[Federal Register Volume 73, Number 182 (Thursday, September 18, 2008)]
[Rules and Regulations]
[Pages 54226-54254]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-21686]
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Part III
Department of Health and Human Services
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Centers for Medicare & Medicaid Services
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42 CFR Parts 417, 422 and 423
Medicare Program; Revisions to the Medicare Advantage and Prescription
Drug Benefit Programs; Final Rule
Federal Register / Vol. 73, No. 182 / Thursday, September 18, 2008 /
Rules and Regulations
[[Page 54226]]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Parts 417, 422 and 423
[CMS 4138-IFC]
RIN 0938-AP52
Medicare Program; Revisions to the Medicare Advantage and
Prescription Drug Benefit Programs
AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.
ACTION: Interim final rule with comment period.
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SUMMARY: This interim final rule with comment period (IFC) revises the
regulations governing the Medicare Advantage (MA) program (Part C),
prescription drug benefit program (Part D) and section 1876 cost plans.
This IFC makes conforming changes to the MA regulations to reflect new
statutory requirements regarding special needs plans (SNP), private-
fee-for-service plans (PFFS), regional preferred provider organizations
(RPPO) plans, Medicare medical savings accounts (MSA) plans, and new
statutory provisions governing cost-sharing for dual-eligible enrollees
in the MA program prescription drug pricing, coverage, and payment
processes in the Part D program. In addition, this IFC sets forth new
requirements governing the marketing of Part C and Part D plans which
by statute must be in place at a date specified by the Secretary, but
no later than November 15, 2008. Both the conforming changes to the
regulations to reflect new statutory provisions and the new marketing
requirements are based on provisions in the Medicare Improvements for
Patients and Providers Act (MIPPA), which became law on July 15, 2008.
DATES: Effective Date: September 18, 2008.
Comment Date: To be assured consideration, comments must be
received at one of the addresses provided below, no later than 5 p.m.
on November 17, 2008.
ADDRESSES: In commenting, please refer to file code CMS-4138-IFC.
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 specific
issues in this regulation to http://www.regulations.gov. Follow the
instructions for ``Comment or Submission'' and enter the filecode to
find the document accepting comments.
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-4138-IFC, P.O. Box 8016, Baltimore, MD 21244-8016.
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-4138-IFC, 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 either of the following addresses:
a. Room 445-G, Hubert H. Humphrey Building, 200 Independence
Avenue, SW., Washington, DC 20201;
(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.)
b. 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:
Private-Fee-For-Service Plans--Sabrina Ahmed, 410-786-7499.
Special Needs Plans--LaVern Baty, 410-786-5480.
Cost Plans--Chris McClintick, 410-786-4682.
Medicare Medical Savings Account Plans--Anne Manley, 410-786-1096.
Enrollment--Lynn Orlosky, 410-786-9064.
Payment--Frank Szeflinski, 303-844-7119.
Marketing--Camille Brown, 410-786-0274, or Chevell Thomas, 410-786-
1387.
Contract provision relating to Part D drug benefit--Vanessa Duran, 410-
786-8697, or Deborah Larwood, 410-786-9500.
Low-income subsidy and late enrollment penalties--Deondra Moseley,
(410) 786-4577 or Meghan Elrington, (410) 786-8675.
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://regulations.gov. Follow the search instructions on that Web site to
view public comments.
Comments received timely will be also 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
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 Medicare prescription drug benefit program (Part D)
and made revisions to the provisions in Medicare Part C, governing what
is now called the Medicare Advantage (MA) program (formerly
Medicare+Choice). 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.
[[Page 54227]]
The MMA also directed implementation of the prescription drug
benefit and revised MA program provisions by 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 and 70 FR 4194,
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 gained more experience with the MA program and the
prescription drug benefit program, we proposed to revise areas of both
programs and issued a proposed rule on May 16, 2008 (73 FR 28556) that
would have clarified existing policies or codified current guidance for
both programs. Several of these proposed regulatory revisions have been
overtaken by statutory provisions enacted in the Medicare Improvements
for Patients and Providers Act (MIPPA) (Pub. L. 110-275), enacted on
July 15, 2008. These MIPPA provisions directly address in statute
several issues we proposed to address through rulemaking, and thus
supersedes our rulemaking in these areas. Comments on our proposals in
these areas thus are no longer relevant, as we have no authority to
depart from the statutory requirements Congress has enacted (these
requirements largely track the regulatory proposals in the May 16
proposed rule). Because the law has changed in these areas, however,
conforming changes must be made to the relevant sections of the Code of
Federal Regulations in order for the regulations to accurately reflect
the new state of the law under MIPPA. This interim final rule with
comment period (IFC) makes these changes.
