[Federal Register Volume 73, Number 5 (Tuesday, January 8, 2008)]
[Proposed Rules]
[Pages 1301-1306]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 08-15]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 422 and 423

[CMS-4133-P]
RIN 0938-AP25


Medicare Program; Option for Prescription Drug Plans To Lower 
Their Premiums for Low-Income Subsidy Beneficiaries

AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.

ACTION: Proposed rule.

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SUMMARY: This proposed rule would provide for an option for Medicare

[[Page 1302]]

Prescription Drug Plan (PDP) Sponsors to offer a separate prescription 
drug premium amount for low-income subsidy (LIS) individuals subject to 
certain conditions. We are proposing to allow PDP Sponsors to offer a 
reduced premium amount for LIS-eligible individuals to ensure that at 
least five PDP Sponsors in every PDP region would have a PDP with a 
premium at or below the premium subsidy amount. This provision will 
help to ensure there are a sufficient number of organizations offering 
zero-premium plans in each region and reduce the number of LIS 
beneficiary reassignments to other organizations.

DATES: To be assured consideration, comments must be received at one of 
the addresses provided below, no later than 5 p.m. on March 10, 2008.

ADDRESSES: In commenting, please refer to file code CMS-4133-P. Because 
of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission.
    You may submit comments in one of four ways (no duplicates, 
please):
    1. Electronically. You may submit electronic comments on specific 
issues in this regulation to http://www.cms.hhs.gov/eRulemaking. Click 
on the link ``Submit electronic comments on CMS regulations with an 
open comment period.'' (Attachments should be in Microsoft Word, 
WordPerfect, or Excel; however, we prefer Microsoft Word.)
    2. By regular mail. You may mail written comments (one original and 
two copies) to the following address ONLY: Centers for Medicare & 
Medicaid Services, Department of Health and Human Services, Attention: 
CMS-4133-P, P.O. Box 8010, Baltimore, MD 21244-8010.
    Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    3. By express or overnight mail. You may send written comments (one 
original and two copies) to the following address ONLY: Centers for 
Medicare & Medicaid Services, Department of Health and Human Services, 
Attention: CMS-4133-P, Mail Stop C4-26-05, 7500 Security Boulevard, 
Baltimore, MD 21244-1850.
    4. By hand or courier. If you prefer, you may deliver (by hand or 
courier) your written comments (one original and two copies) before the 
close of the comment period to one of the following addresses. If you 
intend to deliver your comments to the Baltimore address, please call 
telephone number (410) 786-9994 in advance to schedule your arrival 
with one of our staff members.

    Room 445-G, Hubert H. Humphrey Building, 200 Independence Avenue, 
SW., Washington, DC 20201; or 7500 Security Boulevard, Baltimore, MD 
21244-1850.
(Because access to the interior of the HHH Building is not readily 
available to persons without Federal Government identification, 
commenters are encouraged to leave their comments in the CMS drop slots 
located in the main lobby of the building. A stamp-in clock is 
available for persons wishing to retain a proof of filing by stamping 
in and retaining an extra copy of the comments being filed.)

    Comments mailed to the addresses indicated as appropriate for hand 
or courier delivery may be delayed and received after the comment 
period.

FOR FURTHER INFORMATION CONTACT:
Deondra Moseley, (410) 786-4577.
Meghan Elrington, (410) 786-8675.

SUPPLEMENTARY INFORMATION:
    Submitting Comments: We welcome comments from the public on all 
issues set forth in this rule to assist us in fully considering issues 
and developing policies. You can assist us by referencing the file code 
CMS-4133-P and the specific ``issue identifier'' that precedes the 
section on which you choose to comment.
    Inspection of Public Comments: All comments received before the 
close of the comment period are available for viewing by the public, 
including any personally identifiable or confidential business 
information that is included in a comment. We post all comments 
received before the close of the comment period on the following Web 
site as soon as possible after they have been received: http://www.cms.hhs.gov/eRulemaking. Click on the link
    ``Electronic Comments on CMS Regulations'' on that Web site to view 
public comments.
    Comments received timely will also be available for public 
inspection as they are received, generally beginning approximately 3 
weeks after publication of a document, at the headquarters of the 
Centers for Medicare & Medicaid Services, 7500 Security Boulevard, 
Baltimore, Maryland 21244, Monday through Friday of each week from 8:30 
a.m. to 4 p.m. To schedule an appointment to view public comments, 
phone 1-800-743-3951.

