenter recommended that we prevent MA plans from
``cherry picking'' healthier beneficiaries and to review bids and plan
benefit packages to ensure they are not discriminatory against sicker
beneficiaries. The commenter cited studies by The Commonwealth Fund and
Medpac that confirm that some MA plans have used co-payments and other
devices to discourage enrollment of beneficiaries who have high
utilization of services.
Response: We will be evaluating bids for their actuarial soundness
based on the documentation submitted by plans to support the submitted
bid amount and associated proportions. As mandated by the MMA (and
earlier statutory provisions), we will also be reviewing the benefit
packages of each plan to guard against discrimination. In addition, we
will continue to follow the standards described in the M+C final
regulation of June 2000 at Sec. 422.110, which prohibit an
organization from discriminating against beneficiaries by denying,
limiting or conditioning
[[Page 4651]]
coverage to beneficiaries or offering of benefits to individuals
eligible to enroll in a plan on the basis of any factor that is related
to health status (for example, medical history or medical condition,
with limited exceptions). We will be concerned about levels of cost
sharing for dialysis and chemotherapy drugs, and cost sharing for
medical categories (inpatient stays, outpatient facilities, and
ambulatory surgical centers).
Negotiation process
Proposed Sec. 422.256(a) would implement section 1854(a)(6)(B)(i)
of the Act, which provides us the authority to negotiate with MA
organizations. We have the authority to negotiate to ensure that the
bid is not discriminatory; and in situations where we have questions
about the assumptions used for a plan bid, we will negotiate with the
MA organization regarding the appropriate assumptions and the resulting
rebate and/or supplemental premiums. We expect that the process of bid
negotiation between CMS and an MA organization could result in an
agreement to adjust the bid's pricing, utilization, and/or enrollment
assumptions. The MA organization would resubmit the bid information for
the plan. The bid cannot be changed unless mutually agreed upon by the
MA organization's representatives and CMS as a result of our review and
negotiation process.
Comment: A few commenters are concerned that we have a uniform
process for conducting bid negotiations to ensure that there is
consistency across negotiating teams as well as firm deadlines for
ending negotiations.
Response: We understand the concerns about the uniformity and
timing of bid negotiations. We believe that the bid negotiations will
be governed by the specific actuarial review principles that will be
contained in the bid pricing tool. Bid negotiations will have to be
complete before September in order for plans to have sufficient time to
submit their plan benefit package materials for our website.
Comment: One commenter wanted to know how our deadlines for
negotiation compare with the deadlines established by OPM for its FEHBP
negotiations.
Response: OPM's rate filing and negotiation schedule is similar to
that proposed by CMS. Rate proposals are due by May 31 each year, and
by mid-August negotiations are generally complete. By law, the filing
deadline for the MA program is the first Monday in June, and we expect
to conclude negotiations by the end of August or early September.
Comment: Several commenters wanted to confirm that organizations
unable to reach agreement with us during the negotiation process will
be permitted to withdraw their bids without penalty. The ability to
withdraw a bid is significant to avoid an MA organization committing to
providing coverage for a year that is not sustainable financially,
potentially jeopardizing beneficiary coverage and the MA organization's
long term success and viability.
Response: This issue is still under consideration, and we will be
issuing subsequent guidance.
Comment: One commenter stated that in the past periodically MA
organizations have identified errors in their ACRP after submitting
them to us for the filing deadline. The commenter requested that we
retain the current policy where MA organizations are allowed to correct
these errors after the filing deadline and resubmit the ACRP provided
that: (1) the MA organization can demonstrate that the information in
fact was in error; (2) it is clear that the error was made
inadvertently; and (3) the correction is made within a relatively short
period of time following the submission.
Response: We intend to retain the current practice of allowing
corrections for inadvertent errors, for example, typographical errors
and certain other types of errors that caused the submission to fail
the initial front end edits. Guidance on this matter will be published
as part of the guidance on filing the new bid pricing tool and Plan
Benefit Package.