MIPPA also called upon the Secretary to revise the marketing
requirements for Part C and Part D plans in several areas specified in
MIPPA. With the exceptions noted in this interim final rule, these new
rules are to take effect at a date specified by the Secretary, but no
later than November 15, 2008. This IFC contains provisions that
implement these latter MIPPA requirements. Some provisions in our May
16 proposed rule addressed issues in areas in which MIPAA required that
we establish marketing limits no later than November 15th. As a result,
to the extent our policies were informed by these comments, we will
address them in our discussion of the marketing provisions we have
developed in implementing these provisions of MIPPA. In addition we
will publish in the near future, a separate final rule responding to
public comments on those provisions of the May 16, 2008 proposed rule
that were not addressed in MIPPA. Because MIPPA and the May 16, 2008
proposed rule often specified requirements in the same general areas,
we are publishing separate regulations in order to clearly distinguish
between provisions which are statutory and those provisions which we
proposed to promulgate through rulemaking and will be finalizing based
on public notice and comment.
B. Relevant Legislative 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 a 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 Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of
1999 (BBRA), Public Law 106-111, amended the M+C provisions of the BBA.
Further amendments were made to the M+C program by the Medicare,
Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000
(BIPA) (Pub. L. 106-554), enacted December 21, 2000.
As noted above, 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 1860D-42) creating the Medicare Prescription Drug Benefit
Program, the most significant change to the Medicare program since its
inception in 1965.
Sections 201 through 241 of title II of the MMA made significant
changes to the Part C program. Title II of the MMA renamed the M+C
program 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, 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) and the prescription drug benefit program (69 FR
46632). 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) and (70 FR 4194).
On July 15, 2008, the Medicare Improvements for Patients and
Providers Act became law, leading to the revisions to the MA and Part D
prescription drug benefit programs discussed in Section II, Provisions
of the Interim Final Rule.
II. Provisions of the Interim Final Rule
In the sections that follow, we discuss the revisions made in this
IFC to final provisions to the regulations in 42 CFR 417, 422 and 423
governing, respectively, section 1876 cost plans, and the MA and
prescription drug benefit programs. Several of the final provisions
affect both the MA and Part D programs. In our discussion, we note when
a provision affects both the MA and prescription drug benefit and
include in section II C, a table comparing the proposed Part C and Part
D program changes by specifying each issue and the sections of the Code
of Federal Regulations that we are revising for both programs.
A. Changes to the Regulations in Part 422--Medicare Advantage Program
1. Special Needs Plans
The Congress first authorized special needs plans (SNP) to
exclusively or disproportionately serve individuals with special needs.
The three types of special needs individuals eligible for enrollment
identified by the Congress include (1) institutionalized individuals
(defined in Sec. 422.2 as an individual residing or expecting to
reside for 90 days or longer in a long term care facility), (2)
individuals entitled to medical assistance under a State plan under
title XIX, and (3) other individuals with severe or disabling chronic
conditions that would benefit from enrollment in a SNP.
The number of SNPs approved as of January 2008, is 787. This figure
includes 442 dual-eligible SNPs, 256
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chronic care SNPs, and 89 institutional SNPs.
a. Model of Care (Sec. 422.101(f))
Section 164 of MIPPA adds care management requirements for all SNPs
effective January 1, 2010, as set forth in section 1859(f)(5) of the
Act (42 U.S.C. 1395w-28(f)). The new mandate requires dual-eligible,
institutional, and chronic condition SNPs to implement care management
requirements having two explicit components. While our revisions
specifically reflect the MIPPA provisions, it should be noted that in
our May 16, 2008 proposed rule, we proposed other, related provisions
which we will finalize, based on public notice and comments, in a final
rule to be published soon after this IFC.
The first component is an evidence-based model of care with an
appropriate network of providers and specialists to meet the
specialized needs of the SNP target population. We do not endorse any
particular set of evidence-based guidelines or protocols but expect
that SNPs will develop such guidelines and protocols through sources
such as the Agency for Healthcare Research and Quality (http://www.ahrq.gov/). The AHRQ does not endorse any particular set of
evidence-based guidelines or protocols but its Web site includes access
to nationally-recognized evidence-based practices. The second component
is a battery of care management services that includes (1) a
comprehensive initial assessment and annual reassessments of the
individual's physical, psychosocial, and functional needs, (2) an
individualized plan of care having goals and measurable outcomes,
including specific services and benefits to be provided, and (3) an
interdisciplinary team to manage care. In addition, MIPPA mandates the
periodic audit of SNPs to ensure that plans meet the model of care
requirements.
