[Federal Register Volume 74, Number 203 (Thursday, October 22, 2009)]
[Proposed Rules]
[Pages 54634-54737]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-24756]
[[Page 54633]]
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Part II
Department of Health and Human Services
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Centers for Medicare & Medicaid Services
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42 CFR Parts 417, 422, 423 et al.
Medicare Program; Policy and Technical Changes to the Medicare
Advantage and the Medicare Prescription Drug Benefit Programs; Proposed
Rule
Federal Register / Vol. 74, No. 203 / Thursday, October 22, 2009 /
Proposed Rules
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Parts 417, 422, 423, and 480
[CMS-4085-P]
RIN 0938-AP77
Medicare Program; Policy and Technical Changes to the Medicare
Advantage and the Medicare Prescription Drug Benefit Programs
AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.
ACTION: Proposed rule.
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SUMMARY: We are proposing revisions to the Medicare Advantage (MA)
program (Part C) and prescription drug benefit program (Part D) based
on our continued experience in the administration of the Part C and D
programs. The proposed revisions clarify various program participation
requirements; specify changes to strengthen beneficiary protections;
ensure that plan offerings to beneficiaries include meaningful
differences; improve plan payment rules and processes; and implement
new policy such as a Part D formulary policy.
DATES: To be assured consideration, comments must be received at one of
the addresses provided below, no later than 5 p.m. Eastern Standard
Time (EST) on December 8, 2009.
ADDRESSES: In commenting, please refer to file code CMS-4085-P. Because
of staff and resource limitations, we cannot accept comments by
facsimile (FAX) transmission.
You may submit comments in one of four ways (please choose only one
of the ways listed):
1. Electronically. You may submit electronic comments on this
regulation to http://www.regulations.gov. Follow the instructions under
the ``More Search Options'' tab.
2. By regular mail. You may mail written comments to the following
address ONLY: Centers for Medicare & Medicaid Services, Department of
Health and Human Services, Attention: CMS-4085-P, P.O. Box 8013,
Baltimore, MD 21244-8013.
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 to
the following address ONLY: Centers for Medicare & Medicaid Services,
Department of Health and Human Services, Attention: CMS-4085-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 before the close of the comment period
to either of the following addresses: a. For delivery in Washington,
DC--Centers for Medicare & Medicaid Services, Department of Health and
Human Services, Room 445-G, Hubert H. Humphrey Building, 200
Independence Avenue, SW., Washington, DC 20201.
(Because access to the interior of the Hubert H. Humphrey 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.)
b. For delivery in Baltimore, MD--Centers for Medicare & Medicaid
Services, Department of Health and Human Services, 7500 Security
Boulevard, Baltimore, MD 21244-1850.
If you intend to deliver your comments to the Baltimore address,
please call telephone number (410) 786-7195 in advance to schedule your
arrival with one of our staff members.
Comments mailed to the addresses indicated as appropriate for hand
or courier delivery may be delayed and received after the comment
period.
Submission of comments on paperwork requirements. You may submit
comments on this document's paperwork requirements by following the
instructions at the end of the ``Collection of Information
Requirements'' section in this document.
For information on viewing public comments, see the beginning of
the SUPPLEMENTARY INFORMATION section.
FOR FURTHER INFORMATION CONTACT:
Alissa Deboy, (410) 786-6041, General information and Part D
issues.
Sabrina Ahmed, (410) 786-7499, Part C issues.
Chris Eisenberg, (410) 786-5509, Risk adjustment data validation
issues.
Terry Lied, (410) 786-8973, Collection of information requirements
and regulatory impact analysis issues.
Kristy Nishimoto, (410) 786-8517, Part C and D enrollment and
appeals issues.
Christine Reinhard, (410) 786-2987, Part C and D compliance and
sanction issues.
Frank Szeflinski, (303) 844-7119, Part C payment issues.
SUPPLEMENTARY INFORMATION: 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.regulations.gov. Follow the search instructions 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.
Table of Contents
I. Background
A. Overview of the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003
B. History and Overview
II. Provisions of the Proposed Regulation
A. Changes To Strengthen Our Ability To Distinguish for Approval
Stronger Applicants for Part C and D Program Participation and To
Remove Consistently Poor Performers
1. Require Notice of Intent To Apply Under Part C and D Within
the Application Requirements (Sec. 422.501 and Sec. 423.502)
2. Application Requirements (Sec. 422.501(c) and Sec.
423.502(c)) and Evaluation and Determination Procedures for
Determining Whether Applicants Are Qualified for a Contract Under
Parts C and D (Sec. 422.502 and Sec. 423.503)
3. Deny Contract Qualification Applications Based on Past
Contract Performance (Sec. 423.750 and Sec. 422.750)
4. Use of Data To Evaluate Continued Ability To Act as a
Qualified Sponsoring Organization Under Parts C and D (Sec.
422.504, and Sec. 423.505)
5. Compliance Programs Under Part C and D (Sec.
422.503(b)(4)(vi) and Sec. 423.504(b)(4)(vi))
6. Network Adequacy of Coordinated Care and Network-Based
Private Fee-for-Service Plans Under Part C (Sec. 422.112)
7. Deemable Program Requirements Under Parts C and D (Sec.
422.156(b)(7), Sec. 422.156(f), Sec. 423.165(b), and Sec.
423.165(f))
8. Modify the Corrective Action Plan (CAP) Process as It Relates
to Procedures for Termination and Nonrenewal of a Part C or D
Contract by CMS (Sec. 422.506(b)(3), Sec. 422.510(c)(1), Sec.
423.507(b)(3), and Sec. 423.509(c)(1))
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9. Procedures for Imposing Intermediate Sanctions and Civil
Money Penalties Under Part C and D (Sec. 422.756 and 423.756)
10. Termination of Contracts Under Parts C and D (Sec.
422.510(a) and Sec. 423.509(a))
11. Request for Hearing Under Parts C and D (Sec. 422.662 and
Sec. 423.651)
12. Burden of Proof, Standard of Proof, Standard of Review and
Conduct of Hearing (Sec. 422.660, Sec. 423.650, Sec. 422.676 and
Sec. 423.658)
13. Expedited Contract Terminations Procedures (Sec. 422.510,
Sec. 423.509, Sec. 422.664, Sec. 423.652, Sec. 422.644, and
Sec. 423.642) Under Parts C and D
14. Time and Place of Hearing Under Parts C and D (Sec. 422.670
and Sec. 423.655)
15. Discovery Under Parts C and D (Sec. 422.682 and Sec.
423.661)
16. Review by the Administrator Under Parts C and D Sec.
422.692(a) and Sec. 423.666(a))
17. Reopening of an Initial Contract Determination or Decision
of a Hearing Officer or the Administrator Under Parts C and D (Sec.
422.696 and Sec. 423.668)
18. Prohibition of MA and Part D Applications for 2 Years After
a Mutual Termination Sec. 422.503(b)(6) and Sec. 423.504(b)(5))
B. Changes To Strengthen Beneficiary Protections
1. Broker and Agent Requirements Under Parts C and D
2. Beneficiary Communications Materials Under Parts C and D
(Sec. 422.2260, Sec. 423.2262, Sec. 423.2260, and Sec. 423.2262)
3. Required Use of Standardized Model Materials Under Parts C
and D (Sec. 422.2262, and Sec. 423.2262)
4. Involuntary Disenrollment for Failure To Pay Plan Premiums
Under Parts C and D (Sec. 422.74 and Sec. 423.44)
5. Maximum Allowable Out-of-Pocket Cost Amount for Medicare
Parts A and B Services (Sec. 422.100)
6. Maximum Allowable Cost Sharing Amount for Medicare Parts A
and B Services and Prescription Drugs (Sec. 422.100 and Sec.
423.104)
7. Prohibition on Prior Notification by PPO, PFFS, and MSA Plans
Under Part C (Sec. 422.2, Sec. 422.4, and Sec. 422.105)
8. Requirements for LIS Eligibility Under Part D (Sec. 423.773)
9. Enrollment of Full Subsidy Eligible Individuals and Other
Subsidy Eligible Individuals Under Part D (Sec. 423.34)
10. Special Enrollment Periods Under Part D (Sec. 423.380)
11. Transition Process Under Part D (Sec. 423.120(b)(3))
12. Part D Sponsor Responsibility for Retroactive Claims
Adjustment Reimbursements and Recoveries Under Part D (Sec.
423.464)
13. Time Limits for Coordination of Benefits (Sec. 423.466)
14. Use of Standardized Technology Under Part D (Sec. 423.120)
15. Absence From Service Area for More Than 12 Months Under Part
D (Sec. 423.44)
16. Prohibition of Mid Year Mass Enrollment Changes by SPAPS
Under Part D (Sec. 423.464(e))
17. Non-renewal Beneficiary Notification Requirement Under Parts
C and D (Sec. 422.506 and Sec. 423.507)
18. Notice of Alternative Medicare Plans Available To Replace
Non-renewing Plans Under Parts C and D (Sec. 422.506(a)(2)(ii) and
Sec. 423.507(a)(2)(ii))
19. Timeframes and Responsibilities for Making Redeterminations
Under Part D (Sec. 423.590)
20. Requirements for Requesting Organization Determinations
Under Part C (Sec. 422.568)
21. Organization Determinations Under Part C (Sec. 422.566 and
Sec. 422.568)
22. Representatives (Sec. 422.561, Sec. 422.574 and Sec.
422.624)
23. Disclosure Requirements Under Parts C and D (Sec.
422.111(g) and Sec. 423.128(f))
24. Definition of MA Plan Service Area (Sec. 422.2)
C. Changes To Provide Plan Offerings With Meaningful Differences
1. Bid Submissions--Ensuring Significant Differences (Sec.
422.254 and Sec. 423.265)
2. Bid Review Process (Sec. 422.256 and Sec. 423.272)
3. Transition Process in Cases of Acquisitions and Mergers
(Sec. 422.256 and Sec. 423.272)
4. Non-renewing Low-enrollment Plans (Sec. 422.506(b)(1)(iv)
and Sec. 423.507(b)(1)(iii))
D. Changes To Improve Payment Rules and Processes
1. Risk Adjustment Data Validation Appeals (Sec. 422.310)
a. Background
b. Risk Adjustment Data Validation Initiatives
c. RADV Error Rate Calculation Disputes and Reconsiderations
d. Proposed Addition of Medicare Advantage Organization Risk
Adjustment Data Validation-Dispute and Appeals Procedures
2. Payments to Medicare Advantage Organizations--Actuarial
Valuation (Sec. 422.254)
3. Determination of Acceptable Administrative Cost by Cost
Contract and Health Care Prepayment Plans (Sec. 417.564)
4. Calculation of the Minimum Percentage Increase Under Part C
(Sec. 422.306)
E. Changes To Improve Data Collection for Oversight and Quality
Assessment
1. Requirements for Quality Improvement Programs Under Part C
(Sec. 422.152, Sec. 422.153, and Sec. 480.140)
a. Quality Improvement Programs
b. New Quality Measures
c. Use of Quality Improvement Organization Review Information
2. CAHPS Survey Administration Under Parts C and D (Sec.
417.472, Sec. 422.152 and Sec. 423.156)
3. Validation of Part C and Part D Reporting Requirements (Sec.
422.516 and Sec. 423.514)
4. Collection of Additional Part D Claims' Elements for
Nonpayment-Related Purposes (Sec. 423.505)
F. Changes To Implement New Policy
1. Protected Classes of Concern Under Part D (Sec.
423.120(b)(2)(v))
2. Pro-rating the Plan Deductible for Part C MSA Enrollments
Occurring During an Initial Coverage Election Period (Sec. 422.103)
G. Changes To Clarify Various Program Participation Requirements
1. Uniform Benefits Under Parts C and D (Sec. 422.100(d) and
Sec. 423.104))
2. Ensuring the Security of Personal Health Information and
Other Personally Identifiable Information (Sec. 422.504 and Sec.
423.505)
3. Requirement for Sponsoring Organizations Under Parts C and D
To Report Other Payer Information to the Coordination of Benefits
Contractor (Sec. 422.108 and Sec. 423.464)
4. Visitor/Traveler Benefit Under Part C for the Purpose of
Extending Enrollment Up to 12 Months (Sec. 422.74)
5. Medication Therapy Management Programs Under Part D (Sec.
423.153(d))
6. Formulary Requirements-Development and Revision by a Pharmacy
and Therapeutics Committee (Sec. 423.120)
7. Generic Equivalent Disclosure Under Part D (Sec. 423.132)
8. Access to Covered Part D Drugs (Sec. 423.120)
9. Standard Timeframe and Notice Requirements for Coverage
Determinations Under Part D (Sec. 423.568)
10. Expediting Certain Coverage Determinations (Sec. 423.570)
11. Timeframes and Notice Requirements for Expedited Coverage
Determinations (Sec. 423.572)
12. Clarify Novation Agreements Under Part D (Sec. 423.551)
13. Cost Contract Program Revisions: Appeals and Marketing
Requirements (Sec. 417.428, Sec. 417.494, Sec. 417.500, and Sec.
417.640)
14. Appeals Processes for Contract Determinations, Intermediate
Sanctions, and Civil Money Penalties
a. Contract Determinations (Sec. 417.492 and 417.494)
b. Civil Money Penalties (Sec. 417.500)
c. Intermediate Sanctions (Sec. 417.500)
15. Extending MA Marketing Requirements to Cost Program Plans
(Sec. 417.428)
a. Definitions Concerning Marketing Materials (Sec. 422.2260)
b. Review and Distribution of Marketing Materials (Sec.
422.2262)
c. Guidelines for CMS Review (Sec. 422.2264)
d. Deemed Approval (Sec. 422.2266)
e. Standards for MA Organization Marketing (Sec. 422.2268)
f. Licensing of Marketing Representatives and Confirmation of
Marketing Resources (Sec. 422.2272)
g. Broker and Agent Requirements (Sec. 422.2274)
H. Changes To Implement Corrections and Other Technical Changes
1. Application of Subpart M to Health Care Prepayment Plans
(Sec. 417.840)
2. Generic Notice Delivery Requirements (Sec. 422.622 and
422.626)
3. Revision to Definition of Gross Covered Prescription Drug
Costs (Sec. 423.308)
4. Application Evaluation Procedures (Sec. 422.502(c and d) and
Sec. 423.503(c and d))
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5. Intermediate Sanctions (Sec. 422.750(a) and Sec.
423.750(a))
6. Basis for Imposing Intermediate Sanctions and Civil Money
Penalties (Sec. 422.752 and Sec. 423.752)
III. Collection of Information Requirements
A. ICRs Regarding Basic Contract Requirements (Sec. 417.472)
B. ICRs Regarding Apportionment and Allocation of Administrative
and General Costs (Sec. 417.564)
C. ICRs Regarding Medicare Secondary Payer (MSP) Procedure
(Sec. 422.108 and Sec. 423.462)
D. ICRs Regarding Disclosure Requirements (Sec. 422.111)
E. ICRs Regarding Quality Improvement Program (Sec. 422.152)
F. ICRs Regarding RADV Audit Dispute and Appeal Processes (Sec.
422.311)
G. ICRs Regarding Application Requirements (Sec. 422.501 and
Sec. 423.502)
H. ICRs Regarding General Provisions (Sec. 422.503 and Sec.
423.504)
I. ICRs Regarding Contract Provisions (Sec. 422.504 and
423.505)
J. ICRs Regarding Nonrenewal of Contract (Sec. 422.506 and
Sec. 423.507)
K. ICRs Regarding Request for Hearing (Sec. 422.662 and Sec.
423.651)
L. ICRs Regarding Time and Place of Hearing (Sec. 422.670 and
Sec. 423.655)
M. ICRs Regarding Review by the Administrator (Sec. 422.692 and
Sec. 423.666)
N. ICRs Regarding Procedures for Imposing Intermediate Sanctions
and Civil Monetary Penalties (Sec. 422.756 and Sec. 423.756)
O. ICRs Regarding Disclosure of Part D Plan Information (Sec.
423.128)
P. ICRs Regarding Consumer Satisfaction Surveys (Sec. 423.156)
Q. ICRs Regarding Validation of Part C and Part D Reporting
Requirements (Sec. 422.516 and Sec. 423.514)
R. ICRs Regarding Drug Utilization Management, Quality
Assurance, and Medication Therapy Management Programs (MTMPs) (Sec.
423.153)
S. ICRs Regarding Timeframes and Notice Requirements for
Standard Coverage Determinations (Sec. 423.568)
T. ICRs Regarding Timeframes and Notice Requirements for
Expedited Coverage Determinations (Sec. 423.572)
U. ICRs Regarding Access to Covered Part D Drugs (Sec. 423.120)
V. ICRs Regarding Timeframes and Responsibility for Making
Redeterminations (Sec. 423.590)
W. Annual Information Collection Burden
IV. Response to Public Comments
V. Regulatory Impact Analysis
A. Overall Impact
B. Increase in Costs to MA Organizations and Part D Sponsors
C. Expected Benefits
D. Analysis by Provision
E. Anticipated Effects
1. Effects of Cap on Out-of-Pocket Costs and Cost Sharing
Amounts
2. Alternatives Considered
a. Strengthening CMS' Ability To Take Timely, Effective Contract
Determinations or Intermediate Sanctions (Part C & D)
b. Changing the Standards of Review, Clarifying the Standard of
Proof and Burden of Proof for Appeals, and Modifying the Conduct of
Hearing for Contract Decisions (Including Denials of Initial
Applications to Contract, Service Area Expansions for Existing
Contracts, Contract Non-Renewals and Terminations, and Intermediate
Sanctions)
c. Clarify That CMS May Require a ``Test Period'' During an
Enrollment/Marketing Sanction
d. Right for CMS To Require an Independent Audit of Sponsoring
Organizations Under Intermediate Sanction
e. The Ability for CMS To Require Sponsors To Disclose to
Current and Potential Enrollees Compliance and Performance
Deficiencies
f. Section 176 of MIPPA--Formulary and Protected Classes
Requirements (Part D)
g. Reducing Duplicative and Low Enrollment Plans (Parts C & D)
h. Validation of Part C and Part D Reporting Requirements
F. Accounting Statement
G. Conclusion
Regulations Text
Acronyms
AO Accrediting Organization
ADS Automatic Dispensing System
AEP Annual Enrollment Period
AHFS-DI American Hospital Formulary Service
AHFS-DI American Hospital Formulary Service-Drug Information
AHRQ Agency for Health Care Research and Quality
ALJ Administrative Law Judge
BBA Balanced Budget Act of 1997 (Pub. L. 105-33)
BBRA [Medicare, Medicaid and State Child Health Insurance Program]
Balanced Budget Refinement Act of 1999 (Pub. L. 106-113)
BIPA Medicare, Medicaid, and SCHIP Benefits Improvement Protection
Act of 2000 (Pub. L. 106-554)
CAHPS Consumer Assessment Health Providers Survey
CAP Corrective Action Plan
CCIP Chronic Care Improvement Program
CMR Comprehensive Medical Review
CMP Civil Money Penalties
CMR Comprehensive Medical Review
CMS Centers for Medicare & Medicaid Services
CMS-HCC CMS Hierarchal Condition Category
CTM Complaints Tracking Module
COB Coordination of Benefits
CORF Comprehensive Outpatient Rehabilitation Facility
CY Calendar year
DOL U.S. Department of Labor
DRA Deficit Reduction Act of 2005 (Pub. L. 109-171)
EGWP Employer Group/Union-Sponsored Waiver Plan
EOB Explanation of Benefits
ESRD End-stage renal disease
FACA Federal Advisory Committee Act
FDA Food and Drug Administration (HHS)
FEHBP Federal Employees Health Benefits Plan
FFS Fee-For-Service
FY Fiscal year
GAO Government Accountability Office
HCPP Health Care Prepayment Plans
HEDIS HealthCare Effectiveness Data and Information Set
HHS [U.S. Department of] Health and Human Services
HIPAA Health Insurance Portability and Accountability Act of 1996
(Pub. L. 104-191)
HMO Health Maintenance Organization
HOS Health Outcome Survey
HPMS Health Plan Management System
ICD-9-CM Internal Classification of Disease, 9th, Clinical
Modification Guidelines
ICEP Initial Coverage Enrollment Period
ICL Initial Coverage Limit
ICR Information Collection Requirement
LEP Late Enrollment Penalty
LIS Low Income Subsidy
LTC Long Term Care
LTCF Long Term Care Facility
MA Medicare Advantage
MAAA American Academy of Actuaries
MAO Medicare Advantage Operations
MA-PD Medicare Advantage-Prescription Drug Plans
M+C Medicare+Choice program
MPDPF Medicare Prescription Drug Plan Finder
MIPPA Medicare Improvements for Patients and Providers Act of 2008
MMA Medicare Prescription Drug, Improvement, and Modernization Act
of 2003 (Pub. L. 108-173)
MSA Metropolitan Statistical Area
MSAs Medical Savings Accounts
MSP Medicare Secondary Payer
MTM Medication Therapy Management
MTMP Medication Therapy Management Programs
NAIC National Association Insurance Commissioners
NCPDP National Council for Prescription Drug Programs
NGC National Guideline Clearinghouse
NIH National Institutes of Health
NOMNC Notice of Medicare Non-coverage
OEP Open Enrollment Period
OIG Office of Inspector General
OMB Office of Management and Budget
OPM Office of Personnel Management
OTC Over the Counter
PART C Medicare Advantage
PART D Medicare Prescription Drug Benefit Programs
PBM Pharmacy Benefit Manager
PDE Prescription Drug Event
PDP Prescription drug plan
PFFS Private Fee For Service Plan
POS Point of Service
PPO Preferred Provider Organization
PPS Prospective Payment System
P&T Pharmacy & Therapeutics
QIO Quality Improvement Organization
QRS Quality Review Study
PACE Programs of All Inclusive Care for the Elderly
RAPS Risk Adjustment Payment System
RADV Risk Adjustment Data Validation
SCHIP State Children's Health Insurance Programs
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SEP Special Enrollment Periods
SHIP State Health Insurance Assistance Programs
SNF Skilled Nursing Facility
SNP Special Needs Plan
SPAP State Pharmaceutical Assistance Programs
SSI Supplemental Security Income
TrOOP True Out Of Pocket
U&C Usual and Customary
USP U.S. Pharmacopoeia
I. Background
A. Overview of the 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. The
MMA established the Part D program and made revisions to the provisions
in Part C of the Medicare statute governing the Medicare Advantage (MA)
program. The MMA directed that important aspects of the new Medicare
prescription drug benefit program under Part D be similar to and
coordinated with regulations for the MA program.
The MMA also directed implementation of the prescription drug
benefit and revised MA program provisions effective January 1, 2006.
The final rules for the MA and Part D prescription drug programs
appeared in the Federal Register on January 28, 2005 (70 FR 4588-4741
and 70 FR 4194-4585, respectively). Many of the provisions relating to
applications, marketing, contracts, and the new bidding process for the
MA program became effective on March 22, 2005, 60 days after
publication of the rule, so that the requirements for both programs
could be implemented by January 1, 2006. All of the provisions
regarding the new Part D prescription drug program became effective on
March 22, 2005.
As we have gained more experience with the MA program and the
prescription drug benefit program, we have revised the Part C and D
regulations to continue to improve or clarify existing policies and/or
codify current guidance for both programs. For example, in December
2007, we published a final rule with comment on contract determinations
involving Medicare Advantage (MA) organizations and Medicare Part D
prescription drug plan sponsors (72 FR 68700). In April 2008, we
published a final rule to address policy and technical changes to the
Part D program (73 FR 20486). In September 2008 and January 2009, we
finalized revisions to both the Medicare Advantage and prescription
drug benefit programs (73 FR 54226 and 74 FR 1494, respectively) to
implement provisions in the Medicare Improvement for Patients and
Providers Act (MIPPA) (Pub. L.110-275), which contained provisions
impacting both the Medicare Part C and D programs, and make other
policy clarifications based on experience with both programs (73 FR
54208, 73 FR 54226, and 74 FR 2881).
Under this proposed rule, we have identified additional
programmatic and operational changes (outlined below) that we believe
are needed in order to further improve our oversight and management of
the Part C and D programs and to further improve beneficiary experience
under MA or Part D plans.
B. History and Overview
The Balanced Budget Act of 1997 (BBA) (Pub. L. 105-33) established
a new ``Part C'' in the Medicare statute (sections 1851 through 1859 of
the Social Security Act (the Act)) which provided for what was then
called 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 most 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. The
M+C provisions in Part C were amended by the Medicare, Medicaid, and
SCHIP Balanced Budget Refinement Act of 1999 (BBRA) (Pub. L. 106-111),
and further amended by the Medicare, Medicaid, and State Children's
Health Insurance Program (SCHIP) Benefits Improvement Act of 2000
(BIPA) (Pub. L. 106-554).
As noted previously, the MMA was enacted on December 8, 2003. Title
I of the MMA added a new ``Part D'' to the Medicare statute (sections
1860D-1 through 42 of the Act) creating the Medicare Prescription Drug
Benefit Program, one of the most significant changes to the Medicare
program since its inception in 1965. Sections 201 through 241 of Title
II of the MMA made significant changes to the M+C program. Title II of
the MMA renamed the M+C program as the MA program and included new
payment and bidding provisions, new regional MA plans and special needs
plans, reestablished authority for medical savings account (MSA) plans
that had been provided in the BBA on a temporary basis, addressed
private fee-for-service plans, and made other changes. Title I of the
MMA created prescription drug benefits under Medicare Part D, and a new
retiree drug subsidy program.
Both the MA and prescription drug benefit regulations were
published separately, as proposed and final rules, though their
development and publication were closely coordinated. On August 3,
2004, we published in the Federal Register proposed rules for the MA
program (69 FR 46866 through 46977) and the prescription drug benefit
program (69 FR 46632 through 46863). In response to public comments on
the proposed rules, we made several revisions to the proposed policies
for both programs. For further discussion of these revisions, see the
respective final rules (70 FR 4588 through 4741) and (70 FR 4194
through 4585).
Also as noted above, MIPPA was enacted on July 15, 2008, which
addressed a number of provisions impacting the Part C and D programs,
including provisions impacting marketing under both programs. In the
September 18, 2008 Federal Register (73 FR 54208), we published a final
rule that finalized certain marketing provisions, effective October 1,
2008, that paralleled provisions in MIPPA. In the same issue of the
Federal Register (73 FR 54226), we published a separate interim final
rule that addressed the other provisions of MIPPA affecting the MA and
Part D programs. We also clarified the MIPPA marketing provisions in a
November 2008 interim final rule (73 FR 67407 and issued a separate
interim final rule in January 2009 to address MIPPA provisions related
to Part D plan formularies (74 FR 2881).
Now, with almost four years' experience behind us, we are proposing
further revisions to these programs affecting both beneficiaries and
sponsoring organizations.
When the MMA required that the Part D benefit afford each enrollee
a minimum of two choices in each plan region, few if any envisioned the
overwhelming response from the healthcare industry would result in most
beneficiaries choosing among dozens of plans with various benefit
packages. In the first few years of the Part D benefit, we believed
this was on the whole a great success. More plans means more variation,
competition and lower prices for Medicare beneficiaries choosing to
enroll in a stand-alone prescription drug plan (PDP), or Medicare
Advantage prescription drug plan (MA-PD). However, with so many plans
to choose from many beneficiaries reportedly find the annual task of
selecting one plan from so many overwhelming, and confusing. Moreover,
we have found that, as
[[Page 54638]]
overseers of the Part C and D programs, organizations submitting bids
to offer multiple plans have not consistently submitted plan benefit
designs that were significantly different from each other, which can
add to beneficiary confusion.
Since its inception in 2006, the Medicare Part D program has
improved access to drug coverage for elderly and offered beneficiaries
a wide range of plans from which to choose. At the same time, some have
suggested that significant numbers of beneficiaries are confused by the
array of choices and find it difficult to make enrollment decisions
that are best for them. Many do not enroll in necessarily the lowest
cost plan and many eligible individuals are not enrolled in the low-
income subsidy program. Finally, once beneficiaries have chosen a plan
and enrolled in it, they tend to remain in those plans, despite changes
in medication use or premium increases.
We remain committed to considering changes in the way we administer
the Part C and D programs to enable Medicare beneficiaries to choose
the plan that best suits their needs. Among other proposals, we making
following three specific proposals to simplify the program for
beneficiaries:
First, we propose to require sponsors to ensure that when
they provide multiple plan offerings, those offerings sufficiently
differ and thereby provide beneficiaries meaningful options (see
section II. of this proposed rule);
Second, we propose to eliminate plans with persistently
low enrollments, since these can add complexity to choices without
adding value (see section II.D. of this proposed rule);
Third, we propose to require sponsors to use standardized
``templates'' in their beneficiary communication materials (for
example, the Annual Notice of Changes (ANOC) and the Evidence of
Coverage (EOC) notices), so that seniors can better understand how
their current benefits and cost-sharing requirements will be changing
and more easily compare their current plan with other plan options (see
section II.B.3 of this proposed rule).
We believe that more can be done to structure choices for seniors
to aid them in making better plan choices.1 2 For example,
studies have suggested that providing personalized drug utilization and
cost information to beneficiaries can encourage seniors to switch to
plans that better meet their medication needs while reducing their
overall costs.\3\ Some have urged that the agency can do more to
provide improved individual drug utilization and cost information to
beneficiaries to encourage seniors to switch to lower-cost plans. Other
studies have found that some beneficiaries are not fully aware of the
financial implications of deferring enrollment in drug plans,\4\ a
finding that suggests that we could do more to make those implications
more salient to beneficiaries. We invite comments on these
possibilities and other improvements the agency can make, to help
beneficiaries choose the plans that best suit their needs. We also
invite comment on the type of research that might be undertaken to help
inform future regulatory and programmatic improvements and how we can
best support our partners, such as states, to assist them in helping
beneficiaries enroll in the best possible plans. For example, we are
interested in assessing the impacts of random auto-assignments on low-
income beneficiaries. To the extent that States are interested in
exploring non-random assignment methods, we invite comment on what type
of information States would find most beneficial, including the types
of data analyses we could potentially undertake with the data we
already have from States who utilize non-random assignment methods.
---------------------------------------------------------------------------
\1\ McFadden D (2006). Free Markets and Fettered Consumers. The
American Economic Review 96(1), 5-29
\2\ Hanock Y, Rice T, Cummings J, Wood S (2009). How Much Choice
is Too Much? The Case of the Medicare Prescription Drug Benefit.
Health Services Research 44:4; 1157-1168.
\3\ See, for example, Wrobel MV, Kling J, Mullainathan S, Shafir
E, Vermeulen L (2009). A Shot in the Arm for Medicare Part D: Four
Ways for the Government to Boost its Customer Communications. http://www.brookings.edu/papers/2008//media/Files/rc/papers/2008/1120_medicare_kling/1120_medicare_kling.pdf.
\4\ Hargrave E, Piya B, Hoadley J, Summer L, Thompson J (2008).
Experiences Obtaining Drugs under Part D: Focus Groups with
Beneficiaries, Physicians, and Pharmacists. Final Report Submitted
to the Medicare Payment Advisory Commission. National Opinion
Research Center.
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We also have found that in certain cases, we have been limited by
existing program rules and regulations to implement actions that would
improve sponsoring organization performance. Toward this end, we
propose provisions that would limit the number of plan offerings by
eliminating duplicative bids, and strengthen our program participation
requirements.
We are proposing a number of additional provisions aimed at
strengthening existing beneficiary protections. For example, we propose
to strengthen plan transition process requirements to ensure maximum
transparency regarding our expectations of Part D plans with respect to
enrollees transitioning to the plan from other drug coverage and to
ensure that current subregulatory practices are codified in regulation.
We are also proposing another set of provisions that are aimed at
improving payment rules and processes, and improving data collection
for oversight and quality assessment. For example, we are proposing to
expand the collection of prescription drug event data that we currently
collect for research and other non-payment related purposes. Collecting
these additional data, which are currently collected for payment
purposes, would provide us additional information to conduct analyses
that may be used to improve policies and assist in monitoring of Part D
plan sponsors.
In addition, we are proposing significant new Part D policy in this
rule. For example, in the area of Part D formulary policy, we propose a
regulatory interpretation of MIPPA protected drug categories and
classes provision in section 176 of MIPPA (Pub. L. 110-275) that we
previously addressed in a January 19, 2009 interim final rule with
comment period (IFC). Based on comments received in response to that
IFC, we believe that interpretation of statutory terms is needed. In
addition, we believe that additional clarification is needed relative
to the process that we intend to utilize to identify the protected
categories and classes of drugs that must be listed on all Part D plan
formularies.
Finally, we propose other provisions that are aimed at further
clarifying existing policy and we make technical corrections where
needed. For example, in some cases, we are addressing topic areas that
were included in our 2010 call letter to Part C and D plans, the
document that outlines policy clarifications and reminders for plans
bidding on plan offerings in the coming contract cycle. In the spirit
of transparency, we have outlined some of these clarifications within
this rule so to ensure the public has a full opportunity to comment on
our policies.
II. Provisions of the Proposed Regulations
In the sections that follow, we discuss the proposed changes to the
regulations in 42 CFR parts 417, 422, 423, and 480 governing the MA and
prescription drug benefit programs. To better frame the discussion of
the specific regulatory provisions we are proposing, we have structured
the preamble narrative by topic area rather than by subpart order.
Accordingly, our proposals address the following eight specific goals
as foreshadowed in the preceding introduction:
[[Page 54639]]
Strengthening our ability to distinguish for approval
strong applicants for MMA participation and remove consistently poor
performers.
Strengthening beneficiary protections.
Providing plan offerings with sufficient enrollment and
meaningful differences.
Improving payment rules and processes.
Improving data collection for oversight and quality
assessment.
Implementing other new policies.
Clarifying various sponsor program participation
requirements.
Implementing corrections and other technical changes.
Several of the proposed revisions and clarifications affect both
programs. Within each section, we have provided a chart listing all
subject areas that contain provisions affecting the Part C and D
programs and the associated regulatory citations that would be revised.
Please note that in our discussion of these provisions, we often refer
to ``sponsoring organizations'' to refer to both Medicare Advantage
organizations (MAOs) and Part D sponsors.
A. Changes To Strengthen Our Ability To Distinguish for Approval Strong
Applicants for Part C and D Program Participation and To Remove
Consistently Poor Performers
This section addresses a number of proposals designed to strengthen
our ability to approve strong applicants and remove poor performers in
the Part C and D programs. Since the implementation of revisions to the
MA and initial implementation of the prescription drug programs in
January 2006, we have steadily enhanced our ability to measure MAO and
PDP sponsor performance through efforts such as the analysis of data
provided routinely by sponsors and by our contractors, regular review
of beneficiary complaints, marketing surveillance activities, and
routine audits. This information, combined with feedback we have
received from beneficiary satisfaction surveys, HEDIS data, and
information from MAOs and PDP sponsors themselves, has enabled us to
develop a clearer sense of what constitutes a successful Medicare
organization capable of providing quality Part C and D services to
beneficiaries. This information has also allowed us to identify and
take appropriate action against organizations that are not meeting
program requirements and not meeting the needs of beneficiaries.
As our understanding of Part C and D program operations has
deepened over the past 4 years, our use of our authority to determine
which organizations are qualified to offer MA and PDP sponsor
contracts, evaluate their compliance with Part C and D requirements,
and make determinations concerning intermediate sanctions, contract
nonrenewals and contract terminations has evolved as well. As set forth
below, we are proposing changes and clarifications to our regulations
to make certain that all current and potential MAOs and PDP sponsors
clearly understand and can reasonably anticipate how we measure sponsor
performance, determine when there is noncompliance, and when
enforcement actions are warranted. While we are pleased that so many
organizations have elected to participate in the Part C and D programs,
we have an obligation to ensure that only appropriate organizations are
given the responsibility for providing quality medical care and drug
coverage to Medicare beneficiaries.
Each year, since contract year 2006, we have solicited applications
from organizations seeking to become qualified to enter into Part C or
D sponsor contracts. We received hundreds of applications in each of
those years. To properly manage a workload of that size, and to ensure
that we conduct a fair review of every application, we have adopted an
increasingly standardized, computer-based application submission
process. At the same time, we have also become increasingly strict in
the application of our regulatory authority to limit the number and
timing of opportunities for applicants to resubmit materials to cure
applications that do not initially demonstrate that the applicant meets
Part C or D requirements.
Until 2 years ago, applicants may have found that we would accept
as many corrected submissions as the applicants needed to make their
materials (usually documents concerning provider/pharmacy networks,
subcontracting arrangements, or risk-bearing licenses) consistent with
Part C or D requirements. We recognized that this was an inefficient
process that afforded some applicants the opportunity to make more re-
submissions than others and arguably enabled less well-prepared and
qualified applicants to enter the program. To improve the fairness of
the application process, and to reduce the burden it imposes on
applicants and CMS alike, we have, through our application instructions
issued over the last 3 years, clarified to all applicants that we will
only provide three opportunities to submit an approvable contract
qualification application to CMS: The initial solicitation response,
one courtesy opportunity to correct any identified deficiencies, and a
final opportunity during the 10-day cure period provided for
specifically in the regulations.
Some organizations have expressed surprise during the last 2 years
at our use of our authority to impose strict deadlines and standards of
review on applications for qualification as an MAO or PDP sponsor. To
reduce the opportunity for confusion about the application process, we
are proposing some regulatory clarifications in furtherance of our goal
of using a fair and efficient process for ensuring that only truly
qualified organizations are offered Part C or D organization contracts.
These provisions, described in greater detail below, include requiring
applicants to demonstrate that they meet all (not a substantial number)
of the Part C and D program requirements, prohibiting applicants from
submitting additional curing materials after the expiration of the ten-
day period following their receipt of a notice of intent to deny their
application, and requiring applicants to submit a nonbinding notice of
intent to apply for a Part C or D contract.
Organizations should be aware that we will continue to exercise our
authority to consider an organization's past Part C or D contract
performance in evaluating whether it should be afforded the opportunity
to obtain additional contracts or to serve a larger portion of the
Medicare beneficiary population. Additionally, sponsoring organizations
should be aware that we rely on data to evaluate compliance with
program requirements in a number of ways. For example, we use data to
evaluate adherence to requirements in the MMA statute or the Part C and
D regulations (for example, retail pharmacy access). We also use data
to evaluate adherence to the requirements outlined in our manual
chapters and other guidance (for example, customer and provider call
center performance standards). Finally, we conduct outlier analysis by
comparing the performance across all organizations on a particular Part
C or D requirement to identify organizations that appear to be poor
performers. The most notable example of this kind of analysis is
reflected in our performance metrics (that is, the Medicare Part D Plan
Ratings). These ratings represent an effort to make additional
information available to the public regarding the price and quality of
services for which Medicare makes payments. The Plan
[[Page 54640]]
Ratings are located on the Medicare Prescription Drug Plan Finder
(MPDPF) Tool at (http://www.Medicare.gov) and are designed to provide a
clear differentiation of the various Plan offerings to beneficiaries.
Organizations receiving less than ``good'' ratings in any category
should anticipate communication from us. Another example is our review
of data in the Complaints Tracking Module (CTM), which can be a
particularly strong indicator of a sponsor's inability to perform a
required Part C or D function. An abnormally high complaint rate for a
particular sponsor will likely prompt us to investigate other sources
of information to determine whether the organization is complying with
specific Part C or D requirements.
Our efforts are aimed at making certain that we have well-
functioning MAOs and PDP sponsors administering Part C and D benefits
on our behalf. Just as we have become more sophisticated in our
analysis of sponsor applications and compliance, we also continue to
review our sanction and contract termination authority to ensure that
we pursue actions when there is sufficient basis to support them. For
example, we have developed an annual process for analyzing sponsor
performance during the preceding contract year. We review each
sponsor's compliance history, including CMS-issued compliance notices,
audit results, and performance ratings (for example, star ratings) to
develop a full picture of that sponsor's ability to deliver Part C and
D services to its members. If that picture indicates that a particular
sponsor has a significant pattern of poor performance or even isolated
incidences of noncompliance with crucial operational requirements (for
example, enrollment processing), we will consider termination or
nonrenewal of the contract of that sponsor.
With the clarifications we are proposing to the Part C and D
regulations through this proposed rule and the background provided in
this preamble section, MAOs and PDP sponsors should now be fully aware
that we will continue to apply stricter scrutiny to sponsor
qualifications and contract performance as our analytical capabilities
and understanding of industry best practices improves. As the Part C
and D programs have now reached a certain level of maturity and
organizations' strong interest in participating in the programs has
been established, it is appropriate for us to use the authority and
evidence at our disposal to make certain that beneficiary plan choices
are characterized more by their quality than their quantity. These
provisions are described in detail in Table 1.
Table 1--Provisions Strengthening Our Ability To Distinguish for Approval Strong Applicants and To Remove Consistently Poor Performers
--------------------------------------------------------------------------------------------------------------------------------------------------------
Part 422 Part 423
Provision -------------------------------------------------------------------------------------------------------------------
Subpart Section Subpart Section
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notice of Intent to Apply........... Subpart K.............. Sec. 422.501......... Subpart K............. Sec. 423.502.
Application Standards............... Subpart K.............. Sec. 422.502......... Subpart K............. Sec. 423.503.
Compliance Measures/Analysis........ Subpart K.............. Sec. 422.502......... Subpart K............. Sec. 423.503.
Compliance Programs................. Subpart K.............. Sec. Subpart K............. Sec. 423.504(b)(4)(vi).
422.503(b)(4)(vi).
Network Adequacy of Coordinated Care Subpart C.............. Sec. 422.112......... N/A................... N/A.
and Network-Based Private-Fee-For-
Service plans under Part C.
Clarify programmatic elements that Subpart D.............. Sec. 422.156(b)(7), Subpart D............. Sec. 423.165(b), Sec. 423.165(f).
are ``deemable''. Sec. 422.156(f).
Procedures for termination and Subpart K.............. Sec. 422.510(c)(1), Subpart K............. Sec. 423.509(c)(1), Sec.
Nonrenewals: Part C and D. Sec. 422.506(b)(3). 423.507(b)(3).
Intermediate Sanctions: Procedures Subpart O.............. Sec. 422.756......... Subpart O............. Sec. 423.756.
for imposing civil and money
penalties.
Contract Termination................ Subpart K.............. Sec. 422.510(a)...... Subpart K............. Sec. 423.509(a).
Proper request for hearings......... Subpart N.............. Sec. 422.662......... Subpart N............. Sec. 423.651.
Burden of Proof, Standard of Proof, Subpart N.............. Sec. 422.660, Sec. Subpart N............. Sec. 423.650, Sec. 423.658(d).
Standard of Review and Conduct of 422.676(d).
Hearing.
Postponement of effective date of Subpart N.............. Sec. 422.664......... Subpart N............. Sec. 423.652.
determination when a request is
being filed.
Extending timeframe for contract Subpart N.............. Sec. 422.670......... Subpart N............. Sec. 423.655.
determination hearings.
Appeal times: Require each party Subpart N.............. Sec. 422.682......... Subpart N............. Sec. 423.661.
provide witness list and documents
5 calendar days before hearing.
Appeal times: Require request for a Subpart N.............. Sec. 422.692(a)...... Subpart N............. Sec. 423.666(a).
review by the administrator must be
received with 15 days after receipt
of hearing decision.
Contract redeterminations and Subpart N.............. Sec. 422.696......... Subpart N............. Sec. 423.668.
reopening.
Mutual termination of contract...... Subpart K.............. Sec. 422.503(b)(6)... Subpart K............. Sec. 423.504(b)(5).
--------------------------------------------------------------------------------------------------------------------------------------------------------
1. Require Notice of Intent To Apply Under Part C and D Within the
Application Requirements (Sec. 422.501 and Sec. 423.502)
Subpart K of part 422 and subpart K of part 423 set forth the
requirements for contracts with MA Organizations and Part D sponsors
including application procedures. Section 1871(a)(1) of the Act
authorizes us to prescribe such regulations as may be necessary to
carry out the administration of the Medicare program. We propose using
that authority to establish an administrative requirement for both the
Part C and D programs related to the submission to us of applications
to qualify as MA and PDP sponsor contractors.
Beginning with the applications for the 2009 contract year, the
Medicare Advantage, Part D Prescription Drug benefit, and Employer/
Union-Only Group Waiver Plan (Direct Contract or ``800 Series'')
sponsor applications are
[[Page 54641]]
submitted via a paperless process. Each application is completed
through the CMS Health Plan Management System (HPMS). As a result of
the fully electronic submission process and restrictions on access to
HPMS, every applicant must complete a Notice of Intent to Apply as
described in the HPMS memo dated October 10, 2008. This includes
current contractors seeking to expand their organization's service
area, and current contractors adding a Special Needs Plan (SNP) or an
Employer Group/Union-Sponsored Waiver Plan (EGWP) to their existing
contract.
The Notice of Intent to Apply provides us with critical information
for generating a pending contract number and providing User ID
connectivity. Submitting a Notice of Intent to Apply does not bind that
organization to submit an application for the following year. However,
without a pending contract number and completed CMS User ID
connectivity, an organization will not be able to access the
appropriate modules in HPMS to complete the application materials. We
propose codifying in Sec. 422.501 and Sec. 423.502 our existing
guidance that initial applicants and existing contractors seeking to
expand complete a nonbinding Notice of Intent to Apply.
2. Application Requirements (Sec. 422.501(c) and Sec. 423.502(c)) and
Evaluation and Determination Procedures for Determining Whether
Applicants Are Qualified for a Contract Under Parts C and D (Sec.
422.502 and Sec. 423.503)
Subpart K of Part 422 and subpart K of Part 423 set forth the
requirements for contracts with MA organizations and Part D sponsors,
respectively, including application procedures. Section 1860D-12(b)(3)
of the Act states that we must apply certain specified provisions of
section 1857 of the Act including the procedures for termination in
section 1857(h) of the Act in the same manner as they apply to
contracts under section 1857(a) of the Act. Therefore, we are making a
single proposal that applies to both MA organizations and Part D
sponsors related to our application evaluation procedures and appeals
of our determinations regarding applications.
During the first four years of the Medicare Advantage and Part D
programs, several unsuccessful applicants contested our denial of their
applications for MA organization or Part D sponsor contracts. At
hearings, some of those applicants were successful in arguing that the
regulations were not clear in stating that an applicant needed to
demonstrate that it met all program requirements to qualify for a
contract. Accordingly, we are proposing to revise Sec. 422.502 and
Sec. 423.503 to make it explicit that we will approve only those
applications that demonstrate that they meet all (not substantially
all) Part C and D program requirements.
The application requirements and evaluation and determination
procedures for MA organizations and Part D sponsors are set forth in
subpart K of Parts 422 and 423, respectively. The application process
in each instance requires an applicant to submit for CMS review a
combination of attestations that it will comply with stated program
requirements, as well as contracts with organizations the applicant has
contracted with to perform key Part C or D functions, evidence of the
applicant's risk-bearing licenses, and data documenting that the
applicant can provide its members access to Part C and D services
consistent with the programs' requirements. As we have proposed to
clarify at Sec. 422.501(c)(1) and (2), Sec. 422.502(a)(2), Sec.
423.502(c)(1) and (2), and Sec. 423.503(a)(2), we require that
applicants demonstrate that they meet all requirements outlined in the
MA organization and Part D sponsor applications.
Under the current regulations at Sec. 422.502(a)(1) and Sec.
423.503 (a)(1), we evaluate an entity's application on the basis of
information contained in the application itself and any additional
information that we obtain through onsite visits, publicly available
information, and any other appropriate procedures. We propose to
simplify and clarify the process by modifying Sec. 422.502(a)(1) and
Sec. 423.503(a)(1) and limiting the evaluation of an entity's
application to information contained in the application and any
additional information that we obtain through onsite visits. Limiting
our review to this information ensures that we will afford all
applicants (numbering in the hundreds each of the last four years) a
fair and consistent review of their qualifications. Organizations can
be assured that we will not consider additional sources of information
regarding one applicant's qualifications that we do not consider for
others.
We are also proposing a clarification of our authority to decline
to consider application materials submitted after the expiration of the
10-day period following our issuance of a notice of intent to deny an
organization's contract qualification application. Under Sec.
422.502(c) and Sec. 423.503(c), we notify applicants of our
determination on the application and the basis for the determination.
If the applicant does not appear qualified to contract as an MA
organization or Part D sponsor and has not provided enough information
to permit us to evaluate the application, the applicant receives a
notice of intent to deny the application and a summary for the basis
for the finding. As provided in Sec. 422.502(c)(2) and Sec.
423.503(c)(2), within 10 days from the date of the notice, the
applicant can respond in writing to the issues or other matters that
were the basis for our findings and revise its application to correct
any deficiencies.
The purpose of the proposed regulatory change is to clarify that
information submitted after 10 days from the notice will under no
circumstances be reviewed for the purpose of approving an application.
Further, consistent with the proposed revisions to Sec. 422.650(b)(2)
and Sec. 423.660(b)(2), which are discussed elsewhere in this proposed
rule, the applicant would not be permitted to submit additional revised
application material to the Hearing Officer for review should the
applicant elect to appeal the denial of its application. To allow for
the submission and review of such information as part of the hearing
would, in effect, extend the deadline for submitting an approvable
application. Moreover, the proposed change would further clarify the
standard for the disposition of applications for which either revisions
are not provided within the 10 days or are inadequate.
Specifically, we propose to clarify Sec. 422.502(c)(2) and Sec.
423.503(c)(2) by adding a new paragraph (iii) to establish that if we
do not receive a revised application within 10 days from the date of
the intent to deny notice, or if after timely submission of a revised
application the applicant still appears unqualified to contract as an
MA organization or Part D sponsor and/or has not provided enough
information to allow us to evaluate the application, we will deny the
application.
3. Deny Contract Qualification Applications Based on Past Contract
Performance (Sec. 422.750 and Sec. 423.750)
As described in Sec. 422.502(b) and Sec. 423.503(b), we may deny
an application based on the applicant's failure to comply with the
terms of a prior contract with CMS even if the applicant currently
meets all of the application requirements. However, we propose to
modify Sec. 422.502(b) and Sec. 423.503(b) to state that we will
review past performance across all of the contracts held by the
applicant. The provision as currently drafted mentions a ``prior
contract'' with CMS. Today,
[[Page 54642]]
contracts are ``evergreen'' and some organizations hold multiple MA
and/or PDP sponsor contracts; therefore the concept of ``prior
contract'' is outdated, as the prior performance issues could have
occurred in any other contract currently or formerly held by an
applicant. Therefore, we propose to revise the language in Sec.
423.503(b) and Sec. 422.502(b) to refer to ``any current or prior
contract'' held by the organization, instead of the current language
referring to a ``previous year's contract.'' We also propose to clarify
that the period that will be examined for past performance problems be
limited to those identified by us during the 14 months prior to the
date by which organizations must submit contract qualification
applications to CMS. Fourteen months covers the time period from the
start of the previous contract year through the time that applications
are received for the next contract year.
Indicia of performance deficiencies that might lead us to conclude
that an organization has failed to comply with a current or prior
contract include, but are not limited to, poor performance ratings as
displayed on the Medicare Options Compare and MPDPF web sites; receipt
of requests for corrective action plans (CAPs) unrelated to an audit
(as these types of CAPs generally involve direct beneficiary harm); and
receipt of one or more other types of noncompliance notices from CMS
(for example, notices of noncompliance or warning letters).
Additionally, as indicated by the changes to Sec. 422.503(b),
Sec. 422.508(c), Sec. 423.504(b), and Sec. 423.508(e), we consider
withdrawal of Part C or D operations from some or all of an
organization's newly contracted service area prior to the start of a
benefit year (through mutual termination or otherwise) an indication of
poor performance. Such a situation can arise when, for example, an
organization, after it has signed its Medicare contract for the
upcoming program year, loses a contract with a significant number or
type of providers, jeopardizing its ability to provide its members
adequate access to services. Also, an organization may suddenly face
financial difficulties that threaten its ability to offer the benefit
packages approved by CMS throughout the upcoming contract year. In such
instances, we could simply leave the contract in place and take
enforcement actions against the organization. Under such an approach,
we would knowingly be permitting beneficiaries to remain enrolled with
an organization that cannot effectively deliver the benefit. Instead,
we act(s) in the best interests of the beneficiaries by agreeing with
the organization to terminate its contract and work(s) with the
organization to make certain that beneficiaries receive uninterrupted
access to Medicare services through another MA organization, PDP
sponsor, or original Medicare. But for our acting to protect
beneficiaries by agreeing to the contact termination, the organization
would have faced significant compliance and enforcement actions once
its failure to comply with program requirements became apparent. Also,
the organization's failure to conduct the proper due diligence on its
contracted provider network or its finances represents itself a
significant failure to have in place the administrative capability to
operate a Medicare benefit plan worthy of compliance and enforcement
actions. Accordingly, we believe(s) it is appropriate to consider an
organization's withdrawal from its contract prior to the start of the
benefit year to be a strong indication of poor performance worthy of
our consideration under Sec. 422.750 and Sec. 423.750.
We will review performance in accordance with these examples and
other evidence of noncompliance, and will deny applications for initial
contracts and service area expansions on the basis of noncompliant past
performance. By specifically providing these examples and clarifying
that we intend to exercise this authority, we believe that
organizations will be motivated to enhance their compliance operations
in order to avoid being out of compliance with program requirements,
and this will significantly deter noncompliance leading to improved
overall performance of organizations in the Part C and D programs.
4. Use of Data To Evaluate Continued Ability To Act as a Qualified
Sponsoring Organization Under Parts C and D (Sec. 422.504, and Sec.
423.505)
Sections 1857(e)(1) and 1860D-12(b)(3)(D) of the Act provide broad
authority for the Secretary to add terms to the contracts with MA and
Part D sponsors including terms that require the sponsor to provide the
Secretary ``with such information * * * as the Secretary may find
necessary and appropriate.'' Under that authority, we established Sec.
422.516 and Sec. 423.514, Reporting Requirements. Consistent with
sections 1857(a) and 1860D-12(b)(1) of the Act, we established that we
will oversee an MA organization's and Part D sponsor's continued
compliance with Part C and Part D requirements under Sec.
422.502(d)(1) and Sec. 423.503(d)(1).
Some of the data acquired through Sec. 422.516 and Sec. 423.514
are used for the purpose of monitoring an organization's or sponsor's
continued compliance with MA and/or Part D requirements. For example,
under Sec. 423.514(a)(5), Part D sponsors must have an effective
procedure to develop, compile, evaluate, and report to CMS particular
matters, such as low income subsidy (LIS) contract data, that we
require. At the contract level, the sponsor's LIS data is compared to
our LIS data and a match rate is calculated. Under our guidance, the
match rate between our data and the sponsor's should exceed 95 percent.
Sponsors who fail to exceed the 95 percent match rate are notified of
their noncompliance and are expected to come into compliance with Part
D instructions. In some instances, we may use an outlier analysis to
determine a MA organization's or Part D sponsor's performance relative
to industry standards established by the performance of all the other
organizations and sponsors as described earlier in the preamble in our
discussion of the development of our policies concerning the awarding,
monitoring, and enforcement of Medicare contracts. For example, Part D
plans report grievance data to CMS. We conduct outlier analysis to
identify plans with the highest numbers of reported grievances for the
purpose of identifying plans needing some type of compliance action. To
conduct these types of outlier analysis, we usually perform the
following steps:
Develop a data distribution--data values ordered from low
to high.
Determine the maximum and minimum data values.
Determine the range (maximum-minimum).
Determine the outlier threshold--When conducting an
outlier analysis, we typically identify sponsors typically in the
highest (or lowest) 5 percent of comparable sponsors (for example,
compare PDPs to PDPs).
We also use the Performance Metrics (Plan Star Ratings), some of
which are determined by relative ranking, for oversight and monitoring
purposes to ensure plan quality. As stated in the 2009 Call Letter,
organizations and sponsors with less than ``good'' ratings should
expect to be the subject of our monitoring and compliance actions.
Likewise, if after an analysis of data submitted under Sec. 422.516 or
Sec. 423.514 an organization's or sponsor's performance is found to be
an outlier based on relative ranking, the organization or sponsor may
be considered out of compliance with MA and Part D requirements.
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We propose to add paragraphs Sec. 422.504(m)(1) and (2) and Sec.
423.505(n)(1) and (2) to make explicit our existing authority to find
organizations or sponsors out of compliance with MA and/or Part D
requirements when the organization's or sponsor's performance fails to
meet performance standards articulated in statutes, regulations, and
guidance or when an organization's or sponsor's performance represents
an outlier relative to the performance of other organizations or
sponsors.
5. Compliance Programs Under Parts C and D (Sec. 422.503(b)(4)(vi) and
Sec. 423.504(b)(4)(vi))
Section 1857(a) of the Act provides the Secretary with the
authority to enter into contracts with MA organizations and section
1860D-12(b)(1) of the Act provides the Secretary with the authority to
enter into contracts with PDP sponsors. The current regulatory
provisions provide that any entity seeking to contract as an MA
organization or PDPsponsor must have administrative and management
arrangements satisfactory to us as demonstrated by (among other
requirements) having a compliance plan that consists of seven basic
elements. These seven elements of the compliance plan outline
fundamental requirements such as written policies and procedures, a
compliance officer and committee that is accountable to senior
management, effective compliance training and communication,
enforcement of disciplinary standards, and procedures for internal
monitoring and auditing and ensuring prompt responses to detected
offenses. In addition, a compliance plan must include measures to
detect, correct, and prevent fraud, waste, and abuse.
Compliance programs have long been recognized as key to achieving
adherence with contract requirements and to protecting against fraud,
waste, and abuse. The recent focus on the importance of these programs
has been heightened not only by CMS through our ongoing audit and
oversight efforts but also by several of our oversight bodies. For
example, over the last several years, the U.S. Department of Health and
Human Services Office of Inspector General (OIG) and the Government
Accountability Office (GAO) have each focused specific oversight
efforts on MA organizations' and PDP sponsors' compliance programs and
have requested that we take actions to evaluate and oversee these
programs to ensure entities have effective programs in place.
Similarly, like the Medicare Part C and D programs, other state
programs, including the State of New York Medicaid program, now require
effective compliance programs as a condition of participation.
Our recent experience is that some sponsoring organizations have
instituted a compliance plan that appears to meet the minimum
requirements of our regulations, but may not have an effective
compliance program. Other sponsoring organizations seem to legitimately
grapple with how best to implement the regulatory requirements within
their organization and which particular actions on their part will meet
our requirements.
We propose to stress the importance of sponsoring organization's
implementing and maintaining robust compliance programs by modifying
the language at Sec. 422.503(b)(4)(vi) and Sec. 423.504(b)(4)(vi) to
explicitly provide clarification as to what will constitute an
``effective'' compliance program prior to contracting with CMS. We are
also proposing to further clarify existing policy by modifying current
language and/or adding language in support of each of the elements of
an effective compliance plan in order to assist sponsoring
organizations with implementing more effective compliance programs.
In the first element concerning the overall requirement to have
written policies and procedures, we are proposing to further clarify
existing policy by adding language at Sec. 422.503(b)(4)(vi)(A) and
Sec. 423.504(b)(4)(vi)(A) that these policies must describe compliance
expectations as embodied in the standards of conduct, implement the
operations of the compliance program, provide guidance to others,
identify how to communicate compliance issues to compliance personnel,
describe how compliance issues are investigated and resolved and
include a policy of non-intimidation and non-retaliation.
In the second element concerning the requirement to have a
compliance officer and committee accountable to senior management, we
are proposing to further clarify existing policy by adding language at
Sec. 422.503(b)(4)(vi)(B) and Sec. 423.504(b)(4)(vi)(B) that the
compliance officer and committee must periodically report directly to
the governing body (for example, Board of Directors) and that body must
be knowledgeable about the compliance program and exercise reasonable
oversight over the implementation and effectiveness of the program. The
governing body's direct involvement with and oversight of the
compliance program is instrumental in fulfilling this requirement and
achieving an effective compliance program. Our recent experience with
some sponsoring organizations has indicated that Boards of Directors
may not be sufficiently aware or may have limited information about
their organization's compliance programs or compliance issues. In
deciding how often the compliance officer and committee must directly
report to the Board of Directors, sponsoring organizations must
consider many factors, including but not limited to: the size of the
organization, the number of compliance problems, whether there is an
emergency that calls for the Board's attention, and whether the
sponsoring organization is under an intermediate sanction. Our proposed
language further clarifies existing policy related to this requirement
for senior management to be sufficiently engaged, informed, and to
exercise appropriate governance over the organization's compliance
program.
In the third element concerning the requirement to have effective
training and education, we are proposing to further clarify existing
policy by adding language at Sec. 422.503(b)(4)(vi)(C) and Sec.
423.504(b)(4)(vi)(C) that includes several key groups and individuals
(the chief executive or other senior administrator, managers, and
governing body members) among the sponsoring organization's employees
that are required to have compliance training and education. Because
these employees have specific governing and oversight responsibilities,
we believe it is important to clarify these requirements. We are
proposing to further clarify existing policy by adding language that
also clarifies that this training must occur at a minimum annually and
must be made a part of the orientation for a new employee, new first
tier, downstream and related entities, and new appointment to a chief
executive, manager or governing body member.
In the December 5, 2007 Federal Register, we published the
``Medicare Program; Revisions to the Medicare Advantage and Part D
Prescription Drug Contract Determinations, Appeals and Intermediate
Sanctions Process'' final rule (72 FR 68700). In the December 5, 2007
final rule, we established that compliance plans for sponsoring
organizations must include training and education and effective lines
of communication between the compliance officer and the sponsoring
organization's employees, managers, and directors as well as their
first tier, downstream, and related entities.
Since publication of the December 5, 2007 final rule, it has become
apparent that application of training about fraud,
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waste, and abuse to the MA organizations' first tier, downstream, and
related entities may be redundant of the certification made when these
entities submit enrollment applications to become Medicare physician
and non-physician practitioners, institutional providers, and
suppliers. Medicare practitioner enrollment applications require that
applicants certify to having read and understood the Penalties for
Falsifying Information contained in the application and that the
applicant will not present or cause to present a false claim to
Medicare. Section 422.204(b)(3) requires that basic benefits offered by
MA organizations be offered through providers and suppliers who meet
applicable requirements of Title XVIII and Part A of Title XI of the
Act. Providers of services must have a provider agreement with us that
permits them to provide services under original Medicare. Requiring an
additional fraud, waste, and abuse certification as was clarified in
the response to comments in the December 5, 2007 final rule imposes an
additional unnecessary burden on these Medicare providers. Therefore,
we are proposing to modify this paragraph to state that providers who
have met this requirement through enrollment into the Medicare program
are deemed to have met this training and education requirement. More
specifically, we are proposing to clarify existing policy by adding
language at Sec. 422.503(b)(4)(vi)(C) specifying that MA organizations
whose first tier, downstream, and related entities have met the fraud,
waste and abuse certification requirements are deemed to have met the
training and educational requirements for fraud, waste, and abuse. We
are not proposing similar deeming language at Sec.
423.504(b)(4)(vi)(C) because these certification requirements do not
currently apply to Part D first tier, downstream, or related entities.
The current requirement for training in fraud, waste, and abuse of
first tier, downstream, and related entities creates another potential
problem. A particular pharmacy or other provider may contract with
dozens of MA or PDP plans, each of which is required by the existing
language, read literally, to provide the required training to the
pharmacy, or other provider, and its staff. Clearly, we do not intend
to require duplicative training. We therefore seek comment on whether
or how best to rephrase the existing language to clarify this point,
while still ensuring that our requirement is met with respect to each
first tier, downstream, and related entity. One option might be that
the plan sponsor ``assures'' or ``obtain an assurance'' that the first
tier, downstream, and related entity has received such training, but
this leaves open the issue of who would then actually provide the
needed training. We understand that some plans are arranging fraud,
waste, and abuse collaborative training efforts and we welcome this.
Another option might be to leave existing language unchanged, but issue
interpretive guidance on this point. We request workable suggestions to
assure that our objective is met, while eliminating unnecessary
duplication.
In the fourth element concerning the requirement to have effective
lines of communication, we are proposing to further clarify existing
policy by adding language at Sec. 422.503(b)(4)(vi)(D) and Sec.
423.504(b)(4)(vi)(D) that requires that these lines of communication
are confidential and accessible to all and allow for compliance issues
to be reported anonymously and in good faith as issues are identified.
In the fifth element concerning the requirement to have enforcement
of standards through well-publicized disciplinary guidelines, we are
proposing to further clarify existing policy by adding language at
Sec. 422.503(b)(4)(vi)(E) and Sec. 423.504(b)(4)(vi)(E) that more
specifically describes that these guidelines must be implemented to
include policies that articulate expectations for reporting issues and
their resolution, identify noncompliance or unethical behavior, and
provide for timely, consistent and effective enforcement of the
standards when noncompliance or unethical behavior is detected.
In the sixth element concerning the requirement to have procedures
for internal monitoring and auditing, we are proposing to further
clarify existing policy by modifying the current language at Sec.
422.503(b)(4)(vi)(F) and Sec. 423.504(b)(4)(vi)(F) to more
specifically describe that an effective system for routine monitoring
and identification of compliance risks includes internal monitoring and
audits and, as appropriate, external audits, in order to evaluate the
organization's compliance with our requirements and overall
effectiveness of the compliance program. These audits should include
the sponsoring organization's first tier entities.
In the seventh element concerning the requirement to have
procedures for ensuring prompt response to detected offenses and
development of CAPs, we are proposing to further clarify existing
policy by modifying the current language at Sec. 422.503(b)(4)(vi)(G)
and Sec. 423.504(b)(4)(vi)(G) to more specifically describe the
implementation of a system for promptly responding to compliance issues
as they are raised, investigating potential compliance problems
identified in the course of self-evaluations and audits, correcting
such problems promptly and thoroughly to reduce the potential for
recurrence and ensuring ongoing compliance with our requirements.
6. Network Adequacy of Coordinated Care and Network-Based Private Fee-
for-Service Plans Under Part C (Sec. 422.112)
Section 1852(d)(1)(A) of the Act establishes that an organization
offering an MA plan may select the providers from whom the benefits
under the plan are provided so long as the organization makes such
benefits available and accessible to each individual electing the plan
within the plan service area with reasonable promptness and in a manner
which ensures continuity in the provision of benefits. The requirements
of section 1852(d)(1)(A) of the Act are implemented at Sec.
422.112(a)(1), which provides that a coordinated care plan must
maintain a network of appropriate providers that is sufficient to
provide adequate access to covered services to meet the needs of the
population served.
To determine if a proposed health care delivery network of an MA
plan adequately makes health care services available and accessible, it
has been our practice when initially approving and when reviewing to
compare the proposed network with the prevailing community patterns of
health care delivery in the service area of the plan. We have also used
as a rough benchmark a maximum access to providers of 30 minutes/30
miles. We would be interested in comments regarding our proposed
criteria for developing standards for the network adequacy of MA plans.
We are in the process of developing an automated system for reviewing
network adequacy on a continuing basis based on the elements that we
determine define community patterns of health care delivery. In this
system, MAOs offering MA plans would submit data to us through the HPMS
system specifying the access and availability of its proposed provider
networks. This information would be analyzed and compared through
electronic mapping software against our access standards for a given
geographical area to confirm whether the proposed provider network
meets our access and availability standards.
Given that we are developing this automated system, we believe it
is
[[Page 54645]]
appropriate to more explicitly define how we determine network
adequacy. To that end, we propose using our authority under section
1852(d)(1)(A) of the Act to include more specific criteria that we will
apply in defining community patterns of care in order to determine if a
network offered by an MA plan meets Medicare access and availability
requirements. We also propose applying these more specific criteria to
the proposed provider networks of both coordinated care and PFFS plans
that are intending to meet Medicare access to services requirements, in
whole or in part, through a network of direct contracting providers.
Our operational experience has demonstrated that the concept of
community patterns of health care delivery provides a useful industry
standard benchmark for measuring a proposed provider network because it
allows for varying geographical and regional conditions to be taken
into consideration. For example, plans operating in rural rather than
urban counties will necessarily face different market conditions in
terms of the number and specialties of providers available and their
willingness to contract with the plan.
However, given the lack of specificity regarding how we determine
if a given provider network meets Medicare access and availability
requirements in Sec. 422.112(a)(1) as currently drafted, we believe it
is important to amend that section of our regulations to describe how
we will include the elements of the prevailing community patterns of
health care delivery in its evaluations of provider networks. We
believe the proposed changes will make the standards of community
patterns of care more transparent and consistent across the country.
The proposed changes are consistent with the elements that will be used
by the automated system we are developing to assess network adequacy.
Specifically, we propose to add paragraph (a)(10) to amend Sec.
422.112 to specify the factors comprising community patterns of health
care delivery that we will use as a benchmark in evaluating a proposed
MA plan health care delivery network. Under proposed Sec.
422.112(a)(10), these factors would include, but not be limited to--
The number and geographical distribution of eligible
health care providers available to potentially contract with an MAO to
furnish plan covered services within the proposed service area of the
MA plans;
The prevailing market conditions in the service area of
the MA plan. Specifically, the number and distribution of health care
providers contracting with other health care plans (both commercial and
Medicare) operating in the service area of the plan;
Whether the service area is comprised of rural or urban
areas or some combination of the two;
Whether the MA plan's proposed provider network meets
Medicare time and distance standards for member access to health care
providers including specialties; and
Other factors that we determine to be relevant in setting
a standard for an acceptable health care delivery network in a
particular service area.
We plan to further define through subregulatory guidance (for
example the Call Letter) how we will operationalize these provisions.
For example, as previously noted, we have in the past used as a rough
benchmark a maximum access to provider ratio of 30 minutes/30 miles to
determine ``network adequacy.'' We solicit comment on whether these
regulatory provisions are sufficiently clear, and whether clarification
should be provided through regulation or subregulatory guidance, such
as the annual Call Letter.
7. Deemable Program Requirements Under Parts C and D (Sec.
422.156(b)(7), Sec. 422.156(f), Sec. 423.165(b), and Sec.
423.165(f))
We are proposing to clarify which regulatory requirements are
``deemable'' for MA organizations that offer prescription drug benefit
programs. Sections 1852(e)(4) and 1860D-4(j) of the Act provide that we
can authorize approved accrediting organizations (AOs) to accredit MA
organizations and Part D sponsors, and deem such entities to have met
our program requirements, as long as the standards the AO uses to
evaluate the performance of the organizations and plan sponsors meet or
exceed our own performance assessment standards. The statute also
dictates which performance standards we can allow an AO to evaluate in
the place of CMS. Those standards that we permit AOs to survey for,
rather than CMS, are referred to as ``deemable'' program requirements.
The current regulations state that the Part D prescription drug
benefit program is a deemable requirement for MA organizations that
offer prescription drug benefits. We believe that this language does
not precisely reflect the requirements that are listed as deemable in
the statute. Therefore, we are proposing to modify Sec. 422.156(b)(7)
to refer to the list of deemable requirements for Part D sponsors set
out at Sec. 423.165(b)(1) through (b)(3), as we believe this cross
reference is a more accurate reflection of the specific program
requirements that are deemable per section 1860D-4(j) of the Act for MA
organizations that offer prescription drug benefits.
In Sec. 422.156(f) and Sec. 423.165(f), we are proposing to
clarify the extent of our authority under the deeming program. The
regulation currently states that we retain our authority to initiate
enforcement actions against MA organizations or Part D sponsors that we
determine, on the basis of its own survey, or the survey of an
accrediting organization, no longer meet the Medicare requirements for
which deemed status was granted. We believe that this language is
unduly limiting and does not comport with the statute. Section
1852(e)(4)(D) of the Act states nothing in section 1852(e)(4) of the
Act shall be construed to limit our authority under section 1857 of the
Act, which encompasses much more than enforcement actions. Therefore,
we are proposing to revise the language in Sec. 422.156(f) and Sec.
423.165(f) to more closely match the authority granted by the statute,
which is to state that we retain authority to impose intermediate
sanctions and civil money penalties (CMPs), initiate contract
terminations, and perform evaluations and audits of an organization's
records, facilities and operations, notwithstanding the deeming
provisions.
We plan to further define through subregulatory guidance how we
will operationalize these provisions. We solicit comment on whether
these regulatory provisions provide sufficient clarity. If not, we
solicit comment on whether clarification should be provided through
regulation or subregulatory guidance, such as the annual Call Letter.
In Sec. 423.165(b), we are proposing to delete paragraph (b)(4)
from the items listed as deemable program requirements. The regulation
currently states that a program to protect against fraud, waste, and
abuse is a deemable program requirement. We believe that including this
in the list of deemable requirements was an error, as the statute does
not list a program to protect against fraud, waste, and abuse as one of
the programmatic areas that is deemable. Therefore, we are proposing to
remove programs to protect against fraud, waste, and abuse from the
list of deemable programmatic requirements.
[[Page 54646]]
8. Modify the Corrective Action Plan (CAP) Process as it Relates to
Procedures for Termination and Nonrenewal of a Part C or D Contract by
CMS (Sec. 422.506(b)(3), Sec. 422.510(c)(1), Sec. 423.507(b)(3), and
Sec. 423.509(c)(1))
Sections 1857(h) and 1860D-12(b)(3)(F) of the Act provide that the
Secretary may terminate a contract with an MA organization or PDP
sponsor in accordance with formal investigation and compliance
procedures established by the Secretary under which the sponsoring
organizations are to be provided with reasonable notice and opportunity
for hearing and reasonable opportunity to develop and implement a CAP
to correct the deficiencies that were the initial basis for termination
prior to terminating the contract. These statutory provisions further
provide, under sections 1857(h)(2) and 1860D-12(b)(3)(F) of the Act,
that these procedures shall not apply if the Secretary determines that
a delay in termination, resulting from compliance with these procedures
prior to termination, would pose an imminent and serious risk to the
health of individuals enrolled with the sponsoring organization.