Comment: One commenter requested clarification of the timeline for
bid negotiations and finalizing benchmarks for negotiation with
providers.
Response: Regarding negotiations with other contractors, we believe
that bidders are developing their bids on what it will cost them to
provide the items and/or services in their plan benefit packages and
have had discussions and negotiations with potential contractors in
order to estimate properly in their bid submission. In most cases where
organizations have made good faith efforts to estimate their actual
revenue requirements with appropriate supporting documentation, we do
not anticipate significant modifications to bid amounts and proportions
during the negotiation phase of the process.
Rules for adjustment of rebate dollar allocations.
In addition to other negotiated changes, an MA organization may
need to adjust the allocation of rebate dollars in a plan bid, and
resubmit the bid. We described several circumstances under which we
expect reallocation of rebate dollars.
First, MA organizations must submit their plan bids in June
(including the estimated drug premium amount) for both local and
regional MA plans before knowing the national average monthly bid
amount for basic coverage. Given the preliminary nature of MA
organizations' Part D premium submission, we expect that some rebate
allocations to Part D premium reductions will be overestimated
(excessive allocation) or underestimated (insufficient allocation).
These misestimates will mean some portion of the beneficiary rebate has
been credited where it is not needed or not enough has been credited to
achieve the premium desired. For example, if a plan's monthly drug
premium is determined to be $34, which is less than the projected
premium of $35 in its initial bid submission, there was an excessive
allocation of $1 of the rebate to fund the Part D premium reduction. We
would require the MA organization to amend its bid submission to
reallocate the excessive $1 of rebate credit to other mandatory
supplemental benefits. On the other hand, if the plan monthly drug
premium is determined to be $36, which is greater than the projected
monthly premium of $35 in the initial bid submission, there is an
insufficient allocation of $1. We would give the MA organization the
option of reallocating $1 of rebate from another mandatory supplemental
benefit toward the Part D premium reduction in order to eliminate the
$1 Part D premium and return to the zero premium in the initial bid
submission.
For this reason, we anticipated that some MA organizations will
make minor technical adjustments to the benefit structures of their
non-drug bid amounts (that is, the basic A/B bid and supplemental bid).
The adjustments will consist of reallocation of beneficiary rebate
dollars among a subset of the categories allowed by law: (1) reduction
in the premium for the non-drug portion of the mandatory supplemental
package (that is, reduction in cost sharing for Parts A and B benefits
or reduction in the cost of additional non-Medicare covered benefits);
and (2) reduction in the Part D and Part B premiums. No modifications
would be allowed to the cost of the Part D supplemental benefit
(reduction in Part D cost sharing or reduction in the cost for coverage
of drugs not covered under Part D). Changing the reduction in Part D
cost sharing would have a domino effect. It would have implications for
projected
[[Page 4652]]
reinsurance dollars, which impacts the pricing of the bid for basic
Part D benefits, which in turn could affect the national average
monthly bid amount and, hence, the basic beneficiary premium, which we
would have just previously calculated and published for the year, as
required by section 1860D-13(a)(4) of the Act.
Second, we recognized that the June bid submission for regional MA
plans will be based on unknown benchmarks not only for the drug premium
but also for Medicare Parts A and B benefits. As discussed in Sec.
422.258(c), the region-specific benchmark amount is based, in part, on
a weighted average of the plan bids for Medicare Part A and Part B
benefits, which we cannot calculate until after the June bid
submission. This means that the exact amount of a plan's rebate is
unknown and will shift to the extent that the estimated benchmark a
plan uses to create its June basic A/B bid amount differs from the
region-specific non-drug benchmark we establish based on plan bids.
Therefore, regional MA plans will also be allowed to modify the
allocation of rebate dollars, other than for Part D benefits, to arrive
at the supplemental, Part B, and Part D premiums originally submitted.
