[Federal Register: September 1, 2006 (Volume 71, Number 170)]
[Proposed Rules]
[Page 52014-52017]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr01se06-16]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Part 422
[CMS-4121-P]
RIN 0938-AO54
Medicare Program; Prohibition of Midyear Benefit Enhancements for
Medicare Advantage Organizations Offering Plans in Calendar Year 2007
and Subsequent Calendar Years
AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.
ACTION: Proposed rule.
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SUMMARY: This proposed rule would prohibit Medicare Advantage (MAs)
organizations, including organizations offering employer/union group
health plans (EGHPs) (that is, plans that enroll both beneficiaries and
employer/union members (plans open to general enrollment) and plans
that are not open to general enrollment), from making midyear changes
to nondrug benefits, premiums, and cost-sharing submitted in their
approved bids for a given contract year. Programs of all-inclusive care
for elderly (PACE) would not be subject to the provisions of this
proposed rule and could continue to offer enhanced benefits as
specified in our guidance for PACE plans.
DATES: To be assured consideration, comments must be received at one of
the addresses provided below, no later than 5 p.m. on October 31, 2006.
ADDRESSES: In commenting, please refer to file code CMS-4121-P. Because
of staff and resource limitations, we cannot accept comments by
facsimile (FAX) transmission.
You may submit comments in one of four ways (no duplicates,
please):
1. Electronically. You may submit electronic comments on specific
issues in this regulation to http://www.cms.hhs.gov/eRulemaking. Click
on the link ``Submit electronic comments on CMS regulations with an
open comment period.'' (Attachments should be in Microsoft Word,
WordPerfect, or Excel; however, we prefer Microsoft Word.)
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2. By regular mail. You may mail written comments (one original and
two copies) to the following address only:
Centers for Medicare & Medicaid Services, Department of Health and
Human Services, Attention: CMS-4121-P, P.O. Box 1850, Baltimore, MD
21244-1850.
Please allow sufficient time for mailed comments to be received
before the close of the comment period.
3. By express or overnight mail. You may send written comments (one
original and two copies) to the following address only: Centers for
Medicare & Medicaid Services, Department of Health and Human Services,
Attention: CMS-4121-P, Mail Stop C4-26-05, 7500 Security Boulevard,
Baltimore, MD 21244-1850.
4. By hand or courier. If you prefer, you may deliver (by hand or
courier) your written comments (one original and two copies) before the
close of the comment period to one of the following addresses. If you
intend to deliver your comments to the Baltimore address, please call
telephone number (410) 786-9994 in advance to schedule your arrival
with one of our staff members. Room 445-G, Hubert H. Humphrey Building,
200 Independence Avenue, SW., Washington, DC 20201; or 7500 Security
Boulevard, Baltimore, MD 21244-1850.
(Because access to the interior of the HHH Building is not readily
available to persons without Federal Government identification,
commenters are encouraged to leave their comments in the CMS drop slots
located in the main lobby of the building. A stamp-in clock is
available for persons wishing to retain a proof of filing by stamping
in and retaining an extra copy of the comments being filed.)
Comments mailed to the addresses indicated as appropriate for hand
or courier delivery may be delayed and received after the comment
period.
For information on viewing public comments, see the beginning of
the SUPPLEMENTARY INFORMATION section.
SUPPLEMENTARY INFORMATION:
Submitting Comments: We welcome comments from the public on all
issues set forth in this rule to assist us in fully considering issues
and developing policies. You can assist us by referencing the file code
CMS-4121-P and the specific ``issue identifier'' that precedes the
section on which you choose to comment.
Inspection of Public Comments: All comments received before the
close of the comment period are available for viewing by the public,
including any personally identifiable or confidential business
information that is included in a comment. We post all comments
received before the close of the comment period on the following Web
site as soon as possible after they have been received: http://www.cms.hhs.gov/eRulemaking.
Click on the link ``Electronic Comments on
CMS Regulations'' on that Web site to view public comments.
Comments received timely will also be available for public
inspection as they are received, generally beginning approximately 3
weeks after publication of a document, at the headquarters of the
Centers for Medicare & Medicaid Services, 7500 Security Boulevard,
Baltimore, Maryland 21244, Monday through Friday of each week from 8:30
a.m. to 4 p.m. To schedule an appointment to view public comments,
phone 1-800-743-3951.