I. Background

[If you choose to comment on issues in this section, please include the 
caption ``BACKGROUND'' at the beginning of your comments.]

    The beneficiary premiums for Prescription Drug Plans (PDP) are 
based on an annual bidding process. Each year the beneficiary premium 
for a Part D plan can change as a result of this bidding process. In 
addition, each year, as required by statute, CMS recalculates the 
Federal Part D premium subsidy available to low-income beneficiaries 
based on the new premiums for plans in each region. As a result of 
these premium and subsidy changes, the premium for a Part D plan can be 
fully covered by the low-income subsidy (LIS) in one year and not the 
following year.
    The amount of the premium subsidy available to LIS-eligible 
individuals cannot be calculated until after bids are submitted for the 
calendar year in question, because the subsidy amount is based on the 
bids that are submitted. Therefore, a PDP sponsor whose premium for 
LIS-eligible enrollees is currently zero does not know at the time its 
bid is submitted whether the premium that would result from its bid 
will be higher or lower than the premium subsidy amount.
    LIS-eligible individuals enrolled in a PDP that does not charge 
them a premium are faced with the possibility that the plan they are 
enrolled in will impose a premium during the next calendar year that 
would require them to make monthly payments. Section 1860D-1(b)(1)(C) 
of the Social Security Act (the Act) mandates the initial enrollment of 
full-benefit dual eligible individuals not choosing a plan into a PDP 
where they would not pay a premium. It does not, however, require that 
individuals be reassigned to a plan that would not charge them a 
premium, if they would be required to pay a premium in their plan the 
following calendar year. Using our authority under Section 1860D-
1(b)(1)(A) of the Act to, ``establish a process for the enrollment, 
disenrollment, termination, and change of enrollment of Part D eligible 
individuals in prescription drug plans,'' we have specified that LIS-
eligible individuals facing the above situation may ``elect'' a PDP 
with no premium (to which they would be randomly assigned) by taking no 
action. We have referred to this process as our reassignment process. 
Beneficiaries eligible for the full low-income premium subsidy, 
including beneficiaries dually eligible for benefits under Titles XVIII 
and XIX of the Social Security Act, are subject to reassignment. 
Beneficiaries eligible for a partial premium subsidy are not subject to 
reassignment.
    For 2008, the number of beneficiaries reassigned to a different 
organization under this process varied widely by region, ranging from 
as few as 17

[[Page 1303]]

beneficiaries to approximately 402,322 beneficiaries. The average 
number of beneficiaries reassigned to an organization other than the 
one with which they were enrolled was 34,044 per region.
    Alternatively, LIS beneficiaries can affirmatively elect to stay in 
their plan and begin paying a premium, or choose another plan with or 
without a premium. While this policy prevents an LIS-eligible 
individual who did not choose to elect a plan from being charged a 
premium, it disrupts continuity and stability in coverage.
    Currently, under the demonstration project entitled, ``Medicare 
Demonstration to Transition Enrollment of Low-Income Subsidy 
Beneficiaries'' (established in 2007 and extended to 2008), if the 
premium amount for a LIS-eligible individual in the above situation is 
lower than a specified de minimis amount, the individual would not be 
charged this de minimis amount, and could remain in his or her current 
plan without paying a premium. This demonstration also transitions the 
calculation of the low-income benchmark premium amount for a region 
from a method that weights the standardized Part D bids for PDPs 
equally to the statutory method, which calculates the benchmarks by 
weighting the bids for PDPs and MA-PD plans in that region based on 
plan enrollment. While the evaluation for this demonstration project is 
still underway, we believe the de minimis policy has demonstrated the 
advantages of the continuity of care and stability that result from 
permitting LIS-eligible individuals effectively to be charged a lower 
total premium than the total premium amount charged in the case of non-
LIS-eligible individuals. Accordingly, we believe that PDP Sponsors 
should have this option on an ongoing basis under regular program 
rules, subject to limitations that ensure the integrity of the bid 
process, and retain incentives to submit competitive bids.
    We believe that the statute could reasonably be interpreted to 
permit, consistent with limitations that would be set forth in 
regulations, PDP Sponsors to establish a separate premium for LIS-
eligible individuals in the amount of the low-income premium subsidy. 
Section 1860D-13(a)(1)(F) of the Act ordinarily requires that a 
prescription drug premium be uniform. This rule applies, however, 
``except as provided in subparagraphs (D) (which provides for the late 
enrollment penalty) and (E) (which governs LIS-eligible individuals) * 
* *''. In addition 1860D-13(a)(1)(E) of the Act provides that in the 
case of an LIS-eligible individual, the premium ``is subject to 
decrease * * *''. While we initially interpreted this language to refer 
only to the decrease in the amount paid by the LIS-eligible individual 
in the amount of the low-income premium subsidy, we believe that the 
statutory language would also permit an interpretation that would allow 
PDP Sponsors to charge a decreased premium amount in the case of such 
individuals. When subject to the limitations as proposed here, this 
reasonable interpretation of the statute supports our goal of ensuring 
continuity of care and stability, while ensuring the integrity of the 
bid process and retaining incentives for organizations to submit 
competitive bids. We believe that our earlier interpretation of the 
statute did not take into account the flexibility afforded by section 
1860D-13(a)(1)(E) of the statute, which is broadly worded to provide 
that for a LIS eligible individual, ``[t]he monthly beneficiary premium 
is subject to decrease[.]''