We proposed the following rules for the negotiation process
concerning reallocation of rebate dollars due to excessive or
insufficient allocation.
MA plans with overestimated allocations to Part D premium
reduction must reallocate beneficiary rebate dollars to other mandatory
supplemental benefits and can do so only for the purpose of achieving
the original Part D premium in their initial bid submission.
Local MA plans with underestimated allocations to Part D
premium reduction have the option of reallocating beneficiary rebate
dollars from other mandatory supplemental benefits. However, the plan
could only reallocate rebate dollars for the purpose of achieving the
Part D premium in the initial bid submission. In this circumstance,
plans could choose not to adjust the new premium or reallocate the
appropriate amount to achieve the initial premium submitted.
We proposed the following rule for regional plans, which unlike
local plans will not know the exact amount of their rebate dollars at
the time of the June bid submission.
Regional MA plans may reallocate beneficiary rebate
dollars to achieve the supplemental, Part B, and Part D premiums in
their initial bid submission.
Local MA plans not offering Part D benefits (these would
only be PFFS plans who have elected this option) would have all the
necessary information upon which to estimate their bid amounts for
their initial June bid submission, and, therefore, the MA organizations
would not be allowed to modify their plan benefit structures.
Comment: A few commenters recommended that MA organizations be
permitted to reallocate rebate dollars to ensure that dual eligibles
would not need to pay a premium for Part D if they enroll or remain
enrolled in these MA plans. The commenter believed that the MA plans
that would likely use this discretion are MA Special Needs Plans
(SNPs). The success of SNPs would be seriously undermined if their Part
D premiums exceed the applicable low income Part D subsidy, because
their dual eligible enrollment would have an incentive to disenroll
from these plans. Because the Part D bids of MA special needs plans are
not factored into the national average monthly bid amount and the low-
income benchmark premium amount, this adjustment will have an
insignificant effect on the bid and payment process.
Response: The proposed requirement is that reallocation of rebate
dollars during the negotiation process must result in the supplemental,
Part B, and Part D premiums originally submitted in June. We believe
the commenter is requesting that this requirement be expanded to allow
a change in the Part D premium from that originally submitted in order
to allow an MA organization to change the plan premium to match the low
income premium subsidy level in effect for the plan's service area. We
would allow this. Therefore, when rebate reallocation results in a Part
D premium that differs from that originally submitted in June, the new
premium must match the low income premium subsidy level. The Part D
premium will have to be uniform for every member of the plan.
Comment: One commenter supported our proposal to limit changes to
bids to technical changes. The commenter also questioned why MA
regional plans would be permitted to make changes in cost sharing that
would not be allowed for MA local plans. The commenter believes that
allowing more than technical changes from regional plans would
destabilize the level playing field of the bidding process.
Response: Because the benchmark is calculated for regional plans
after bids are submitted, unlike local plans, regional plans do not
have the advantage of knowing the benchmark for estimating their
rebate, cost sharing and premium amounts. Therefore, it is necessary to
provide additional latitude for regional plans that is not necessary to
provide for local plans. Our intent is to allow appropriate
redistribution of the estimated amounts so that plans' benchmark
estimates can be reconciled with the actual benchmark estimates and the
necessary modifications.
5. Calculation of Benchmarks (Sec. 422.258)
Proposed Sec. 422.258(a) implemented the new section 1853(j) of
the Act by providing a description of how benchmarks for local MA plans
are calculated. For a service area that is entirely within an MA local
area (county), the MA area-specific non-drug monthly benchmark amount
is equal to the monthly MA capitation rate for the local area. For a
service area that is in more than one MA local area, the benchmark
amount is calculated as a weighted average of the local MA monthly
capitation rates, using as weights the projected enrollment in each
county used to calculate the bid.