Under this statutory authority, we issued the December 5, 2007
final rule that detailed timeframes for the development and
implementation of CAPs prior to an issuance of a notice of intent to
terminate or nonrenew a CMS contract. These regulations, codified at
Sec. 422.506(b)(3), Sec. 422.510(c)(1), Sec. 423.507(b)(3), and
Sec. 423.509(c)(1), currently require us to provide sponsoring
organizations with 45 calendar days from the date of our request, to
develop and submit a CAP prior to CMS issuing a notice of intent to
terminate or nonrenew a contract to the sponsoring organization. In
addition, the current regulations provide that if, after our review,
this first CAP submission is determined unacceptable, the sponsoring
organization will be provided an additional 30 calendar days to submit
a revised CAP to CMS for review. Under these current provisions, once
we determine the CAP acceptable, we are then required to notify the
sponsoring organization of the deadline by which the CAP must be fully
implemented. We must then assess whether successful implementation
occurred. It is only after exercising these protracted procedures that
we may issue a notice of intent to terminate or nonrenew a contract to
the sponsoring organization in instances when we determine that
successful implementation of the CAP has not occurred and/or the
deficiencies have not been fully corrected.
Since the implementation of the December 5, 2007 final rule, we
have determined that some modification is required of our overall
approach to our compliance procedures, particularly in situations when
serious and/or repeated compliance deficiencies are identified. More
specifically, we have concluded that the compliance procedures and
timeframes set forth in Sec. 422.506(b)(3), Sec. 422.510(c)(1), Sec.
423.507(b)(3), and Sec. 423.509(c)(1) related to notice and
opportunity to develop and implement corrective actions could be
improved to more effectively assist us and sponsoring organizations in
achieving timely, efficient, and effective correction of identified
underlying contract compliance deficiencies. These current compliance
procedures require us to focus our internal oversight resources and
expertise on reviewing and approving ``how'' sponsoring organizations
will correct their deficiencies rather than utilizing our resources and
expertise more effectively and efficiently to review information
submitted by sponsoring organizations to determine if the underlying
deficiencies have actually been corrected. For example, if the
deficiency cited was for misclassification of appeals versus
grievances, current practice requires a sponsoring organization to
develop a written plan on how it will fix the misclassification
problem. Then the sponsoring organization must submit the plan to us
for review and approval before it would be allowed to implement the
plan. Rather than focusing on the plan or process that the sponsoring
organization developed, we instead, should focus on reviewing data to
determine if the sponsoring organization has actually fixed the problem
and is classifying appeals and grievances appropriately.
Similarly, under the current compliance procedures, sponsoring
organizations potentially expend significant resources and expertise
responding to requests from us for plans about how they will correct
deficiencies as opposed to expending efforts on correcting the
deficiencies identified by us and providing sufficient evidence that
the identified deficiencies have been corrected. Given that sponsoring
organizations have varying business models, levels of resources, and
expertise, it is particularly challenging for us to be the decision-
maker as to whether one operational plan of correction under a
particular operational business model versus another will most
effectively correct identified deficiencies and achieve particular
compliance outcomes.
Therefore, we believe our compliance procedures need to shift from
focusing on the submission of plans for our review and approval that
merely outline a process for how deficiencies will be corrected to a
focus on requiring plans to demonstrate that particular outcomes have
been achieved, for example, that deficiencies have actually been
corrected. We are proposing to eliminate the existing language
contained in regulations at Sec. 422.506(b)(3), Sec. 422.510(c)(1),
Sec. 423.507(b)(3), and Sec. 423.509(c)(1) that requires CAPs to be
submitted for our approval prior to us issuing a notice of intent to
terminate or nonrenew a contract.
We are proposing instead to add new provisions at Sec.
422.506(b)(3), Sec. 422.510(c)(1), Sec. 423.507(b)(3), and Sec.
423.509(c)(1) that captures the outcome-oriented approach which is
currently incorporated in our day-to-day ongoing contract compliance
and oversight activities. Under this approach, we are proposing to add
new provisions which state that before providing a notice of intent to
terminate or nonrenew a contract, we will provide the sponsoring
organization with a notice of its deficiencies and afford it the
opportunity to develop and implement a CAP to correct these
deficiencies. We are also proposing that the sponsoring organization is
solely responsible for the identification, development, and
implementation of its CAP and for demonstrating to us that the
underlying deficiencies have been corrected within the time period
afforded under the notice and opportunity for corrective action.
All sponsoring organizations are assigned a CMS account manager
whose primary responsibility consists of day-to-day monitoring and
oversight of that organization. In addition to these account management
monitoring and oversight activities, we conduct other oversight
activities based on data and information collected from sponsoring
organizations and from other relevant sources. As a part of these
ongoing overall monitoring and oversight activities, sponsoring
organizations routinely receive written notification of their
compliance deficiencies, including but not limited to, notices of
noncompliance, warning notices, and requests for corrective actions.
These ongoing contract monitoring and oversight processes are designed
to proactively prevent, detect, and respond to compliance deficiencies
at the lowest level of occurrence by providing sponsoring organizations
with ongoing notification and information from CMS
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about the current status of any identified compliance deficiencies that
come to our attention and an opportunity to correct where appropriate.
As a result, in many instances sponsoring organizations will receive
written notification of noncompliance and opportunities to correct any
deficiencies arising from the above-described day-to-day monitoring and
oversight procedures. Therefore, in most cases the sponsoring
organization will have been made fully aware of its deficiencies before
CMS provides it with the notice and opportunity to implement a CAP that
must be afforded prior to CMS issuing a notice of intent to terminate
or nonrenew a contract under sections 1857(h) and 1860D-12(b)(3)(F) of
the Act.
In addition to these proposals, we are proposing to amend the
existing language at Sec. 422.506(b)(3), Sec. 422.510(c)(1), Sec.
423.507(b)(3), and Sec. 423.509(c)(1) that sets forth the specific
timeframes afforded sponsoring organizations for the development and
implementation of a CAP prior to CMS issuing a notice of intent to
terminate or nonrenew.
Based on our experience under our ongoing contract compliance and
oversight processes and our new outcome-oriented approaches to contract
oversight and compliance, we have concluded that affording sponsoring
organizations at least 30 calendar days to develop and implement a CAP
prior to issuing the notice of intent to terminate or nonrenew is a
sufficiently reasonable opportunity under the statutory authority
afforded. We will consider the nature and extent of the particular
compliance deficiencies and other relevant factors such as whether or
not the deficiencies are isolated or repeated and longstanding, and
whether or not the entity has been afforded a prior notice and
opportunity to correct in reaching a decision whether it may be
appropriate for the MAO or Part D Sponsor to be afforded more than 30
days to correct the identified deficiencies.
Thus, we are proposing to amend Sec. 422.506(b)(3), Sec.
422.510(c)(1), Sec. 423.507(b)(3), and Sec. 423.509(c)(1) to afford
sponsoring organizations at least 30 calendar days to fully implement a
CAP and to demonstrate to CMS that the underlying deficiencies have
been corrected.
9. Procedures for Imposing Intermediate Sanctions and Civil Money
Penalties Under Parts C and D (Sec. 422.756 and Sec. 423.756))
Sections 1857(g) and 1860D-12(b)(3)(E) of the Act provide the
Secretary the ability to impose intermediate sanctions on sponsoring
organizations. Intermediate sanctions under these statutory provisions
consist of suspension of enrollment, suspension of payment and CMPs.
Sections 1857(g)(2)(B) and 1860D-12(b)(3)(E) of the Act that
specifically govern enrollment suspensions require the intermediate
sanctions to remain in place until the Secretary is satisfied that the
basis for the sanction determination has been corrected and is not
likely to recur. Additionally, under sections 1857(e)(1) and 1860D-
12(b)(3)(D) of the Act, sponsoring organizations are required to
provide the Secretary with such information as the Secretary may find
necessary and appropriate. Current regulations governing intermediate
sanctions are contained in Subpart O of parts 422 and 423. Sections
422.756 and 423.756 provide specific procedures for imposing
intermediate sanctions and CMPs, and include provisions outlining the
duration of the sanction.
Existing regulations at Sec. 422.756(d)(3) and Sec. 423.756(d)(3)
incorporate the statutory standard by providing that the sanction
remains in effect until we notify the sponsoring organization that we
are satisfied that the basis for imposing the sanction has been
corrected and is not likely to recur. Based on recent experience, it
has been difficult at times for us to make the determination to lift a
sanction. For example, when we impose an enrollment sanction on a
sponsoring organization because it has failed to comply with enrollment
and disenrollment requirements, it is very difficult for us to conclude
that the sponsoring organization's enrollment deficiencies have been
corrected and are not likely to recur when the organization is not
permitted to enroll members. Difficulties also arise when the
sponsoring organization attempts to fix deficiencies with highly
technical internal business processes. In order to assist us in making
the determination that the deficiencies have been corrected and are not
likely to recur, we need to have greater flexibilities at our disposal.
We are proposing two changes to the regulation that provide
additional flexibilities to assist us in making the determination to
lift a sanction. First, we are proposing that we may require the
sponsoring organization to hire an independent auditor to provide us
with additional information to determine if the deficiencies upon which
the sanction was based have actually been corrected and are not likely
to recur. The independent auditor would be hired by the sponsoring
organization and work in accordance with our specifications in order to
provide accurate and reliable information to CMS.
In making a determination to lift sanctions, we often must rely on
either self-disclosed information from the sanctioned sponsoring
organization, CMS data, some of which is also self-disclosed, or we
must attempt to engage in a process to independently verify that the
underlying deficiencies have been corrected and are not likely to
recur. Given our experience with the nature and extent of some
compliance deficiencies (for example, those caused by information
technology system deficiencies or lack of adequate internal controls)
and the need to obtain the level of skill and experience necessary to
conduct an exhaustive audit and verification of the correction of these
deficiencies, we have concluded that an independent auditor hired by
the sponsoring organization would be beneficial for both the sponsoring
organization and CMS. This proposal is consistent with our statutory
authority which requires sponsoring organizations to provide
information to us when we deem it is necessary and appropriate. An
independent auditor, who is familiar with the processes of the
sanctioned sponsoring organization, may be able to provide CMS with
important information that we may use to help us make a more timely
decision as to when to lift a sanction.
A similar approach is used by the HHS Office of Inspector General
(OIG) in their Corporate Integrity Agreements and/or Self-Disclosure
Protocol processes. The OIG often negotiates compliance obligations
with health care providers and other entities as part of the settlement
of Federal health care program investigations. A provider or entity
consents to these obligations as part of the civil settlement and in
exchange for the OIG's agreement not to seek an exclusion of that
health care provider or entity from participation in Medicare,
Medicaid, and other Federal health care programs. The typical terms of
a comprehensive OIG corporate integrity agreement include the
requirement for the provider to retain an independent review
organization to provide independent validation and verification of
adherence to Medicare requirements in relevant areas where
[[Page 54648]]
the provider has been found to be noncompliant.
We do not intend to require all sponsoring organizations that are
under intermediate sanctions to hire an independent auditor because not
all determinations will require the expertise of an independent
auditor. However, there are situations when the expertise of an
independent auditor will be helpful and in those cases, we are
proposing we be afforded the discretion to require that an auditor be
hired by the sponsoring organization. For example, an independent
auditor who specializes in complex information technology systems and
who has knowledge of how the systems interact with each other to be
compliant with our requirements may be helpful in those instances where
an organization with enrollment and disenrollment processing systems
has been sanctioned. This is an example of a situation where we would
require the sponsoring organization to hire an independent auditor in
order to assist in making the determination that the deficiencies that
formed the basis of the sanction have been corrected and are not likely
to recur.
We are also considering an alternative proposal whereby instead of
providing us with the authority to require sponsoring organizations to
engage an independent auditor, we would grant sponsoring organizations
the discretion to hire an independent auditor to evaluate the
organization's compliance with our requirements. We would afford the
results of the independent auditor's review some weight in our
determination of whether the bases for the sanction have been corrected
and are not likely to recur. We invite comments from sponsors and the
industry about this alternative proposal and suggestions on other
options we could implement to accomplish the desired outcome.
At this time we are proposing to add language to Sec. 422.756 and
Sec. 423.756 that would allow us to require that a sponsoring
organization hire an independent auditor to provide us with additional
information to determine if the deficiencies that are the basis for a
sanction have been corrected and are not likely to recur. Under either
this proposal or our alternative proposal, the independent auditor
would work in accordance with our specifications and must be willing to
attest that a complete and full independent review has been performed.
Next, we are proposing that in instances where an enrollment and/or
marketing suspension has been imposed, we may determine that it is
appropriate to subject the sponsoring organization to a ``test period''
whereby the organization or sponsor will, for a limited time, engage in
marketing activities and/or accept enrollments in order to assist us in
making a determination as to whether the bases for the sanctions have
been corrected and are not likely to recur. The basis for this proposal
is that we have found that there is often not a satisfactory way to
determine if marketing and/or enrollment problems have been corrected
while a sanction is in place and no such activities are permitted.
Similarly, sponsoring organizations also have experienced challenges in
demonstrating to us that these kinds of deficiencies have been
corrected and are not likely to recur while they are under marketing
and/or enrollment sanctions. In order to lift intermediate sanctions as
expeditiously as possible when the sponsoring organization has
corrected the deficiencies and to protect beneficiaries if the
deficiencies have not been fully corrected, this proposed provision
will permit us to assess whether the deficiencies upon which the
sanction was made have been corrected and are not likely to recur by
conducting a test of the organizations or sponsor's processes. The
specific requirements for the marketing and/or enrollment ``test
period'' will be determined by considering numerous factors, including
but not limited to: the size of the organization, the specific
deficiencies, and the timeframe in which the ``test period'' is
conducted.
This provision will benefit sponsoring organizations,
beneficiaries, and CMS. Sponsoring organizations will have an effective
way to demonstrate that a sanction should be lifted. Beneficiaries will
be protected because we will have sufficient evidence that deficiencies
have been corrected prior to lifting sanctions and we will be assured
that the bases for the sanctions have been corrected and are not likely
to recur.
Therefore, we are proposing to add language to Sec. 422.756 and
Sec. 423.756 that in instances where marketing or enrollment or both
intermediate sanctions have been imposed, we may determine, in our sole
discretion, that it is appropriate to require the sponsoring
organization to market and/or to accept enrollments for a limited time
in order to assist us in making a determination as to whether the
deficiencies that are the bases for the intermediate sanctions have
been corrected and are not likely to recur. Following this time period,
if we determine the deficiencies have not been corrected or are likely
to recur, the intermediate sanction will remain in effect until such
time that we are assured the deficiencies have been corrected and are
not likely to recur. The sponsoring organization would have not had a
right to a hearing to challenge our determination to keep the sanction
in effect.
In addition to the above proposed changes to Sec. 422.756 and
Sec. 423.756, we are proposing to delete the existing provisions at
Sec. 422.756(c) and Sec. 423.756(c) which currently detail the three
types of intermediate sanctions that may be imposed pursuant to our
authority under sections 1857(g)(2)(B) through (C) and 1860D-
12(b)(3)(E) of the Act. These provisions are duplicative of the list of
sanctions at Sec. 422.750(a) and Sec. 423.750(a) and are unnecessary.
Due to this deletion, we are proposing to redesignate paragraphs (d)
through (f) in Sec. 422.756 and Sec. 423.756 as paragraphs (c)
through (e), respectively.
10. Termination of Contracts Under Parts C and D (Sec. 422.510(a) and
Sec. 423.509(a))
Sections 1857(c)(2) and 1860D-12(b)(3)(B) of the Act permit CMS to
terminate a sponsoring organization's contract if the sponsoring
organization--
Has failed substantially to carry out the contract;
Is carrying out the contract in a manner inconsistent with
the efficient and effective administration of this part; or
No longer substantially meets the applicable conditions of
this part.
Existing regulations at Sec. 422.510(a)(6) through (12) and Sec.
423.509(a)(6) through (11) provide a number of bases (in addition to
the statutory bases) upon which a contract may be terminated. This list
does not include every reason for which we have the authority to
terminate a contract. For example, the list does not explicitly include
a provision that provides that a failure by the sponsoring organization
to comply with enrollment and disenrollment regulations may be a basis
for CMS termination. However, sponsoring organizations must follow
enrollment and disenrollment regulations and a failure to comply with
these regulations may be a basis for terminating the sponsoring
organization's contract because it would have failed substantially to
carry out the terms of its contract as required by the Act. We are
concerned that by not specifically including each and every requirement
on this enumerated list, organizations may be under the mistaken
impression that we cannot take an action to terminate (or non-renew) a
contract, or sanction an organization, for a failure to comply with a
requirement(s) that is not
[[Page 54649]]
enumerated. Therefore, we are proposing to delete the enumerated bases
for termination contained at Sec. 422.510(a)(6) through (12) and Sec.
423.509(a)(6) through (11). In addition, we are proposing to revise
Sec. 422.510(a) and Sec. 423.509(a) to separate the language into two
paragraphs. The first paragraph, (a)(1), will list the statutory bases
for termination under sections 1857(c)(2) and 1860D-12(b)(3)(B) of the
Act which state that we may at any time terminate a contract if we
determine that the sponsoring organization has: (i) Failed
substantially to carry out the contract; (ii) is carrying out the
contract in a manner inconsistent with the efficient and effective
administration of this part; or (iii) no longer substantially meets the
applicable conditions of this part. The second paragraph, (a)(2), will
clarify--(i) that a sponsoring organization's failure to comply with
our regulations, (ii) failure to meet performance standards; and/or
(iii) participation in false, fraudulent, or abusive activities, may
constitute a basis for CMS to determine that the sponsoring
organization meets the requirements for contract termination in
accordance with paragraph (a)(1).
More specifically, we are proposing to add new language to Sec.
422.510(a)(2)(i) and Sec. 423.509(a)(2)(i) that failure to comply with
any of the regulatory requirements contained in Parts 422 or 423 may
constitute a basis for CMS to determine that the sponsoring
organization meets the requirements for contract termination in
accordance with paragraph (a)(1). This new provision is intended to
clarify that compliance with all regulations is necessary to remain a
contracting organization with CMS and if the sponsoring organization's
failure to comply with the regulations supports one or more of the
bases for termination in paragraph (a)(1), then we may terminate the
contract.
We are also proposing to add new language to Sec.
422.510(a)(2)(ii) and Sec. 423.509(a)(2)(ii) that failure to meet our
performance expectations in carrying out the Part C and Part D
regulatory requirements may constitute a basis for us to determine that
the sponsoring organization meets the requirements for contract
termination in accordance with proposed paragraph (a)(1). This includes
when we determine that a sponsoring organization is out of compliance
with a Medicare requirement because our analysis of data related to
that sponsoring organization's performance indicates it is an outlier
relative to that of other organizations.
In some instances, we may use an outlier analysis to determine a
sponsor's performance relative to industry standards that were
established by looking at the performance of all sponsors across the
program, as described earlier in the preamble in our discussion of the
development of our policies concerning the awarding, monitoring, and
enforcement of Medicare contracts. This strategy is part of a larger
strategy to oversee the program using a data driven, risk-based,
transparent approach. This information is used to monitor plan sponsor
compliance and make plan-specific and programmatic decisions. As
reflected in the proposed regulations, in addition to using these data
for program-wide evaluations and assessments, these performance
standards will continue to be used to make assessments concerning
compliance with our requirements and, when deemed appropriate, to take
CMS contract actions, including contract termination and nonrenewal.
Finally, in our proposed language we are retaining the authority to
terminate a sponsoring organization that has committed or participated
in false, fraudulent, or abusive activities as currently stated in
Sec. 422.510(a)(4) and Sec. 423.509(a)(4). However, we are proposing
to redesignate current Sec. 422.510(a)(4) and Sec. 423.509(a)(4) as
Sec. 422.510(a)(2)(iii) and Sec. 423.509(a)(2)(iii), respectively, as
such failures may also constitute a basis for us to determine that the
sponsoring organization meets the requirements for contract termination
in accordance with the proposed revisions to paragraph (a)(1).
In addition, we are proposing additional amended language to this
regulation. The existing regulations permit us to terminate a contract
only when we determine that a sponsoring organization's fraudulent
activities concern the Medicare program. We believe that we should not
be contracting with MA organizations and Part D sponsors who commit or
participate in fraudulent activities related to any governmental health
care programs. Therefore, we are proposing to amend this regulation to
include false, fraudulent, or abusive activities affecting Medicaid, or
other State or Federal health care programs.
In addition, existing regulations that govern termination at Sec.
422.510(a)(5) and Sec. 423.509(a)(5) provide that we may terminate a
contract if the sponsoring organization experiences financial
difficulties so severe that its ability to make necessary health
services available is impaired to the point of posing an imminent and
serious risk to the health of its enrollees, or otherwise fails to make
services available to the extent that such a risk to health exists.
This language incorporates the Secretary's authority under sections
1857(h)(2) and 1860D-12(b)(3)(F) of the Act to take an immediate
termination if it is determined that a delay in termination, in order
to comply with the CAP and appeal termination procedures, would pose an
imminent and serious risk to the health of the individuals enrolled. We
are proposing changes elsewhere in these regulations to our provisions
governing expedited terminations. Therefore, we are proposing to delete
the regulatory text contained at Sec. 422.510(a)(5) and Sec.
423.509(a)(5). Recognizing that it is not possible to enumerate every
reason for which we have the authority to terminate a contract, we
believe we have reached a good balance between providing sufficient
regulatory detail and preserving administrative flexibility. When
regulatory provisions require further clarification, we plan to further
define through subregulatory guidance how we would operationalize these
provisions. We have historically used our manual chapters, reporting
requirements, and marketing guidelines to indicate how we measure
compliance with our performance requirements and what we consider
acceptable practice. We solicit comment on whether these regulatory
provisions provide sufficient clarity. If not, we solicit comment on
whether clarification should be provided through regulation or
subregulatory guidance, such as the annual Call Letter or our Manual.
11. Request for Hearing Under Parts C and D (Sec. 422.662 and Sec.
423.651)
Sections 1857(c) and 1860D-12 of the Act permit us to terminate
contracts with sponsoring organizations. Current regulations at Sec.
422.662(a) and Sec. 423.651(a) governing the hearing procedures
require sponsoring organizations to file a request for a hearing on
contract determinations with the Hearing Officer and to also file it
with ``any CMS office.'' This procedure is ineffective and inefficient
because it is likely to result in a request for hearing not being
received by the appropriate officials within CMS. Consequently, we are
proposing a modification in the language contained at Sec. 422.662(a)
and Sec. 423.651(a) to state that the sponsoring organization must
file the request for a hearing in accordance with the requirements
specified in the notice of the contract determination or intermediate
sanction, thus ensuring that the proper officials within CMS receive
the request and can act upon the request in a timely manner.
[[Page 54650]]
We are also making a conforming change at Sec. 422.662(b) and
Sec. 423.651(b) which govern the timeframes for filing the request for
hearing to provide that the request must be filed within 15 calendar
days after receipt of the notice (versus the existing language which
states 15 calendar days from the ``date CMS notifies'' the sponsoring
organization of its determination). This change is to ensure
consistency with the way deadlines are described in other regulatory
provisions of parts 422 and 423 governing contract determinations or
the imposition of intermediate sanctions (including related appeals
processes).
12. Burden of Proof, Standard of Proof, Standards of Review, and
Conduct of Hearing (Sec. 422.660, Sec. 423.650, Sec. 422.676 and
Sec. 423.658)
Under the existing regulations at Sec. 422.660(b), and Sec.
423.650(b), when appealing a contract determination or an intermediate
sanction, the sponsoring organization bears the burden of proof to
demonstrate that it was in ``substantial compliance'' with our
requirements on the ``earliest of'' following three dates:
The date of the notice of contract determination or
intermediate sanction.
The date of the most recent onsite audit.
The date of the alleged breach of the current contract or
past substantial noncompliance as determined by CMS.
In practice, these existing standards of review (``substantial
compliance'' and ``earliest of test'') have led to confusion among
parties to the hearing and have been difficult for the Hearing Officer
to apply. We have come to realize that the existing ``substantial
compliance'' standard of review articulated at Sec. 422.660(b), and
Sec. 423.650(b) does not reflect the nuances of the different legal
standards provided in the Act for making contract determinations and
imposing intermediate sanctions. For example, sections 1857(c)(2)(B)
and 1860D-12(b)(3)(F) of the Act provide that the Secretary may
terminate a contract if the Secretary finds that the sponsoring
organization ``has failed substantially to carry out the contract, is
carrying out the contract in a manner inconsistent with the efficient
and effective administration of this part, or no longer substantially
meets the applicable conditions of this part.'' Similarly, there is no
reference to a substantial compliance standard in the bases available
to CMS for imposing intermediate sanctions. Based on these nuances, we
have determined that the application of the substantial compliance
standard of review to all appeals is unnecessarily confusing and may
have led to unintended consequences in that it may have distorted
review of the applicable statutory and regulatory requirements.
Accordingly, we are proposing to delete ``substantial compliance'' as a
standard of review.
In addition to the preceding, the ``earliest of'' test does not
accurately reflect how and when we make our determinations for
different contract actions or intermediate sanctions. For example, when
making a determination as to whether or not we should enter into a
contract with an applicant, we review all of the information that the
applicant provides and decides whether it meets our standards according
to Sec. 422.501 and Sec. 422.502 or Sec. 423.502 and Sec. 423.503.
If the applicant does not meet those standards, then we will deny the
application. During a hearing, it would be inappropriate for the
applicant to insist that its application should be approved because it
corrected its deficiencies after we issued a denial of the application.
The ``earliest of'' test may create this mistaken impression because it
provides that during a hearing the applicant must demonstrate that it
was in ``substantial compliance'' with our requirements on the
``earliest of'' one of three dates. This creates confusion and imposes
an unworkable time period for the applicant or sponsoring organization
to demonstrate that it has met CMS standards. Therefore, we are also
proposing to delete the existing regulations which provide for an
``earliest of'' test.
Finally, though the existing regulations explicitly state that the
sponsoring organization bears the burden of proof, it does not provide
the standard of proof that is to be applied by the hearing officer. We
believe that the sponsoring organization bearing the burden of proof is
appropriate since the purpose of the hearing is to provide the
sponsoring organization an opportunity to appeal and dispute our
contract determination or imposition of intermediate sanction.
Therefore, we believe that no change is necessary concerning the burden
of proof. In order, however, to more clearly articulate the standard of
proof and standards of review we are proposing the following changes to
our regulations.
First, we are clarifying the standard of proof that we believe
applies to these appeals proceedings. It has been our experience that
the hearing officer does appropriately use the preponderance of
evidence standard when weighing the evidence at a hearing for an appeal
of a CMS contract determination or imposition of intermediate sanction.
We believe, however, that it is important to explicitly state the
standard of proof so as to provide as much clarity and consistency as
possible for the Hearing Officers and the parties to a hearing. In
addition, the preponderance of the evidence standard is consistent with
the standard of proof used in Subparts T to Parts 422 and 423 which
governs appeal proceedings for civil money penalties.
Second, we are addressing the use of a proper standard of review.
The proposed standard of review that we believe applies to these appeal
procedures is dependent on the type of contract determination or
intermediate sanction. Our proposed revisions make explicit which
standard of review is to be applied by the Hearing Officer to the three
types of contract determinations identified at Sec. 422.641(a) and
Sec. 423.641(a) and to intermediate sanctions identified at Sec.
422.750 and Sec. 423.750 by noting the different requirements for each
type of action. Specifically, the proposed regulation clarifies that
the standards of review are different for determinations involving Part
C or D contract application qualifications, those involving the
termination or non-renewal of a sponsoring organization's contract, and
those involving the imposition of intermediate sanctions. These
separate and distinct standards of review are intended to reflect the
inherent differences in the processes and standards we use to make each
type of determination.
Therefore, we are proposing to delete the existing language
contained at Sec. 422.660(b) and Sec. 423.650(b) and replace it with
language which provides that the applicant or the sponsoring
organization has the burden of proving by a preponderance of the
evidence that our determination was inconsistent with the requirements
of the applicable part. We specify that these requirements are Sec.
422.501 and Sec. 422.502 that governs the processes and standards for
applicants for the MA program, Sec. 423.502 and Sec. 423.503 for
applicants for the Part D program, Sec. 422.506 or Sec. 422.510 for
MA contract determinations, Sec. 423.507 or Sec. 423.509 for Part D
contract determinations, and Sec. 422.752 or Sec. 423.752 for
intermediate sanctions.
Additionally, we propose to modify Sec. 422.660(c) and Sec.
423.660(c), which currently specify that the notice of any decision
favorable to a Part C or D applicants appealing a determination that it
is not qualified to enter into a contract with us must be issued by
July 15th for the contract in question to be effective on January 1st
of the following year. We propose changing the July 15th
[[Page 54651]]
deadline to September 1st. Over the past 4 years, we have found the
July 15th deadline to be an unreasonable timeframe within which to
complete the hearing process afforded denied applicants pursuant to
Subpart N of Parts 422 and 423. September 1st allows sufficient time
for an applicant to receive a decision issued by the CMS Hearing
Officer on the status of its application and for us to contract with
the applicant should the applicant receive a favorable decision.
Accordingly, we are also proposing to make the following conforming
changes to Sec. 422.660 and Sec. 423.650.
Revise the section headings for Sec. 422.660 and Sec.
423.650 to read ``Right to a hearing, burden of proof, standard of
proof, and standards of review'' in order to conform with the section
headings to our proposed changes.
Add paragraph headings. We believe that these additions
would improve the structure and readability of the proposed regulatory
text.
Correct the references in Sec. 422.660(a)(1) and Sec.
423.650(a)(1). Sections 422.660(a)(1) and 423.650(a)(1) currently state
that a contract applicant that has been determined to be unqualified to
enter into a contract with CMS under Sec. 422.501 and Sec. 423.503
respectively, is entitled to a hearing. The correct citations for the
sections that we use when making a determination as to whether to enter
into a contract with an applicant are Sec. 422.501 and Sec. 422.502
for Part C contracts and Sec. 423.502 and Sec. 423.503 for Part D
contracts. Therefore, we are proposing to accurately reflect these
references in the regulations by making a technical change which
incorporates the appropriate and necessary citations by adding the
reference Sec. 422.502 to Sec. 422.660(a)(1), and by adding the
reference Sec. 423.502 to Sec. 423.650(a)(1).
Make technical changes in Sec. 422.660(a) and Sec.
423.650(a). In paragraphs (a)(1) through (a)(4) of these sections, we
are proposing to revise the terminology preceding the cross-reference
(that is, change ``pursuant to'' to ``in accordance with'' or
``under''), adding a section symbol before the section number, and
completing the cross-reference by adding the phrase ``of this part''
after the section number.
Finally, we are also proposing to modify the existing regulations
at Sec. 422.676(d) and Sec. 423.658(d) governing the conduct of the
hearing. We are proposing to revise the language contained in Sec.
422.676(d) and Sec. 423.658(d) to provide that, consistent with the
burden of proof, during the hearing the sponsoring organization bears
the burden of being the first to present its argument to the Hearing
Officer according to any briefing schedule determined by the Hearing
Officer. We believe that requiring the sponsoring organization to
present its argument to the Hearing Officer first is appropriate since
the basis for our determination is detailed in the notice of
determination that is sent to the sponsoring organization. Since the
purpose of the sponsoring organization's appeal is to dispute our
determination it seems appropriate that the sponsoring organization
should first be required to present its argument as to why it believes
the determination is incorrect or otherwise not supported prior to CMS'
putting on its case in support of its contract or intermediate sanction
determination.
13. Expedited Contract Terminations Procedures (Sec. 422.510, Sec.
423.509, Sec. 422.664, Sec. 423.652, Sec. 422.644, and Sec.
423.642)) Under Parts C and D
Sections 1857(h)(2) and 1860D-12(b)(3)(F) of the Act provide the
procedures requiring reasonable notice and opportunity to develop and
implement a CAP and for a hearing shall not apply prior to termination
if the Secretary determines that a delay in termination, resulting from
compliance with these procedures would pose an imminent and serious
risk to the health of individuals enrolled with the sponsoring
organization. These kinds of terminations are referred to as
``expedited terminations'' under current regulations.
Sections 422.510(a)(4) and (5), and Sec. 423.509(a)(4) and (5)
currently provide two of these bases for expedited terminations. Under
Sec. 422.510(a)(4) and Sec. 423.509(a)(4), we may terminate a
contract when there is credible evidence that the sponsoring
organization committed or participated in false, fraudulent, or abusive
activities affecting the Medicare program. Under Sec. 422.510(a)(5)
and Sec. 423.509(a)(5), we may terminate a contract when the
sponsoring organization experiences financial difficulties so severe
that its ability to make necessary health services available is
impaired ``to the point of posing an imminent and serious risk to the
health of its enrollees or otherwise fails to make services available
to the extent that such a risk to health exists'', thereby
incorporating the expedited termination statutory language.
Termination procedures at Sec. 422.510(c)(2) and Sec.
423.509(c)(2) provide that if a contract is terminated under Sec.
422.510(a)(4) or (a)(5), and Sec. 423.509(a)(4) or (a)(5), the
sponsoring organization will not have the opportunity to submit a CAP
prior to termination. Our notice of termination procedures also provide
at Sec. 422.510(b)(2)(i) and Sec. 423.509(b)(2)(i) that, if a
contract is terminated under Sec. 422.510(a)(4) or (a)(5) and Sec.
423.509(a)(4) or (a)(5), we will notify the sponsoring organization
that its contract will be terminated on a date specified by CMS. Appeal
procedures at Sec. 422.664(b)(2) and Sec. 423.652(b)(2) currently
provide that a contract terminated under either of these bases will be
terminated on the date specified by CMS and will not be postponed if a
hearing is requested.
These current regulations governing expedited terminations do not
adequately reflect the scope of the Secretary's authority under section
1857(h)(2) and 1860D-12(b)(3)(F) of the Act. The Act does not limit the
Secretary's authority to effectuate expedited terminations solely based
on the circumstances prescribed in Sec. 422.510(a)(4) or (a)(5), and
Sec. 423.509(a)(4) or (a)(5) and therefore, these regulations are
unduly limiting. If compliance with the CAP provisions and hearing
procedures prior to termination would pose an imminent and serious risk
to the health of individuals enrolled with the sponsoring organization,
the Act permits us to terminate a contract without providing a right to
a CAP or hearing prior to termination. While the current regulations
provide several instances where such a determination would be
appropriate, these are not the only instances where such a
determination would need to be made to protect beneficiaries from
imminent and serious risk to their health.
Therefore, we are proposing to delete the references to Sec.
422.510(a)(4) or (a)(5) and Sec. 423.509(a)(4) or (a)(5) as contained
in the termination (Sec. 422.510(b)(2)(i), Sec. 423.509(b)(2)(i),
Sec. 422.510(c)(2) and Sec. 423.509(c)(2)) and in the appeal
procedures (Sec. 422.664(b)(2) and Sec. 423.652(b)(2)). More
specifically, we are proposing to amend the termination procedures
language of Sec. 422.510(b)(2)(i) and Sec. 423.509(b)(2)(i) to
clarify that for terminations based on violations prescribed in Sec.
422.510(a) and Sec. 423.509(a), if we determine that a delay in
termination, resulting from compliance with CAP and hearing procedures
prior to termination, would pose an imminent and serious risk to the
health of the individuals enrolled with the sponsoring organization,
the effective date of the termination will be specified, in writing by
CMS. In addition, we are proposing to amend the termination procedures
language at Sec. 422.510(c)(2) and Sec. 423.509(c)(2) to clarify that
if we determine that a delay
[[Page 54652]]
in termination, resulting from compliance with the CAP procedures,
would pose an imminent and serious risk to the health of the
individuals enrolled with the MA organization or Part D sponsor, the MA
organization or Part D sponsor will not be provided with an opportunity
to develop and implement a CAP prior to termination. Lastly, we are
proposing to amend the appeals procedures language at Sec.
422.664(b)(2) and Sec. 423.652(b)(2) to state that if we determine
that a delay in termination, resulting from compliance with the notice
and opportunity for hearing procedures, prior to termination, would
pose an imminent and serious risk to the health of individuals enrolled
with the MA organization or Part D sponsor, the date of termination
will not be postponed if the MA organization or Part D sponsor requests
a hearing.
It is important to note that our proposal to delete the references
to Sec. 422.510(a)(4) or (a)(5), and Sec. 423.509(a)(4) or (a)(5)
contained in the existing termination and appeal procedures should not
be interpreted in any way to limit our ability under our statutory
authority to expedite a termination when we determine that a sponsoring
organization is experiencing severe financial difficulty, otherwise
fails to make services available to the extent that such a risk to the
health exists or when there is credible evidence that a sponsoring
organization committed or participated in false, fraudulent, or abusive
activities.
We are also making conforming changes (to ensure consistency of the
proposed regulations) to the termination notice procedures contained in
Sec. 422.510(b) and Sec. 423.509(b) and notice of contract
determinations contained in Sec. 422.644(c) and Sec. 423.642(c) which
reference the expedited termination bases. In Sec. 422.510(b) and
Sec. 423.509(b), we are deleting the references to Sec. 422.510(a)(4)
or (a)(5), and Sec. 423.509(a)(4) or (a)(5). In Sec. 422.644(c) and
Sec. 423.642(c), we are deleting the references to Sec. 422.510(a)(4)
or (a)(5), and Sec. 423.509(a)(4) or (a)(5) and replacing the language
with the proposed language contained in Sec. 422.510(b)(2)(i) and
Sec. 423.509(b)(2)(i).
14. Time and Place of Hearing Under Parts C and D (Sec. 422.670 and
Sec. 423.655)
Sections 1857(h)(1)(b) and 1860D-12(b)(3)(F) of the Act provide the
procedures requiring reasonable notice and opportunity for hearing when
we terminate a sponsoring organization's contract. Current regulations
at Sec. 422.670(b) and Sec. 423.655(b) provide the Hearing Officer
may, on his or her own motion, or at the request of party, change the
time and place for the hearing and may adjourn or postpone the hearing.
Based on our experience with this process, we believe that both
sponsoring organizations and we may need additional time to prepare for
a hearing. Therefore, we are proposing to add language to Sec.
422.670(b) and Sec. 423.655(b) to state the sponsoring organization or
we may request that the hearing date be postponed by filing a written
request no later than 5 calendar days prior to the scheduled hearing,
when either the sponsoring organization or CMS requests an extension,
the Hearing Officer will provide a one-time 15 calendar day
postponement, and additional postponements may be granted at the
discretion of the Hearing Officer.
In addition, current regulations at Sec. 422.670(a) and Sec.
423.655(a) require that the CMS Hearing Officer schedule a hearing to
review a contract determination or the imposition of an intermediate
sanction within 30 calendar days from the ``receipt of request for the
hearing.'' We are proposing to change the language at Sec. 422.670(a)
and Sec. 423.655(a) to provide that the CMS Hearing Officer schedule a
hearing to review a contract determination or the imposition of an
intermediate sanction within 30 calendar days after the ``receipt of
the request for the hearing.'' This change is to ensure consistency
with the way deadlines are described in other regulatory provisions of
parts 422 and 423 governing contract determinations or the imposition
of intermediate sanctions (including related appeals processes).
15. Discovery Under Parts C and D (Sec. 422.682 and Sec. 423.661)
Sections 1857(h)(1)(b) and 1860D-12(b)(3)(F) of the Act provide the
procedures requiring reasonable notice and opportunity for hearing when
we terminate a sponsoring organization's contract. The statute does not
require a formal discovery process for CMS appeal procedures. In the
December 5, 2007 final rule, we provided in Sec. 422.682 and Sec.
423.661 for a formal discovery process prior to hearing. However, based
on our experience since the promulgation of this rule, we do not now
believe a formal discovery process is necessary or appropriate for
these kinds of proceedings. In addition, the existing timeframe in
which the hearing normally must take place, 30 calendar days after
request for a hearing, does not easily accommodate a formal discovery
process.
Therefore, we are proposing to delete the formal discovery process
contained in Sec. 422.682 and Sec. 423.661. Simultaneously, we need
to ensure that both parties receive witness lists and relevant
documents with enough time prior to the hearing while at the same time
ensuring the hearing is conducted in a timely and orderly fashion.
Therefore, we are proposing to amend the regulations at Sec.
422.682 and Sec. 423.661. First, we propose to modify the existing
regulations to change the titles of Sec. 422.682 and Sec. 423.661
from ``Discovery'' to ``Witnesses and Documents'' to reflect the
changes made. Second, under this newly titled section, we are proposing
to substitute new language which requires that witness lists and
documents must be identified and exchanged at least 5 calendar days
prior to the scheduled hearing. We believe this change more
appropriately reflects what is necessary to meet the evidentiary needs
of the parties by providing the parties with the appropriate amount of
information in advance of the hearing to present their evidence and
counter arguments.
Additionally, existing regulations at Sec. 422.670(a)(2) and Sec.
423.655(a)(2) currently provide that the Hearing Officer will notify
the parties of the ability to conduct formal discovery. Because we are
proposing to delete the formal discovery processes in Sec. 422.682 and
Sec. 423.661, we are proposing to make a conforming change by deleting
Sec. 422.670(a)(2) and Sec. 423.655(a)(2).
16. Review by the Administrator Under Parts C and D (Sec. 422.692(a)
and Sec. 423.666(a))
Sections 1857(h)(1)(b) and 1860D-12(b)(3)(F) of the Act provide the
procedures requiring reasonable notice and opportunity for hearing when
we terminate a sponsoring organization's contract. Our current
regulations at Sec. 422.692 and Sec. 423.666 provide for a sponsoring
organization to request review by the CMS Administrator of a hearing
decision. These existing regulations provide that a sponsoring
organization may request review by the Administrator within 15 calendar
days of ``receiving the hearing decision.''
We are proposing to revise the language at Sec. 422.692(a) and
Sec. 423.666(a) to provide that the sponsoring organization may
request review by the Administrator within 15 calendar days after
``receipt of the hearing decision.'' In addition, we are proposing to
change the language at Sec. 422.692(c) and Sec. 423.666(c) governing
the notification of Administrator determination to state that the
Administrator must notify both parties
[[Page 54653]]
of his or her determination regarding review of the hearing decision
within 30 calendar days after ``receipt of the request for review''
(versus the existing language which provides within 30 calendar days of
``receiving the request for review''). These changes ensure consistency
with the way deadlines are described in other regulatory provisions of
Parts 422 and 423 governing contract determinations or the imposition
of intermediate sanctions (including related appeals processes).
17. Reopening of an Initial Contract Determination or Decision of a
Hearing Officer or the Administrator Under Parts C and D (Sec. 422.696
and Sec. 423.668)
Sections 1857(h)(1)(b) and 1860D-12(b)(3)(F) of the Act provide the
procedures requiring reasonable notice and opportunity for hearing when
we terminate a sponsoring organization's contract. Our current
regulations at Sec. 422.696 and Sec. 423.668 govern the reopening of
an initial contract determination or decision of a Hearing Officer or
the Administrator. More specifically, existing regulations at Sec.
422.696(a) and Sec. 423.668(a) state that we may reopen and revise an
``initial determination'' upon our own motion. The term ``initial
determination'' is not used elsewhere in Subpart N (Contract
determinations and Appeals). Therefore, we are proposing to revise
these regulations by replacing the language ``initial determination''
with ``contract determination'' in the section headings of Sec.
422.696 and Sec. 423.668 and in the text of Sec. 422.696(a) and Sec.
423.668(a).
18. Prohibition of MA and Part D Applications for 2 Years After a
Mutual Termination (Sec. 422.503(b)(6) and Sec. 423.504(b)(5))
The regulations in Sec. 422.503(b)(6) and Sec. 423.504(b)(5)
currently provide that MA organizations and Part D sponsors that
nonrenew contracts with CMS are considered unqualified to recontract
with us for a period of 2 years, unless we identify circumstances that
warrant special consideration. This is consistent with Sec.
422.506(a)(4) and Sec. 423.507(a)(3), which describe contract
nonrenewal requirements and procedures. We interpret these provisions
to apply to MA organizations and Part D sponsors that nonrenew all of
their contracts with us in a given area for a given line of business
(MA or Part D), thereby severing their contractual relationship with
the Agency across all of their MA, Part D, or both lines of business in
the area. We have not interpreted this provision to apply to an
organization that, for instance, holds many MA contracts in an area but
chooses to nonrenew fewer than all of those contracts.
In practice, a voluntary nonrenewal of a contract by a Part D
sponsor or MA organization is not dissimilar from an organization
requesting and being granted a mutual termination of their contract
under Sec. 422.503 and Sec. 423.508. The primary difference between
the two events is often timing, whereby a nonrenewal request to take
effect at the end of the current contract year must be received by us
on or before the first Monday in June (the bid deadline), as specified
in Sec. 423.507(a)(2)(i) and Sec. 422.506(a)(2)(i). Once an
organization submits a bid, it can no longer voluntarily nonrenew its
contract for the following year. Rather, the Part D sponsor or MA
organization must request a mutual contract termination. The later in
the year the organization requests such a mutual termination for the
following contract year, the more disruptive and difficult the process
becomes. Particularly, once the organization completes all of its
contract renewal obligations, such as signing a new bid attestation and
a contract with CMS, where applicable, we begin including the new plan
offerings under the contract on our Web site and in print materials to
inform beneficiaries about the opportunity to enroll in those plan
offerings for the upcoming contract year. To request a mutual contract
termination late in the year once such information has become publicly
available, marketed to beneficiaries, and beneficiaries have been given
the opportunity to enroll is to create significant disruption for us
and beneficiaries. Similarly, even greater disruption results from
mutual terminations requested to take effect during the course of a
contract year.
Circumstances are sometimes such that the requesting MA
organization or Part D sponsor is requesting the mutual termination
because it realizes it would be significantly out of compliance with
one or more program requirements should it keep the contract in place.
Therefore, it is sometimes in the organization's and our interest to
execute the mutual termination. Nevertheless, the disruption is
significant and completely the responsibility of the sponsor. Yet,
currently the regulations are silent on whether the MA organization or
Part D sponsor would be qualified to enter into new contracts with CMS
in future years. We believe that a termination by mutual consent, which
involves a termination by an MA organization or a Part D sponsor as
well as by CMS, should be considered a termination of a contract for
purposes of the 2-year ban on entering into new contracts under section
1857(c)(4)(A) of the Act, which is incorporated for Part D under
section 1860D-12(b)(3)(B) of the Act.
For these reasons, we are proposing that as a condition of the
consent to a mutual termination, we will prohibit the MA organization
or Part D sponsor from applying for new contracts or service area
expansions for a period of 2 years, absent circumstances that warrant
special consideration as provided under section 1857(c)(4)(A) of the
Act. Such language would be incorporated into the mutual termination
consent agreement to be signed by both parties.
Therefore, we are proposing to modify Sec. 423.508 by adding
paragraph (e), which states that as a condition of the consent to a
mutual termination, we will require as a provision of the termination
agreement language prohibiting the Part D sponsor from applying for new
contracts or service area expansions for a period of 2 years, absent
circumstances warranting special consideration. Similarly, in Sec.
423.504(b), we propose to add a new paragraph (b)(6) stating that
organizations may be qualified to apply for new contracts to the extent
that they have not terminated a contract by mutual consent under which,
as a condition of the consent, the Part D sponsor agreed that it was
not eligible to apply for new contracts or service area expansions for
a period of 2 years per Sec. 423.508(e). To accomplish these changes,
we propose to redesignate the current Sec. 423.504(b)(6) to Sec.
423.504(b)(7).
We propose to make the same modification to the MA regulations.
Specifically, we are proposing to modify Sec. 422.508 by adding
paragraph (c), which states that as a condition of the consent to a
mutual termination, we will require as a provision of the termination
agreement language prohibiting the MA organization from applying for
new contracts or service area expansions for a period of 2 years,
absent circumstances warranting special consideration. Similarly, in
section Sec. 422.503(b), we propose to add a new paragraph (b)(7),
stating that organizations may be qualified to apply for new contracts
to the extent that they have not terminated a contract by mutual
consent under which, as a condition of the consent, the MA organization
agreed that it was not eligible to apply for new contracts or service
area expansions for a period of 2 years per Sec. 422.508(c).
[[Page 54654]]
B. Changes To Strengthen Beneficiary Protections
This section includes provisions aimed at strengthening beneficiary
protections under Parts C and D. Under Part D, we address proposals in
the area of eligibility and enrollment policy, transition period
requirements, coordination of benefits policy, retroactive claims
adjustment reimbursements and recoveries, and use of standardized
technology. We also propose to revise Part D rules regarding timeframes
and responsibility for making redeterminations.
Under Part C, we propose to revise our rules to--
Authorize us to annually establish an overall annual cap
on member cost sharing;
Prohibit PPO, PFFS, and MSA plans from using compliance
with voluntary prior notification procedures in determining cost-
sharing amounts;
Establish new requirements for organization
determinations; and
Offer two definitional revisions.
In the area of Parts C and D marketing, we continue to monitor
plans that use independent agents and brokers to ensure sponsoring
organizations adhere to CMS requirements. In this rule, we solicit
comments on options aimed at further protecting beneficiaries in this
area. We also propose to strengthen our marketing requirements,
distinguishing marketing materials from enrollee communications
materials and mandating the use of standardized marketing material
language and format to ensure clarity and accuracy among plan
documents. We also clarify notice requirements, and propose that
sponsoring organizations disclose information concerning the
organization's performance and compliance deficiencies to enable
beneficiaries to make informed choices. This information is detailed in
Table 2.
Table 2--Provisions To Strengthen Beneficiary Protections
--------------------------------------------------------------------------------------------------------------------------------------------------------
Part 422 Part 423
Provision -------------------------------------------------------------------------------------------------------------------
Subpart Section Subpart Section
--------------------------------------------------------------------------------------------------------------------------------------------------------
Broker & Agent Requirements under N/A..................... N/A.................... N/A..................... N/A.
Parts C and D.
Beneficiary Communications Materials Subpart V............... Sec. 422.2260, Sec. Subpart V............... Sec. 423.2260, Sec. 423.2262.
under Parts C and D. 422.2262.
Required Use of Standardized Model Subpart V............... Sec. 422.2262........ Subpart V............... Sec. 423.2262.
Materials under Parts C and D.
Extend the mandatory minimum grace- Subpart B............... Sec. 422.74.......... Subpart B............... Sec. 423.44.
period for failure to pay premiums.
Maximum allowable out-of-pocket cost Subpart C............... Sec. 422.100......... N/A..................... N/A.
amount for Medicare Parts A and B
services.
Maximum allowable cost sharing Subpart C............... Sec. 422.100......... Subpart C............... Sec. 423.104
amount for Medicare Parts A and B
services and prescription drugs.
Prohibition on prior notification by Subpart A............... Sec. 422.2, Sec. N/A..................... N/A
PPO, PFFS, and MSA plans. 422.4, Sec.
422.105(b).
Requirements for LIS eligibility: N/A..................... N/A.................... Subpart P............... Sec. 422.773(c)(2).
Expand the deeming period for LIS-
eligible beneficiaries to cover at
least 13 months.
Expand auto-enrollment rules to N/A..................... N/A.................... Subpart B............... Sec. 423.34
entire LIS-eligible population.
Special Enrollment Period (SEP) N/A..................... N/A.................... Subpart B............... Sec. 423.38.
Policies.
Transition Process.................. N/A..................... N/A.................... Subpart C............... Sec. 423.120(b)(3).
Sponsor responsibility for N/A..................... N/A.................... Subpart J............... Sec. 423.464.
retroactive claims adjustment
reimbursements and recoveries.
Time Limits for Coordination of N/A..................... N/A.................... Subpart J............... Sec. 423.466.
Benefits.
Pharmacy use of Standard Technology N/A..................... N/A.................... Subpart C............... Sec. 423.120.
(ID cards) under Part D.
Allow members in stand-alone Part D N/A..................... N/A.................... Subpart B............... Sec. 423.44.
plans to be temporarily out of area
for up to 12 months.
Prohibit mass SPAP reenrollments N/A..................... N/A.................... Subpart J............... Sec. 423.464(e).
during plan year.
Non-Renewal Public Notice 60-day non- Subpart K............... Sec. 422.506......... Subpart K............... Sec. 423.507.
renewal beneficiary notification
requirement.
Notice of Alternative Medicare Plans Subpart K............... Sec. 422.5(a)(2)(ii). Subpart K............... Sec. 423.507(2)(ii).
Timeframes and Responsibility for N/A..................... N/A.................... Subpart M............... Sec. 423.590.
making Redeterminations under Part
D.
Requirements for Requesting Subpart M............... Sec. 422.568......... N/A..................... N/A.
Organization Determinations.
Organization Determinations under Subpart M............... Sec. 422.566 & Sec. N/A..................... N/A.
Parts C. 422.568.
Refine/clarify definitions related Subpart M............... Sec. 422.561, Sec. N/A..................... N/A.
to authorized representatives. 422.574 & Sec.
422.624.
Sponsors may be required to disclose Subpart C............... Sec. 422.111(g)...... Subpart C............... Sec. 423.128(f).
to enrollees compliance and
performance deficiencies.
Revise definition of ``service Subpart A............... Sec. 422.2........... N/A..................... N/A.
area'' to exclude facilities in
which individuals are incarcerated.
--------------------------------------------------------------------------------------------------------------------------------------------------------
1. Broker and Agent Requirements Under Parts C and D
Prior to January 1, 2006, beneficiaries could enroll in MA plans
(then called Medicare+Choice plans) at any time throughout the year,
effective the first day of the next month. Under those circumstances,
most MA plans were able to employ a full-time sales force. Effective
January 1, 2006, enrollment in MA plans and Part D prescription drug
plans (PDPs) was limited to an annual coordinated election period in
the fall, and in the case of MA plans only, the
[[Page 54655]]
open enrollment period during the first 3 months of the year. As a
result, maintaining a full-time, year-round sales force became
untenable for many organizations, leading to increasing reliance on
independent agents and brokers to educate beneficiaries about their
Medicare health care options and enroll them in their products.
In 2008, the Congress enacted the Medicare Improvements for
Patients and Providers Act (Pub. L. 110-275) (MIPPA). In order to
address concerns raised by reports of significant agent and broker
misconduct in the market place, section 103 of MIPPA placed certain
restrictions and limits on the marketing of MA plans and PDPs. Our
objective in implementing the marketing requirements included in the
MIPPA was to ensure that agent and broker compensation would not create
financial incentives for agents and brokers to enroll Medicare
beneficiaries in particular MA plans or PDPs based on considerations
other than the best interests of the beneficiary.
In the September 18, 2008 Federal Register, we published an interim
final rule with comment period (73 FR 54226) implementing the MIPPA
compensation provisions. In the November 14, 2008 Federal Register, we
published the Medicare Advantage & Prescription Drug Programs:
Clarification of Compensation Plans interim final rule with comment
period (73 FR 67406), which clarified and modified the September 18,
2008 rule in part because we believed that plans were misinterpreting
certain provisions of the September 18, 2008 interim final rule.
Because so little time has passed since the publication of these rules,
we believe it is too soon to fully evaluate whether these changes
involving agent compensation have achieved the MIPPA's goal of creating
incentives for agents and brokers to assist beneficiaries with
selecting plans based on their health care needs rather than on agent
or broker financial interests.
We recognize the important role that agents and brokers play in
assisting beneficiaries with accessing and understanding plan
information, making informed choices, and enrolling them in Medicare
health plans. However, we remain concerned about the inherent financial
incentives independent agents and brokers have when selling Medicare
products. For this reason, we are continuing to explore the most
effective means of providing Medicare health plan and drug plan
information and enrollment assistance in order to ensure that
beneficiaries select the plan that best meets their needs, including
whether additional changes are needed in the requirements related to
plan sponsors' use of agents and brokers.
Our overarching objective is that with any potential further
limitations on independent agent and broker activity beneficiaries will
continue to have the assistance they need to make health care choices
best suited to their needs. We provide a number of tools, both through
our print publications and our online resources (Medicare Options
Compare, MPDPF, and Online Enrollment Center) to assist beneficiaries
with their health care decisions, and we continuously seek to improve
these tools. We are exploring whether State Health Insurance Assistance
Programs (SHIPs) have the capacity to serve significantly more Medicare
beneficiaries. We also are considering limiting the use of independent
agents and brokers by MA organizations to certain times of the year,
specifically, the open enrollment period (OEP) and annual enrollment
period (AEP), or to selected groups of beneficiaries. Limiting the use
of independent agents and brokers to the OEP and AEP or to a subset of
beneficiaries would allow us to better focus our monitoring efforts
throughout the year, while still recognizing the role independent
agents and brokers play in assisting beneficiaries with obtaining and
evaluating plan information (including year to year plan benefit
changes), making informed choices, and enrolling in Medicare health
plans.
While we are not proposing any changes at this time, we are seeking
comments on the approaches discussed in this section, as well as other
potential solutions to ensure that beneficiaries receive adequate
assistance in understanding their choices and with enrollment,
including potential alternative roles for agents and brokers. Any
changes resulting from comments to this section will be implemented
through future notice and comment rulemaking.
2. Beneficiary Communications Materials Under Parts C and D (Sec.
422.2260, Sec. 422.2262, Sec. 423.2260, and Sec. 423.2262)
Section 1851(h) of the Act, which is made applicable to Part D in
section 1860D-1(b)(1)(vi) of the Act, established requirements
regarding the review and approval of marketing materials by MA
organizations and PDP sponsors. Sections 422.2260 and 423.2260 of the
regulations define marketing materials as informational materials
targeted to Medicare beneficiaries which may include the following:
General audience materials such as--
++ General circulation brochures;
++ Newspapers;
++ Magazines;
++ Television;
++ Radio;
++ Billboards;
++ Yellow pages; or
++ The Internet.
Marketing representative materials such as scripts or
outlines for telemarketing or other presentations.
Presentation materials such as slides and charts.
Promotional materials such as brochures or leaflets,
including materials for circulation by third parties (for example,
physicians or other providers);
Membership communication materials such as--
++ Membership rules;
++ Subscriber agreements;
++ Member handbooks; and
++ Wallet card instructions to enrollees.
Letters to members about--
++ Contractual changes;
++ Changes in providers;
++ Premiums;
++ Benefits, plan procedures, and membership; or
++ Claims processing activities.
Sections 422.2260, 422.2262, 423.2260, and 423.2262 codify
requirements regarding CMS review and approval of marketing materials.
Given a number of years of experience in implementing these processes
under both the Part C and Part D programs, we have found that our
definition of the term ``marketing materials'' is so broad as to
encompass plan notification materials that are often either situational
materials or beneficiary specific customized communications. As these
materials are considered marketing materials, they are subject to our
rules regarding review, distribution, and approval in Sec. 422.2262
and Sec. 423.2262. However, we have found that CMS Regional Office
review and approval procedures for situational marketing materials
should follow a separate review process determined by CMS. Materials
that are beneficiary specific letters are not considered to be
marketing materials such as--
Part D explanations of benefits (EOBs);
Notifications about claims processing changes or errors;
and
Other one-time or situational, beneficiary specific
letters to current enrollees.
Therefore, we propose to revise Sec. 422.2260 and Sec. 423.2260
to exclude materials about claims processing activities from the
definition of marketing materials. We also propose to add a definition
of current enrollee
[[Page 54656]]
communications materials not to be considered marketing materials
encompassing information targeted to situational or beneficiary-
specific circumstances, including claims processing issues and other
one-time communications about operations. In addition, we propose to
revise Sec. 422.2262 and Sec. 423.2262 to specify that, while current
enrollee communications are not subject to the statutory requirement
that applies to marketing materials (that is, that they be submitted to
CMS for review prior to use), we retain the right to review them, and
their use could be disapproved by CMS, or disapproved unless
modifications are made. We believe these changes will streamline the
review and approval of beneficiary communication notices to current
members.
3. Required Use of Standardized Model Materials Under Parts C and D
(Sec. 422.2262 and Sec. 423.2262)
Section 1851(h) of the Act establishes standards for review and
approval of marketing materials. Section 1860D-1(B)(1)(vi) of the Act
requires CMS to use rules ``similar to (and coordinated with)'' the
foregoing marketing rules set forth in section 1851(h) with respect to
Part D marketing. Specifically, organizations may not distribute
marketing materials unless they have been submitted to CMS for review.
Materials submitted for such review are deemed to be approved unless
disapproved within 45 days, or 10 days when using model language
specified by CMS. In reviewing marketing materials or election forms
under Sec. 422.2264 and Sec. 423.2264, we ensure that marketing
materials are provided in a format (with appropriate print size, as
applicable) specified by CMS and will use standard terminology
specified by CMS.
Our current marketing materials submission and review process
encourages MAOs and PDP sponsors to use model materials to expedite the
review and approval process. The model documents contain language
provided by CMS, including language that is optional (or that can be
modified), for plan use. Under this arrangement, MAOs and Part D
sponsors may submit customized materials that reflect preferred word
choices or phrasing tied to corporate messaging.
As marketing materials that describe plan benefits are critical to
ensuring that beneficiaries make the best health care decisions for
their particular needs, it is imperative that plan materials are
accurate, free of errors, and comparable across MAOs and PDPs.
Accordingly, in order to reduce variability of marketing materials and
to ensure documents are more accurate and understandable to
beneficiaries, we propose to move toward greater standardization of the
information provided in plan marketing materials. Specifically, we are
proposing to revise Sec. 422.2262 and Sec. 423.2262 to require that
MAOs and PDP sponsors use standardized marketing material language and
format, without modification, in every instance in which we provide
standardized language and formatting. We provide MAOs and PDP sponsors
with standardized marketing materials through the annual Call Letter or
Health Plan Management System (HPMS) memoranda. We believe this change
would ensure beneficiaries receive more accurate and comparable
information to make informed decisions about their health care options.
This proposed change will also ensure increased efficiencies and
greater consistency in our marketing material review protocols and
processes.
4. Involuntary Disenrollment for Failure To Pay Plan Premiums Under
Parts C and D (Sec. 422.74 and Sec. 423.44)
Section 1851(g)(3)(B)(i) of the Act provides that MA organizations
may terminate those MA plan enrollees who fail to pay basic and
supplemental premiums within the grace period established by the MA
organization. Section 1860D-1(b)(1)(B) of the Act generally directs us
to use disenrollment rules for Part D sponsors that are similar to
those established for MA organizations under section 1851 of the Act.
Consistent with these sections of the Act, the Parts C and D
regulations set forth our requirements with respect to involuntary
disenrollment procedures under Sec. 422.74 and Sec. 423.44,
respectively.
Currently, Sec. 422.74(d)(1)(i)(B) specifies that an MA
organization must provide, at minimum, a 1-month grace period before
disenrolling individuals for failure to pay the premium. Similarly,
under current regulations at Sec. 423.44(b)(1)(i) and Sec.
423.44(d)(1), Part D sponsors may disenroll an individual from a PDP
for failing to pay PDP premiums on a timely basis, using the process
set forth in the regulations. Unlike the statute, the Part D
regulations do not specifically use the term ``grace period,'' but we
have interpreted the regulations in the Medicare Managed Care Manual
provisions (Section 40.3.1 of the Enrollment Chapter) to require that
organizations provide beneficiaries a grace period of not less than 1
month, beginning on the first day of the month for which the premium is
unpaid, before disenrollment for failure to pay premiums timely. For
both Parts C and D, these involuntary disenrollments are not mandatory;
thus, organizations may choose to implement longer grace periods or
forego involuntary disenrollments entirely.
However, MA organizations and Part D sponsors that choose to
disenroll enrollees for failure to pay premiums must notify the
enrollee of the delinquency and allow the enrollee an opportunity to
resolve the delinquency within 30 days. Further, the organization or
sponsor must also be able to demonstrate to us that it has made
reasonable efforts to collect the unpaid premium amounts. Given the
time required to notify the enrollee of the delinquency, for the
enrollee to make payment, and for the payment to be received by the
organization in cases where the organization has established the
minimum grace period, the actual amount of time the enrollee has to
resolve the delinquency may be less than one month.
A beneficiary who is disenrolled from his or her MA or Part D plan
for failure to pay premiums is not eligible for a special enrollment
period based on that disenrollment. This beneficiary may be unable to
enroll in another plan until the next annual election period in the
fall. This may leave a significant gap in coverage for MA-PD and PDP
enrollees, since their disenrollment will likely leave them without
prescription drug coverage for the remainder of the year, and in
addition they potentially face a late enrollment penalty (LEP) should
they subsequently choose to re-enroll in some type of Medicare
prescription drug coverage. Given the possible risk to the health
status of individuals that lose prescription drug coverage, as well as
the LEP consequences, we propose to codify in regulations a stronger
version of our existing policy.
Therefore, we are proposing to amend the regulations at Sec.
422.74(d)(1) and Sec. 423.44(d)(1) regarding disenrollment for
nonpayment of premium to require a minimum grace period of 2 months
before any involuntary disenrollment associated with failure to pay a
premium. We further propose to codify the aforementioned manual
provision regarding the beginning of the grace period for Part D. We
believe that a 2-month period will provide adequate time for
organizations to respond to instances in which individuals fail to pay
their premiums, and for affected enrollees to take steps to remedy the
situation and avoid disenrollment. We note that organizations would
still be able to offer a more generous grace period than provided in
the regulation, if they so choose.
[[Page 54657]]
5. Maximum Allowable Out-of-Pocket Cost Amount for Medicare Parts A and
B Services (Sec. 422.100)
Under section 1852(b)(1) of the Act, we may not approve MA plans if
we determine that the design of the plan and its benefits would
substantially discourage enrollment by certain MA eligible individuals.
Based on program experience and efforts to curb discriminatory benefit
packages, we are proposing that all local MA plans include an annual
out-of-pocket cap on members' total cost-sharing liability for Part A
and Part B services, the amount of which will be set annually by CMS.
Given that regional PPO plans already are required to have an annual
cap on member out-of-pocket costs and that many local MA plans already
have such limits, we believe that requiring the inclusion of such a
limit in plan design is necessary in order to avoid discouraging
enrollment by individuals who utilize higher than average levels of
health care services (that is, in order for a plan not do be
discriminatory in violation of section 1852(b)(1) of the Act).
While our concern about discriminatory or confusing benefit
packages is longstanding, it has been particularly acute since the
implementation of the Medicare Prescription Drug, Improvement and
Modernization Act of 2003 (MMA) (Pub. L. 108-173). Since that time,
plan offerings have become increasingly complex in terms both of cost
sharing design and rules governing the application of cost sharing. For
example, Health Maintenance Organization (HMO) plans may have a point
of service benefit that allows the enrollee to obtain services out of
network, but for higher cost-sharing levels. Preferred provider
organization (PPO) plans are required to cover all plan services both
in and out of network with typically higher out-of-network cost
sharing. Members in private fee-for-service (PFFS) plans with a network
may have differential cost sharing depending on whether they obtain
services from a contracting or a deemed provider. Also, some
coordinated care plans have introduced cost sharing ``tiers'' by which
enrollees may be assessed different cost-sharing amounts depending on,
for example, the plan contracted hospital from which they seek care.
Because MA plans can vary in numerous ways, we are increasingly
concerned that, faced with too many complex choices, beneficiaries are
unable to confidently compare health plans and make meaningful choices.
Because of these concerns, in the last few years, we have used our
authority under section 1852(b)(1) of the Act to scrutinize cost
sharing and benefit designs offered by MA plans, and to require changes
on a case by case basis where we found discriminatory cost-sharing. We
also established out-of-pocket limits that, if adopted under an MA
plan, would exempt the plan cost sharing from the same level of
scrutiny it would otherwise receive.
For example, during the period since 2003, we have issued guidance:
(1) Establishing an optional out-of-pocket maximum that plans could
adopt which would result in less scrutiny of cost-sharing amounts for
individual benefits under the plan; and (2) identifying certain health
care services for special review that beneficiaries with higher than
average health care needs are likely to need (for example, in-patient
hospital, dialysis, skilled nursing facility (SNF), mental health
services, Part B drugs and home health care).
To implement this guidance, we established a comprehensive process
to review the proposed cost sharing of each plan benefit package and
determine if the cost sharing design discriminates against those
beneficiaries with higher than average health care needs. Specifically,
we have conducted outlier analyses for the purpose of reviewing whether
cost sharing levels on submitted benefit designs are discriminatory. We
review, for example, the distribution of cost sharing levels submitted
by MA organizations to identify the levels in the upper tail end of the
range. This analysis assists us in determining the cost sharing
threshold above which we consider the level to be discriminatory. We
believe these efforts have resulted in some improvements in reducing
discriminatory cost sharing and transparency of plan design. For
example, including regional PPO plans, nearly 60 percent of all current
MA plans have an out-of-pocket cap on beneficiary cost sharing with
some local plans excluding certain services. Based on this experience,
we believe that both a standard and mandatory cap on member cost
sharing for all local MA plan types is an important and necessary step
to ensure that plans are not discriminatory and beneficiaries are
protected from unreasonable financial costs regardless of which MA plan
they enroll.
Under our authority in section 1852(b)(1)(A) of the Act to ensure
against MA plans that discriminate, our authority under section
1856(b)(1) of the Act to establish MA standards by regulation, and our
authority under section 1857(e)(1) of the Act to add necessary and
appropriate contract terms, we propose to amend Sec. 422.100(f)(3) by
adding a new paragraph (f)(4) to specify that all local MA plans must
establish an out-of-pocket maximum inclusive of all Medicare Parts A
and B services that is no greater than the annual limit set by CMS. The
cap for local PPO plans will be inclusive of all in-network and out-of-
network beneficiary cost sharing. The methodology for determining the
out-of-pocket maximum for local MA plans will be similar to the
methodology we used to establish the voluntary out-of-pocket maximum
amount for MA plans for contract year 2010. The out-of-pocket maximum
will be set at a certain percentile of expected FFS spending, and this
amount will be estimated by the Office of the Actuary (OACT). We
summarized the methodology used to determine the voluntary out-of-
pocket maximum for MA plans for contract year 2010 on page 13 of the
2010 Call Letter. As summarized in the 2010 Call Letter, MA out-of-
pocket threshold is based on a beneficiary-level distribution of Parts
A and B cost sharing for individuals enrolled in Original Medicare. The
CY 2010 out-of-pocket threshold of $3,400 represents the 85th
percentile of projected beneficiary spending in 2010. We do not expect
an impact on cost-sharing and premiums, all other things being equal,
for plans that already provide for an out-of-pocket maximum. However,
requiring all plans to have an out-of-pocket maximum will likely result
in increases to premiums and/or cost-sharing, although we are not able
to quantify the extent of this increase. We propose to continue to
furnish information to MA organizations on our methodology and the
amounts for acceptable out-of-pocket caps on a timely basis through the
annual Call Letter or Health Plan Management System (HPMS) memoranda.
We solicit comments on this approach.
6. Maximum Allowable Cost Sharing Amount for Medicare Parts A and B
Services and Prescription Drugs (Sec. 422.100, Sec. 423.104)
We have always reviewed cost sharing levels for individual services
for the purpose of determining whether or not such levels are
discriminatory. Based on our experience, in which we annually review
the levels of cost sharing across all bids, we propose to amend our
regulations on the general requirements related to MA benefits and
qualified prescription drug coverage to expressly authorize us to
establish cost sharing thresholds for individual services below which
cost sharing will be considered non-discriminatory. We believe that
requiring the inclusion of such cost
[[Page 54658]]
sharing thresholds in plans' benefit designs affords greater
predictability and protection against high out-of-pocket costs for
beneficiaries with medical conditions that could result in
exceptionally high out-of-pocket costs obligations, and further ensures
that those beneficiaries are not discouraged from enrolling in an MA
plan.
Under Part C, we propose annually to review bid data to determine
specific cost sharing levels for Medicare A and B services below which
would not have a discriminatory effect, and therefore may be approved
in an MA benefit package. Similarly, under Part D, we would annually
review bid data to determine acceptable cost sharing tiers for non-
defined standard benefit designs. We will furnish information to MA
organizations and Part D sponsors on its methodology and the acceptable
cost sharing amounts based on the prior year's bids on a timely basis
either through the annual Call Letter or Health Plan Management System
(HPMS) memoranda. The methodology for determining the cost-sharing
thresholds for Part A and B services will involve reviewing the prior
year's bid data, as well as actuarial equivalencies from original
Medicare, to determine outliers. These amounts could be adjusted based
on new bid submissions for the current year.
We propose to determine these acceptable cost sharing levels based
on factors such as distribution of cost sharing among submitted bids,
comparison to Original Medicare cost sharing (in the case of Part C),
and other factors that we find to assist in identifying discriminatory
levels of cost sharing (for example, the number of tiers in the case of
a Part D plan). A sponsoring organization's cost sharing will be
considered discriminatory if it is higher than the maximum level that
we determine to be non-discriminatory for a particular service in the
case of an MA plan or a drug cost tier in the case of a Part D plan. We
will communicate expected discriminatory cost sharing thresholds to
sponsoring organizations through the annual Call Letter or HPMS
memoranda during the annual bid and benefit package review process.
These thresholds will be based on the prior year's experience and may
be adjusted based on bid submissions for the current year. We solicit
comment on this approach, including the extent to which we have
provided sufficient clarity on how we determine whether cost-sharing
levels are discriminatory.
Organizations submitting MA plan or prescription drug plan bids
found to have discriminatory cost sharing will have an opportunity to
resubmit their bid and benefit package to comply with our non-
discrimination requirements. We will annually evaluate our review
process and the criteria we use to determine cost sharing
discrimination and may make changes to ensure that beneficiaries are
protected from discriminatory cost sharing.
We propose to amend Sec. 422.100 by adding a new paragraph (f)(5)
to specify that cost sharing for Medicare A and B services may not
exceed levels annually determined by CMS to be discriminatory.
Additionally, we propose to revise Sec. 423.104(d)(2) by adding a new
paragraph (iii) to specify that tiered cost sharing for non-defined
standard benefit designs may not exceed levels annually determined by
CMS to be discriminatory.