II. Provisions of the Proposed Regulations

[If you choose to comment on issues in this section, please include the 
caption ``PROVISIONS OF THE PROPOSED REGULATIONS'' at the beginning of 
your comments.]

    We are proposing to make revisions to the regulations in order to 
implement an option for PDP Sponsors to reduce PDP beneficiary premiums 
for LIS-eligible individuals. This option would not be made available 
to plans that offer enhanced alternative coverage. Specifically, we are 
proposing to revise Sec.  422.262 and Sec.  423.286(e), to provide for 
an exception to the general rule for uniformity of premiums. We are 
also proposing to revise Sec.  423.286(e), to state that the monthly 
beneficiary premium paid by the beneficiary may be eliminated as 
provided in Sec.  423.780.
    We are proposing to amend Sec.  423.34(d), to clarify that PDPs 
that have a separate premium for LIS-eligible individuals under our 
proposed option would not be eligible to receive ``auto-enrollees'' 
under section 1860D-1(b)(1)(C) of the Act. However, PDP Sponsors that 
have separate premiums for LIS enrollees in their PDPs would keep their 
existing LIS enrollees. An auto-enrollment would continue to be 
available only to PDPs with a standard prescription drug premium that 
is equal to, or below, the LIS amount.
    In addition, we are proposing to revise Sec.  423.780, to permit a 
PDP sponsor, subject to the conditions discussed below, to establish a 
separate premium for LIS-eligible individuals in the amount of the low-
income premium subsidy amount when the premium that would otherwise 
apply would exceed this amount.
    Several options were considered as we developed this proposed rule. 
We considered allowing all PDP Sponsors to make a business judgment, 
after the LIS amount was established, whether to reduce their premium 
to the subsidy amount for LIS-eligible individuals without regard to 
the amount by which their premium would otherwise exceed the amount of 
the subsidy. We did not choose this approach for two reasons. First, if 
the difference between the two amounts were too great, this would 
produce a significant disparity between the revenue needs assumed in 
the bid, and the revenue that would be received under the reduced 
premium, and undermine the integrity of the bid process. More 
importantly, if a PDP sponsor knew that it could be assured of reducing 
its premium for LIS-eligible individuals to the LIS amount no matter 
how much the premium produced by its bid exceeded this amount, this 
would greatly reduce existing incentives to bid as low as possible.
    Second, we considered changing our approach to re-assignment from 
allowing LIS-eligible individuals to be re-assigned if they take no 
action to an approach that would allow LIS-eligible individuals to be 
informed of zero-premium PDP options, but would remain in their current 
plan if they take no action. We consulted with beneficiary advocate 
groups about this approach, and many expressed concerns about LIS-
eligible individuals being subjected to premium costs without them 
electing to pay them. We further considered only reassigning LIS 
individuals if the premium they would have to pay were above a certain 
level, on the assumption that a relatively low premium amount may not 
present a financial hardship. However, this would raise complicated 
issues regarding collection of these premium amounts.
    We are proposing to retain the current reassignment policy and 
permit certain PDP Sponsors to reduce premiums for LIS-eligible 
individuals to the subsidy amount, while limiting the amount the 
premium produced by bids could be reduced to reach the LIS amount. We 
considered proposing a fixed dollar amount, as is employed under the 
current de minimis demonstration, and would be employed under the 
change in reassignment policy discussed above. However, we again were 
concerned about an approach that permanently would employ a fixed 
dollar figure, and decided that a methodology under which the number is 
not known in