Proposed Sec. Sec. 422.258(b) and (c) implemented section 1858(f)
of the Act by providing a description of how regional MA plan
benchmarks are calculated. Each MA region will have a benchmark amount
that consists of two components: (1) the statutory component (based on
a weighted average of local area capitation rates in the MA region);
and (2) the plan bid component (based on the weighted average of
regional plans bids in the MA region). The purpose of the blend will be
to be more responsive to market conditions in the region by allowing
plan bids to influence the final benchmark amount.
Finally, the statutory component will be multiplied by the
statutory national market share, which is the number of MA eligibles in
the Nation who were not enrolled in an MA plan during the reference
month (the month in the previous year for which the most recent data on
MA eligibles is available) divided by the total number of MA eligibles
in the nation in the reference month. The plan-bid component will be
multiplied by the non-statutory market share, which is the number of MA
eligible in the nation who were enrolled in an MA plan during the
reference month divided by the total number of MA eligible in the
nation. These components will be added to yield the MA regional
benchmark.
Comment: One commenter recommended that we revise the first
sentence of Sec. 422.258(c)(4) to replace the references to ``plan(s)
offered in the region'' with ``regional plans offered in the region''
to clarify the plan-bid component of the regional benchmark is
[[Page 4653]]
calculated based only the regional plan bids, not all of the MA plan
bids in the region.
Response: We agree and have made this correction. We also made
technical corrections in Sec. 422.258(c) along the same lines to
further clarify this point. Finally, we made another change to the
proposed rule language at Sec. 422.258(c)(5)(i) to clarify further how
the plan bid component of the regional benchmark will be calculated. In
the final rule at Sec. 422.258(c)(5)(i), we delete the following
sentence from the proposed regulatory text because it states a specific
calculation for determining a plan's share of enrollment that is not
mandated at section 1858(f)(5)(B)(iii) of the Act: ``In that case, each
plan's share will be the plan's projected enrollment divided by the
total projected enrollment among all plans being offered in the
region.'' We delete this sentence to clarify that the statute allows us
to apply a factor based on plans' projected enrollment but does not
mandate a particular calculation.
6. Beneficiary Premiums (Sec. 422.262)
Proposed Sec. 422.262(a) would implement section 1854(b)(2)(A) of
the Act, and described the new methodology for calculating the MA
monthly basic beneficiary premium. This premium will now be determined
by comparing the unadjusted statutory non-drug bid amount (basic A/B
bid) to unadjusted benchmark amount. For an MA plan with a basic A/B
bid that is less than the appropriate unadjusted non-drug benchmark
amount, the basic beneficiary premium is zero. For an MA plan with a
basic A/B bid that is equal to or greater than the unadjusted non-drug
benchmark amount, the basic beneficiary premium is the amount by which
the bid amount exceeds the benchmark amount. All approved premiums must
be charged; that is, plans are not allowed to waive basic beneficiary
premiums.
Proposed Sec. 422.262(b) would implement section 1854(d)(4) of the
Act, which specifies that MA enrollees must be charged consolidated
monthly premiums. As intended by the Congress and as a part of our
efforts to simplify the process for beneficiaries, an MA enrollee will
pay a single premium consisting of the sum of all premiums a particular
plan charges its enrollees, which will be one or more of the following:
(1) the monthly basic beneficiary premium; (2) the monthly supplemental
premium; and (3) the MA monthly prescription drug premium. This process
will be in addition to the Part B premium payment process already in
place.
We clarified that in the case of an Medical Savings Account (MSA)
plan, there are no basic beneficiary premiums because we instead make a
deposit to the enrollee's MSA. MSA plans are high deductible insurance
policies, not managed care plans. The only beneficiary premium for an
MSA plan will be a supplemental premium.
Uniformity of premiums and cost-sharing.
The MMA did not change current law regarding uniformity of
premiums. Proposed Sec. 422.262(c) would implement section 1854(c) of
the Act, which specifies that, with the exception permitted under Sec.