In this IFC, we are revising Sec. 422.101(f), effective January 1,
2010, to reflect the new MIPPA provisions requiring a SNP model of
care. Specifically, we are revising the regulation to reflect the
statutory components described in the preceding paragraph. We also
issued guidance on the SNP model of care in our 2008 and 2009 Call
Letters. Care coordination and a provider network comprised of clinical
experts pertinent to the target population have been the cornerstones
of the SNP model of care.
We expect that MA organizations having the commitment and resources
to serve vulnerable special needs beneficiaries through SNPs will
perpetually evaluate their own model of care by collecting and
analyzing performance data to continually improve their model of care.
Through the analysis of SNP performance data and monitoring visits, the
review of scientific research on the efficacy of other care models, and
feedback from beneficiaries, advocacy groups, and healthcare
professionals, we will continue to evaluate models of care. As we look
longitudinally at evidence-based advancements in care coordination, we
will also issue guidance through our Call Letters and informational
memoranda to share innovations and facilitate improvement in the SNP
model of care framework.
b. Dual-Eligible SNPs and Contracts With States (Sec. 422.107)
In the May 16, 2008 proposed rule, we proposed in new section Sec.
422.107 to require, effective January 1, 2010, that MA organizations
offering a dual-eligible SNP have a documented relationship with the
State Medicaid agency, and that the arrangements, at a minimum, include
a means to (1) verify enrollees' eligibility for both Medicare and
Medicaid, (2) identify and share information on Medicaid provider
participation, and (3) identify Medicaid benefits which are not covered
by Medicare.
CMS' proposed Sec. 422.107, which sought to require a documented
relationship between MA organizations and State Medicaid agencies for
dual-eligible SNPs, has been superseded by Section 164 of MIPPA.
Section 164 of MIPPA adds new requirements to section 1859(f) of the
Act for dual-eligible SNPs. Beginning on January 1, 2010, MA
organizations offering new dual-eligible SNPs must have a contract with
the State Medicaid agency to provide benefits, or arrange for benefits
to be provided, for individuals entitled to receive medical assistance
under title XIX. In order to implement the MIPPA requirement for a
contract, we are specifying in this IFC that the contract with the
state Medicaid agency include the category(ies) of eligibility covered
under the SNP, the service area covered under the SNP, and the contract
period for the SNP. We also specify that MA organizations with existing
dual-eligible SNPs may continue to operate through 2010 without a State
contract provided they meet all other statutory requirements, that is,
care management and quality improvement program requirements. It should
also be noted that under MIPPA, States are not required to enter into
written contracts with plans, and plans that do not establish contracts
with States in 2010 cannot expand their service areas.
We are incorporating the above MIPPA requirements in a revised
version of our proposed Sec. 422.107, with an effective date of
January 1, 2010.
c. SNPs and Quality Improvement Program (Sec. 422.152)
Section 164 of MIPPA adds a new clause (ii) to section
1852(e)(3)(A) of the Act and a new paragraph (6) to section 1857(d) of
the Act. Section 1852(e)(3)(A)(ii) of the Act now mandates that,
beginning on a date specified by the Secretary (but in no case later
than January 1, 2010), data collected, analyzed, and reported as part
of the plan's quality improvement program must measure health outcomes
and other indices of quality at the plan level with respect to the
model of care as required in section 1859(f)(2-5). As a Medicare
Advantage plan, each SNP must implement a documented quality
improvement program for which all information is available for
submission to CMS or for review during monitoring visits. The focus of
the SNP quality improvement program should be the monitoring and
evaluation of the performance of its model of care (see Sec.
422.101(f)). The program should be executed as a three-tier system of
performance improvement. The first tier consists of data on quality and
outcomes that is collected and analyzed to enable beneficiaries to
compare and select from among health coverage options. In calendar year
(CY) 2008, CMS required the submission of thirteen HEDIS measures and
three structure and process measures to pilot the development of
comparative measures to facilitate beneficiary choice. We continue to
work on this initiative and will issue guidance to SNPs on collecting
comparative measures for submission using CMS required tools in CY
2009.