[[Page 1304]]

advance would better preserve incentives to submit a low bid.
    We are proposing to apply this rule to PDPs only, as current auto-
assignment rules do not apply to beneficiaries enrolled in MA-PDs. For 
this same reason, we do not plan to apply this rule to partial subsidy 
eligible enrollees. Furthermore, partial subsidy eligible enrollees 
already pay a premium, as their subsidy is only a percentage of the 
subsidy amount. A change from the subsidy amount to a higher premium 
does not have the same impact on them that it does on a full-subsidy 
eligible beneficiary, who would go from a zero-premium to paying one.
    We accordingly propose to set the amount at a region-specific level 
that would ensure LIS-eligible individuals in each region a robust 
choice among zero-premium PDPs. Specifically, we are proposing that the 
limit on the amount by which premiums could be reduced for LIS-eligible 
individuals be an amount that ensures that at least five PDP Sponsors 
(i.e., organizations offering PDPs) in every PDP region would have a 
PDP with a premium at or below the premium subsidy amount. We chose the 
minimum number of five PDP Sponsors per region because this represents 
the mid-range number of PDP Sponsors in key regions that qualified for 
assignment of low-income subsidy-eligible beneficiaries in 2008. 
Specifically, in 2008 the number of PDP Sponsors with zero-premium 
plans for LIS individuals ranges from a low of two to a high of eight 
organizations in key regions with significant MA enrollment. The option 
of five organizations as a minimum threshold was selected to maintain 
the average 2008 level of competitiveness. This proposed rule would not 
affect regions in which there would be at least five PDP Sponsors 
offering zero-premium plans without this rule in place. In order to 
achieve the goal of stability for beneficiaries and plans, and offer 
multiple provider options, this test will be applied at the 
organizational level (PDP sponsor), rather than the plan (PDP) level. 
We believe that capping the number of premium differential 
organizations at a number that would produce zero-premium plans from at 
least five PDP Sponsors would maintain or possibly improve upon the 
current competitiveness of bids. We invite public comments on our 
choice of the minimum number five as the minimum number of Sponsors 
offering zero-premium plans, as well as on the other options discussed 
above that we considered, and any additional options that we are not 
proposing in this proposed rule.
    PDP Sponsors will be required to elect this option in their bids. 
CMS will add a checkbox to the current Bid Pricing Tool submitted by 
PDP Sponsors in June of each year for each PDP to be offered. Sponsors 
will use this checkbox to indicate that the PDP will have two 
premiums--one for enrollees not eligible for the full LIS subsidy and 
another for LIS-eligible enrollees if they qualify under this rule. 
This rule will not increase the amount of the low-income premium 
subsidy paid to plans to account for the difference between the low-
income premium subsidy and the premium produced by the plan's bid.
    We note that PDP Sponsors that elect this option would be 
obligated, under our proposed regulations, to charge all LIS-eligible 
enrollees in affected plans a premium amount that would be the premium 
subsidy amount if the prescription drug premium produced by their bid 
did not exceed the amount established to ensure at least five PDP 
Sponsors offer zero-premium plans in each region. This premium would be 
part of the benefit package they would be obligated under their 
contract to cover.

III. Collection of Information Requirements

    The information collection requirements contained in Sec.  
423.780(f)(i) of this proposed rule are subject to the Paperwork 
Reduction Act (PRA). However, the burden associated with the 
requirement for the PDP sponsor to elect the option of providing for a 
separate prescription drug premium amount for LIS individuals is 
included in the burden estimate associated with the Bid Pricing Tool 
for Prescription Drug Plans which is currently approved under OMB 
approval number 0938-0944.