422.106(d), the MA bid amount and beneficiary premiums may not vary
among individuals enrolled in the plan. Proposed Sec. 422.262(c)
continues current regulations now in subpart G at Sec. 422.304(b) that
cost sharing for basic and supplemental benefits may not vary among
individuals enrolled in an MA plan.
MA organizations offering local MA plans within segments of service
areas must submit separate bids for those segments that may have
different premiums and cost sharing. Section 1858(a)(1) of the Act
which specifies that regional MA plans may not have segmented service
areas.
Proposed Sec. 422.262(f) would implement section 1854(d)(2) of the
Act on beneficiary payment options. This provision gives enrollees the
option, at their discretion, of paying their MA consolidated premium
by: (1) having it deducted directly from their Social Security benefit
amount of from their Railroad Retirement Board or the Office of
Personnel Management benefit amount in the same manner that Part B
premium reductions are handled; (2) setting up an electronic funds
transfer; or (3) through other appropriate means CMS may identify,
including payment by an employer or under employment-based retiree
coverage on behalf of an employee, a former employee, or a dependent.
The MA organization may not impose a charge for individuals electing to
pay their premiums through a deduction from their Social Security
payments. In this final rule, we have consolidated subparagraphs (3)
and (4) of Sec. 422.262(f) to clarify that the other methods we may
specify for payment of premiums include those listed in the regulation.
Comment: One commenter requested that we allow intra-regional
benefit plan adjustments (that is, waiver of the requirement that plan
have a uniform benefit package for a service area, including plan
premiums and all applicable cost sharing) to ensure that regional PPO
plans are not placed at a competitive advantage or disadvantage versus
local plans due to rate variations within a plan's regional service
area. The commenter stated that overall, the intra-regional benefit
waiver would lead to greater participation in the regional PPO program
and, at the same time, would ensure local plans can continue
participation in areas with traditionally low reimbursement rates,
resulting in competition and increased access to health plans for
beneficiaries.
Response: We do not have the authority to waive the requirement at
section 1854(c) of the Act, which states that plan bids and premiums be
uniform for all members of a plan. Moreover, section 1858(a)(1) of the
Act explicitly disallows the application of section 1854(h) of the Act
to regional plans, which signals Congressional intention that there not
be variation in premium and cost sharing across segments within a
region. Therefore, at this time, we cannot allow variations in the plan
benefit package within the service area of regional MA plan.
Comment: Two commenters recommended that we provide an option for
an MA organization to waive the amount of premium that is the
difference between the MA-PD premium and the low-income premium subsidy
under Part D provided for in Sec. 423.780. The commenter believes that
this waiver would fit well within a safe harbor provided for in the
federal anti-kick back statute. The ability to waive premium would: (1)
allow dual eligibles to be auto-enrolled into their current Medicare
Advantage plan without the burden of an added premium that many of
these beneficiaries could not afford; and (2) provide more flexibility
for dual eligible enrollees to self-enroll into an MA-PD plan of their
choosing.
Response: If the commenter's reference to the ``MA-PD premium'' is
to the combined basic Part A and Part B beneficiary premium and the
Part D beneficiary premium charged by an MA-PD plan, then we must
emphasize that these two premiums are determined separately and under
different rules. When a plan's basic A/B bid is equal to or below its
benchmark, by law the plan is not allowed to charge a basic premium for
basic Part A and Part B benefits. When a plan's basic A/B bid is above
its benchmark, section 1854(a)(2)(A) of the Act states that this
difference is the monthly basic beneficiary premium. The basic
beneficiary premium cannot be waived.
Section 1854 of the Act does not provide for waiver of the basic
Part A and Part B premium for dual eligibles.
[[Page 4654]]
Subsidies for dual eligibles for coverage of medical benefits are set
forth under Title XIX of the Act. Moreover, special needs plans are
subject to the same bidding rules as other MA plans, in accordance with
sections 1854(a)(1)(A) and 1854(a)(6) of the Act. Therefore, we do not
have the authority to waive the basic beneficiary premium for dual
eligibles.
