[Federal Register: February 25, 2005 (Volume 70, Number 37)]
[Notices]
[Page 9360-9362]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr25fe05-93]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
[CMS-4088-N]
Medicare Program; Part D Reinsurance Payment Demonstration
AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.
ACTION: Notice.
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SUMMARY: This notice informs interested Prescription Drug Plan (PDP)
sponsors and Medicare Advantage (MA) organizations of an opportunity to
participate in the Part D Reinsurance Payment Demonstration beginning
in contract year 2006.
FOR FURTHER INFORMATION CONTACT: Mark Newsom, (410) 786-3198;
mnewsom@cms.hhs.gov. Jennifer Harlow, (410) 786-4549;
jharlow@cms.hhs.gov.
Application Requirements: Organizations intending to offer a stand
alone prescription drug plan must submit an application in accordance
with the instructions found in the Solicitation for Applications from
Prescription Drug Plans posted on the CMS website on January 21,
2005.\1\ Organizations intending to offer a prescription drug benefit
in combination with a Medicare Advantage plan must submit a completed
Medicare Advantage Prescription Drug application in accordance with the
Solicitation for Applications from Medicare Advantage Sponsors posted
on the CMS Web site on January 21, 2005.\2\ Applications are due to CMS
on or before March 23, 2005.
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\1\ See http://www.cms.hhs.gov/pdps/. See section 2 of the
application.
\2\ Id.
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Eligible Organizations: All PDP sponsors may participate in option
one as described below.\3\ Medicare Advantage organizations offering
Prescription Drug Plans (MA-PD plans) are eligible to participate in
options one and two (as described below) \4\ with the exception of the
following: Program of All Inclusive Care for the Elderly (PACE), MA
employer only plans, and employer direct contract plans.
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\3\ See II(A) Demonstration Design--Two Part D Reinsurance
Options.
\4\ Id.
SUPPLEMENTARY INFORMATION:
I. Background
A. Legislative Authority
Section 402(a)(1)(A) of the Social Security Amendments of 1967
authorizes the Secretary to conduct demonstrations designed to test
whether methods of payment or reimbursement will have the effect of
increasing the efficiency and economy of programs without adversely
affecting the quality of those programs' services.
Section 402(b) of the Social Security Amendments of 1967 authorizes
the Secretary to waive requirements in title XVIII that relate to
reimbursement and payment in order to carry out demonstrations
authorized under section 402(a). Section 1860D-42(b) of the Act
provides that the provisions of section 402 of the Social Security
Amendments of 1967 apply with respect to Part D and Part C in the same
manner as they apply to Parts A and B, except that any reference with
respect to a trust fund in relation to an experiment or demonstration
project relating to prescription drug coverage under this part will be
deemed a reference to the Medicare Prescription Drug Account within the
Federal Supplementary Medical Insurance Trust Fund.
B. Issue
The Medicare Prescription Drug, Improvement, and Modernization Act
of 2003 (MMA) Conference Report notes that provisions of the new Part D
benefit
[[Page 9361]]
that relate to the out-of-pocket (OOP) threshold established in section
1860D-2(b)(4)(B) of the Social Security Act (the Act) may create a
disincentive for Part D plans to provide supplemental prescription drug
benefits through the enhanced alternative coverage option. Reinsurance
benefits provided for in the MMA are not available until this OOP
threshold is reached. The provision of supplemental coverage thus might
prevent Sponsors or MA organizations offering Part D benefits from
benefiting from reinsurance. This concern was also strongly voiced
among the commenters to the proposed rule.
The reinsurance demonstration proposal allows for a budget neutral
alternative payment approach, over a 5-year period, that may provide an
incentive for private sector plans to offer supplemental prescription
drug coverage to Medicare beneficiaries.