FOR FURTHER INFORMATION CONTACT: Christopher McClintick (410) 786-4682.
I. Background
[If you choose to comment on issues in this section, please include
the caption ``Background'' at the beginning of your comments.]
Title II of the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 (MMA) (Pub. L. 108-173) made important
changes to the Medicare+Choice (M+C) program under Part C of Medicare
and renamed the program Medicare Advantage (MA). In the August 3, 2004
Federal Register (69 FR 46866), we published a proposed rule that set
forth the provisions that would implement Title II of the MMA.
Subsequently, in the January 28, 2005 Federal Register (70 FR 4588), we
published a final rule to implement our proposals. The changes that MMA
made to the MA program--
Provided for regional plans that have made private plan
options available to many more beneficiaries, especially those in rural
areas.
Expanded the number and type of plans provided for, so
that more beneficiaries can choose from Health Maintenance
Organizations (HMOs), Preferred Provider Organization (PPO) plans, and
Private Fee-for-Service (FFS) plans, and further authorized Medical
Savings Account (MSA) plans, if available where the beneficiary lives.
Enriched the range of benefit choices available to
enrollees including improved prescription drug benefits under the new
Medicare Part D.
Provided incentives to contracting health plans to create
specialized plans to coordinate and manage care in ways that
comprehensively serve those with complex and disabling diseases and
conditions.
Used competition among MA plans to improve service,
improve benefits, invest in preventive care, and hold costs down in
ways that attract enrollees.
Enhanced and stabilized payments to contracting
organizations, improved program design, introduced new flexibility for
plans, and reduced impediments to plan participation.
Advanced the goal of improving quality and increasing
efficiency in the overall health care system.
Over time, organizations offering MA plans will be under continued
competitive pressure to improve benefits, reduce premiums and cost
sharing, and improve networks and services in order to gain or retain
enrollees. In addition, we expect MA organizations offering 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.
In conjunction with the new Part D drug benefit required under
Title I of MMA, which was finalized in the January 28, 2005 Federal
Register (70 FR 4194), changes made in the MMA to 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.
Beginning in 2006, payments for local and regional MA plans are
based on amounts submitted in bids rather than on a statutory formula.
MA organizations offering health plans 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 nondrug
benefits (that is, original Medicare (Part A and Part B) benefits),
Part D basic prescription drugs, and supplemental benefits (including
reductions in cost sharing). For an MA plan's coverage of original
Medicare benefits, our payment to an MA organization depends on the
relationship of the plan's basic A/B bid to a ``benchmark'' amount
determined through a statutory formula (for regional
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plans the benchmark is based in part on bids submitted in the region).
For a plan with a basic A/B bid below its benchmark, we 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 pay the MA
organization the plan benchmark, adjusted by the individual enrollee's
risk factor. The MA organization is required to charge any difference
between its bid and the benchmark in the form of a premium.
II. Provisions of the Proposed Rule
[If you choose to comment on issues in this section, please include
the caption ``Provisions of the Proposed Regulations'' at the beginning
of your comments.]
In the August 3, 2004 Federal Register (69 FR 46866), we proposed
to prohibit MA organizations from offering midyear benefit enhancements
(MYBEs) that is, enhanced benefits or reductions in premiums or cost-
sharing amounts not specified in the approved bid for the calendar year
(CY) in question. In commenting on the August 3, 2004 proposed rule,
several commenters objected to our proposal to eliminate MYBEs. These
commenters believed that we could allow MYBEs without affecting the
integrity of the bidding process.
In the January 28, 2005 final rule (70 FR 4639), we noted that
under the previous M+C program, we permitted M+C organizations to offer
new plans midyear and to offer MYBEs to existing benefit packages. In
the final rule (70 FR 4640), we also noted that MYBEs ``* * * would be
a de facto adjustment to the benefit packages from which bids were
submitted earlier in the year.'' In our related final rule (published
January 28, 2005 (70 FR 4301)) implementing the Medicare prescription
drug benefit (Part D regulations), we stated that MYBEs ``* * * would
be de facto acknowledgement that the revenue requirements submitted by
the plan were overstated.'' We also note that the Part D regulations do
not permit MYBEs under any circumstances. Although we acknowledged that
MYBEs could threaten the integrity of the bidding process, in response
to comments on the August 3, 2004 proposed rule, we decided to permit
them on an interim basis under limited circumstances. Therefore, in the
January 28, 2005 final rule (70 FR 4640), we stated that we would
permit MYBEs to nondrug benefits only under the following
circumstances:
An MYBE can be effective no earlier than July 1 of the
contract year, and no later than September 1 of the contract year;
MA organizations cannot submit MYBE applications later
than July 31 of the contract year; and
Twenty-five percent of the value of the MYBE will be
retained by the government.