The Part D premium determination is discussed at Sec. 423.286. We
do not have the authority to waive the Part D premium for beneficiaries
eligible for a premium subsidy. If those beneficiaries eligible for
this subsidy enroll in a Part D plan or MA-PD plan that has a Part D
premium higher than the subsidy, then they owe this difference.
Comment: A commenter recommended that during the negotiation
process, MA organizations be allowed to reallocate rebate dollars to
reduce the Part D premium to the level of the low-income premium
subsidy benchmark.
Response: See Sec. 422.256 and the above response to comment in
this subpart of the preamble for a discussion on this issue.
Comment: Several commenters recommended that CMS and the Social
Security Administration not implement the provision that beneficiaries
may opt to have their premiums deducted from their Social Security
benefit amounts until the systems are fully in place to ensure that
payments will be made to MA organizations correctly and on a timely
basis. The concern is that without sufficient operational planning for
the development and testing of a new payment system, organizations will
not be paid enrollee premiums accurately and timely.
Response: We do not intend to delay the implementation of a
statutorily mandated provision that gives beneficiaries the option of
paying MA premiums by deducting the amounts from their Social Security
benefit amounts. However, we are confident that the development and
testing of a new payment system for accurate and timely payment of
plans is feasible by January 2006.
Comment: One commenter requested that we make clear that the MMA
language at section 1854(d)(2)(C) of the Act only prohibits MA plans
from imposing charges pertaining to choice of the premium payment
option if beneficiaries choose to have their premiums deducted from
their Social Security benefit checks. That is, the commenter wishes
that we make clear to beneficiaries that the statute does not prohibit
MA plans from imposing charges related to premium payment under other
payment options. The commenter therefore requested that we require MA
organizations to convey clearly to beneficiaries, and in writing, what
are the precise charges that will apply to other premium payment
options before the beneficiary makes a choice of how to pay plans
premiums.
Response: MA plans may not charge fees for late payment of the plan
premium or other types of processing fees because this would violate
the uniformity of premiums provision at section 1854(c) of the Act. For
example, we interpret the uniform premium provision to mean that plans
may not provide incentives to members to pay premiums in a certain
manner by offering lower processing fees (per section 1854(d)). See
Subpart B for a discussion of administrative remedies for non-payment
of premiums.
Comment: One commenter wanted to verify that beneficiaries may
still opt to pay their MA plan premiums directly to the plan.
Response: Enrollees in the MA plans may still choose to pay their
MA plan premiums directly to the plan.
Comment: Several commenters request that we remove for American
Indian/Alaska Natives (AI/AN) Tribes the barriers to paying their Part
B premiums under our current group payer rules, specifically rules
concerning the size of the group and switching an individual from
automatic deduction to group pay. The commenters maintained that
without these changes, it is unlikely that AI/AN individuals, who are
entitled to health care without cost sharing, will enroll in MA plans.
Response: The issue of payment of Part B premiums under our current
group payer rules is beyond the scope of this rulemaking.
7. Calculation of Savings (Sec. 422.264)
Proposed Sec. Sec. 422.264(a), (c), and (e) would implement
sections 1854(b)(3)(A)and (B) of the Act (for local plans) and sections
1854(b)(4)(A) and (B) of the Act (for regional plans) concerning
calculation of risk-adjusted basic A/B bids and risk-adjusted
benchmarks, which is the first step in determining whether an MA plan
has savings. The MMA gave the Secretary flexibility to determine
whether the risk adjustment factors to be applied to the benchmarks and
bids are determined on a State-wide basis for local plans, a region-
wide basis for regional plans, a plan-specific basis, or on the basis
of another geographic area.