The second tier of the quality improvement program for SNPs,
effective January 1, 2010 replaces the requirements in Sec. 422.152(b)
with requirements in a new Sec. 422.152(g) that reflects the new
statutory requirement that SNPs collect, analyze, and report data that
measures the performance of their plan-specific model of care (section
1852(e)(3)(A)(ii) of the Act). This new rule establishes CMS
requirements for measuring essential components of the model of care
using a variety of plan-determined methodologies such as claims data,
record reviews, administrative data, clinical outcomes, and other
existing valid and reliable measures (ACOVE, MDS, HEDIS, CAHPS, HOS,
OASIS, etc.) at the plan level to evaluate the effectiveness of the
process of care and
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clinical outcomes. Specifically, each SNP should collect, analyze, and
be prepared to report data for its performance on: Access to care;
improvement in beneficiary health status; care management through its
staffing structure and processes; assessment and stratification of
health risk; care management through an individualized plan of care;
provision of specialized clinical expertise targeting its special needs
population; the coordination and delivery of services and benefits
through transitions across settings and providers; the coordination and
delivery of extra services and benefits that meet the needs of the most
vulnerable beneficiaries; the use of evidence-based practices and/or
nationally recognized clinical protocols; and the application of
integrated systems of communication. Each SNP must coordinate the
systematic collection of data using indicators that are objective,
clearly defined, and based on measures having established validity and
reliability. Indicators should be selected from a variety of quality
and outcome measurement domains such as functional status, care
transitioning, disease management, behavioral health, medication
management, personal and environmental safety, beneficiary involvement
and satisfaction, and family and caregiver support. SNPs must document
all aspects of the quality improvement program including data
collection and analysis, actions taken to improve the performance of
the model of care, and the participation of the interdisciplinary team
members and network providers in quality improvement activities.
We are developing the third tier of the quality improvement program
which is the required reporting of monitoring data. The monitoring data
will consist of a prescribed sample of data that SNPs will already be
collecting in tier two to measure the performance of their model of
care. We will draw from a pool of measures across several service
delivery domains, and, whenever possible, use valid measures that SNPs
have reported they currently collect. We are also soliciting comments
from the public regarding the types of monitoring data that we should
require SNPs to submit. We will issue guidance on the requirement to
report monitoring data and the collection methodology after reviewing
the public comments and completing development of the initiative for
implementation in calendar year 2010.
Section 1857(d)(6) stipulates that CMS will conduct reviews of the
SNP model of care in conjunction with the periodic audits of the MA
organizations. As of January 1, 2010, these reviews will focus on how
the SNPs have operationalized their models of care and how their
quality improvement programs have affected their care management as
structured by the model of care.
d. Special Needs Plans and Other MA Plans With Dual-Eligibles:
Responsibility for Cost-Sharing (Sec. 422.504(g)(1))
Section 165 of MIPPA, which revised section 1852(a) of the Act,
provides that for those persons who are full benefit dual-eligible
individuals or a qualified Medicare beneficiary enrolled in a dual-
eligible special needs plan, as described in section 1859(b)(6)(B)(ii)
of the Act, the plan may not impose cost-sharing that exceeds the
amount of cost-sharing that would be permitted if the individual were
under title XIX and were not enrolled in a special needs plan. The
effective date of this provision is January 1, 2010. In order to
reflect this provision, we are updating our regulations by updating
part 42 by adding new paragraph (g)(1)(iii) to Sec. 422.504(g).
Additionally, section 164 of MIPPA requires that the plan provide
each prospective enrollee, prior to enrollment, a comprehensive written
statement, describing the benefits and cost-sharing protections for
which the individual would be entitled under title XIX as well as the
MA plan.
We are reflecting these statutory requirements in the regulations
at Sec. 422.504(g)(1), effective January 1, 2010.
While our revisions specifically reflect the MIPPA provisions, it
should be noted that in our May 16, 2008 proposed rule, we proposed
other, related provisions which we will finalize, based on public
notice and comments, in a final rule to be published soon after this
IFC.
2. Revisions to Requirements for MA PFFS Plans (Sec. 422.114)
Section 162 of MIPPA revised the requirements for PFFS plans in a
number of significant ways that will affect how employer and non-
employer PFFS plans can meet access requirements. Below we describe
each of the changes to PFFS plans as a result of MIPPA.