7. Prohibition on Prior Notification by PPO, PFFS and MSA Plans Under
Part C (Sec. 422.2, Sec. 422.4, and Sec. 422.105(b))
In the preamble of the Medicare Program; Establishment of the
Medicare Advantage Program final rule published in the January 28, 2005
Federal Register (70 FR 4598 through 4599), as well as in the 2009 and
2010 Call Letter, http://www.cms.hhs.gov/PrescriptionDrugCovContra/Downloads/CallLetter.pdf and http://www.cms.hhs.gov/PrescriptionDrugCovContra/Downloads/2010CallLetter.pdf, respectively,
we provided guidance permitting local and regional PPO plans (for out-
of-network services) and PFFS plans to provide for lower cost sharing
amounts in cases in which an enrollee or provider voluntarily gives the
MA organization with prior notification that the service will be
received. We also made clear that PPO plans (for out-of-network
services) and PFFS plans may not require such notice, or prior
authorization or referrals from gatekeepers, as a condition of coverage
in order to restrict an enrollee's access to services. As stated below,
Medical Savings Account (MSA) plans similarly may not impose prior
authorization requirements as a condition of coverage. Under prior
authorization, a plan requires an enrollee to seek its approval before
obtaining services from a provider; if the enrollee does not obtain
prior approval, then the plan can deny coverage for the service. We
provided additional guidance to PPO and PFFS plans on how they must
explain to current and prospective enrollees the plan's standard cost
sharing and the reduced cost sharing related to prior notification.
However, since that time, we have become increasingly concerned
about the use of prior notification by PPO and PFFS plans. Program
experience has demonstrated that prior notification is confusing to
beneficiaries, misleading in terms of disclosure of cost-sharing, and,
in some instances, used inappropriately as a form of prior
authorization. In the GAO report titled ``Medicare Advantage:
Characteristics, Financial Risks, and Disenrollment Rates of
Beneficiaries in Private Fee-for-Service Plans (GAO-09-25),'' the GAO
noted that some PFFS plans it reviewed ``inappropriately used the term
prior authorization rather than pre-notification in the informational
materials they distributed to beneficiaries, which may have caused
confusion about beneficiaries' financial risks.'' We have concluded
that the complexity of cost sharing designs using prior notification
has made it more difficult for both enrollees and providers to
understand the enrollee's cost sharing obligation in advance of
receiving services. Therefore, in order to reduce the complexity of MA
plans' cost sharing designs and improve transparency for both enrollees
and providers, we are proposing to prohibit PPO plans (for out-of-
network services) and PFFS plans from providing for lower cost-sharing
where prior notification rules have been satisfied. We propose to
revise Sec. 422.4(a)(1)(v) and (a)(3) to provide that PPO and PFFS
plans will be prohibited from establishing prior notification rules
under which an enrollee is charged lower cost sharing when either the
enrollee or the provider notifies the plan before a service is
furnished.
We also propose to prohibit MSA plans from establishing prior
notification rules. The definition of a MSA plan in section
1859(b)(3)(A)(iii) of the Act ensures open access to services for MSA
enrollees without restriction to a provider network and without prior
authorization reviews for health care services. MSA plans may have
networks of providers, but may not restrict an enrollee's access to
those network providers. We believe that prior notification rules
established by MSA plans would also be confusing to enrollees of those
plans and have similar negative effects as those described above for
PPO and PFFS plans. We propose to modify Sec. 422.4(a)(2) such that
MSA plans will also be prohibited from establishing prior notification
rules under which an enrollee is charged lower cost sharing when either
the enrollee or the provider notifies the plan before a service is
furnished.
In the preamble of the Medicare Program; Establishment of the
Medicare Advantage Program final rule published in the January 28, 2005
Federal Register
[[Page 54659]]
(70 FR 4617 through 4619), we discussed rules related to point of
service (POS) options that are offered by some MA organizations. We
stated that PPOs may offer a POS-like benefit under which beneficiary
cost sharing would be less than it would otherwise be for non-network
provider services, but still might be greater than it would be for in-
network provider services, provided an enrollee follows
preauthorization, pre-certification, or prenotification rules before
receiving out-of-network services. We also noted that such
preauthorization, pre-certification, or prenotification cannot be a
necessary condition for receipt of, or required MA plan reimbursement
for, out-of-network covered services by a PPO enrollee, but that it
could act as a financial incentive (by lowering the normal out-of-
network cost sharing that would otherwise apply) to an enrollee to
voluntarily participate. Similar to our concerns about the use of prior
notification rules by PPO and PFFS plans, as discussed above, we
believe that the complexity of cost sharing designs for PPO plans with
a POS-like benefit make it more difficult for both enrollees and
providers to understand the enrollee's cost sharing obligation in
advance of receiving services. In order to reduce the complexity of PPO
plans' cost sharing designs and improve transparency for both enrollees
and providers, we are proposing to prohibit PPO plans from offering a
POS-like benefit. We propose to revise the definition of POS in Sec.
422.2 and Sec. 422.105(b) to indicate the only HMOs may offer a POS
benefit. The proposed change is consistent with section
1851(a)(2)(A)(i) of the Act, which states that an HMO may include a POS
option.
Although PPO (for out-of-network services), PFFS, and MSA plans may
not impose prior authorization and referral requirements as conditions
for covering services, enrollees and providers have the right to
request a written advance coverage determination from the plan, in
accordance with Subpart M of Part 422, before an enrollee receives a
service in order to confirm that the service is medically necessary and
will be covered by the plan.
8. Requirements for LIS Eligibility Under Part D (Sec. 423.773)
Section 423.773(c) specifies that the individuals treated as full
subsidy eligible individuals include the following:
Full-benefit dual eligible individuals;
Supplemental Security Income (SSI) recipients under Title
XVI of the Act; and
Individuals eligible for Medicaid as a Qualified Medicare
Beneficiary, Specified Low-Income Medicare Beneficiary, or a Qualifying
Individual under a State's Medicaid plan.
In Sec. 423.773(c)(2), we are proposing to amend the length of the
period for which individuals are re-deemed eligible for the full low
income subsidy to conform with guidance we issued in section 40.2.2 of
Chapter 13 of the Medicare Prescription Drug Benefit Manual. Section
423.773(c)(2) currently specifies that a full subsidy eligible
individual is deemed eligible for the full subsidy for a period up to 1
year. However, in practice, the period of deemed eligibility varies
from as little as 7 months to as long as eighteen months, depending on
when the individual attained deemed status (that is, became eligible
for Medicaid, a Medicare Savings Program, or for SSI).
Every year, we review data from State Medicaid Agencies and the
Social Security Administration (SSA) sent to us in July and August,
respectively, to determine whether individuals currently deemed
eligible for the subsidy should continue to be deemed (that is, ``re-
deemed'') eligible for the subsidy. This allows us sufficient time to
update individuals' records in our systems, if necessary, and to notify
them if they are losing deemed status, so that they can take the
appropriate steps to apply for the subsidy, in time for coverage to be
effective at the start of the new calendar year.
When we are reviewing data in July and August, we also identify
individuals who are newly eligible for Medicaid, a Medicare Savings
Program, or SSI, and deem these individuals eligible for the subsidy
for the remainder of the current calendar year. We also redeem these
individuals for the subsidy for the next calendar year, because we do
not have sufficient time in the final months of the year to conduct a
separate redeeming process for these individuals. If we waited to
redeem these beneficiaries after the start of the calendar year, they
could incur greatly increased premium liability and cost sharing
amounts at the start of the new calendar year than they would have
otherwise.
For example, if a State Medicaid Agency submits data to CMS
indicating an individual is eligible for Medicaid in March of a given
year, and that individual is Part D eligible, we deem that individual
eligible for the Part D low income subsidy from March 1st through
December 31st of that year. We redeem that individual for the following
calendar year only if we receive subsequent information from the State
or SSA indicating that the individual remains eligible for Medicaid, a
Medicare Savings Program, or SSI.
On the other hand, if a State submits data to CMS indicating that
an individual is eligible for Medicaid in July or a later month of a
given year, and the individual is Part D eligible, we deem the
individual eligible for the Part D subsidy for the remainder of that
calendar year and all of the following calendar year. (See section
40.2.2 of Chapter 13 of the Medicare Prescription Drug Benefit Manual.)
Therefore, we propose to amend Sec. 423.773(c)(2) to indicate that the
deeming will be, at a minimum, for the following periods: If deemed
status is determined between January 1st and June 30th of a calendar
year, the individual is deemed subsidy eligible for the remainder of
the calendar year. If deemed status is determined between July 1st and
December 31st of a calendar year, the individual is deemed subsidy
eligible for the remainder of the calendar year and the next calendar
year. We believe this change will streamline the deeming/redeeming
process and decrease the administrative burden on agencies and subsidy
eligible individuals.
9. Enrollment of Full Subsidy Eligible Individuals and Other Subsidy
Eligible Individuals Under Part D (Sec. 423.34)
In the January 28, 2005 Federal Register, when we issued the
Medicare Prescription Drug Benefit final rule (70 FR 4193), we added
Sec. 423.34 to describe our procedures for enrollment of full-benefit
dual eligible individuals. We discussed how full-benefit dual eligible
individuals are enrolled, which PDPs they are assigned to, and the
effective date of their enrollment. As noted in the preamble to the
final regulation, enrollment of other low-income subsidy (LIS) eligible
individuals would also be conducted, and details would be issued in
operational guidance. However, we did not incorporate into the initial
Part D regulations further detail about the enrollment procedures that
would apply to this remaining population of LIS-eligible individuals.
Section 1860D-1(b)(1)(A) of the Act directs the Secretary to
establish a process for the enrollment of Part D eligible individuals.
As we indicated in the preamble to the January 28, 2005 final rule (70
FR 4209), while the statute does not explicitly provide for the auto-
enrollment of other LIS-eligible individuals into the Medicare Part D
program, we believe that enrolling these individuals clearly is
consistent not only with statutory intent but also with the intent of
the individuals themselves.
[[Page 54660]]
The express purpose of applying for the Part D low-income subsidy is to
obtain prescription drugs on a subsidized basis, which can only be
accomplished through enrollment in a Part D plan. Therefore, we
established a separate enrollment process for these individuals known
as ``facilitated enrollment.'' We randomly assign these individuals to
a PDP in their area with a premium below the low-income benchmark and
notify these individuals that they may choose a Part D plan on their
own and that if they do not choose a plan, we will enroll them in a
plan in their area. We have been carrying out the ``facilitated''
enrollment process for more than 3 years without objections from
beneficiaries or from the advocacy community; in fact, we believe that
many individuals are under the mistaken impression that being approved
for the subsidy actually equates with enrolling in a plan, so we
believe our proposal will help rectify that problem. (See section
30.1.4 of Chapter 3 of the Medicare Prescription Drug Benefit Manual
for more information about facilitated enrollment).
Based on this experience, we believe it would be appropriate to
codify in regulation the enrollment procedures that we use for these
individuals, which are similar to those specified in the regulation for
the dual eligible population. We believe that our regulations would be
more accurate and complete if they specifically addressed this
population. Thus, we are proposing to amend Sec. 423.34 to reflect the
guidance we have issued in Chapter 3 of the Prescription Drug Program
Manual. Specifically, we are proposing to include information on how we
enroll all LIS-eligible individuals, including full-benefit dual
eligible individuals.
We are proposing the following revisions to Sec. 423.34:
In Sec. 423.34(a), we propose to expand the general rule
to refer to all LIS-eligible individuals, so that the rest of that
section applies not only to full-benefit dual eligible individuals, but
also to all LIS-eligible individuals.
In Sec. 423.34(b), we would retain the definition of
full-benefit dual eligible individual, and add a definition for ``low-
income subsidy eligible individual.''
We propose to amend the paragraph heading of Sec.
423.34(c) to indicate that this paragraph describes the process we use
to reassign LIS individuals during the annual coordinated election
period. We would indicate that the reassignment process applies to
certain low-income subsidy eligible individuals (that is, not just full
benefit dual eligible individuals).
We are proposing to revise the paragraph heading of Sec.
423.34(d) from ``Automatic Enrollment Rules'' to ``Enrollment Rules.''
We are proposing this change to reflect the inclusion of full subsidy
and other subsidy eligible groups in this enrollment process, in
addition to full-benefit dual eligible individuals. In our guidance, we
refer to the process of enrolling full-benefit dual eligible
individuals as ``automatic enrollment,'' and the process for other LIS
eligibles as ``facilitated enrollment.'' (See section 30.1.4 of Chapter
3 of the Medicare Prescription Drug Benefit Manual.)
We propose to amend Sec. 423.34(e) to indicate that the
rules regarding declining enrollment and disenrollment also apply to
all LIS-eligible individuals.
In Sec. 423.34(f), we would clarify that the paragraph
heading and contents of this paragraph are limited to the effective
date of enrollment for full-benefit eligible individuals. We propose to
amend Sec. 423.34(f)(3) to specify that, for individuals who are
eligible for Part D and subsequently become eligible for Medicaid on or
after January 1, 2006, the effective date of enrollment would be the
first day of the month the individual becomes eligible for both
Medicaid and Medicare Part D.
In Sec. 423.34(g), we propose adding a new paragraph to
specify that the effective date for low income subsidy eligibles who
are not full benefit dual eligibles would be no later than the first
day of the second month after we determine that the individual meets
the criteria for enrollment into a PDP under this section. This change
conforms to section 30.1.4 of Chapter 3 of the Medicare Prescription
Drug Benefit Manual. Unlike full benefit dual eligible individuals who
may have retroactive Part D coverage, these individuals have only
prospective Part D coverage.
Although we believe that all these provisions will benefit the LIS-
eligible population, we recognize that concerns have been raised about
the impact of the current random auto-enrollment process on affected
beneficiaries. For example, focus groups of seniors suggest the
possibility that some auto-enrolled beneficiaries may not realize they
have been enrolled in a drug plan or that they have been reassigned to
a different drug plan. We are committed to taking appropriate steps to
improve this process. Thus, we welcome comments related to all aspects
of these procedures, including comments on issues such as the
following:
The efficacy of the existing auto-enrollment and
facilitated enrollment procedures, and suggestion for improving these
procedures;
Ways to assess the impact of these procedures on the dual
eligible and LIS population, including the costs, benefits, and
potential unintended consequences. For example, is it possible that
seniors who are LIS-eligible but not eligible for Medicaid will not
realize that they have been auto-enrolled into a drug plan? Is there
any possibility that auto-enrolling these individuals could ever lead
to delinquencies in payments? Given that LIS-eligible individuals are
auto-enrolled into plans with premiums below the benchmark, we do not
believe these individuals would ever become subject to premium issues
or liable for other such costs that they are not aware of in advance.
However, we welcome comment on whether the possibility exists and, if
so, how payment delinquencies should be handled in this vulnerable
population.
How we can better assist beneficiaries in identifying plan
choices that best suit their individual drug needs, and encourage them
to make an active election.
10. Special Enrollment Periods Under Part D (Sec. 423.380)
Consistent with the changes in Sec. 423.34, we are proposing to
expand the special enrollment period described in Sec. 423.38(c)(4),
which currently applies to full-benefit dual eligible individuals, to
all LIS-eligible individuals. This change is consistent with our
authority in section 1860D-1(b)(3)(C) of the Act and would conform our
regulations to current practice as reflected in CMS guidance in section
20.3.8, item 7, of chapter 3 of the Medicare Prescription Drug Benefit
Manual.
11. Transition Process Under Part D (Sec. 423.120(b)(3))
Section 1860D-11(d)(2)(B) of the Act gives the Secretary authority
similar to that of the Director of the Office of Personnel Management
with respect to health benefits plans under chapter 89 of title 5,
United States Code. This includes the authority to ``prescribe
reasonable minimum standards for health benefits plans.'' In addition,
section 1860D-11(e)(2)(D) of the Act prohibits us from approving a plan
if ``the design of the plan and its benefits (including any formulary
and tiered formulary structure) are likely to substantially discourage
enrollment by certain part D eligible individuals.''
[[Page 54661]]
Under the authority of section 1860D-11 of the Act, we established
a requirement in the January 28, 2005 final rule implementing the Part
D program that requires sponsors of Part D plans to provide for an
appropriate transition process for new enrollees prescribed Part D
drugs that are not on its plan's formulary (70 FR 4264). We further
specified in regulation that the transition policy must be consistent
with written policy guidelines and other CMS instructions. The
transition requirement is codified in at Sec. 423.120(b)(3).
Following publication of the regulation, we issued guidance in 2005
on what constituted an appropriate transition process for new Part D
enrollees. We noted in our guidance that an appropriate transition
process was one that balances the protection of certain vulnerable
populations with the flexibility necessary for Part D plans to develop
a benefit design that promotes beneficiary choice and affordable access
to medically necessary drugs. We updated the transition guidance for
contract year 2007 as part of the 2007 Call letter, noting that the
transition guidance represented a minimum set of standards for a Part D
sponsor transition process. This guidance was incorporated into Chapter
6 of the Medicare Prescription Drug Benefit Manual located at http://www.cms.hhs.gov/PrescriptionDrugCovContra/downloads/R2PDBv2.pdf.
Our experience has shown that transition processes represent an
important enrollee protection to ensure access to needed Part D drugs.
Given the movement from year to year of some dual eligible
beneficiaries due to reassignment, and the annual bidding cycle related
to Part D plan offerings in which benefits and formularies may be
modified, we believe that some protections are necessary for plan
enrollees with immediate prescription needs who experience a change in
enrollment or who experience formulary changes under their existing
plan at the beginning of a contract year. These protections are
particularly important when an individual first presents at a
participating pharmacy with a prescription for a drug that is not on
the formulary, unaware of what is covered by the plan or of the
sponsor's exceptions process for providing access to Part D drugs that
are not on the plan's formulary. For example, a full-benefit dual
eligible enrollee who is auto-enrolled into a plan may not make an
affirmative choice based on review of a plan's benefit relative to his
existing medications needs. For these types of situations, we directed
Part D sponsors to have systems capabilities to allow them to provide a
one time, temporary supply of non-formulary Part D drugs (including
Part D drugs that are on a sponsor's formulary but require prior
authorization or step therapy under a sponsor's utilization management
rules) in order to accommodate the immediate needs of an enrollee, as
well as to allow the sponsor and/or the enrollee sufficient time to
work out with the prescriber an appropriate switch to a therapeutically
equivalent medication or the completion of an exception request to
maintain coverage of an existing drug based on medical necessity
reasons. Our guidance has developed over time in response to these
concerns, and we believe it strikes the right balance between enrollee
protection and plan flexibility.
Given the importance of our transition policy as an enrollee
protection--particularly for auto-assigned and reassigned beneficiaries
who did not affirmatively choose a Part D plan--we propose to codify in
regulation certain policies from our guidance on the necessary elements
of a plan transition process. We also believe that any plan that fails
to meet its transition policy requirements discourages enrollment (or
re-enrollment) by Part D eligible individuals that may currently be
taking prescription drugs that are not on the plan's formulary.
Accordingly, we propose that a Part D sponsor must provide for a
transition for the following:
New enrollees into PDPs following the annual coordinated
election period;
Newly eligible Medicare enrollees from other coverage;
Individuals who switch from one plan to another after the
start of the contract year; and
Current enrollees remaining in the plan who are affected
by formulary changes from one contract year to the next.
Our experience thus far has shown that these groups represent the
minimum target populations that are most likely to require protections
to ensure immediate access to their prescription drug benefit.
We also propose, consistent with our current guidance, that a Part
D sponsor's transition process requirements be applicable to non-
formulary drugs, meaning both: (1) Part D drugs that are not on a
sponsor's formulary; and (2) Part D drugs that are on a sponsor's
formulary but require prior authorization or step therapy under a
plan's utilization management rules. The latter is included because a
formulary drug to which access is restricted via utilization management
requirements is essentially equivalent to a non-formulary Part D drug
to the extent that the relevant utilization management requirements are
not met for a particular enrollee.
Additionally, we propose, consistent with our current guidance, to
codify the timeframes for the transition process and the days' supply
limit for a transition fill of an enrollee's medication. Our guidance
was premised on the position that it made sense to limit the amount of
time during which a transition process is applicable to new enrollees
to the first 3 months under the plan as we believed an enrollee
unfamiliar with his or her plan's formulary requirements would likely
to present with a prescription during the first few months enrolled. We
also propose to codify the transition process timeframe to apply during
the first 90 days of coverage under a new plan. This 90-day timeframe
would apply to retail, home infusion, long-term care, and mail-order
pharmacies.
We also propose to require plans to provide a temporary supply of
drugs under their transition process. As we noted in our original
transition guidance to Part D plan sponsors in Chapter 6 of the
Medicare Prescription Drug Benefit Manual, providing a temporary supply
represented the most efficient method of triaging requests for filling
initial prescriptions of non-formulary drugs for large numbers of new
enrollees who, despite education efforts to make them aware of the
plan's benefit, may not be aware of which drugs are listed on the
plan's formulary. Consistent with Chapter 6, we propose that Part D
plan sponsors must ensure that the one-time, temporary supply of non-
formulary Part D drugs requested during the first 90 days of coverage
in an outpatient setting must be for at least 30 days of medication,
unless the prescription is written by a prescriber for less than 30
days, in which case the Part D sponsor must allow multiple fills to
provide up to a total of 30 days of medication. For a new enrollee in a
Long term Care (LTC) facility, the temporary supply may be for up to 31
days (unless the prescription is written for less than 31 days),
consistent with the dispensing practices in the LTC industry. In
addition, due to the often complex needs of LTC residents that often
involve multiple drugs and necessitate longer periods in order to
successfully transition to new drug regimens, sponsors must honor
multiple fills of non-formulary Part D drugs, as necessary during the
entire length of the 90-day transition period. This is particularly
important if transitions to
[[Page 54662]]
formulary drugs have not been effectuated prior to the refills. We
propose to require up to a 31-day transition supply for enrollees in an
LTC facility given that many LTC pharmacies and facilities dispense
medication in 31-day increments. Thus, a Part D sponsor would be
required to provide a LTC resident enrolled in its Part D plan at least
a 31 day supply of a prescription when presenting in the first 90 days
of enrollment (unless the prescription is written for less) with
refills provided, if needed, up to a 93 day supply.
In addition to codifying the preceding requirements, we also
propose to take the opportunity in this rulemaking to clarify our
expectations of sponsors with respect to providing transition notices.
Based on our experience overseeing the Part D program, we have learned
that a successful transition process is contingent upon informing
enrollees and their caretakers about their options for ensuring that
enrollees' medical needs are safely accommodated within a Part D
sponsor's formulary. An enrollee who receives a temporary supply of a
non-formulary Part D drug at a network pharmacy might simply assume
that, by virtue of filling his or her prescription, the plan will cover
that drug for the remainder of the contract year. For this reason, we
are proposing to require sponsors to provide enrollees with appropriate
notice regarding their transition process within a reasonable amount of
time after providing a temporary supply of non-formulary Part D drugs
(including Part D drugs that are on a sponsor's formulary but require
prior authorization or step therapy under a sponsor's utilization
management rules).
Our guidance specifies that Part D sponsors send a written notice,
via U.S. First Class mail, to each enrollee who receives a transition
fill. This standard is consistent with our requirement that other
enrollee communications, including formulary change notices and
explanations of benefits, be sent via U.S. First Class mail. In
addition, our guidance directs sponsors to send this notice to each
affected enrollee within 3 business days of the temporary fill. Our
rationale for this turnaround time is that it is necessary in order to
provide an affected enrollee with sufficient time--especially in light
of our 30-day transition fill policy in the outpatient setting to work
with his or her prescriber to switch to a therapeutically equivalent
drug that is on the plan's formulary or to process an exceptions
request.
Given the importance of enrollee access to medications, especially
during a transition in coverage, or a transition in a level of care, we
propose to codify this portion of our guidance and require provision of
transition notices. However, in addition to this codification, we also
propose to require plan sponsors to make reasonable efforts to notify
prescribers, via mail, electronic or verbal communication, that the
affected enrollees' prescription cannot be refilled, either because of
utilization management requirements such as prior authorization or step
therapy, or because the prescribed medication is not on the plan
sponsor's formulary. We believe that this communication is necessary in
order to expedite the prescriber's plan to seek therapeutic
alternatives for the enrollee or to fill out the requisite paper work
to submit to the Part D sponsor to initiate the exceptions process. We
invite comments on this proposal.
Accordingly, we propose the following revisions to Sec.
423.120(b)(3):
Add paragraph (3)(i) to clarify which enrollees the
transition process should apply;
Add paragraph (3)(ii) to ensure access to a temporary
supply of drugs within the first 90 days of coverage under a new plan;
Add paragraph (3)(iii) to provide a temporary fill when an
enrollee requests a fill of a non-formulary drug during the time period
specified in paragraph (ii) (including Part D drugs that are on a
plan's formulary but require prior authorization or step therapy under
a plan's utilization management rules) and the days supply in the
outpatient setting must be for at least 30 days of medication. In the
long-term care setting, the temporary supply must be for up to 90 days
in 31 day supply increments;
Add paragraph (3)(iv) to ensure written notice is provided
to each affected enrollee within 3 business days of the temporary fill;
Add paragraph (3)(v) to ensure that reasonable efforts are
made to notify prescribers of affected enrollees who receive a
transition notice under paragraph (iv).
12. Part D Sponsor Responsibility for Retroactive Claims Adjustment
Reimbursements and Recoveries Under Part D (Sec. 423.464)
Sections 1860D-23 and 1860D-24 of the Act require PDP sponsors to
coordinate with state pharmaceutical assistance programs (SPAPs) as
well as other drug plans, including Medicaid programs, group health
plans, Federal Employee Health Benefit Plans (FEHBP), military coverage
and other plans or programs providing prescription drug coverage. These
requirements are codified at Sec. 423.464 and set forth in the
Medicare Prescription Drug Benefit Manual. As we have gained more
experience with the prescription drug program, we have found that some
beneficiary changes (for example, those resulting from retroactive low
income subsidy LIS eligibility determinations, LIS status changes, or
midyear Part D enrollment changes) that necessitate retroactive claims
adjustments are a significant issue under Part D. These changes, as
well as long-term care pharmacy billing practices for dual-eligible
beneficiaries and the presence of secondary, tertiary and even
quartenary payers have all contributed to a higher than expected volume
of retroactive claims adjustments requiring Part D sponsor
reimbursements and recoveries, as well as a greater than anticipated
complexity of calculating these amounts. While we previously
anticipated that beneficiaries would be owed reimbursements due to
changes in LIS status, and required plan sponsors to make such
reimbursements in Sec. 423.800(c), we have since learned that our
current regulations do not reflect the other entities that may
sometimes need to be taken into account in reimbursement or recovery
transactions. Moreover, we have also learned that no industry standard
electronic process exists to explicitly handle underpayment recoveries
or overpayment reimbursements created by these adjustments, and that
the current Health Insurance Portability and Accountability Act (HIPAA)
standard for coordination of benefits for pharmacy claims only partly
supports these activities when the pharmacy initiates ``reverse and
rebill'' transactions. As a result, we are aware that Part D sponsors
are sometimes struggling with how to manage these retroactive
adjustments and that those sponsors that are refunding overpayments or
seeking underpayment recovery are each doing it differently.
Since current regulations do not address retroactive adjustments
and the complexities associated with coordination of benefit activities
that cannot be accomplished between the Part D sponsor and the pharmacy
through reversal and re-billing, we have issued general guidance to
direct sponsor coordination of benefit activities. Sections of the COB
and LIS chapters of the Medicare Prescription Drug Benefit Manual
specify standards for a PDP sponsor to: work with other providers of
prescription drug coverage to resolve payment issues; have a process in
place to handle the payment
[[Page 54663]]
resolution that is not restricted by implementation of timely filing
requirements; make retroactive adjustments and promptly refund monies
owed to the correct party (including, but not limited to the
beneficiary); and generally limit requests for pharmacy reprocessing to
those situations involving a pricing error. Additionally, CMS guidance
includes as part of the coordination of benefits the transfer of true
out-of-pocket (TrOOP) costs and gross covered drug cost data to a new
Part D plan when a beneficiary changes enrollment during the coverage
year. In our October 20, 2008 Part D sponsor implementation guidance on
the automated process for the transfer of these TrOOP-related data, we
established a 45-day maximum time limit from receipt of a post-
adjudicative change in the reported data for the sponsor to take
adjustment action, make a refund, and/or initiate recovery. We
established this time limit after an informal survey and discussions
with Part D sponsors and their processors. While some entities
indicated they were making adjustments more frequently, the industry
generally supported a 90-day limit, which is consistent with the time
limit on pharmacy claim reversals. However, we believe this longer
timeframe is not in the best interests of the beneficiary because it
would delay the payment of refunds and notification of the need for
payment recovery. On the other hand, because many of the claims
reversals occur early in the 90-day period, a very short adjustment
timeframe could lead to a series of consecutive refunds and recoveries
that would be confusing and, therefore, also not in the best interests
of the beneficiary. Accordingly, we believe that a 45-day time limit
represents a reasonable compromise.
Many of the post-adjudicative adjustments, such as those that are
due to enrollment changes, are changes that affect beneficiary cost-
sharing, premiums and/or plan benefit phase. Establishing a reasonable
time limit for all Part D adjustment, refund, and recovery activity is
in the beneficiaries' best interests because it ensures that required
changes are effectuated on timely basis, thus correcting retroactive
and prospective beneficiary premium and cost-sharing amounts. Moreover,
it is in the best interest of others who have paid a claim, or are
holding a balance due, on the beneficiary's behalf because it ensures
that these amounts are resolved timely.
At Sec. 423.464 and Sec. 423.466, we are proposing to codify our
previous policy guidance (for instance, our memorandum on plan LIS
changes dated October, 30, 2006) by proposing that sponsors must both
make retroactive claim adjustments and take other payer contributions
into account as part of the coordination of benefits. Further, we are
also proposing to add a new timeliness standard at Sec. 423.466 to
require adjustment and issuance of refunds or recovery notices within
45 days of the sponsor's receipt of the information necessitating the
adjustment. While claims adjustments must be made and notices issued
within the established timeframes, we continue to recognize that
calculating the precise amount of the adjustment and any resulting
reimbursements or recoveries may not always be practicable due to
limitations in the electronic transaction set and contractual terms and
conditions for payment in use in the pharmacy industry. However,
sponsors must exercise due diligence in fulfilling these requirements.
To date, most Part D coordination of benefits activity has been
performed at point-of-sale or soon after, so pharmacy reversal and
rebilling of claims can be accomplished within the payers' timely
filing windows. For Part D, this window must be a minimum of 90 days,
but for other (non-Part D) providers of prescription drug coverage the
filing window could be as short as 30 days. With the instability of LIS
data and Part D enrollments creating a significant volume of
retroactive adjustments, it has become evident that sponsors are facing
more claims adjustments than current pharmacy claim reversal and
rebilling approaches can adequately address.
Online real-time coordination of benefits, in which the order of
payment among multiple payers is established and programmed into payer
systems, generally did not take place in pharmacy benefit management
prior to Part D implementation. Therefore, following the issuance of
the Medicare Prescription Drug Benefit final rule on January 28, 2005,
CMS and the industry, in collaboration with the National Council for
Prescription Drug Programs (NCPDP), collaborated to develop an
electronic process consistent with HIPAA-authorized transaction
standards to allow supplemental payer information to be available at
point-of-sale and patient-pay amounts remaining after supplemental
payer payments to be reported back to the primary Part D sponsor for
purposes of tracking TrOOP. However, by design, all billing
transactions still require the pharmacy to initiate the activity. What
this means in the case of a claims adjustment is that if the
beneficiary is no longer at the counter and a supplemental payer's
claim filing window is closed, the pharmacy can no longer effectively
coordinate benefits between payers. And payers cannot effectively
coordinate among themselves, both because of the absence of electronic
standards for post-adjudication claim adjustments among payers (as
opposed to between pharmacies and payers), and the presence of
contractual prohibitions between payers and pharmacies on the
disclosure of proprietary pricing information. Therefore, at the
present time, CMS and the industry are struggling to determine how best
to handle retroactive claims adjustments whenever the adjustment cannot
be resolved simply between the sponsor and the pharmacy.
Pharmacies regard their pricing information as proprietary and are
concerned about the potential chilling effect any disclosure of this
information might have on their ability to negotiate with payers.
Therefore, to ensure the confidentiality of pricing information,
coordination of benefits on the initial claim is accomplished without
reporting complete information on negotiated pricing. The amount
reported in the transaction to the Part D plan is the amount of the
beneficiary payment after the supplemental payment. As a result, a Part
D sponsor attempting to determine refund or recovery amounts without
having the pharmacy reverse and rebill the original claim can generally
only impute the amount of any supplemental payment made by another
payer by determining the difference between the Part D cost-sharing and
the beneficiary amount paid after the supplemental payment. The only
alternative is to ask the pharmacy to reverse and rebill the claim to
all payers. However, this procedure is generally unreasonable after the
industry standard 30-day window because many supplemental payers will
not accept the late claim and, as a consequence, the pharmacy would be
left short the supplemental payer payment amount, as well as any
difference in beneficiary cost sharing that might be due.
In the absence of legal authority to compel supplemental payer
cooperation and to avoid pharmacy underpayment, imposing a requirement
on sponsors to nonetheless calculate a precise reimbursement or
recovery liability would require the creation of a new payer-to-payer
transaction that both enables reprocessing and addresses pharmacies'
concerns about revealing their proprietary pricing. It is not clear
that both goals can be achieved. Nor is it clear that even if this
conflict could be resolved, that the cost of doing so would be
justified by the benefits. That
[[Page 54664]]
is, it is not clear to us that the benefits of more precisely
calculating the differential amounts owed or due (the incremental
amounts more or less that supplemental payers and beneficiaries would
have paid if the correct LIS subsidy had been applied to the original
claim) outweigh the costs of developing customized electronic
transactions for such calculations. This is because while some
adjustments are from non-subsidized to subsidized cost sharing, many
others only change patient pay amounts after the Part D plan payment by
a dollar or two, and many would not change the beneficiary cost sharing
at all because the difference would be picked up by or owed to a
supplemental payer. Thus, despite the importance of accurate
reimbursement to all parties, the cost of developing specialized
transactions may outweigh the benefits that would accrue.
Some supplemental payers are cooperating in the exploration of a
solution through NCPDP, for example, certain SPAPs, but others continue
to close their claims filing window at 30 days and permit no further
coordination. Part D sponsors and/or their claim processors are
likewise currently engaged with CMS through NCPDP in examining the
scope of the problem and exploring alternative approaches to
retroactively and electronically adjust claims. However, at this time,
while simple adjustments involving just the Part D sponsor and the
pharmacy are relatively straightforward (and can and should be promptly
transacted), those involving other payers are not. Thus, we continue to
hold the plans accountable for making best efforts to coordinate
benefits occasioned by claim adjustments, but we acknowledge that
electronic transaction standards have not yet been developed to support
timely, reliable, and precise coordination on adjusted claims when
multiple payers are involved. Therefore, we will continue to work with
the industry on methods to make best efforts in this area, including
limiting other payer recoveries and reimbursements to imputed amounts
due to and from supplemental payers that choose to fully cooperate with
industry consensus-driven processes developed through NCPDP. We note
that amounts due to or from beneficiaries must also be imputed in some
of these situations. We are soliciting comments on alternative
approaches to improving post-adjudication coordination of benefits
necessitated by retroactive Medicare enrollment and low-income subsidy
changes when multiple payers are involved, as well as our assessment
that the costs of achieving precision in such transactions may far
outweigh the benefits.
In the short-term, there are some adjustment-related activities
that plans can control and, consistent with our authority in section
1860D-24(a)(1) of the Act, we can require that sponsors do these
better. Therefore, we are proposing the following revisions to Sec.
423.464:
Revising paragraph (a) to clarify that all Part D sponsors
must comply with administrative processes and requirements established
by CMS to ensure effective coordination between Part D plans and other
providers of prescription drug coverage for retroactive claims
adjustments, underpayment reimbursements and overpayment recoveries;
and
Adding a paragraph (g)(7) to address the sponsors'
responsibility to account for payments by SPAPs and other providers of
prescription drug coverage in reconciling retroactive claims
adjustments that create overpayments and/or underpayments, as well as
to account for payments made, and for amounts being held for payment,
by other individuals or entities. The new paragraph also specifies that
Part D sponsors must have systems to track and report adjustment
transactions and to demonstrate that--
++ Adjustments involving payments by other plans and programs
providing prescription drug coverage have been made;
++ Reimbursements for excess cost-sharing and premiums for low-
income subsidy eligible individuals have been processed in accordance
with the requirements in Sec. 423.800(c); and
++ Recoveries of erroneous payments for enrollees have been sought
as specified in Sec. 423.464(f)(4).
13. Time Limits for Coordination of Benefits (Sec. 423.466)
Currently, there is no statutory or regulatory time limit for Part
D sponsor coordination of benefits with SPAPs, other providers of
prescription drug coverage, or other payers. Current CMS guidance as
set forth in the Coordination of Benefits (COB) chapter of the Medicare
Prescription Drug Benefit Manual requires Part D sponsors to establish
at least a 90-day timely claims filing window and to make appropriate
allowances for COB claims on a case-by-case basis. Section 50 of the
COB chapter also requires sponsors, in retroactive enrollment
situations, to coordinate benefits with other payers as required by the
regulations at Sec. 423.464(f), as well as accept claims from the
beneficiary without imposing time limits. This section states further
that sponsors, even in those situations when retroactive enrollment is
not an issue, continue to be liable for claims received after the end
of the coverage year as defined in Sec. 423.308 and note that while
contract provisions regarding timely claims filing may limit claims
from network pharmacies, nonnetwork pharmacies and beneficiaries must
still have the opportunity to submit claims for reimbursement without
the imposition of time limits by the Part D sponsor.
Experience with Part D has shown there is benefit to be derived
from placing a time limit on claims submission for Part D sponsor
coordination of benefits. In addition to limiting sponsors' financial
liability, a time limit would strengthen the ability of SPAPs, other
providers of prescription drug coverage and other payers, including
beneficiaries to obtain payment for covered Part D drugs. We would
likewise benefit from a COB time limit by enabling us to close our Part
D prescription drug databases.
In considering now establishing time limits on the submission of
claims to Part D sponsors by beneficiaries and other payers of
prescription drug coverage for proper coordination of benefits, we note
that the Medicare FFS time limit for filing claims, as specified in
Sec. 424.44, is December 31st of the following year for services
furnished during the first 9 months of a calendar year and December
31st of the second following year for services furnished during the
last 3 months of the calendar year. The time for filing will be
extended 6 months if the failure to file timely is due to an error or
misrepresentation by an employee, intermediary, carrier, or agent of
the Department. We also noted that States have a 3-year time limit for
seeking recovery of Medicaid claims payments when the State is not the
primary payer. Specifically, the Deficit Reduction Act of 2005 (Pub. L.
109-171) (DRA) strengthened the State Medicaid programs' ability to
obtain payment from health insurers with which they need to coordinate
benefits by adding section 1902(a)(25)(I) of the Act. The new section
requires States to have laws in effect that require health insurers to
make payment as long as the claim is submitted by the State within 3
years from the date on which the item or service was furnished. This
DRA provision does not include SPAPs and, therefore, does not impose a
time limit on the requirement for Part D sponsors to coordinate
benefits with SPAPs.
[[Page 54665]]
Having considered these filing limit precedents, we now propose to
establish a 3-year filing limit for Part D coordination of benefits
with SPAPs, other entities providing prescription drug coverage, and
all other payers, including beneficiaries or other individuals or
entities paying, or holding amounts for payment, on the beneficiaries'
behalf. Specifically, we propose to revise new Sec. 423.466 by adding
a new paragraph (b) that would establish a 3-year time limit on Part D
coordination of benefits. That is, we propose to require Part D
sponsors to coordinate benefits with SPAPs, other entities providing
prescription drug coverage, and other payers for a period not to exceed
3 years from the date on which the prescription for the covered Part D
drug was filled. By adding this provision to the regulation, we clarify
timely filing responsibilities and deadlines for all beneficiaries and
payers, as well as place a limit on Part D sponsors' claims payment
liabilities and coordination of benefits responsibilities.
We are proposing this requirement consistent with our authority
under sections 1860D-23(a)(2) and 1860D-24(a)(1) of the Act to
establish requirements to ensure effective coordination among Part D
plans, SPAPs, and other providers of prescription drug coverage, and
consistent with our general rulemaking authority under section 1871(a)
of the Act. Experience since the implementation of Part D has
demonstrated that the ability of both CMS and the sponsors to manage
our respective responsibilities in administering the program is
complicated by the absence of any time limit for coordination of
benefits. Part D sponsors face open-ended financial liability for
continued benefit coordination and must project and include the costs
of future liabilities in their bids. We also incur the expense of
keeping our databases open to continue to accept prescription drug
event data for the purpose of reopening Part D payment determinations
to account for claims received by Part D sponsors from SPAPs, other
entities providing prescription drug coverage, and other payers after
the end of the coverage year. We believe that a 3-year limit provides
more than ample time for beneficiaries to seek reimbursement of out-of-
network and other paper claims, as well as sufficient time for
coordination of benefits activities to take place among payers.
14. Use of Standardized Technology Under Part D (Sec. 423.120)
Section 1860D-4(b)(2)(A) of the Act, as codified in Sec.
423.120(c), requires Part D sponsors to issue (and reissue, as
appropriate) a card or other technology that may be used by an enrollee
to assure access to negotiated prices under section 1860D-2(d) of the
Act. Section 1860D-4(b)(2)(B) of the Act requires us to provide for the
development, adoption, or recognition of standards relating to a
standardized format for the card or other technology that are
compatible with the administrative simplification requirements of Title
XI of the Act and to consult with the NCPDP and other standard setting
organizations, as appropriate. In accordance with section 1860D-
4(b)(2)(B) of the Act, we consulted with NCPDP and subsequently issued
guidance adopting NCPDP's ``Pharmacy ID Card Standard'', which is based
on the American National Standards Institute (ANSI) INCITS 284-1997
standard entitled ``Identification Card-Health Care Identification
Cards'', as the standard for identification cards for the Part D
program. Information required in the Pharmacy ID Card Standard includes
billing identifiers necessary to direct online real-time transactions
to the appropriate online processor to enable real-time adjudication of
the prescription drug claim at point of sale.
Our current regulations and guidance specifically address the
requirement for Part D sponsors to issue (and reissue, as appropriate)
standardized cards that may be used by an enrollee to ensure access to
negotiated prices under section 1860D-2(d) of the Act. The only way
that an enrollee can be assured access to the negotiated price at the
point of sale is through online adjudication of the prescription drug
claim. Any other price available to the beneficiary at the point of
sale, as for instance, the pharmacy's ``cash price'', cannot be deemed
to be the negotiated price mandated under section 1860D-2(d) of the
Act. Therefore, to ensure access to these negotiated prices, the
billing information on the cards must be used by the pharmacies at
which beneficiaries fill their prescriptions to submit claims to an
enrollee's Part D sponsor (or its intermediary). Beginning with the COB
requirements originally issued on July 1, 2005, as required by section
1863D-23(a)(1) of the Act, and subsequently maintained as Chapter 14 of
the Prescription Drug Plan Manual, we have instructed plan sponsors to
process all claims online real-time (see section 50.4 entitled,
``Processing Claims and Tracking TrOOP''. The requirements of accurate
TrOOP accumulations, Part D benefit administration of multiple coverage
intervals, and coordination of benefits with other payers all
necessitate online real-time adjudication of individual pharmacy
claims. Furthermore, since July 1, 2005, we have stated that we expect
that Part D plan sponsors will establish policies and procedures
appropriately restricting the use of paper claims to those situations
in which on-line claims processing is not available to the beneficiary
at the point of sale in order to promote accurate TrOOP accounting, as
well as to minimize administrative costs to the Part D plans and the
Medicare program and reduce opportunities for fraudulent duplicative
claim reimbursements. We are now proposing at section 423.120(c)(3) to
require Part D sponsors to contractually mandate that their network
pharmacies submit claims electronically to the Part D sponsor or its
intermediary on behalf of the beneficiary whenever feasible unless the
enrollee expressly requests that a particular claim not be submitted to
the Part D sponsor or its intermediary.
We are proposing to codify this guidance in regulation at this time
because we have been made aware of an increasing number of instances in
which network pharmacies are not submitting pharmacy claims to Part D
Sponsors on behalf of Part D enrollees. Generally, we believe it is in
the best interest of Part D enrollees to have their claims consistently
processed through the Part D sponsor (or its intermediary). Not only
does processing claims through the Part D sponsor ensure access to Part
D negotiated prices, but it also ensures that proper concurrent drug
utilization review (including safety checks) is performed (as required
under 1860D-4(c) of the Act). Only the plan can conduct accurate
concurrent drug utilization review when multiple pharmacies are
utilized by the beneficiary or prevent payment to excluded providers.
Online, real-time processing also facilitates accurate accounting for
enrollees' true out-of-pocket (TrOOP) and total drug costs by the Part
D sponsor so that each claim is processed in the appropriate phase of
the benefit and accurate cost sharing assessed. In addition, a Part D
sponsor cannot coordinate benefits with other payers as required under
sections 1860D-23 and 1860D-24 of the Act if it never receives the
claim.
We also propose to add a new paragraph (2) to Sec. 423.120(c) to
codify our existing guidance that Part D sponsors utilize standard
electronic transactions established by 45 CFR
[[Page 54666]]
162.1102 for processing Part D claims. We will issue guidance on the
use of optional or conditional fields in the HIPAA standard
transactions through the Call Letter and Prescription Drug Benefit
Manual instructions. We routinely work with NCPDP and industry
representatives in arriving at recommendations for standardized use of
such fields when necessary to improve administration of the Part D
benefit. Previous examples of such guidance include those described in
sections 50.4 and 50.5 of Chapter 14 of the Prescription Drug Benefit
Manual on ``Processing Claims and Tracking TrOOP'' and ``Standardized
Claims Messaging'', respectively. Such instructions are consistent with
the rules governing use of HIPAA transactions whereby use of optional
and conditional fields is governed by contractual terms between trading
partners.
In a related matter, we are interested in better understanding the
impact of a requirement for Part D sponsors to establish uniquely
identifiable Part D payer/processor and enrollee identification numbers
in billing and other coordination of benefits-related transactions. We
have learned that not all processors organize their enrollment data
this way, and some may rely upon other data such as person codes or
dates of birth to distinguish between two enrollees (such as spouses)
with a single identification number (``RxID''). This practice
complicates coordination of benefits activities with other parties when
unique identifiers are necessary. We have also learned that pharmacies
cannot routinely distinguish Medicare Part D claims from other types of
prescription drug coverage when the same routing information (``RxBIN
and RxPCN'') is used for all lines of business managed by a single
processor. If pharmacies cannot consistently distinguish Part D claims,
they cannot ensure that Part D claims and beneficiaries are handled in
accordance with Part D-specific policies and procedures. Consequently
we are proposing to add a new paragraph (c)(4) in Sec. 423.120 to
require that sponsors and their intermediary processors establish and
exclusively utilize unique RxBIN or ``RxBIN/RxPCN combinations'' to
identify all Medicare part D member claims, as well as to assign unique
``RxID'' identifiers to individual Part D beneficiaries. We solicit
comments on the operational issues and timelines that would be involved
in making these proposed technical changes to claims processing
systems.
As stated previously, we generally believe it is in the best
interest of Part D enrollees to have their claims electronically
submitted at the point of sale by pharmacies to the Part D sponsor (or
its intermediary), but recognize there are situations when this will
not be feasible or warranted. The most obvious example involves
prescriptions filled at out-of-network pharmacies when Part D enrollees
generally must pay out of pocket and submit paper claims for
reimbursement from the Part D sponsor. Another example involves
situations when network pharmacies offer special discount prices that
are lower than plan negotiated prices. If this discounted price is not
a pharmacy's usual and customary (U&C) price, we understand that the
pharmacy may not offer it to the Part D sponsor (or its intermediary)
for claims processing. In these situations, we have articulated a
``lower cash price'' policy whereby the enrollee may pay the pharmacy
in full and submit a paper claim for reimbursement so that the costs
will be counted towards his or her total drug spend and TrOOP balances.
Finally, we also recognize that enrollees may have personal reasons for
not wanting specific prescription claims processed through their Part D
sponsor (or intermediary) and we uphold the enrollees' right to make
such decisions. In situations such as the last two examples, our
proposed requirement now clarifies that the enrollee must expressly
request that a particular claim not be submitted to the Part D sponsor
or its intermediary for processing. That is, the beneficiary should of
his or her own initiative request that the claim not be submitted to
the Part D plan, and this decision must neither be solicited nor
assumed by the pharmacy.
While the previous examples explain why some pharmacy claims for
Part D enrollees legitimately will not be processed through the Part D
sponsor (or its intermediary), we are concerned about other reasons why
network pharmacies may be failing to submit claims to Part D sponsors
(or their intermediaries). Most notably, we are concerned that
enrollees, their pharmacists or both incorrectly believe that the
enrollee will always pay their Part D sponsor's higher negotiated price
in situations when the pharmacy has a lower price. In many cases, this
is illustrated by the enrollee submitting a paper claim after having
paid cash at a network pharmacy even though the enrollee would have
received the same price if the claim was processed through the Part D
sponsor (or its intermediary) by the network pharmacy. We believe there
may be confusion resulting from the increasing availability of very low
cost generic drugs at many Part D network pharmacies.
It is important to distinguish between a lower pharmacy price that
is the pharmacy's U&C price versus a lower pharmacy price that is a
non-U&C special discounted price. As our ``lower cash price'' policy
describes, an enrollee would need to pay out of pocket and submit for
reimbursement if the pharmacy's lower price is not its U&C price
because the pharmacy will not submit that price to the Part D sponsor
(or its intermediary). However, if the pharmacy submits a U&C price
that is lower than a Part D sponsor' negotiated price, the enrollee
will pay the lesser of the Part D sponsor's negotiated price or the
pharmacy's U&C price. Therefore, the enrollee is better off when the
pharmacy submits the claim to the Part D sponsor (or its intermediary)
because the enrollee will pay the lower pharmacy price and have the
dollar amounts reflected in their TrOOP and total drug spend balances.
Finally, we are concerned that sometimes enrollees are not aware
that claims are not being processed through their Part D sponsor. We
believe this can occur when pharmacies mistakenly believe that
processing the claim through the Part D sponsor will result in the
enrollee paying a higher Part D sponsor negotiated price or because the
pharmacy deliberately does not want to incur transaction costs when the
enrollee will be paying the pharmacy U&C price regardless. Our new
requirement makes it clear that Part D sponsors must contractually
require their network pharmacies to submit claims to the Part D sponsor
(or its intermediary) whenever feasible unless the enrollee expressly
requests that such claims not be submitted. We believe this requirement
will help to ensure that Part D enrollees always have access to
critical safety checks, as well as Part D negotiated prices and that
their TrOOP and total drug spend balances accurately reflect their Part
D expenditures.
15. Absence From Service Area for More Than 12 Months Under Part D
(Sec. 423.44)
Section 1860D-1 of the Act establishes eligibility criteria for
enrolling in a PDP plan or an MA-PD plan. In accordance with section
1860D-1(a)(3) of the Act, a ``Part D eligible individual'' is defined
as an individual who is entitled to or enrolled in Medicare benefits
under Part A or enrolled in Part B. In order to enroll in a PDP, the
individual must reside in the plan's service area, and cannot be
enrolled in an MA plan, other than an MSA plan or PFFS plan that does
not
[[Page 54667]]
provide qualified prescription drug coverage.
Section 1860D-1(b)(1)(B) of the Act generally directs us to use
disenrollment rules similar to those established under section 1851 of
the Act. We applied the provisions of section 1851(g)(3) of the Act
that provide authority for the basis of terminations for MA plans,
which are codified in Sec. 422.74. The disenrollment provisions for
PDPs are outlined in Sec. 423.44.
Under the current MA and PDP rules at Sec. 422.74 and Sec.
423.44, respectively, individuals who are out of the service area for
more than 6 months will be disenrolled. There is an exception for MA
plans that offer visitor or traveler benefits which allows a temporary
absence from the service area for up to 12 months. However, given the
inherent difference between PDPs and MA plans (in particular, the range
of services each provides) we believe that it may not be appropriate or
necessary to apply the disenrollment requirements established under MA
in the same way for PDPs. The 6-month limit on the length of time an MA
enrollee may be out of the service area before being disenrolled is
based in large part on the inability of the enrollee to access the full
range of medical services while out of the plan service area. However,
Part D benefits generally can be accessed through a national pharmacy
network, which can serve individuals effectively regardless of whether
they are in their PDP region of residence. Thus, the same out-of-area
time limit for PDPs may not be necessary, as long as there are specific
assurances from the PDP that individuals will have access to PDP
benefits while out of the area (provided the individual remains in the
United States). For example, a PDP may have shared computer systems
with PDPs in other regions or have a network of pharmacies in other
regions (or nationwide) that would provide immediate access to
prescription drugs outside of the region on the same basis as
pharmacies within the enrollee's region of residence.
Therefore, given the nature of the Part D benefit and the strong
likelihood that a PDP enrollee can access the full range of PDP
benefits while out of the service area, we are proposing to amend Sec.
423.44 to allow a temporary absence from the PDP plan service area for
up to 12 months before disenrollment would be mandatory. We believe 12
months is an appropriate time frame because it is consistent with the
time frame for MA plans' visitor or traveler benefits.
16. Prohibition of Mid-Year Mass Enrollment Changes by SPAPS Under Part
D (Sec. 423.464(e)
Section 1860D-23(b) of the Act defines a SPAP as a State program
that (1) provides financial assistance for the purchase or provision of
supplemental prescription drug coverage or benefits on behalf of part D
eligible individuals; (2) when determining eligibility and the amount
of assistance to Part D eligible individuals under the Part D program,
provides assistance to such individuals in all Part D plans and does
not discriminate based upon the Part D plan in which the individual is
enrolled; and (3) satisfies the requirements of other provisions in
section 1860D-23 of the Act, like Medicare as primary payer. Section
1860D-23(a)(1) of the Act provides that the Secretary has the authority
to establish requirements for Part D sponsors to ensure the effective
coordination between a Part D plan and an SPAP. Included among those
requirements are enrollment file sharing, claims processing and
payment, claims reconciliation, application of the out-of-pocket
expenditures, and other administrative processes set by the Secretary.
In order to coordinate effectively with Part D sponsors, we permit
SPAPs to conduct large volumes of enrollments (sometimes referred to as
``mass enrollments'') consistent with our nondiscrimination guidance
(see Chapter 14 of the Medicare Prescription Drug Benefit Program
Manual). Most SPAPs perform these mass enrollments on a calendar year
basis for all its members who have not chosen a Part D plan; however,
some SPAPs have chosen to perform these enrollments on a noncalendar
year basis. In these situations, Part D sponsors have found that
substantial disenrollment of large numbers of SPAP members from one
plan, followed by mass enrollment into another during the calendar year
significantly affects their financial operations.
We believe that mass re-enrollment into a new plan mid-year
disrupts any continuity of care the beneficiary has established with
his other current Part D plan, and introduces transition risks such as
drugs not being covered by the member's new plan, or requiring the
member to change his or her pharmacy that are not outweighed by any
administrative convenience to the SPAP. Therefore, given these
concerns, we are proposing, under our authority described above, to add
a requirement to Sec. 423.464(e) to prohibit mid-year mass enrollment
changes by SPAPs. We believe this revision would deter any SPAPs from
engaging in what has been a rare but exceedingly disruptive practice,
and require large enrollment changes to be made on a calendar year
basis only. We note that individual members of qualified SPAPs (or the
State acting as the authorized representative of individual members)
will continue to have Special Enrollment Periods (SEP), as provided in
the current CMS guidance, for case-by-case enrollment actions.
In addition to beneficiary disruptions, our actuaries have
determined that there are significant financial disparities among the
Part D plans related to mass mid-year plan enrollment changes. The
source of the disparity is the front-loading of plan liabilities in the
annual bid due to the unique benefit structure of Part D program,
including the coverage gap. Specifically, plans that have beneficiaries
early in the year are likely to incur expenses attributable to the
initial coverage period, the portion of the benefit that includes 75
percent coverage. Plans that have beneficiaries later in the year are
more likely to have beneficiaries during the coverage gap portion of
the benefit, which requires 100 percent beneficiary cost-sharing and no
plan payment obligation in most cases. Because the funding of the
benefit is uniform over the entire plan year, plans that lose
beneficiaries mid-year are more likely to incur losses (the premiums
associated with these beneficiaries after the initial coverage period),
and plans that acquire beneficiaries mid-year from other Part D plans
are more likely to experience gains (due to the beneficiaries enrolling
during the gap in coverage) that in neither case have been anticipated
in the plan's bids. This inequitable result demonstrates the importance
of having a policy in place that minimizes mass mid-year plan changes.
17. Nonrenewal Beneficiary Notification Requirement Under Parts C and D
(Sec. 422.506, and Sec. 423.507)
Section 1857(a) of the Act provides the Secretary with the
authority to enter into contracts with MA organizations, and section
1860D-12(b)(1) of the Act provides the Secretary with the authority to
enter into contracts with PDP sponsors. Additionally, sections
1857(c)(1) and 1860D-12(b)(3)(B) of the Act grant the Secretary the
authority to renew contracts. In accordance with the above-referenced
authority, we have issued contracting regulations including Sec.
422.506 of the MA regulations, and Sec. 423.507 of the Part D
regulations which provide for the nonrenewal of a contract.
Nonrenewals of MA or PDP contracts require the MA organization, the
Part D
[[Page 54668]]
sponsor, or CMS to notify both the enrollees of the organization or
sponsor and the general public of the nonrenewal. Existing regulations
require notification 60 days prior to the effective date of the
nonrenewal for notification both to enrollees and to the general
public. The effective date of contract nonrenewals in the MA and PDP
programs is January 1st of each calendar year. We propose to change the
requirement for notification to enrollees from an ``at least 60 day
requirement'' to an ``at least 90 day requirement'', as it was prior to
January 1, 2009. Changing the requirement for the personalized
beneficiary specific CMS-approved notice to at least 90 days provides
beneficiaries with an increased notice period giving beneficiaries more
time to choose a new Medicare plan prior to the start of the new
benefit year. When we changed the required notice period to 60 days, we
did so primarily to provide adequate time for the appeals process to
conclude prior to the start of the next calendar year; however, our
recent experience has indicated that the vast number of nonrenewals are
voluntarily elected by the PDP sponsor or MA organization, so there is
rarely a need to accommodate the appeals process. For this reason, we
propose revising Sec. 422.506(a)(2)(ii) and (b)(2)(ii) of the MA
regulations and Sec. 423.507(a)(2)(ii) and (b)(2)(ii) of the Part D
regulations to change the beneficiary notice requirement from at least
60 days to at least 90 days.
We also propose removing the current requirement for nonrenewing
plans (in voluntary nonrenewal situations) and for us (in CMS-initiated
nonrenewal situations) to provide notice to the general public by
publishing a notice in one or more newspapers of general circulation
concerning the impending nonrenewal. This change is motivated by the
cost of newspaper advertisements and the declining rate of newspaper
circulation, weighed against the very limited benefit gained from
notice to the general public who is minimally, if at all, affected by
the nonrenewal. Also, non-renewal information is now easily available
to the general public through Internet web sites maintained by us (for
example, http://www.Medicare.gov), a resource not available to the
public when the newspaper notice requirement was first adopted. We
believe that the requirement to provide personalized nonrenewal
information to plan enrollees is sufficient to ensure adequate
nonrenewal notice to the beneficiaries that are being nonrenewed, the
population that is most directly affected by the nonrenewal. For this
reason, we propose deleting Sec. 422.506(a)(2)(iii) and (b)(2)(iii) of
the MA regulations and Sec. 423.507(a)(2)(iii) and (b)(2)(iii) of the
Part D regulations to remove the requirement that the general public be
informed of the impending nonrenewal through the publication of
newspaper notices.
18. Notice of Alternative Medicare Plans Available To Replace
Nonrenewing Plans Under Parts C and D (Sec. 422.506(a)(2)(ii) and
Sec. 423.507(a)(2)(ii))
To allow additional operational flexibility, we also propose to
change the requirement for PDP sponsors and MA organizations to provide
written notification of the alternative Medicare plans available to
replace the nonrenewing plan. We propose changing the requirement to
include the option of either providing a written list of alternatives
available, or placing outbound calls to all affected enrollees to
ensure beneficiaries know whom to contact to learn about their
enrollment options. We believe this change will be advantageous for
beneficiaries because, depending on where the beneficiary resides, a
listing of available plan options is often very long and may be too
overwhelming for the beneficiary to use appropriately. A much more
useful approach would be to provide beneficiaries with contact
information and resources for identifying the most appropriate option
given their unique, individual circumstances. For this reason, we
propose revising Sec. 422.506(a)(2)(ii) of the MA regulations and
Sec. 423.507(a)(2)(ii) of the Part D regulations, to provide the
option of sending written notices of all available alternatives or
placing outbound beneficiary calls to ensure beneficiaries know whom to
contact to learn about their enrollment options. In either case, as
discussed earlier in this section, a personalized CMS-approved
beneficiary notice regarding the nonrenewal still must be sent to each
beneficiary.
19. Timeframes and Responsibility for Making Redeterminations Under
Part D (Sec. 423.590)
In accordance with section 1860D-4(g) of the Act, the Part D
redetermination notice provisions in Sec. 423.590 largely mirror the
MA reconsideration notice provisions in Sec. 422.590. There is one
notable exception--Sec. 422.590(d)(3) allows MA plans to make the
initial notice of a completely favorable expedited reconsideration
orally, so long as a written confirmation is mailed to the enrollee
within 3 calendar days of the oral notice. We did not carry over this
requirement to Sec. 423.590, although a parallel instruction is
contained in our subregulatory guidance in Chapter 18 of the PDP
manual. Therefore, we propose to reconcile this discrepancy by adding
new Sec. 423.590(d)(2). Consistent with the requirements in Sec.
422.590(d)(3), new Sec. 423.590(d)(2) will allow Part D plan sponsors
to make the initial notice of a completely favorable expedited
redetermination orally, so long as a written confirmation of the fully
favorable decision is mailed to the enrollee within three calendar days
of the oral notice.
We also propose in Sec. 423.590(d)(2) to allow Part D plan
sponsors to make the initial notice of an adverse expedited
reconsideration orally, so long as a written confirmation of the
decision is mailed to the enrollee within three calendar days of the
oral notice. We also propose to add a cross reference to paragraphs
Sec. 422.590(d)(1) and (d)(2) in paragraph (g) in order to apply the
written notice requirements in paragraph (g) to adverse expedited
redetermination decisions. We recognize that the MA reconsideration
notice provisions at Sec. 422.590(d)(5) and (e) do not provide
explicit instructions regarding how MA organizations are to notify MA
enrollees of adverse expedited reconsideration decisions. However,
given the expedited status of these requests, we believe adding these
two proposed notice requirements to the Part D expedited
redetermination process is in the enrollee's best interests.
Additionally, because adverse redetermination decisions are not
automatically forwarded to the Part D Independent Review Entity, Part D
enrollees need to receive clear information about the right to appeal
and the procedures for appealing. We note that these two proposals are
consistent with our subregulatory guidance and the process for
notifying enrollees of expedited adverse coverage determination
decisions in Sec. 423.572(b).
Similarly, Sec. 423.590(a)(1) requires a plan sponsor to send an
enrollee written notice of a completely favorable decision for
benefits; however, the regulations do not specify the content of that
notice. Consistent with the statute, Sec. 423.590(a)(1) mirrors the
parallel provision at Sec. 422.590(a)(1). However, for the same
reasons outlined in the discussion above in this section, we believe
incorporating notice requirements for the Part D standard
reconsideration notice provisions does not conflict with the related MA
provisions, and will provide an important beneficiary protection that
will ensure continuity of care for Medicare beneficiaries who are
[[Page 54669]]
obtaining refills of prescription drugs under Part D. Therefore, we
propose to add Sec. 423.590(h) to establish the form and content
requirements for completely favorable redetermination decisions, and
propose making those notice requirements applicable to redeterminations
issued under paragraph (a)(1). We also propose to reference paragraphs
(d)(1) and (d)(2) in paragraph (h), so the proposed form and notice
requirements in paragraph (h) will apply to completely favorable
expedited redetermination decisions.
20. Requirements for Requesting Organization Determinations Under Part
C (Sec. 422.568)
Section 1852(g)(3) of the Act allows an enrollee to request an
expedited organization determination either orally or in writing.
However, the method for requesting a standard determination is not
addressed in either the Act or the implementing regulations at Sec.
422.568. Both beneficiary advocates and MA plans have voiced concern
about the absence of express regulatory authority allowing enrollees to
request standard organization determinations both orally and in
writing. Therefore, we propose adding specific language in Sec.
422.568 allowing oral requests for organization determinations, except
where the request is for payment.
21. Organization Determinations Under Part C (Sec. 422.566 and Sec.
422.568)
Section 1852(g)(1)(A) of the Act requires MA organizations to have
a procedure for making determinations regarding whether an enrollee is
entitled to receive health services or payment under the program. In
accordance with section 1852(g)(1)(A) of the Act, Sec. 422.566 and
Sec. 422.568 establish the requirements related to organization
determinations and notices. Existing Sec. 422.566(b)(4) specifies that
an organization determination includes a determination resulting in
``[d]iscontinuation or reduction of a service if the enrollee believes
that continuation of the services is medically necessary.'' (emphasis
added). Similarly, under Sec. 422.568(c), the plan must give the
enrollee a written notice of the determination ``if an enrollee
disagrees with the MA organization's decision to discontinue or reduce
an ongoing course of treatment.'' (emphasis added).
Both of these provisions have at times been read to imply that the
existence of an organization determination, and the associated notice
requirements, were tied to the enrollee's ``belief'' or
``disagreement.'' Therefore, we propose changing this language to
better reflect its meaning and purpose by removing the phrases ``if the
enrollee believes that continuation of the services is medically
necessary'' and ``if an enrollee disagrees with an MA organization's
decision to''. Regardless of an enrollee's decision whether to appeal
as a result of this discontinuation or reduction, the key purpose of
these provisions was to ensure that enrollees received an explanation
of the plan's decision and their rights if they choose to appeal the
determination. Therefore, we propose removing the language noted above
from Sec. 422.566(b)(4) and Sec. 422.568(c).
22. Representatives (Sec. 422.561, Sec. 422.574, and Sec. 422.624)
For various reasons, enrollees may choose or need to have someone
represent them in the appeals process in order to protect their
interests. Presently, under sections 1852(f) and (g) of the Act, a
representative may act on behalf of an enrollee or other party when
filing a grievance. However, existing Sec. 422.561 does not explicitly
permit the filing of grievances by representatives unlike the
corresponding Part D regulation. In order to rectify this and be
consistent with the Part D definition of representative at Sec.
423.560, we propose to amend Sec. 422.561 to clarify that a
representative may act on an enrollee's behalf with respect to the
grievance process.
23. Disclosure Requirements Under Parts C and D (Sec. 422.111(g) and
Sec. 423.128(f))
Section 1857(a) of the Act provides the Secretary with the
authority to enter into contracts with MA organizations, and section
1860D-12(b)(1) of the Act provides the Secretary with the authority to
enter into contracts with PDP sponsors. Currently, Sec. 422.111 and
Sec. 423.128 provide specific requirements on information that must be
disclosed to enrollees, either at specific designated times, or upon
request. We are proposing at Sec. 422.111(g) and Sec. 423.128(f) to
state that we may require a sponsoring organization to disclose to its
enrollees and potential enrollees information concerning the sponsoring
organization's performance and contract compliance deficiencies in a
manner specified by CMS. This disclosure may be required when a
sponsoring organization is sanctioned, or when a sponsoring
organization's compliance and/or performance deficiencies rise to a
certain level, such that we determine it is necessary for the
sponsoring organization to notify its existing and potential enrollees
of these deficiencies. The vehicle by which the information is
disclosed by the plan, such as through the organization's Web site,
pre-enrollment materials, or separate letter to enrollees, and the
timing and content of that disclosure, are subject to CMS review and
approval. The language we are proposing is not intended to limit these
required disclosures to particular times of the year when beneficiaries
would ordinarily be able to make changes or elections (for example, AEP
or OEP). We believe that this kind of transparency will provide
additional incentives for sponsoring organizations to make improvements
to their operations and also provide relevant information to
beneficiaries and the public concerning plan choices. We solicit
comment on these regulatory provisions. In particular, we solicit
comment on whether these disclosure requirements should be imposed only
in those circumstances where a beneficiary would be afforded the
opportunity to act on them (for example, requiring disclosure during
the particular times of year when beneficiaries would ordinarily be
able to make change or elections, except in those situations where the
compliance deficiency is so significant that a beneficiary may be
afforded a special enrollment opportunity).
24. Definition of MA Plan Service Area (Sec. 422.2)
Section 1851(b)(1)(A) of the Act provides that Medicare
beneficiaries are eligible to enroll in an MA plan only if they reside
in the geographic area served by the MA plan, that is, the ``service
area.'' An MA plan's ``service area'' is currently defined in Sec.
422.2 and the definition expressly requires organizations to meet
access standards, in accordance with access standards in Sec. 422.112.
One question that has been posed to us is whether incarcerated
individuals are eligible to join an MA plan, especially an MA plan that
does not offer Medicare prescription drug coverage. Note that the
definition of service area for a Part D plan (Sec. 423.4) already
excludes a jail or prison within the boundaries of the Part D plan
service area, given that beneficiaries in jail or prison do not have
access to pharmacies as required under Sec. 423.120. It is a logical
conclusion that incarcerated beneficiaries similarly would not have
access to MA plan services, as required under Sec. 422.112. Therefore,
such an area could not meet the MA service area definition, which
requires that such access standards be satisfied. Additionally, there
is no reason for an individual to enroll in an MA plan while
incarcerated, since basic health
[[Page 54670]]
care services typically are furnished by the jail or prison. Similarly,
it would not be appropriate for an MA organization to receive monthly
payments for such an individual, since medical services typically would
be covered for the individual by the facility in which the individual
is incarcerated. Such payments would represent an unwarranted windfall
for services the MA organization would not have to, and could not,
deliver. Therefore, we are proposing to amend the definition of an MA
plan ``service area'' at Sec. 422.2 to exclude facilities in which
individuals are incarcerated.
C. Changes To Provide Plan Offerings With Meaningful Differences
This section addresses proposed changes to our regulations designed
to foster plan offerings with meaningful differences. One of the
underlying principles in the establishment of the Medicare Part D
prescription drug benefit and the revisions to the Medicare managed
care program resulting from the MMA was that both market competition
and the flexibility provided to MA organizations and Part D sponsors in
the statute would result in the offering of a broad array of cost-
effective health and prescription drug coverage options for Medicare
beneficiaries. Indeed, in the several years since implementation of the
MMA, private health plans have taken full advantage of the opportunity
to offer a wide array of health care plans and prescription drug
benefit packages to Medicare beneficiaries. As a result, since 2006,
Medicare beneficiaries throughout the United States have had available
to them a multiplicity of health care and prescription drug options
offered by a substantial number of private sector entities. We continue
to support the concept of offering a wide variety of health plan and
prescription drug coverage choices for Medicare beneficiaries
consistent with our commitment to afford beneficiaries access to high
value health care. However, based on several years of experience with
the MA and Part D programs, we have learned that although beneficiaries
need access to a variety of alternative plan options, benefit packages
must represent significant differences to ensure meaningful choices. As
noted previously, we have attempted to work with Part D sponsors since
2006 to reduce the number of offerings from PDP sponsors as well as to
convey information about Part D plan benefit designs in ways that are
meaningful and understandable to beneficiaries. For example, we provide
information about the various local MA plan and PDP options available
to beneficiaries in the health plan charts included in the annual
Medicare & You publication. Because there are practical limitations to
the display of detailed comparative information in a print format, we
also provide comparative plan information through other vehicles. We
post landscape files to our Web site (see http://www.cms.hhs.gov/PrescriptionDrugCovGenIn/) that provide more detailed comparative
information, such as information about benefit type and, for Part D,
whether the plan has a $0 premium with full LIS subsidy, and a
description of any gap coverage provided. This information is geared
more toward beneficiary advocates and researchers than beneficiaries.
In addition, because a static description of plan benefits design
features does not suffice to allow meaningful comparisons between drug
plans, we also design and maintain the Medicare Options Compare (MOC)
and the Medicare Prescription Drug Plan Finder (MPDPF) Web tool. These
Web tools allow beneficiaries to customize their comparisons based on
their particular needs and thus compare plan benefit packages in a
meaningful way. For example, the MPDPF allows beneficiaries or their
representatives to develop customized comparisons that are sensitive to
a beneficiary's drug regimen, as well as tolerance for generic and
therapeutic substitutes. Our goal in maintaining this tool is to strike
a balance between the desire to provide as much information as possible
to beneficiaries yet only provide information that is useful in making
appropriate drug plan choices. We continue to look for ways to improve
this tool and make information more understandable to beneficiaries and
welcome comments in this area. Ensuring that Part C and D sponsors
offer substantially different plan options, as the proposed regulatory
changes discussed below are intended to do, will further maximize
opportunities for beneficiaries to select benefit packages that meet
their particular needs, while also streamlining and simplifying the
plan selection process.
Half of all Medicare beneficiaries have over 40 MA plan choices
(this figure does not include special needs plans or employer group
health plans which have additional criteria for enrollment), and many
states offer 50 or more stand alone Part D plans, a number that can
double when one includes Medicare Advantage plans with a Part D
benefit. Several studies suggest that the MA and Part D program
offerings are so numerous that they can be confusing. In a report by
Marsha Gold of Mathematica Policy Research, Inc., for example, Gold
writes of the MA program that ``Existing research suggests that
simplification may have advantages for beneficiaries,'' and that one
such advantage is preventing competitors to take advantage of the
system ``through product design.'' \5\ In his study, ``How Much Choice
is Too Much? The Case of the Medicare Prescription Drug Benefit,'' T.
Rice argues, based on Part D beneficiary studies that he and others in
the field have conducted, that ``The results show that decision quality
[of seniors' ability to choose plans with the lowest annual total cost]
deteriorated as the number of plans increases.'' \6\
---------------------------------------------------------------------------
\5\ Gold, Marsha. Strategies for Simplifying the Medicare
Advantage Market. Publication prepared for the Kaiser Family
Foundation. July, 2009.