Proposed Sec. Sec. 422.264(b) and (d) implement sections
1854(b)(3)(C) and (b)(4)(C) of the Act, respectively, on how to
determine the amount of savings for each local and regional MA plan (if
any) by calculating the amount by which the risk-adjusted benchmark
amount exceeds the risk-adjusted bid amount.
Comment: All commenters from the industry agreed plan savings
should be related to the risk profile of the enrollees. One important
reason for this policy is that the rebate will likely take the form of
supplemental benefits or reduced cost sharing and/or premiums. MA plans
with enrollees whose average risk score is higher will typically need
more revenue to provide the same level of supplemental benefits as a
plan whose enrollees have a lower average risk score. To accomplish
this objective, the adjustment to the benchmark and the bid that is
used for calculating the savings should be based on the risk score of
the particular plan.
Response: We agree with the commenters. For both local and regional
MA plans, the calculation of savings will be determined by applying the
plan average risk adjustment factor to the basic A/B bid and benchmark.
We have revised Sec. Sec. 422.264(c) and (e) to reflect this policy,
although we have left in regulation our discretion, as provided in the
statute, to select a method for calculating savings.
8. Beneficiary Rebates (Sec. 422.266)
Section 1854 (b)(1)(C) of the Act states that an MA plan with
savings (because the basic A/B bid is less than the benchmark) must
provide to the enrollee a monthly rebate equal to 75 percent of the
savings amount for that plan for the year. The remaining 25 percent of
the savings would be retained by the Medicare Trust Funds. If the plan
basic A/B bid is equal to or greater than the benchmark, the plan has
no savings and, thus, no rebate.
Proposed Sec. 422.266(b) provided, as set forth in section
1854(b)(1)(C)(ii) of the Act, that the beneficiary rebate could be
provided in the following forms: (1) some part or all of the rebate can
be credited toward the provision of supplemental health care benefits
(including additional health benefits not covered under original
Medicare; (2) a reduction in cost sharing for Parts A, B, and D
benefits, and/or a reduction in the premium for the mandatory
supplemental benefits); or (3) credited toward the prescription drug
premium or Part B premium.
Proposed Sec. 422.266(b)(1) provided that all rebate dollars must
be applied to a mandatory supplemental benefit. We interpret the
provision at section 1854(b)(1)(C)(i) of the Act that an MA plan must
provide to enrollees a rebate equal to 75 percent of savings to mean
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that rebate dollars must be provided to all enrollees in a plan.
Therefore, rebate dollars could not be used to fund optional
supplemental benefits because this would not guarantee that the plan is
providing every enrollee with the rebate dollars.
Although rebate dollars can only be used to fund a mandatory
supplemental benefit, a mandatory supplemental benefit may also be
funded by beneficiary premium dollars. That is, a plan with a rebate
may fund a mandatory supplemental benefit with rebate dollars only or
with a mixture of rebate and premium dollars.
The MA plan will be required to inform us about the form and amount
of the rebate and/or the actuarial value of the supplemental health
care benefits. Adjustments to the structure of the benefit package will
occur during the process of negotiating and approving bids detailed in
proposed Sec. 422.256.
If an MA organization elects to provide a rebate in the form of a
reduction in the beneficiary Part B premium for beneficiaries in a
particular plan, we will work with the Commissioner of Social Security
to provide the necessary information to the Commissioner to apply a
credit (as provided for under section 1840 of the Act) to reduce the
amount of the Part B premium to be charged under section 1839 of the
Act for each enrollee in that MA plan.
Comment: One commenter recommended that we revise proposed Sec.
422.266 to note that rebate dollars may be used both to pay for the
Part D premium and to provide supplemental drug coverage at no cost.
The commenter argued that this change is needed to clarify that MA
plans have the right to use rebate dollars to fund supplemental
prescription drug benefits at no cost to the beneficiary as part of the
basic Part D prescription drug benefit offered by the MA plan.