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 Statement

A. Overall Impact

    We have examined the impact of this rule as required by Executive 
Order 12866 (September 1993, Regulatory Planning and Review), the 
Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96-354), 
section 1102(b) of the Social Security Act, the Unfunded Mandates 
Reform Act of 1995 (Pub. L. 104-4), Executive Order 13132 on 
Federalism, 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). This rule 
permits Prescription Drug Plan (PDP) Sponsors, subject to conditions, 
to lower their premiums for low-income subsidy beneficiaries to ensure 
there are a sufficient number of organizations offering zero-premium 
plans in each region and reduce the number of reassignments compared to 
the current regulatory framework. We believe this proposed rule would 
lead to Federal savings of approximately $20 million per year. This 
assumes full enrollment weighting for the calculations of the low-
income benchmark premium amounts. The estimate was developed by 
applying this rule against the 2008 bids and this impact was projected 
throughout the forecast period. The estimate does not anticipate any 
change in bidding strategies or outcomes. All organizations with 
existing LIS beneficiaries that could be assigned out of the 
organization are assumed to elect the option to retain their 
beneficiaries including receiving reduced premiums for such LIS 
members. LIS beneficiaries that are assigned out of organizations are 
assumed to be randomly assigned to organizations that have premiums 
below the low income premium subsidy benchmark. We invite public 
comment on the assumptions included in this assessment.
    We also evaluated the potential for non-Federal costs and savings 
associated with this rule. A small number of Part D sponsors would 
forego revenue associated with the reduction in their beneficiary 
premium for low income beneficiaries. In addition, we anticipate a 
reduction in administrative costs for these sponsors, as well as for 
sponsors to which the beneficiaries would have been reassigned in the 
absence of this rule. However, we believe that these costs and savings 
would be relatively small. We invite public comment on this assessment 
of non-Federal costs and savings. This rule

[[Page 1305]]

does not reach the economic threshold and thus is not considered a 
major rule.
    The RFA requires agencies to analyze options for regulatory relief 
of small businesses. For purposes of the RFA, small entities include 
small businesses, nonprofit organizations, and small governmental 
jurisdictions. Most hospitals and most other providers and suppliers 
are small entities, either by nonprofit status or by having revenues of 
$6.5 million to $31.5 million in any 1 year. Individuals and States are 
not included in the definition of a small entity. We are not preparing 
an analysis for the RFA because we have determined, and the Secretary 
certifies, that this regulation will not have a significant economic 
impact on a substantial number of small entities.
    In addition, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis if a rule may have a significant impact on 
the operations of a substantial number of small rural hospitals. This 
analysis must conform to the provisions of section 603 of the RFA. For 
purposes of section 1102(b) of the Act, we define a small rural 
hospital as a hospital that is located outside of a Metropolitan 
Statistical Area for Medicare payment regulations and has fewer than 
100 beds. We are not preparing an analysis for section 1102(b) of the 
Act because we have determined, and the Secretary certifies, that this 
regulation will not have a significant impact on the operations of a 
substantial number of small rural hospitals.
    Section 202 of the Unfunded Mandates Reform Act of 1995 also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule whose mandates require spending in any 1 year of $100 
million in 1995 dollars, updated annually for inflation. That threshold 
level is currently approximately $127 million. This rule will have no 
consequential effect on State, local, or tribal governments in the 
aggregate, or by the private sector.
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a proposed rule (and subsequent 
final rule) that imposes substantial direct requirement costs on State 
and local governments, preempts State law, or otherwise has Federalism 
implications. Since this regulation does not impose any costs on State 
or local governments, the requirements of E.O. 13132 are not 
applicable.