\6\ Rice, T. Reducing the Number of Drug Plans for Seniors: A
Proposal and Analysis of three Case Studies. Presentation at Academy
of Health Annual Research Meeting: Washington, DC. June 9, 2008.
---------------------------------------------------------------------------
As part of our goal of streamlining and simplifying the plan
selection process for beneficiaries, we are also proposing to revise
the nonrenewal regulations to expressly provide as a ground for
nonrenewal the fact that an MA or Part D plan has failed to attract
more than a small number of enrollees over a sustained period of time.
In deciding whether to nonrenew a plan on this basis, we would expect
to consider arguments as to why such low enrollment would be defensible
in a particular situation (for example, the plan provides a benefit
structure that is extremely important to its enrollees, despite the
fact that they are small in number).
In this section, we discuss our proposed revisions to both the bid
submission and review processes and the nonrenewal regulations. We
believe these proposed revisions will help us accomplish the balance we
wish to strike with respect to encouraging competition and providing
health plan and PDP choices to beneficiaries that represent meaningful
choices in benefit packages. Table 3 outlines these proposed revisions.
[[Page 54671]]
Table 3--Provisions To Ensure Meaningful Differences in Plan Offerings
--------------------------------------------------------------------------------------------------------------------------------------------------------
Part 422 Part 423
Provision -------------------------------------------------------------------------------------------------------------------
Subpart Section Subpart Section
--------------------------------------------------------------------------------------------------------------------------------------------------------
Bid Submissions: Ensuring Subpart F.............. Sec. 422.254......... Subpart F............. Sec. 423.265.
Significant Differences.
Bid Review Process.................. Subpart F.............. Sec. 422.256......... Subpart F............. Sec. 423.272.
Transition Process in Cases of Subpart F.............. Sec. 422.256......... Subpart F............. Sec. 423.272.
Acquisitions and Mergers).
Non-renewing Low-enrollment Plans... Subpart K.............. Sec. Subpart K............. Sec. 423.507(b)(1)(iii).
422.506(b)(1)(iv).
--------------------------------------------------------------------------------------------------------------------------------------------------------
1. Bid Submissions--Ensuring Significant Differences (Sec. 422.254 and
Sec. 423.265)
Consistent with our authority under section 1857(e)(1) of the Act,
incorporated for Part D by section 1860D-12(b)(3)(D) of the Act, to
establish additional contract terms and our authority under section
1860D-11(d)(2)(B) of the Act to propose regulations imposing
``reasonable minimum standards'' on Part D sponsors, we propose to
amend Sec. 422.254(a)(4) and Sec. 423.265(b) to specify that, when
submitting bids to contract as an MA organization or Part D plan
sponsor for the following contract year, MAOs and Part D sponsors must
ensure that they submit bids for multiple plans in the same area only
if those plans have significant differences from each other in terms of
key benefit or plan characteristics such as premiums, cost-sharing,
formulary structure, or benefits offered.
By proposing this change to our existing regulatory requirements
regarding submission, review, and negotiation of bids, as well as CMS
approval of plans, we aim to strengthen and build on our efforts to
date to ensure a proper balance between affording beneficiaries a wide
range of plan choices and avoiding undue beneficiary confusion in
making coverage selections. Since 2005, we have reviewed Part D plan
bids and negotiated with sponsors based on key benefit package
characteristics, such as deductibles, substantial formulary
differences, coverage in the coverage gap, and previous enrollment
numbers. We also have reviewed plan offerings and negotiated with Part
C contractors as part of our annual bid review and approval process, in
an effort to identify and eliminate MA plans that appear to be
duplicative. In connection with 2010 plan offerings, for example, we
contacted MAOs whose plans in a service area represented insignificant
cost differences, as well as MAOs having MA plans with 100 or fewer
enrollees, and conveyed our expectation that they consolidate or
terminate such plans, when appropriate.
We do not propose to specify in regulations text specific benefit
package requirements or enrollment thresholds. Rather, it is our goal
to permit MA organizations and PDP sponsors maximum flexibility to
create plans with meaningful differences and, where warranted, to
permit low enrollment plans to continue to operate when it is in the
best interest of the program and of Medicare beneficiaries. We would
issue guidance about the overall process, including the criteria for
meaningful plan offerings and assessment of such offerings, in the
annual Part C and D Call Letter. With this in mind, with respect to
Part C, we would consider meaningful differences among plans offered by
an MAO in a service area, as determined by CMS, to include a mix of
plan types (for example, HMO, PPO, private FFS, or MSA plan),
significant differences in plan benefit packages (the offering of a
Part D benefit or a significant Part B buy-down, for example), or
significant differences in premiums or cost-sharing (for example, a low
premium-high cost-sharing plan versus a high premium-low cost-sharing
plan) or aggregate costs to beneficiaries. In one possible scenario,
under these general guidelines, we would particularly scrutinize
whether there were sufficient differences among MA plan options if an
MAO proposes to offer more than two plans of the same plan type in a
service area. Even if only two plans of a given type are offered, they
would, under our proposal, have to have meaningful differences relative
to one another. For example, if two MA plans included a Part D benefit,
we would require that there also be significant differences between
these plans' Part D benefits in terms of premiums, cost-sharing or
other benefits.
If the proposed new requirement is implemented, we would require
that plans be dropped that do not offer meaningful choices for
beneficiaries. In making determinations about what is a meaningful
choice of plan type, we could view a PPO and an HMO with a POS benefit
as being similar plan offering if the POS benefit covered all A and B
services out of network. Similarly, a network private FFS plan and a
PPO plan could also be viewed as similar plan offerings given the
similarity in the access to services rules between these two MA plan
types.
With respect to Part D plans, we would continue to focus our
analysis on whether there are significant differences in proposed
beneficiary out-of-pocket costs as a result of the deductible amounts
(for example, $0 deductible versus a $310 deductible) and cost share or
coinsurance (for example, a $20 cost share versus a $45 cost share for
preferred brand drugs). We also would evaluate plan formularies (for
example, a 25 percent difference in the number of unique generic
entities offered on the plans' formularies). These factors are the most
significant considerations that are applicable to all benefit types. We
solicit comment on how big the differences between plan offerings need
to be in order to be ``meaningful'' to beneficiaries. For example, is
there a meaningful difference between an enhanced plan with a $0
deductible and no coverage in the gap versus an enhanced plan with a $0
deductible and coverage of 50 generic drugs in the gap?
Additional benefit offerings such as free first fill programs and
brand-name only deductibles may also be considered for the appropriate
benefit types. In addition to the current considerations of formulary
depth and breadth we may also consider the overall percent of
utilization management applied to drugs and the specific types of
utilization management (for example, prior authorization and step
therapy). It is important to note that, even though a sponsor may
submit different formularies for different plan offerings, all
submitted formularies must be sufficiently robust to pass our rigorous
formulary reviews and be determined not to discourage enrollment by
certain types of beneficiaries. Based on our experience and given
statutory actuarial equivalency requirements, we do not expect that,
absent substantial differences in approved formularies, sponsors can
demonstrate substantial differences between plans offering basic
[[Page 54672]]
prescription drug coverage. It is also our experience that sponsors
typically must offer substantial coverage in the coverage gap as a
supplemental benefit in order to demonstrate that one enhanced
alternative plan design is substantially different from another.
We are proposing that, in our review process, we would provide
particular scrutiny in those market areas where multiple MAOs or Part D
sponsors offer multiple plans. Specifically, we would particularly
target our resources to our review for ``meaningful differences'' in
areas where the elimination of duplicative plans would still leave a
large number of plan options. For example, in the highly competitive
Miami-Dade county market area, we might particularly focus our review
on multiple HMO offerings from the same MAO in areas where additional
HMO plans are not adding meaningful new choices for prospective
enrollees. Similarly, we would particularly scrutinize Part D plan
offerings from the same Part D sponsors for meaningful differences in
regions where multiple plans with multiple benefit types (for example,
enhanced alternative coverage, coverage in the gap) already exist.
As we continue to accumulate program experience negotiating with MA
organizations and Part D plan sponsors regarding bid submissions, it is
our intent to apply these ``lessons learned'' both to our bid
submission requirements and to our bid negotiation protocols. We expect
to continue to determine whether there are substantial differences in
plan types and benefit packages by looking at factors such as health
plan benefit packages, cost-sharing, and deductibles, substantial
formulary differences, and coverage in the coverage gap. We are
soliciting comments on our proposed changes to the bid submission
process.
As discussed more fully in section II.B.5. of this proposed rule,
we are also interested in building additional checks into our process
to ensure that, in structuring bids that are sufficiently different
from any other bid they may propose, MAOs and Part D sponsors do not
design benefit packages that have the effect of discriminating against
certain types of Medicare beneficiaries. This is consistent with our
statutory authority in sections 1852(d)(1)(A) and 1860D-11(e)(2)(D)(i)
of the Act, which provide that we may disapprove a bid if we find that
a plan's proposed benefit design substantially discourages enrollment
in that plan by certain Medicare-eligible individuals.
In the context of the MA program, we are especially concerned about
cost-sharing for certain high-cost services and would caution plans to
ensure that when crafting plan packages with meaningful differences,
they do not create discriminatory cost-sharing structures. We have the
authority, under section 1852(b)(1) of the Act (implemented at Sec.
422.110), to reject bids that we determine to be discriminatory. With
respect to Part D sponsors, a plan that is considering an additional
benefit package that is both nondiscriminatory and substantially
different from its basic or enhanced alternative PDP offering(s) might
choose to bid on enhanced alternative coverage that includes coverage
of both some brand and generic drugs in the coverage gap. Depending on
how this enhanced alternative coverage were structured, such a design
could meet the threshold of being substantially different from a
benefit package offering basic prescription drug coverage and/or an
enhanced alternative benefit package that only offers coverage of
certain excluded drugs, as provided in Sec. 423.104(f)(1)(ii)(A).
2. Bid Review Process (Sec. 422.256 and Sec. 423.272)
In order to further ensure that the benefit packages and plan cost
structures offered by an MAO or Part D sponsor are meaningfully
different, consistent with the preceding discussion, we propose to add
Sec. 422.256(b)(4)(i) and Sec. 423.272(b)(3)(i) to provide that we
will only approve a bid submitted by an MAO or Part D sponsor if we
find its plan benefit package to be substantially different from the
plan benefit packages reflected in that sponsor's other submitted bids
in terms of key plan characteristics such as premiums, cost-sharing,
formulary structure, or benefits offered.
3. Transition Process in Cases of Acquisitions and Mergers (Sec.
422.256 and Sec. 423.272)
Based on several years of program operational experience, we have
also learned that when an MAO or Part D sponsor (or a parent
organization to the sponsor) purchases another MAO or PDP sponsor, the
result can be that the single parent organization offers plans through
multiple subsidiaries of that same parent that are not substantially
different from one another. In this specific situation, plan options
may be designed by a subsidiary that has no incentive to compete
against plans offered by other subsidiaries, which may result in
multiple plan offerings by one sponsor or parent organization that do
not represent substantial or truly meaningful choices to beneficiaries.
In the 2008 Call Letter for Medicare health plans and PDPs, we
announced a policy under which PDP sponsors or parent organizations
with new acquisitions would be afforded a period of 3 years to
transition their plan offerings to meet the goal of ensuring that the
sponsor's offerings were substantially different from one another. For
example, a PDP sponsor (or its parent organization) completing an
acquisition of another sponsor in November 2009 would not be subject to
requirements for offering substantially different bids until the 2013
contract year (that is, bids would be due in June 2010 for the 2011
program year; transition would occur during 2011 and 2012; and the plan
sponsor or parent would need to ensure that in June 2012, when it
submits its bids for program year 2013, all of its 2013 bids are for
substantially different plans).
Consistent with existing policy, we propose adding a new paragraph
Sec. 423.272(b)(3)(ii) providing for a 2-year transition period in the
case of a merger of Part D plan sponsors or the acquisition of a Part D
plan by another Part D plan sponsor or parent organization. We believe
a 2-year transition period strikes a balance between allowing sponsors
(or their parent organizations) with recent acquisitions sufficient
time to streamline their operations after completion of an acquisition
with the need to streamline and simplify beneficiary plan selection. We
are proposing the 2-year transition instead of our current policy of 3
years based on our experience with Part D sponsors that have merged
with or acquired other sponsors. Based on our experience, we believe
that a 2-year period permits sponsors ample time to ensure that all
plans offered represent significant differences, especially because, as
indicated in the sample bidding cycle outlined above, we do not count
the year of the merger or acquisition as part of the 2-year period.
After a transition period of 2 years, we would only approve a bid
submitted by a PDP sponsor, or a parent organization to that PDP
sponsor, if the benefits or plan cost structure represented by that bid
was substantially different from any other bid submitted by the same
Part D sponsor (or parent organization to that Part D sponsor) in terms
of key plan characteristics, such as premiums, cost-sharing, or
formulary structure.
We are also proposing to make a similar change so that MA plans
acquired through purchase or merger offered by same MAO or parent
organization reflect meaningful differences after a 2-year transition
[[Page 54673]]
period. We propose to codify this policy at Sec. 422.256(b)(4)(ii).
We request comments regarding the adequacy of our proposed
transition period length of 2 years in both the MA and Part D contexts.
4. Non-Renewing Low-Enrollment Plans (Sec. 422.506(b)(1)(iv) and Sec.
423.507(b)(1)(iii))
We are proposing to revise the Part C and Part D nonrenewal
regulations to include, as a specific ground for nonrenewal, a finding
that a plan has failed to attract a significant number of enrollees
over a sustained period of time. We believe that, absent special
circumstances, which we discuss below, a plan that has failed, over a
sustained period, to attract enrollees is being operated in a manner
``inconsistent with the efficient and effective administration'' of the
Part C or Part D programs, within the meaning of section 1857(c)(2)(B)
of the Act, which is incorporated into Part D by section 1860D-
12(b)(3)(B) of the Act, and thus would be subject to termination.
In the 2010 Call Letter, we announced that MA organizations and PDP
sponsors should terminate or consolidate low-enrollment Part C and D
plans. In advance of the 2010 contract year, we have contacted MAO
sponsors with enrollments of 100 beneficiaries or fewer for 2 or more
years, conveying our expectation that the organization consolidate or
terminate such plans. We now propose to add continuously low enrollment
to the specific regulatory grounds for nonrenewal by CMS of an MA plan
or PDP. We note that this requirement would be independent of the
current requirement in Sec. 422.514(a) and Sec. 423.512(a) that MAOs
and Part D sponsors meet minimum enrollment requirements at the
organization level for purposes of entering into a contract with us.
Those requirements apply to all enrollees of the organization, not
enrollees in a particular plan.
Although low enrollments often reflect lack of beneficiary interest
in a plan, there are instances when low enrollment is a function of the
type of beneficiaries served, geographic location, or other
circumstance. Instances in which we would consider a waiver of the
proposed requirements include but are not limited to a chronic care SNP
offering health care services especially tailored to this category of
beneficiaries not available elsewhere, or an employer group health plan
offering benefits augmenting those of an MA plan to employees of a
small business. If a case can be made that low enrollment is justified
and the absence of such a plan would significantly limit beneficiary
health care options in a service area, consistent with effective and
efficient administration of the Part C or Part D benefit, we would not
nonrenew that plan. Similarly, although we believe an enrollment of 100
or fewer beneficiaries for 2 or more years was a reasonable threshold
for scrutiny under our 2010 assessment of MA plan enrollments, this
number could fluctuate. As a result we are not proposing to revise our
regulations to specify a specific threshold. If, using the principles
described above, we identify an alternative threshold for scrutiny, we
will include this information in our annual Call Letter. We solicit
comment on this approach and whether we have provided sufficient
clarity on how we will determine whether a low-enrollment plan will not
be renewed.
D. Changes To Improve Payment Rules and Processes
This section addresses four payment issues under Part C. The first
proposal outlines a new proposed dispute and appeal rights process for
risk adjustment data validation audit findings that result in payment
errors. The second proposal would require an actuarial certification
for Part C bids. The third proposal under this section would clarify
how health care prepayment plans (HCPP) and cost plans authorized under
section 1876 of the Act must determine acceptable administrative costs.
Finally, the last proposal would update our regulations to eliminate a
2 percent minimum update for all rate calculations, other than end-
stage renal disease (ESRD), for reasons we set forth below. These
provisions are outlined in Table 4.
Table 4--Improving Payment Rules and Processes
----------------------------------------------------------------------------------------------------------------
Part 417/422 Part 417/422 Part 423 Part 423
Provision --------------------------------------------------------------------------------
Subpart Section Subpart Section
----------------------------------------------------------------------------------------------------------------
Risk Adjustment Data Validation Subpart G......... Various sections N/A................ N/A.
Appeals. of Part 422.
Payments to Medicare Advantage Subpart F......... Sec. 422.254.... N/A................ N/A.
Organizations--Actuarial
Valuation.
Determination of Acceptable Subpart O......... Sec. 417.564.... N/A................ N/A.
Administrative Costs by Cost
Contract and Health Care
Prepayment Plans (HCPPs).
Calculation of the Minimum Subpart G......... Sec. 422.306.... N/A................ N/A.
Percentage Increase under Part
C.
----------------------------------------------------------------------------------------------------------------
1. Risk Adjustment Data Validation Appeals (Sec. 422.310)
a. Background
Subpart G of the MA regulations at part 422 describes how payment
is made to MA organizations. These payment principles are based on
sections 1853, 1854, and 1858 of the Act. Subpart G also sets forth the
requirements for making payments to MA organizations offering local and
regional MA plans, including calculation of MA capitation rates.
Section 1853(a)(3) of the Act requires that we risk adjust our
payments to MA organizations. Risk adjustment strengthens the Medicare
program by ensuring that accurate payments are made to MA organizations
based on the health status plus demographic characteristics of their
enrolled beneficiaries and ensures that MA organizations are paid
appropriately for their plan enrollees (that is, less for healthier
enrollees expected to incur lower health care costs and more for less
healthy enrollees expected to incur higher health care costs). Accurate
payments to MA organizations also help ensure that providers are paid
appropriately for the services they provide to MA beneficiaries. In
general, the current risk adjustment methodology relies on enrollee
diagnoses, as specified by the International Classification of Disease,
currently the Ninth Revision Clinical Modification guidelines (ICD-9-
CM) to prospectively adjust capitation payments for a given enrollee
based on the health status of the enrollee.
[[Page 54674]]
Diagnosis codes determine the risk scores, which in turn determine the
risk adjusted reimbursement. As a result, physicians and providers must
focus attention on complete and accurate diagnosis reporting according
to the official ICD-9-CM coding guidelines (that is, coding diagnoses
accurately and to the highest level of specificity).
The current risk adjustment model employed in adjusting MA plan
payments is known as the CMS Hierarchical Condition Category (CMS-HCC)
model. It functions by categorizing ICD-9-CM codes into disease groups
called Hierarchical Condition Categories, or HCCs. Each HCC includes
diagnosis codes that are related clinically and have similar cost
implications. The CMS-HCC model is recalibrated approximately every 2
years to reflect newer treatment and coding patterns in Medicare FFS.
In 2007, a demographic data-only payment method was completely phased-
out for MA plans, and 100 percent of payment was risk-adjusted. The
statute continues to provide us the authority to add to, modify, or
substitute for risk adjustment factors if the changes will improve the
determination of actuarial equivalence.
b. Risk Adjustment Data Validation Initiatives
MA enrollee HCCs are assigned based on risk adjustment diagnoses
from FFS claims and from risk adjustment data submitted to us by MA
organizations via the Risk Adjustment Payment System (RAPS). The CMS-
HCCs contribute to an enrollee's risk score, which is used to adjust a
base payment rate. Essentially, the higher the risk score for an
enrollee, the higher the expected health care cost for the enrollee.
The HCC data that MA organizations submit to CMS via the RAPS system is
self-reported by the MA organization and does not go through a
validation review before being incorporated into a given beneficiary's
risk-profile. Since there is an incentive for MA organizations to
potentially over-report diagnoses so that they can increase their
payment, the Agency audits plan-submitted diagnosis data a few years
later to ensure they are supported by medical record documentation.
Verifiable medical record documentation is the key to accurate
payment and successful data validation. We annually select MA
organizations for risk adjustment data validation (RADV) audits. RADV
audits are intended to confirm the presence of risk adjustment
conditions (that is, diagnoses that map to HCCs) as reported by MA
organizations for their enrollees and confirmed via medical record
documentation. RADV audits occur after the final risk adjustment data
submission deadline for the MA contract year. We validate the HCC data
submitted by MA organizations by reviewing hospital inpatient, hospital
outpatient, and physician/practitioner provider medical records. The
focus of this medical record review activity is on diagnoses related to
the enrollee's HCC profile. Risk adjustment discrepancies are
identified when the enrollee's HCCs used for payment (based upon MA
organization-submitted data) differ from the HCCs assigned based on the
medical record, pursuant to the RADV audit process. Risk adjustment
discrepancies can be aggregated to determine an overall level payment
error. In turn, payment error for a sample of contract enrollees can be
extrapolated to calculate a contract-level payment error estimate.
From 1999 until 2003, our payment validation activity for the M+C
program had both an educational and audit focus and was intended to
improve the accuracy of the risk adjustment data that was being
submitted to CMS for payment. Payment adjustments were limited to
enrollee-level adjustments for those enrollees sampled in the payment
validation audit. At the time, only 10 percent of the MA payment amount
was risk adjusted. As a result, payment recovery amounts for the small
number of plans audited was very small. Since payment year 2004 was the
first year for which MA payments were based on the current HCC risk
adjustment model, we considered payment years 2004 through 2006 as
pilot years for the purpose of RADV and no payment recovery activity
occurred. For payment year 2007, we began conducting payment
adjustments based on statistical RADV MA contract-level payment error
audit findings. The existence of contract-level RADV audits is intended
to enable us to make contract-level payment adjustments rather than
simply adjusting payments for specific enrollees from an audit sample
as we have done previously.
On July 17, 2008, we announced a pilot program to more extensively
audit MA organizations for payment year 2007 based on calendar year
2006 payment data. In this notice, we announced its plans to make
contract-level payment adjustments using payment error findings from a
sample of enrollees from each of the selected contracts. This was a
major change to our RADV audit approach in that it signaled for the
first time the Agency's intent to recover MA organization contract-
level payments. As a consequence, this would result in substantially
larger payment error than the previous enrollee-level audits. In 2009,
we expanded its RADV audits to randomly selected MA organizations and
MA organizations targeted because of the results of an earlier coding
intensity study. Both the random and targeted RADV audits were intended
to generate statistically valid contract-level payment error estimates
based on 2007 payments.
c. RADV Error-Rate Calculation Disputes and Reconsiderations
Neither the MMA nor existing Medicare Advantage regulations
expressly provide for an administrative appeals process that would
apply to RADV-related disputes involving MA organizations undergoing
RADV audits. Until 2008, because RADV audit payment adjustments were
limited to sampled beneficiary-level findings only, the overall impact
of these payment adjustments on MA organizations was relatively small.
Nevertheless, affected MA organizations requested that we provide some
type of appeal remedy for disputing RADV audit results. In response to
this request, for the RADV audit activity that occurred for payment
year 2005, MA organizations that disputed our RADV audit findings were
permitted to do so via an administrative process known as documentation
dispute. Under documentation dispute, MA organizations selected for
RADV audit could dispute enrollee-level HCC findings based on the
application of the ICD-9-CM guidelines. This documentation dispute
process allowed MA organizations to submit new medical record
documentation and clarifying documentation. Our medical record review
contractors reviewed this clarifying documentation via the
documentation dispute process and if this documentation overturned the
initial discrepancy determination, the contractor would recalculate the
MA organization's payment error estimate and make payment adjustments
based upon the revised payment error estimate.
d. Proposed Addition of Medicare Advantage Organization Risk Adjustment
Data Validation--Dispute and Appeal Procedures
Our experience to date in conducting RADV audits has led us to
propose affording MA organizations undergoing RADV audits the formal
dispute and appeal rights as possible remedies for RADV audit findings
that result in payment errors. Since neither the statute nor existing
MA program regulations specify RADV dispute or appeal requirements, we
are, under our authority to establish MA program
[[Page 54675]]
standards by regulation at section 1856(b)(1) of the Act, proposing
additions to part 422, subpart G at new Sec. 422.311, to specify RADV
dispute and appeal rights for MA organizations. Specifically, we
propose allowing MA organizations that have undergone RADV audit(s)
to--(1) submit physician and other practitioner signed attestations for
physician and other outpatient medical records with missing or
illegible signature and/or credentials that could result in a payment
error; (2) dispute certain other types of medical record review-related
errors through the use of a documentation dispute process; and (3)
appeal our RADV payment error calculation. By availing themselves of
these RADV dispute and appeal processes, MA organizations may be able
to reduce their RADV payment error and thereby, reduce their overall
estimated MA payment error. Therefore, we are proposing the following
provisions under part 422:
At Sec. 422.2, we provide definitions of six terms that
pertain to Risk Adjustment Data Validation (RADV) activities and
thereby, relate to our proposals for implementing RADV dispute and
appeal processes.
At Sec. 422.311, we propose adding a new section to
Subpart G--RADV audit dispute and appeal processes--describing
procedures that we would implement to afford MA organizations
undergoing RADV audits the opportunity to have certain potential RADV
payment errors addressed in advance of RADV-audit-related payment error
determinations being made, and other types of confirmed payment errors
overturned. At Sec. 422.311(a) and (b), we summarize the procedures
that we undertake to conduct RADV audits of MA organizations. Beginning
with Sec. 422.311(c), we propose implementing three RADV-related
dispute and appeal procedures that MA organizations could undertake to
reduce their RADV payment error to include--
Physician/practitioner attestation(s);
Documentation dispute; and
RADV payment error calculation appeal.
Analysis of data originating from medical records submitted by MA
organizations that have undergone RADV audit indicates that a
substantial percentage of medical record-related payment error
determinations are due to missing or illegible signature or credentials
on medical records. Medicare program rules dictate the necessity of
physician signatures on medical records, and MA risk adjustment
requirements dictate that risk adjustment diagnosis data be accepted
from health services that were conducted by certain physician
specialties. Therefore, RADV requirements dictate that in addition to
the presence of diagnosis information that would support HCCs submitted
by MA organizations, physician signatures and credentials must be
present on medical records. Medical records with missing or illegible
signatures and/or credentials are scored as errors under RADV audit
procedures. We estimate that if given the opportunity to do so, many
physicians and other practitioners that provided the diagnosis
information on RADV-reviewed medical records would in fact attest that
they documented the information in these medical records, even though
signatures and credentials were missing. The presence of a signature or
credential attestation to accompany these medical records would in our
opinion, provide justification for preventing both contract-level and
national-level RADV payment errors that may otherwise originate from
medical record signature and/or credential discrepancies only. They
would not, however, be acceptable to address any issues outside the
RADV audit process.
Therefore, under our authority to establish MA program standards by
regulation at section 1856(b)(1) of the Act and the authority at
section 1853(a)(3) of the Act to risk adjust payments for MA
organizations, at newly established Sec. 422.311(c)(1), we are
proposing to implement a process that would allow MA organizations to
voluntarily submit CMS attestations (that is, only attestations
developed and pre-populated by CMS). These attestations would be signed
by physicians/practitioners who would attest responsibility for
conducting and documenting the health services in the physician and
outpatient medical record(s) being submitted for RADV audit. We specify
at Sec. 422.311(c)(1)(ii) and (iii) that MA organizations would be
eligible to use attestations to address signature and/or credential-
related discrepancies only from physician or outpatient medical
records; attestations would not be allowed to address signature and/or
credential-related discrepancies found on inpatient medical records. We
do not believe it is necessary to permit attestations for inpatient
medical records. The proposed use of an attestation would not in any
way supplant the medical record, nor would it permit attesting
physicians/practitioners to alter the existing medical record.
Based on our recent RADV experience, the percentage of payment
error associated with signature and credentials for inpatient medical
records is relatively small. Furthermore, MA organizations would not be
permitted to use attestations as a vehicle for introducing new HCCs for
payment consideration.
At Sec. 422.311(c)(1)(C)(iv), we indicate that we would
prospectively notify MA organizations that if their one best medical
record necessary to validate an audited HCC was missing a physician/
practitioner signature or credential, the MA organization would be
permitted to submit a CMS RADV attestation along with the medical
record, to fulfill the requirement that medical records contain
physician/practitioner signatures and credentials.
We describe the process that we would jointly undertake to review
attestations submitted for our review at Sec. 422.311(c)(1)(iv) and
(v). Only CMS-generated attestations that meet certain requirements
described at Sec. 422.311(c)(1) and (d) are eligible for
consideration. Failure to meet these requirements would result in us
not reviewing submitted attestations. CMS attestations that have been
altered or amended (for example, striking out pre-populated words and
replacing them with hand-written replacement words) without instruction
or written confirmation by CMS will not be accepted. Attestations must
accompany the medical record at the same time that the medical record
is submitted to CMS for RADV audit. MA organizations may not submit
attestations before or after submission of their RADV medical records.
Attestations must originate from the physician/practitioner whose
medical record accompanies and corresponds to the attestation. We will
not accept attestations or medical records from any party other than
the MA organization. Organizations may not submit attestations during
the documentation dispute or RADV reconsideration processes described
at Sec. 422.311(c)(2 and 3). At Sec. 422.311(c)(1)(iv), we describe
the process that we would undertake to review attestations and notify
appellant MA organizations of the results of these attestation reviews.
Our attestation review determinations would be final and binding upon
both parties and would otherwise not be eligible for further appeal.
We believe this proposal benefits both MA organizations and the
Government. First, MA organizations will be provided an opportunity to
prevent substantially high RADV payment errors that would otherwise be
associated with signature and/or credential errors. Second, we benefit
by being able to report RADV payment errors that
[[Page 54676]]
originate primarily from the lack of diagnosis data necessary to
justify submitted HCCs rather than missing signatures and/or
credentials or the lack of legible signature and/or credentials. We
believe that this is an important distinction given the underlying
principles of the risk adjustment payment model--a model that pays MA
organizations less for healthy enrollees and more for less-healthy
enrollees based upon the existence of diagnostic data in enrollee
medical records.
We further propose affording MA organizations the option of
disputing other non-signature or credential-types of RADV-related
medical record diagnosis coding discrepancies via a proposed
documentation dispute process that we describe in new paragraph Sec.
422.311(c)(2) et seq. This proposal is based upon our authority to
establish MA program standards by regulation at section 1856(b)(1) of
the Act and the authority at section 1853(a)(1)(G) of the Act to risk
adjust payments for MA organizations. In order to be eligible for
documentation dispute, MA organizations must submit their one best
medical record to us in accordance with RADV medical record submission
deadlines established by CMS during the RADV medical record request
process.
At Sec. 422.311(c)(2)(a), we specify the types of RADV-related
errors that would be eligible for the documentation dispute process.
The documentation dispute process will apply only to the errors that
arise out of operational processing of medical records selected for
RADV audit and submitted to CMS by established deadlines. In this
context, errors that arise from operational processing mean errors that
arise from the collection and processing of medical records for RADV
audit. For example, if an MA organization submits a two-page medical
record that inadvertently becomes separated into ``two'' medical
records upon receipt by the CMS Medical Record Review Contractor--we
would permit the MA organization to resubmit the two-page medical
record so that the record can be reviewed in its intended two-page
format. At Sec. 422.311(c)(2)(ii), we specify the limitations that we
would impose upon the documentation dispute process, namely that MA
organizations would not be permitted to dispute any medical record
coding discrepancies, nor would MA organizations be permitted to submit
altogether new medical records in place of previously submitted medical
records. Payment errors that resulted from missing medical records will
not be eligible for documentation dispute. A missing medical record
means that no medical record documentation was submitted by the formal
CMS-established deadline. MA organizations would not be permitted to
use the documentation dispute process as a mechanism for establishing
new HCCs for payment consideration. In this context, the term ``new
HCC'' means an HCC that was not previously assigned to an enrollee,
because no associated risk adjustment diagnosis data was submitted to
CMS for payment.
At Sec. 422.311(c)(2)(iii) and (iv), we indicate that we would
prospectively notify MA organizations of RADV payment errors that would
be eligible for documentation dispute, describe the documentation
dispute process that we would undertake, along with the process that we
will undertake to notify MA organizations of the results of
documentation dispute reviews. As described at Sec. 422.311(c)(2)(v),
our documentation dispute review determination would be final and
binding upon both parties and would not otherwise be eligible for
further administrative appeal.
We believe affording MA organizations the ability to dispute the
operational processing of those medical records that are submitted
timely offers MA organizations and CMS a balanced approach for
disputing a significant portion of RADV errors. It also does so in a
manner that benefits both MA organizations and the Government. Allowing
MA organizations to dispute CMS' operational processing errors provides
MA organizations an opportunity to overturn certain types of RADV
payment errors and thereby reduce their overall RADV payment error.
However, the approach we recommend here that limits MA organizations to
disputing only certain types of errors ensures that the integrity of
the CMS' RADV audit process remains intact. We believe this is an
important consideration in developing an RADV dispute process that
balances the desires of the MA industry and the program integrity
interests of the Federal Government. To date, some MA organizations
that have undergone RADV audit have been dissatisfied with our medical
record review processes and have petitioned CMS to allow additional
opportunities to validate HCCs selected for audit. Given the rigor of
our existing RADV audit procedures generally and multi-faceted medical
record review procedures specifically, we believe this is unnecessary.
Indeed, we believe that it is important to understand that while the
RADV medical record review process is intentionally a rigorous
procedure that is carried out by several independent CMS contractors,
we have structured the overall medical record review process so that MA
organizations can successfully submit requested medical records
necessary to validate diagnoses that were sent to us for determining
payments under risk adjustment.
The rigor surrounding the RADV medical record review process is
well established and has been known to the MA industry for several
years. For purposes of clarity and context, we summarize that process
here. To validate the CMS-HCCs selected for audit, MA organizations
need only submit medical record documentation for each enrollee CMS-HCC
requested by CMS for the specified audit time frame. The medical record
must reflect a date of service that occurred during the respective
audit period. We instruct each MA organization to select and submit the
one best medical record necessary to support each enrollee CMS-HCC
being validated. Furthermore, we provide each MA organization
undergoing RADV audit 12 weeks to submit the one best medical record
for validation. Once requested medical records have been received, for
any identified RADV errors, we conduct two rounds of medical record
review by two independent contractors. Medical record review
contractors employ certified coders to review medical records. The
purpose of the second independent medical record review is to confirm
discrepancies found in the initial review. To ensure the integrity of
the medical record review process and the accuracy of the medical
record review findings, the second medical record review contractor is
blind to the findings from the first medical record review contractor
when it examines medical records that the first medical record review
contractor determined were discrepant. Further, all discrepant records
with coding discrepancies are reviewed twice. First they are reviewed
by a primary coder and then they are forwarded to a senior-level expert
coder for review confirmation. As needed, consultation from physicians
is also provided. Finally, we undertake robust medical record coder
inter-rater reliability (IRR) testing to ensure that medical record
review activity is consistent and the application of CMS RADV coding
guidelines are applied uniformly and fairly.
Together in its entirety, we believe the RADV medical record review
process is thorough and it affords MA organizations ample opportunity
to successfully meet RADV audit standards. We believe that affording MA
organizations additional opportunities
[[Page 54677]]
for attestation and documentation dispute to meet CMS' RADV medical
record documentation standards, beyond those specified at proposed
Sec. 422.311(c)(1) and(2) et seq., would be an unnecessary use of
government resources that is unlikely to result in any meaningful
change in RADV audit results.
Pursuant to our authority to establish MA program standards by
regulation at section 1856(b)(1) of the Act and the authority at
section 1853(a)(1)(G) of the Act to risk adjust payments for MA
organizations, we are adding Sec. 422.311(c)(3) to establish an
appeals process whereby RADV payment error calculations may be subject
to appeal. Unlike our proposed attestation process described at Sec.
422.311(c)(1) and proposed documentation dispute process describe at
Sec. 422.311(c)(2) which afford MA organizations the opportunity to
dispute aspects of our medical record review process, the RADV payment
error calculation appeal process is specifically designed to afford MA
organizations the opportunity to appeal our contract-level RADV payment
error calculation. Under the proposed RADV payment error calculation
appeal process, we are establishing a three-level appeal process
whereby MA organizations may--
Seek reconsideration;
Appeal the reconsideration decision to an independent CMS
hearing officer; and
Appeal the decision of the independent CMS hearing officer
to the CMS Administrator.
Unlike the proposed attestation and documentation dispute processes
described in our proposed regulations at Sec. 422.311(c)(1) and
(c)(2), our proposed RADV payment error calculation appeal process has
several layers of appeal available to MA organizations. Our proposed
dispute processes described at Sec. 422.311(c)(1) and (c)(2) afford MA
organizations only one level of dispute consideration because the RADV
medical record audit process already provides multiple layers of strong
and overlapping review and independence. These measures ensure robust
layers of internal checks and balances that help maintain the integrity
of the medical record review process. Therefore, we do not believe that
the attestation or document dispute processes require additional levels
of dispute. Given the complexity of RADV audits in general, and the
calculation of RADV-related error rates in particular, we do believe
it's prudent to afford appellate MA organizations multiple-layers of
RADV-related payment error appeal.
At Sec. 422.311(c)(3)(ii) we specify that MA organizations may not
under the RADV payment error calculation appeal process appeal medical
record review errors nor may MA organizations seek formal appeal of
physician or practitioner signature or credential-related review
errors. Medical record review-related issues will be resolved as a
result of the rigorous medical record review process and the proposed
attestation and documentation dispute processes described earlier in
this proposed regulation. In accordance with our proposed regulation at
Sec. 422.311(c)(3)(i), the RADV payment error calculation appeals
process only applies to errors identified in the RADV payment error
calculation. MA organizations cannot utilize the payment error
calculation appeal process as a method for submitting any medical
records for consideration in the calculation of the payment error. In
order to be eligible for RADV payment error calculation appeal, MA
organizations must adhere to established RADV audit requirements,
including the submission of medical records in the manner and by the
deadlines specified by CMS.
Furthermore, MA organizations cannot appeal the CMS' payment error
calculation methodology. Our justification for excluding methodological
appeals is two-fold. First, the methodology that we employ to calculate
RADV payment errors is methodologically sound and academically
defensible. We intend to ensure that all MA organizations understand
the RADV payment error calculation methodology by providing annual
notice to all MA organizations of the methodology that will be employed
for calculating Part C payment errors. MA organizations that object to
CMS' RADV payment error calculation methodology will be given an
opportunity to provide comment to us under the Agency's annual notice
of RADV audit methodology. Second, in addition to providing an annual
notice of RADV audit methodology, we will provide an expanded
explanation of methodology as part of each audit report of findings
that we send to MA organizations that undergo RADV audit. Included in
this expanded explanation of methodology will be RADV payment error
calculation factors unique to each audited MA organization that will
enable the MA organization to independently calculate its own RADV
payment error.
At Sec. 422.311(c)(3)(iii) and (v), we specify that MA
organizations will be notified of their RADV payment error calculation
appeal rights at the time CMS issues a RADV audit report to that
organization. MA organizations will have 30 days from the date of this
notice to submit a written request for reconsideration of its RADV
payment error calculation. A request for reconsideration must specify
the issues with which the MA organization disagrees, the reasons for
the disagreements and explain why the organization believes the issues
are eligible for reconsideration. The request for reconsideration may
include additional documentary evidence that the MA organization
considers material to the reconsideration, though MA organizations are
prohibited from submitting medical record-related evidence such as new
or previously submitted medical records or physician or practitioner
attestations and from appealing any issues pertaining to the
methodology applied in any part of the RADV audit. At Sec.
422.311(c)(3)(iv), we further specify that the MA organization bears
the burden of proof to demonstrate that CMS' RADV payment error
calculation was clearly incorrect.
We describe the proposed conduct of a RADV payment error
calculation reconsideration, the decision of the reconsideration
official and the effect of the CMS reconsideration decision official at
Sec. 422.311(c)(3)(e) and (f).
At Sec. 422.311(c)(3)(v) and (vi), we describe the first level of
RADV payment error calculation appeal, the request for reconsideration
of our RADV payment error calculation. Under this process a CMS
official or our contractor not otherwise involved in error-rate
calculation activity reviews our RADV payment error calculation and any
written evidence submitted by the MA organization that pertains to CMS'
RADV payment error calculation, recalculates the payment error
utilizing our RADV payment error calculation methodology as specified
in our standard operating procedures, and renders a determination
whether the RADV payment error calculation is accurate. This CMS
official or CMS contractor (not otherwise involved in RADV error-rate
calculation activity) may calculate and arrive at a different RADV
payment error. Whether the official or contractor agrees with our
payment error calculation or overturns this calculation and establishes
a new RADV payment error, this party's RADV payment error calculation
determination is issued to a CMS reconsideration official. The CMS
reconsideration official reviews their analysis and makes a
determination whether to accept or reject the findings of the CMS
official or CMS contractor that recalculated the RADV payment error. In
instances when
[[Page 54678]]
the CMS official or contractor recommends overturning CMS' RADV payment
error calculation and the reviewing CMS reconsideration official agrees
with the newly calculated RADV payment error, we issue a
reconsideration decision which informs the appealing MA organization in
writing of its reconsideration decision, in effect, notifying the MA
organization of its new RADV payment error. If the reconsideration
official upholds the decision of the CMS official or contractor to
sustain our initial RADV payment error calculation, the reconsideration
official similarly notifies the appellant MA organization of its
determination. In either instance, the decision of the reconsideration
official is final and binding unless a request for hearing is filed by
CMS or the appellant MA organization.
At Sec. 422.311(c)(4), we propose to allow CMS or MA organizations
that are dissatisfied with the decision of the CMS reconsideration
official described at Sec. 422.311(c)(3) et seq., to request a second
level of RADV payment error calculation appeal, a hearing on their RADV
payment error calculation determination. CMS or MA organizations
choosing to pursue a hearing must file a request for hearing within 30
days of the date the MA organization receives our written RADV payment
error calculation reconsideration decision as described at Sec.
422.311(c)(3)(vi). CMS or MA organizations requesting a hearing must do
so in writing, include a copy of the CMS reconsideration official's
decision to either uphold or overturn our RADV payment error
calculation, and specify the findings or issues in that reconsideration
decision that they disagree with and why they disagree with them. The
hearing will be conducted by the CMS Office of Hearings and presided
over by a CMS Hearing Officer who neither receives testimony nor
accepts any new evidence that was not presented with the request for
reconsideration of the RADV payment error calculation. The hearing will
be held on the record, unless the parties request, subject to the
hearing officer's discretion, a live or telephonic hearing. The hearing
officer may also schedule a live or telephonic hearing upon their own
motion. The CMS hearing officer is limited to the review of the record
that was before us when we made both our initial RADV payment error
calculation and our reconsidered RADV payment error calculation.
The hearing officer has full power to make rules and establish
procedures, consistent with the law, regulations, and CMS rulings.
These powers include the authority to take appropriate action in
response to failure of an organization to comply with such procedures.
As described at proposed Sec. 422.311(c)(4)(iv), the CMS hearing
officer reviews and decides whether the reconsideration official's
decision was correct and notifies CMS and the MA organization in
writing of his/her decision, explaining the basis for the decision. In
effect, the CMS hearing officer's ruling either upholds or overturns
the RADV payment error calculation. The Hearing Officer does not
recalculate the error and offer either party an alternative RADV
payment error. In instances where the hearing officer overturns the
RADV payment error calculation, the hearing officer issues their
written determination to CMS and the MA organization, in effect,
notifying both parties that we must recalculate the organization's RADV
payment error. If the Hearing Officer upholds the decision of the CMS
reconsideration official regarding the RADV payment error calculation,
the Hearing Officer similarly notifies CMS and the MA organization of
his/her determination. The Hearing Officer's decision is final and
binding, unless the decision is reversed or modified by the CMS
Administrator in accordance with Sec. 422.311(c) (5).
The third level of RADV payment error calculation appeal that MA
organizations can request is discretionary review by the CMS
Administrator. We describe this proposed process at Sec. 422.311(c)(5)
et seq. At this level of appeal, CMS or the MA organization can appeal
the decision of the CMS Hearing Officer by requesting that the CMS
Administrator review the CMS Hearing Officer's determination. Parties
requesting CMS Administrator review would have to request the review
within 30 days of receipt of the CMS Hearing Officer's determination.
If the Administrator agrees to review the case, the Administrator
reviews the Hearing Officer's decision as well as any other information
included in the record of the Hearing Officer's decision and determines
whether to uphold, reverse, or modify the CMS Hearing Officer's
decision. The Administrator's determination is final and binding.
Based on our experience with appeals of MA and Medicare Part D
program contract determinations, we have determined that it is
necessary for us to establish a ``compliance date'' to use as a
reference point in issuing a ruling regarding RADV audit findings. By
way of this proposed regulation at Sec. 422.311(b)(2), we are
requiring that the compliance date for meeting Federal regulations
requiring MA organizations to submit medical records for the validation
of risk adjustment data, (Sec. 422.310(e)) also be the due date when
MA organizations (or their contractor(s)) selected for RADV audit, must
submit medical records to CMS. We will inform an MA organization in
writing regarding selection for RADV audit including the due date for
submission of medical records. Without a specific date as a reference
point for evaluating compliance, MA organizations could choose to
assert that while they were unable to meet RADV audit requirements on
the date we specified as the due date for medical record submission,
they were later able to do so. Under this scenario, organizations would
be free to assert the right to submit medical records in place of, or
in addition to, records that were, or, were not, as the case may be,
submitted to us by the RADV audit due date. Accordingly, if we
proceeded to conduct our RADV audit, issue a report of findings, and
attempt to collect any identified overpayments, affected MA
organizations could counter that while they did not have medical
records to justify a particular HCC-level payment at the time due, they
now have such records. Therefore, we should re-open the audit, review
the new medical records and adjust our report of findings accordingly.
The medical record review process could continue ad-infinitum,
preventing us from closing out RADV audits and collecting any
identified overpayments.
We welcome comments on all aspects of these proposed rules.
2. Payments to Medicare Advantage Organizations--Actuarial Valuation
(Sec. 422.254)
We propose to amend the regulation to expressly require an
actuarial certification for Part C bids. Operationally, we require an
actuarial certification to accompany every bid, for both Parts C and D.
A qualified 0actuary who is a Member of the American Academy of
Actuaries (MAAA) must complete the certification. The objective of
obtaining an actuarial certification is to place greater responsibility
on the actuary's professional judgment and to hold him/her accountable
for the reasonableness of the assumptions and projections. This
requirement is already set forth in the part D regulations at Sec.
423.265(c)(3). This proposed change in the part C regulation text will
bring the part C regulation at Sec. 422.254(b)(5) in line with current
requirements and Part D.
[[Page 54679]]
3. Determination of Acceptable Administrative Costs by Cost Contracts
and Health Care Prepayment Plans (Sec. 417.564)
Our requirements for the apportionment and allocation of
administrative and general costs for health care prepayment plans
(HCPPs) authorized under section 1833(a)(1)(A) of the Act and cost
contractors authorized under section 1876 of the Act are set forth at
Sec. 417.564. As provided under Sec. 417.802(a), with limited
exceptions, allowable costs for HCPP reimbursement are the same as
those for reasonable cost HMOs and CMPs as specified in Subpart O of
Part 417. Both section 1833(a)(1)(A) of the Act (for HCPPs) and section
1876(h)(2) of the Act (for cost HMOs and CMPs) incorporate the
definition of ``reasonable cost'' in section 1861(v) of the Act, which
used to govern reimbursement to providers of services under Part A
prior to the enactment of Prospective Payment Systems (PPS). Because
that definition was originally established with respect to Original
Medicare providers, we believe that it is appropriate to interpret and
apply the principles in section 1861(v) in the managed care context. We
accordingly propose to revise the regulations governing payments to
HCPPs and cost HMOs/CMPs to clarify how we believe the reasonable cost
principles in section 1861(v) should apply to HCPPs and HMOs/CMPs by
specifying the methodologies that must be used in determining the
different allowable administrative costs for both such entities.
We have noted in recent audits of HCPP and section 1876 cost
contractors uncertainty regarding what constitutes a ``reasonable''
level of administrative costs incurred by these entities. In conducting
audits, we have not always been able to confirm that HCPP and cost
contractors authorized under section 1876 of the Act were calculating
their administrative costs in a manner that has allowed us to verify
that they have followed appropriate practices.
In order to remove any uncertainty on the part of HCPP and cost
contractors authorized under section 1876 of the Act, we propose
revising Sec. 417.564(b)(2) to clarify how HCPP and cost contractors
authorized under section 1876 of the Act must determine ``reasonable''
administrative costs. As proposed at Sec. 417.564(b)(2)(iii),
personnel costs claimed in administering both HCPP and cost contracts
authorized under section 1876 of the Act must be linked to the specific
administrative function performed by persons, at a specific rate of
pay, for a specified period of time. We also propose to clarify that
this level of information must be available to CMS upon request or in
the course of a review. Additionally, we propose revising Sec. 417.564
by adding a new paragraph (c) that specifies that, in order for costs
to be considered ``reasonable costs'' within the meaning of section
1861(v) of the Act, which expressly excludes ``incurred cost found to
be unnecessary in the efficient delivery of needed health services,''
the following costs must be excluded when computing reimbursable
administrative costs:
Donations.
Fines and penalties.
Political and lobbying activities.
Charity and courtesy allowances.
Spousal education.
Entertainment.
Return on equity.
Because we are simply clarifying our reporting and recordkeeping
requirements, by clarifying what costs an HCPP may report in its cost
report as administrative costs for reimbursement by the government, we
do not believe this provision would increase burden or costs for plan
sponsors. However, we solicit comment on our assumptions.
4. Calculation of the Minimum Percentage Increase Under Part C (Sec.
422.306)
Section 5301 of the DRA added section 1853(k) of the Act to create
a single rate book for calculating MA payments and applicable
adjustments. The DRA also modified the methodology for updating the MA
payment rates by adding section 1853(k)(1)(B) of the Act. Beginning in
2007, the statute requires for purposes of calculating the minimum
percentage increase rate that the previous year's benchmarks be updated
annually using only the national per capita MA growth percentage as
described in section 1853(c)(6) of the Act. Prior to 2007 the minimum
percentage increase rate was the greater of 102 percent of the MA
capitation rate for the preceding year or the MA capitation rate for
the preceding year increased by the national per capita MA growth
percentage for the year.
Since the statute, as revised by the DRA, no longer provides for
the 2 percent minimum update, we can no longer apply it to the MA
rates. The 2 percent minimum update still applies to the end stage
renal disease MA update because the statute at section 1853(a)(1)(H) of
the Act provides that ESRD rates are to be calculated in a manner
consistent with the way those rates were calculated ``under the
provisions of [section 1853 of the Act] as in effect before the date of
enactment of the MMA.'' The pre-2003 version of section 1853 of the Act
included the 2 percent minimum update. Therefore, we propose to revise
Sec. 422.306 to eliminate the 2 percent minimum update for all rate
calculations other than ESRD.
E. Changes To Improve Data Collection for Oversight and Quality
Assessment
This section of the rule outlines four proposals related to
improving Part C and D data collection for oversight and quality
assessment. The first proposal addresses quality improvement projects
and data on quality and outcomes measures under Part C. As part of this
proposal, we would use data collected by Quality Improvement
Organizations for MA quality improvement and performance assessment
purposes.
The second proposal addresses payment for beneficiary surveys. We
would require, consistent with other surveys under the MA program that
MA and Part D sponsoring organizations pay for the data collection
costs of the Consumer Assessment of Healthcare Providers and Systems
(CAHPS) annual survey beginning in 2011.
Under our third proposal, we propose to require that each Part C
and Part D sponsor be subject to an independent yearly audit of Part C
and Part D measures (collected pursuant to our reporting requirements)
to determine their reliability, validity, completeness, and
comparability in accordance with specifications developed by us.
Finally, the last proposal would amend our rules on the collection
and use of prescription drug event data for nonpayment-related
purposes. Previously our rules addressed only the collection of the
original 37 data elements for non-payment related purposes. In this
rule, we are proposing to collect all data elements included on the
drug event record for non-payment purposes. We also propose to provide
for the limited release of plan identifiers to certain government
grantees.
For the reasons set forth below, we believe each of these proposals
is necessary to ensure continued quality improvement in the Part C and
D programs.
[[Page 54680]]
Table 5--Improve Data Collection for Oversight and Quality Assessment
--------------------------------------------------------------------------------------------------------------------------------------------------------
Part 422 Part 423
Provision ---------------------------------------------------------------------------------------------- Part 480
Subpart Section Subpart Section
--------------------------------------------------------------------------------------------------------------------------------------------------------
Requirements for Quality Subpart D............. Sec. 422.152,...... N/A................... N/A.................. Sec. 480.140.
Improvement Programs under Part C. Sec. 422.153.......
Require that Sponsors pay for the Subpart D............. Sec. 422.152(b)(5). Subpart D............. Sec. 423.156....... N/A.
Consumer Assessment Health Plan
Survey (CAHPS).
Require validation of reporting Subpart D............. Sec. 422.516, Sec. Subpart D............. Sec. 423.514....... N/A.
requirements. 423.514.
Allow collection of all PDE data N/A................... N/A.................. Subpart D............. Sec. 423.505....... N/A.
elements to be collected for non-
payment purposes.
--------------------------------------------------------------------------------------------------------------------------------------------------------
1. Requirements for Quality Improvement Programs Under Part C (Sec.
422.152, Sec. 422.153, and Sec. 480.140)
Section 1851(d)(4)(D) of the Act requires us to make available to
MA eligible individuals' information comparing MA plan options,
including information on plan quality and performance indicators to the
extent this information is available. Separately, section 1852(e)(1) of
the Act requires that each MA organization have an ongoing quality
improvement program for the purpose of improving the quality of care
provided to enrollees in each MA plan offered by the MA organization.
Section 1852(e)(3)(A) of the Act requires that, as part of this quality
improvement program, MA organizations collect, analyze, and report data
that permits the measurement of health outcomes and other indices of
quality as part of their quality improvement program for their
coordinated care plans. To the extent that local PPO, regional PPO,
PFFS, and MSA plans have a network of contracted providers, these plan
types must meet the same quality improvement requirements as other
coordinated care plans.
Section 1852(e)(3)(B)(i) of the Act generally limits the collection
of data on quality, outcomes, and beneficiary satisfaction under
section 1852(e)(3)(A) to facilitate consumer choice and program
administration to ``the types of data'' that were collected as of
November 1, 2003, however, section 1852(e)(3)(B)(ii), titled ``Changes
in Types of Data,'' provides for the Secretary to ``change the types of
data that are required to be submitted under subparagraph (A) after
submitting to Congress a report on the reasons for such changes that
was prepared in consultation with MA organizations and private
accrediting bodies.'' Section 1852(e)(3)(B)(iii) also makes clear that
the limitation in section 1852(e)(3)(B)(i) shall not be construed as
``restricting the ability of the Secretary to carry out the duties
under section 1851(d)(4)(D)'' to provide beneficiaries with
``available'' quality information on MA plans.
a. Quality Improvement Programs
The requirement for MA organizations to have ongoing quality
improvement programs is codified at Sec. 422.152(a). Under Sec.
422.152(a)(1), MA plans are required to include a chronic care
improvement program (CCIP) as part of their quality improvement program
that meets the requirements set forth in Sec. 422.152(c). As specified
under Sec. 422.152(a)(2), MA organizations are also required to
include quality improvement projects as part of their quality
improvement program that are expected to have a favorable effect on
enrollee health outcomes and enrollee satisfaction, and meet
requirements established in Sec. 422.152(d). Under our current
regulations at Sec. 422.152(c) and Sec. 422.152(d), MA organizations
have flexibility to develop criteria for CCIPs and initiate any quality
improvement project that focuses on clinical and non-clinical areas
based on the needs of their enrolled population.
Based on our continued experience with the MA program and due to
inconsistent methods used across organizations, we are concerned that
relying on MA organizations to establish their own CCIPs and quality
improvement projects may not lend itself to effectively compare plans
by beneficiaries and to manage and report projects. More importantly,
we have concerns that these projects are not addressing quality
improvement areas that we believe reflect beneficiary needs. For
example, some projects may be designed to improve processes only
without linking the processes to clinical outcomes. For example,
improving the timeliness and effectiveness of referrals to specialists,
as measured by process measures, may have little or no impact on
improved health outcomes for beneficiaries. We are interested in MA
organizations focusing on individual as well as population specific
health risk needs (for example, MA organizations' use of data sources
internal to their organizations to identify clinical outcomes that not
only fail to meet national averages, but also jeopardize the overall
health and quality of life of the beneficiary).
As a result of our concerns, we are proposing to revise Sec.
422.152(a)(1) and Sec. 422.152(a)(2) to require that MA organizations
conduct CCIPs in patient populations and quality improvement projects
in areas identified by CMS based on our review of data collected from
MA organizations and the population served by the plans. We propose to
determine what areas would most benefit from quality improvement and
will provide guidance on specific quality improvement projects for MA
organizations to implement, either based on that organization's
specific quality improvement needs, or quality improvement needs for MA
plans generally. We also will suggest methods and processes by which to
manage a quality improvement project as appropriate.
Using the HPMS, Medicare Managed Care Manual, and other means of
communication that CMS determines to be appropriate, we will annually
inform MA organizations individually and/or generally which patient
populations and areas we have determined would benefit most from a CCIP
and quality improvement project, respectively.
b. New Quality Measures
As we strengthen our oversight of quality improvement programs
implemented by MA organizations, we believe that there is also a need
for us to collect additional data on quality and outcomes measures in
order to better track plan performance. We currently collect from MA
organizations data on quality, outcomes, and beneficiary satisfaction
under Healthcare Effectiveness Data and Information Set (HEDIS[reg]),
Health Outcome Survey (HOS), and Consumer Assessment Health Providers
Survey (CAHPS[reg]). We anticipate additional collection and reporting
of the same types of data on health outcomes and quality measures
[[Page 54681]]
that we currently collect as part of these processes.
We believe that the collection of these data is consistent with our
authority under section 1852(e)(3)(A) of the Act, and do not believe
that the limitation described under section 1852(e)(3)(B) of the Act
limits this proposed additional data collection because the data
collected would be of the same ``type'' of data that we currently
collect as part of the HEDIS[reg], HOS, and CAHPS[reg] processes.
Examples of additional areas on which we plan to collect data are post-
surgical infections or patient falls. Therefore, we are proposing to
modify Sec. 422.152(b)(3) and Sec. 422.152(e)(2) to require MA plans
to collect, analyze, and report quality performance data identified by
CMS that are of the same type of data that plans are currently required
to collect and report to CMS. Consistent with the Paperwork Reduction
Act, we will provide the public at least two opportunities for public
comment before imposing additional quality-related collection and
reporting requirements.
c. Use of Quality Improvement Organization Review Information
The mission of the Quality Improvement Organization Program, as
authorized under section 1862(g) and Part B of title XI of the Act, is
to improve the effectiveness, efficiency, economy, and quality of
services delivered to Medicare beneficiaries. We contract with one
organization in each state, as well as the District of Columbia, Puerto
Rico, and the U.S. Virgin Islands, to serve as that state/
jurisdiction's Quality Improvement Organization (QIO) contractor. QIOs
are private, mostly not-for-profit organizations, which are staffed by
professionals, mostly doctors and other health care professionals, who
are trained to review medical care and help beneficiaries with
complaints about the quality of care and to implement improvements in
the quality of care available throughout the spectrum of care. Over
time, QIOs have been instrumental in advancing national efforts to
motivate providers in improving the quality of Medicare services, and
in measuring and improving outcomes of quality.
Data collected by QIOs to accomplish their mission represent an
important tool for CMS in our efforts to improve quality under the MA
program. QIOs collect survey, administrative, and medical records data
in order to monitor and assess provider performance. These data are
frequently required by scope of work contracts administered by CMS to
assess whether or not QIOs are meeting performance goals.
Certain QIO data could be used to develop a standardized core set
of clinical and non-clinical quality and performance measures that
could be applied to all MA plans in order to allow beneficiaries to
make better comparisons across all MA plan types and make an informed
decision when selecting a plan. These measures could be used to rate
plans according to their performance. To support efforts to provide
meaningful information to beneficiaries when selecting an MA plan, we
also plan to develop minimum performance levels and requirements that
address clinical and non-clinical areas. In addition to tracking plan
performance, these data could also be used to ensure plan compliance
with MA contract requirements and support compliance or enforcement
actions against plans that are poor performers on certain quality and
performance measures. These data would also allow us to create a
competitive value-based purchasing program based on quality of care.
Therefore, we plan to use one particular type of information
already collected by QIOs and retool the data elements to make them
specific to beneficiaries enrolled in MA plans. This information is
quality review study (QRS) information, which is defined in 42 CFR
480.101(b). A QRS is ``an assessment, conducted by or for a QIO, of a
patient care problem for the purpose of improving patient care through
peer analysis, intervention, resolution of the problem and follow-up.''
QRS information means all documentation related to the QRS process. We
intend to collect from the QIO only the data that relates to MA plan
beneficiaries, providers, practitioners, and services. We could then
aggregate the data to the applicable MA plan based on beneficiary
enrollment. Accordingly, we are proposing to add a new Sec. 422.153 to
indicate that we will collect from the QIOs and use quality review
study information that is generated, collected, or acquired by QIOs
under part 42 CFR 480. We intend to use these data for the following
functions: Enabling beneficiaries to compare health coverage options
and select among them, measuring performance under the plan, ensuring
compliance with plan requirements under Part 422, and other purposes
related specifically to MA plans, as specified by CMS. We will not
disclose any beneficiary identifiable information. In addition, we are
proposing to amend Sec. 480.140 to add a new paragraph (g),
authorizing CMS's use of quality review study information solely for
the purposes specified in Sec. 422.153.
2. CAHPS Survey Administration Under Parts C and D (Sec. 417.472,
Sec. 422.152, and Sec. 423.156)
In accordance with the 1997 Balanced Budget Act mandate to collect
quality assessment data about health plans, we began collecting data in
1998 for the Consumer Assessment of Healthcare Providers and Systems
(CAHPS) survey of enrollees in Medicare Advantage (MA) plans (then
called Medicare+Choice plans). In addition, cost contractors under
section 1876 of the Act have also been participating in the CAHPS
survey process with respect to their enrollees. We have continued to
conduct this annual CAHPS survey at no cost to MA organizations or
section 1876 cost contractors. After passage of the Medicare
Modernization Act (MMA), we began administering a Part D version of
this survey in 2007 to Prescription Drug Plans (PDPs) and Medicare
Advantage-Prescription Drug Plans (MA-PDs) in accordance with Sec.
423.156 and Sec. 422.152.
Under sections 1857(e) (1) and 1860D-12 of the Act, the Secretary
may add additional terms to the contracts with MA organizations and
Part D sponsors as deemed necessary and appropriate. Similarly, in the
case of cost contracts under section 1876, such new contract terms may
be added under section 1876(i)(3)(D). As explained below, we are
proposing on the basis of this authority, that MA, Part D, and section
1876 cost contracts will be amended to require MA organizations, Part D
sponsors, and cost contractors to pay for the data collection costs of
the annual CAHPS survey beginning in 2011.
In the 2010 Call Letter to Part C and D sponsoring organizations,
we indicated that all MA and Part D contracts with at least 600
enrollees as of July 1 of the prior calendar year would be required to
pay for the data collection costs of the CAHPS survey starting with the
administration of the 2011 annual CAHPS survey. This proposal is
intended to codify this requirement in the Part C and Part D
regulations at Sec. 423.156 and Sec. 422.152, and for cost
contractors in Sec. 417.472.
The proposal to require MA organizations, Part D sponsors, and
section 1876 cost contractors to pay for the data collection costs of
the CAHPS survey would apply only to contracts with 600 or more
enrollees. For reasons of statistical precision, a target minimum of
300 or more completed Medicare CAHPS Surveys must be received for each
contract. In order to
[[Page 54682]]
obtain 300 or more completed surveys, we believe plans must have 600 or
more enrollees because some enrollees will not be eligible to receive
the survey, such as institutionalized enrollees, and not all enrollees
selected to be surveyed will respond to the survey.
It is important to note that we conduct other Medicare quality
surveys, such as the Hospital CAHPS and the Medicare Health Outcomes
Survey (HOS) for which the MAOs are responsible for the cost of the
data collection. This model for data collection is standard industry
practice. For example, FEHB plans pay for the administration of the
CAHPS survey to their members. The data collection model that we are
proposing for CAHPS survey process would use the same model that MAOs
currently follow for HOS. The National Committee for Quality Assurance
(NCQA) certifies vendors to conduct the HOS survey on behalf of CMS. In
2009, MAOs chose from a list of six approved vendors for HOS. We have
been moving toward this model for all of our data collection efforts
for beneficiary satisfaction surveys. We propose to use a similar model
for the Medicare CAHPS survey where Part C & D contractors and section
1876 cost contractors would select a vendor from a CMS list of approved
vendors to conduct the survey on their behalf.
While this proposal would shift the cost of data collection to the
eligible Part C and D contractors for the Medicare CAHPS survey
(section 1876 cost contractors would be able to claim these costs on
their cost reports), with this change the sponsoring organizations will
have the flexibility of adding their own questions to the Medicare
CAHPS survey. The flexibility to add questions will allow them to get
feedback about any contract specific issues.
Under this proposal, the following types of contracts would be
amended to include a requirement to administer the CAHPS survey--
All Coordinated Care contracts, including local and
regional preferred provider organizations (PPOs) and contracts with
exclusively Special Needs Plans (SNPs) benefit packages;
Cost contracts under section 1876 of the Act;
Private-Fee-For Service (PFFS) and Medical Savings
Accounts (MSA) contracts; and
Prescription Drug Plans contracts (PDPs).
All plans under Programs of All Inclusive Care for the Elderly
(PACE), HCPP--1833 cost plans, and employer/union only (PDP and PFFS)
contracts are excluded from this CAHPS administration.
Under this proposal, the first survey using the new model of data
collection would be conducted in early 2011. Contracts that were in
effect on or before January 1, 2010, would use the number of enrollees
in a plan as of July 1, 2010 to determine whether they are required to
conduct the 2011 CAHPS survey. In late 2010, all MA and Part D
contracts that are subject to the CAHPS survey requirement in 2011
would need to select an approved Medicare CAHPS survey vendor to
administer the survey.
We note that, in addition to approving a list of survey vendors to
conduct the survey on behalf of all MA and Part D contracts, we would
select the sample of enrollees to be surveyed for each contract,
approve survey vendors, provide oversight of survey vendor activities,
analyze the CAHPS data for plan ratings, and produce individual-level
reports for quality improvement use by MA and Part D contracts. Vendors
will be trained by us to collect and submit data within specified
timeframes. If we decide to implement this proposal, we will provide
further information regarding access to the listing of approved vendors
for the CAHPS survey.
3. Validation of Part C and Part D Reporting Requirements (Sec.
422.516 and Sec. 423.514)
Under sections 1857(e) and 1860D-12 of the Act, we have the
authority to establish information collection requirements with respect
to MA organizations and Part D sponsors. Under section 1857(e)(1) of
the Act, MA organizations are required to provide the Secretary with
such information as the Secretary may find necessary and appropriate.
Section 1857(e)(1) of the Act applies to PDPs as indicated in section
1860D-12. Pursuant to our statutory authority, we codified these
information collection requirements in regulation at Sec. 422.516 and
Sec. 423.514, respectively.
Consistent with our regulatory authority to collect information, we
developed specific MA and Part D reporting requirements to assist in
monitoring the Part C and D programs and to respond to questions from
Congress, oversight agencies, and the public. These inquiries include
questions about costs, availability of services, beneficiary use of
available services, patient safety, grievance rates, and other factors
pertaining to MAOs and PDPs. We began collecting Part D information at
the inception of the program. Data collected under the Part D reporting
requirements currently include seventeen measures ranging from access
to extended day supplies at retail pharmacies to drug benefit analyses.
Over time, we have modified the data elements collected as we gained
more experience with the program. The current Part D reporting
requirements (OMB 0938-0992) may be accessed at http://www.cms.hhs.gov/PrescriptionDrugCovContra/08_RxContracting_ReportingOversight.asp.
We also require routine reporting of specific data elements by MA
organizations. Beginning in January 2009, MA organizations are required
to report information across 13 measures ranging from benefit
utilization to agent training and testing. Similar to the Part D
reporting requirements, these measures are designed to enable us to
monitor plan performance and to respond to inquiries. The current Part
C reporting requirements (OMB 0938-1054) may be accessed at http://www.cms.hhs.gov/HealthPlansGenInfo/16_ReportingRequirements.asp.
In order for us to use the data provided by MA organizations and
PDP sponsors, the data must be accurate, valid, reliable, and
comparable across plans. Because we have received data of questionable
validity from some Part D sponsors, we stated in the 2010 Call letter
(http://www.cms.hhs.gov/prescriptiondrugcovcontra) that the agency
``has received many inquiries from Congress, oversight agencies, and
the public about costs, availability of services, beneficiary use of
available services, patient safety, grievance rates, and other factors
pertaining to MAOs and PDPs. However, to date, we have not been able to
address many of these inquiries due to either an absence of data with
respect to MAOs or, despite collecting over three years' worth of data,
data of questionable validity submitted by Part D sponsors.''
Accordingly, to meet the goals of data validity reliability, and
comparability, we indicated in the Call Letter that, ``to better enable
CMS to respond to inquiries and manage our programs, sponsoring
organizations should undertake a data validation audit on reported Part
C and Part D data effective for CY2010.'' Given the importance of the
new Part C and Part D data reporting requirements, we are proposing to
require MAOs and Part D sponsors to undertake an independent data
validation audit in accordance with CMS specifications on reported Part
C and Part D data that would be effective for CY2011. We believe that
only an independent data validation audit conducted by an external
entity under contract to the MAO or PDP sponsoring organization would
ensure that the
[[Page 54683]]
results of the audit are in accordance with CMS specifications, that
data used to develop plan performance measures are credible to other
stakeholders, and that information used to respond to Congressional and
public inquiries are reliable. We therefore propose to amend Sec.
422.516 and Sec. 423.514 to state that each Part C and Part D sponsor
be subject to an independent yearly audit of Part C and Part D measures
(collected pursuant to our reporting requirements) to determine their
reliability, validity, completeness, and comparability in accordance
with specifications developed by CMS.
We note that we are working with a contractor to develop data
validation specifications to ensure that the goals of reliability,
validity, completeness, and comparability are met at the conclusion of
the data validation audit. These specifications will focus on how
organizations and sponsors compile numerators and denominators, take
into account appropriate data exclusions, and verify calculations,
computer code, and algorithms. In addition, they will be used to inform
how the MAOs, cost plans, and Part D sponsors collect, store, and
report data. We expect that these specifications will be utilized by
the auditors hired by MAOs and Part D sponsors to conduct the data
validation audits, the results of which will be forwarded to us. We
expect to make these specifications available on our website for public
comment early next year. We solicit comment on this approach.
4. Collection of Additional Part D Claims' Elements for Nonpayment-
Related Purposes (Sec. 423.505)
Section 1860D-12(b)(3)(D) of the Act, which incorporates section
1857(e) of the Act provides the Secretary with authority to include in
Part D sponsor contracts any terms or conditions the Secretary deems
necessary and appropriate, including requiring the organization to
provide the Secretary with such information as the Secretary may find
necessary and appropriate. Under this authority, on May 28, 2008 we
published a final rule that allowed the Secretary to collect Part D
``claims'' data from the prescription drug event (PDE) record and use
the information gathered for non-payment purposes (73 FR 30664).
However, this rule limited what data (hereinafter referred to as PDE
elements) we may collect and use for non-payment purposes. The rule
also described circumstances under which we may disclose the data to
other government and external entities, and the limitations associated
with any such release.
In 2006 and 2007 there were 37 PDE elements. In 2008 the number of
PDE elements collected was expanded from the original 37 elements to 39
elements. The additional PDE elements are ``Estimated Rebate Amount
Applied to the Point-of-Sale Price'' and ``Vaccine Administration
Fee.'' The ``Estimated Rebate Amount applied to the Point-of-Sale
Price'' is the estimated amount of a rebate that the plan sponsor has
elected to apply to the negotiated price as a reduction in the drug
price made available to the beneficiary at the point of sale. The
``Vaccine Administration Fee'' is the amount that is charged for the
administration of a vaccine separate from the actual vaccine.
In the 2010 Call Letter to sponsoring organizations we noted that
we were planning to add a new (40th) element to the PDE record,
referred to as the ``Prescription Origin Code.'' (at http://www.cms.hhs.gov/PrescriptionDrugCovContra/Downloads/CallLetter.pdf).
The prescription origin code is designed to capture the frequency with
which providers use e-prescribing.
The original Part D claims data proposed rule published on October
18, 2006 (71 FR 61447) did not address the collection, for purposes
other than payment, of any additional elements that might be added to
the original 37 elements. Rather, in the proposed rule, we only
included a discussion of the 37 elements that then comprised the PDE
record and proposed that we would collect these 37 PDE elements under
section 1860D-12(b)(3)(D) of the Act. As a result, as noted in the May
28, 2008 final rule (73 FR 30667) on Part D claims data, interested
parties were not afforded an opportunity to comment on whether new
elements that were added to the PDE record for 2008 (or any PDE
elements that might be added in the future) should be collected under
section 1860D-12(b)(3)(D) of the Act, and, consequently, used or
disclosed to other parties for non-payment related purposes.
In this rule, we are now proposing to collect all additional PDE
elements beyond the original 37 elements under the same authority
described in the May 28, 2008 final rule on Part D claims data (that
is, section 1860D-12(b)(3)(D) of the Act). As a result, we would be
able to use these data for non-payment related purposes. Similarly,
under this proposal, we would be able to release these elements to
governmental and external entities, under the authority of section 1106
of the Act, using the same process that we now use to release the
original 37 elements as described in the May 28, 2008 final rule, and
as updated by the September 18, 2008 interim final rule that
incorporated changes made as a result of section 181 of MIPPA. Thus, in
this rule, we propose that the release of any additional PDE data
elements collected using our authority under section 1860D-12(b)(3)(D)
of the Act would continue to be subject to our minimum necessary data
policy, our data sharing procedures, and the encryption of certain
identifiers and aggregation of cost data to protect beneficiary
confidentiality and commercially sensitive data of Part D sponsors.