Note: See also section A.3., Revision to Quality Improvement
Programs, for discussion of new requirements related to PFFS plans
and quality improvement features.
a. Changes in Access Requirements for PFFS Plans
Section 162(a)(3) of MIPPA amended section 1852(d)(4)(B) of the Act
to require, effective January 1, 2010, that PFFS plans meeting access
standards based on signed contracts meet access standards with respect
to a particular category of provider by establishing contracts or
agreements with a sufficient number and range of providers to meet the
access and availability standards described in section 1852(d)(1) of
the Act. Section 1852(d)(1) of the Act describes the requirements that
MA organizations offering a ``network'' MA plan must satisfy when
selecting providers to furnish benefits covered under the plan.
We are revising Sec. 422.114(a)(2)(ii) to reflect this new
statutory requirement.
b. Requirement for Certain Non-Employer PFFS Plans To Use Contract
Providers
Prior to MIPPA, section 1852(d)(4) of the Act and Sec. 422.114(a)
described how an MA organization that offers an MA PFFS plan must
demonstrate to CMS that it can provide sufficient access to services
covered under the plan. An MA organization was permitted to meet access
requirements if, with respect to a particular category of providers,
the plan has met one of the conditions in Sec. 422.114(a)(2). That is,
the plan has--
Payment rates that are not less than the rates that apply
under Original Medicare for the provider in question;
Contracts or agreements with a sufficient number and range
of providers to furnish the services covered under the MA private fee-
for-service plan; or
A combination of the above.
Section 1852(j)(6) of the Act and Sec. 422.216(f) provide that if
a provider who does not have a contract or agreement with a PFFS plan
furnishes services to an enrollee of that plan that are not considered
emergency services, the provider is deemed to have a contract with the
PFFS plan if the following conditions are met:
(1) The provider is aware, in advance of furnishing health care
services, that the patient is enrolled in a PFFS plan.
(2) The provider has reasonable access to the plan's terms and
conditions of payment.
(3) The provider furnishes services that are covered by the plan.
Section 162(a)(1) of MIPPA added a new paragraph (5) to section
1852(d) of the Act. The new paragraph creates a requirement for certain
non-employer MA PFFS plans to establish contracts
[[Page 54230]]
with providers. Specifically, for plan year 2011 and subsequent plan
years, MIPPA requires that non-employer/union MA PFFS plans (employer/
union sponsored PFFS plans are addressed in a separate provision of
MIPPA) that are operating in a network area (as defined in section
1852(d)(5)(B) of the Act) must meet the access standards described in
section 1852(d)(4). As noted above, in order to meet the access
standards in section 1852(d)(4), PFFS plans must have contracts with a
sufficient number and range of providers to meet the access and
availability standards described in section 1852(d)(1) of the Act.
These PFFS plans may no longer meet the access standards by paying not
less than the original Medicare payment rate and having providers
deemed to be contracted, as provided under Sec. 422.216(f). Section
162(a)(1) of MIPPA is reflected in regulations at 42 CFR 422.114(a)(3).
``Network area'' is defined in section 1852(d)(5)(B) of the Act,
for a given plan year, as the area that the Secretary identifies (in
the announcement of the risk and other factors to be used in adjusting
MA capitation rates for each MA payment area for the previous plan
year) as having at least two network-based plans (as defined in section
1852(d)(5)(C) of the Act) with enrollment as of the first day of the
year in which the announcement is made. For plan year 2011, we will
inform PFFS plans of their network areas in the announcement of CY 2010
MA capitation rates, which will be published on the first Monday of
April, 2009. We will use enrollment data for January 1, 2009 to
identify the location of network areas.
``Network-based plan'' is defined in section 1852(d)(5)(C) of the
Act as (1) an MA plan that is a coordinated care plan as described in
section 1851(a)(2)(A)(i) of the Act, excluding non-network regional
PPOs; (2) a network-based MSA plan; or (3) a section 1876 cost plan.
Types of coordinated care plans that meet the definition of a
``network-based plan'' are HMOs, PSOs, local PPOs, as well as regional
PPOs with respect to portions of their service area in which access
standards are met through establishing written contracts or agreements
with providers. MIPPA specifies that the term ``network-based plan''
excludes a regional PPO that meets access requirements in its service
area substantially through the authority of Sec. 422.112(a)(1)(ii),
rather than through written contracts. Section 422.112(a)(1)(ii)
permits regional PPOs to meet access requirements using methods other
than written agreements with providers (that is, allowing members to
see non-contract providers at in-network cost sharing in areas where
the plan does not have established a network of contracted providers).
For purposes of determining the network area of a PFFS plan, we
will determine whether any network-based plans with enrollment exist in
each of the counties located within the PFFS plan's service area.