C. MMA Part D Reinsurance
Reinsurance begins at the annual OOP threshold, defined by section
1860D-2(b)(4)(B) of the Act and Sec. 423.104(d)(5)(ii) of 42 CFR as
$3,600 for 2006 (which, under the defined standard benefit, would equal
$5,100 in total drug expenditures). The enhanced alternative benefit
with supplemental coverage, as defined by 1860D-2(a)(2) of the Act and
Sec. 423.104(f)(1)(ii) of the regulation, could have the effect of
changing the catastrophic attachment point for reinsurance, or
preventing it from attaching altogether.
D. MMA Conference Committee
The MMA Conference Committee noted that ``the conditions under
which the government provides reinsurance subsidies may create
significant disincentives for private sector plans to provide
supplemental prescription drug coverage.'' \5\ To address this concern,
the conferees suggested use of Medicare demonstration authority to
``allow private sector plans maximum flexibility to design alternative
prescription drug coverage.'' \6\
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\5\ U.S. House of Representatives, 108th Congress (November 21,
2003). Medicare Prescription Drug, Improvement, and Modernization
Act of 2003 Conference Report to accompany H.R. 1. Report 108-391.
Washington DC: Government Printing Office. Available online at
http://www.gpoaccess.gov/serialset/creports/index.html.
\6\ Id.
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Our authority to conduct Medicare demonstrations is provided in
section 402 of the Social Security Amendments of 1967 (42 U.S.C. 1395b-
1). Under section 402(b), the Secretary is authorized to waive
requirements in title XVIII that relate to reimbursement and payment.
As noted above, this authority applies for Parts C and D in the same
manner as Parts A and B under the provision of section 1860D-42(b) of
the Act. The conferees specifically recommended that we demonstrate the
effect of filling in the gap in coverage by reimbursing participating
plans a capitated payment that is actuarially equivalent to the amount
that plans would otherwise receive from the government in the form of
specific reinsurance when an individual plan enrollee reaches the
catastrophic attachment point ($3,600 in OOP costs for 2006).\7\
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\7\ Id.
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The conferees specified that we are not permitted to waive the
minimum benefits provided by the plans.\8\
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\8\ Id.
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In summary, the MMA conference report urged CMS to conduct a
demonstration for the purposes of creating an incentive for plans to
offer supplemental benefits filling in the coverage gap. Consequently,
in the proposed rule published on August 3, 2004 (69 FR 46633), we
stated that we were considering establishing a demonstration to
evaluate possible ways of achieving extended coverage. During the
subsequent public comment period, we received support from key
stakeholders for conducting a demonstration in this area, and in the
final rule, we agreed to conduct this demonstration.
II. Provisions of the Notice
A. Demonstration Design
This reinsurance demonstration proposal represents an alternative
payment approach; however, unless specifically noted, all other Part D
rules will apply. This demonstration will be limited to a 5-year
period. Participation in this Part D reinsurance demonstration will
require the provision of supplemental benefits through an enhanced
alternative benefit package, as well as payment based on either one of
the two reinsurance options described below.\9\
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\9\ See Two Part D Reinsurance Options in this section.
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Enhanced Alternative Coverage: Under this Part D reinsurance
demonstration, eligible participants must provide supplemental benefits
through enhanced alternative coverage. Under Part D rules, enhanced
alternative coverage may include a supplemental benefit covering non-
Part D drugs, reducing cost sharing, increasing the initial coverage
limit, reducing the deductible, or any combination of these actions.
For this demonstration, however, the supplemental benefit may only fill
in part or all of the coverage gap. To clarify, other supplemental
benefits that are part of enhanced alternative coverage (as defined in
Sec. 423.104(f)) are not included in this demonstration. Thus, a PDP
Sponsor or MA organization offering an MA-PD plan under this
demonstration would provide coverage between the initial coverage limit
and the out of pocket threshold ($3,600 of True Out-of-Pocket (TrOOP)
in 2006). The coverage gap may be filled in part or completely. The
Sponsor or MA organization must provide catastrophic coverage.
Two Part D Reinsurance Options: Under our demonstration authority,
two Part D reinsurance options will be made available. Again, note that
unless otherwise stated, all other Part D payment rules apply.