This proposal would allow us to collect and use for non-payment-
related purposes any data obtained as a result of the addition of new
elements to the PDE record without undertaking rulemaking for each
additional element added in the future. We believe that the May 28,
2008 of Part D Claims Data final rule (73 FR 30664) resolved any
statutory ambiguity surrounding our broad authority to collect PDE data
under section 1860D-12(b)(3)(D) of the Act. Accordingly, we may use
this same authority to collect additional elements that have been added
to the PDE since 2007. Once data have been collected under section
1860D-12(b)(3)(D) of the Act, we may use these data for non-payment
related purposes and may release PDE data consistent with our minimum
necessary policy and our data procedures.
Elements such as rebates applied at the point-of-sale, vaccine
administration, and prescription origin code represent claim-level
information that once accessed and analyzed, could provide useful
insight into operations of the Part D prescription drug benefit
program. For example the prescription origin code could be studied to
identify how often electronic prescribing is used in practice, and
serve as background for policy proposals to further support this
practice in the industry. Accordingly, we believe it is appropriate
that these elements should be collected under section 1860D-12(b)(3)(D)
of the Act.
For the same reason, we believe it would be appropriate to use our
authority under section 1860D-12(b)(3)(D) of the Act to collect for
non-payment purposes all elements that may be added to the PDE record
in the future. We believe that the ability to analyze new claims-
related elements added to the PDE record would increase both specific
and general knowledge of Medicare beneficiaries' healthcare and the
operation of the Part D program and would aid our ability to conduct
program oversight, support operational tasks, and provide more
information for use in internal and external healthcare
[[Page 54684]]
research studies. Moreover, we would not be required to undertake a
separate rulemaking and public comment process each time new elements
are added to the PDE record, but rather would automatically begin
collecting for non-payment purposes elements added to the PDE record
using our authority under section 1860D-12(b)(3)(D) of the Act and
Sec. 423.505(f)(3) of the regulations. As a result, we would have the
ability to analyze these data for nonpayment related purposes in order
to identify operational problems or to support future policy proposals
without delay. Moreover, because we do not propose to modify our data
sharing processes or our minimum necessary data policy with this
proposal, any release of these new elements would be subject to the
same protections that currently apply to all other Part D PDE data.
Thus, we will continue to--
Ensure that beneficiary, prescriber, or pharmacy
identifiers are not released unless absolutely necessary for a project
(for example, to link to another database);
Encrypt Part D plan identifiers and aggregate cost data
elements (ingredient cost, dispensing fee, and sales tax) when sharing
PDE data with external requesters; and
Subject each request to our data sharing procedures which
includes ensuring that requestors have the appropriate experience and
are working for, or on behalf of, a reputable institution and that,
when appropriate, make their project results public. External requests
concerning beneficiary identifiable data would continue to be reviewed
by the CMS Privacy Board, and would require the requestor to sign a
data use agreement.
Accordingly, for the aforementioned reasons, we are proposing to
amend Sec. 423.505(f)(3) to include all data elements included in all
drug claims for purposes deemed necessary and appropriate by the
Secretary and consistent with the Paperwork Reduction Act.
In the May 28, 2008 final rule we deemed it necessary to protect
various Part D elements when responding to external research requests
(as discussed above). Accordingly, beneficiary ID, plan ID, prescriber
ID, and pharmacy ID are encrypted prior to release to external
entities. However, in the case of beneficiary ID, prescriber ID, and
pharmacy ID, this information may be provided in an unencrypted format
when needed to link to another data set. In contrast, under the current
rule, there is no exception to the requirement that plan identifiers be
encrypted for all external research requests. Under the current
regulation, grantees of HHS agencies are treated as external entities
and may not access plan identifiers. In contrast, contractors acting on
behalf of HHS are not considered to be external entities and may
receive unencrypted plan identifiers when necessary for a particular
project, due to the provision in Sec. 423.505(m)(iii)(A) that ``all
elements on the claim are available to HHS.''
Subsequent to publication of the Part D data rule, we have been
made aware by some HHS agencies that a number of their grantees are
having difficulty conducting some studies without a Plan ID (for
example, studies which examine the extent to which plan choice is
influenced by a plan's name could only be determined using actual plan
identifiers). These concerns have arisen at time when healthcare costs
and patient outcomes under existing healthcare delivery systems are
under great scrutiny, necessitating more research on cost-effective
alternatives for healthcare delivery.
We are proposing to revise Sec. 423.505(m)(iii)(C) to permit CMS
disclosure to HHS grantees of unencrypted plan identifiers when certain
conditions are met. We believe these conditions will mitigate the risk
of any unauthorized use or disclosure of commercially sensitive plan
information. The conditions we propose be met include--
The plan identifier is essential to the study and there is
no other source of CMS data that would substitute for plan identifiers
in order to carry out the study;
The study is key to the mission of the sponsoring agency;
The study provides significant benefit to the Medicare
program; and
The requestor attests that any public findings or
publications will not identify plans or plan sponsors.
In evaluating requestors' proposals to determine whether these
conditions are met, we propose the following evaluation standards:
Plan identifier, to evaluate the requestor's rationale to
determine whether an encrypted plan identifier would be sufficient for
the study design or if the real identifier is necessary for the study.
Agency mission, we propose to review the requestor's
agency's rationale for the study and how the study would help the
agency achieve its mission.
Medicare program benefit, we propose to review the
requestor's rationale for the importance of study findings to the
Medicare program.
Public reporting, we propose to require an attestation
from the requestor that the requestor will not identify specific plans
or plan sponsors in any public reporting.
We are proposing to provide access to unencrypted plan identifiers
to HHS grantees for several reasons. First, some HHS agencies
accomplish their mission through grants, rather than contracts, and
hence cannot rely on the access that is provided to HHS contractors,
which means that HHS agencies have differential access to prescription
drug event data. In addition, we believe that research performed by HHS
grantees will advance the interests of Medicare beneficiaries, who may
also be served by other HHS programs. A number of HHS agencies, such as
the National Institutes of Health (NIH) and the Agency for Health Care
Research and Quality (AHRQ), provide grants for research on topics such
as the utilization, adherence, safety, and effectiveness of medications
in the elderly and disabled populations which are of key interest to
the Medicare program. We anticipate that such studies will assist
health care providers in improving medication use in Medicare
beneficiaries over time.
Although our proposal is limited to HHS grantees, we also request
comments on whether it would be appropriate to extend this proposal to
permit grantees of other Federal agencies to have access to plan
identifiers when this access may be necessary for a particular research
project and that project otherwise meets the conditions described
above.
F. Changes To Implement New Policy
This section addresses two policy proposals. In the area of Part D
formulary policy, we propose new regulatory requirements affecting the
inclusion of protected drug categories and classes on Part D
formularies, following the enactment of MIPPA, which made a number of
changes to the Part C and D programs., Under Part C, we propose to
revise our rules to allow beneficiaries who elect MSAs as a type of
health insurance plan to pay only a pro-rated deductible if their MSA
deposit is pro-rated because they enroll after January 1. These
revisions are detailed in Table 6.
[[Page 54685]]
Table 6--Revisions to Implement New Policy
--------------------------------------------------------------------------------------------------------------------------------------------------------
Part 422 Part 423
Provision -------------------------------------------------------------------------------------------------------------------
Subpart Section Subpart Section
--------------------------------------------------------------------------------------------------------------------------------------------------------
Clarify the MIPPA 176 ``Protected N/A.................... N/A.................... Subpart C............. Sec. 423.120(b)(2)(v).
Classes'' formulary provision.
Pro-rating the Plan Deductible for Subpart C.............. Sec. 422.103......... N/A................... N/A.
Part C MSA Enrollments Occurring
During an Initial Coverage Election
Period.
--------------------------------------------------------------------------------------------------------------------------------------------------------
1. Protected Classes of Concern Under Part D (Sec. 423.120(b)(2)(v))
As noted previously, the MIPPA was enacted on July 15, 2008. Prior
to the passage of MIPPA and before the start of the program, we
directed Part D sponsors to include on their formularies all or
substantially all drugs in six drug categories (that is,
antidepressant; antipsychotic; anticonvulsant; immunosuppressant for
transplant rejection; antiretroviral; and antineoplastic categories or
classes). This directive was aimed at ensuring a smooth transition of
the approximately 6 million dual eligible beneficiaries who were
converting from Medicaid drug coverage to Medicare drug coverage at the
start of the Part D program. Although section 1860D-11(i) of the Act
prohibits us from establishing a ``national formulary,'' we have
interpreted our obligation under section 1860D-11(e)(2)(D)(i) of the
Act not to approve discriminatory benefit designs as providing the
authority to set standards for review of formularies. In developing our
formulary policy, we have sought to build on a careful balance between
ensuring access to drugs for vulnerable populations, while at the same
time allowing Part D sponsors the ability to implement drug utilization
management processes to achieve cost containment. These standards are
contained in Chapter 6 of the Medicare Prescription Drug Benefit Manual
located at http://www.cms.hhs.gov/PrescriptionDrugCovContra/downloads/R2PDBv2.pdf.
Section 176 of MIPPA added a new section 1860D-4(b)(3)(G)(i) to the
Act requiring, effective plan year 2010, that the Secretary establish
certain categories or classes of drugs that meet two specific statutory
specifications: (1) Restricted access to the drugs in the category or
class would have major or life threatening clinical consequences for
individuals who have a disease or disorder treated by drugs in such
category or class; and (2) There is a significant need for such
individuals to have access to multiple drugs within a category or class
due to unique chemical actions and pharmacological effects of the drugs
within a category or class. In addition, the MIPPA provides the
Secretary with the discretion to establish exceptions permitting Part D
sponsors to exclude from their formularies, or to otherwise limit
access to (including utilization management restrictions or prior
authorization), certain Part D drugs from the protected categories and
classes.
In the January 16, 2009 Federal Register (74 FR 2881), we published
the Medicare Advantage and Prescription Drug Programs MIPPA Drug
Formulary and Protected Classes Policies interim final rule with
comment period that revised the regulations governing the Medicare Part
D formularies as a result of MIPPA. We codified the MIPPA provision
requiring the inclusion of all drugs from identified ``protected
categories and classes'' on Part D sponsor formularies at Sec.
423.120(b)(2)(v). We also noted in the preamble of the January 16, 2009
IFC that the timing of Part D formulary submissions for 2010 will
preclude us from making identification in time for the 2010 contract
year. As such, we noted that Part D sponsors must continue to provide
coverage of the six classes of clinical concern in contract year 2010,
consistent with the policy already in place since 2005. For contract
years 2011 and subsequent contract years, we indicated in the preamble
that we plan to conduct a comprehensive analysis to--
Determine which categories and classes of drugs, including
which existing six classes of clinical concern, meet the MIPPA
requirements for protected categories and classes; and
Identify any potential exceptions to the requirement that
all drugs from protected categories or classes be included on Part D
sponsor formularies.
We also specifically noted in the preamble that we are planning a
multilevel review process to identify protected categories and classes
that would include the following:
An initial data-driven analysis of widely used treatment
guidelines and Part D utilization data; and
A secondary review by a clinical review panel that will
serve to validate the findings of the initial analysis.
We also stated that the second-level expert panel would be
``consensus driven'' and that ``information regarding the independence,
potential conflicts of interest, expertise, and balance of the
individuals chosen for this panel would be made publicly available.''
We received 30 public comments on the January 16, 2009 IFC. Some
commenters suggested an expansion of the current six classes of
clinical concern policy, either through the removal of current
exceptions or through processes that might broaden the number of
protected classes beyond six. Other commenters suggested that the MIPPA
was passed in order to codify the current six classes of clinical
concern. Still other commenters suggested limiting the protected
classes, stating that plans and pharmaceutical benefit managers can
only limit beneficiary cost increases through use of formulary and drug
utilization management tools. These commenters stated that CMS must
carefully weigh increased beneficiary costs against any additional
protections that derive from the establishment protected drug classes.
Several commenters requested further clarification of terms, such as
what we meant by our review of ``widely used treatment guidelines'' and
what is meant by the MIPPA definition of ``access to multiple drugs,''
with many suggesting different interpretations. Finally, many
commenters focused on our process outlined in the January 2009 IFC,
with some questioning whether members of the validation review panel
would be solicited from experts outside the government under a Federal
Advisory Committee Act (FACA) process, whether the representation would
include the perspective of beneficiaries, especially groups that
advocate for beneficiaries living with specific diseases prevalent
among Medicare beneficiaries, and whether the panel would include
practicing physicians and specialists with documented
[[Page 54686]]
experience in treating Medicare patients in the therapeutic areas under
review.
Based on the comments received on the January 16, 2009 IFC, we have
decided to revisit section 176 of MIPPA and the ``protected classes''
for further interpretation and review. While some commenters and a few
outside parties have suggested that the Congress' intention behind
section 176 of MIPPA was to codify our preexisting ``6 class'' policy,
we do not believe that the plain reading of the statute supports such
an interpretation because the six classes are not expressly identified
in the MIPPA. Rather, we continue to believe that various analyses are
needed to determine which drug classes meet the MIPPA criteria.
Furthermore, varied and conflicting public comments we received on the
January 16, 2009 IFC persuade us that the MIPPA criteria are not self
implementing and, moreover, the process envisioned in the January 16,
2009 IFC may be unduly burdensome and too unwieldy to permit timely
changes in reaction to medical and pharmacological advances. As a
result, we are engaging in notice and comment rulemaking to further
interpret section 176 of MIPPA.
We believe that the critical policy decision at hand, based on the
comments received, is how broadly or narrowly we interpret specific
terms in the MIPPA provisions. Interpreted broadly, the provisions in
section 176 of MIPPA might easily encompass many classes of drugs and
significantly increase costs to the Part D program by eliminating the
need for manufacturers to aggressively rebate their products for
formulary placement. However, a narrow interpretation of these criteria
would reduce the number of classes that are ``protected''.
We believe that the plain reading of section 176 of MIPPA does not
remove or otherwise revise our transition and coverage determination
protections outlined in subparts C and M of part 423, and further
explained in Chapters 6 and 18 of the Medicare Prescription Drug
Benefit Manual at http://www.cms.hhs.gov/PrescriptionDrugCovContra/12_PartDManuals.asp#TopOfPage. These existing protections require Part D
sponsors to establish a transition process, consistent with our
requirements (which we propose to codify elsewhere in this rule), for
issues associated with coverage of non-formulary drugs. They also
require a Part D sponsor to establish an exceptions and appeals
process, including an expedited request process in urgent situations
that allows a beneficiary the right to request a coverage determination
for a non-formulary Part D drug on the basis of medical necessity. Our
requirements further include the right of review of a sponsor's
negative determination by an independent review entity in cases of both
a standard and expedited appeal.
We believe that it is critically important that section 176 of
MIPPA be read in the context of the other protections inherent in the
Part D program in order to avoid establishing unnecessary duplicative
protections. The current protections already serve as an underlying
foundation to ensuring access to needed Part D drugs that do not appear
on a Part D plan's formulary. We therefore propose to amend the
regulatory language at Sec. 423.120(b)(2)(v) that was added by the
January 16, 2009 IFC in order to reflect the MIPPA protected categories
and classes provision in the context of these protections.
Specifically, we are proposing to interpret several of the statutory
terms in section 176 of MIPPA to better define the scope of the
protections under this section of MIPPA. To that end, we are proposing
several new definitions at Sec. 423.100.
In order to read section 176 of MIPPA in the context of the
existing Part D program, we believe there is a need to interpret the
meaning of the term ``restricted access'' under the first MIPPA
criterion in section 1860D-4(b)(3)(G)(i) of the Act, which refers to
``restricted access to the drugs in the category or class [having] a
major or life threatening clinical consequences for individuals who
have a disease or disorder treated by drugs in such category or
class.'' In theory, lack of access to any drug that is medically
necessary could result in serious or life-threatening clinical
consequences. Thus, one could argue that all prescribed Part D drugs
are medically necessary and therefore should be protected. However, we
believe that is more appropriate to interpret the MIPPA criteria more
narrowly, both to avoid duplicative protections, as mentioned above, as
well as to preserve one of the key aspects of the Part D program--
namely, that Part D sponsors have the ability to undertake cost
containment efforts through formulary design. For this reason, we
believe it makes sense to interpret the statutory criteria that will be
used to identify protected categories or classes of drugs with these
parameters in mind, while seeking to ensure that the protections
afforded under section 176 of MIPPA are meaningful. Under this
interpretation, therefore, we intend the criteria to apply in those
circumstances wherein a short time delay that results from the
application of existing procedures will result in the exacerbation of
the enrollee's underlying disease to an extent that it would cause
persistent or permanent damage. For example, a short delay in access to
an immunosuppressant to prevent transplant rejection would be more
likely to meet the statutory criteria than a short delay in access to a
drug intended to increase bone density or treat hyperlipidemia.
Given these considerations, we believe that in light of existing
beneficiary protections under Part D, ``restricted access'' should be
construed to occur in the case of someone who, but for the protected
classes provision, urgently requires a Part D drug but is waiting for
an expedited redetermination by a Part D plan or our independent review
entity with respect to coverage of that drug. It is during this period
of time--where the beneficiary may urgently need the drug but does not
yet have access to it--that is most likely to result in a major or life
threatening clinical consequence for beneficiaries who require
treatment of a chronic condition or disease and who are going without
such medications while awaiting the redetermination. Accordingly, we
believe that we must identify drug classes and categories to, in part,
address this situation.
To understand how our proposed definition of restricted access fits
in context with the rest of the first MIPPA criterion, we believe it is
important to have a consistent interpretation of the phrase ``major or
life threatening clinical consequences.'' In thinking about how to
define this term, we considered a definition developed by the FDA for
new drug and biological products that are being studied for their
safety and effectiveness in treating life-threatening or severely
debilitating diseases. The definition of life-threatening in that
context reads as: (1) Diseases or conditions where the likelihood of
death is high unless the course of the disease is interrupted; and (2)
diseases or conditions with potentially fatal outcomes, where the
endpoint of clinical trial analysis is survival (21 CFR 312.81(a)).
However, we concluded that this definition is too restrictive for our
purposes. Seciton 176 of MIPPA contemplates ensuring enrollee access to
drugs where restricted access ``would have major or life threatening
clinical consequences'' (emphasis added). Thus, an interpretation that
potentially could exclude ``major'' clinical consequences that were
non-life-threatening would be insufficient. Instead, we believe that
the definition of a similar term, ``serious
[[Page 54687]]
reaction,'' found at World Health Organization's Web site at http://www.who.int/medicines/areas/quality_safety/safety_efficacy/Annex1GlossaryofTerms.pdf is more instructive and more appropriate for
addressing the circumstances in which Part D enrollees may face
restricted access to medically necessary drugs without a protected
class requirement because unlike the FDA definition, it is not limited
life-threatening situations, but rather encompasses both major and
life-threatening clinical consequences. Therefore, we propose to define
major or life threatening clinical consequences in a manner similar to
the WHO definition. Specifically, we propose to define ``major or life
threatening clinical consequences'' to mean serious clinical events
that arise as a result of not taking a drug that leads to patient
hospitalization, or a persistent or significant disability or
incapacity, or that result in death.
We note that our proposed definitions with respect to the first
criterion of section 176 of MIPPA are intended to provide protection
against major or life threatening consequences at a time when other
beneficiary protections still would result in a delay in access. We
believe that only categories or classes of drugs for which a delay
could cause a major or life threatening clinical consequences based on
the definitions described above establish the most logical standard for
the Part D program given existing beneficiary protections while
avoiding potential increased program costs associated with adding
duplicative protections.
The second MIPPA criterion requires that ``[t]here is a significant
need for such individuals to have access to multiple drugs within a
category or class due to unique chemical actions and pharmacological
effects of the drugs within the category or class, such as drugs used
in the treatment of cancer.'' To understand how this criterion
intersects with the first criterion, one has to understand the meaning
of the phrase ``significant need for access to multiple drugs.'' We
believe that this phrase can be interpreted in only two ways: (1) To
infer that the statutory phrase means simultaneous use of multiple
drugs; or (2) to infer that the phrase means the sequential use of
drugs due to a significant likelihood of failure of a specific drug in
a class leading to the substitution of another drug or drugs in the
same class. To ensure beneficiary protection, we propose to define the
term ``significant need for access to multiple drugs'' to include both
readings. Thus, we propose to define the term to mean instances in
which--
There is a need for simultaneous use of multiple drugs
within a drug grouping because such drugs work in combination with each
other; or
There is a strong likelihood of sequential use of drugs
within a class or category within a short period of time due to a
significant likelihood of failure of a specific drug in a class leading
to the substitution of another drug or drugs in the same class. In
other words, there is a strong likelihood that a different drug in the
same category or class will be needed in a short period of time if the
first drug failed due to the unique effects that the drug type may have
on an individual. For example, there is a strong likelihood that
noncurative chemotherapy will require multiple different drug
substitutions as the cancer goes in and out of remission. Second, with
respect to duration, we propose that a ``short period of time'' is a
short time frame delay that will result in exacerbation of underlying
disease to an extent that persistent and permanent damages will occur.
We propose to define the term ``multiple drugs'' to mean two or
more drugs, and we propose to define the phrase ``category or class''
for purposes of determining compliance with the rules for protected
categories and classes of section 176 of MIPPA as the identification of
a drug grouping that is reasonable to identify the applicable drug
product. We do not believe this identification is necessarily tied to a
specific drug classification system, but rather represents the most
specific grouping that is reasonable to identify the applicable drug
products. For example, it may include drug groupings based on the USP
Model Guidelines, the American Hospital Formulary Service (AHFS)
classification, another drug classification system, or some combination
thereof to define reasonable groupings of drugs.
Finally, consistent with the statutory authority for the Secretary
to identify exceptions to the provision in section 176 of MIPPA, we
propose to specify some of the exceptions to the MIPPA provision to
include on formulary ``all'' Part D drugs meeting the two conditions
set forth in section 1860D-4(b)(3)(G)(i) of the Act. As we stated in
the January 16, 2009 IFC (74 FR 2881) and in our January 28, 2005 Part
D final rule (70 FR 4260), inclusion of ``all covered Part D drugs'' on
formulary from a protected class or category does not extend to
inclusion of all brand-name drugs and generic versions of the covered
drug in question. Under our longstanding interpretation of the term
``covered Part D drug,'' and based upon scientific evidence and medical
standards of practice, Part D sponsors will only be required to include
on their formularies all chemically distinct drugs from the protected
classes or categories in order to the meet the provision in section 176
of MIPPA. Thus, two drug products that are determined to be therapeutic
equivalents by the FDA and identified as such in the FDA's Orange Book
are considered to be the same Part D ``drug'' and would not be required
on all formularies.
We also believe that it is important to consider safety and general
drug and population applicability issues in the context of the new
protections under section 176 of MIPPA. Although, as noted above, we
believe that section 176 of MIPPA is intended to provide additional
beneficiary protections, we believe it would be imprudent to interpret
these new protections in such a way that they interfere with existing
protections intended to promote safety and efficacy. For example, we
believe that it is appropriate for Part D sponsors to establish edits
for safety and that our policies not interfere with basic drug
utilization management edits that sponsors apply at point-of-sale to
ensure that adverse events do not occur. Such edits must be consistent
with FDA labeling to ensure that they are based on scientific evidence
and medical standards of practice. Indeed, we believe that any
interpretation of section 176 of MIPPA that interferes with a plan's
ability to impose safety edits would defeat the very purpose of section
176 of MIPPA.
In order to minimize confusion about the scope of the protections
under section 176 of MIPPA, we clarify that the formulary requirements
set forth in section 1860D-4(b)(3)(G)(ii) of the Act apply only to Part
D drugs; therefore, drugs that are not Part D drugs need not be
included on a plan's formulary, even if a particular non-Part-D drug
might otherwise be included in a protected class or category under
section 176 of MIPPA. In other words, the MIPPA protections do not
apply to non-Part D drugs and their exclusion from the formulary
requirements is not based on our exceptions authority under section
1860D-4(b)(3)(G)(iii) of the Act. Further, we do not require now as
part of our six class policy, and would not require under the authority
of section 176 of MIPPA, the inclusion of drugs that have been
historically paid for under Part B (for example, ``incident to'' drugs
supplied and administered by physicians during patient visit and paid
for under Part B) or whose regulatory status under the definition of a
Part D
[[Page 54688]]
drug at Sec. 423.100 is not known. Given the fact that these drugs are
not covered under Part D today, we believe their lack of presence on
plan formularies would not disrupt access. We further believe that
requiring the inclusion of these drugs on the formulary when they are
not payable under Part D would lead to beneficiary confusion,
particularly with respect to drugs with an unknown approval status. For
these reasons, we are proposing to exclude drugs with very limited
applicability to the Medicare Part D population and non-Part D drugs
from the formulary requirements under section 176 of MIPPA.
Therefore, we have added a new paragraph to Sec. 423.120(b)(2) to
clarify exceptions to the inclusion of all drugs meeting the criteria
under section 176 of MIPPA. Under Sec. 423.120(b)(2)(vi), exceptions
would include the following:
Drug products that are determined to be therapeutic
equivalents under the FDA's Orange Book;
Edits that limit the quantity of drugs due to safety; and
Other drugs that we may specify through a process that is
based upon scientific evidence and medical standards of practice (and,
in the case of antiretroviral medications, is consistent with the
Department of Health and Human Services Guidelines for the Use of
Antiretroviral Agents in HIV-1-Infected Adults and Adolescents) and
which permits public notice and comment.
We welcome comment on these proposed definitions and
clarifications.
As noted previously, we now believe that the process outlined in
the January 16, 2009 IFC may be too burdensome to pursue. One practical
concern with that process is one of timing. We no longer consider it
feasible by contract year 2011 to complete the process outlined in the
January 16, 2009 IFC, in which we would--(1) contract with an
organization to complete a data-driven analysis to identify possible
protected classes and exceptions under the MIPPA; (2) decide on the
composition, independence, expertise, potential conflicts of interest,
and balance of individuals chosen to participate in the second-level
validation panel that would arrive a consensus-driven set of
recommendations; and (3) complete notice-and-comment rulemaking to both
identify the protected categories or classes and to establish
exceptions. Additionally, periodic updates and adjustments to the
protected categories and classes, as well as to the exceptions, would
take longer to implement if the process contemplated in the preamble
were followed every year or some periodic timeframe thereafter.
We continue to believe that the best way to determine which drug
classes meet the MIPPA criteria is through a data-driven process, which
includes an analysis of prescription drug event data, a review of
widely used treatment guidelines, validation of the results by a expert
committee of clinicians, and acceptance by the Secretary. By widely
used treatment guidelines, we mean clinical literature that we consider
to represent best practices. We envision these would include references
in such sources as the Cochrane database and the AHRQ National
Guideline Clearinghouse (NGC), and to include literature referred to in
the Part D statutory compendia. (For more information on the Cochrane
database and the NGC are see their Web sites at http://www.cochrane.org/reviews and http://www.guideline.gov/, respectively.)
Therefore, it is our expectation that we will undertake the following
multilevel process, which we again state is critical to any future
identification of protected formulary classes under the Part D program:
Commence an initial data-driven analysis of widely used
treatment guidelines and Part D utilization data to identify the
following:
++ Possible categories and classes of drugs, including those of the
existing six classes of clinical concern, that meet the requirements
for protected categories and classes; and
++ Any potential exceptions to the requirement that all drugs from
protected categories or classes be included on Part D sponsor
formularies. We note that a review of treatment guidelines along with
the review of the prescription drug event data will provide us with the
necessary data to make informed decisions on the identification of
MIPPA protected classes to present to the Secretary.
Arrange for a secondary review by a group of government
clinicians that will serve to validate the findings of the initial
analysis. We believe that an expert Government panel will best assist
us in appropriately weighing the data derived from the initial analysis
against the statutory requirements to identify protected categories or
classes of drugs in which ``access to multiple drugs within a category
or class'' is needed because ``major or life threatening clinical
consequences'' may arise if access is restricted. Furthermore, we
believe the expert panel will be well positioned to consider the data
that may suggest possible exceptions and consider this data in light of
the protected categories or classes in order to identify exceptions
that are based upon available scientific evidence and medical standards
of practice. Moreover, an expert panel of government physicians and
pharmacists will obviate any problems surrounding independence of
clinical judgment and potential conflicts of interest.
Present recommendations to the Secretary of HHS of the
drug classes or categories, and any recommended exceptions.
We note that the main difference between these data-driven process
described here and the process outlined in the January 16, 2009 IFC is
the composition of the clinical committee that will serve a validation
review. As we noted above, an expert panel composed solely of
government physicians and pharmacists would obviate any problems
surrounding independence of clinical judgment and potential conflicts
of interest, and would simplify the process compared to an external
panel commissioned under the FACA.
With regard to the designation of the drug classes themselves and
the manner in which they are announced, we believe there are two
options and solicit comment on which option the public believes will
allow us to make timely determinations in a transparent manner.
Option 1: Announce protected classes through subregulatory guidance
(for example, the Call Letter) that provides a notice and comment
process but does not entail full notice and comment rulemaking.
One option would be to promulgate regulations that set forth the
criteria we would use to identify the protected classes and to apply
those criteria as part of the data analysis and validation process
described above, but to announce the protected classes that result from
this process through subregulatory guidance, such as CMS's annual Call
Letter to Part D plans, or alternatively through a separate Federal
Register notice. Under either vehicle, we would invite comment prior to
the final announcement of the protected classes and exceptions thereto,
and prior to finalizing any changes to the protected classes or
exceptions. We believe this approach represents a more simplified and
streamlined process. We further believe that this simplified and
streamlined process would provide ample opportunity for public input
and adequate protection of the public interest in the determination of
the protected classes and any exceptions thereto.
Furthermore, we believe that this process also is consistent with
other processes we use to make similar
[[Page 54689]]
determinations. For example, under Medicare Part B, coverage of off-
label use of anticancer therapies may include uses that are supported
by certain drug compendia. In the CY 2008 Medicare Physician Fee
Schedule final rule, we implemented a new process to make changes to
the list of Part B-accepted compendia. This process involves posting
materials on the CMS website, soliciting comment, and announcing final
decision through nonregulatory means.
Option 2--Announce the protected classes through formal notice and
comment rulemaking.
A second option would be to undertake the clinical and data driven
review process described above and after promulgating regulations
addressing the criteria for identifying the protected classes,
implement the proposed protected classes themselves through notice and
comment rulemaking, consistent with our proposal in the January 16,
2009 IFC.
We welcome comments on these two approaches for soliciting public
comment and announcing the protected categories or classes of drugs
required for inclusion on Part D sponsor formularies. We note that,
given the implementation timeframes discussed above, as well as the
need to ensure consistency in formulary coverage as we complete our
analysis to implement the requirements of section 1860D-4(b)(3)(G)(i)
of the Act, we will retain our existing six classes of clinical concern
contained in Chapter 6 of the Medicare Prescription Drug Benefit Manual
(section 30.2.5) for contract year 2010. We further note that any
decisions with respect to the retention of these classes for the 2011
contract year will be made either through a separate rulemaking that
identifies the MIPPA protected classes and any exceptions thereto and/
or as part of the 2011 Call Letter to Part D plans.
2. Pro-rating the Plan Deductible for Part C MSA Enrollments Occurring
During an Initial Coverage Election Period (Sec. 422.103)
Section 1851(a)(2)(B) of the Act establishes Medicare Medical
Savings Account (MSA) plans as a type of health insurance plan that
combines both a tax advantaged savings account and a high-deductible
health insurance policy. Under this MA plan option, Medicare pays the
MA organization offering the MA plan the premium amount charged by the
organization for a high-deductible insurance policy and the remainder
of the MA payment amount is deposited in the enrollee's savings
account. If an individual enrolls in such a plan mid-year, a pro-rated
share corresponding to the number of months remaining in the calendar
year is placed into the individual's savings account. As provided under
Sec. 422.103(d), however, beneficiaries newly eligible for Medicare
who enroll in MSAs midyear pursuant to an initial coverage election
period (ICEP) are currently required to pay a full deductible for the
calendar year. For example, an enrollee whose 65th birthday is in May
and who chooses to enroll May 1 will be given 8/12ths of the deposit
that has been approved for the plan for the year, but this enrollee is
required to pay the full deductible approved for the plan for the
entire calendar year. An enrollee whose 65th birthday is later in the
year could enroll, for example, on September 1 and would receive a pro-
rated deposit representing only 4/12ths of the year; however, this
enrollee would also be required to pay the full calendar year
deductible.
We are proposing to interpret the deductible requirement as
implicitly applying only for the number of months in which a
beneficiary is enrolled in the MSA plan, and accordingly are proposing
to revise Sec. 422.103(d) to allow beneficiaries who enroll during the
year as ICEP enrollments to pay only a pro-rated deductible consistent
with the pro-rated deposit they receive. This rule would also apply to
disabled enrollees under age 65 who become eligible for Medicare during
the year. Interested beneficiaries may inquire with potential MSA plans
about their options prior to enrollment, and, upon enrollment, would
receive a confirmation of enrollment letter that would inform them of
both their pro-rated deposit amount and their pro-rated deductible.
G. Changes To Clarify Various Program Participation Requirements
We have worked with sponsoring organizations to implement and
operationalize the Medicare Advantage and Prescription Drug Benefit
Programs over the past 4 years. As part of this partnership, we have
implemented operational and/or policy guidance via HPMS memoranda or
manual instruction to assist sponsoring organizations in ensuring the
proper and efficient administration of the Part C and D programs. The
proposed regulations in this section either clarify existing
regulations or implement new requirements consistent with existing
policy guidance, to assist sponsoring organizations with attaining the
goals envisioned by the Congress when the legislation implementing the
Medicare Advantage and Prescription Drug Benefit programs was first
passed. These clarifications are detailed in Table 7.
Table 7--Clarifications of Various Sponsor Program Participation Requirements
--------------------------------------------------------------------------------------------------------------------------------------------------------
Part 422 Part 423
Provision -------------------------------------------------------------------------------------------------------------------
Subpart Section Subpart Section
--------------------------------------------------------------------------------------------------------------------------------------------------------
Clarify what we mean by uniform Subpart C.............. Sec. 422.100(d)...... Subpart C............. Sec. 423.104.
benefits.
Ensure security of personal health Subpart K.............. Sec. 422.504......... Subpart K............. Sec. 423.505.
information and other personally
identifiable information.
Require plans to report other payer Subpart C.............. Sec. 422.108......... Subpart C............. Sec. 423.464.
information to support coordination
of benefits (COB).
Visitor/Traveler Benefit under Part Subpart B.............. Sec. 422.74.......... N/A................... N/A.
C for the Purpose of Extending
Enrollment up to 12 Months.
Codify authority to establish (MTM) N/A.................... N/A.................... Subpart D............. Sec. 423.153(d).
Program requirements.
Clarify Pharmacy & Therapeutics N/A.................... N/A.................... Subpart C............. Sec. 423.120.
(P&T) Committee requirements.
Generic equivalent disclosure....... N/A.................... N/A.................... Subpart C............. Sec. 423.132.
Application of access standards at N/A.................... N/A.................... Subpart C............. Sec. 423.120.
application level.
Standard Timeframe for coverage N/A.................... N/A.................... Subpart M............. Sec. 423.568.
requirements.
Clarify Novation requirements....... N/A.................... N/A.................... Subpart L............. Sec. 423.551.
[[Page 54690]]
Cost Contract Program revisions: Subpart O.............. Sec. 417.428......... N/A................... N/A.
Appeals and Marketing Requirements. Sec. 417.492.........
Sec. 417.494.........
Sec. 417.500.........
Sec. 417.640.........
--------------------------------------------------------------------------------------------------------------------------------------------------------
1. Uniform Benefits Under Parts C and D (Sec. 422.100(d) and Sec.
423.104)
Section 1852(d)(1)(A) of the Act requires a Medicare Advantage (MA)
organization offering a plan to select the providers from whom the
benefits under the plan are provided so long as the organization makes
such benefits available and accessible to each individual electing the
plan within the plan's service area with reasonable promptness and in a
manner which assures continuity in the provision of benefits. Section
1860D-2(a) of the Act defines qualified prescription drug coverage to
mean access to standard or actuarially equivalent prescription drug
coverage and access to negotiated prices (in accordance with section
1860D-2(d) of the Act). We codified these sections in our regulations
at Sec. 422.100(d) and Sec. 423.104(b).
Both sections currently require that either an MA organization or
PDP sponsor offering a plan must offer that plan to all eligible
beneficiaries residing in the plan's service area, or for MA
organizations, a subset of the plan's service area. We further
interpret section 1860D-2(a) of the Act as requiring the provision of
uniform premiums and benefits.
We have provided guidance to Part D sponsors on several occasions
indicating that varying cost-sharing or premiums, including waiving
cost-sharing or premiums, violates the uniform benefit requirements at
Sec. 423.104(b) because doing so results in the Part D sponsor's plan
not providing uniform premiums and benefits to all eligible
beneficiaries within its service area. We have further informed Part D
sponsors that their failure to collect cost-sharing at the time the
service is provided or to attempt to collect cost-sharing or bill cost-
sharing to the appropriate party (either a beneficiary or another
payer) after the fact is in violation of the uniform benefit provisions
set forth in the current regulation at Sec. 423.104(b).
However, we believe that Sec. 423.104(b) is not clear in regard to
the PDP sponsor's imposition of uniform premiums and cost-sharing.
Therefore, we propose to revise Sec. 423.104(b) to mirror the language
at Sec. 422.100 to specify that Part D sponsors apply uniform premiums
and cost-sharing.
2. Ensuring the Security of Personal Health Information and Other
Personally Identifiable Information (Sec. 422.504 and Sec. 423.505)
In the contract provisions sections of subpart K of parts 422 and
423, we specify that MAOs and Part D sponsors must permit access to
their facilities by the Secretary or his or her designee. Access to
facilities must be granted in connection with the Secretary's right to
evaluate through audit, inspection, or other means MAO and Part D
sponsor compliance with Medicare contract requirements, including the
quality, appropriateness, and timeliness of services.
We interpret the Secretary's right to audit or inspect compliance
with MA and Part D program regulations to include evaluation of
compliance with CMS requirements for maintaining the privacy and
security of personal health information and other personally
identifiable information of Medicare enrollees. In order to clarify our
policy that beneficiaries' personal health information and other
personally identifiable information must remain secure, we propose to
revise Sec. 422.504 and Sec. 423.505 to make this interpretation
explicit. In a related change, we propose to clarify that we interpret
the term ``facilities'' to include an MAO's or Part D sponsor's
computer or other electronic systems. We would implement these proposed
changes at Sec. 422.504(e)(1)(ii) and Sec. 423.505(e)(1)(ii). We are
also proposing conforming changes to the contract requirements related
to downstream entities at Sec. 422.504(i)(2)(i) and Sec.
423.505(i)(2)(i), respectively. Note that while we do not believe our
authority extends to accessing the facilities of downstream entities,
we may review systems and computer-generated information from
downstream entities for compliance with privacy and security
requirements. Such information includes, but is not limited to, backup
tapes, print outs of screen shots, CDs, and similar information.
We encourage the use of computerized and electronic systems by MAOs
and Part D sponsors. We are aware, however, of the additional potential
for security and privacy breaches in a computerized/electronic context.
Our proposed changes are designed to ensure that beneficiaries'
protected health information and personally identifiable information
associated with their enrollment remain private and secure.
3. Requirement for Sponsoring Organizations Under Parts C and D To
Report Other Payer Information to the Coordination of Benefits
Contractor (Sec. 422.108 and Sec. 423.464)
Section 1852(a)(4) of the Act provides that an MA organization may
charge or authorize a provider to seek reimbursement for services from
a beneficiary or third party to the extent that payment is made
secondary under section 1862(b)(2) of the Act. Section 1860D-2(a)(4) of
the Act extends the Medicare secondary payer (MSP) procedures
applicable to MA organizations under section 1852(a)(4) of the Act to
Part D sponsors and their provision of qualified prescription drug
coverage. This authority is implemented for MA organizations in Sec.
422.108 and for Medicare PDPs in Sec. 423.462, as well as in CMS
manuals.
MA organizations are responsible for identifying payers that are
primary to Part C of Medicare, determining the amounts payable by those
payers, and for coordinating the benefits the plan offers with the
benefits of such payers. Additionally, MA organizations must take into
account Part C costs that could have been recovered or avoided due to
MSP when determining costs in the base period. MA organizations must
account for Part C MSP amounts in one of three ways. MA organizations
must--
Recover from liable third parties;
Avoid Part C costs by directing providers to bill liable
third parties directly; or
Account for Part C costs that could have been recovered or
avoided, but that were actually not recovered or avoided,
[[Page 54691]]
by not including them in Part C base period costs.
MA organizations and PDPs are required to follow the same rules
regarding--
Their responsibilities under the MSP statutory and
regulatory provisions;
Collection of payment from insurers, group health plans
and large group health plans, the enrollee, or other entities for
covered Part D drugs; and
The interaction of MSP rules with State laws.
Sections 1860D-23 and 1860D-24 of the Act also require a Part D
sponsor to coordinate with SPAPs, as well as other drug plans,
including Medicaid programs, group health plans, FEHBP, military
coverage, and other plans or programs providing prescription drug
coverage. To support the required benefit coordination, section 1860D-
2(b)(4)(D)(ii) of the Act permits Part D sponsors to request
information on third party insurance from beneficiaries. The authority
for COB, as well as for information collection from beneficiaries is
implemented for prescription drug sponsors in Sec. 423.464 and in the
Coordination of Benefits chapter of the Medicare Prescription Drug
Benefit Manual.
The growing number of CMS data sharing agreements with other payers
has improved the volume and quality of other payer information
available to MA organizations and prescription drug sponsors on the COB
data file from CMS. New mandatory insurer reporting of MSP group health
plan coverage, liability insurance, no-fault insurance and workers'
compensation, required by section 111 of the Medicare, Medicaid, and
State Children's Health Insurance Program (SCHIP) Extension Act of 2007
(Pub. L. 110-173), will further expand the other payer information
available for MA organization and PDP MSP procedures and for Part D
sponsor coordination of benefits. (See 42 U.S.C. 1395y(b)(7) and (8).)
Most insurers will need to report their own coverage already. It is
only when an MA organization becomes aware of coverage that is primary
to Medicare offered by another insurer that it will need to report
under this rule. In addition to these advances, we continue to seek
improvements to the quality of the MSP and COB information we report to
MA organizations and Part D sponsors. We believe the best means to
accomplish this is to rely primarily on the most reliable sources of
other coverage information. Based on our experience, these sources tend
to be the other insurers.
However, MA organizations and PDP sponsors will on occasion
continue to receive information about other coverage from their
enrollees, as well as other sources. While our MA program policy does
not currently include reporting requirements, Part D subregulatory
policy guidance, reflected in section 50.2 of the Coordination of
Benefits chapter of the Prescription Drug Benefit Manual, requires that
PDP sponsors submit other coverage information that is brought to their
attention within 30 days of receipt to the CMS COB Contractor for
verification and application of the verified data to our data systems.
Given the importance of the other payer information to MA
organization and PDP MSP procedures and for prescription drug program
coordination of benefits, we propose to require the reporting of other
coverage information in Sec. 422.108 for MA organizations and Sec.
423.462 and Sec. 423.464 for PDP sponsors. Given concerns regarding
the quality of the information, we propose to limit the information
reported to that which is reported to the sponsor as being inconsistent
with existing information on the COB file.
Specifically, we propose to include in regulatory text the
requirement that MA organizations and Part D sponsors, upon being
notified of credible new information regarding other payers or changes
to existing other payer information, report this information to the CMS
COB Contractor in accordance with the processes and timeframes
established by CMS. By ``credible'' we mean information that is
consistent with conventions for how group health insurance coverage is
identified, for instance including the name and address of the
insurance company and the policy identification number. We also propose
to extend the reporting requirements to MA organizations as they relate
to other primary payers. We note that Medicare MA organizations and
Part D sponsors should never be reported to CMS as a ``primary'' payer.
In the absence of another (that is, non-Medicare) primary payer, the MA
organization or Part D plan is always primary. This is not to say that
if an enrollee has primary individual or employer group coverage
through the same insurer or organization through which they also have
MA or Part D coverage, such primary coverage should not be reported. In
fact, such coverage must be reported. However, reporting Medicare
itself as primary serves no purpose and merely causes confusion.
The proposed changes described in this section of the proposed rule
would impose a new requirement on MA organizations but would not change
current MSP and coordination of benefits policy for the prescription
drug program.
4. Visitor/Traveler Benefit Under Part C for the Purpose of Extending
Enrollment Up to 12 Months (Sec. 422.74)
Under our authority to establish special rules for the enrollment
of beneficiaries in MA plans at section 1851(b) of the Act, we had
previously described in the Medicare Advantage regulations a visitor/
traveler (V/T) benefit. Specifically, Sec. 422.74(d)(4)(iii)
established an exception to our disenrollment requirements, under which
a plan member must be disenrolled when out of the service area for more
than 6 months. Under this exception, MA plans may offer their enrollees
extended enrollment in the plan when they are out of the plan service
area, but within the United States, from 6 to 12 months if the plan
covers services other than emergent, urgent, maintenance and post
stabilization, and renal dialysis services. Section 422.74(d)(iii)
establishes that an MAO can offer a ``visitor'' or ``traveler'' type
program which would allow its enrollees to remain enrolled in the plan
while out of the plan's service area for up to 12 months. We note that
Medicare-covered services can only be covered within the United States.
Although we stated in the preamble of the Medicare+Choice program;
Managed Care Provisions final rule, published in the August 22, 2003
Federal Register (68 FR 50848), that the visitor or traveler program
must cover ``the full range of services available to other members,''
we did not specify in regulation text what we intended by ``full range
of services.''
Given the lack of specificity in our regulations, we have received
a number of questions since that time regarding what services must be
covered through a V/T program if an MA plan wishes to retain members up
to 12 months when those members are residing outside the service area.
We propose to amend Sec. 422.74(d)(4)(iii) to specify that an MAO may
offer an extended enrollment V/T option under an MA plan if that plan
furnishes all plan covered services--that is, Medicare Parts A and B
services and all mandatory and optional supplemental benefits--at in-
network cost-sharing levels consistent with Medicare access and
availability requirements at Sec. 422.112. An MAO offering a V/T
benefit under an MA plan must make the option available to all plan
enrollees. Specifically, the V/T benefit must be available to all plan
enrollees who are temporarily in the
[[Page 54692]]
areas where the V/T benefit is offered for the 6-12 months the member
is in the area.
5. Medication Therapy Management Programs Under Part D (Sec.
423.153(d))
Section 1860D-4(c)(1)(c) of the Act requires Part D sponsors to
establish Medication Therapy Management programs (MTMP) and section
1860D-4(c)(2) of the Act requires MTMPs to be designed to ensure, with
respect to targeted beneficiaries described in section 1860D-
4(c)(2)(A)(ii) of the Act, that covered Part D drugs are appropriately
used to optimize therapeutic outcomes through improved medication use
and to reduce the risk of adverse events. These requirements are
codified at Sec. 423.153(d) of the Part D regulations.
Section 423.153(d)(1) requires each Part D sponsor to establish a
MTMP that is designed to ensure that covered Part D drugs (as defined
in Sec. 423.100) prescribed to targeted beneficiaries are
appropriately used to optimize therapeutic outcomes through improved
medication use; designed to reduce the risk of adverse events for
targeted beneficiaries; furnished by a pharmacist or other qualified
provider; and allowed to distinguish between services provided in
ambulatory and institutional settings. Section 423.153(d)(2) defines
targeted beneficiaries as enrollees who have multiple chronic diseases,
are taking multiple Part D drugs, and are likely to incur annual costs
for covered Part D drugs that exceed a predetermined level as specified
by the Secretary.
In the original Part D final rule (that is, the January 28, 2005
final rule), we did not identify specific medication therapy management
(MTM) requirements beyond those contained in the Act because there was
insufficient industry experience and no widely accepted standard
practices for MTMPs. Moreover, we also believed that in the future
outcomes measures would provide the best method for evaluating MTMPs
and promoting the most effective programs. However, given the
experience garnered from the first few years for the Part D program,
and as we still await further development of MTMP outcomes measures
that can serve the Part D program, we have determined that it necessary
to have more specific Part D MTMP requirements for enrollment methods,
targeting procedures, and MTM services. Accordingly, in the 2010 Call
Letter, we included policy guidance regarding the implementation of
MTMPs. This policy guidance reflects common practices among Part D
MTMPs that were derived from our extensive review of MTMP applications,
plan-reported data, exploratory research on MTM, informal interviews
with Part D sponsors, and other relevant literature and data. In this
rule, we are proposing to codify this policy guidance in Sec.
423.153(d). We believe the proposed changes to the MTMP requirements
will promote greater consistency across the Part D program that will
allow for better evaluation and comparison of MTMPs when outcomes
measures become available.
Specifically, in accordance with sections 1860D-4(c)(1)(C) and
1860D-4(c)(2) of the Act, we propose to add the following requirements:
Part D sponsors shall use only an opt-out method for MTMP
enrollment;
Part D sponsors shall target beneficiaries for MTMP
enrollment at least quarterly during each plan year; and
Part D sponsors shall offer a minimum level of MTM
services for each beneficiary enrolled in the MTMP that includes
interventions for both, beneficiaries and prescribers, annual
comprehensive medication reviews, and quarterly targeted medication
reviews.
In addition, we are proposing to revise the requirements for
targeting beneficiaries who have multiple chronic diseases and take
multiple Part D drugs by specifying the maximum number of multiple
chronic diseases and multiple Part D drugs that Part D sponsors may
establish as a minimum threshold for satisfying their MTMP targeting
criteria.
We propose adding Sec. 423.153(d)(1)(v) to require Part D sponsors
to enroll beneficiaries in their MTMPs using an opt-out method of
enrollment only. Under this proposal, a beneficiary that meets the
targeting criteria would be auto-enrolled into the MTMP and considered
to be enrolled unless the he or she declines enrollment. This opt-out
method of enrollment is currently the preferred method of enrollment
among Part D sponsors, used by approximately 85 percent of current
MTMPs, and has increased enrollment of targeted beneficiaries into
MTMPs. As a result, we believe that requiring an opt-out method of
enrollment will provide more beneficiaries with access to MTM services.
We also propose adding Sec. 423.153(d)(1)(vi) to require Part D
sponsors to target beneficiaries for enrollment in the MTMP at least
quarterly during each plan year. Currently, more than 95 percent of
Part D sponsors target beneficiaries for enrollment in their MTMPs on a
daily, weekly, monthly, or quarterly basis. We believe that making this
a requirement for all Part D sponsors will allow more Medicare
beneficiaries to have access to the MTMP earlier in the year. Part D
sponsors also can promote continuity of care by identifying current
MTMP enrollees towards the end of a plan year who will qualify for MTMP
enrollment in the next plan year. This practice would allow the Part D
sponsors to have such beneficiaries enrolled in their MTMP at the
beginning of the next plan year.
We also propose adding Sec. 423.153(d)(1)(vii) to require Part D
sponsors to offer a minimum level of MTM services for each beneficiary
enrolled in the MTMP that includes interventions for both beneficiaries
and prescribers; annual comprehensive medication reviews; and quarterly
targeted medication reviews. In 2008, approximately 90 percent of Part
D MTMPs provided interventions targeting both beneficiaries and
prescribers. Our proposed requirement that MTMPs include interventions
for both beneficiaries and prescribers does not mean, however, that all
interventions must target both the beneficiary and the prescriber.
Instead, Part D sponsors must determine if the beneficiary, prescriber,
or both should be targeted for any specific intervention or
interventions. Prescriber interventions may be passive (for example,
faxed or mailed) and should be targeted to resolve potential
medication-related issues or other opportunities to optimize medication
use.
Furthermore, while Part D sponsors may incorporate passive or
``lower touch'' beneficiary interventions, such as education
newsletters, drug utilization review (DUR) edits, refill reminders, and
medication lists into their MTMPs, where appropriate, these passive
interventions cannot be the sole offerings. Part D sponsors must also
offer MTM services to beneficiaries that include an interactive
component, continued monitoring, and follow-up when necessary. In
addition, Part D sponsors should have procedures in place to follow-up
with beneficiaries that do not respond to initial offers for MTM
services.
Under this proposal, Part D sponsors would also be required to
offer an annual comprehensive medication review (CMR) to all targeted
beneficiaries. With the exception of targeted beneficiaries in long-
term care settings, the CMR would be required to include an
interactive, person-to-person consultation performed by a pharmacist or
other qualified provider. A CMR is a review of a beneficiary's
medications including prescription medications,
[[Page 54693]]
over-the-counter (OTC) medications, herbal therapies and dietary
supplements intended to aid in assessing medication therapy, and
optimizing patient outcomes. The review of the beneficiary's medication
may be performed concurrently with the beneficiary consultation or
prior to the consultation by a qualified provider or computerized
clinical algorithm. The consultation must be a real-time interaction
that is provided either face-to-face or via an alternative interactive
method such as the telephone. Finally, the beneficiary must receive a
written summary of the CMR and consultation that may include such
things as a medication record, reconciled medication list, action plan,
or recommendations for monitoring, education, or self management.
In addition to the annual CMR, under this proposal, Part D sponsors
would be required to perform targeted medication reviews for all
beneficiaries enrolled in the MTMP no less often than quarterly. These
targeted reviews would focus on assessing medication use since the CMR
and determining if any issues that were identified during the CMR
remain unresolved or if any new drug therapy issues have arisen. The
Part D sponsor must assess the findings of these reviews to determine
if a follow-up intervention is necessary with either the prescriber or
beneficiary. Unlike the CMR, these interventions are not required to be
interactive although it should be considered when appropriate.
Consistent with section 1860D-4(c)(2)(ii)(A) of the Act, Part D
sponsors must target beneficiaries who have multiple chronic diseases
for MTM services. In the original rule, we left the determination of
``multiple'' and ``chronic disease'' entirely to the Part D sponsors.
In 2008, approximately 85 percent of Part D MTMPs targeted
beneficiaries with a minimum of two or three chronic diseases. Based
upon our experience with Part D MTMPs since the beginning of the Part D
program, we issued guidance in 2009 to clarify the range and types of
diseases that will satisfy this requirement beginning in 2010.
In this rule, we propose to revise Sec. 423.153(d)(2)(i) to
specify that the minimum number of multiple chronic diseases for
targeted beneficiaries be no more than three. Under the proposed
revision to Sec. 423.153(d)(2)(i), we would require Part D sponsors to
define the minimum threshold for ``multiple'' for purposes of targeting
beneficiaries as no more than three chronic diseases. Therefore, Part D
sponsors would be permitted to set their minimum threshold at two or
three and target beneficiaries with at least two chronic diseases or at
least three chronic diseases.
Under this proposed revision to Sec. 423.153(d)(2)(i), Part D
sponsors may continue to target any chronic diseases or limit MTMP
enrollment to enrollees having specific chronic diseases. However,
beginning in 2010, CMS guidance specifies, at a minimum, that Part D
sponsors should target at least four of seven core chronic diseases
that we have identified as prevalent in the Medicare population based
upon the analysis of the RxHCC Risk Adjustment model, posing a risk to
the Medicare Trust Fund, and reflecting the most common diseases
targeted by Part D MTMPs in general. The seven chronic diseases are
hypertension, heart failure, diabetes, dyslipidemia, respiratory
disease, bone disease-arthritis, and mental health diseases such as
depression, schizophrenia, and bipolar disorder. In determining whether
a beneficiary meets the minimum number of multiple chronic diseases to
be targeted for MTM services, a beneficiary could have any combination
of the chronic diseases targeted by the Part D sponsor.
Consistent with section 1860D-4(c)(2)(ii)(II) of the Act, plan
sponsors must target beneficiaries taking multiple covered Part D drugs
for MTM services. In the original Part D rule, we left the
determination of ``multiple'' entirely to the Part D sponsors. Based
upon our experience and extensive analysis of the Part D MTMPs since
the beginning of the Part D program, we issued guidance in 2009 to
clarify the range that plan sponsors should consider in order to
satisfy the statutory requirement beginning in 2010. Specifically, we
noted that Part D sponsors should define ``multiple'' for purposes of
satisfying this requirement as no more than eight Part D drugs as the
minimum number of multiple Part D drugs. Consistent with this policy
guidance, we now propose to revise Sec. 423.153(d)(2)(ii) to specify
that no more than eight multiple Part D drugs be established as a
minimum for targeted beneficiaries. Therefore, Part D sponsors would be
permitted to set this minimum threshold for MTMP eligibility at any
number equal to or between two and eight.
Under section 1860D-4(c)(2)(ii)(III) of the Act, plans must target
beneficiaries that are likely to incur annual costs for covered Part D
drugs that exceed a level specified by CMS. In the 2010 Call Letter, we
specified a new, lower three thousand dollar threshold. Moving forward,
we believe that it makes more sense to establish a dollar threshold
based upon a benchmark that is tied to the Part D benefit. We believe
that the initial coverage limit (ICL) for the Part D defined standard
benefit provides a logical benchmark for the MTMP because it ensures
that Part D sponsors will always be able to target enrollees at risk of
entering the coverage gap. Accordingly, in this rule, we propose to
revise Sec. 423.153(d)(2)(iii) to specify that targeted beneficiaries
must be likely to incur costs for covered Part D drugs that exceed the
ICL for the Part D defined standard benefit for the applicable Part D
plan year.
6. Formulary Requirements--Development and Revision by a Pharmacy and
Therapeutics Committee (Sec. 423.120)
Section 1860D-4(b)(3)(A) of the Act requires Part D sponsors to use
a pharmacy and therapeutics (P&T) committee to develop and review the
formulary if the Part D sponsor uses a formulary. In developing and
reviewing the formulary, section 1860D-4(b)(3)(B) of the Act requires
the P&T committee to base clinical decisions on the strength of
scientific evidence and standards of practice, including accessing
peer-reviewed medical literature, such as randomized clinical trials,
pharmacoeconomic studies, outcomes research data, and on such other
information as the committee determines to be appropriate. The P&T
committee must also consider whether the inclusion of a particular Part
D drug in a formulary or formulary tier has any therapeutic advantages
in terms of safety and efficacy. We codified these requirements at
Sec. 423.120(b)(1).
In the preamble to the January 28, 2005 final rule (70 FR 4193) and
subsequent formulary guidance, we distinguished between the roles of
the P&T committee in determining which drugs are placed on a formulary
versus the application of utilization management tools that are applied
to the drugs placed on the formulary. Specifically, we said that the
P&T committee recommendations regarding which Part D drugs are placed
on a formulary are binding on the Part D sponsor while recommendations
regarding utilization management tools such as prior authorization
(PA), step therapy, and quantity limits are advisory only and not
binding on the Part D sponsor. We made this distinction because we
believed that the placement of a drug on the formulary was the primary
clinical decision in developing a formulary while the application of
utilization management tools, although clinically justified, required
the consideration of additional
[[Page 54694]]
financial and benefit design criteria that went beyond the scope of the
P&T committee role. Consequently, we believed it was only necessary for
the P&T committee to review for clinical appropriateness Part D sponsor
policies that guide utilization management processes and codified this
requirement in Sec. 423.120(b)(vi).
We have gained a better understanding of the formulary development
process since the beginning of the Part D program and now recognize
that the application of PA criteria, step therapy, and quantity limits
are as important to the clinical soundness of a formulary as the drugs
that are included. Access to Part D drugs may be influenced as much by
the application of PA criteria, step therapy requirements, or quantity
limit restrictions as it can be by exclusion of a Part D drug from a
Part D formulary. For example, one formulary could list twice as many
drugs as another formulary but if all the additional drugs on the
second formulary are subject to PA requirements, overall access to Part
D drugs may be the same under both formularies. For this reason, our
formulary review process has not been limited to evaluating the number
and types of drugs on Part D formularies but also includes the review
of the specific PA criteria, step therapy requirements, and quantity
limit restrictions that are applied within the Part D formularies.
Therefore, in accordance with section 1860D-4(b)(3)(A) and (b)(3)(B) of
the Act, we propose adding new paragraph Sec. 423.120(b)(1)(ix) to
require Part D P&T committees to review and approve all clinical PA
criteria, step therapy protocols, and quantity limit restrictions
applied to each covered Part D drug.
PA criteria, step therapy requirements, and quantity limits
directly affect beneficiary access to formulary drugs. Because P&T
committees must review and approve all drugs before they may be added
to a formulary, we also believe it is necessary that all PA criteria,
step therapy protocols, and quantity limits be approved by P&T
committees prior to their application to formulary drugs. We continue
to recognize that the decision to apply such utilization management
tools is not based solely upon clinical considerations and, therefore,
remains the responsibility of the Part D sponsors. However, we believe
this new requirement adds a necessary beneficiary protection by
ensuring that independent clinical experts have reviewed and approved
each application of these utilization management tools for clinical
appropriateness. It is our understanding that this is standard practice
for P&T committees, and therefore, do not believe this requirement
creates an additional burden.
Finally, we do not believe it is necessary for P&T committees to
review and approve administrative PA criteria such as those used to
make ``B vs. D'' determinations. Only PA criteria that require clinical
information and justification require the review and approval of the
P&T committee.
7. Generic Equivalent Disclosure Under Part D (Sec. 423.132)
Section 1860D-4(k)(1) of the Act requires a Part D sponsor to have
each of their network pharmacies inform enrollees of any difference
between the price of the drug(s) they are purchasing via the plan and
the price of the lowest priced therapeutically equivalent generic
product available to the pharmacy. Section 1860D-4(k)(2)(A) of the Act
requires that this information be provided at the time of purchase
except for purchases delivered by mail when it must be provided at the
time of delivery. Under section 1860D-4(k)(2)(B) of the Act the
Secretary has the authority to waive this requirement for certain
entities in certain cases as specified in Sec. 423.132(c).
In Sec. 423.132(d), we specified that for enrollees in long-term
care pharmacy settings, the timing portion of the disclosure
requirement (that is, the requirement that the enrollee be informed at
time of purchase) may be waived. Accordingly, sponsors are required to
disclose the differential (if any) in pricing for long-term care
network pharmacies by requiring that this information be provided in
the explanation of benefits (EOB).
Over time, we have heard from sponsors, as well as pharmaceutical
benefit managers on behalf of sponsors, that providing this information
in the EOB is unworkable from a plan operational standpoint. Primarily,
this is due to the fact that information on generic pricing can--and
often does--vary day to day; thus, sponsors cannot accurately reflect
the differential within a monthly EOB. Additionally, sponsors have
pointed out that they would need to program the generic equivalent
prices for all drugs specific to a particular LTC's contracted
reimbursement rate into their systems to populate electronically on the
EOB, which represents a significant programming and financial burden.
We also believe the generic equivalent information provided on the
EOB is of no value to the long-term care beneficiary. In the LTC
setting, the beneficiary receives the medication after the prescription
drug claim has been submitted by the LTC pharmacy and processed by the
Part D sponsor. Therefore, the ability of the beneficiary to make
changes at the point-of-service based upon information provided on the
EOB is simply not feasible. Unlike the enrollee standing at the retail
pharmacy counter at time of service, enrollees in long-term care
institutions have limited opportunities to affect a switch to a lower-
priced generic substitute before dispensing. Because of this
limitation, we have not enforced this regulatory requirement and have
not included model language that addresses this requirement in the EOB.
For the aforementioned reasons, we are proposing to revise Sec.
423.132(c) by adding long-term care network pharmacies to the list of
entities for which from the public disclosure requirement is waived,
and revise Sec. 423.132(d) to remove the requirement that long-term
care network pharmacies provide the pricing differential information in
enrollees' EOBs.
8. Access to Covered Part D Drugs (Sec. 423.120)
The statute at sections 1860D-4(b)(1)(C) and 1860D-21(c)(1) of the
Act establishes the standards for convenient access for network
pharmacies for PDP sponsors and other Part D sponsors. This section of
the statute requires that the sponsor of a PDP shall secure the
participation in its network of a sufficient number of pharmacies that
dispense (other than by mail order) drugs directly to patients to
ensure convenient access consistent with the rules established by the
Secretary, and as long as they are no less favorable than the TRICARE
pharmacy access standards.
A TRICARE contractor is required to maintain a pharmacy network
sufficient to meet the following minimum beneficiary access standards
on an overall basis--Urban: a pharmacy within 2 miles of 90 percent of
the beneficiaries; Suburban: a pharmacy within five miles of 90 percent
of the beneficiaries; and Rural: a pharmacy within fifteen miles of 70
percent of the beneficiaries. We adopted into regulation these
standards, but instead of specifying them at the contract or PDP
sponsor level, erroneously established them at the plan level.
Specifically, in Sec. 423.120(a) of the regulation, which describes
the requirements to assure pharmacy access, we inadvertently used the
term ``plans'' instead of the correct terminology of PDP sponsor or
other Part D sponsors. This error is problematic when considering the
definitions outlined in
[[Page 54695]]
Sec. 422.2 (for MA) and Sec. 423.4 (for Part D) because the term
``plan'' is intended to mean a specific benefit package offered to
beneficiaries living in a geographic area. For any given service area,
Part D sponsors frequently offer multiple plans under one contract with
CMS, and any given plan may be offered within a subset of the Part D
sponsor's total service area.
Our intention has always been to ensure adequate access to Part D
covered drugs at sponsor level, not at the plan level. For one, the
statute explicitly states that access should be ensured at the PDP
sponsor level. Further, assessing adequacy of pharmacy access is one of
the most critical steps in the Part D application review process and
determining access to Part D covered drugs at the plan level is not
possible during application review. This is because plan service areas
(potentially subsets of Part D sponsor or organization service areas)
are not determined until the time of the bid submission, which occurs
after applications are reviewed. However, sponsor service areas are
known at the time of application submission. Our proposed correction
would align our regulations with the intent of the statute with regard
to the level of analysis that should be conducted for access to Part D
drugs, namely at the Part D sponsor level, rather than at the plan
level.
We note that as a practical matter and consistent with the current
drafting of the regulation, if the Part D sponsor's entire service area
is larger than one State, we will continue to ensure access at no
greater than the State level for multi-state regions. This approach is
necessary to ensure that pharmacies are not unduly clustered in one
part of the region. Accordingly, based on the preceding rationale, we
are proposing to revise the text of the regulation that discusses
pharmacy access in Sec. 423.120(a)(10 through (a)(7) to refer to PDP
sponsors, MA organizations offering local and regional MA-PD plans, and
cost contracts rather than plans. Additionally, since Sec. 423.120(a)
(defining access requirements for Part D drugs) references a definition
provided in Sec. 423.112(a) (establishment of PDP service areas), it
is necessary to correct the terminology in that location as well.
Therefore, we propose to revise Sec. 423.112(a) to specify the
establishment of service areas for PDP sponsors.
9. Standard Timeframe and Notice Requirements for Coverage
Determinations Under Part D (Sec. 423.568)
Section 1860D-4(g) of the Act requires Part D plan sponsors to
establish procedures for processing requests for coverage
determinations and redeterminations. Those procedures must apply to
Part D plan sponsors in the same manner as such requirements apply to
MA organizations with respect to organization determinations and
reconsiderations. In accordance with section 1860D-4(g) of the Act,
Sec. 423.568 establishes the standard timeframe and notice
requirements for coverage determinations. However, that section does
not explain the method for filing such requests. We originally omitted
these instructions from Sec. 423.568 because Sec. 422.568 does not
dictate the method for filing requests for standard organization
determinations. However, elsewhere in this rule, we are proposing to
revise Sec. 422.568 of the MA regulations by adding a new paragraph
(a) clarifying the method for filing requests for standard organization
determinations. The proposal requires MA organizations to accept
standard organization determination requests orally and in writing,
except for standard requests for payment, which must be submitted in
writing unless the MA organization adopts a voluntary policy of
accepting oral payment requests. Because section 1860D-4(g) of the Act
requires Part D plan sponsors to meet the requirements for Part D
coverage determinations in the same manner as such requirements apply
to MA organizations for organization determinations, we propose to make
a corresponding change to Sec. 423.568 and require Part D plan
sponsors to accept standard coverage determination requests orally and
in writing. This proposed change would not apply to standard requests
for payment, which must be submitted in writing unless the plan sponsor
adopts a policy for accepting those requests orally.
In addition to this technical change, we propose to revise the
timeframe for a Part D plan sponsor to notify an enrollee of a payment
determination in Sec. 423.568(b). The regulation currently requires
that a plan sponsor notify the enrollee of its determination no later
than 72 hours after receipt of the request. We propose to revise the
provision to require Part D plan sponsors to process requests for
payment no later than 14 calendar days after receipt of the request,
and also make payment no later than 14 calendar days after receiving
the request when a plan sponsor's decision is partially or fully
favorable.
As noted above, section 1860D-4(g) of the Act requires Part D plan
sponsors to meet the requirements for Part D coverage determinations in
the same manner as such requirements apply to MA organizations with
respect to organization determinations. The MA regulations under Sec.
422.568 distinguish between how requests for benefits not yet received
and requests for payment are processed by MA plans. The rules
pertaining to requests involving benefits not yet received are
contained in paragraph (a), while paragraph (b) contains the rules for
processing requests for payment. In accordance with section 1860D-4(g)
of the Act, this distinction was carried over to Part D in current
Sec. 423.568(a) and (b).
We received a comment on the Application of Certain Appeals
Provisions to the Medicare Prescription Drug Appeals Process proposed
rule (73 FR 14342), published in the March 17, 2008 Federal Register,
recommending that we revise Sec. 423.568(b) of the existing
regulations by lengthening the timeframe for making standard coverage
determinations involving requests for reimbursement submitted by
enrollees. Although the comment was outside the scope of the Part D
appeals-related proposals in the March 17, 2008 proposed rule, we
believe the commenter's suggestion merits consideration, as discussed
in detail below.
The commenter contends that the existing 72-hour requirement for
making a determination on an enrollee's request for reimbursement
constitutes an unprecedented and overly burdensome timeframe, and the
only way a Part D plan sponsor can meet the regulatory timeframe is by
making an adverse coverage determination (that is, deny the request for
payment). Thus, the existing requirement in effect forces an enrollee
into the Part D appeals process, even though in the vast majority of
such situations, the claim will eventually be paid within the 30-day
timeframe for effectuating a coverage determination. The commenter
recommended that we revise Sec. 423.568(b) to extend the timeframe for
making a coverage determination on a request for payment from 72 hours
to 30 days.
As the commenter indicates, Sec. 423.568(b) sets forth the
coverage determination and notification requirements in situations
(generally involving non-network pharmacies) where an enrollee has
already obtained a drug and subsequently makes a request to the Part D
plan sponsor for payment. Existing Sec. 423.568(b) requires a Part D
plan sponsor to make this coverage determination and notify the
enrollee of its determination no later than 72 hours after receiving
such a payment request. Although the regulations do not specify a
timeframe for making payment to the enrollee when the plan determines
the drug in
[[Page 54696]]
question should be covered, plans are directed by manual guidance that
such payment should be made within 30 days of the request. We note that
the 30-day effectuation timeframe comports with the established
requirements in Sec. 423.636 for effectuating redeterminations or
reconsiderations involving requests for payment. It also generally
parallels the prompt payment provisions that apply under Sec. 422.520
and Sec. 422.568 of the MA program.
The intent of these provisions was to ensure enrollees receive a
prompt response to requests for payment while still giving plans a
reasonable amount of time to process the payment. However, in practice,
we agree that the 72-hour timeframe for making a coverage determination
in these situations may be quite difficult for Part D plan sponsors to
meet. Requests for reimbursement are generally submitted by mail in
paper form, and must be identified as reimbursement requests,
transferred from the mailroom to the reimbursement processing
department, and then manually entered and adjudicated by Part D plan
sponsors outside of the usual online real-time electronic claims
processing procedures. We also note that under these circumstances,
information that Part D plan sponsors need to make meaningful
determinations with respect to a request (which is readily available on
electronic claims) may be missing from the member-submitted paper
claim. Finally, the Part D plan sponsor must notify the enrollee of its
determination within 72 hours. Thus, as the commenter asserts, in
practice the only way to meet the 72-hour coverage determination
timeframe often may be to make a negative coverage determination, at
least initially, which is clearly not in the best interests of the
enrollee. This initial negative determination can be particularly
confusing to an enrollee in situations where a Part D plan sponsor
subsequently determines that the reimbursement request should be paid
and remits payment to the enrollee, frequently within a few days of the
initial negative determination.
As previously stated, the current regulations do not establish a
timeframe for effectuating payment, and our manual guidance establishes
a 30-day timeframe for doing so. Thus, even when a Part D plan sponsor
completes the process above and issues a coverage determination within
72 hours, it is under no obligation to make payment any sooner than 30
calendar days after receiving the request. While we recognize that
receiving Part D coverage decisions as soon as possible is important,
an enrollee who is requesting reimbursement already has the needed
prescription drug in hand. Thus, we believe it is more important for
him or her to receive the actual payment as soon as possible, rather
than simply a determination as to whether payment will or will not be
made.
Therefore, we believe it would be in the best interests of
enrollees to modify the requirements of Sec. 423.568(b) by extending
the timeframe for making coverage determinations with respect to
requests for payment in such a way as to avoid confusion but also
ensure that enrollees receive payment as soon as possible. Based on our
experience and previous discussions with Part D plan sponsors, we have
determined that Part D sponsors generally are capable of making such
payments within a 14-day period following receipt of a reimbursement
request, as opposed to the 30-day period recommended by the commenter.
Therefore, we propose revising Sec. 423.568(b) to require Part D plan
sponsors to take the following actions: (1) Make a coverage
determination on a request for payment and notify the enrollee of its
determination no later than 14 calendar days after receipt of a request
for reimbursement, and (2) for favorable coverage determinations, make
payment no later than 14 calendar days after receipt of the
reimbursement request. We believe these changes will establish a more
reasonable standard for the adjudication of paper claims, as well as
ensure faster payments to enrollees who submit these requests. Thus,
this change will better serve both plans and their members. As a result
of changes proposed elsewhere in this rule, if adopted, these new
requirements regarding the timeframe for processing requests for
payment would appear at Sec. 423.568(c) of the regulations.