Response: We agree with the commenter, with one clarification. If
an MA-PD plan offers basic drug coverage under Part D, by definition at
Sec. 423.100, there is no supplemental drug benefit, and thus no
supplemental drug premium toward which to apply rebate dollars. If an
MA-PD plan offers enhanced alternative coverage under Part D, then the
plan must charge a premium for supplemental drug coverage. Per Sec.
422.266(b), supplemental drug coverage may consist of reductions in
Part D cost sharing and coverage of drugs not covered under Part D.
Section 1854(b)(2)(C) of the Act refers to the supplemental
beneficiary premium that is attributable to the provision of
supplemental health care benefits, less the amount of the rebate
applied to supplemental benefits. The supplemental beneficiary premium
is the estimated revenue required to offer the supplemental package,
which may include non-drug or drug supplemental benefits or both.
Therefore, when pricing a plan benefit package, MA organizations will
distinguish the cost of a Part D supplemental benefit from a non-drug
supplemental benefit.
We have changed the language at Sec. 422.266(b)(1) to clarify that
rebate dollars may be used to reduce the premium for either the non-
drug or drug portions of the supplemental benefit. We also have added
language clarifying that plans must distinguish the amount of rebate
applied to enhance original Medicare benefits from the rebate applied
to enhance Part D benefits. Rebate dollars may also be used to reduce
the basic Part D premium and the Part B premium.
Comment: One commenter requested that we allow MA organizations to
use rebate dollars to fund stabilization of their provider networks,
because recent improvements in provider compensation are not sufficient
to ensure stable provider networks.
Response: Proposed Sec. 422.266(b), which implements section
1854(b)(1)(C)(ii) of the Act establishes permissible uses of the
beneficiary rebate. The statute does not allow MA organizations to
apply rebate dollars to stabilize an MA plan's provider network.
9. Incorrect Collection of Premiums and Cost-Sharing for All Years
(Sec. 422.270)
Proposed Sec. 422.270, which is identical to the previous language
in the current MA regulations in subpart G at Sec. 422.309, sets out
procedures for situations in which an MA organization collects more
than the amount the plan is allowed to charge its enrollees.
Subpart G--Payments to Medicare Advantage Organizations
1. Basis and Scope (Sec. 422.300)
Proposed Sec. 422.300 set forth the basis and scope for the
revised subpart G, stating that it is based on sections 1853, 1854, and
1858 of the Act. It also indicated that the regulations in this subpart
set forth the requirements for making payments to MA organizations
offering local and regional MA plans, including calculation of MA
capitation rates and benchmarks, conditions under which payment is
based on plan bids, adjustments to capitation rates (including risk
adjustment), and other payment rules.
2. Monthly Payments (Sec. 422.304)
The MMA revised the payment methodology for MA plans beginning in
2006. We provided, in proposed Sec. 422.304(a), that, with the
exception of payments to MSA plans and payments for ESRD enrollees in
all other plans, we will make advance monthly payments to an MA
organization for each enrollee for coverage of original FFS benefits in
the plan payment area for a month, using a new bidding methodology
described in this subpart and subpart F.
The amount of our payment for an MA plan (except an MSA plan)
depends on the relationship of the plan basic A/B bid to the benchmark
amount. Section 422.304(a) described two payment tracks:
If the plan's risk-adjusted basic A/B bid is less than the
risk-adjusted benchmark, the plan's average per capita monthly savings
equals 100 percent of that difference, and the beneficiary is entitled
to a rebate of 75 percent of this plan savings amount.
If the plan's risk-adjusted plan basic A/B bid is equal to
the risk-adjusted benchmark, the plan has no savings and thus no
rebate, and we pay plans without rebates the benchmark for the
geographic service area.
If the plan's risk-adjusted basic A/B bid is greater than
the risk-adjusted benchmark, the plan has no rebate and to meet the
plan's revenue needs enrollees must pay a basic beneficiary premium
equal to the difference between the unadjusted basic A/B bid and the
unadjusted benchmark.
Under section 18