B. Anticipated Effects

    The number of PDP Sponsors offering PDPs that had low enough 
premiums to qualify for low-income assignments for 2008 ranged from two 
to eight organizations per region in key regions that had a relatively 
high proportion of beneficiaries enrolled in MA plans. Five is the 
average number of PDP Sponsors offering plans that qualified for low-
income assignments in these regions; we selected the five PDP Sponsor 
option to maintain the 2008 level of competitiveness in the bidding 
process. The 5 plan requirement is an attempt to balance the two goals 
of introducing beneficiary stability, particularly in regions with very 
low LIS premium subsidy benchmarks, together with maintaining the 
incentives in the competitive bidding process. There may be negative 
consequences if the 5 organizational requirement is too high and the 
plans bid less competitively or if the 5 organizational requirement is 
too low and there are an even greater number of low-income beneficiary 
reassignments. In addition, based on analysis of the 2008 bids, and 
assuming no de minimis demonstration is in place, CMS anticipates that 
seven regions would be affected by having a minimum of five plans. CMS 
estimates that a three Sponsor minimum would have affected five 
regions, while a seven Sponsor minimum would have affected ten regions. 
Therefore, we anticipate that this regulation will increase the number 
of PDP Sponsors offering zero-premium PDPs that would be available to 
full low-income subsidy-eligible beneficiaries. This proposed 
regulation would also decrease the number of reassignments of LIS-
eligible beneficiaries to other PDPs, compared to the level of 
reassignment under the current regulation absent a de minimis policy. 
This decrease in beneficiary movement across plans would boost program 
stability for both beneficiaries and plans. Based on an analysis of 
2008 bids, the five-organization minimum requirement results in 0.2 
million fewer beneficiary assignments as compared to the current 
regulatory framework. The five-organization minimum requirement results 
in 0.5 million more beneficiary reassignments than would occur under 
the de minimis policy.
    Lastly, CMS expects the improved program continuity and stability 
that would be produced by this rule would help prevent an increase in 
costs and risks imposed on PDP Sponsors. The higher the threshold for 
the number of PDP Sponsors per region offering zero-premium PDPs, the 
greater the negative impact on competitive bidding. We are seeking to 
strike a balance between minimizing LIS reassignments and preserving 
the integrity of the competitive bidding process. The results of 
competitive bidding in 2008 generated an average of five PDP Sponsors 
per region eligible for reassignments in certain key regions with 
relatively high MA enrollment. Selecting five as the minimum 
organization threshold under this proposed rule is intended to achieve 
this balance.
    This approach maintains a strong incentive to bid low to keep and 
possibly add LIS beneficiaries. Absent the rule, there may be a 
``winner take all'' outcome in certain regions with one organization 
acquiring all of the LIS beneficiaries in the region. It is difficult 
to predict what would happen in the absence of this rule, but we would 
expect some organizations would be induced to bid even lower while 
other organizations would give up on this population and bid higher. 
From a cost perspective these factors may offset relative to the 
proposed rule, but the volatility issue would remain.

C. Alternatives Considered

    As stated in the Background section of this proposed rule, we 
considered allowing PDP Sponsors to reduce their premium to the subsidy 
amount after it was established for LIS-eligible individuals without 
regard to the amount of their premium. We also considered allowing 
plans with premiums under a fixed dollar amount to reduce their low-
income premiums to the premium subsidy amount. We determined, however, 
that these options would undermine the integrity and competitiveness of 
the bidding process.
    We also considered changing our approach to reassignment to an 
approach that would allow LIS-eligible individuals to be informed of 
zero-premium PDP options, but would remain in their current plan, 
regardless of the premium, if they take no action. Beneficiary advocacy 
groups were concerned about beneficiaries being charged a premium 
without electing to pay it. We further considered only reassigning LIS 
individuals if the premium they would have to pay were above a certain 
relatively low premium amount; however, this would raise complicated 
issues regarding collection of these premium amounts.
    We chose to propose to retain the current reassignment policy and, 
in regions that would not otherwise have at least five zero-premium 
plans for LIS enrollees, permit a sufficient number of PDPs to reduce 
their premiums for LIS individuals so that the region includes five 
zero-premium plans. We believe this option would both maintain or 
possibly improve upon the current competitiveness of bids and reduce 
reassignments for beneficiaries.

[[Page 1306]]

    In accordance with the provisions of Executive Order 12866, this 
regulation was reviewed by the Office of Management and Budget.

List of Subjects

42 CFR Part 422

    Administrative practice and procedure, Grant programs--health, 
Health care, Health insurance, Health maintenance organizations (HMO), 
Loan programs--Health, Medicare, Reporting and recordkeeping 
requirements.

42 CFR Part 423

    Administrative practice and procedure, Emergency medical services, 
Health facilities, Health maintenance organizations (HMO), Medicare, 
Penalties, Privacy, Reporting and recordkeeping.
    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 422--MEDICARE ADVANTAGE PROGRAM

    1. 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 F--Submission of Bids, Premiums, and Related Information 
and Plan Approval

    2. Amend Sec.  422.262 to revise paragraph (c)(1) to read as 
follows:


Sec.  422.262  Beneficiary premiums.