Our last proposed change to Sec. 423.568 involves adding new
paragraphs (d) and (e), which will explain the form and content of
favorable coverage determination decisions. In Sec. 423.568(d), we
propose requiring plan sponsors to send written notice of fully
favorable decisions to enrollees. We also propose to allow plan
sponsors the option of providing the initial notice orally so long as a
written follow-up notice is sent to within 3 calendar days of the oral
notification. In Sec. 423.568(e), we propose to require notice of
fully favorable decisions to include the conditions of the approval in
a readable and understandable manner.
Adding further requirements regarding the form and content of
favorable determination decisions to the Part D regulations is
necessary because prescription drugs are often provided to
beneficiaries on a recurring basis (unlike most MA services which are
generally provided to beneficiaries only once), and requiring plans to
provide the terms of an approval in writing helps ensure continuity of
care for Medicare beneficiaries who receive prescription drugs under
Part D. The prescription may be subject to prior authorization or some
other rule which needs to be met before a prescription can be refilled.
Also, a prescription may only be approved for a specific period of time
and refills may not be authorized. In those situations, it is important
for the enrollee to know the conditions (for example, duration,
limitations, and coverage rules for refills) of the approval before he
or she needs to refill the prescription, so he or she can work with his
or her physician to secure prior approval for additional refills,
obtain an exception, or switch to an appropriate alternative
prescription if necessary. Otherwise, the enrollee may experience a
break in coverage if he or she attempts to fill a prescription and is
told for the first time at the pharmacy that the prescription cannot be
filled because it is subject to a coverage rule or additional refills
have not been authorized. We believe the proposed changes to the notice
requirements for favorable coverage determinations will help to ensure
that enrollees and their physicians or other prescribers have the
information they need in order maintain the continuity of prescription
drug treatment.
10. Expediting Certain Coverage Determinations (Sec. 423.570)
Consistent with the proposed revisions to Sec. 423.568, we propose
to make a technical change to Sec. 423.570 by revising the cross
reference to Sec. 423.568(a) to Sec. 423.568(b).
11. Timeframes and Notice Requirements for Expedited Coverage
Determinations (Sec. 423.572)
In accordance with section 1860D-4(g) of the Act, Sec. 423.572
establishes the timeframe and notice requirements for expedited
coverage determinations. Section 423.572(c)(1) requires Part D plan
sponsors to include the specific reasons for any expedited decision
(whether favorable or adverse) in its decision notice, and paragraph
(c)(2) addresses the content of adverse decision notices. However,
Sec. 423.572 does not include any content requirements for favorable
expedited decisions. Consistent with our rationale for adding form and
content requirements for favorable standard coverage determination
decisions, we believe form and content requirements
[[Page 54697]]
for favorable expedited coverage determinations are important
beneficiary protections that will help to ensure that enrollees are
able to maintain continuity in their prescription drug treatment.
Therefore, we propose to revise Sec. 423.572(b) by requiring plan
sponsors to send written notice of fully favorable expedited decisions
to enrollees, and allowing plan sponsors the option of providing the
initial notice orally so long as a written follow-up notice is sent to
the enrollee within three calendar days of the oral notification. We
also propose to add paragraph (c)(2), which requires notice of a fully
favorable expedited decision to provide the conditions of the approval
in a readable and understandable manner.
We are also proposing in Sec. 423.572(c)(2)(i) to require plan
sponsors to issue adverse expedited coverage determination decisions
using CMS approved language in readable and understandable form.
Section 423.568(d) requires plan sponsors to use approved notices for
adverse standard coverage determinations, and a parallel instruction
for adverse standard and expedited coverage determinations is contained
in subregulatory guidance. We developed Form CMS-10146 for use when
plan sponsors issue adverse coverage determinations and, in our
subregulatory guidance, we instruct plan sponsors to use that form when
issuing adverse standard and expedited coverage determination
decisions. Our proposed change in Sec. 423.572(c)(2)(i) would
reconcile this discrepancy in the regulations. We note that the
proposed change does not create an additional burden for plan sponsors
because sponsors already submit Form CMS-10146 to CMS for approval for
adverse standard coverage determination decisions and, consistent with
our subregulatory guidance, we expect plan sponsors to also use Form
CMS-10146 for adverse expedited coverage determination decisions.
12. Clarify Novation Agreements Under Part D (Sec. 423.551)
Section 1860D-12(b) (1) of the Act provides the Secretary with the
authority to enter into contracts with PDP sponsors. Additionally,
section 1860D-12(b)(3)(B) of the Act grants the Secretary the authority
to amend or modify these contracts in accordance with the furtherance
of the purpose of the Act.
Consistent with the above-stated authority, we have implemented
contracting regulations including Sec. 423.551 of the Part D
regulations, which provide for the novation of a PDP sponsor contract
in the event of a change of ownership involving a PDP sponsor. A change
of ownership prompting the execution of a novation agreement is
appropriate when a PDP sponsor is acquired or when it no longer can or
wants to continue to participate in the PDP program. In the latter
instance, a change of ownership can provide both the holder of the
contract and CMS with an opportunity to transfer the ownership of the
contract to a different entity with little or no disruption to the
enrolled beneficiaries when the original entity faces difficulties (for
example., financial, administrative) in operating its PDP contract. A
change in ownership of the PDP line of business, which is recognized by
CMS when we agree to a novation of the existing PDP sponsor contract,
in this instance promotes the efficient and effective administration of
the PDP program.
However, over the past few years several PDP sponsors have
requested CMS approval of transactions that involve the sale of a piece
of the sponsor's contract with CMS or less than the full line of PDP
business [all PDP contracts held by that PDP sponsor]. For example,
several PDP sponsors who have missed the LIS benchmark for a particular
region requested to novate that portion of their contract to another
PDP who met the benchmark in the region.
However, our policy goals are not served when a sponsor is simply
using the novation process to pick and choose which markets it wishes
to serve at any given time and to profit from its exit from a given PDP
region when a simple nonrenewal for that region is an option available
to the sponsor. Novations are not intended to be an instrument for
moving LIS beneficiaries when a particular sponsor has missed the
benchmark. Rather, we have a reassignment process for moving LIS
beneficiaries to sponsors who have met benchmark for the new contract
year.
Accordingly, we propose to revise Sec. 423.551 and add new
paragraph Sec. 423.551(g) to restrict the situations in which we will
agree to a PDP sponsor contract novation to those transfers involving
the selling of the sponsor's entire line of PDP business, which would
include all PDP sponsor contracts held by the legal entity. We believe
that allowing the spin-off of just one contract (when the PDP sponsor
has more than one PDP contract) or pieces of a single contract can have
a negative impact on beneficiary election rights.
We are recommending becoming more prescriptive in this area because
our experience gained over the first 4 years of the program indicates
this is necessary for the reasons stated above. The proposed change
would also create consistency between the MA program and the PDP
program, because the MA program only allows novations that include the
entire MA line of business (that is, all MA contracts held by a single
legal entity). We invite comments from sponsors and the industry about
this proposed change, and suggestions on other options which would
accomplish the same policy goals.
13. Cost Contract Program Revisions: Appeals and Marketing Requirements
(Sec. 417.428, Sec. 417.494, Sec. 417.500, and Sec. 417.640)
Although the cost contract program authorized under section 1876 of
the Act and the health care prepayment plan (HCPP) programs authorized
under section 1833 of the Act are based on reasonable costs, these
programs have important elements in common with the MA program. As in
the case of MA coordinated care plans, and unlike original Medicare,
cost contractors authorized under section 1876 of the Act and HCPPs
employ networks of providers and deliver services through a managed
care model. However, unlike MA plans, enrollees under cost contracts
authorized under section 1876 of the Act and HCPPs are not ``locked
in'' to their plans networks, and can always receive any service
through Original Medicare if they pay original Medicare cost sharing.
In the case of cost contracts authorized under section 1876 of the
Act, the MA statute specifically recognized the parallels between
contracts authorized under section 1876 of the Act and MA contracts,
providing in section 1856(b)(2) of the Act that MA standards ``shall be
based on standards established under section 1876 to carry out
analogous provisions of such section.'' Indeed, many of the original
Part C regulations borrowed wholesale from the provisions in section
1876 of the Act and codified in Part 417. Using already established
programs as the basis for new but related programs is common practice,
one of the most recent examples of which is the Part D prescription
drug benefit program. The MMA directed that fundamental aspects of the
program, such as enrollment and payment polices, be similar to those of
the MA program.
There are several MA program requirements that we believe are
appropriate to apply to cost contracts. In the case of contracts
authorized under section 1876 of the Act, because section 1876 of the
Act contains similar statutory language to that in Part C for
[[Page 54698]]
MA contracts, this language provides clear authority to impose the same
policies to both types of contracts. We have expressly done this in
past regulations. For example, given the similarities between the
statutory language in sections 1876(c)(5) and 1852(g) of the Act, and
the procedures for an independent review entity that existed in part
417 before Part C was enacted, we revised the part 417 beneficiary
appeals regulations governing cost contract appeals authorized under
section 1876 of the Act simply to incorporate the Part C beneficiary
appeals regulations in part 422. MA contracts and cost contracts
authorized under section 1876 of the Act similarly have had largely the
same process concerning appeals of contract determinations, sanctions,
and civil money penalties (CMPs). More recently, however, these
processes have diverged, especially since the publication of final
regulations revising the contract determination, sanctions, and CMP
processes for MA organizations on December 5, 2007 (72 FR 68700 through
68741). Similarly, the marketing requirements for cost contras, which
at one time largely mirrored the MA requirements, have diverged. This
is especially true since publication of our final regulations
implementing significant changes to marketing standards, agent/broker
compensation, and other marketing changes in 2008. As a result, there
is sometimes confusion over which marketing requirements cost contract
plans must follow.
Therefore, we are proposing in this rule, under the authority under
section 1876(i)(3)(D) of the Act to impose ``other terms and
condition'' under contracts authorized by the statute that the
Secretary finds ``necessary and appropriate,'' and in implementation of
the provisions authorized by section 1876 of the Act set forth below,
to apply the following MA program requirements to cost contracts
authorized under section 1876 of the Act:
Under the authority in section 1876(i)(1) of the Act to
terminate or nonrenew contracts and the authority in section 1876(i)(6)
of the Act to impose intermediate sanctions and CMPs, the MA program
requirements on appeals processes for contract determinations and
intermediate sanctions. (To the extent that the CMP in section
1876(i)(6)(B) and (C) of the Act differ from those under Part C, the
penalty amounts under section 1876 of the Act would continue to
control); and
Under the authority in section 1876(c)(3)(C) of the Act to
regulate marketing of plans authorized under section 1876 of the Act
and ensure that marketing material is not misleading, the MA program
requirements for marketing to cost contract plans.
We discuss the above proposals for cost contracts authorized under
section 1876 of the Act in greater detail in the sections that follow.
14. Appeals Processes for Contract Determinations, Intermediate
Sanctions, and Civil Money Penalties
The policy reasons we gave in our December 2007 final rule for
revising the contract determination and appeals processes for MA plans
apply equally to cost contracts authorized under section 1876 of the
Act. By extending the MA and Part D requirements regarding these
processes to cost contracts authorized under section 1876 of the Act
and organizations that have both MA and contracts authorized under
section 1876 of the Act will also have a more efficient and clear path
for appealing contract determinations, intermediate sanctions, and
CMPs.
We are proposing to revise the following sections of the current
contract requirements provisions of Part 417 authorized at section 1876
of the Act to specify that, with respect to appeals of contract
determinations, intermediate sanctions and CMPs, cost contracts
authorized under section 1876 of the Act would follow the provisions
applicable to MA organizations at, respectively, Subpart N and Subpart
T of part 422. With respect to appeals of intermediate sanctions, we
are proposing to revise Sec. 417.500 of the cost contracts
requirements authorized under section 1876 of the Act to make these
consistent, with the exception of some CMP amount provisions, with the
sanctions processes for MA organizations. We discuss the proposed
changes below.
a. Contract Determinations (Sec. 417.492 and 417.494))
Previous to the implementation of the contract determination
requirements in the December 2007 final rule, the cost contracts
authorized under section 1876 of the Act and MA plan contract
determination requirements were very similar. Although we did not apply
the provisions of the December 2007 regulations to cost contracts
authorized under section 1876 of the Act at that time, we believe that
it makes sense to do so now for the same reasons we made changes to the
MA processes at that time.
As a result, we propose in Sec. 417.492(b)(2), concerning notice
of appeal rights, and Sec. 417.494, concerning notice of termination,
to require cost contract plans to follow the contract determination
appeal procedures under Subpart N of Part 422.
b. Civil Money Penalties (Sec. 417.500)
Currently, the regulations governing cost contracts authorized
under section 1876 of the Act do not set forth a formal process for
appealing CMPs. We propose these plans would follow the same
requirements for CMP appeals that MA organizations follow. As a result,
we propose to revise Sec. 417.500 to require cost contracts authorized
under section 1876 of the Act to follow the MA programs requirements
for appeals of CMPs at Subpart T of Part 422. The appeals process for
CMPs specified at Subpart T allows for a hearing by an Administrative
Law Judge (ALJ) and a review of the ALJ's decision by the Departmental
Appeals Board. In proposed new paragraph (c), we specify that the
amount of CMPs a cost contract may be assessed is governed by section
1876(i)(6)(B) of the Act, not by the provisions in part 422 of the MA
program regulations.
c. Intermediate Sanctions (Sec. 417.500)
Our proposed revision to the cost contracts regulations authorized
under section 1876 of the Act would ensure that these contracts follow
the same requirements for intermediate sanctions appeals specified in
Sec. 422.750 through Sec. 422.764 of the MA program regulations
(subpart O).
These sections concern--
Types of intermediate sanctions and CMPs (Sec. 422.750);
Bases for intermediate sanctions and CMPs (Sec. 422.752);
Procedures for imposing intermediate sanctions and CMPs
(Sec. 422.656);
Collection of CMPs (Sec. 422.758);
Settlement of penalties (Sec. 422.762); and
Other applicable provisions (Sec. 422.764).
As noted above, with respect to determinations of the amount of
CMPs, the provisions in section 1876(i)(6)(B) and (C) of the Act would
govern such amounts.
15. Extending MA Marketing Requirements to Cost Program Plans (Sec.
417.428)
In 2008, we published several marketing-related regulations that
significantly revised the marketing requirements for MA organizations
and Part D sponsors. In the Medicare Advantage and Prescription Drug
Benefit Programs; Final Marketing Provisions final rule, published in
the September 18, 2008 Federal Register (73
[[Page 54699]]
FR 54208 through 54223), we discussed exclusively the marketing and
established marketing standards including prohibiting soliciting door-
to-door or through other unsolicited means for Medicare beneficiaries.
A second regulation, the Revisions to the Medicare Advantage and
Prescription Drug Benefit Programs IFC, also published in the September
18, 2008 Federal Register (73 FR 54226 through 54254), added
requirements limiting agent and broker commissions. A third regulation,
the Revisions to the Medicare Advantage and Prescription Drug Benefit
Programs; Clarification of Compensation Plans IFC, published in the
November 14, 2008 Federal Register (73 FR 67406 through 67414),
clarified and augmented the agent broker requirements as specified. The
new marketing regulations resulted in the creation of a new subpart V
in parts 422 and 423. Although many of these provisions reflect or
implement statutory provisions applicable only to MA plans and Part D
plans, many of these same provisions were initially proposed under our
broad authority to regulate marketing and impose new contract terms. As
noted above, under this latter authority, we propose to amend Sec.
417.428, which governs 1876 cost contract program marketing
requirements, to require cost contract plans to follow the MA marketing
requirements in Sec. 422.2260 et.seq. (Subpart V). We discuss the
proposed marketing changes in the sections below.
a. Definitions Concerning Marketing Materials (Sec. 422.2260)
We are proposing that cost contracts authorized under section 1876
of the Act follow the same standards as MAOs under Sec. 422.2260.
Thus, cost contract plan marketing materials would include any
materials which--
Promote the cost contract, or any cost contract plan
offered by the cost contract;
Inform Medicare beneficiaries that they may enroll, or
remain enrolled in, a cost contract plan offered by the cost contract;
Explain the benefits of enrollment in a cost contract
plan, or rules that apply to enrollees; and
Explain how Medicare services are covered under a cost
contact plan, including conditions that apply to such coverage.
b. Review and Distribution of Marketing Materials (Sec. 422.2262)
We propose that cost contracts authorized under section 1876 of the
Act plan program marketing materials be subject to the same marketing
review guidelines and timelines as MA plans at Sec. 422.2262. While
section 1876(c)(3)(C) of the Act, like section 1851(h) of the Act,
provides that marketing materials must be provided to CMS for review
prior to use, and generally provides that such materials may be used
after 45 days if we do not disapprove them, section 1876(c)(3)(C) of
the Act does not include the shorter, 10-day timeframe that applies
under section 1851(h)(5) of the Act in the case of marketing materials
using model language. However, we believe that as long as material is
submitted to CMS prior to use, we can authorize use by an earlier
timeframe than that provided for under the applicable statute, or for
use under conditions established by CMS for ``deemed'' approval under
the file and use policy or as discussed in section II.G.15.d. of this
proposed rule. Therefore, notwithstanding the differences in statutory
language between sections 1876(c)(3)(C) and 1851(h) of the Act, we
propose that the part 417 marketing regulations be revised to provide
that cost contracts plans authorized under section 1876 of the Act
submit all such marketing materials to CMS at least 45 days before the
date planned for distribution (10 days if plans use CMS model language,
without any modifications), and that file and use materials, as
designated by CMS under the MA marketing regulations, may be released 5
days following their submission to CMS.
c. Guidelines for CMS Review (Sec. 422.2264)
In our proposal to apply the same standards to cost contract plans
as currently applied to MAOs at Sec. 422.2264, cost contractors
authorized under section 1876 of the Act would be required to comply
with MA regulations that specify the information that cost contract
plans must include in marketing materials, and specify that the cost
contract plan must notify the general public concerning the plan's
enrollment period. Under section 1876(i)(3)(D) of the Act, we also
propose that in markets with a significant non-English speaking
population, cost contract plans be required to provide materials in the
language of these individuals.
d. Deemed Approval (Sec. 422.2266)
We propose to specify that if we have not disapproved the
distribution of marketing materials or forms submitted by a cost
contract plan in an area, we are deemed not to have disapproved the
distribution in all other areas covered by the cost contract plan and
cost contract except with regard to any portion of the material or form
that is specific to the particular area, as provided under Sec.
422.2266.
e. Standards for MA Organization Marketing (Sec. 422.2268)
MA marketing standards we propose to extend to cost contract plans
include the following provisions at Sec. 422.2268:
Plans may not offer gifts to potential enrollees, unless
the gifts are of nominal (as defined in the CMS Marketing Guidelines)
value, are offered to all potential employees without regard to whether
or not the beneficiary enrolls, and are not in the form of cash or
other monetary rebates.
Plans may not market any health care-related product
during a marketing appointment beyond the scope agreed upon by the
beneficiary, and documented by the plan, prior to the appointment.
Plans may not market additional health-related lines of
plan business not identified prior to an in-home appointment without a
separate appointment that may not be scheduled until 48 hours after the
initial appointment.
Plans may not use a plan name that does not include the
plan type. The plan type should be included at the end of the plan
name.
f. Licensing of Marketing Representatives and Confirmation of Marketing
Resources (Sec. 422.2272)
As is the case currently for MAOs, we propose that cost contract
plans authorized under section 1876 of the Act, consistent with Sec.
422.2272:
Demonstrate to CMS' satisfaction that marketing resources
are allocated to marketing to the disabled Medicare population as well
as beneficiaries age 65 and over.
Establish and maintain a system for confirming that
enrolled beneficiaries have, in fact, enrolled in the plan, and
understand the rules applicable under the plan.
Employ as marketing representatives only individuals who
are licensed by the State to conduct marketing activities (as defined
in the Medicare Marketing Guidelines) in that State, and whom the cost
program has informed that State it has appointed, consistent with the
appointment process provided for under State law.
g. Broker and Agent Requirements (Sec. 422.2274)
Under section 1876(i)(3)(D) of the Act, we propose applying the MA
limits on independent agent and broker compensation at Sec. 422.2274
to 1876 cost
[[Page 54700]]
contract plans. As with MA plans, compensation would be based on a 6-
year compensation cycle. Agents and brokers would receive initial
compensation (first year of the cycle) with compensation over each of
the successive 5 years to be no more and no less than 50 percent of the
initial aggregate compensation paid for the enrollment. If an enrollee
moves to plan type distinct from the one in which he or she is
currently enrolled, the agent/broker would receive an initial
commission and the cycle would begin anew. Distinct plan types include
MA, MA-PD, PDP, and cost contract plans authorized under section 1876
of the Act.
H. Changes To Implement Corrections and Other Technical Changes
We propose six technical changes in this section outlined below.
Table 8--Changes To Implement Corrections and Other Technical Changes
--------------------------------------------------------------------------------------------------------------------------------------------------------
Part 422 Part 423
Provision -------------------------------------------------------------------------------------------------------------------
Subpart Section Subpart Section
--------------------------------------------------------------------------------------------------------------------------------------------------------
Applications of Subpart M to Health Subpart M.............. Sec. 417.840......... N/A................... N/A.
Care Prepayment Plans.
Generic Notice Requirements......... Subpart M.............. Sec. 422.622, Sec. N/A................... N/A.
422.626.
Revision to Definition of Gross N/A.................... N/A.................... Subpart G............. Sec. 423.308.
Covered Prescription Drug Costs.
Application Evaluation Procedures... Subpart K.............. Sec. 422.502(c) Subpart K............. Sec. 423.503(c) through (d)).
through (d).
Intermediate Sanctions.............. Subpart O.............. Sec. 422.750(a)...... Subpart O............. Sec. 423.750(a).
Basis for Imposing Intermediate Subpart O.............. Sec. 422.752......... Subpart O............. Sec. 423.752.
Sanctions and Civil Money Penalties.
--------------------------------------------------------------------------------------------------------------------------------------------------------
1. Application of Subpart M to Health Care Prepayment Plans (Sec.
417.840)
As part of the January 28, 2005 Medicare Advantage (MA) final rule,
we required cost plans (HMOs), including HCPPs, established under
section 1876 of the Act (Part E) and regulated under Part 417, to
follow the MA appeals requirements in Subpart M of Part 422. While the
MA beneficiary appeals provisions in section 1852(g) of the Act and
cost-HMO-CMP beneficiary appeals provisions in section 1876(c)(5) of
the Act do not apply to HCPP enrollees, HCPP enrollees retain the
general right to appeal Medicare coverage decisions consistent with
section 1869 of the Act. In applying the MA appeals procedures to HCPPs
by regulation, we adapted and implemented section 1869 appeal rights in
the HCPP context. The regulations implementing section 1869 for
services received on a fee-for-service basis through original Medicare
do not address the case of services furnished by an HCPP in the managed
care context.
Because HCPPs only provide Part B services, in our January 28, 2005
final rule (70 FR 4194), we limit the applicability of Subpart M to
HCPP enrollees to only those provisions affecting Part B services.
However, in doing so we inadvertently failed to include fast-track
appeal rights regarding services provided by a (Part B) comprehensive
outpatient rehabilitation facility (CORF). The proposed revision
corrects this oversight, and ensures that HCPP enrollees have access to
fast-track appeals for CORF services furnished by an HCPP. This would
also effectuate for HCPP enrollees the fast track appeal rights
provided for under section 1869 of the Act.
2. Generic Notice Delivery Requirements (Sec. 422.622 and Sec.
422.626)
We propose making two technical revisions in Sec. 422.622 and
Sec. 422.626 to ensure that the MA regulations accurately state when
plans and providers are responsible for delivering certain notices to
enrollees. Section 422.622, states that when a QIO determines that an
enrollee may remain in an inpatient setting, the MA organization must
again provide the enrollee with a copy of the Important Message from
Medicare (IM) when the enrollee no longer requires inpatient hospital
care. However, the IM form instructions make clear that the IM is
always delivered by a hospital. Similarly, in Sec. 422.626, the
current regulations make delivery of the Notice of Medicare Noncoverage
(NOMNC) the MA organization's responsibility. Again, the form
instructions for the NOMNC clearly state that the notice is to be
delivered by the provider. Accordingly, we propose replacing ``MA
organization'' with ``hospital'' in Sec. 422.622, and ``provider'' in
Sec. 422.626.
3. Revision to Definition of Gross Covered Prescription Drug Costs
(Sec. 423.308)
On January 12, 2009, we published a final rule (74 FR 1494) that
included revisions to the definition of ``gross covered prescription
drug costs'' in the Part D regulations at Sec. 423.308. In amending
Sec. 423.308, we made a technical error in the definition of ``gross
covered prescription drug costs'' (74 FR 1545) by referencing
``negotiated prices'', the prices made available to Part D
beneficiaries at network pharmacies, and not also referencing ``usual
and customary prices'', the prices for drugs purchased at out-of-
network pharmacies. When we revised the definition of ``gross covered
prescription drug costs'' our intent was to clarify that Part D
sponsors must use the amount received by the dispensing pharmacy or
other dispensing provider as the basis for determining the drug costs
that must be reported to us. The use of the term ``negotiated prices''
as defined at Sec. 423.100 (74 FR 1544) in the definition of ``gross
covered prescription drug costs'' clarifies this requirement with
regards to covered Part D drugs purchased at network pharmacies.
However, by not also referencing ``usual and customary prices'' for
covered Part D drugs purchased at out-of-network pharmacies, we
inadvertently omitted from the definition of ``gross covered
prescription drug costs'' the share of drug costs actually paid by Part
D sponsors to out-of-network pharmacies.
Section 1860D-15(b)(3) of the Act defines ``gross covered
prescription drug costs'' as ``the costs incurred under the [Part D]
plan, not including administrative costs, but including costs directly
related to the dispensing of covered part D drugs * * *.'' These costs
include costs incurred for covered Part D drugs at out-of-network
pharmacies, as well as costs incurred at network pharmacies. Therefore,
we are proposing to revise the definition of ``gross covered
prescription drug costs'' to correctly reference both ``negotiated
prices'' paid to network pharmacies and ``usual and customary prices''
paid to out-of-network pharmacies. Specifically,
[[Page 54701]]
we are proposing to replace the term ``negotiated price'' with the term
``actual cost,'' which is defined at Sec. 423.100 as ``the negotiated
price for a covered Part D drug when the drug is purchased at a network
pharmacy, and the usual and customary price when a beneficiary
purchases the drug at an out-of-network pharmacy consistent with Sec.
423.124(a).'' Thus, with this correction, the definition of gross
covered prescription drug costs would include ``the share of actual
costs (as defined by Sec. 423.100 of this part) actually paid by the
Part D plan that is received as reimbursement by the pharmacy or other
dispensing entity* * *.''
4. Application Evaluation Procedures (Sec. 422.502(c) and (d) and
Sec. 423.503(c) and (d))
Section 1857(a) of the Act provides the Secretary with the
authority to enter into contracts with MA organizations, and section
1860D-12(b) (1) of the Act provides the Secretary with the authority to
enter into contracts with PDP sponsors. Sections 422.502 and 423.503
provide the evaluation and determination procedures for approving or
denying a contract application. We are proposing two amendments to
these regulations in Sec. 422.502(c) and (d), and Sec. 423.503(c) and
(d).
Currently, Sec. 422.502(c)(3)(iii) and Sec. 423.503(c)(3)(iii)
state that if we deny the application, it gives written notice to the
contract applicant indicating the applicant's right to request
reconsideration. In the December 5, 2007 final rule, we modified the
appeal rights for initial applications and eliminated the
reconsideration process. However, in the final regulations we did not
update Sec. 422.502(c)(3)(iii) and Sec. 423.503(c)(3)(iii) to state
that the applicant has a right to request a hearing and as a result the
existing regulations incorrectly provide for a right to
reconsideration. Therefore, at Sec. 422.502(c)(3)(iii) and Sec.
423.503(c)(3)(iii) we are proposing to make a technical correction and
delete the language ``right to reconsideration'' and replace it with
``right to request a hearing''.
Sections 422.502(d) and 423.503(d) currently provide that we have
the ability to oversee the sponsoring organization's continued
compliance with the requirements and that if the sponsoring
organization no longer meets those requirements, we will terminate the
contract in accordance with Sec. 422.510 and Sec. 423.509. This
regulation is not an appropriate regulation for a section dedicated to
the evaluation and determination procedures for approving or denying a
contract application. Therefore, we are proposing to delete Sec.
422.502(d) and Sec. 423.503(d). The deletion of this language should
not in any way be interpreted as limiting our ability to oversee a
sponsoring organization's compliance with our requirements as outlined
at Sec. 422.504 and Sec. 423.505 or our ability to terminate a
contract when a sponsoring organization no longer meets requirements as
outlined in Sec. 422.510(a) and Sec. 423.509(a).
5. Intermediate Sanctions (Sec. 422.750(a) and Sec. 423.750(a))
Sections 1857(g) and 1860D-12 of the Act provide the Secretary the
ability to impose intermediate sanctions on sponsoring organizations.
Section 422.750 and Sec. 423.750 provide the types of intermediate
sanctions that we may impose. Those intermediate sanctions are
suspension of enrollment, suspension of payment, and suspension of all
marketing activities. We are proposing to make technical changes to
each intermediate sanction regulation to more accurately reflect the
statute.
We are first proposing to change Sec. 422.750(a)(1) and Sec.
423.750(a)(1), which currently state that we may impose an intermediate
sanction that requires the suspension of enrollment of Medicare
beneficiaries. This regulation, as currently written, does not
adequately reflect the statutory language which specifies that the
enrollment suspension applies to the sponsoring organization's
enrollment of Medicare beneficiaries. Therefore, we are proposing to
amend Sec. 422.750(a)(1) and Sec. 423.750(a)(1) to add language which
makes it explicit that the suspension of enrollment applies to
suspension of the sponsoring organization's enrollment of Medicare
beneficiaries .
We also are proposing to change the language of Sec. 422.750(a)(2)
and Sec. 423.750(a)(2), which currently states that we may impose a
suspension of payment to the sponsoring organization for Medicare
beneficiaries who are enrolled in the MA plan. This language does not
conform to the statutory language at section 1857(g)(2)(C) of the Act
which states suspension of payment may be imposed for individuals
enrolled after the date the Secretary notifies the organization of the
imposition of an intermediate sanction. Therefore, we are amending
Sec. 422.750(a)(2) and Sec. 423.750(a)(2) to add language that
specifically states a suspension of payment applies to Medicare
beneficiaries enrolled after the date we notify the organization of the
intermediate sanction.
We are also proposing changes to Sec. 422.750(a)(3) and Sec.
423.750(a)(3), which currently states that we may impose an
intermediate sanction that requires the suspension of all marketing
activities to Medicare beneficiaries by a sponsoring organization for
specified MA or Part D ``plans.'' The use of the words ``for
specified'' MA or Part D ``plans'' does not conform to the statutory
language that applies intermediate sanctions at the organization level.
Therefore, we are amending Sec. 422.750(a)(3) and Sec. 423.750(a)(3)
to conform to the statutory language by deleting the words ``for
specified MA or Part D plans.''
6. Basis for Imposing Intermediate Sanctions and Civil Money Penalties
(Sec. 422.752 and Sec. 423.752)
Sections 1857(g) and 1860D-12 of the Act provide a list of bases
for intermediate sanctions and civil money penalties. Existing
regulations at Sec. 422.752(a) and Sec. 423.752(a) provide a similar
list of bases for intermediate sanctions and civil money penalties.
However, the language provided in Sec. 422.752(a)(1), (3), and (4) and
Sec. 423.752(a)(1), (3), and (4) does not adequately conform to the
statutory language in section 1857(g)(1)(A), (C), and (D) of the Act,
respectively. Specifically, section 1857(g)(1) of the Act states the
Secretary may impose an intermediate sanction if it determines that the
sponsoring organization: (A) Fails substantially to provide medically
necessary items and services that are required (under law or under the
contract) to be provided to an individual covered under the contract,
if the failure has adversely affected (or has substantial likelihood of
adversely affecting) the individual; (C) acts to expel or to refuse to
re-enroll an individual in violation of the provisions of this part;
and (D) engages in any practice that would reasonably be expected to
have the effect of denying or discouraging enrollment (except as
permitted by this part) by eligible individuals with the organization
whose medical condition or history indicates a need for substantial
future medical services. To ensure accuracy, consistency and uniformity
we are making conforming changes to our regulation at Sec.
422.752(a)(1), (3), and (4) and Sec. 423.752(a)(1), (3), and (4) to
more accurately reflect the statutory language.
First, Sec. 422.752(a)(1) states that we may impose an
intermediate sanction if the sponsoring organization fails
substantially to provide, to a sponsoring organization enrollee,
medically necessary services that the organization is required to
provide (under law or under the contract) to a sponsoring organization
enrollee, and that failure
[[Page 54702]]
adversely affects (or is substantially likely to adversely affect) the
enrollee. This language is slightly different than the language
provided in the statute at section1857(g)(1)(A) of the Act. Therefore,
we are proposing to amend Sec. 422.752(a)(1) and Sec. 423.752(a)(1)
to conform with the statutory language and state that we may impose an
intermediate sanction if the sponsoring organization fails
substantially to provide medically necessary items and services that
are required (under law or under the contract) to be provided to an
individual covered under the contract, if the failure has adversely
affected (or has substantial likelihood of adversely affecting) the
individual
Second, Sec. 422.752(a)(3) and Sec. 423.752(a)(3) states that we
may impose an intermediate sanction if the sponsoring organization
expels or refuses to reenroll a beneficiary in violation of the
provisions of this part. This language does not include the word
``acts'' to expel which is mentioned in the statute at section
1857(g)(1)(C) of the Act. Therefore, we are proposing to amend Sec.
422.752(a)(3) and Sec. 423.752(a)(3) to conform with the statutory
language and state that we may impose an intermediate sanction if the
sponsoring organization ``acts'' to expel or refuses to re-enroll a
beneficiary in violation of the provisions of this part.
Third, Sec. 422.752(a)(4) and Sec. 423.752(a)(4) states that we
may impose an intermediate sanction if the sponsoring organization
engages in any practice that could reasonably be expected to have the
effect of denying or discouraging enrollment of individuals whose
medical condition or history indicates a need for substantial future
medical services. This language does not match the exact language
contained in section 1857(g)(1)(D) of the Act. Therefore, we are
proposing to amend Sec. 422.752(a)(4) and Sec. 423.752(a)(4) to
conform with the statutory language and state that we may impose an
intermediate sanction if the sponsoring organization engages in any
practice that would reasonably be expected to have the effect of
denying or discouraging enrollment (except as permitted by this part)
by eligible individuals with the organization whose medical condition
or history indicates a need for substantial future medical services.
We are also proposing to make conforming changes to Sec.
422.752(c) and Sec. 423.752(c). Currently Sec. 422.752(c)(1) and
Sec. 423.752(c)(1) state that we may impose civil money penalties for
any of the determinations at Sec. 422.510(a) and Sec. 423.509(a),
except Sec. 422.510(a)(4) and Sec. 423.509(a)(4). Also, Sec.
422.752(c)(2)(ii) and Sec. 423.752(c)(2)(ii) state that OIG may impose
civil money penalties for a determination made pursuant to Sec.
422.510(a)(4) and Sec. 423.509(a)(4). Since we are proposing elsewhere
in these proposed regulations to redesignate Sec. 422.510(a)(4) and
Sec. 423.509(a)(4) to Sec. 422.510(a)(2)(iii) and Sec.
423.509(a)(2)(iii), we need to conform Sec. 422.752 and Sec. 423.752
to these changes. Therefore, for regulations Sec. 422.752(c)(1), Sec.
422.752(c)(2)(ii), Sec. 423.752(c)(1), and Sec. 423.752(c)(2)(ii) we
are proposing to delete the reference to Sec. 422.510(a)(4) and Sec.
422.509(a)(4) and replace them with a reference to Sec.
422.510(a)(2)(iii) and Sec. 423.509(a)(2)(iii).
III. Collection of Information Requirements
Under the Paperwork Reduction Act of 1995, we are required to
provide 60-day notice in the Federal Register and solicit public
comment before a collection of information requirement is submitted to
the Office of Management and Budget (OMB) for review and approval. In
order to fairly evaluate whether an information collection should be
approved by OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act
of 1995 requires that we solicit comment on the following issues:
The need for the information collection and its usefulness
in carrying out the proper functions of our agency.
The accuracy of our estimate of the information collection
burden.
The quality, utility, and clarity of the information to be
collected.
Recommendations to minimize the information collection
burden on the affected public, including automated collection
techniques.
We are soliciting public comment on each of these issues for the
following sections of this document that contain information collection
requirements (ICRs):
A. ICRs Regarding Basic Contract Requirements (Sec. 417.472)
Proposed Sec. 417.472(i) states that HMO or CMP must comply with
the requirements at Sec. 422.152(b)(5). Proposed Sec. 417.472 states
that all coordinated care contracts (including local and regional PPOs
and contracts with exclusively SNP benefit packages, cost contracts
under section 1876 of the Act, private fee-for-service contracts, and
MSA contracts with 600 or more enrollees in July of the prior year)
must contract with approved Medicare Consumer Assessment of Healthcare
Providers and Systems (CAHPS) survey vendors to conduct the Medicare
CAHPS satisfaction survey of MA plan enrollees in accordance with CMS
specifications and submit the survey data to CMS. The burden associated
with the requirement in Sec. 417.472(i) and (j) is detailed in our
discussion of Sec. 422.152(b)(5).
B. ICRs Regarding Apportionment and Allocation of Administrative and
General Costs (Sec. 417.564)
We are not imposing any new reporting requirements. We are simply
clarifying what costs an HCPP may report in its cost report as
administrative costs for reimbursement from the government. We do not
believe that our proposal will result in additional burden on cost
plans; therefore, we have not incorporated a burden increase in the PRA
section. However, we solicit comment on our burden estimates.
C. ICRs Regarding Medicare Secondary Payer (MSP) Procedure (Sec.
422.108 and Sec. 423.462)
Section 422.108(b)(3) proposes that MA organizations must
coordinate benefits to Medicare enrollees with the benefits of the
primary payers, including reporting, on an ongoing basis, information
obtained in accordance with requirements in paragraphs (b)(1) and
(b)(2) of this section in accordance with CMS instructions. Similarly,
Sec. 423.462 proposed that Part D plan sponsors must report creditable
new or changed primary payer information to the CMS Coordination of
Benefits Contractor in accordance with the processes and timeframes
specified by CMS. The burden associated with this requirement is the
time and effort necessary to report the specified information to CMS on
an ongoing basis. We estimate that 624 MA organizations and 456Part D
plan sponsors must comply with these requirements, a total of 1,080
entities. We also estimate that, on average, each entity will produce
one report thereby yielding a total of 1,080 reports annually for
involved entities. It will take each entity an average of 2,885 hours
to report the required information to CMS. The estimated annual burden
associated with these requirements is 3,115,800 hours. The cost
associated with meeting these requirements is $77.9 million.
D. ICRs Regarding Disclosure Requirements (Sec. 422.111)
Proposed Sec. 422.111 states that we may require an MA
organization to self-disclose to its enrollees or potential enrollees,
the MA organization's performance and contract compliance deficiencies
in a manner specified by CMS. The burden associated with this
[[Page 54703]]
requirement is the time and effort necessary for an MA organization to
make the aforementioned disclosures. We have not accounted for the
burden associated with this provision for two reasons. First, we may
require organizations that are under enforcement actions to disclose
their compliance deficiencies in a letter to their existing members.
However, the number of organizations that receive enforcement actions
per year does not exceed the PRA threshold of 10. Based on past history
and experience, we have not imposed intermediate sanctions on more than
10 plans in a given year. For example, there have been a total of 4
organizations with intermediate sanctions imposed this year which is
the highest number of intermediate sanctions imposed during the past 4
years. Second, for organizations that are not under enforcement action,
we may require them to disclose compliance and performance deficiencies
but only in their existing marketing or enrollment materials sent to
current and potential enrollees. There will be no requirement for them
to submit additional materials to enrollees. We solicit comment on
whether these provisions could impact 10 or more plans and whether
these burdens should be accounted for under the PRA.
E. ICRs Regarding Quality Improvement Program (Sec. 422.152)
Proposed Sec. 422.152(b)(3)(ii) states that MA coordinated care
plans must collect, analyze and report quality performance data
indentified by CMS that are of the same type as those specified under
paragraph (b)(3)(i) of this section. The burden associated with these
requirements is the time and effort necessary for an MA coordinated
care plan to collect, analyze and report quality performance data to
CMS. We estimate that it will require 1,000 hours per MA coordinated
care plan to comply with these requirements. There are 624 MA
coordinated care plans. The estimated annual burden associated with
these requirements is 624,000 hours. The estimated annual cost
associated with these requirements is $36.9 million.
Proposed Sec. 422.152(b)(5) requires that all coordinated care
contracts (including local and regional PPOs and contracts with
exclusively SNP benefit packages, cost contracts under section 1876 of
the Act, private fee-for-service contracts, and MSA contracts with 600
or more enrollees in July of the prior year) must contract with
approved Medicare Consumer Assessment of Healthcare Providers and
Systems (CAHPS) survey vendors to conduct the Medicare CAHPS
satisfaction survey of MA plan enrollees in accordance with CMS
specifications, and submit the survey data to CMS. The burden
associated with this requirement is the time and effort necessary to
conduct the CAHPS survey and submit the corresponding data to CMS.
While this requirement is subject to the PRA, the associated burden is
currently approved under OMB control number 0938-0732.
Proposed Sec. 422.152(e)(2)(ii) states that MA organizations
offering an MA regional plan or local PPO plan must collect, analyze
and report quality performance data identified by CMS that are of the
same type as those described under Sec. 422.152(e)(2)(i). The burden
associated with these requirements is the time and effort necessary for
an MA organization offering an MA regional plan or local PPO plan to
collect, analyze and report quality performance data to CMS. We
estimate that it will require 54 hours per MA organization to comply
with these requirements; there are 509 organizations offering an MA
regional plan or local PPO. The estimated annual burden associated with
these requirements is 27,486 hours. The estimated annual cost
associated with these requirements is $3.1 million.
F. ICRs Regarding RADV Audit Dispute and Appeal Processes (Sec.
422.311)
Proposed Sec. 422.311(c)(1) discusses the attestation process with
regard to the RADV audit dispute and appeal processes. Specifically,
proposed Sec. 422.311(c)(1)(i)(A) states that subsequent to the
conduct of a RADV audit, MA organizations may submit CMS-generated
attestations from physician/practitioner(s) in order to dispute
signature or credential related RADV errors. Proposed Sec.
422.311(c)(1)(iv)(A) states that CMS notifies an MA organization of
their RADV audit status, we will provide the attestation forms and
submission instructions. As stated in proposed Sec.
422.311(c)(1)(iv)(B), MA organizations are required to submit the
attestation to CMS at the same time that the MA organization is
required to submit related medical records for RADV audits.
The burden associated with the requirements in this section is the
time and effort necessary for MA organizations to complete the CMS-
generated attestations and to submit the related documentation to CMS.
While these requirements are subject to the PRA, we believe the
associated burden is exempt from the PRA under 5 CFR 1320.3(h)(1). As
stated in 5 CFR 1320.3(h)(1), information does not generally include
items in the following categories, which include but are not limited to
affidavits, oaths, affirmations and certifications, provided that they
entail no burden other than that necessary to identify the respondent,
the date, the respondent's address, and the nature of the instrument.
Similarly, we believe the burden associated with the aforementioned
information collection requirements is exempt from the PRA under 5 CFR
1320.4. Information collected during the conduct of an administrative
action or audit is not subject to the PRA.
Proposed Sec. 422.311(c)(2) states that an MA organization may
choose to dispute CMS' operational processing of RADV medical records
using a CMS-administered documentation dispute process.
Proposed Sec. 422.311(c)(2)(iii)(B) states that MA organizations
have 30 days from the date of issuance of the RADV audit report to
request a documentation dispute. Proposed Sec. 422.311(c)(2)(iv)
outlines the documentation dispute review and notification procedures.
The burden associated with the requirements in this section is the time
and effort necessary for an MA organization to request a documentation
dispute. While this requirement is subject to the PRA, we believe the
associated burden is exempt under 5 CFR 1320.4. Information collected
during the conduct of an administrative action or audit is not subject
to the PRA.
Proposed Sec. 422.311(c)(3) describes the RADV payment error
appeal process. Specifically, proposed Sec. 422.311(c)(3)(iii) states
that at the time CMS issues its RADV audit report, we notify affected
MA organizations in writing of their appeal rights around the RADV
payment error calculation. The MA organizations have 30 days from the
date of this notice to submit a written request for reconsideration of
its RADV payment error calculation. The burden associated with this
requirement is the time and effort necessary for an MA organization to
draft and submit a redetermination request that contains the content
specified in proposed Sec. 422.311(c)(3)(v). While this requirement is
subject to the PRA, we believe the associated burden is exempt under 5
CFR 1320.4. Information collected during the conduct of an
administrative action or audit is not subject to the PRA.
Proposed Sec. 422.311(c)(4) states that an MA organization that is
dissatisfied with the written decision of the CMS reconsideration
official is entitled to a hearing as provided in this section. The
organization's request for a hearing must be made in writing and filed
with CMS
[[Page 54704]]
within 30 days of the date CMS and the MA organization receive CMS'
written reconsideration decision. The reconsideration request must
contain the information listed in proposed Sec. 422.311(c)(4)(ii). The
burden associated with this requirement is the time and effort
necessary for an MA organization to draft and submit a hearing request.
While this requirement is subject to the PRA, we believe the associated
burden is exempt under 5 CFR 1320.4. Information collected during the
conduct of an administrative action or audit is not subject to the PRA.
G. ICRs Regarding Application Requirements (Sec. 422.501 and Sec.
423.502)
Proposed Sec. 422.501(b) and proposed Sec. 423.502(b) require
that an organization submitting an application under this section for a
particular contract year must first submit a completed Notice of Intent
to Apply by the date established by CMS. We will not accept
applications from organizations that do not submit a timely Notice of
Intent to Apply. The purpose of these requirements is to facilitate CMS
systems access earlier so that the contract number may be given out and
applications may be submitted electronically. While the burden
associated with the requirements contained in proposed Sec. 422.501(b)
and proposed Sec. 423.502(b), the Notice of Intent to Apply, is
subject to the PRA, the burden associated with these requirements is
already approved under the OMB control numbers for the Part C and Part
D applications, 0938-0935 and 0938-0936, respectively.
Section 422.501(c) and Sec. 423.502(c) propose to revise the
current regulation, making clear the application standards for becoming
an MA organization or Part D plan sponsor. Specifically, proposed Sec.
422.501(c) and Sec. 423.502(c) would require that applicants complete
all parts of a certified application. The burden associated with the
aforementioned requirements is the time and effort necessary for an
applicant to complete all parts of a certified Part C or Part D
application. While the burden associated with the requirements
contained in proposed Sec. 422.501(c) and proposed Sec. 423.502(c) is
subject to the PRA, the burden associated with these requirements is
already approved under OMB control numbers for the Part C and Part D
applications, 0938-0935 and 0938-0936, respectively.
The costs associated with submitting the applications approved
under 0938-0935 and 0938-0936 are $864,600 and $655,559, for MA plans
and Part D plan sponsors, respectively.
H. ICRs Regarding General Provisions (Sec. 422.503 and Sec. 423.504)
Section 422.503(b)(4)(vi) and Sec. 423.504(b)(4)(vi) propose to
expand on the existing requirements by providing clarification and
additional guidance with respect to the requirements for developing,
implementing and maintaining effective compliance programs. We believe
the requirements contained in Sec. 422.503(b)(4)(vi) and Sec.
423.504(b)(4)(vi) will assist sponsoring organizations further
improving their existing compliance programs. While these requirements
are subject to the PRA, we believe the associated burden is part of
usual and customary business practices and thereby exempt under 5 CFR
1320.3(b)(2). However, we solicit comment on our assessment and whether
these burdens are, in fact, part of usual and customary business
practices.
I. ICRs Regarding Contract Provisions (Sec. 422.504 and 423.505)
Proposed Sec. 422.504 and Sec. 423.505 explicitly state our
existing authority to find sponsors out of compliance with either MA
requirements, Part D requirements, or both when the sponsor's
performance represents an outlier relative to the performance of other
sponsors. Specifically, proposed Sec. 422.504(e)(2) and Sec.
423.505(e)(2) state that HHS, the Comptroller General or their
designees have the right to audit, evaluate, and inspect any books,
contracts, computer or other electronic systems, including medical
records and documentation of the first tier, downstream, and related to
our contract with the MA organization. These proposed sections contain
recordkeeping requirements. The burden associated with proposed Sec.
422.504(e)(2) and Sec. 423.505(e)(2) is the time and effort necessary
for MA organizations or Part D sponsors to maintain the information on
file and make it available to CMS upon request. While these
requirements are subject to the PRA, we believe the associated burden
is exempt under 5 CFR 1320.3(b)(2). However, we solicit comment on our
assessment and whether these burdens are, in fact, part of usual and
customary business practices.
J. ICRs Regarding Nonrenewal of Contract (Sec. 422.506 and Sec.
423.507)
Proposed Sec. 422.506 and Sec. 423.507 contain notification
requirements for MA organizations and Part D plan sponsors. Section
422.506(a)(2) and Sec. 423.507(a)(2) propose to require that when an
organization does not intend to renew its contract, it must notify each
Medicare enrollee by mail at least 90 calendar days before the date on
which the nonrenewal is effective. An organization would also have to
provide information about alternative enrollment options by complying
with at least one of the requirements specified in proposed Sec.
422.506(a)(2)(ii) or Sec. 423.507(a)(2)(ii). In addition, proposed
Sec. 422.506(b)(2) and Sec. 423.507(b)(2) state that an organization
notify each Medicare enrollee by mail at least 90 calendar days before
the date on which the nonrenewal is effective, or at the conclusion of
the appeals process if applicable.
The burden associated with the aforementioned requirements is the
time and effort necessary for an organization to notify its Medicare
enrollees by mail at least 90 calendar days before the date on which
the nonrenewal is effective, or at the conclusion of the appeals
process if applicable. While this requirement is subject to the PRA, we
are unable to accurately quantify the burden because we cannot estimate
the number of organizations that may not renew their contracts from
year to year. We believe that less than 10 contracts will be terminated
on an annual basis; however, we welcome public comments on these
information collection requirements and whether the PRA would apply. We
will reevaluate this issue in the final rule stage of rulemaking.
K. ICRs Regarding Request for Hearing (Sec. 422.662 and Sec. 423.651)
With respect to Medicare contract determinations and appeals, Sec.
422.662 and Sec. 423.651 propose the requirements for submission
methods and time for filing requirements for MA organizations and Part
D plan sponsors that want to request a hearing for a determination
under appeal. The request for hearing must be submitted in writing and
must be filed within 15 calendar days after the receipt of the notice
of the contract determination or intermediate sanction. The PRA is not
applicable to this proposal because there are no additional
requirements for sponsoring organizations. This is an existing
regulation and we are only modifying the language ``after receipt of
the hearing decision'' to conform to other regulations.
L. ICRs Regarding Time and Place of Hearing (Sec. 422.670 and Sec.
423.655)
Proposed Sec. 422.670 and Sec. 423.655 state that CMS, an MA
organization or a Part D plan sponsor may request an extension by
filing a written request no later than 5 calendar days prior to the
scheduled hearing. The burden
[[Page 54705]]
associated with these requirements is the time and effort necessary for
an MA organization or a Part D plan sponsor to submit a written
extension request to the presiding hearing officer. While this
requirement is subject to the PRA, we believe the associated burden is
exempt from the PRA as stated under 5 CFR 1320.4. Information collected
during the conduct of an administrative action is not subject to the
PRA.
M. ICRs Regarding Review by the Administrator (Sec. 422.692 and Sec.
423.666)
Proposed Sec. 422.692 and Sec. 423.666 state that CMS, an MA
organization or a PDP plan sponsor that has received a hearing decision
may request a review by the Administrator within 15 calendar days after
receipt of the hearing decision. The burden associated with these
requirements is the time and effort necessary to submit a request for
the Administrator to review a hearing decision. The PRA is not
applicable to this proposal because there are no additional
requirements for sponsoring organizations. This is an existing
regulation and we are only modifying the language ``after receipt of
the hearing decision'' to conform to other regulations.
N. ICRs Regarding Procedures for Imposing Intermediate Sanctions and
Civil Monetary Penalties (Sec. 422.756 and Sec. 423.756)
Proposed Sec. 422.756 and Sec. 423.756 state before CMS imposes
intermediate sanctions, MA organizations and Part D plan sponsors may
request a hearing before a CMS hearing officer. A written request must
be received by the designated CMS office within 15 calendar days of the
receipt of the notice of sanction. The burden associated with these
requirements is the time and effort necessary to draft and submit a
hearing request to the designated CMS office. The PRA is not applicable
to this proposal because there are no additional requirements for
sponsoring organizations. This is an existing regulation and we are
only modifying the language ``after receipt of the hearing decision''
to conform to other regulations.
O. ICRs Regarding Disclosure of Part D Plan Information (Sec. 423.128)
Proposed Sec. 423.128 states that we may require a Part D plan
sponsor to self-disclose to its enrollees or potential enrollees, the
Part D plan sponsor's performance and contract compliance deficiencies
in a manner specified by CMS. We believe the burden associated with
this requirement is the time and effort necessary for a Part D plan
sponsor to disclose the aforementioned information. We do not believe
the PRA is applicable for this proposal for two reasons.
First, we may require organizations that are under enforcement
actions to disclose their compliance deficiencies in a letter to their
existing members. Based on past history and experience, we have not
imposed intermediate sanctions on more than 10 plans in a given year.
For example, there have been a total of 4 organizations with
intermediate sanctions imposed this year which is the highest number of
intermediate sanctions imposed during the past 4 years. We believe the
burden associated with the requirement is not subject to the PRA under
5 CFR 1320.3(c), which defines the agency collection of information
subject to the requirements of the PRA as information collection
imposed on 10 or more persons within any 12-month period. This
information collection does not impact 10 or more entities in a 12-
month period. However, we welcome public comments on this issue. We
will reevaluate this issue in the final rule stage of rulemaking.
Second, for organizations that are not under enforcement action, we
may require them to disclose compliance and performance deficiencies
but only in their existing marketing or enrollment materials sent to
current and potential enrollees.
While we do not believe this additional disclosure would increase
burden or costs to organizations, we solicit comment on our burden
estimates and assumptions.
P. ICRs Regarding Consumer Satisfaction Surveys (Sec. 423.156)
Proposed Sec. 423.156 requires Part D contracts with 600 or more
enrollees as of July of the prior year to contract with approved
Medicare Consumer Assessment of Healthcare Providers and Systems
(CAHPS) survey vendors to conduct the Medicare CAHPS satisfaction
survey of Part D plan enroll enrollees in accordance with CMS
specifications and submit the survey data to CMS. The burden associated
with this requirement is the time and effort necessary to conduct the
CAHPS survey and submit the corresponding data to CMS. While this
requirement is subject to the PRA, the associated burden is currently
approved under OMB control number 0938-0732.
Q. ICRs Regarding Validation of Part C and Part D Reporting
Requirements (Sec. 422.516 and Sec. 423.514)
We propose to amend Sec. 422.516 and Sec. 423.514 to state that
each Part C and Part D sponsor be subject to an independent yearly
audit of Part C and Part D measures (collected pursuant to our
reporting requirements) to determine their reliability, validity,
completeness, and comparability in accordance with specifications
developed by CMS. The burden associated with this proposed provision is
the time and effort of the MA organizations and Part D sponsors in
procuring an auditor and in supporting the auditor as well as the time
and effort of the auditor in conducting the yearly audit. We estimate
that the total yearly hourly burden for procuring and supporting the
auditor is equal to the number of sponsors (710) x the average
estimated hours per sponsor (120). This equals 85,200 hours. We
estimated that the average number of hours for the auditor to conduct
an audit was 304. The total estimated hours to conduct audits across
all sponsors would then be 710 x 304 = 215, 840. The total hours would
be 85,200 + 215,840 = 301,040. The estimated annual cost associated
with these requirements is $45.6 million.
R. ICRs Regarding Drug Utilization Management, Quality Assurance, and
Medication Therapy Management Programs (MTMPs) (Sec. 423.153)
The proposed revisions to Sec. 423.153 state that Part D plans
must offer a minimum level of medication therapy management services
for each beneficiary enrolled in the MTMP that includes but is not
limited to annual comprehensive medication reviews with written
summaries. The comprehensive medical review must include an
interactive, person-to-person consultation performed by a pharmacist or
other qualified provider unless the beneficiary is in a long-term care
setting. Additionally, there must by quarterly targeted medication
reviews with follow-up interventions when necessary.
The burden associated with these requirements is the time and
effort necessary for a Part D sponsors (both MA-PDs and PDPs) to
conduct the medical reviews with written summaries. We estimate that
each medical review will take an average of 30 minutes to conduct.
Similarly, we estimate that there will be 1,875,000 reviews conducted
by 456 Part D sponsors on an annual basis. The total annual burden
associated with this requirement is 937,500 hours.
[[Page 54706]]
S. ICRs Regarding Timeframes and Notice Requirements for Standard
Coverage Determinations (Sec. 423.568)
If a Part D plan sponsor makes a completely favorable standard
decision under paragraph (b) of this section, it must give the enrollee
written notice of the determination. The initial notice may be provided
orally, so long as a written follow-up notice is sent within 3 calendar
days of the oral notification.
The burden associated with the requirement proposed in paragraph
(d) is the time and effort necessary for a Part D plan sponsor to
notify an enrollee (and the prescribing physician or other prescriber
involved, as appropriate) in writing of completely favorable standard
decision for benefits. We estimate that each year, the 456 Part D plan
sponsors will issue a total of approximately 760,411 written favorable
standard notifications for benefits. We further estimate that it will
take a Part D plan sponsor 30 minutes to distribute a single notice.
The estimated annual burden associated with the requirement in proposed
Sec. 423.568(d) is 380,206 hours. The estimated annual cost associated
with these requirements is $15.2 million.
T. ICRs Regarding Timeframes and Notice Requirements for Expedited
Coverage Determinations (Sec. 423.572)
If a Part D plan sponsor makes a completely favorable expedited
decision under paragraph (b) of this section, it must give the enrollee
written notice of the determination. The initial notice may be provided
orally, so long as a written follow-up notice is sent within 3 calendar
days of the oral notification. The burden associated with the
requirements listed in Sec. 423.572(b) is the time and effort
necessary for a Part D plan sponsor to notify an enrollee (and the
prescribing physician or other prescriber involved, as appropriate) in
writing of completely favorable expedited decision. We estimate that
each of the 456 Part D plan sponsors will issue an average of 87,103
written favorable expedited notifications per year. We further estimate
that it will take a Part D plan sponsor 30 minutes to distribute a
single notice. The estimated annual burden associated with the
requirement in Sec. 423.572(b) is 43,552 hours. The estimated annual
cost associated with these requirements is $15.2 million.
U. ICRs Regarding Access to Covered Part D Drugs (Sec. 423.120)
Proposed Sec. 423.120(b)(iv) would require sponsors to provide
enrollees with appropriate notice regarding their transition process
within a reasonable amount of time after providing a temporary supply
of non-formulary Part D drugs (including Part D drugs that are on a
sponsor's formulary but require prior authorization or step therapy
under a sponsor's utilization management rules). The burden associated
with this requirement is the time and effort necessary for a Part D
plan sponsor to provide a notice to beneficiaries regarding the
transition process. We estimate this would result in 1.35 million
notices that would take an average of 15 minutes to prepare. We then
estimate the total burden to be 337,500 hours.
Proposed Sec. 423.120(c)(3) would require Part D sponsors to
contractually mandate that their network pharmacies submit claims
electronically to the Part D sponsor or its intermediary on behalf of
the beneficiary whenever feasible unless the enrollee expressly
requests that a particular claim not be submitted to the Part D sponsor
or its intermediary. Proposed Sec. 423.120(c)(3) would require the
approximately 28 pharmacy claims processors currently responsible for
the electronic adjudication of pharmacy benefits to change their RxBIN
or RxBIN and RxPCN combination if such identifiers are not already
unique to its Medicare line of business, and the Part D cardholder
identification number if it is not already unique to each Medicare Part
D enrollee. We estimate the annual hourly burden to be 1,380 hours per
processor to make the coding changes necessary to implement this
requirement. There are an estimated 28 processors. At an estimated $150
cost per hour for the fully loaded labor of a computer programmer, we
estimate the yearly burden to be 38,640 hours for CY 2010. This is a
one-time only burden for programming.
The estimated annual cost associated with requirements associated
with the transition process is $6.8 million.
V. ICRs Regarding Timeframes and Responsibility for Making
Redeterminations (Sec. 423.590)
Proposed Sec. 423.590(d)(2) states that if a Part D plan sponsor
first notifies an enrollee of an adverse or favorable expedited
determination orally, it must mail written confirmation to the enrollee
within 3 calendar days of the oral notification. The burden associated
with this requirement is the time and effort necessary for a Part D
plan sponsor to follow up an initial oral notification to an enrollee
with a written notification. We estimate that each of the 456 Part D
plan sponsors will have to distribute approximately 95 notices for an
estimated annual number of 43,320 responses. Similarly, we estimate
that the work will be conducted at a rate of $40 per hour. The
estimated annual cost associated with this requirement is $1.733
million.
W. Annual Information Collection Burden
Table 9 shows our estimates of the annual reporting and
recordkeeping burden based on the discussion detailed in sections
III.A. through III.V. of this proposed rule.
BILLING CODE 4120-01-P
[[Page 54707]]
[GRAPHIC] [TIFF OMITTED] TP22OC09.000
BILLING CODE 4120-01-C
[[Page 54708]]
If you comment on these information collection and recordkeeping
requirements, please do either of the following:
1. Submit your comments electronically as specified in the
ADDRESSES section of this proposed rule; or
2. E-mail comments to the Office of Information and Regulatory
Affairs, Office of Management and Budget to [email protected] or fax comments to 202-395-7285. Please
reference this rule (CMS-4085-P) and mark your comments to the
attention of CMS desk officer.
IV. Response to Comments
Because of the large number of public comments we normally receive
on Federal Register documents, 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.
V. Regulatory Impact Analysis
A. Overall Impact
We have examined the impact of this rule as required by Executive
Order 12866 on Regulatory Planning and Review (September 30, 1993), the
Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96-354),
section 1102(b) of the Social Security Act, section 202 of the Unfunded
Mandates Reform Act of 1995 (Pub. L. 104-4), Executive Order 13132 on
Federalism (August 4, 1999), and the Congressional Review Act (5 U.S.C.
804(2)).
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).
The RFA requires agencies to analyze options for regulatory relief
of small entities, if a rule has a significant impact on a substantial
number of small entities. For purposes of the RFA, small entities
include small businesses, nonprofit organizations, and small
governmental jurisdictions. Most hospitals and most other providers and
suppliers are small entities, either by nonprofit status or by having
revenues of $7.0 million to $34.5 million in any 1 year. Individuals
and States are not included in the definition of a small entity. MA
organizations and Part D sponsors, the only entities that will be
affected by the provisions of this rule, are not generally considered
small business entities. They must follow minimum enrollment
requirements (5,000 in urban areas and 1,500 in non-urban areas) and
because of the revenue from such enrollments, these entities are
generally are above the revenue threshold required for analysis under
the RFA. While a very small rural plan could fall below the threshold,
we do not believe that there are more than a handful of such plans. A
fraction of MA organizations and sponsors are considered small
businesses because of their non-profit status. For an analysis to be
necessary, however, 3 to 5 percent of their revenue would have to be
affected by the provisions. We do not believe that this threshold would
be reached by the proposed requirements. Therefore, the Secretary has
determined that this proposed rule will not have a significant impact
on a substantial number of small entities.
In addition, section 1102(b) of the Act requires us to prepare a
regulatory impact analysis, if a 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 believe and the
Secretary has 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 by
State, local or tribal governments, in the aggregate, or by the private
sector of $100 million in 1995 dollars, updated annually for inflation.
That threshold level is currently $133 million. This proposed rule is
expected to reach this spending threshold.
Executive Order 13132 establishes certain requirements that an
agency must meet when it promulgates a proposed rule and subsequent
final rule that imposes substantial direct requirement costs on State
and local governments, preempts State law, or otherwise has Federalism
implications. We do not believe that this proposed rule imposes
substantial direct requirement costs on State and local governments,
preempts State law, or otherwise has Federalism implications.
Because there are costs to plans and sponsors associated with
several provisions of this rule, we indicate general areas affected and
specify the costs associated with these. For specific burden associated
with the requirements and the bases for our estimates, see section III.
of this proposed rule.
We estimate this rule is ``economically significant'' as measured
by the $100 million threshold, and hence a major rule under the
Congressional Review Act. Accordingly, we have prepared a Regulatory
Impact Analysis.
B. Increase in Costs to MA Organizations and Part D Sponsors
The provisions of this proposed rule would require MA organizations
and Part D sponsors an estimated cost of approximately $321.68 million
for CY 2010. We believe the following requirements will result in
monetized transfers from the Federal Government to MA organizations and
Part D sponsors between 2011 and 2015. Risk Adjustment Validation (Part
422), Quality Improvement program (Sec. 422.152), Medicare Secondary
Payer Procedures (Sec. 422.108), Validation of Reporting Requirements
(Sec. 422.516 and Sec. 423.514), the Quality Improvement Program and
Consumer Satisfaction Surveys (Sec. 422.152 and Sec. 423.156),
Providing Written Notifications (Sec. 422.568(e)), Organization
Determinations, Transition Process Notice (Sec. 423.120), Standard
Timeframe and Notice Requirements for Coverage Determinations (Sec.
423.568), Drug Utilization Management, Quality Assurance, and
Medication Therapy Management Programs (Sec. 423.153), and Pharmacy
Use of Standard Technology under Part D (Sec. 423.120(c)(3)). We
believe that the MIPPA 176 provision will result in savings. However,
the MIPPA 176 provision will not take effect until CY 2011. Most of the
proposed changes do not require additional data collection or reporting
burden but rather involve clarification or codification of current
policy. The economic impact will be funded through monetized transfers
from the Federal government to health plans and through increases in
beneficiary premiums. We expect that these expenses will be largely
reflected in higher bid prices. Given that there are approximately 27
million PDP enrollees and an additional 8 million MA
[[Page 54709]]
enrollees, the impact on the premium per enrollee will be minimal. In
CY 2010, the estimated cost is approximately $3.2 million, translating
to under $10.00 per enrollee. The affect on the monthly premium would
be less than $1.00. The estimated impact on enrollees would appear to
be negligible.
Table 10--Estimated Costs and Savings by Provision for CYs 2010-2015
[$ in millions]
----------------------------------------------------------------------------------------------------------------
Calendar year
------------------------------------------------------------------------------
2010 2011 2012 2013 2014 2015 2010-2015
----------------------------------------------------------------------------------------------------------------
RADV............................. $3.98 $3.98 $3.98 $3.98 $3.98 $3.98 $23.88
Quality.......................... 36.9 36.9 36.9 36.9 36.9 36.9 221.4
MSP.............................. 77.9 77.9 77.9 77.9 77.9 77.9 467.4
Validation of Reporting 45.6 45.6 45.6 45.6 45.6 45.6 273.6
Requirements....................
CAHPS............................ 0.0 3.1 3.1 3.1 3.1 3.1 15.5
Written Notifications............ 17.0 17.0 17.0 17.0 17.0 17.0 102.0
MIPPA 176........................ 0.0 -90.0 -210.0 -300.0 -340.0 -380.0 -1,320.0
Organization Determinations...... 15.2 15.2 15.2 15.2 15.2 15.2 91.2
Transition Process............... 6.8 6.8 6.8 6.8 6.8 6.8 40.8
Drug Utilization Management...... 112.5 112.5 112.5 112.5 112.5 112.5 675.0
Pharmacy Use of Standard 5.8 0.0 0.0 0.0 0.0 0.0 5.8
Technology......................
Total Cost/Savings............... 321.68 228.98 108.98 18.98 -21.02 -61.02 596.58
----------------------------------------------------------------------------------------------------------------
C. Expected Benefits
Beginning in CY 2014, we expect net savings due to the combined
impact of these new proposed provisions. We expect that the net impact
across the 6-year period from CY 2010 through CY 2015 will be a cost of
$596.58 million.
Many of the new requirements involve clarifications of existing
regulations and policies. As such, they should help plans to improve
their administrative operational functions which will streamline the
Medicare Prescription Drug program and strengthen beneficiary
protections within the program. Specifically, we believe that the
proposed requirements will improve coordination of care, increase
quality of data reporting, increase ability to comply with existing
regulations and policies, enhance appeal and grievance procedures, and
curtail illegal marketing practices. Additional benefits include
clarification of timeframes and notification requirements. Some of the
new requirements may lead to changes in health plan service areas.
We anticipate that several of the proposed requirements will be
beneficial to PBMs when assisting Part D sponsors with administering
the Part D benefit. Proposed codification of transition process
requirements and establishment of protected classes will assist PBMs in
applying the Part D requirements consistently across Part D plans and
managing the Part D sponsor's benefit packages more efficiently.
Establishing cut-off limits for coordination of benefits and requiring
Part D sponsors to report other payer information in a timely fashion
to CMS' COB contractors will improve the administrative burden of the
payment reconciliation process. The technical correction to the
definition of gross covered prescription drug costs will also help PBMs
with calculating a beneficiary's gross covered prescription drug costs.
D. Analysis by Provision
With regard to part 422, Risk Adjustment Data Validation (RADV), we
estimate that we will audit approximately 110 MA organizations for risk
adjustment data validation (RADV) in FYs 2010 and 2011. We estimate
that at least 50 percent of these organizations--55 MA organizations--
will pursue one of the options presented in these proposed rules for
disputing or appealing their RADV audit findings--via attestation,
documentation dispute, or RADV payment error calculation appeal. Our
experience to date indicates that approximately 25 percent of HCCs
audited under RADV audit procedures result in signature and credential-
related medical record review errors. Each MA organization that
undergoes a RADV audit is on average asked to validate approximately
700 HCCs for 200 beneficiaries selected for audit.
Since signature and credential-related errors comprise such a large
overall percentage of RADV error, there is clearly an incentive for MA
organizations to submit attestations along with medical records missing
signatures/credentials to avoid incurring a RADV audit error. With
approximately 110 organizations expected to undergo RADV audit
annually, we can estimate that MA organizations will seek to produce
roughly 19,250 attestations (or 175 attestations per audit). We
estimate that it will take 1 hour to prepare and submit one attestation
to CMS. This equates to 19,250 burden hours at approximately $59.20/
hour (based on U.S. Department of Labor statistics for hourly wages for
management analysts)--or, an aggregate annual dollar burden on the MA
industry of $1,139,600. RADV audit statistics to date indicate that
approximately 55 percent of RADV audit errors are of the type that may
be eligible for documentation dispute. Clearly there is a financial
incentive for MA organizations to pursue documentation dispute in an
attempt to avoid incurring a RADV audit error. Utilizing the same
statistics regarding the number of organizations that we expect to
undergo RADV audit annually (that is, 110 organizations), we estimate
that 100 percent of these organizations will pursue documentation
dispute. Each MA organization that undergoes RADV audit is on average
asked to validate approximately 700 HCCs for 200 beneficiaries audited.
Therefore, we can expect each organization that undergoes RADV audit to
pursue documentation dispute for 385 HCCs. This equates to an overall
volume of 42,350 document dispute requests annually. We estimate that
it will take approximately 1 hour to prepare the necessary
documentation to dispute one HCC via documentation dispute. This
equates to 42,350 burden hours at approximately $59.20/hour (based on
U.S. Department of Labor (DOL) statistics for hourly wages for
management analysts) or an aggregate annual dollar burden on the MA
industry of $2,507,120.
Finally, regarding requests for RADV payment error calculation
appeals, based upon existing RADV audit data, we estimate that 100
percent of MA organizations that undergo RADV audit
[[Page 54710]]
will appeal CMS' RADV payment error calculation since we anticipate the
RADV audit process to uncover significant MA program overpayments.
Currently, MA organizations do not have this appeal right so the
estimates that we provide in this regard are altogether new and unique
to the proposed appeals process. Beyond the costs associated with
appealing the RADV payment error calculation, there is little financial
incentive to not appeal this error calculation. As specified at
proposed Sec. 422.311(c)(3), the RADV payment error calculation appeal
process is a three-pronged appeal process comprised of reconsideration,
hearing and Administrator-review steps. MA organizations can be
expected to incur costs in preparing appeals at each level of the
appeal process. For the first step in the appeal process--the
reconsideration step--we estimate that MA organizations will take
approximately 5 hours to prepare the necessary reconsideration
documentation necessary to appeal CMS' RADV payment error calculation.
This equates to 550 burden hours at approximately $59.20/hour (based on
DOL statistics for hourly wages for management analysts)--or, an
aggregate annual dollar burden on the MA industry of $32,560. For step
two--the hearings step--since the proposed hearing is an on-the-record
hearing that is limited to the documentation submitted to CMS and the
CMS reconsideration official--we do not anticipate MA organizations
incurring substantial costs in submitting the documentation necessary
to invoke their RADV payment error calculation hearing rights. We again
estimate that MA organizations will take approximately 5 hours to
prepare the necessary hearings documentation necessary to appeal CMS'
RADV payment error calculation and the determination of the CMS
reconsideration official. This equates to 550 burden hours at
approximately $59.20/hour (based on U.S. Dept. of Labor statistics for
hourly wages for management analysts)--or, an aggregate annual dollar
burden on the MA industry of $32,560.