Option One: Eligible PDP Sponsors, including organizations
offering MA-PD plans, could offer an enhanced alternative drug benefit
package and receive a capitated drug reinsurance payment, inaddition to
the normal direct subsidy, low income subsidy, and risk sharing
payments. This reinsurance payment would be capitated (instead of
specific reinsurance payments of 80 percent of drug costs after the
beneficiary incurred $3,600 in TrOOP drug costs). The plan specific
capitated reinsurance payment will be negotiated during the bidding
process.
Option Two: For organizations offering MA-PD plans that
use MA premium rebates to cover the additional cost of enhanced
alternative drug coverage, this option would permit enrollees to count
supplemental benefit payments toward meeting the TrOOP spending
requirement for Part D catastrophic coverage. For this option, all the
supplemental benefit must be funded by MA Part A and Part B rebate
dollars. To clarify, MA-PD plans may not include a supplemental premium
for the supplemental benefit under this option. This is because it is
not possible to distinguish A and B rebate dollars that would count
toward TrOOP under this option from beneficiary premium dollars that
would not count toward TrOOP.
For more details regarding the payment options one and two, please
see the Part D Reinsurance Payment Demonstration Fact Sheet on the CMS
Web sites http://www.cms.hhs.gov/pdps/ and http://www.cms.hhs.gov/researchers/demos/.
Bid Submission Process: PDP sponsors or MA organizations wishing to
participate will submit a bid following the bid submission protocol for
the Part D benefit. The bidding
[[Page 9362]]
process will be the same as for Part D, with the exception of including
information relating to the demonstration model selected. There will be
no additional burden associated with the submission of a bid.
B. Demonstration Evaluation Design
An evaluation of the CMS reinsurance demonstration will examine the
impacts on beneficiaries, PDP sponsors, and MA organizations. From the
beneficiary perspective, the analysis will focus on the availability
of, and enrollment in, enhanced alternative benefit packages offered by
PDP sponsors and MA organizations, as well as patterns of utilization
of enrollees. The evaluation will also explore the advantages and
disadvantages of participation from the organizations' perspectives.
C. Budget Neutrality
This demonstration must be budget neutral. This means that the
expected Medicare costs under the demonstration can be no more than
expected costs to the Medicare program in the absence of the
demonstration. In order to ensure budget neutrality, PDP sponsors and
MA organizations participating in the demonstration will have their
capitation payments offset. The amount will be dependent on the
demonstration reinsurance payment option chosen by the plan.
The CMS Office of the Actuary prepared an analysis of the
demonstration for CY 2006 and determined that this demonstration is
budget neutral if the capitated payments are reduced by at least $3.13
per member per year for option one and at least $7.57 per member per
year for option two. Budget neutrality could be at risk under this
demonstration if employer groups are allowed to participate, because
this demonstration could provide an incentive for employer groups to
drop their provision of drug coverage and encourage individuals to seek
coverage under Part D. Further, in order to ensure budget neutrality
for this demonstration initiative, we will consider prior year(s) of
data and bidding information in establishing capitation amounts. Note
that CY 2006 offsets are based on first-year impacts. The amounts shown
may increase annually in a similar manner as other Part D costs for the
duration of the demonstration.
III. Collection of Information Requirements
Other than a simple affirmation, as discussed below, no additional
data will be collected from plans for the purpose of this
demonstration.
Pursuant to this demonstration, plans must affirm to CMS that any
funding of premiums will not come from any respective employer or union
with whom the plan conducts business.
Whereas, this notice does not impose information collection and
record-keeping requirements, it does not need to be reviewed by the
Office of Management and Budget under the authority of the Paperwork
Reduction Act of 1995 (PRA). Further, it is not subject to the PRA as
stipulated under 5 CFR 1320.3(h)(1).
Authority: Section 402 of the Social Security Amendments of
1967.
Dated: February 11, 2005.
Mark B. McClellan,
Administrator, Centers for Medicare & Medicaid Services.
[FR Doc. 05-3621 Filed 2-18-05; 4:24 pm]
BILLING CODE 4120-01-P