    (c) * * *
    (1) General rule. Except as permitted for supplemental premiums 
pursuant to Sec.  422.106(d), for MA contracts with employers and labor 
organizations, the MA monthly bid amount submitted under Sec.  422.254, 
the MA monthly basic beneficiary premium, the MA monthly supplemental 
beneficiary premium, the MA monthly prescription drug premium (except 
as provided in Sec.  423.780), and the monthly MSA premium of an MA 
organization may not vary among individuals enrolled in an MA plan (or 
segment of the plan as provided for local MA plans under paragraph 
(c)(2) of this section). In addition, the MA organization cannot vary 
the level of cost-sharing charged for basic benefits or supplemental 
benefits (if any) among individuals enrolled in an MA plan (or segment 
of the plan).
* * * * *

PART 423--VOLUNTARY MEDICARE PRESCRIPTION DRUG BENEFIT

    3. 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.

    4. Amend Sec.  423.34 by--
    A. Revising paragraph (d)(1).
    B. Adding a new paragraph (d)(3).
    The revisions and additions read as follows:


Sec.  423.34  Enrollment of full-benefit dual eligible individuals.

* * * * *
    (d) * * *
    (1) General rule. Except as provided in paragraph (d)(3) of this 
section, CMS must automatically enroll full-benefit dual eligible 
individuals who fail to enroll in a Part D plan into a PDP offering 
basic prescription drug coverage in the area where the individual 
resides that has a monthly beneficiary premium that does not exceed the 
low-income premium subsidy amount (as defined in Sec.  423.780(b)). 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 must be enrolled in such PDPs on a random basis.
    (2) * * *
    (3) PDPs whose premiums were reduced for LIS beneficiaries under 
Sec.  423.780(f) would not be entitled to automatic enrollment under 
paragraph (d)(1) of this section.
* * * * *

Subpart F--Submission of Bids and Monthly Beneficiary Premiums; 
Plan Approval

    5. Amend Sec.  423.286 by revising paragraph (e) to read as 
follows:


Sec.  423.286  Rules regarding premiums.

* * * * *
    (e) Decrease in monthly beneficiary premium for low-income 
assistance. The monthly beneficiary premium paid by the beneficiary may 
be eliminated as provided in Sec.  423.780.
* * * * *

Subpart P--Premiums and Cost-Sharing Subsidies for Low-Income 
Individuals

    6. Amend Sec.  423.780 by adding a new paragraph (f) to read as 
follows:


Sec.  423.780  Premium subsidy.

* * * * *
    (f) Option for a reduced premium amount for full subsidy eligible 
individuals. PDP sponsors have the option of providing for a separate 
prescription drug premium amount for full subsidy eligible individuals 
for prescription drugs plans under Sec.  423.104(d) or (e) subject to 
the following conditions--
    (1) The PDP sponsor must elect this option at the time its bid is 
submitted, and agree to set its prescription drug premium for all full 
subsidy eligible individuals at the premium subsidy amount under 
paragraph (b) of this section for the entire coverage year if
    (i) The PDP sponsor puts forward no other PDP in the PDP region 
that is offering a premium below the premium subsidy amount or closer 
to the premium subsidy amount; and
    (ii) Its premium amount would otherwise equal or be below the 
amount established under paragraph (f)(ii) of this section.
    (2) Following the establishment of the premium subsidy amount, CMS 
will review the bids of PDP sponsors that have elected the option under 
paragraph (f)(i) of this section, and determine an amount that, when 
added to the premium subsidy amount, would produce a premium amount 
that is no greater than the amount that would equal or exceed the 
prescription drug premium amount produced by bids for at least five PDP 
sponsors in every PDP region.

(Catalog of Federal Domestic Assistance Program No. 93.773, 
Medicare--Hospital Insurance; and Program No. 93.774, Medicare--
Supplementary Medical Insurance Program)

    Dated: December 13, 2007.
Kerry Weems,
Acting Administrator, Centers for Medicare & Medicaid Services.
    Approved: December 28, 2007.
Michael O. Leavitt,
Secretary.
[FR Doc. 08-15 Filed 1-3-08; 10:12 am]
BILLING CODE 4120-01-P