Lastly, in seeking CMS Administrator review, we estimate that MA
organizations will take approximately 5 hours to prepare the necessary
documentation to submit to the CMS Administrator for his/her review of
CMS' RADV payment error calculation. This equates to 550 burden hours
at approximately $59.20/hour (based on DOL statistics for hourly wages
for management analysts) or an aggregate annual dollar burden on the MA
industry of $32,560. Together, we estimate that MA organizations will
in the aggregate incur costs approximating $97,680.
In totaling the burden for attestations, documentation dispute and
RADV payment error calculation appeal, we estimate the aggregate annual
burden on the MA industry to be: $1,139,600 for attestations;
$2,507,120 for documentation dispute; and $97,680 for RADV payment
error calculation appeal. Together, we estimate the total burden to the
MA industry to be approximately $3.74 million as shown in Table 11.
We anticipate effects on entities other than MA organizations.
RADV-eligible physicians and other practitioners, including hospitals,
will be impacted by the attestation and documentation-dispute-related
provisions of this proposed rule. We note that while MA organizations
are not required to submit attestations, we anticipate that most will
at least attempt to do so, given the high likelihood of overturning
RADV errors. However, we do not believe that this impact will be
significant. Our experience to date indicates that approximately 25
percent of HCCs audited under RADV audit procedures result in signature
and/or credential-related medical record review errors. Each MA
organization that undergoes RADV audit is on average asked to validate
approximately 700 HCCs for 200 beneficiaries audited. Clearly, there is
an incentive for MA organizations to submit attestations along with
medical records missing signatures/credentials to avoid incurring a
RADV audit error. With approximately 110 organizations expected to
undergo RADV audit annually, we can estimate that MA organizations will
seek to produce roughly 19,250 attestations (or 175 attestations per
audit). We estimate that it will take physicians and other
practitioners 15 minutes (or one-quarter of an hour) or less to review
a medical record, make a determination whether the medical record
originated from the physician or practitioner in question, sign and
date the CMS attestation, and return the attestation to the requesting
MA organization. This equates to 4,813 burden hours at approximately
$59.20/hour (based on U.S. Department of Labor statistics for hourly
wages for management analysts) or an aggregate annual dollar burden on
other providers of $284,930. We estimate no burden to other providers
for either the documentation dispute proposal or the RADV payment error
calculation appeal proposal since providers will not be called-upon to
participate in these activities.
The proposed attestation and documentation dispute processes will
have an overwhelmingly net-positive impact on the Medicare program
through the ultimate lowering of MA program payment errors. Our
experience to date in conducting RADV audits and upon consultation with
medical record review-industry experts leads us to estimate that MA
organizations will submit attestations for up to 65 percent of
attestation-eligible RADV errors. We likewise estimate that we will
overturn approximately 15 percent of documentation-dispute-eligible
RADV errors via the documentation dispute process. Together, these MA
program error-rate reductions will have a net positive impact on the
Medicare program.
Since the proposed appeals process has not been piloted as part of
the RADV audit process to date, there is no way to realistically
estimate its impact on the Medicare program.
Table 11--RADV Burden for Attestations (Part 422): Total Estimated Impact for CYs 2010 Through 2015
[$ in millions]
----------------------------------------------------------------------------------------------------------------
Calendar year
------------------------------------------------------------------ Total
2010 2011 2012 2013 2014 2015
----------------------------------------------------------------------------------------------------------------
Estimated Impact on MA $3.74 $3.74 $3.74 $3.74 $3.74 $3.74 $22.44
Organizations.....................
Estimated Impact on All Other 0.28 0.28 0.28 0.28 0.28 0.28 1.68
Providers.........................
----------------------------------------------------------------------------
Total.......................... 3.98 3.98 3.98 3.98 3.98 3.98 23.88
----------------------------------------------------------------------------------------------------------------
[[Page 54711]]
We are also proposing to require in Sec. 422.152 that each MAO
contract conduct CCIPs in patient populations and quality improvement
projects in areas identified by CMS and also collect and report new
quality measures. The mean estimated burden per contract as indicated
in section III. of this proposed rule is 1,000 hours. The estimated
mean cost per hour for these contracts is $59.20 (wages, fringe
benefits, and overhead). The mean cost per contract is: 1,000 x $59.20
= $59,200. Since the number of contracts is estimated to be 624, the
overall estimated cost across all contracts is: 624 x $59,200 =
$36,940,800.
Regarding the Medicare Secondary Payer (MSP) Procedures (Sec.
422.108), in 2007 original Medicare estimated total savings due to MSP
at $6.5 billion. This included $2.9 billion recovered or avoided for
working-aged individuals, $1.9 billion for working-disabled
individuals, $877 million for workers' compensation, $278 million for
ESRD beneficiaries, and another $485 million recovered or avoided for
liability and other insurers. In 2007, there were approximately 8.5
million MA enrollees and 44 million total Medicare enrollees (an MA
penetration rate of approximately 19 percent). The $6.5 billion in MSP
savings can be attributed to 35.5 million original Medicare enrollees,
which equates to approximately $183 per original Medicare enrollee that
can be attributed to MSP savings. In 2009 MA penetration is higher,
with approximately 11 million MA enrollees out of approximately 45
million total Medicare enrollees--or about 24 percent MA penetration.
We assume a similar MSP rate for MA enrollees as obtains in original
Medicare, and therefore project total savings from MSP in the MA
program in 2007 as close to $1.5 billion and by 2010 at approximately
$2 billion.
The estimated impact of MSP on 624 MA organizations and 456 PDPs
based on 3.1158 million burden hours at approximately $25/hour (based
on U.S. Department of Labor (DOL) statistics for the hourly wages of
claims analysts of $22.20/hour and for management analysts of $59.20/
hour), is approximately $77.9 million. We expect an MA organization to
use approximately 1.5 FTEs to implement Part C MSP procedures related
to avoiding costs, reporting data, and collecting from liable third
parties related to MSP. We expect the work mix to be completed
approximately 90 percent by the claims analyst and 10 percent by the
management analyst.
We note that MAOs claim expenses related to MSP recoveries as part
of their administrative overhead. MA organizations that faithfully
pursue and recover from liable third parties will have lower medical
expenses. Lower medical expenses make such plans more attractive to
enrollees. The lower the medical expenses in an MA plan, the higher the
potential rebate. The rebate is calculated as the difference between
the cost of Medicare benefits and the benchmark for that plan. The
benchmark is a fixed amount. Therefore, as the cost of Medicare
benefits go down (with the benchmark remaining constant), the larger
the rebate. Therefore, as more MSP dollars are collected or avoided,
medical expense go down and rebates go up, allowing the sponsoring MA
organization to offer potential enrollees additional non-Medicare
benefits funded by rebate dollars. Such non-Medicare benefits include
reductions in cost sharing. Since cost sharing is generally expressed
as a percentage of medical costs, such cost sharing will also be
proportionally lower as overall medical costs go down--providing MA
organizations offering such plans with an additional competitive edge.
Regarding validation of reporting requirements (Sec. 422.516 and
Sec. 423.514), the main focus will be on how the sponsor collects,
stores, and reports the new Part C and Part D data requirements.
Standards and procedures will also focus on how sponsors compile data,
and verify calculations, computer code, and algorithms. The estimated
mean hourly burden per affected part C and Part D sponsor to procure an
auditing organization and to support the auditing organization in its
data collection efforts including staff interviews is 120 hours as
indicated in section III. of this proposed rule. We believe the auditor
that is hired by the plan will typically have a team consisting of a
management analyst, two senior auditors, a senior claims analyst, a
senior statistician, an IT systems analyst, a computer programmer, and
a word processor. We used May 2008 wage statistics supplied by the
Department of Labor, Bureau of Labor Statistics to develop estimates of
direct wages. We also added fringe benefits, overhead costs, and
general and administrative expenses using percentages that are
consistent with CMS contracts. Based on our experience and in
consultant with program experts, we developed an estimate of the hourly
burden. The estimated mean cost per hour for these sponsors is $43.14
(wages, fringe benefits, and overhead). The estimated mean number of
hours per sponsor is 120. The mean cost per sponsor to procure and
support the auditor is therefore: 120 x $43.14 = $5,177. Since the
number of sponsors is estimated to be 710, the overall estimated cost
across all sponsors to do the work involved in procuring and supporting
the auditing contractors is: 710 x $5,177 = $3,675,670.
The total estimated burden hours related to the time and effort for
all auditing organizations to perform the annual audit for both Part C
and Part D data validation is estimated to be 215,840. The mean cost
per hour (includes direct wages, fringe benefits, overhead costs,
general and administrative expenses, and fee) is estimated to be
$194.21. Therefore, the estimated annual cost for auditing contracts
involving all 710 sponsors is: 215,840 x $194.21 = $41,918,287. The
total estimated annual cost for auditing contracts and for the
procurement and audit support time and effort of the sponsors is:
$41,918,287 + 3,675,670= $45,593.956. The auditing costs will be
allowable costs in the plan's bid.
We are also proposing that beginning in 2011 MA organizations and
Part D sponsors will begin paying for the data collection costs of the
CAHPS annual survey. Data collection is to be performed by a contractor
hired by the MAO or part D sponsor. The mean estimated burden per
contract as indicated in section III. of this proposed rule is 51
hours. The estimated mean cost per contract is $5,023. The overall
estimated annual cost across 624 contracts is: 624 x $5,023 =
$3,134,352.
Regarding written notices of a favorable standard coverage
determination (Sec. 423.568(d)), the burden is the time and effort
necessary for each of an estimated 456 PDP sponsors to disclose the
necessary information in writing to an enrollee. (Note: plan sponsors
have always been required to formulate a decision and notify the
enrollee of that decision, so the additional burden is only related to
communicating the favorable decision in writing). We estimated an
annual burden of 380,206 hours. At an estimated cost of $40.00 per hour
(salary/wages, fringe benefits, overhead), the estimated total annual
cost of this proposed change is $15,208,240.
The burden associated with providing written notice of a favorable
expedited coverage determination (Sec. 423.572(b)) is the time and
effort necessary for each of an estimated 456 PDP sponsors to disclose
the necessary information in writing to an enrollee (given that plan
sponsors have always been required to formulate favorable and adverse
expedited decisions, notify enrollees of
[[Page 54712]]
those decisions, and follow-up in writing if the decision is adverse,
the additional burden is only related to communicating the favorable
decision in writing).
The total estimated annual burden associated with this requirement
was 43,550 hours. At an estimated cost of $40.00 per hour, the
estimated total annual cost of this proposed change is $1,742,000.
Therefore, the total estimated annual cost for these two provisions is
$15,208,240 + $1,742,000 = $16,950,240. The total estimated annual cost
for years 2010-2015 is $102 million.
Additionally, regarding written notices, proposed Sec.
423.590(d)(2) states that if a Part D plan sponsor first notifies an
enrollee of an adverse or favorable expedited redetermination decision
orally, it must mail written confirmation to the enrollee within 3
calendar days of the oral notification. The burden associated with this
requirement is the time and effort necessary for a Part D plan sponsor
to notify an enrollee (and the prescribing physician or other
prescriber involved, as appropriate) in writing of an adverse or
favorable expedited redetermination decision. We estimate that each
year the 456 Part D plan sponsors will issue a total of about 21,232
written adverse and favorable expedited notifications. We further
estimate that it will take a Part D plan sponsor 30 minutes to
distribute a single notice. The estimated annual burden associated with
the requirement in Sec. 423.590(d)(2) is 10,616 hours. At an estimated
cost of $40.00 per hour, the estimated total annual cost of this
proposed change is $424,640. The total estimated annual cost for years
2010-2015 is $2.5 million.
With regard to standard timeframes and notice requirements for
organization determinations (Sec. 422.568 and Sec. 423.568), the
total estimated annual burden is 380,206 hours. At an estimated average
hourly cost of $40.00, the total annual estimated cost for CY 2010 is
$15,208,240.
Regarding the MIPPA 176 protected drug class provisions, we project
that future utilization and hence future costs will be lower than
estimated in the Medicare Advantage and Prescription Drug Programs:
MIPPA-Related Marketing Revisions interim final rule with comment
period published in the January 16, 2009 Federal Register (74 FR 2881).
This is because the proposed provisions may be somewhat more
restrictive than those in the January 16, 2009 IFC. That is, in the
January 16, 2009 IFC, we had not proposed definitions of associated
with MIPPA protected classes criteria. The definitions, as outlined in
this proposed rule, provide further precision with respect to the MIPPA
criteria leading to a reduced likelihood of certain disease categories
qualifying as protected classes.
The FY 2010 President's Budget estimated cost of this provision was
about $4.9 billion for FYs 2010 through 2019. This is the amount that
was built into our FY 2010 budget projections. The revised cost
estimate is roughly $1.6 billion over the same period. As a result, the
modifications made in the rule will save Part D an estimated $3.3
billion for FYs 2010 through 2019 relative to our current Budget
baseline.
Regarding the Transition Process (Sec. 423.120), proposed Sec.
423.120 would require sponsors to provide enrollees with appropriate
notice regarding their transition process within a reasonable amount of
time after providing a temporary supply of non-formulary Part D drugs
(including Part D drugs that are on a sponsor's formulary but require
prior authorization or step therapy under a sponsor's utilization
management rules). We estimated the annual hourly burden to be 337,500
hours in section III. of this proposed rule. At an estimated average
$20 cost per hour for the fully loaded labor of an administrative
assistant, we estimate the yearly cost to be $6,750,000 in CY 2010.
Regarding drug utilization management, quality assurance, and
medication therapy management programs (MTMPs), proposed Sec. 423.153
states that Part D plans must offer a minimum level of medication
therapy management services for each beneficiary enrolled in the MTMP
that includes but is not limited to annual comprehensive medication
reviews with written summaries. We estimated that the total annual
burden associated with this requirement is 937,500 hours. At an average
cost of $120 per hour, we estimate the yearly cost to be $112,500,000.
Regarding the Use of Standardized Technology under Part D (Sec.
423.120) requirements, we estimated an annual burden of 38,640 hours,
with a cost of $150 per hour. The estimated one time cost impact for CY
2010 is $5.80 million.
E. Anticipated Effects
1. Effects of Cap on Out-of-Pocket Costs and Cost Sharing Amounts
We are proposing to establish and require local MA plans to have an
annual catastrophic cap on members out-of-pocket cost sharing and that
we will also establish limits on the cost sharing amounts that MA plans
can impose for Part A and B services. These proposed changes are
significant in that they will help beneficiaries to understand and
anticipate their possible health care expenditures. However, we do not
believe these changes will by themselves have a significant impact on
either plan participation or plan costs. We will set the parameters for
the cost sharing and spending cap and this should make it easier for MA
plans to compete on a level playing field and as previously noted
enhance transparency for prospective enrollees. We note that while
there will be cost sharing limits and a catastrophic cap. We are not
setting a cap on the monthly plan premium beyond the overall actuarial
limit (determined annually by CMS) on the amount of cost sharing that
MA plans may impose on its enrollees. In other words, MA plans will
still have the option of collecting the maximum allowed actuarial
amount of cost sharing from beneficiaries in terms of premium, and
costs sharing amounts for plan covered benefits.
2. Alternatives Considered
a. Strengthening CMS' Ability To Take Timely, Effective Contract
Determinations or Intermediate Sanctions (Part C & D)
We are proposing to modify the regulations to more clearly and
accurately clarify our existing statutory authority to terminate a
contract. The existing enumerated list of determinations that could
support a decision to terminate a contract is not all inclusive.
Therefore, we are proposing to remove the enumerated list. Also, we are
proposing to revise the regulatory language to clarify that failure to
comply with any of the regulatory requirements contained in parts 422
and 423 or failure to meet our performance requirements, may constitute
a basis for CMS to determine that the MA Organization or Part D sponsor
meets the requirements for contract termination in accordance with the
statutory standard. We considered modifying or adding to the existing
list of determinations that could support termination (which included
12 items in parts 422 and 11 items in parts 423). However, we believe
that continuing to add to the existing list may fail to make
sufficiently clear to sponsoring organizations that all violations of
our regulations and/or contract and performance requirements may be
used to support a termination decision.
[[Page 54713]]
b. Changing the Standards of Review, Clarifying the Standard of Proof
and Burden of Proof for Appeals, and Modifying the Conduct of Hearing
for Contract Decisions (Including Denials of Initial Applications to
Contract, Service Area Expansions for Existing Contracts, Contract Non-
Renewals and Terminations, and Intermediate Sanctions)
We are proposing to change the standards of review and clarify the
standard of proof when an appeal of a contract determination or
intermediate sanction is requested and an evidentiary hearing is
conducted. The current standards of review require the hearing officer
to determine whether the sponsoring organization can demonstrate
``substantial compliance'' with Part C and/or Part D requirements on
the ``earliest of'' the following three dates: The date the
organization received written notice of contract determination or
intermediate sanction, the date of the most recent onsite audit, or the
date of the alleged breach of current contract or past substantial
noncompliance. In practice, these standards of review (``substantial
compliance'' and ``earliest of test'') have led to confusion among
parties to the hearing and have been difficult for the hearing officer
to apply. Additionally, though the existing regulations explicitly
state that the sponsoring organization bears the burden of proof, it
does not provide the standard of proof that is to be applied by the
hearing officer. Therefore, we are proposing to delete the
``substantial compliance'' and ``earliest of'' test and revise the
regulations to explicitly state the standard of proof and provide clear
standards of review for each type of contract determination or
intermediate sanction.
First, we are proposing to explicitly state that the hearing
officer must apply the ``preponderance of the evidence'' standard of
proof when weighing the evidence at all hearings for contract
determinations or intermediate sanctions. Second, we are proposing to
clarify the standards of review, which vary according to the type of
contract determination or intermediate sanction. In particular, the
proposed change makes the distinction between how the evidentiary
standard of review is to be applied to appeals of CMS determinations
involving Part C or D contract qualification applications, those
involving the termination or non-renewal of a Part C or D sponsor
contract, and those involving the imposition of intermediate sanctions.
Finally, we are proposing to clarify that because the sponsoring
organization bears the burden of proof, under any briefing schedule
determined by the hearing officer, it must first present evidence and
argument to the hearing officer before we present our evidence and
argument. We considered leaving the existing regulations unchanged.
c. Clarify That CMS May Require a ``Test Period'' During an Enrollment/
Marketing Sanction
We are proposing to provide that in instances where an enrollment
and/or marketing suspension has been imposed, we may determine that it
is appropriate to subject the MA organization or Part D sponsor to a
``test period'' whereby the organization or sponsor will, for a limited
time, engage in marketing activities and/or accept enrollments in order
to assist us in making a determination as to whether the bases for the
sanctions have been corrected and are not likely to recur. Currently,
our experience has shown that we are limited in our ability to
adequately determine if marketing and enrollment deficiencies have been
corrected while marketing and enrollment sanctions are in place. If the
test of the Part D sponsor or MA organization's marketing/enrollment
processes reveals that deficiencies have not been corrected and/or are
likely to recur, the sanction will continue to remain in place.
We considered leaving the existing regulations unchanged. However,
we believe this proposal will strengthen our ability to adequately
assess compliance with our requirements. The proposal will also help us
to avoid situations where, because we do not have the ability to
perform adequate testing of an organization's systems/processes (such
as information systems testing) to ensure the deficiencies have been
corrected, we lift a sanction and then find that we have to re-engage
in the statutory and regulatory process for reinstituting the sanction.
d. Right for CMS To Require an Independent Audit of Sponsoring
Organizations Under Intermediate Sanction
We are proposing that we have the flexibility to require certain
Part D sponsors and MA organizations, under intermediate sanctions, to
hire an independent auditor to evaluate whether the bases for a
sanction have been corrected and are not likely to recur before we come
to a determination as to whether lifting of the sanction would be
appropriate. The independent auditor would be hired by the sponsoring
organization and work in accordance with CMS specifications in order to
provide accurate and reliable information to CMS. This would benefit
the sponsoring organization by improving the process for removing a
sanction, which may reduce the duration of the sanction. A similar
approach is used by the Office of Inspector General (OIG) in their
Corporate Integrity Agreements and/or Self-Disclosure Protocol
processes.
We considered leaving the regulations unchanged. This existing
regulatory scheme requires us to rely solely on its internal resources
to assess whether the underlying deficiencies that form the basis of an
intermediate sanction have been corrected and are not likely to recur.
Given our experience with the nature and extent of some compliance
deficiencies (for example, those caused by information technology
issues or lack of adequate internal controls) and the need to obtain
the level of skill and experience necessary to conduct an exhaustive
audit and verification of the correction of these deficiencies, we
believe this additional flexibility and access to expertise (such as a
qualified independent auditor) is appropriate and will benefit both
plan sponsors and CMS.
Another option considered is not requiring certain sponsoring
organizations to hire an independent auditor. Instead, we would
consider using results obtained by an independent auditor hired under a
sponsoring organization's own initiative to evaluate its compliance
with our requirements. We may consider the sponsoring organization's
initiative to obtain an independent audit similar to a ``safe harbor''
and may be afforded some weight in CMS' determination of whether the
bases for the sanction have been corrected and are not likely to recur.
We invite comments from sponsors and the industry about this
alternative proposal and suggestions on other options we could
implement to accomplish the desired outcome.
e. The Ability for CMS To Require Sponsors To Disclose to Current and
Potential Enrollees Compliance and Performance Deficiencies
We are proposing to require certain sponsors to disclose their
current compliance and/or performance deficiencies to existing and
potential enrollees. This disclosure option could be exercised by CMS
either when a sponsor is sanctioned or when a sponsor's compliance
deficiencies rise to a certain level such that we make the
determination that existing or potential enrollees should be notified
of these deficiencies. This level of transparency
[[Page 54714]]
will provide additional incentives for sponsors to make improvements to
their operations and also provide relevant information to beneficiaries
and the public concerning plan choices.
We considered not adding this disclosure authority to the existing
regulations. However, we believe this change is necessary to provide us
with another tool to strengthen our compliance and oversight authority
and provide appropriate transparency concerning compliance and/or
performance deficiencies to beneficiaries and the public.
f. Section 176 of the MIPPA--Formulary and Protected Classes
Requirements (Part D)
The critical policy decision was how broadly or narrowly we
interpret specific terms in the MIPPA provisions. Interpreted broadly,
the provisions in section 176 of the MIPPA might easily encompass many
classes of drugs and significantly increase costs to the Part D program
by eliminating the need for manufacturers to aggressively rebate their
products for formulary placement. Only a narrow interpretation of these
criteria would limit the number of classes ``protected'' under MIPPA.
g. Reducing Duplicative and Low Enrollment Plans (Parts C & D)
We are proposing to implement regulations to reduce duplicative
benefit packages based upon our authority to add such additional terms
to its contracts with Medicare Advantage organizations or Part D plan
sponsors as we ``may find necessary and appropriate'' as specified in
section 1857(e)(1) of the Act (see also section 1860D-12(b)(3)(D) of
the Act (incorporating section 1857(e)(1) of the Act by reference for
Part D.) In addition, we are using our authority under section 1860D-
11(d)(2)(B) of the Act as further support for our authority to propose
regulations imposing ``reasonable minimum standards'' on Part D
sponsors.
One alternative would be to make no changes to our current
regulations regarding bid submission and review and to continue our
current efforts to eliminate duplicative or low enrollment plan
options. However, since our current regulations do not explicitly
address the issue of eliminating duplicative or low enrollment plans,
we believe that codifying our authority to do so will provide us with
more leverage over plans during the bid submissions, review,
negotiation, and approval processes.
Another alternative would be to provide more detail in regulation
text regarding the specific criteria we would use to eliminate
duplicative or low enrollment plan options. We believe addressing the
issue generally in regulations text, but containing most of the
discussion regarding specific criteria to the preamble, maintains our
flexibility to adjust our review processes and criteria consistent with
current market trends.
h. Validation of Part C and Part D Reporting Requirements
Several of the proposed changes do involve costs to MAOs and Part D
sponsors. One such regulatory change was the audit requirement of Part
C and Part D measures. We considered not requiring an audit. However,
because we believe that an audit is required to ensure that the Part C
and Part D measures are consistent with our specifications, are
reliable, valid, and comparable, and are credible to stakeholders, this
alternative was rejected. A second such regulatory change was requiring
MAOs and Part C sponsors to assume a portion of the cost of the annual
CAHPs survey that would result from hiring contractors to conduct the
data collection. We considered not requiring MAOs and Part C sponsors
to hire contractors to perform the CAHPs data collection. However, we
rejected this alternative, because we believe that the benefits
obtained through this regulatory change outweigh the costs incurred by
the MAOs and Part C sponsors.
F. Accounting Statement
As required by OMB Circular A-4 (available at http://www.whitehouse.gov/omb/circulars/a004/a-4.pdf ), in the Table 13, we
have prepared an accounting statement showing the classification of the
expenditures associated with the provisions of this proposed rule.
Table 13 provides our best estimate of the costs and savings as a
result of the changes.
Table 13--Accounting Statement: Classification of Estimated Expenditures, From CY 2010 to CY 2015
[$ in millions]
----------------------------------------------------------------------------------------------------------------
Transfers
----------------------------------------------------------------------------
Category Units discount rate
Year dollar -------------------------------- Period covered
7% 3%
----------------------------------------------------------------------------------------------------------------
Annualized Monetized Transfers..... 2009 $-204.45 $-213.23 CYs 2010-2015
----------------------------------------------------------------------------------------------------------------
From Whom to Whom?................. Federal Government to MAO and Part D Sponsors.
----------------------------------------------------------------------------------------------------------------
Annualized Costs to MAOs and Part D 2009 $319.51 $319.46 CYs 2010-2015
Sponsors.
----------------------------------------------------------------------------------------------------------------
G. Conclusion
We expect that the cost of implementing these provisions will be
$321.68 million in CY 2010. Sponsors will experience additional costs
which they are likely to pass on to us through direct subsidy payments
and to beneficiaries through increases in premiums as reflected in
their bids. Beginning in CY 2013, we expect that these provisions will
generate a net savings on an annual basis. For the entire estimated
time period, CY 2010 through 2015, we expect the overall impact to be a
cost of $596.58 million.
In accordance with the provisions of Executive Order 12866, this
proposed rule was reviewed by the Office of Management and Budget.
List of Subjects
42 CFR Part 417
Administrative practice and procedure, Grant programs--health,
Health care, Health insurance, Health maintenance organizations (HMO),
Loan programs--health, Medicare, and Reporting and recordkeeping
requirements.
[[Page 54715]]
42 CFR Part 422
Administrative practice and procedure, Health facilities, Health
Maintenance Organizations (HMO), Medicare, Penalties, Privacy, and
Reporting and recordkeeping requirements.
42 CFR Part 423
Administrative practice and procedure, Emergency medical services,
Health facilities, Health maintenance organizations (HMO), Health
professionals, Medicare, Penalties, Privacy, Reporting and
recordkeeping requirements.
42 CFR Part 480
Health care, Health professions, Health records, Peer Review
Organizations (PRO), Penalties, Privacy, and Reporting and
recordkeeping requirements.
For the reasons set forth in the preamble, the Centers for Medicare
& Medicaid Services proposes to amend 42 CFR chapter IV as set forth
below:
PART 417--HEALTH MAINTENANCE ORGANIZATIONS, COMPETITIVE MEDICAL
PLANS, AND HEALTH CARE PREPAYMENT PLANS
1. The authority citation for part 417 continues to read as
follows:
Authority: Sec. 1102 and 1871 of the Social Security Act (42
U.S.C. 1302 and 1395hh), secs. 1301, 1306, and 1310 of the Public
Health Service Act (42 U.S.C. 300e, 300e-5, and 300e-9), and 31
U.S.C. 9701.
Subpart K--Enrollment, Entitlement, and Disenrollment Under
Medicare Contract
2. Section 417.428 is revised to read as follows:
Sec. 417.428 Marketing activities.
(a) With the exception of Sec. 422.2276 of this chapter, the
procedures and requirements relating to marketing requirements set
forth in subpart V of part 422 of this chapter also apply to Medicare
contracts with HMOs and CMPs under section 1876 of the Act.
(b) In applying those provisions, references to part 422 of this
chapter must be read as references to this part, and references to MA
organizations as references to HMOs and CMPs.
Subpart L--Medicare Contract Requirements
3. Section 417.472 is amended by adding paragraphs (i) and (j) to
read as follows:
Sec. 417.472 Basic contract requirements.
* * * * *
(i) The HMO or CMP must comply with the requirements at Sec.
422.152(b)(5).
(j) All coordinated care contracts (including local and regional
PPOs and contracts with exclusively SNP benefit packages, cost
contracts under section 1876 of the Act, private fee-for-service
contracts, and MSA contracts with 600 or more enrollees in July of the
prior year) must contract with approved Medicare Consumer Assessment of
Healthcare Providers and Systems (CAHPS) survey vendors to conduct the
Medicare CAHPS satisfaction survey of MA plan enrollees in accordance
with CMS specifications and submit the survey data to CMS.
4. Section 417.492 is amended by revising paragraph (b)(2) to read
as follows:
Sec. 417.492 Nonrenewal of contract.
* * * * *
(b) * * *
(2) Notice of appeal rights. CMS gives the HMO or CMP written
notice of its right to appeal the nonrenewal decision, in accordance
with part 422 subpart N of this chapter, if CMS's decision was based on
any of the reasons specified in Sec. 417.494(b).
5. Section 417.494 is amended by revising paragraph (b)(2) to read
as follows:
Sec. 417.494 Modification or termination of contract.
* * * * *
(b) * * *
(2) If CMS decides to terminate a contract, it sends a written
notice informing the HMO or CMP of its right to appeal the termination
in accordance with part 422 subpart N of this chapter.
* * * * *
6. Section 417.500 is revised to read as follows:
Sec. 417.500 Intermediate sanctions for and civil monetary penalties
against HMOs and CMPs.
(a) Except as provided in paragraph (c) of this section, the
rights, procedures, and requirements related to intermediate sanctions
and civil money penalties set forth in part 422 subparts O and T of
this chapter also apply to Medicare contracts with HMOs or CMPs under
sections 1876 of the Act.
(b) In applying paragraph (a) of this section, references to part
422 of this chapter must be read as references to this part and
references to MA organizations must be read as references to HMOs or
CMPs.
(c) In applying paragraph (a) of this section, the amounts of civil
money penalties that can be imposed are governed by section
1876(i)(6)(B) and (C) of the Act, not by the provisions in part 422 of
this chapter.
Subpart O--Medicare Payment: Cost Basis
7. Section 417.564 is amended by adding new paragraphs (b)(2)(iii)
and (c) to read as follows:
Sec. 417.564 Apportionment and allocation of administrative and
general costs.
* * * * *
(b) * * *
(2) * * *
(iii) For the costs incurred under paragraphs (b)(1)(i) through
(iv) of this section that include personnel costs, the organization
must be able to identify the person hours expended for each
administrative task and the rate of pay for those persons performing
the tasks. Administrative tasks performed and rate of pay for the
persons performing those tasks must match in terms of the skill level
needed to accomplish those tasks. This information must be made
available to CMS upon request.
(c) Costs excluded from administrative costs. In accordance with
section 1861(v) of the Act, the following costs must be excluded from
administrative costs:
(1) Donations.
(2) Fines and penalties.
(3) Political and lobbying activities.
(4) Charity or courtesy allowances.
(5) Spousal education.
(6) Entertainment.
(7) Return on equity.
Subpart R--Medicare Contract Appeals
8. Section Sec. 417.640 is revised to read as follows:
Sec. 417.640 Applicability.
(a) The rights, procedures, and requirements relating to contract
determinations and appeals set forth in part 422 subpart N of this
chapter also apply to Medicare contracts with HMOs or CMPs under
section 1876 of the Act.
(b) In applying paragraph (a) of this section, references to part
422 of this chapter must be read as references to this part and
references to MA organizations must be read as references to HMOs or
CMPs.
Sec. 417.642 through Sec. 417.694 [Removed]
9. Remove Sec. 417.642 through Sec. 417.694.
Subpart U--Health Care Prepayment Plans
10. Section 417.840 is revised to read as follows:
[[Page 54716]]
Sec. 417.840 Administrative review procedures.
The HCPP must apply Sec. 422.568 through Sec. 422.626 of this
chapter to--
(a) Organization determinations and fast-track appeals that affect
its Medicare enrollees; and
(b) Reconsiderations, hearings, Medicare Appeals Council review,
and judicial review of the organization determinations and fast-track
appeals specified in paragraph (a) of this section.
PART 422--MEDICARE ADVANTAGE PROGRAM
11. The authority citation for part 422 continues to read as
follows:
Authority: Secs. 1102 and 1871 of the Social Security Act (42
U.S.C. 1302 and 1395hh).
Subpart A--General Provisions
12. Section 422.2 is amended by--
A. Adding the definitions of ``Attestation process,''
``documentation dispute process,'' and ``Hierarchical condition
categories.''
B. Revising the definition of ``Point of service.''
C. Adding the definitions of ``RADV payment error calculation
appeal process'' and ``Risk adjustment data validation (RADV) audit.''
D. Revising the introductory text of the definition of ``Service
area''.
E. Adding the definition of ``The one best medical record''.
The additions and revision read as follows:
Sec. 422.2 Definitions.
Attestation process means a CMS-developed RADV audit-related
dispute process that enables MA organizations undergoing RADV audit to
submit CMS-generated and physician practitioner signed attestations for
medical records with missing or illegible signatures or credentials.
Physicians/practitioners who documented health care services in the
specific medical record under RADV review will be allowed to attest
that they provided and documented the health care services evidenced in
the specific medical record.
* * * * *
Documentation dispute process means a dispute process that enables
MA organizations that have undergone a RADV audit to dispute medical
record discrepancies that pertain to incorrect ICD-9-CM coding by
allowing affected MA organizations to submit formal written disputes
regarding discrepancy findings for the initial medical record that an
organization submitted for HCC validation.
* * * * *
Hierarchical condition categories (HCC) means disease groupings
consisting of disease codes (currently ICD-9-CM codes) that predict
average healthcare spending. HCCs represent the disease components of
the enrollee risk score that are applied to MA payments.
* * * * *
Point of service (POS) means a benefit option that an MA HMO plan
can offer to its Medicare enrollees as an additional, mandatory
supplemental, or optional supplemental benefit. Under the POS benefit
option, the HMO plan allows members the option of receiving specified
services outside of the HMO plan's provider network. In return for this
flexibility, members typically have higher cost-sharing requirements
for services received and, when offered as a mandatory or optional
supplemental benefit, may also be charged a premium for the POS benefit
option.
* * * * *
RADV payment error calculation appeal process means an
administrative process that enables MA organizations that have
undergone RADV audit to appeal the CMS calculation of an MA
organization's RADV payment error.
* * * * *
Risk adjustment data validation (RADV) audit means a CMS-
administered payment audit of a Medicare Advantage (MA) organization
that ensures the integrity and accuracy of risk adjustment payment
data.
* * * * *
Service area means a geographic area that for local MA plans is a
county or multiple counties, and for MA regional plans is a region
approved by CMS within which an MA-eligible individual may enroll in a
particular MA plan offered by an MA organization. Facilities in which
individuals are incarcerated are not included in the service area of an
MA plan. Each MA plan must be available to all MA-eligible individuals
within the plan's service area. In deciding whether to approve an MA
plan's proposed service area, CMS considers the following criteria: * *
*
* * * * *
The one best medical record for the purposes of Medicare Advantage
Risk Adjustment Validation (RADV) is defined as: the clinical
documentation for a single encounter for care (that is, a physician
office visit, an inpatient hospital stay, or an outpatient hospital
visit) that occurred for one patient during the data collection period.
The single encounter for care must be based on a face-to-face encounter
with a provider deemed acceptable for risk adjustment and documentation
of this encounter must be reflected in the medical record.
13. Amend Sec. 422.4 by--
A. Revising paragraphs (a)(1)(v) and (a)(2)(i)(A).
B. Redesignating paragraph (a)(2)(i)(B) as paragraph (a)(2)(i)(C).
C. Adding new paragraphs (a)(2)(i)(B) and (a)(3)(iv).
The revisions and additions read as follows:
Sec. 422.4 Types of MA plans.
* * * * *
(a) * * *
(1) * * *
(v) A PPO plan is a plan that--
(A) Has a network of providers that have agreed to a contractually
specified reimbursement for covered benefits with the organization
offering the plan;
(B) Provides for reimbursement for all covered benefits regardless
of whether the benefits are provided within the network of providers;
(C) Only for purposes of quality assurance requirements in Sec.
422.152(e), is offered by an organization that is not licensed or
organized under State law as an HMO; and
(D) Does not permit prior notification for out-of-network
services--that is, a reduction in the plan's standard cost-sharing
levels when the out-of-network provider from whom an enrollee is
receiving plan-covered services voluntarily notifies the plan prior to
furnishing those services, or the enrollee voluntarily notifies the PPO
plan prior to receiving plan-covered services from an out-of-network
provider.
(2) * * *
(i) * * *
(A) Pays at least for the services described in Sec. 422.101,
after the enrollee has incurred countable expenses (as specified in the
plan) equal in amount to the annual deductible specified in Sec.
422.103(d);
(B) Does not permit prior notification--that is, a reduction in the
plan's standard cost-sharing levels when the provider from whom an
enrollee is receiving plan-covered services voluntarily notifies the
plan prior to furnishing those services, or the enrollee voluntarily
notifies the MSA plan prior to receiving plan-covered services from a
provider; and
* * * * *
(3) * * *
(iv) Does not permit prior notification--that is, a reduction in
the plan's standard cost-sharing levels when the provider from whom an
enrollee is receiving plan-covered services
[[Page 54717]]
voluntarily notifies the plan prior to furnishing those services, or
the enrollee voluntarily notifies the PFFS plan prior to receiving
plan-covered services from a provider.
* * * * *
Subpart B--Eligibility, Election, and Enrollment
14. Section 422.74 is amended by revising paragraphs (d)(1)(i)(B)
and (d)(4)(iii) to read as follows:
Sec. 422.74 Disenrollment by the MA organization.
* * * * *
(d) * * *
(1) * * *
(i) * * *
(B) Providing the individual with a grace period, that is, an
opportunity to pay past due premiums in full. The length of the grace
period must be at least 2 months, beginning on the first day of the
month for which the premium is unpaid.
* * * * *
(4) * * *
(iii) Exception. If the MA plan offers a visitor/traveler benefit
when the individual is out of the service area but within the United
States (as defined in Sec. 400.200 of this chapter) for a period of
consecutive days longer than 6 months but less than 12 months, the MA
organization may elect to offer to the individual the option of
remaining enrolled in the MA plan if--
(A) The individual is disenrolled on the first day of the 13th
month after the individual left the service area (or residence, if
paragraph (d)(4)(i)(B) of this section applies);
(B) The individual understands and accepts any restrictions imposed
by the MA plan on obtaining these services while absent from the MA
plan's service area for the extended period, consistent with paragraph
(d)(4)(i)(C) of the section;
(C) The MA organization makes this visitor/traveler option
available to all Medicare enrollees who are absent for an extended
period from the MA plan's service area. MA organizations may limit this
visitor/traveler option to enrollees who travel to certain areas, as
defined by the MA organization, and who receive services from qualified
providers who directly provide, arrange for, or pay for health care;
and
(D) The MA organization furnishes all Medicare Parts A and B
services and all mandatory and optional supplemental benefits at the
same cost sharing levels as apply within the plan's service area; and
(E) The MA organization furnishes the services in paragraph (D) of
this paragraph consistent with Medicare access and availability
requirements at Sec. 422.112 of this part.
* * * * *
Subpart C--Benefits and Beneficiary Protections
15. Section 422.100 is amended by adding new paragraphs (f)(4) and
(f)(5) to read as follows:
Sec. 422.100 General requirements.
* * * * *
(f) * * *
(4) All local MA plans must establish an out-of pocket maximum for
Medicare A and B services that is no greater than the annual limit set
by CMS.
(5) Cost sharing for Medicare A and B services does not exceed
levels annually determined by CMS to be discriminatory.
* * * * *
16. Section 422.103 is amended by adding a new paragraph (d)(3) to
read as follows:
Sec. 422.103 Benefits under an MA MSA plan.
* * * * *
(d) * * *
(3) Is pro-rated for enrollments occurring during a beneficiary's
initial coverage election period as described at Sec. 422.62(a)(1) of
this part.
* * * * *
17. Section 422.105 is amended by revising paragraphs (b), (c), and
(f) to read as follows:
Sec. 422.105 Special rules for self-referral and point of service
option.
* * * * *
(b) Point of service option. As a general rule, a POS benefit is an
option that an MA organization may offer in an HMO plan to provide
enrollees with additional choice in obtaining specified health care
services. The organization may offer A POS option--
(1) Before January 1, 2006, under a coordinated care plan as an
additional benefit as described in section 1854(f)(1)(A) of the Act;
(2) Under an HMO plan as a mandatory supplemental benefit as
described in Sec. 422.102(a); or
(3) Under an HMO plan as an optional supplemental benefit as
described in Sec. 422.102(b).
(c) Ensuring availability and continuity of care. An MA HMO plan
that includes a POS benefit must continue to provide all benefits and
ensure access as required under this subpart.
* * * * *
(f) POS-related data. An MA organization that offers a POS benefit
through an HMO plan must report enrollee utilization data at the plan
level by both plan contracting providers (in-network) and by non-
contracting providers (out-of-network) including enrollee use of the
POS benefit, in the form and manner prescribed by CMS.
18. Section 422.108 is amended by revising paragraph (b)(3) to read
as follows:
Sec. 422.108 Medicare secondary payer (MSP) procedures.
* * * * *
(b) * * *
(3) Coordinate its benefits to Medicare enrollees with the benefits
of the primary payers, including reporting, on an ongoing basis,
information obtained related to requirements in paragraphs (b)(1) and
(b)(2) of this section in accordance with CMS instructions.
* * * * *
19. Section 422.111 is amended by adding a new paragraph (g) to
read as follows:
Sec. 422.111 Disclosure requirements.
* * * * *
(g) CMS may require an MA organization to self-disclose to its
enrollees or potential enrollees, the MA organization's performance and
contract compliance deficiencies in a manner specified by CMS.
20. Section 422.112 is amended by adding a new paragraph (a)(10) to
read as follows:
Sec. 422.112 Access to services.
* * * * *
(a) * * *
(10) Prevailing patterns of community health care delivery.
Coordinated care and PFFS MA plans that meet Medicare access and
availability requirements through direct contracting network providers
must do so consistent with the prevailing community pattern of health
care delivery in the areas where the network is being offered. Factors
making up community patterns of health care delivery that CMS will use
as a benchmark in evaluating a proposed MA plan health care delivery
network include, but are not limited to--
(i) The number and geographical distribution of eligible health
care providers available to potentially contract with an MAO to furnish
plan covered services within the proposed service area of the MA plans.
(ii) The prevailing market conditions in the service area of the MA
plan. Specifically, the number and distribution of health care
providers contracting with other health care plans (both commercial and
Medicare) operating in the service area of the plan.
[[Page 54718]]
(iii) Whether the service area is comprised of rural or urban areas
or some combination of the two.
(iv) Whether the MA plan's proposed provider network meet Medicare
time and distance standards for member access to health care providers
including specialties.
(v) Other factors that CMS determines are relevant in setting a
standard for an acceptable health care delivery network in a particular
service area.
* * * * *
Subpart D--Quality Improvement
21. Section 422.152 is amended by--
A. Revising paragraphs (a)(1) and (a)(2).
B. Redesignating paragraph (b)(3)(ii) as paragraph (b)(3)(iii).
C. Adding new paragraph (b)(3)(ii).
D. Adding new paragraph (b)(5).
F. Redesignating paragraphs (e)(2)(ii) and (e)(2)(iii) as
paragraphs (e)(2)(iii) and (e)(2)(iv), respectively.
H. Adding a new paragraph (e)(2)(ii).
The revisions and additions read as follows:
Sec. 422.152 Quality improvement program.
(a) * * *
(1) Have a chronic care improvement program that meets the
requirements of paragraph (c) of this section concerning elements of a
chronic care program and addresses populations identified by CMS based
on a review of current quality performance;
(2) Conduct quality improvement projects that can be expected to
have a favorable effect on health outcomes and enrollee satisfaction,
meet the requirements of paragraph (d) of this section, and address
areas identified by CMS; and
* * * * *
(b) * * *
(3) * * *
(ii) Collect, analyze, and report quality performance data
identified by CMS that are of the same type as those under paragraph
(b)(3)(i) of this section.
* * * * *
(5) All coordinated care contracts (including local and regional
PPOs and contracts with exclusively SNP benefit packages, cost
contracts under section 1876 of the Act, private fee-for-service
contracts, and MSA contracts with 600 or more enrollees in July of the
prior year) must contract with approved Medicare Consumer Assessment of
Healthcare Providers and Systems (CAHPS) survey vendors to conduct the
Medicare CAHPS satisfaction survey of MA plan enrollees in accordance
with CMS specifications, and submit the survey data to CMS.
* * * * *
(e) * * *
(2) * * *
(ii) Collect, analyze, and report quality performance data
identified by CMS that are of the same type as those described under
paragraph (e)(2)(i) of this section.
* * * * *
22. Section 422.153 is added to read as follows:
Sec. 422.153 Use of quality improvement organization review
information.
CMS will acquire from quality improvement organizations (QIOs) as
described in part 480 of this chapter quality review study information
as defined in Sec. 480.101(b) and subject to the requirements in Sec.
480.140(g). CMS will acquire this information, as needed, and use it
for the following limited functions:
(a) Enable beneficiaries to compare health coverage options and
select among them.
(b) Evaluate plan performance.
(c) Ensure compliance with plan requirements under this part.
(d) Develop payment models.
(e) Other purposes related to MA plans as specified by CMS.
23. Section 422.156 is amended by revising paragraphs (b)(7) and
(f) to read as follows:
Sec. 422.156 Compliance deemed on the basis of accreditation.
* * * * *
(b) * * *
(7) The requirements listed in Sec. 423.165 (b)(1) through (3) for
MA organizations that offer prescription drug benefit programs.
* * * * *
(f) Authority. Nothing in this subpart limits CMS' authority under
subparts K and O of this part, including but not limited to, the
ability to impose intermediate sanctions, civil money penalties, and
terminate a contract with an MA organization.
Subpart F--Submission of Bids, Premiums, and Related Information
and Plan Approval
24. Section 422.254 is amended by adding new paragraphs (a)(4) and
(b)(5) to read as follows:
Sec. 422.254 Submission of bids.
* * * * *
(a) * * *
(4) Substantial differences between bids. An MA organization's bid
submissions must reflect differences in benefit packages and plan costs
that CMS determines to represent substantial differences relative to a
sponsor's other bid submissions.
* * * * *
(b) * * *
(5) Actuarial valuation. The bid must be prepared in accordance
with CMS actuarial guidelines based on generally accepted actuarial
principles.
(i) A qualified actuary must certify the plan's actuarial valuation
(which may be prepared by others under his or her direction or review).
(ii) To be deemed a qualified actuary, the actuary must be a member
of the American Academy of Actuaries.
(iii) Applicants may use qualified outside actuaries to prepare
their bids.
* * * * *
25. Section 422.256 is amended by adding a new paragraph (b)(4) to
read as follows:
Sec. 422.256 Review, negotiation, and approval of bids.
* * * * *
(b) * * *
(4) Substantial differences between bids.
(i) General. CMS approves a bid only if it finds that the benefit
package and plan costs represented by that bid are substantially
different from the MA organization's other bid submissions. In order to
be considered ``substantially different,'' each bid must be
significantly different from other plans of its plan type with respect
to premiums, benefits, or cost-sharing structure.
(ii) Transition period for MA organizations with new acquisitions.
After a 2-year transition period, CMS approves a bid offered by an MA
organization (or by a parent organization to that MA organization) that
recently purchased (or otherwise acquired or merged with) another MA
organization only if it finds that the benefit package and plan costs
represented by that bid are substantially different, as provided under
paragraph (b)(4)(i) of this section, from any benefit package and plan
costs represented by another bid submitted by the same MA organization
(or parent organization to that MA organization).
* * * * *
Subpart G--Payments to Medicare Advantage Organizations
26. Section 422.306 is amended by revising paragraph (a) to read as
follows:
Sec. 422.306 Annual MA capitation rates.
* * * * *
(a) Minimum percentage increase rate. The annual capitation rate
for each MA local area is equal to the minimum percentage increase
rate, which is the
[[Page 54719]]
annual capitation rate for the area for the preceding year increased by
the national per capita MA growth percentage (defined at Sec.
422.308(a)) for the year, but not taking into account any adjustment
under Sec. 422.308(b) for a year before 2004.
* * * * *
27. A new Sec. 422.311 is added to read as follows.
Sec. 422.311 RADV audit dispute and appeal processes.
(a) Risk Adjustment Data Validation (RADV) audits. In accordance
with Sec. 422.2 and Sec. 422.310 et seq., CMS annually conducts RADV
audits to ensure risk adjusted payment integrity and accuracy.
(b) RADV audit results.
(1) MA organizations that undergo RADV audits will be issued an
audit report post medical record review that describes the results of
the RADV audit as follows:
(i) Detailed enrollee-level information relating to confirmed
enrollee HCC discrepancies.
(ii) The contract-level RADV payment error estimate in absolute
dollars.
(iii) The contract-level payment adjustment amount to be made in
absolute dollars.
(iv) An approximate timeframe for the payment adjustment.
(v) An enrollee-level description of HCC-level discrepancies that
will be eligible for dispute.
(vi) A description of the MA organization's RADV audit appeal
rights.
(2) Compliance date. The compliance date for meeting RADV medical
record submission requirements for the validation of risk adjustment
data is the due date when MA organizations selected for RADV audit must
submit medical records to CMS or its contractors.
(c) RADV audit dispute and appeal processes.
(1) Attestation process.
(i) MA organizations--
(A) May submit CMS-generated attestations from physician/
practitioner(s) in order to dispute signature or credential-related
RADV errors.
(B) That submit CMS-generated attestations must do so in accordance
with the rules under this section.
(C) Are not obligated to submit attestations to CMS.
(ii) RADV audit-related errors eligible for attestation process.
CMS will only accept an attestation to support a physician or
outpatient medical records with missing or illegible signatures or
missing or illegible credentials or both.
(iii) RADV audit-related errors ineligible for attestation process.
(A) Attestations from providers, for the purpose of resolving
coding discrepancies or other medical record documentation, will not be
permitted.
(B) The introduction of new HCCs for payment that were not
previously identified by CMS for RADV audit will not be eligible for
attestation.
(C) Inpatient provider-type medical records are not eligible for
attestation.
(iv) Manner and timing of a request for attestation.
(A) At the time CMS notifies an MA organization that it has been
selected for RADV audit, CMS provides the MA organization with the
attestation forms and instructions regarding the submission of
attestations.
(B) If an organization decides to submit attestations completed by
physicians or other practitioners, the MA organization must submit the
attestations to CMS at the same time that the MA organization is
required to submit related medical records for RADV audit.
(v) Attestation content. An attestation must accompany and
correspond to the medical record submitted for RADV audit and must meet
the following requirements:
(A) Only CMS-generated attestations will be accepted by CMS.
(B) The CMS attestation form may not be altered unless otherwise
instructed and agreed-upon in writing by CMS.
(C) Attestations must be completed and be signed and dated by the
RADV-physician/practitioner whose medical record accompanies the
attestation.
(D) Attestations must be based upon medical records that document
face-to-face encounters between beneficiaries and RADV-eligible
physicians/practitioners.
(vi) Attestation review and determination procedures.
(A) CMS reviews each submitted attestation to determine if it meets
CMS requirements and is acceptable for use during the medical record
review.
(B) CMS provides written notice of its determination(s) regarding
submitted attestations to the MA organization at the time CMS issues
its RADV audit report.
(vii) Effect of CMS' attestation determination. CMS' attestation
determination is final and binding.
(2) Documentation dispute process. An MA organization may choose to
dispute CMS' operational processing of RADV medical records using a
CMS-administered documentation dispute process.
(i) RADV-related errors eligible for documentation dispute process.
The documentation dispute process will apply only to the operational
processing of those medical records selected for RADV audit. In order
to be eligible for documentation dispute, medical records have to have
been submitted to CMS by the CMS-established deadline.
(ii) RADV-related audit errors ineligible for documentation dispute
process.
(A) Medical record coding discrepancies.
(B) MA organizations may not use the documentation dispute process
to submit new medical records in place of previously-submitted medical
records.
(C) MA organizations may not use the documentation dispute process
to introduce new HCCs for payment that were not earlier identified by
CMS for audit.
(D) MA organizations may not submit medical records for HCCs that
were in error because the MA organization failed to meet the medical
record submission deadline established by CMS.
(iii) Manner and timing of a request for documentation dispute.
(A) At the time CMS issues its RADV audit report to affected MA
organizations, CMS notifies affected MA organizations of any RADV
errors that are eligible for documentation dispute.
(B) MA organizations have 30 days from date of issuance of the RADV
audit report to request documentation dispute.
(iv) Documentation dispute review and notification procedures.
(A) CMS reviews documentation submitted by MA organizations to
determine whether it supports overturning errors listed in the MA
organization's RADV audit report.
(B) CMS provides written notice of its determination(s) to the MA
organization and notifies the MA organization of its aggregate
determinations regarding overturning errors listed in the MA
organization's RADV audit report and recalculating the MA
organization's RADV payment error.
(v) Effect of CMS documentation dispute determination. CMS'
documentation dispute determination is final and binding.
(3) RADV payment error calculation appeal process.
(i) MA organizations may appeal CMS' RADV payment error
calculation.
(ii) RADV payment error-related issues ineligible for appeal.
(A) MA organizations may not appeal RADV medical record review-
related errors.
(B) MA organizations may not appeal physician/practitioner
signature or credential-related medical record review errors.
[[Page 54720]]
(C) MA organizations may not introduce new HCCs to CMS for payment
consideration in the context of their RADV payment error calculation
appeal.
(D) MA organizations may not appeal RADV errors that result from an
MA organization's failure to submit a medical record.
(E) MA organizations may not appeal CMS' RADV payment error
calculation methodology.
(iii) Manner and timing of a request for appeal.
(A) At the time CMS issues its RADV audit report, CMS notifies
affected MA organizations in writing of their appeal rights around the
RADV payment error calculation.
(B) MA organizations have 30 days from the date of this notice to
submit a written request for reconsideration of its RADV payment error
calculation.
(iv) Burden of proof. The MA organization bears the burden of proof
in demonstrating that CMS failed to follow its stated RADV payment
error calculation methodology.
(v) Content of request. The written request for reconsideration
must specify the issues with which the MA organization disagrees and
the reasons for the disagreements.
(A) Excluding evidence pertaining to issues described at Sec.
422.311(c) (1) and (2), the written request for reconsideration may
include additional documentary evidence the MA organization wishes CMS
to consider.
(B) CMS does not accept reconsiderations for issues with the
methodology applied in any part of the RADV audit.
(vi) Conduct of written reconsideration.
(A) In conducting the written reconsideration, CMS reviews all of
the following information:
(1) The RADV payment error calculation.
(2) The evidence and findings upon which they were based.
(3) Any other written evidence submitted by the MA organization.
(B) CMS ensures that a third party--either within CMS or a CMS
contractor--not otherwise involved in the RADV payment error
calculation reviews the written request for reconsideration.
(C) The third party recalculates the payment error in accordance
with CMS RADV payment calculation procedures described in CMS' RADV
payment error calculation standard operating procedures.
(D) The third party described in paragraph (B) of this paragraph
provides his or her determination to a CMS reconsideration official not
otherwise involved in the RADV payment error calculation to review the
reconsideration determination.
(vii) Decision of the CMS reconsideration official. The CMS
reconsideration official informs the MA organization and CMS in writing
of the decision of the CMS reconsideration official.
(viii) Effect of the CMS reconsideration official. The written
reconsideration decision is final and binding unless a request for a
hearing is filed by CMS or the appellant MA organization in accordance
with paragraph (c)(4) of this section.
(4) Right to a hearing. CMS or an MA organization dissatisfied with
the written decision of the CMS reconsideration official is entitled to
a hearing as provided in this section.
(i) Manner and timing for request. A request for a hearing must be
made in writing and filed with CMS within 30 days of the date CMS and
the MA organization receives CMS' written reconsideration decision.
(ii) Content of request. The written request for hearing must
include a copy of the written decision of the CMS reconsideration
official and must specify the findings or issues in the reconsideration
decision with which either CMS or the MA organization disagrees and the
reasons for the disagreement.
(iii) Hearing procedures.
(A) The hearing will be held on the record, unless the parties
request, subject to the hearing officer's discretion, a live or
telephonic hearing. The hearing officer may schedule a live or
telephonic hearing on his/her own motion.
(B) The hearing is conducted by an official from the CMS' Office of
Hearings (CMS Hearing Officer) who neither receives testimony nor
accepts any new evidence that was not presented with the request for
reconsideration. The CMS Hearing Officer is limited to the review of
the record that was before CMS when CMS made its initial RADV payment
error calculation determination and when the CMS reconsideration
official issued the written reconsideration decision.
(C) The hearing officer has full power to make rules and establish
procedures, consistent with the law, regulations, and CMS rulings.
These powers include the authority to dismiss the appeal with prejudice
or take any other action which the hearing officer considers
appropriate for failure to comply with such rules and procedures.
(iv) Decision of the CMS Hearing Officer. The CMS Hearing Officer
decides whether the reconsideration official's decision was correct,
and sends a written decision to CMS and the MA organization, explaining
the basis for the decision.
(v) Effect of the Hearing Officer's decision. The Hearing Officer's
decision is final and binding, unless the decision is reversed or
modified by the Administrator in accordance with paragraph (c)(5) of
this section.
(5) Review by the CMS Administrator. (i) At his or her discretion,
the CMS Administrator can choose to either review or not review a case.
(ii) CMS or an MA organization that has received a Hearing Officer
decision upholding or overturning a CMS initial or reconsideration-
level RADV payment error calculation determination may request review
by the Administrator within 30 days of receipt of the Hearing Officer's
decision.
(iii) If the CMS Administrator chooses to review the case, the CMS
Administrator reviews the Hearing Officer's decision, any written
documents submitted by CMS or the MA organization to the Hearing
Officer, as well as any other information included in the record of the
Hearing Officer's decision and determines whether to uphold, reverse,
or modify the Hearing Officer's decision.
(iv) The Administrator's determination is final and binding.
Subpart K--Contracts With Medicare Advantage Organizations
28. Section 422.501 is amended by--
A. Redesignating paragraphs (b) through (e) as paragraphs (c)
through (f), respectively.
B. Adding a new paragraph (b).
C. Revising newly redesignated paragraph (c)(1) introductory text
and paragraph (c)(2).
The addition and revisions read as follows:
Sec. 422.501 Application requirements.
* * * * *
(b) Completion of a notice of intent to apply.
(1) An organization submitting an application under this section
for a particular contract year must first submit a completed Notice of
Intent to Apply by the date established by CMS. CMS will not accept
applications from organizations that do not first submit a timely
Notice of Intent to Apply.
(2) Submitting a Notice of Intent to Apply does not bind that
organization to submit an application for the applicable contract year.
(c) * * *
(1) In order to obtain a determination on whether it meets the
requirements to
[[Page 54721]]
become an MA organization and is qualified to provide a particular type
of MA plan, an entity, or an individual authorized to act for the
entity (the applicant) must fully complete all parts of a certified
application, in the form and manner required by CMS, including the
following:
* * * * *
(2) The authorized individual must thoroughly describe how the
entity and MA plan meet, or will meet, all the requirements described
in this part.
* * * * *
29. Section 422.502 is amended by--
A. Revising paragraphs (a)(1), (a)(2), and (b).
B. Adding a new paragraph (c)(2)(iii).
C. Revising paragraph (c)(3)(iii).
D. Removing paragraph (d).
The revisions read as follows:
Sec. 422.502 Evaluation and determination procedures.
(a) * * *
(1) With the exception of evaluations conducted under paragraph (b)
of this section, CMS evaluates an application for an MA contract solely
on the basis of information contained in the application itself and any
additional information that CMS obtains through other means such as on-
site visits.
(2) After evaluating all relevant information, CMS determines
whether the applicant's application meets all the requirements
described in this part.
(b) Use of information from a current or prior contract. If an MA
organization fails during the 14 months preceding the deadline
established by CMS for the submission of contract qualification
applications to comply with the requirements of the Part C program
under any current or prior contract with CMS under title XVIII of the
Act or fails to complete a corrective action plan during the 14 months
preceding the deadline established by CMS for the submission of
contract qualification applications, CMS may deny an application based
on the applicant's failure to comply with the requirements of the Part
C program under any current or prior contract with CMS even if the
applicant currently meets all of the requirements of this part.
(c) * * *
(2) * * *
(iii) If CMS does not receive a revised application within 10 days
from the date of the notice, or if after timely submission of a revised
application, CMS still finds the applicant does not appear qualified to
contract as an MA organization or has not provided enough information
to allow CMS to evaluate the application, CMS will deny the
application.
(3) * * *
(iii) The applicant's right to request a hearing in accordance with
the procedures specified in subpart N of this part.
30. Section 422.503 is amended by--
A. Revising paragraph (b)(4)(vi).
B. Adding new paragraph (b)(7).
The revisions and addition read as follows:
Sec. 422.503 General provisions.
* * * * *
(b) * * *
(4) * * *
(vi) Adopt and implement an effective compliance program, which
must include measures that prevent, detect, and correct non-compliance
with CMS' program requirements as well as measures that prevent,
detect, and correct fraud, waste, and abuse. The compliance program
must, at a minimum, include the following core requirements:
(A) Written policies, procedures, and standards of conduct that--
(1) Articulate the organization's commitment to comply with all
applicable Federal and State standards;
(2) Describe compliance expectations as embodied in the standards
of conduct,
(3) Implement the operation of the compliance program;
(4) Provide guidance to employees and others on dealing with
potential compliance issues;
(5) Identify how to communicate compliance issues to appropriate
compliance personnel;
(6) Describe how potential compliance issues are investigated and
resolved by the organization; and
(7) Include a policy of non-intimidation and non-retaliation for
good faith participation in the compliance program, including but not
limited to reporting potential issues, investigating issues, conducting
self-evaluations, audits and remedial actions, and reporting to
appropriate officials.
(B) The designation of a compliance officer and a compliance
committee who report directly to the organization's chief executive or
other senior administrator.
(1) The compliance officer, vested with the day-to-day operations
of the compliance program, must be an employee of the MA organization.
(2) The compliance officer and the compliance committee must
periodically report directly to the governing body of the MA
organization on the activities and status of the compliance program,
including issues identified, investigated, and resolved by the
compliance program.
(3) The governing body of the MA organization must be knowledgeable
about the content and operation of the compliance program and must
exercise reasonable oversight with respect to the implementation and
effectiveness of the compliance programs.
(C)(1) Each MA organization must establish and implement effective
training and education between the compliance officer and organization
employees, the MA organization's chief executive or other senior
administrator, managers and governing body members, and the MA
organization's first tier, downstream, and related entities. Such
training and education must occur at a minimum annually and must be
made a part of the orientation for a new employee, new first tier,
downstream and related entities, and new appointment to a chief
executive, manager, or governing body member.
(2) First tier, downstream, and related entities who have met the
fraud, waste, and abuse certification requirements through enrollment
into the Medicare program are deemed to have met the training and
educational requirements for fraud, waste, and abuse.
(D) Establishment and implementation of effective lines of
communication, ensuring confidentiality, between the compliance
officer, members of the compliance committee, the MA organization's
employees, managers and governing body, and the MA organization's first
tier, downstream, and related entities. Such lines of communication
must be accessible to all and allow compliance issues to be reported
including a method for anonymous and confidential good faith reporting
of potential compliance issues as they are identified.
(E) Well-publicized disciplinary standards through the
implementation of procedures which encourage good faith participation
in the compliance program by all affected individuals. These standards
must include policies that:
(1) Articulate expectations for reporting compliance issues and
assist in their resolution,
(2) Identify noncompliance or unethical behavior; and
(3) Provide for timely, consistent, and effective enforcement of
the standards when noncompliance or unethical behavior is determined.
(F) Establishment and implementation of an effective system for
routine monitoring and identification of compliance risks. The system
should include internal monitoring and audits and, as appropriate,
external audits, to evaluate the MA organization, including first tier
entities', compliance with CMS
[[Page 54722]]
requirements and the overall effectiveness of the compliance program.
(G) Establishment and implementation of procedures and a system for
promptly responding to compliance issues as they are raised,
investigating potential compliance problems as identified in the course
of self-evaluations and audits, correcting such problems promptly and
thoroughly to reduce the potential for recurrence, and ensure ongoing
compliance with CMS requirements.
* * * * *
(7) Not have terminated a contract by mutual consent under which,
as a condition of the consent, the MA organization agreed that it was
not eligible to apply for new contracts or service area expansions for
a period of 2 years per Sec. 422.508(c) of this subpart.
* * * * *
31. Section 422.504 is amended by--
A. Redesignating paragraph (e)(1)(ii) and (e)(1)(iii) as paragraph
(e)(1)(iii) and (e)(1)(iv), respectively.
B. Adding a new paragraph (e)(1)(ii).
C. Revising newly redesignated paragraph (e)(1)(iii).
D. Revising paragraph (i)(2)(i).
E. Add a new paragraph (m).
The additions and revisions read as follows:
Sec. 422.504 Contract provisions.
* * * * *
(e) * * *
(1) * * *
(ii) Compliance with CMS requirements for maintaining the privacy
and security of personal health information and other personally
identifiable information of Medicare enrollees;
(iii) The facilities of the MA organization to include computer and
other electronic systems; and
* * * * *
(i) * * *
(2) * * *
(i) HHS, the Comptroller General, or their designees have the right
to audit, evaluate, and inspect any books, contracts, computer or other
electronic systems, including medical records and documentation of the
first tier, downstream, and related to CMS' contract with the MA
organization.
* * * * *
(m)(1) CMS may determine that an MA organization is out of
compliance with Part C when the organization fails to meet performance
standards articulated in the Part C statutes, regulations, or guidance.
(2) If CMS has not already articulated a measure for determining
noncompliance, CMS may determine that a MA organization is out of
compliance when its performance represents an outlier relative to the
performance of other MA organizations.
32. Section 422.506 is amended by--
A. Revising paragraph (a)(2)(ii).
B. Removing paragraph (a)(2)(iii).
C. Revising paragraph (a)(3)(i).
D. Adding a new paragraph (b)(1)(iv).
E. Revising paragraph (b)(2)(ii).
F. Removing paragraph (b)(2)(iii).
G. Revising paragraph (b)(3).
The revisions and addition read as follows:
Sec. 422.506 Nonrenewal of contract.
(a) * * *
(2) * * *
(ii) Each Medicare enrollee by mail at least 90 calendar days
before the date on which the nonrenewal is effective. The MA
organization must also provide information about alternative enrollment
options by doing one or more of the following:
(A) Provide a CMS approved written description of alternative MA
plan options available for obtaining qualified Medicare services within
the beneficiaries' region.
(B) Place outbound calls to all affected enrollees to ensure
beneficiaries know who to contact to learn about their enrollment
options.
(3) * * *
(i) The MA organization notifies its Medicare enrollees in
accordance with paragraph (a)(2)(ii) of this section; and
* * * * *
(b) * * *
(1) * * *
(iv) The contract must be nonrenewed as to an individual MA plan if
that plan does not have a sufficient number of enrollees to establish
that it is a viable independent plan option.
(2) * * *
(ii) To each of the MA organization's Medicare enrollees by mail at
least 90 calendar days before the date on which the nonrenewal is
effective, or at the conclusion of the appeals process if applicable.
(3) Opportunity to develop and implement a corrective action plan.
(i) Before providing a notice of intent of nonrenewal of the
contract, CMS will provide the MA organization with a notice specifying
the deficiencies and reasonable opportunity to develop and implement a
corrective action plan to correct the deficiencies that form the basis
for the determination to non-renew the contract.
(ii) CMS affords the MA organization with at least 30 calendar days
in which to develop and implement a corrective action plan to correct
the deficiencies that formed the basis for the determination to non-
renew the contract.
(iii) The MA organization is solely responsible for the
identification, development, and implementation of its corrective
action plan and for demonstrating to CMS that the underlying
deficiencies have been corrected within the time period specified by
CMS in the notice requesting corrective action.
* * * * *
33. Section 422.508 is amended by adding paragraph (c) to read as
follows:
Sec. 422.508 Modification or termination of contract by mutual
consent.
* * * * *
(c) Agreement to limit new MA applications. As a condition of the
consent to a mutual termination CMS will require, as a provision of the
termination agreement language prohibiting the MA organization from
applying for new contracts or service area expansions for a period of 2
years, absent circumstances warranting special consideration.
34. Section 422.510 is amended by revising paragraphs (a), (b)
introductory text, (b)(2)(i), (b)(2)(ii), and (c) to read as follows:
Sec. 422.510 Termination of contract by CMS.
(a) Termination by CMS.
(1) CMS may at any time terminate a contract if CMS determines that
the MA organization meets any of the following:
(i) Has failed substantially to carry out the contract.
(ii) Is carrying out the contract in a manner that is inconsistent
with the efficient and effective administration of this part.
(iii) No longer substantially meets the applicable conditions of
this part.
(2) CMS may determine, in accordance with paragraph (a)(1) of this
section, that a basis exists to terminate an MA organization's contract
if--
(i) The MA organization fails to comply with any of the regulatory
requirements contained in this part or part 423 of this chapter or
both;
(ii) The MA organization fails to meet CMS performance requirements
in carrying out the regulatory requirements contained in this part or
part 423 of this chapter or both including, but not limited to, when
CMS determines that an analysis of data related to the organization's
performance indicates it is an outlier relative to that of other
organizations; or
(iii) There is credible evidence to show that the MA organization
has committed or participated in false, fraudulent, or abusive
activities
[[Page 54723]]
affecting the Medicare, Medicaid, or other State or Federal health care
programs, including submission of false or fraudulent data.
(b) Notice. If CMS decides to terminate a contract it gives notice
of the termination as follows:
(1) * * *
(2) Expedited termination of contract by CMS. (i) If CMS determines
that a delay in termination, resulting from compliance with the
procedures provided in this part prior to termination, would pose an
imminent and serious risk to the health of the individuals enrolled
with the MA organization, the effective date of termination will be
specified, in writing, by CMS.
(ii) If a termination is effective in the middle of a month, CMS
has the right to recover the prorated share of the capitation payments
made to the MA organization covering the period of the month following
the contract termination.
* * * * *
(c) Opportunity to develop and implement a corrective action plan.
(1) General. (i) Before providing a notice of intent to terminate
the contract, CMS will provide the MA organization with a notice
specifying the deficiencies and reasonable opportunity to develop and
implement a corrective action plan to correct the deficiencies that
form the basis for the determination to terminate the contract.
(ii) CMS affords the MA organization with at least 30 calendar days
in which to develop and implement a corrective action plan to correct
the deficiencies that formed the basis for the determination to
terminate the contract.
(iii) The MA organization is solely responsible for the
identification, development, and implementation of its corrective
action plan and for demonstrating to CMS that the underlying
deficiencies have been corrected within the time period specified by
CMS in the notice requesting corrective action.
(2) Exceptions. If CMS determines that a delay in termination,
resulting from compliance with the procedures provided in this part
prior to termination, would pose an imminent and serious risk to the
health of the individuals enrolled with the MA organization, the MA
organization will not be provided with an opportunity to develop and
implement a corrective action plan prior to termination.
* * * * *
35. Section 422.516 is amended by--
A. Revising the section heading.
B. Adding a new paragraph (g).
The revision and addition to read as follows:
Sec. 422.516 Validation of Part C reporting requirements.
* * * * *
(g) Data validation. Each Part C sponsor must subject information
collected under paragraph (a) of this section to a yearly independent
audit to determine their reliability, validity, completeness, and
comparability in accordance with specifications developed by CMS.
Subpart M--Grievances, Organization Determinations, and Appeals
36. Section 422.561 is amended by revising the definition of
``Representative'' to read as follows:
Sec. 422.561 Definitions.
* * * * *
Representative means an individual appointed by an enrollee or
other party, or authorized under State or other applicable law, to act
on behalf of an enrollee or other party involved in the grievance or
appeal. Unless otherwise stated in this subpart, the representative
will have all the rights and responsibilities of an enrollee or party
in filing a grievance, and in obtaining an organization determination
or in dealing with any of the levels of the appeals process, subject to
the applicable rules described in part 405 of this chapter.
37. Section 422.566 is amended by revising paragraph (b)(4) to read
as follows:
Sec. 422.566 Organization determinations.
* * * * *
(b) * * *
(4) Discontinuation or reduction of a service or an authorized
course of treatment.
* * * * *
38. Section 422.568 is amended by--
A. Redesignating paragraphs (a) through (f) as paragraphs (b)
through (g), respectively.
B. Adding a new paragraph (a).
C. Revising newly redesignated paragraph (e).
The addition and revision read as follows:
Sec. 422.568 Standard timeframes and notice requirements for
organization determinations.
(a) Method and place for filing a request. An enrollee must ask for
a standard organization determination by making a request with the MA
organization or, if applicable, to the entity responsible for making
the determination (as directed by the MA organization), in accordance
with the following:
(1) The request may be made orally or in writing, except as
provided in paragraph (a)(2) of this section.
(2) Requests for payment must be made in writing (unless the MA
organization or entity responsible for making the determination has
implemented a voluntary policy of accepting oral payment requests).
* * * * *
(e) Written notice for MA organization denials.
(1) If an MA organization decides to deny a service or payment in
whole or in part, or discontinue or reduce the level of care for an
authorized course of treatment, the organization must give the enrollee
written notice of the determination.
(2) If an enrollee requests an MA organization to provide an
explanation of a practitioner's denial of an item or service, in whole
or in part, the MA organization must give the enrollee a written
notice.
* * * * *
39. Section 422.574 is amended by revising paragraph (a) to read as
follows:
Sec. 422.574 Parties to the organization determination.