If the MYBE meets the circumstances described above, the requesting
MA organization--
Must ``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;'' and
Would be subject to CMS consideration of ``whether there
is a current year MYBE request when analyzing a plan's bid for the
following year.''
In the final rule, we exempted the program of all-inclusive care
for the elderly (PACE) plans and employer/union group health plans
(EGHPs) that are not open to general enrollment (that is, both the
``800 series'' employer-only plans and group plans where we contract
directly with the employer/union offering an MA product, now referred
to collectively as employer/union-only group waiver plans (EGWPs)) from
the new restrictions on MYBEs. As stated in the final rule (70 FR
4640), we exempted PACE 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. In the January 28, 2005 final
rule, we also noted that we did not believe that the competitive nature
of the bidding process was affected if benefit packages for PACE
organizations or EGHPs not open to general enrollment were adjusted
midyear in accordance with our guidance.
In addition, we stated (70 FR 4640) that we considered this policy
to be an interim policy ``for the initial years'' of the competitive
bidding system, and indicated we would ``review whether there is a
continuing need for this policy.'' We have reevaluated our MYBE policy
over the course of the first contract year of the new bidding process,
and believe that there is no longer a need for this interim policy. We
note that this policy was intended to assist MA organizations during
the initial phase of the new bidding process, while ensuring that
beneficiaries have a choice of plans. We believe the focus should now
be solely on ensuring the integrity of the bidding process established
by statute so that there will be an even playing field for
organizations and, as a result, a choice of health plan options for
beneficiaries.
We believe that continuing the current MYBE policy would threaten
the integrity of the competitive bidding process established by the
MMA. Under the bidding process, MA organizations compete with one
another by submitting plan bids that specify the revenue requirements
for offering the various components of their health plans. We believe
that permitting MYBEs could undermine the integrity of the competitive
bidding process as MA organizations, knowing that they could alter
their benefit packages after the bidding process was complete, could
misrepresent their actual costs to provide benefits (overbid) and
noncompetitively revise their benefit packages later in the year. More
specifically, we believe that MYBEs offered in July or September of the
contract year would be offered in a way primarily to attract
individuals in their initial coverage election period (ICEP). We
believe that such individuals are very attractive to MA organizations
because of their relatively low utilization (they are new to the
program and tend to be healthier) and because of their numbers
(nationally, over 100,000 individuals per month ``age-in'' to
Medicare). Additionally, we estimate that organizations planning on
revising their bids through MYBEs could overbid by approximately 2-3
percent in order to distinguish themselves from other plans later in
the year and attract ICEP beneficiaries.
Using the MYBE process in this manner would undermine the
competitive nature of the bidding process in two ways. First, it would
encourage overbidding, and second, it would penalize MA organizations
that do not attempt to ``game the system'' and which instead offer a
bid that more accurately represents their costs to offer benefits over
the full course of a contract year.
While it is too early in the MA program to quantify the percentage
of plans that we believe would use MYBEs to bolster plans later in the
year, we will gather data and incorporate our findings in our response
to public comment, as appropriate. We believe, however, that allowing
MYBEs in 2006 has served its purpose to ease the transition to the new,
more competitive MA program. We are equally convinced that our
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primary goal going forward must be to ensure, as mandated by statute,
that plans compete on an even playing field and that beneficiaries will
gain in terms of cost, plan choices, and generosity of benefits. We
believe we can help achieve this goal only if MYBEs are not permitted
in subsequent years.
Furthermore with respect to MYBEs, we do not believe that nondrug
benefits should be treated differently than Part D benefits. Similarly,
with respect to all EGHPs including EGWPs, we believe that the
integrity of the competitive bidding process overrides any possible
program benefit from MYBEs. Therefore beginning with CY 2007, we are
proposing that MA organizations, including all organizations offering
EGHPs, would not be permitted to make any midyear changes in benefits,
premiums, or cost-sharing, even under the circumstances in which these
types of changes were permitted in CY 2006. This includes EGHPs that
enroll both beneficiaries and employer/union members (in other words
plans open to general enrollment) and plans not open to general
enrollment. We note that programs of all-inclusive care for the elderly
(PACE) would be able to continue to offer MYBEs in accordance with our
guidance for PACE plans.