* * * * *
(a) The enrollee (including his or her representative);
* * * * *
40. Section 422.622 is amended by revising paragraph (f)(3) to read
as follows:
Sec. 422.622 Requesting immediate QIO review of the decision to
discharge from the inpatient hospital.
* * * * *
(f) * * *
(3) If the QIO determines that the enrollee still requires
inpatient hospital care, the hospital must provide the enrollee with a
notice consistent with Sec. 422.620(c) of this subpart when the
hospital or MA organization once again determines that the enrollee no
longer requires inpatient hospital care.
* * * * *
41. Section 422.624 is amended by revising paragraph (c)(1) to read
as follows:
Sec. 422.624 Notifying enrollees of termination of provider services.
* * * * *
(c) * * *
(1) The enrollee (or the enrollee's representative) has signed and
dated the notice to indicate that he or she has received the notice and
can comprehend its contents; and
* * * * *
42. Section 422.626 is amended by--
[[Page 54724]]
A. Redesignating paragraph (f) as paragraph (g).
B. Redesignating paragraph (e)(5) as paragraph (f) and revising the
newly redesignated paragraph (f).
The revisions read as follows:
Sec. 422.626 Fast-track appeals of service terminations to
independent review entities (IREs).
* * * * *
(f) Responsibilities of the provider. If an IRE reverses an MA
organization's termination decision, the provider must provide the
enrollee with a new notice consistent with Sec. 422.624(b) of this
subpart.
* * * * *
Subpart N--Medicare Contract Determinations and Appeals
43. Section 422.644 is amended by revising paragraph (c) to read as
follows:
Sec. 422.644 Notice of contract determination.
* * * * *
(c) CMS-initiated terminations.
(1) General rule. CMS mails notice to the MA organization 90
calendar days before the anticipated effective date of the termination.
(2) Exception. For terminations where CMS determines that a delay
in termination, resulting from compliance with the procedures provided
in this part prior to termination, would pose an imminent and serious
risk to the health of the individuals enrolled with the MA
organization, CMS notifies the MA organization of the date that it will
terminate the MA organization's contract.
* * * * *
44. Section Sec. 422.660 is revised to read as follows:
Sec. 422.660 Right to a hearing, burden of proof, standard of proof,
and standards of review.
(a) Right to a hearing. The following parties are entitled to a
hearing:
(1) A contract applicant that has been determined to be unqualified
to enter into a contract with CMS under Part C of Title XVIII of the
Act in accordance with Sec. 422.501 and Sec. 422.502.
(2) An MA organization whose contract has been terminated under
Sec. 422.510 of this part.
(3) An MA organization whose contract has not been renewed under
Sec. 422.506 of this part.
(4) An MA organization who has had an intermediate sanction imposed
in accordance with Sec. 422.752(a) through (b) of this part.
(b) Burden of proof, standard of proof, and standards of review at
a hearing.
(1) During a hearing to review a contract determination as
described at Sec. 422.641(a) of this subpart, the applicant has the
burden of proving by a preponderance of the evidence that CMS'
determination was inconsistent with the requirements of Sec. 422.501
and Sec. 422.502 of this part.
(2) During a hearing to review a contract determination as
described at Sec. 422.641(b) of this subpart, the MA organization has
the burden of proving by a preponderance of the evidence that CMS'
determination was inconsistent with the requirements of Sec. 422.506
of this part.
(3) During a hearing to review a contract determination as
described at Sec. 422.641(c) of this subpart, the MA organization has
the burden of proving by a preponderance of the evidence that CMS'
determination was inconsistent with the requirements of Sec. 422.510
of this part.
(4) During a hearing to review the imposition of an intermediate
sanction as described at Sec. 422.750 of this part, the MA
organization has the burden of proving by a preponderance of the
evidence that CMS' determination was inconsistent with the requirements
of Sec. 422.752 of this part.
(c) Timing of favorable decisions. Notice of any decision favorable
to the MA organization appealing a determination that it is not
qualified to enter into a contract with CMS must be issued by September
1 for the contract in question to be effective on January 1 of the
following year.
45. Section 422.662 is amended by revising paragraphs (a) and (b)
to read as follows:
Sec. 422.662 Request for hearing.
(a) Method and place for filing a request. (1) A request for a
hearing must be made in writing and filed by an authorized official of
the contract applicant or MA organization that was the party to the
determination under the appeal.
(2) The request for the hearing must be filed in accordance with
the requirements specified in the notice.
(b) Time for filing a request. A request for a hearing must be
filed within 15 calendar days after the receipt of the notice of the
contract determination or intermediate sanction.
* * * * *
46. Section 422.664 is amended by revising paragraph (b)(2) to read
as follows:
Sec. 422.664 Postponement of effective date of a contract
determination when a request for a hearing is filed timely.
* * * * *
(b) * * *
(2) If CMS determines that a delay in termination, resulting from
compliance with the procedures provided in this part prior to
termination, would pose an imminent and serious risk to the health of
individuals enrolled with the MA organization, the date of termination
will not be postponed if the MA organization requests a hearing.
47. Section 422.670 is revised to read as follows:
Sec. 422.670 Time and place of hearing.
(a) The hearing officer--
(1) Fixes a time and place for the hearing, which is not to exceed
30 calendar days after the receipt of the request for the hearing; and
(2) Sends written notice to the parties that informs the parties of
the general and specific issues to be resolved, the burden of proof,
and information about the hearing procedure.
(b)(1) The hearing officer may, on his or her own motion, change
the time and place of the hearing.
(2) The hearing officer may adjourn or postpone the hearing.
(c)(1) The MA organization or CMS may request an extension by
filing a written request no later than 5 calendar days prior to the
scheduled hearing.
(2) When either the MA organization or CMS requests an extension,
the hearing officer will provide a one-time 15 calendar day extension.
(3) Additional extensions may be granted at the discretion of the
hearing officer.
48. Section 422.676 is amended by revising paragraph (d) to read as
follows:
Sec. 422.676 Conduct of hearing.
* * * * *
(d) The MA organization bears the burden of going forward and must
first present evidence and argument before CMS presents its evidence
and argument.
49. Section 422.682 is revised to read as follows:
Sec. 422.682 Witness lists and documents.
Witness lists and documents must be identified and exchanged at
least 5 calendar days before the scheduled hearing.
50. Section 422.692 is amended by revising paragraphs (a) and (c)
to read as follows:
Sec. 422.692 Review by the Administrator.
(a) Request for review by Administrator. CMS or an MA organization
that has received a hearing decision may request a review by the
Administrator within 15 calendar days after receipt of the hearing
decision as provided under Sec. 422.690(b). Both the MA organization
and CMS may provide
[[Page 54725]]
written arguments to the Administrator for review.
* * * * *
(c) Notification of Administrator determination. The Administrator
notifies both parties of his or her determination regarding review of
the hearing decision within 30 calendar days after receipt of request
for review. If the Administrator declines to review the hearing
decision or the Administrator does not make a determination regarding
review within 30 calendar days, the decision of the hearing officer is
final.
* * * * *
51. Section 422.696 is amended by revising the section heading and
paragraph heading for paragraph (a) to read as follows:
Sec. 422.696 Reopening of a contract determination or decision of a
hearing officer or the Administrator.
(a) Contract determination. * * *
* * * * *
Subpart O--Intermediate Sanctions
52. Section 422.750 is amended by revising paragraph (a) to read as
follows:
Sec. 422.750 Types of intermediate sanctions and civil money
penalties.
(a) The following intermediate sanctions may be imposed and will
continue in effect until CMS is satisfied that the deficiencies that
are the basis for the sanction determination have been corrected and
are not likely to recur:
(1) Suspension of the MA organization's enrollment of Medicare
beneficiaries.
(2) Suspension of payment to the MA organization for Medicare
beneficiaries enrolled after the date CMS notifies the organization of
the intermediate sanction.
(3) Suspension of all marketing activities to Medicare
beneficiaries by an MA organization.
* * * * *
53. Section 422.752 is amended by--
A. Revising paragraphs (a) introductory text, (a)(1), (a)(3), and
(a)(4).
B. In paragraph (c)(1), removing the cross-reference
``422.510(a)(4)'' and adding the cross-reference ``Sec.
422.510(a)(2)(iii) of this part'' in its place.
C. In paragraph (c)(2)(iii), removing the phrase ``pursuant to
422.510(a)(4)'' and adding the phrase ``under Sec. 422.510(a)(2)(iii)
of this part'' in its place.
The revisions read as follows:
Sec. 422.752 Basis for imposing intermediate sanctions and civil
money penalties.
(a) All intermediate sanctions. For the violations listed in this
paragraph, CMS may impose one or more of the sanctions specified in
Sec. 422.750(a) of this subpart on any MA organization with a
contract. The MA organization may also be subject to other remedies
authorized under law.
(1) Fails substantially to provide medically necessary items and
services that are required (under law or under the contract) to be
provided to an individual covered under the contract, if the failure
has adversely affected (or has the substantial likelihood of adversely
affecting) the individual.
* * * * *
(3) Acts to expel or refuses to re-enroll a beneficiary in
violation of the provisions of this part.
(4) Engages in any practice that would reasonably be expected to
have the effect of denying or discouraging enrollment (except as
permitted by this part) by eligible individuals with the organization
whose medical condition or history indicates a need for substantial
future medical services.
* * * * *
54. Section 422.756 amended by--
A. Revising paragraph (b).
B. Removing paragraph (c).
C. Redesignating paragraphs (d) through (f) as paragraphs (c)
through (e), respectively.
D. Revising the newly redesignated paragraphs (c)(1) and (c)(3).
The revisions read as follows:
Sec. 422.756 Procedures for imposing intermediate sanctions and civil
money penalties.
* * * * *
(b) Hearing. (1) The MA organization may request a hearing before a
CMS hearing officer.
(2) A written request must be received by the designated CMS office
within 15 calendar days after the receipt of the notice.
(3) A request for a hearing under Sec. 422.660 does not delay the
date specified by CMS when the sanction becomes effective.
(4) The MA organization must follow the right to a hearing
procedure as specified at Sec. 422.660 through Sec. 422.684.
(c) Effective date and duration of sanction. (1) Effective date.
The effective date of the sanction is the date specified by CMS in the
notice.
* * * * *
(3) Duration of sanction. The sanction remains in effect until CMS
is satisfied that the deficiencies that are the basis for the sanction
determination have been corrected and are not likely to recur.
(i) CMS may require that the MA organization hire an independent
auditor to provide CMS with additional information to determine if the
deficiencies that are the basis for the sanction determination have
been corrected and are not likely to recur. The independent auditor
must work in accordance with CMS specifications and must be willing to
attest that a complete and full independent review has been performed.
(ii) In instances where marketing or enrollment or both
intermediate sanctions have been imposed, CMS may require an MA
organization to market or to accept enrollments or both for a limited
period of time in order to assist CMS in making a determination as to
whether the deficiencies that were the bases for the intermediate
sanctions have been corrected and are not likely to recur.
(A) If, following this time period, CMS determines the deficiencies
have not been corrected or are likely to recur, the intermediate
sanctions will remain in effect until such time that CMS is assured the
deficiencies have been corrected and are not likely to recur.
(B) The MA organization does not have a right to a hearing under
Sec. 422.660(a)(4) of this part to challenge CMS' determination to
keep the intermediate sanctions in effect.
* * * * *
Subpart V--Medicare Advantage Marketing Requirements
55. Section 422.2260 is amended by revising paragraph (5)(vii) of
the definition of ``Marketing materials'' to read as follows:
Sec. 422.2260 Definitions concerning marketing materials.
* * * * *
(5) * * *
(vii) Membership activities--Current enrollee communication
materials. Current enrollee communication materials include any
informational materials that are--
(A) Targeted to current enrollees; and
(B) Customized or limited to a subset of enrollees or apply to a
specific situation; or
(C) Cover claims processing or other operational issues.
56. Section 422.2262 is amended by--
A. Revising paragraphs (a)(1) and (b).
B. Adding new paragraphs (c) and (d).
The revisions and additions read as follows:
[[Page 54726]]
Sec. 422.2262 Required use of standardized model materials.
(a) * * *
(1) Except as provided in paragraph (b) of this section, an MA
organization may not distribute any marketing materials (as defined in
Sec. 422.2260 of this subpart), or election forms, or make such
materials or forms available to individuals eligible to elect an MA
organization unless--
(i) At least 45 days (or 10 days if using certain types of
marketing materials that use, without modification, proposed model
language and format, including standardized language and formatting, as
specified by CMS) before the date of distribution the MA organization
has submitted the material or form to CMS for review under the
guidelines in Sec. 422.2264 of this subpart; and
(ii) CMS does not disapprove the distribution of new material or
form.
* * * * *
(b) File and use. The MA organization may distribute certain types
of marketing material, designated by CMS, 5 days following their
submission to CMS if the MA organization certifies that in the case of
these marketing materials, it followed all applicable marketing
guidelines and, when applicable, used model language specified by CMS
without modification.
(c) Standardized model marketing materials. When specified by CMS,
organizations must use standardized formats and language in model
materials.
(d) Current enrollee communication materials. Current enrollee
communication materials may be reviewed by CMS, which may upon review
determine that such materials must be modified, or may no longer be
used.
PART 423--MEDICARE PROGRAM; MEDICARE PRESCRIPTION DRUG PROGRAM
57. The authority citation for part 423 continues to read as
follows:
Authority: Secs. 1102, 1860D-1 through 1860D-42, and 1871 of the
Social Security Act (42 U.S.C. 1302, 1395w-101 through 1395w-152,
and 1395hh).
Subpart B--Eligibility and Enrollment
58. Section 423.34 is revised to read as follows:
Sec. 423.34 Enrollment of low-income subsidy eligible individuals.
(a) General rule. CMS must ensure the enrollment into Part D plans
of low-income subsidy eligible individuals who fail to enroll in a Part
D plan.
(b) Definitions.
Full-benefit dual-eligible individual. For purposes of this
section, a full-benefit dual eligible individual means an individual
who is--
(1) Determined eligible by the State for--
(i) Medical assistance for full-benefits under Title XIX of the Act
for the month under any eligibility category covered under the State
plan or comprehensive benefits under a demonstration under section 1115
of the Act; or
(ii) Medical assistance under section 1902(a)(10)(C) of the Act
(medically needy) or section 1902(f) of the Act (States that use more
restrictive eligibility criteria than are used by the SSI program) for
any month if the individual was eligible for medical assistance in any
part of the month.
(2) Eligible for Part D in accordance with Sec. 423.30(a) of this
subpart.
Low-income subsidy-eligible individual. For purposes of this
section, a low-income subsidy eligible individual means an individual
who meets the definition of full subsidy eligible (including full
benefit dual eligible individuals) or other subsidy eligible in Sec.
423.772 of this part.
(c) Reassigning low-income subsidy-eligible individuals.
Notwithstanding Sec. 423.32(e) of this subpart, during the annual
coordinated election period, CMS may reassign certain low-income
subsidy-eligible individuals in another PDP if CMS determines that the
further enrollment is warranted.
(d) Enrollment rules.
(1) General rule. Except for low-income subsidy eligible
individuals who are qualifying covered retirees with a group health
plan sponsor as specified in paragraph (d)(3) of this section, CMS
enrolls those individuals who fail to enroll in a Part D plan into a
PDP offering basic prescription drug coverage in the area where the
beneficiary resides that has a monthly beneficiary premium amount that
does not exceed the low-income subsidy amount (as defined in Sec.
423.780(b) of this part). In the event that there is more than one PDP
in an area with a monthly beneficiary premium at or below the low-
income premium subsidy amount, individuals are enrolled in such PDPs on
a random basis.
(2) Individuals enrolled in an MSA plan or one of the following
that does not offer a Part D benefit. Low-income subsidy eligible
individuals enrolled in an MA private fee-for-service plan or cost-
based HMO or CMP that does not offer qualified prescription drug
coverage or an MSA plan and who fail to enroll in a Part D plan must be
enrolled into a PDP plan as described in paragraph (d)(1) of this
section.
(3) Exception for individuals who are qualifying covered retirees.
(i) Full benefit dual eligible individuals who are qualifying
covered retirees as defined in Sec. 423.882 of this part, and for whom
CMS has approved the group health plan sponsor to receive the
retirement drug subsidy described in subpart R of this part, also are
automatically enrolled in a Part D plan, consistent with this
paragraph, unless they elect to decline that enrollment.
(ii) Before effectuating such an enrollment, CMS provides notice to
such individuals of their choices and advises them to discuss the
potential impact of Medicare Part D coverage on their group health plan
coverage. The notice informs individuals that they will be deemed to
have declined to enroll in Part D unless they affirmatively enroll in a
Part D plan or contact CMS and confirm that they wish to be auto-
enrolled in a PDP. Individuals who elect not to be auto-enrolled, may
enroll in Medicare Part D at a later time if they choose to do so.
(iii) All other low-income subsidy eligible beneficiaries who are
qualified covered retirees are not enrolled by CMS into PDPs.
(e) Declining enrollment and disenrollment. Nothing in this section
prevents a low-income subsidy eligible individual from--
(1) Affirmatively declining enrollment in Part D; or
(2) Disenrolling from the Part D plan in which the individual is
enrolled and electing to enroll in another Part D plan during the
special enrollment period provided under Sec. 423.38.
(f) Effective date of enrollment for full-benefit dual eligible
individuals. Enrollment of full-benefit dual eligible individuals under
this section must be effective as follows:
(1) January 1, 2006 for individuals who are full-benefit dual-
eligible individuals as of December 31, 2005.
(2) The first day of the month the individual is eligible for Part
D under Sec. 423.30(a)(1) for individuals who are Medicaid eligible
and subsequently become newly eligible for Part D under Sec.
423.30(a)(1) on or after January 1, 2006.
(3) For individuals who are eligible for Part D under Sec.
423.30(a)(1) of this subpart and subsequently become newly eligible for
Medicaid on or after January 1, 2006, enrollment is effective with the
first day of the month when the individuals become eligible for both
Medicaid and Part D.
(g) Effective date of enrollment for non-full-benefit dual-eligible
individuals who are low-income subsidy-eligible individuals. The
[[Page 54727]]
effective date for non-full-benefit dual-eligible individuals who are
low-income subsidy-eligible individuals is no later than the first day
of the second month after CMS determines that they meet the criteria
for enrollment under this section.
59. Section 423.38 is amended by revising paragraph (c)(4) to read
as follows:
Sec. 423.38 Enrollment periods.
* * * * *
(c) * * *
(4) The individual is a full-subsidy eligible individual or other
subsidy-eligible individual as defined in Sec. 423.772 of this part.
* * * * *
60. Section 423.44 is amended by--
A. Redesignating paragraphs (d)(1)(iii) and (d)(1)(iv) as
paragraphs (d)(1)(iv) and (d)(1)(v), respectively.
B. Adding a new paragraph (d)(1)(iii).
C. Redesignating the introductory text of paragraph (d)(5) as
paragraph (d)(5)(i).
D. Adding new paragraph (d)(5)(ii).
The revisions and additions read as follows:
Sec. 423.44 Involuntary disenrollment by the PDP.
* * * * *
(d) * * *
(1) * * *
(iii) The PDP sponsor provides the individual with a grace period,
that is, an opportunity to pay past due premiums in full. The grace
period must--
(A) Be at least 2 months; and
(B) Begin on the first day of the month for which the premium is
unpaid.
* * * * *
(5) * * *
(ii) Special rule. If the individual has not moved from the PDP
service area, but has been absent from the service area for more than
12 consecutive months, the PDP sponsor must disenroll the individual
from the plan effective on the first day of the 13th month after the
individual left the service area.
* * * * *
Subpart C--Benefits and Beneficiary Protections
61. Section 423.100 is amended by adding the definitions of ``Drug
category or class,'' ``Major or life threatening clinical
consequences,'' ``Multiple drugs,'' ``Restricted access,'' and
``Significant need for access to multiple drugs'' to read as follows:
Sec. 423.100 Definitions.
* * * * *
Drug category or class means, for the purpose of Sec.
423.120(b)(2)(v) of the subpart, the identification of a drug grouping
that is reasonable to identify the applicable drug products.
* * * * *
Major or life threatening clinical consequences means consequences
in which serious clinical events may arise as a result of not taking a
drug that can lead to patient hospitalization, or a persistent or
significant disability or incapacity, or that can result in death.
Multiple drugs mean two or more Part D drugs.
* * * * *
Restricted access means, for the purposes of Sec.
423.120(b)(2)(v)(A) of this subpart, an enrollee who but for Sec.
423.120(b)(2)(v) of this subpart urgently requires a Part D drug but is
waiting for an expedited redetermination by a Part D plan or an CMS
independent review entity with respect to coverage of that drug.
* * * * *
Significant need for access to multiple drugs means instances in
which --
(1) There is a need for simultaneous use of drugs within a drug
grouping because such drugs work in combination with each other; or
(2) There is a strong likelihood of sequential use of drugs within
a class or category within a short period of time due to the unique
effects the drugs have on various individuals.
* * * * *
62. Section 423.104 is amended by--
A. Revising paragraph (b).
B. Adding a new paragraph (d)(2)(iii).
The revision and addition read as follows:
Sec. 423.104 Requirements related to qualified prescription drug
coverage.
* * * * *
(b) Availability of prescription drug plan. A PDP sponsor offering
a prescription drug plan must offer the plan--
(1) To all Part D eligible beneficiaries residing in the plan's
service area; and
(2) At a uniform premium, with uniform benefits and level of cost-
sharing throughout the plan's service.
* * * * *
(d) * * *
(2) * * *
(iii) Tiered cost sharing under paragraph (d)(2)(ii) of this
section may not exceed levels annually determined by CMS to be
discriminatory.
* * * * *
63. Section 423.112 is amended by revising paragraph (a) to read as
follows:
Sec. 423.112 Establishment of prescription drug plan sponsor service
areas.
(a) Service area for prescription drug plan sponsors. The service
area for a prescription drug plan sponsor other than a fallback
prescription drug plan sponsor consists of one or more PDP regions as
established under paragraphs (b) and (c) of this section.
* * * * *
64. Section 423.120 is amended by--
A. Revising paragraph (a).
B. Redesignating paragraph (b)(1)(ix) as paragraph (b)(1)(x).
C. Adding a new paragraph (b)(1)(ix).
D. Revising paragraph (b)(2)(v).
E. Adding new paragraph (b)(2)(vi).
F. Revising paragraph (b)(3).
G. Redesignating paragraph (c) as paragraph (c)(1).
H. Adding new paragraphs (c)(2) through (c)(4).
The revisions and additions read as follows:
Sec. 423.120 Access to covered Part D drugs.
(a) Assuring pharmacy access--(1) Standards for convenient access
to network pharmacies. Except as provided in paragraph (a)(7) of this
section, a Part D sponsor (as defined in Sec. 423.4 of this part) must
have a contracted pharmacy network consisting of retail pharmacies
sufficient to ensure that, for beneficiaries residing in each State in
a PDP sponsor's service area (as defined in Sec. 423.112(a) of this
part), each State in a regional MA-organization's service area (as
defined in Sec. 422.2 of this part), the entire service area of a
local MA organization (as defined in Sec. 422.2 of this chapter) or
the entire geographic area of a cost contract (as defined in Sec.
417.401 of this chapter) all of the following requirements are
satisfied:
(i) At least 90 percent of Medicare beneficiaries, on average, in
urban areas served by the Part D sponsor live within 2 miles of a
network pharmacy that is a retail pharmacy or a pharmacy described
under paragraph (a)(2) of this section.
(ii) At least 90 percent of Medicare beneficiaries, on average, in
suburban areas served by the Part D sponsor live within 5 miles of a
network pharmacy that is a retail pharmacy or a pharmacy described
under paragraph (a)(2) of this section.
(iii) At least 70 percent of Medicare beneficiaries, on average, in
rural areas served by the Part D sponsor live within 15 miles of a
network pharmacy that is a retail pharmacy or a pharmacy described
under paragraph (a)(2) of this section.
(2) Applicability of some non-retail pharmacies to standards for
convenient access. Part D sponsors may count
[[Page 54728]]
I/T/U pharmacies and pharmacies operated by Federally Qualified Health
Centers and Rural Health Centers toward the standards for convenient
access to network pharmacies in paragraph (a)(1) of this section.
(3) Access to non-retail pharmacies. A Part D sponsor's contracted
pharmacy network may be supplemented by non-retail pharmacies,
including pharmacies offering home delivery via mail-order and
institutional pharmacies, provided the requirements of paragraph (a)(1)
of this section are met.
(4) Access to home infusion pharmacies. A Part D sponsor's
contracted pharmacy network must provide adequate access to home
infusion pharmacies consistent with written policy guidelines and other
CMS instructions. A Part D plan must ensure that such network
pharmacies, at a minimum meet all the following requirements:
(i) Are capable of delivering home-infused drugs in a form that can
be administered in a clinically appropriate fashion.
(ii) Are capable of providing infusible Part D drugs for both
short-term acute care and long-term chronic care therapies.
(iii) Ensure that the professional services and ancillary supplies
necessary for home infusion therapy are in place before dispensing Part
D home infusion drugs.
(iv) Provide delivery of home infusion drugs within 24 hours of
discharge from an acute care setting, or later if so prescribed.
(5) Access to long-term care pharmacies. A Part D sponsor must
offer standard contracting terms and conditions, including performance
and service criteria for long-term care pharmacies that CMS specifies,
to all long-term care pharmacies in its service area. The sponsor must
provide convenient access to long-term care pharmacies consistent with
written policy guidelines and other CMS instructions.
(6) Access to I/T/U pharmacies. A Part D sponsor must offer
standard contracting terms and conditions conforming to the model
addendum that CMS develops, to all I/T/U pharmacies in its service
area. The sponsor must provide convenient access to I/T/U pharmacies
consistent with written policy guidelines and other CMS instructions.
(7) Waiver of pharmacy access requirements. CMS waives the
requirements under paragraph (a)(1) of this section in the case of
either of the following:
(i) An MA organization or cost contract (as described in section
1876(h) of the Act) that provides its enrollees with access to covered
Part D drugs through pharmacies owned and operated by the MA
organization or cost contract, provided the organization's or plan's
pharmacy network meets the access standard set forth--
(A) At Sec. 422.112 of this chapter for an MA organization; or
(B) At Sec. 417.416(e) of this chapter for a cost contract.
(ii) An MA organization offering a private fee-for-service plan
described in Sec. 422.4 of this chapter that--
(A) Offers qualified prescription drug coverage; and
(B) Provides plan enrollees with access to covered Part D drugs
dispensed at all pharmacies, without regard to whether they are
contracted network pharmacies and without charging cost-sharing in
excess of that described in Sec. 423.104(d)(2) and (d)(5).
(8) Pharmacy network contracting requirements. In establishing its
contracted pharmacy network, a Part D sponsor offering qualified
prescription drug coverage--
(i) Must contract with any pharmacy that meets the Part D sponsor's
standard terms and conditions; and
(ii) May not require a pharmacy to accept insurance risk as a
condition of participation in the Part D sponsor's contracted pharmacy
network.
(9) Differential cost-sharing for preferred pharmacies. A Part D
sponsor offering a Part D plan that provides coverage other than
defined standard coverage may reduce copayments or coinsurance for
covered Part D drugs obtained through a preferred pharmacy relative to
the copayments or coinsurance applicable for such drugs when obtained
through a non-preferred pharmacy. Such differentials are taken into
account in determining whether the requirements under Sec.
423.104(d)(2) and (d)(5) and Sec. 423.104(e) are met. Any cost-sharing
reduction under this section must not increase CMS payments to the Part
D plan under Sec. 423.329.
(10) Level playing field between mail-order and network pharmacies.
A Part D sponsor must permit its Part D plan enrollees to receive
benefits, which may include a 90-day supply of covered Part D drugs, at
any of its network pharmacies that are retail pharmacies. A Part D
sponsor may require an enrollee obtaining a covered Part D drug at a
network pharmacy that is a retail pharmacy to pay any higher cost-
sharing applicable to that covered Part D drug at the network pharmacy
that is a retail pharmacy instead of the cost-sharing applicable to
that covered Part D drug at the network pharmacy that is a mail-order
pharmacy.
(b) * * *
(1) * * *
(ix) Reviews and approves all clinical prior authorization
criteria, step therapy protocols, and quantity limit restrictions
applied to each covered Part D drug.
* * * * *
(2) * * *
(v) Beginning with contract year 2011, except as provided in
paragraph (b)(2)(vi) of this section, a Part D sponsor's formulary will
include all Part D drugs in a category or class for which both of the
following apply:
(A) Restricted access to the drugs in the category or class would
have major or life threatening clinical consequences for individuals
who have a disease or disorder treated by drugs in such category or
class; and
(B) There is a significant need for such individuals to have access
to multiple drugs within a category or class due to unique chemical
actions and pharmacological effects of the drugs within a category or
class.
(vi) Exceptions to paragraph (b)(2)(v) of this section are as
follows:
(A) Drug products that are rated as therapeutically equivalent
(under the Food and Drug Administration's most recent publication of
``Approved Drug Products with Therapeutic Equivalence Evaluations,''
also known as the Orange Book).
(B) Utilization management processes that limit the quantity of
drugs due to safety.
(C) Other drugs that CMS specifies through a process that is based
upon scientific evidence and medical standards of practice (and, in the
case of antiretroviral medications, is consistent with the Department
of Health and Human Services Guidelines for the Use of Antiretroviral
Agents in HIV-1-Infected Adults and Adolescents) and which permits
public notice and comment.
(3) Transition process. A Part D sponsor must provide for an
appropriate transition process for enrollees prescribed Part D drugs
that are not on its Part D plan's formulary (including Part D drugs
that are on a sponsor's formulary but require prior authorization or
step therapy under a plan's utilization management rules). The
transition process must:
(i) Be applicable to all of the following:
(A) New enrollees into Part D plans following the annual
coordinated election period.
(B) Newly eligible Medicare enrollees from other coverage.
[[Page 54729]]
(C) Individuals who switch from one plan to another after the start
of the contract year.
(D) Current enrollees remaining in the plan affected by formulary
changes.
(ii) Ensure access to a temporary supply of drugs within the first
90 days of coverage under a new plan. This 90-day timeframe applies to
retail, home infusion, long-term care and mail-order pharmacies,
(iii) Ensure the provision of a temporary fill when an enrollee
requests a fill of a non-formulary drug during the time period
specified in paragraph (ii) of this paragraph (including Part D drugs
that are on a plan's formulary but require prior authorization or step
therapy under a plan's utilization management rules).
(A) In the outpatient setting, the one-time, temporary supply of
non-formulary Part D drugs (including Part D drugs that are on a
sponsor's formulary but require prior authorization or step therapy
under a sponsor's utilization management rules) must be for at least 30
days of medication, unless the prescription is written by a prescriber
for less than 30 days and requires the Part D sponsor to allow multiple
fills to provide up to a total of 30 days of medication.
(B) In the long-term care setting, the temporary supply of non-
formulary Part D drugs (including Part D drugs that are on a sponsor's
formulary but require prior authorization or step therapy under a
sponsor's utilization management rules) must be for up to 90 days in
31-day supply increments (unless the prescription is written for less
than 31 days).
(iv) Ensure written notice is provided to each affected enrollee
within 3 business days of the temporary fill.
(v) Ensure that reasonable efforts are made to notify prescribers
of affected enrollees who receive a transition notice under paragraph
(b)(3)(iv) of this section.
(c) * * *
(2) When processing Part D claims, a Part D sponsor or its
intermediary must comply with the electronic transaction standards
established by 45 CFR 162.1102. CMS will issue guidance on the use of
conditional fields within such standards.
(3) A Part D sponsor must require its network pharmacies to submit
claims to the Part D sponsor or its intermediary whenever the card
described in paragraph (c)(1) of this section is presented or on file
at the pharmacy unless the enrollee expressly requests that a
particular claim not be submitted to the Part D sponsor or its
intermediary.
(4) A part D sponsor must assign a unique--
(i) Part D BIN or RxBIN and Part D processor control number (RxPCN)
combination to its Medicare line of business; and
(ii) Part D cardholder identification number (RxID) to each
Medicare Part D enrollee to clearly identify Medicare Part D
beneficiaries.
65. Section 423.128 is amended by adding a new paragraph (f) to
read as follows:
Sec. 423.128 Dissemination of Part D plan information.
* * * * *
(f) Disclosure requirements. CMS may require a Part D plan sponsor
to disclose to its enrollees or potential enrollees, the Part D plan
sponsor's performance and contract compliance deficiencies in a manner
specified by CMS.
66. Section 423.132 is amended by--
A. Revising the introductory text of paragraph c.
B. In paragraphs (c)(2) and (c)(3), removing the ``;'' and adding a
``.'' in its place.
C. In paragraph (c)(4), removing ``; and'' and adding a ``.'' in
its place.
D. Redesignating paragraph (c)(5) as (c)(6).
E. Adding a new paragraph (c)(5).
F. Revising paragraph (d).
The revisions and additions read as follows:
Sec. 423.132 Public disclosure of pharmaceutical prices for
equivalent drugs.
* * * * *
(c) Waiver of public disclosure requirement. CMS waives the
requirement under paragraph (a) of this section in any of the following
cases:
* * * * *
(5) A long-term care network pharmacy.
(d) Modification of timing requirement. CMS modifies the
requirement under paragraph (b) of this section under circumstances
where CMS deems compliance with this requirement to be impossible or
impracticable.
Subpart D--Cost Control and Quality Improvement Requirements
67. Section 423.153 is amended by--
A. Adding paragraphs (d)(1)(v) through (vii).
B. Revising paragraph (d)(2).
The additions and revisions read as follows:
Sec. 423.153 Drug utilization management, quality assurance, and
medication therapy management programs (MTMPs).
* * * * *
(d) * * *
(1) * * *
(v) Must enroll targeted beneficiaries using an opt-out method of
enrollment only.
(vi) Must target beneficiaries for enrollment in the MTMP at least
quarterly during each plan year.
(vii) Must offer a minimum level of medication therapy management
services for each beneficiary enrolled in the MTMP that includes all of
the following:
(A) Interventions for both beneficiaries and prescribers.
(B) Annual comprehensive medication reviews with written summaries.
The comprehensive medical review must include an interactive, person-
to-person consultation performed by a pharmacist or other qualified
provider unless the beneficiary is in a long-term care setting.
(C) Quarterly targeted medication reviews with follow-up
interventions when necessary.
(2) Targeted beneficiaries. Targeted beneficiaries for the MTMP
described in paragraph (d)(1) of this section are enrollees in the
sponsor's Part D plan who--
(i) Have multiple chronic diseases, with three chronic diseases
being the maximum number a Part D plan sponsor may require for targeted
enrollment;
(ii) Are taking multiple Part D drugs, with eight Part D drugs
being the maximum number of drugs a Part D plan sponsor may require for
targeted enrollment; and
(iii) Are likely to incur costs for covered Part D drugs that
exceed the initial coverage limit for the Part D defined standard
benefit for the applicable Part D plan year.
* * * * *
68. Section 423.156 is revised to read as follows:
Sec. 423.156 Consumer satisfaction surveys.
Part D contracts with 600 or more enrollees as of July of the prior
year must contract with approved Medicare Consumer Assessment of
Healthcare Providers and Systems (CAHPS) survey vendors to conduct the
Medicare CAHPS satisfaction survey of Part D plan enrollees in
accordance with CMS specifications and submit the survey data to CMS.
69. Section 423.165 is amended by--
A. Removing paragraph (b)(4).
B. Revising paragraph (f).
The revision reads as follows:
Sec. 423.165 Compliance deemed on the basis of accreditation.
* * * * *
(f) Authority. Nothing in this limits CMS' authority under subparts
K and O
[[Page 54730]]
of this part, including, but not limited to the ability to impose
intermediate sanctions, civil money penalties, and terminate a contract
with a Part D plan sponsor.
Subpart F--Submission of Bids and Monthly Beneficiary Premiums:
Plan Approval
70. Section 423.265 is amended by revising paragraph (b) to read as
follows:
Sec. 423.265 Submission of bids and related information.
* * * * *
(b) Bid submission. (1) General. Not later than the first Monday in
June, each potential Part D sponsor must submit bids and supplemental
information described in this section for each Part D plan it intends
to offer in the subsequent calendar year.
(2) Substantial differences between bids. Potential Part D
sponsors' bid submissions must reflect differences in benefit packages
and plan costs that CMS determines to represent substantial differences
relative to a sponsor's other bid submissions. In order to be
considered ``substantially different,'' each bid must be significantly
different from the sponsor's other bids with respect to beneficiary
out-of-pocket costs and formulary structures.
* * * * *
71. Section 423.272 is amended by adding a new paragraph (b)(3) to
read as follows:
Sec. 423.272 Review and negotiation of bid and approval of plans
submitted by potential Part D sponsors.
* * * * *
(b) * * *
(3) Substantial differences between bids--(i) General. CMS approves
a bid only if it finds that the benefit package and plan costs
represented by that bid are substantially different as provided under
Sec. 423.265 (b)(2) of this subpart from the benefit package
represented by another bid submitted by the same Part D sponsor.
(ii) Transition period for PDP sponsors with new acquisitions.
After a 2-year transition period, as determined by CMS, CMS approves a
bid offered by a PDP sponsor (or by a parent organization to that PDP
sponsor) that recently purchased (or otherwise acquired or merged with)
another Part D sponsor if it finds that the benefit package and plan
costs represented by that bid are substantially different from any
benefit package and plan costs represented by another bid submitted by
the same Part D sponsor (or parent organization to that Part D
sponsor).
* * * * *
Subpart G--Payments to Part D Plan Sponsors for Qualified
Prescription Drug Coverage
Sec. 423.308 [Amended]
72. Section 423.308 is amended in paragraph (1) of the definition
of ``gross covered prescription drug costs'' by removing the phrase
``The share of negotiated prices'' and adding in its place ``The share
of actual costs''.
Subpart J--Coordination Under Part D Plans With Other Prescription
Drug Coverage
73. Section 423.462 is amended by--
A. Redesignating the existing text as paragraph (a).
B. Adding a paragraph heading for paragraph (a) and new paragraph
(b).
The additions read as follows:
Sec. 423.462 Medicare secondary payer procedures.
* * * * *
(a) General rule. * * *
(b) Reporting requirements. A Part D sponsor must report credible
new or changed primary payer information to the CMS Coordination of
Benefits Contractor in accordance with the processes and timeframes
specified by CMS.
74. Section 423.464 is amended by adding new paragraphs (a)(3),
(e)(1)(vi), and (g) to read as follows:
Sec. 423.464 Coordination of benefits with other providers of
prescription drug coverage.
(a) * * *
(3) Retroactive claims adjustments, underpayment reimbursements,
and overpayment recoveries as described in paragraph (g) of this
section and Sec. 423.466(a) of this subpart.
* * * * *
(e) * * *
(1) * * *
(vi) Does not engage in midyear plan or noncalendar year plan
enrollment changes on behalf of a substantial number of its members
when authorized to do so on the beneficiary's behalf.
* * * * *
(g) Responsibility to account for other providers of prescription
drug coverage when a retroactive claims adjustment creates an
overpayment or underpayment. When a Part D sponsor makes a retroactive
claims adjustment, the sponsor has the responsibility to account for
SPAPs and other entities providing prescription drug coverage in
reconciling the claims adjustments that create overpayments or
underpayments. In carrying out these reimbursements and recoveries,
Part D sponsors must also account for payments made, and for amounts
being held for payment, by other individuals or entities. Part D
sponsors must have systems to track and report adjustment transactions
and to support all of the following:
(1) Adjustments involving payments by other plans and programs
providing prescription drug coverage have been made.
(2) Reimbursements for excess cost-sharing and premiums for low-
income subsidy eligible individuals have been processed in accordance
with the requirements in Sec. 423.800(c).
(3) Recoveries of erroneous payments for enrollees as specified in
Sec. 423.464(f)(4) have been sought.
75. A new Sec. 423.466 is added to subpart J to read as follows:
Sec. 423.466 Timeframes for coordination of benefits.
(a) Retroactive claims adjustments, underpayment refunds, and
overpayment recoveries. Whenever a sponsor receives information that
necessitates a retroactive claims adjustment, the sponsor must process
the adjustment and issue refunds or recovery notices within 45 days of
the sponsor's receipt of complete information regarding claims
adjustment.
(b) Coordination of benefits. Part D sponsors must coordinate
benefits with SPAPs, other entities providing prescription drug
coverage, beneficiaries, and others paying on the beneficiaries' behalf
for a period not to exceed 3 years from the date on which the
prescription for a covered Part D drug was filled.
Subpart K--Application Procedures and Contracts With PDP Sponsors
76. Section 423.502 is amended by--
A. Redesignating paragraphs (b) through (d) as (c) through (e),
respectively
B. Adding a new paragraph (b).
C. Revising newly redesignated paragraph (c)(1) introductory text
and paragraph (c)(2).
The addition and revisions reads as follows:
Sec. 423.502 Application requirements.
* * * * *
(b) Completion of a notice of intent to apply.
(1) An organization submitting an application under this section
for a particular contract year must first submit a completed Notice of
Intent to Apply by the date established by CMS. CMS will not accept
applications from organizations that do not submit a timely Notice of
Intent to Apply.
[[Page 54731]]
(2) Submitting a Notice of Intent to Apply does not bind that
organization to submit an application for the applicable contract year.
(c) * * *
(1) In order to obtain a determination on whether it meets the
requirements to become a Part D plan sponsor, an entity, or an
individual authorized to act for the entity (the applicant), must fully
complete all parts of a certified application in the form and manner
required by CMS, including the following:
* * * * *
(2) The authorized individual must describe thoroughly how the
entity is qualified to meet the all requirements described in this
part.
* * * * *
77. Section 423.503 is amended by--
A. Revising paragraphs (a)(1), (a)(2), and (b).
B. Adding a new paragraph (c)(2)(iii).
C. Revising paragraph (c)(3)(iii).
D. Removing paragraph (d).
The revisions and addition read as follows:
Sec. 423.503 Evaluation and determination procedures for applications
to be determined qualified to act as a sponsor.
* * * * *
(a) * * *
(1) With the exception of evaluations conducted under paragraph (b)
of this section, CMS evaluates an entity's application solely on the
basis of information contained in the application itself and any
additional information that CMS obtains through on-site visits.
(2) After evaluating all relevant information, CMS determines
whether the application meets all the requirements described in this
part.
(b) Use of information from a current or prior contract. If a Part
D plan sponsor fails during the 14 months preceding the deadline
established by CMS for the submission of contract qualification
applications (or in the case of a fallback entity, the previous 3-year
contract) to comply with the requirements of the Part D program under
any current or prior contract with CMS under title XVIII of the Act or
fails to complete a corrective action plan during the 14 months
preceding the deadline established by CMS for the submission of
contract qualification applications, CMS may deny an application based
on the applicant's failure to comply with the requirements of the Part
D program under any current or prior contract with CMS even if the
applicant currently meets all of the requirements of this part.
(c) * * *
(2) * * *
(iii) If CMS does not receive a revised application within 10 days
from the date of the notice, or if after timely submission of a revised
application, CMS still finds the applicant does not appear qualified to
contract as a Part D plan sponsor or has not provided enough
information to allow CMS to evaluate the application, CMS denies the
application.
(3) * * *
(iii) The applicant's right to request a hearing in accordance with
the procedures specified in subpart N of this part.
78. Section 423.504 is amended by--
A. Revising paragraph (b)(4)(vi).
B. Redesignating paragraph (b)(6) as paragraph (b)(7).
C. Adding a new paragraph (b)(6).
The revisions and addition read as follows:
Sec. 423.504 General provisions.
* * * * *
(b) * * *
(4) * * *
(vi) Adopt and implement an effective compliance program, which
must include measures that prevent, detect, and correct noncompliance
with CMS' program requirements as well as measures that prevent,
detect, and correct fraud, waste, and abuse. The compliance program
must, at a minimum, include the following core requirements:
(A) Written policies, procedures, and standards of conduct that--
(1) Articulate the Part D plan sponsor's commitment to comply with
all applicable Federal and State standards;
(2) Describe compliance expectations as embodied in the standards
of conduct;
(3) Implement the operation of the compliance program;
(4) Provide guidance to employees and others on dealing with
potential compliance issues;
(5) Identify how to communicate compliance issues to appropriate
compliance personnel;
(6) Describe how potential compliance issues are investigated and
resolved by the Part D plan sponsor; and
(7) Include a policy of non-intimidation and non-retaliation for
good faith participation in the compliance program, including but not
limited to reporting potential issues, investigating issues, conducting
self-evaluations, audits and remedial actions, and reporting to
appropriate officials.
(B) The designation of a compliance officer and a compliance
committee who report directly to the Part D plan sponsor's chief
executive or other senior administrator.
(1) The compliance officer, vested with the day-to-day operations
of the compliance program, must be an employee of the Part D plan
sponsor.
(2) The compliance officer and the compliance committee must
periodically report directly to the governing body of the Part D plan
sponsor on the activities and status of the compliance program,
including issues identified, investigated, and resolved by the
compliance program.
(3) The governing body of the Part D plan sponsor must be
knowledgeable about the content and operation of the compliance program
and must exercise reasonable oversight with respect to the
implementation and effectiveness of the compliance programs.
(C)(1) Each Part D plan sponsor must establish, implement and
provide effective training and education for its employees including,
the chief executive and senior administrators or managers; governing
body members; and first tier, downstream, and related entities.
(2) The training and education must occur at a least annually and
be a part of the orientation for new employees including, the chief
executive and senior administrators or managers; governing body
members; and first tier, downstream, and related entities.
(D) Establishment and implementation of effective lines of
communication, ensuring confidentiality, between the compliance
officer, members of the compliance committee, the Part D plan sponsor's
employees, managers and governing body, and the Part D plan sponsor's
first tier, downstream, and related entities. Such lines of
communication must be accessible to all and allow compliance issues to
be reported including a method for anonymous and confidential good
faith reporting of potential compliance issues as they are identified.
(E) Well-publicized disciplinary standards through the
implementation of procedures which encourage good faith participation
in the compliance program by all affected individuals. These standards
must include policies that--
(1) Articulate expectations for reporting compliance issues and
assist in their resolution;
(2) Identify non-compliance or unethical behavior; and
(3) Provide for timely, consistent, and effective enforcement of
the standards when non-compliance or unethical behavior is determined.
[[Page 54732]]
(F) Establishment and implementation of an effective system for
routine monitoring and identification of compliance risks. The system
should include internal monitoring and audits and, as appropriate,
external audits, to evaluate the Part D plan sponsors, including first
tier entities', compliance with CMS requirements and the overall
effectiveness of the compliance program.
(G) Establishment and implementation of procedures and a system for
promptly responding to compliance issues as they are raised,
investigating potential compliance problems as identified in the course
of self-evaluations and audits, correcting such problems promptly and
thoroughly to reduce the potential for recurrence, and ensure ongoing
compliance with CMS requirements.
* * * * *
(6) Not have terminated a contract by mutual consent under which,
as a condition of the consent, the Part D plan sponsor agreed that it
was not eligible to apply for new contracts or service area expansions
for a period up to 2 years per Sec. 423.508(e) of this subpart.
* * * * *
79. Section 423.505 is amended by--
A. Redesignating paragraph (e)(1)(ii) and (e)(1)(iii) as paragraph
(e)(1)(iii) and (e)(1)(iv), respectively.
B. Adding a new paragraph (e)(1)(ii).
C. Revising newly redesignated paragraph (e)(1)(iii).
D. Revising paragraph (f)(3) introductory text.
E. Revising paragraphs (i)(2)(i) and (m)(1)(iii)(C).
F. Add a new paragraph (n).
The additions and revisions read as follows:
Sec. 423.505 Contract provisions.
* * * * *
(e) * * *
(1) * * *
(ii) Compliance with CMS requirements for maintaining the privacy
and security of personal health information and other personally
identifiable information of Medicare enrollees;
(iii) The facilities of the Part D sponsor to include computer and
other electronic systems; and
* * * * *
(f) * * *
(3) All data elements included in all its drug claims for purposes
deemed necessary and appropriate by the Secretary, including, but not
limited to the following:
* * * * *
(i) * * *
(2) * * *
(i) HHS, the Comptroller General, or their designees have the right
to audit, evaluate, and inspect any books, contracts, computer or other
electronic systems, including medical records and documentation of the
first tier, downstream, and related to CMS' contract with the Part D
sponsor.
* * * * *
(m)(1) * * *
(iii) * * *
(C) Plan identifier elements on the claim are encrypted or
unavailable for release to external entities with the exception of HHS
grantees that CMS determines meet all of the following criteria:
(1) The plan identifier is essential to the study.
(2) The study is key to the mission of the sponsoring agency.
(3) The study provides significant benefit to the Medicare program.
(4) The requestor attests that any public findings or publications
will not identify plans.
* * * * *
(n)(1) CMS may determine that a Part D plan sponsor is out of
compliance with a Part D requirement when the sponsor fails to meet
performance standards articulated in the Part D statutes, regulations,
or guidance.
(2) If CMS has not already articulated a measure for determining
noncompliance, CMS may determine that a Part D sponsor is out of
compliance when its performance represents an outlier relative to the
performance of other Part D sponsors.
80. Section 423.507 is amended by--
A. Revising paragraph (a)(2)(ii).
B. Removing paragraph (a)(2)(iii).
C. Adding a new paragraph (b)(1)(iii).
D. Revising paragraph (b)(2)(ii).
E. Removing (b)(2)(iii).
F. Redesignating paragraph (b)(2)(iv) as (b)(2)(iii).
G. In newly redesignated paragraph (b)(2)(iii), removing the
reference ``paragraphs (b)(2)(ii) and (iii) of this section'' and add
the reference ``paragraph (b)(2)(ii) of this section'' in its place.
H. Revising paragraph (b)(3).
The revisions and addition read as follows:
Sec. 423.507 Nonrenewal of a contract.
(a) * * *
(2) * * *
(ii) Each Medicare enrollee by mail at least 90 calendar days
before the date on which the nonrenewal is effective. The sponsor must
also provide information about alternative enrollment options by doing
one or more of the following:
(A) Provide a CMS approved written description of alternative PDP
plan options available for obtaining qualified prescription drug
coverage within the beneficiaries' region.
(B) Place outbound calls to all affected enrollees to ensure
beneficiaries know who to contact to learn about their enrollment
options.
* * * * *
(b) * * *
(1) * * *
(iii) The contract must be nonrenewed as to an individual PDP if
that plan does not have a sufficient number of enrollees to establish
that it is a viable independent plan option.
(2) * * *
(ii) To each of the Part D plan sponsor's Medicare enrollees by
mail at least 90 calendar days before the date on which the nonrenewal
is effective, or at the conclusion of the appeals process if
applicable.
* * * * *
(3) Opportunity to develop and implement a corrective action plan.
(i) Before providing a notice of intent of nonrenewal of the contract,
CMS will provide the Part D plan sponsor with a notice specifying the
deficiencies and reasonable opportunity to develop and implement a
corrective action plan to correct the deficiencies that form the basis
for the determination to non-renew the contract.
(ii) CMS affords the Part D plan sponsor at least 30 calendar days
in which to develop and implement a corrective action plan to correct
the deficiencies that formed the basis for the determination to
nonrenew the contract.
(iii) The Part D plan sponsor is solely responsible for the
identification, development, and implementation of its corrective
action plan and for demonstrating to CMS that the underlying
deficiencies have been corrected within the time period specified by
CMS in the notice requesting corrective action.
* * * * *
81. Section 423.508 is amended by adding a new paragraph (e) to
read as follows:
Sec. 423.508 Modification or termination of contract by mutual
consent.
* * * * *
(e) Agreement to limit new Part D applications. As a condition of
the consent to a mutual termination, CMS will require, as a provision
of the termination agreement language prohibiting the Part D plan
sponsor from applying for new contracts or service area expansions for
a period up to 2 years, absent circumstances warranting special
consideration.
[[Page 54733]]
82. Amend Sec. 423.509 by revising paragraphs (a), introductory
text of paragraph (b), (b)(2), and (c) to read as follows:
Sec. 423.509 Termination of contract by CMS.
(a) Termination by CMS.
(1) CMS may at any time terminate a contract if CMS determines that
the Part D plan sponsor meets any of the following:
(i) Has failed substantially to carry out the contract.
(ii) Is carrying out the contract in a manner that is inconsistent
with the efficient and effective administration of this part.
(iii) No longer substantially meets the applicable conditions of
this part.
(2) CMS may determine, in accordance with paragraph (a)(1) of this
section, that a basis exists to terminate a Part D sponsor's contract
if--
(i) The Part D plan sponsor fails to comply with any of the
regulatory requirements contained in this part.
(ii) The Part D plan sponsor fails to meet CMS performance
requirements in carrying out the regulatory requirements contained in
this part, including, but not limited to, when CMS determines that an
analysis of data related to the sponsor's performance indicates it is
an outlier relative to that of other sponsors; or.
(iii) There is credible evidence to show that the Part D plan
sponsor has committed or participated in false, fraudulent, or abusive
activities affecting the Medicare, Medicaid, or other State or Federal
health care programs, including submission of false or fraudulent data.
(b) Notice. If CMS decides to terminate a contract it gives notice
of the termination as follows:
* * * * *
(2) Expedited termination of contract by CMS. (i) If CMS determines
that a delay in termination, resulting from compliance with the
procedures provided in this part prior to termination, would pose an
imminent and serious risk to the health of the individuals enrolled
with the Part D plan sponsor the effective date of termination will be
specified, in writing, by CMS.
(ii) If a termination in is effective in the middle of a month, CMS
has the right to recover the prorated share of the capitation payments
made to the Part D plan sponsor covering the period of the month
following the contract termination.
* * * * *
(c) Opportunity to develop and implement a corrective action plan.
(1) General. (i) Before providing a notice of intent to terminate
the contract, CMS will provide the Part D plan sponsor with a notice
specifying the deficiencies and reasonable opportunity to develop and
implement a corrective action plan to correct the deficiencies that
form the basis for the determination to terminate the contract.
(ii) CMS will afford the Part D plan sponsor at least 30 calendar
days in which to develop and implement a corrective action plan to
correct the deficiencies that formed the basis for the determination to
terminate the contract.
(iii) The Part D plan sponsor is solely responsible for the
identification, development, and implementation of its corrective
action plan and for demonstrating to CMS that the underlying
deficiencies have been corrected within the time period specified by
CMS in the notice requesting corrective action.
(2) Exceptions. If CMS determines that a delay in termination,
resulting from compliance with the procedures provided in this part
prior to termination, would pose an imminent and serious risk to the
health of the individuals enrolled with the Part D plan sponsor, the
Part D plan sponsor will not be provided with an opportunity to develop
and implement a corrective action plan prior to termination.
* * * * *
83. Section 423.514 is amended by--
A. Revising the section heading.
B. Adding a new paragraph (g).
The revision and addition to read as follows:
Sec. 423.514 Validation of Part D reporting requirements.
* * * * *
(g) Data validation. Each Part D sponsor must subject information
collected under paragraph (a) of this section to a yearly independent
audit to determine its reliability, validity, completeness, and
comparability in accordance with specifications developed by CMS.
Subpart L--Effect of Change of Ownership or Leasing of Facilities
During Term of Contract
84. Section 423.551 is amended by adding a new paragraph (g) to
read as follows:
Sec. 423.551 General provisions.
* * * * *
(g) Sale of beneficiaries not permitted. (1) CMS will only
recognize the sale or transfer of an organization's entire PDP line of
business, consisting of all PDP contracts held by the PDP sponsor.
(2) CMS will not recognize or allow a sale or transfer that
consists solely of the sale or transfer of individual beneficiaries,
groups of beneficiaries enrolled in a pharmacy benefit package, or one
contract if the sponsor holds more than one PDP contract.
Subpart M--Grievances, Coverage Determinations, and Appeals
85. Section 423.568 is revised to read as follows:
Sec. 423.568 Standard timeframe and notice requirements for coverage
determinations.
(a) Method and place for filing a request. An enrollee must ask for
a standard coverage determination by making a request with the Part D
plan sponsor in accordance with the following:
(1) Except as specified in paragraph (a)(2) of this section, the
request may be made orally or in writing..
(2) Requests for payment must be made in writing (unless the Part D
plan sponsor has implemented a voluntary policy of accepting oral
payment requests).
(b) Timeframe for requests for drug benefits. When a party makes a
request for a drug benefit, the Part D plan sponsor must notify the
enrollee (and the prescribing physician or other prescriber involved,
as appropriate) of its determination as expeditiously as the enrollee's
health condition requires, but no later than 72 hours after receipt of
the request, or, for an exceptions request, the physician's or other
prescriber's supporting statement.
(c) Timeframe for requests for payment. When a party makes a
request for payment, the Part D plan sponsor must notify the enrollee
of its determination and make payment (when applicable) no later than
14 calendar days after receipt of the request.
(d) Written notice for favorable decisions by a Part D plan
sponsor. If a Part D plan sponsor makes a completely favorable decision
under paragraph (b) of this section, it must give the enrollee written
notice of the determination. The initial notice may be provided orally,
so long as a written follow-up notice is sent within 3 calendar days of
the oral notification.
(e) Form and content of the approval notice. The notice of any
approval under paragraph (d) of this section must explain the
conditions of the approval in a readable and understandable form.
(f) Written notice for denials by a Part D plan sponsor. If a Part
D plan sponsor decides to deny a drug benefit, in whole or in part, it
must give the enrollee written notice of the determination.
[[Page 54734]]
(g) Form and content of the denial notice. The notice of any denial
under paragraph (f) of this section must meet the following
requirements:
(1) Use approved notice language in a readable and understandable
form.
(2) State the specific reasons for the denial.
(i) For drug coverage denials, describe both the standard and
expedited redetermination processes, including the enrollee's right to,
and conditions for, obtaining an expedited redetermination and the rest
of the appeals process.
(ii) For payment denials, describe the standard redetermination
process and the rest of the appeals process.
(3) Inform the enrollee of his or her right to a redetermination.
(4) Comply with any other notice requirements specified by CMS.
(h) Effect of failure to meet the adjudicatory timeframes. If the
Part D plan sponsor fails to notify the enrollee of its determination
in the appropriate timeframe under paragraphs (b) or (c) of this
section, the failure constitutes an adverse coverage determination, and
the plan sponsor must forward the enrollee's request to the IRE within
24 hours of the expiration of the adjudication timeframe.
86. Section 423.570 is amended by revising paragraph (d)(1) to read
as follows:
Sec. 423.570 Expediting certain coverage determinations.
* * * * *
(d) * * *
(1) Make the determination within the 72 hour timeframe established
in Sec. 423.568(b) for a standard determination. The 72 hour period
begins on the day the Part D plan sponsor receives the request for
expedited determination, or, for an exceptions request, the physician's
or other prescriber's supporting statement.
* * * * *
87. Section 423.572 is amended by revising paragraphs (b) and (c)
to read as follows:
Sec. 423.572 Timeframes and notice requirements for expedited
coverage determinations.
* * * * *
(b) Confirmation of oral notice. If the Part D plan sponsor first
notifies an enrollee of an adverse or favorable expedited determination
orally, it must mail written confirmation to the enrollee within 3
calendar days of the oral notification.
(c) Content of the notice of expedited determination. (1) If the
determination is completely favorable to the enrollee, the notice must
explain the conditions of the approval in a readable and understandable
form.
(2) If the determination is not completely favorable to the
enrollee, the notice must--
(i) Use approved language in a readable and understandable form;
(ii) State the specific reasons for the denial;
(iii) Inform the enrollee of his or her right to a redetermination;
(iv) Describe--
(A) Both the standard and expedited redetermination processes,
including the enrollee's right to request an expedited redetermination;
(B) Conditions for obtaining an expedited redetermination; and
(C) Other aspects of the appeal process.
* * * * *
88. Section 423.590 is amended by--
A. Redesignating paragraph (d)(2) as paragraph (d)(3).
B. Adding a new paragraph (d)(2).
C. Revising the introductory text of paragraph (g).
D. Adding a new paragraph (h).
The revisions and additions read as follows:
Sec. 423.590 Timeframes and responsibility for making
redeterminations.
* * * * *
(d) * * *
(2) Confirmation of oral notice. If the Part D plan sponsor first
notifies an enrollee of an adverse or favorable expedited
redetermination orally, it must mail written confirmation to the
enrollee within 3 calendar days of the oral notification.
* * * * *
(g) Form and content of an adverse redetermination notice. The
notice of any adverse determination under paragraphs (a)(2), (b)(2),
(d)(1) or (d)(2) of this section must--
* * * * *
(h) Form and content of a completely favorable redetermination
notice. The notice of any completely favorable determination under
paragraphs (a)(1), (d)(1) or (d)(2) of this section must explain the
conditions of the approval in a readable and understandable form.
Subpart N--Medicare Contract Determinations and Appeals
89. Section 423.642 is amended by revising paragraph (c) to read as
follows:
Sec. 423.642 Notice of contract determination.
* * * * *
(c) CMS-initiated terminations--(1) General rule. CMS mails notice
to the Part D plan sponsor 90 calendar days before the anticipated
effective date of the termination.
(2) Exception. For terminations where CMS determines that a delay
in termination, resulting from compliance with the procedures provided
in this part prior to termination, would pose an imminent and serious
risk to the health of the individuals enrolled with the Part D plan
sponsor, CMS notifies the Part D plan sponsor of the date that it will
terminate the Part D plan sponsor's contract.
* * * * *
90. Section 423.650 is revised to read as follows:
Sec. 423.650 Right to a hearing, burden of proof, standard of proof,
and standards of review.
(a) Right to a hearing. The following parties are entitled to a
hearing:
(1) A contract applicant that has been determined to be unqualified
to enter into a contract with CMS under Part D of Title XVIII of the
Act in accordance with Sec. 423.502 and Sec. 423.503 of this part.
(2) A Part D sponsor whose contract has been terminated under Sec.
423.509 of this part.
(3) A Part D sponsor whose contract has not been renewed in
accordance with Sec. 423.507 of this part.
(4) A Part D sponsor who has had an intermediate sanction imposed
in accordance with Sec. 423.752(a) and (b) of this part.
(b) Burden of proof, standard of proof, and standard of review at
hearing.
(1) During a hearing to review a contract determination as
described at Sec. 423.641(a) of this subpart, the applicant has the
burden of proving by a preponderance of the evidence that CMS'
determination was inconsistent with the requirements of Sec. 423.502
and Sec. 423.503 of this part.
(2) During a hearing to review a contract determination as
described at Sec. 423.641(b) of this part, the Part D plan sponsor has
the burden of proving by a preponderance of the evidence that CMS'
determination was inconsistent with the requirements of Sec. 423.507
of this part.
(3) During a hearing to review a contract determination as
described at Sec. 423.641(c) of this subpart, the Part D plan sponsor
has the burden of proving by a preponderance of the evidence that CMS'
determination was inconsistent with the requirements of Sec. 423.509
of this part.
(4) During a hearing to review the imposition of an intermediate
sanction as described at Sec. 423.750 of this part, the Part D sponsor
has the burden of proving by a preponderance of the
[[Page 54735]]
evidence that CMS' determination was inconsistent with the requirements
of Sec. 423.752 of this part.
(c) Timing of favorable decision. Notice of any decision favorable
to the Part D sponsor appealing a determination that it is not
qualified to enter into a contract with CMS must be issued by September
1 for the contract in question to be effective on January 1 of the
following year.
* * * * *
91. Section 423.651 is amended by revising paragraphs (a) and (b)
to read as follows:
Sec. 423.651 Request for hearing.
(a) Method and place for filing a request. (1) A request for a
hearing must be made in writing and filed by an authorized official of
the contract applicant or Part D plan sponsor that was the party to the
determination under the appeal.
(2) The request for the hearing must be filed in accordance with
the requirements specified in the notice.
(b) Time for filing a request. A request for a hearing must be
filed within 15 calendar days after the receipt of the notice of the
contract determination or intermediate sanction.
* * * * *
92. Section 423.652 is amended by revising paragraph (b)(2) to read
as follows:
Sec. 423.652 Postponement of effective date of a contract
determination when a request for a hearing is filed timely.
* * * * *
(b) * * *
(2) If CMS determines that a delay in termination, resulting from
compliance with the procedures provided in this part prior to
termination, would pose an imminent and serious risk to the health of
individuals enrolled with the Part D plan sponsor, the date of
termination will not be postponed if the Part D plan sponsor requests a
hearing.
* * * * *
93. Section 423.655 is revised to read as follows:
Sec. 423.655 Time and place of hearing.
(a) The hearing officer--
(1) Fixes a time and place for the hearing, which is not to exceed
30 calendar days after the receipt of request for the hearing;
(2) Sends written notice to the parties that informs the parties of
the general and specific issues to be resolved, the burden of proof,
and information about the hearing procedure.
(b)(1) The hearing officer may, on his or her own motion, change
the time and place of the hearing.
(2) The hearing officer may adjourn or postpone the hearing.
(c)(1) The Part D plan sponsor or CMS may request an extension by
filing a written request no later than 5 calendar days prior to the
scheduled hearing.
(2) When either the Part D plan sponsor or CMS requests an
extension the hearing officer will provide a one-time 15-calendar day
extension.
(3) Additional extensions may be granted at the discretion of the
hearing officer.
94. Section 423.658 is amended by revising paragraph (d) to read as
follows:
Sec. 423.658 Conduct of hearing.
* * * * *
(d) The Part D sponsor bears the burden of going forward and must
first present evidence and argument before CMS presents its evidence
and argument.
95. Section 423.661 is revised to read as follows:
Sec. 423.661 Witnesses lists and documents.
Witness lists and documents must be identified and exchanged at
least 5 calendar days prior to the scheduled hearing.
96. Section 423.666 is amended by revising paragraphs (a) and (c)
to read as follows:
Sec. 423.666 Review by the Administrator.
(a) Request for review by Administrator. CMS or a Part D plan
sponsor that has received a hearing decision may request a review by
the Administrator within 15 calendar days after receipt of the hearing
decision as provided under Sec. 423.665(b) of this subpart. Both the
Part D plan sponsor and CMS may provide written arguments to the
Administrator for review.
* * * * *
(c) Notification of Administrator determination. The Administrator
notifies both parties of his or her determination regarding review of
the hearing decision within 30 calendar days after receipt of request
for review. If the Administrator declines to review the hearing
decision or the Administrator does not make a determination regarding
review within 30 calendar days, the decision of the hearing officer is
final.
* * * * *
97. Section 423.668 is amended by revising the section heading and
the paragraph heading for paragraph (a) to read as follows:
Sec. 423.668 Reopening of a contract determination or decision of a
hearing officer or the Administrator.
(a) Contract determination. * * *
* * * * *
Subpart O--Intermediate Sanctions
98. Section 423.750 is amended by revising paragraph (a) to read as
follows:
Sec. 423.750 Types of intermediate sanctions and civil money
penalties.
(a) The following intermediate sanctions may be imposed and will
continue in effect until CMS is satisfied that the deficiencies that
are the basis for the sanction determination have been corrected and
are not likely to recur:
(1) Suspension of the Part D plan sponsor's enrollment of Medicare
beneficiaries.
(2) Suspension of payment to the Part D plan sponsor for Medicare
beneficiaries enrolled after the date CMS notifies the organization of
the intermediate sanction.
(3) Suspension of all marketing activities to Medicare
beneficiaries by a Part D plan sponsor.
* * * * *
99. Section 423.752 is amended by--
A. Revising the paragraphs (a) introductory text, (a)(1), (a)(3),
and (a)(4).
B. In paragraph (c)(1), removing the cross-reference
``423.509(a)(4)'' and adding the cross-reference ``Sec.
422.509(a)(2)(iii) of this part'' in its place.
C. In paragraph (c)(2)(ii), removing the phrase ``pursuant to
423.509(a)(4)'' and adding the phrase ``under Sec. 422.509(a)(2)(iii)
of this part'' in its place.
Sec. 423.752 Basis for imposing intermediate sanctions and civil
money penalties.
(a) All intermediate sanctions. For the violations listed in this
paragraph (a), CMS may impose one or more of the sanctions specified in
Sec. 423.750(a) of this subpart on any Part D plan sponsor with a
contract. The Part D plan sponsor may also be subject to other remedies
authorized under law.
(1) Fails substantially to provide medically necessary items and
services that are required (under law or under the contract) to be
provided to an individual covered under the contract, if the failure
has adversely affected (or has the substantial likelihood of adversely
affecting) the individual.
* * * * *
(3) Acts to expel or refuses to re-enroll a beneficiary in
violation of the provisions of this part.
[[Page 54736]]
(4) Engages in any practice that would reasonably be expected to
have the effect of denying or discouraging enrollment (except as
permitted by this part) by eligible individuals with the organization
whose medical condition or history indicates a need for substantial
future medical services.
* * * * *
100. Section 423.756 is amended by--
A. Revising paragraph (b).
B. Removing paragraph (c).
C. Redesignating paragraphs (d) through (f) as paragraphs (c)
through (e), respectively.
D. Revising the newly redesignated paragraphs (c)(1) and (c)(3).
The revisions read as follows:
Sec. 423.756 Procedures for imposing intermediate sanctions and civil
money penalties.
(b) Hearing. (1) The Part D plan sponsor may request a hearing
before a CMS hearing officer.
(2) A written request must be received by the designated CMS office
within 15 calendar days after the receipt of the notice.
(3) A request for a hearing under Sec. 423.650 of this part does
not delay the date specified by CMS when the sanction becomes
effective.
(4) The Part D plan sponsor must follow the right to a hearing
procedure as specified at Sec. 423.650 through Sec. 423.662 of this
part.
(c) * * *
(1) Effective date. The effective date of the sanction is the date
specified by CMS in the notice.
* * * * *
(3) Duration of sanction. The sanction remains in effect until CMS
is satisfied that the deficiencies that are the basis for the sanction
determination have been corrected and are not likely to recur.
(i) CMS may require that the Part D plan sponsor hire an
independent auditor to provide CMS with additional information to
determine if the deficiencies that are the basis for the sanction
determination have been corrected and are not likely to recur. The
independent auditor must work in accordance with CMS specifications and
must be willing to attest that a complete and full independent review
has been performed.
(ii) In instances where marketing or enrollment or both
intermediate sanctions have been imposed, CMS may require a Part D plan
sponsor to market or to accept enrollments or both for a limited period
of time in order to assist CMS in making a determination as to whether
the deficiencies that were the bases for the intermediate sanctions
have been corrected and are not likely to recur.
(A) If, following this time period, CMS determines the deficiencies
have not been corrected or are likely to recur, the intermediate
sanctions will remain in effect until such time that CMS is assured the
deficiencies have been corrected and are not likely to recur.
(B) The Part D plan sponsor does not have a right to a hearing
under Sec. 423.650(a)(4) of this subpart to challenge CMS'
determination to keep the intermediate sanctions in effect.
* * * * *
Subpart P--Premium and Cost-Sharing Subsidies for Low-Income
Individuals
101. Section 423.773 is amended by revising paragraph (c)(2) to
read as follows:
Sec. 423.773 Requirements for eligibility.
* * * * *
(c) * * *
(2) CMS notifies an individual treated as a full-subsidy eligible
under this paragraph (c) that he or she does not need to apply for the
subsidies under this subpart, and, at a minimum, is deemed eligible for
a full subsidy as follows:
(i) For an individual deemed eligible between January 1 and June 30
of a calendar year, the individual is deemed eligible for a full
subsidy for the remainder of the calendar year.
(ii) For an individual deemed eligible between July 1 and December
31 of a calendar year, the individual is deemed eligible for the
remainder of the calendar year and the following calendar year.
* * * * *
Subpart V--Part D Marketing Requirements
102. Section 423.2260 is amended by revising paragraph (5)(vii) of
the definition ``Marketing materials'' to read as follows:
Sec. 423.2260 Definitions concerning marketing materials.
* * * * *
Marketing materials. * * *
(5) * * *
(vii) Membership activities. Current enrollee communication
materials include any informational materials that are--
(A) Targeted to current enrollees, and
(B) Customized or limited to a subset of enrollees or apply to a
specific situation; or
(C) Cover claims processing or other operational issues.
* * * * *
103. Section 423.2262 is amended by--
A. Revising paragraph (a)(1)(i).
B. Adding new paragraphs (c) and (d) to read as follows:
Sec. 423.2262 Review and distribution of marketing materials.
* * * * *
(a) * * *
(1) * * *
(i) At least 45 days (or 10 days if using certain types of
marketing materials that use, without modification, proposed model
language and format, including standardized language and formatting, as
specified by CMS) before the date of distribution, the Part D sponsor
submits the material or form to CMS for review under the guidelines in
Sec. 423.2264 of this subpart; and
* * * * *
(c) Standardized model marketing materials. When specified by CMS,
organizations must use standardized formats and language in model
materials.
(d) Current enrollee communication materials. Current enrollee
communication materials may be reviewed by CMS, which may upon review
determine that such materials must be modified, or may not longer be
used.
PART 480--ACQUISITION, PROTECTION, AND DISCLOSURE QUALITY
IMPROVEMENT ORGANIZATION REVIEW INFORMATION
104. The authority citation for part 480 continues to read as
follows:
Authority: Secs. 1102 and 1871 of the Social Security Act (42
U.S.C. 1302 and 1395hh).
105. Section 480.140 is amended by adding a new paragraph (g) to
read as follows.
Sec. 480.140 Disclosure of quality review study information.
* * * * *
(g) The QIO must disclose quality review study information with
identifiers of MA plan beneficiaries, providers, practitioners, and
services to CMS when CMS requests this information for the sole purpose
of conducting activities related to MA organizations as described in
Sec. 422.153 of this chapter.
Authority: (Catalog of Federal Domestic Assistance Program No.
93.773, Medicare--Hospital Insurance; and Program No. 93.774,
Medicare--Supplementary Medical Insurance Program)
[[Page 54737]]
Dated: August 13, 2009.
Charlene Frizzera,
Acting Administrator, Centers for Medicare & Medicaid Services.
Approved: September 1, 2009.
Kathleen Sebelius,
Secretary.
[FR Doc. E9-24756 Filed 10-9-09; 4:15 pm]
BILLING CODE 4120-01-P