III. Response to Comments
Because of the large number of items of correspondence we normally
receive on Federal Register documents published for comment, we are not
able to acknowledge or respond to them individually. We will consider
all comments we receive by the date and time specified in the DATES
section of this preamble, and, when we proceed with a subsequent
document, we will respond to the comments in the preamble to that
document.
IV. Collection of Information Requirements
This document does not impose information collection and
recordkeeping requirements. Consequently, it need not be reviewed by
the Office of Management and Budget under the authority of the
Paperwork Reduction Act of 1995.
V. Regulatory Impact Statement
[If you choose to comment on issues in this section, please include
the caption ``Regulatory Impact Statement'' at the beginning of your
comments.]
We have examined the impact of this rule as required by Executive
Order 12866 (September 1993, Regulatory Planning and Review), the
Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96-354),
section 1102(b) of the Social Security Act, the Unfunded Mandates
Reform Act of 1995 (Pub. L. 104-4), and Executive Order 13132.
Executive Order 12866 directs agencies to assess all costs and
benefits of available regulatory alternatives and, if regulation is
necessary, to select regulatory approaches that maximize net benefits
(including potential economic, environmental, public health and safety
effects, distributive impacts, and equity). A regulatory impact
analysis (RIA) must be prepared for major rules with economically
significant effects ($100 million or more in any 1 year). This rule
does not reach the economic threshold and thus is not considered a
major rule. However, we are requesting comments regarding the possible
impact of our proposal to prohibit MYBEs.
The RFA requires agencies to analyze options for regulatory relief
of small businesses. For purposes of the RFA, small entities include
small businesses, nonprofit organizations, and small governmental
jurisdictions. Most hospitals and most other providers and suppliers
are small entities, either by nonprofit status or by having revenues of
$6 million to $29 million in any 1 year. Individuals and States are not
included in the definition of a small entity. The MA program, by having
both regional and local plans, provides an opportunity for health
insurance entities of all types and most sizes (but probably not below
the ``small'' insurance entity cutoff level defined by the SBA ($6
million), which is lower than appears viable for a comprehensive, risk-
bearing insurance plan) to participate. Therefore, we are not preparing
an analysis for the RFA because we have determined that this rule will
not have a significant economic impact on a substantial number of small
entities.
In addition, section 1102(b) of the Act requires us to prepare a
regulatory impact analysis if a rule may have a significant impact on
the operations of a substantial number of small rural hospitals. This
analysis must conform to the provisions of section 603 of the RFA. For
purposes of section 1102(b) of the Act, we define a small rural
hospital as a hospital that is located outside of a Metropolitan
Statistical Area and has fewer than 100 beds. We are not preparing an
analysis for section 1102(b) of the Act because we have determined that
this rule will not have a significant impact on the operations of a
substantial number of small rural hospitals.
Section 202 of the Unfunded Mandates Reform Act of 1995 also
requires that agencies assess anticipated costs and benefits before
issuing any rule whose mandates require spending in any 1 year of $100
million in 1995 dollars, updated annually for inflation. That threshold
level is currently approximately $120 million. This rule will have no
consequential effect on State, local, or tribal governments or on the
private sector.
Executive Order 13132 establishes certain requirements that an
agency must meet when it promulgates a proposed rule (and subsequent
final rule) that imposes substantial direct requirement costs on State
and local governments, preempts State law, or otherwise has Federalism
implications. Since this regulation does not impose any costs on State
or local governments, the requirements of E.O. 13132 are not
applicable.
In accordance with the provisions of Executive Order 12866, this
regulation was reviewed by the Office of Management and Budget.
(Catalog of Federal Domestic Assistance Program No. 93.773,
Medicare--Hospital Insurance; and Program No. 93.774, Medicare--
Supplementary Medical Insurance Program)
Dated: May 5, 2006.
Mark B. McClellan,
Administrator, Centers for Medicare & Medicaid Services.
Approved: June 12, 2006.
Michael O. Leavitt,
Secretary.
[FR Doc. 06-7394 Filed 8-31-06; 8:45 am]
BILLING CODE 4120-01-P