Beginning in plan year 2011, in counties where there is availability of
two or more network-based plans (such as an HMO plan, a PSO plan, a
local PPO plan, a network regional PPO plan, a network-based MSA plan,
or a section 1876 cost plan), a PFFS plan operating in these counties
must establish a network of contracted providers to furnish services in
these counties in accordance with the amended section 1852(d)(4)(B) of
the Act. In such counties, a PFFS plan would no longer be able to meet
access requirements through providers deemed to have a contract with
the plan at the point of service in these counties. In counties where
there are no network-based plan options, or only one other network-
based plan, the statute allows PFFS plans to continue to meet access
requirements in accordance with section 1852(d)(4) of the Act and Sec.
422.114(a)(2). Regardless of whether a PFFS plan meets access
requirements through deeming or is subject to the requirement that it
establish a network of providers with signed contracts, providers who
do not have a contract with the PFFS plan may continue to be deemed to
have a contract with the plan if the deeming conditions described in
Sec. 422.216(f) are met.
An existing PFFS plan may have some counties in its current service
area that meet the definition of a network area and other counties that
do not. In order to operationalize section 162(a)(1) of MIPPA, CMS will
not permit a PFFS plan to operate a mixed model where some counties in
the plan's service area are considered network areas and other counties
that are non-network areas. Beginning in plan year 2011, an MA
organization offering a PFFS plan will be required to create separate
plans within its existing service areas where it is offering PFFS plans
based on whether the counties located in those service areas are
considered network areas or not. For example, if an existing PFFS plan
has some counties in its current service area that are network areas
and other counties that are non-network areas, then in order to operate
in this service area in plan year 2011 and subsequent plan years, the
MA organization must establish a unique plan with service area
consisting of the counties that are network areas and another plan with
service area consisting of the counties that are non-network areas.
Consequently, the PFFS plan operating in the counties that are network
areas must establish a network of contracted providers in these
counties in accordance with section 1852(d)(4)(B) of the Act in order
to meet access requirements. The PFFS plan operating in the counties
that are not network areas can continue to meet access requirements
under Sec. 422.114(a)(2) by paying rates at least as high as rates
under Medicare Part A or Part B to providers deemed to have a contract
with the plan if the conditions described in Sec. 422.216(f) are met.
The MA organization must file separate plan benefit packages for the
PFFS plan that will operate in network areas and the plan that will
operate in non-network areas. We recognize that the creation of unique
plans based on network and non-network areas will potentially create an
artificial increase in the total number of PFFS plans offered in plan
year 2011 and subsequent plan years; this would not reflect an actual
increase in PFFS plan offerings, but rather a change in how these PFFS
offerings are structured and identified.
For purposes of making the judgment of provider network adequacy
for PFFS plans that will be required to operate using a network of
contracted providers in plan year 2011 and afterwards, we will apply
the same standards for PFFS plans that we apply to coordinated care
plans. To determine where a PFFS plan's proposed network meets access
and availability standards, we will follow the procedure described in
the section above on ``changes in access requirements for PFFS plans.''
We are revising Sec. 422.114(a)(3) to reflect the requirements in
section 162(a)(1) of MIPPA.
c. Requirement for All Employer/Union Sponsored PFFS Plans To Use
Contracts With Providers
Section 162(a)(2) of MIPPA amended section 1852(d) of the Act by
adding a new requirement for employer/union sponsored PFFS plans. For
plan year 2011 and subsequent plan years, MIPPA requires that all
employer/union sponsored PFFS plans under section 1857(i) of the Act
meet the access standards described in section 1852(d)(4) of the Act
only through entering into written contracts or agreements in
accordance with section 1852(d)(4)(B) of the Act, and not, in whole or
in part, through establishing payment rates meeting the requirements
under section 1852(d)(4)(A) of the Act.
[[Page 54231]]
We are revising Sec. 422.114(a) to reflect this statutory change.
Specifically, Sec. 422.114(a) now sets forth how an MA organization
that offers a PFFS plan must demonstrate to CMS that it can provide
sufficient access to services covered under the plan. In order to meet
the access requirements beginning plan year 2011, an employer/union
sponsored PFFS plan must establish written contracts or agreements with
a sufficient number and range of health care providers in its service
area for all categories of services in accordance with the access and
availability requirements described in section 1852(d)(1) of the Act.
An employer/union sponsored PFFS plan will not be allowed to meet
access requirements by establishing payment rates for a particular
category of provider that are at least as high as rates under Medicare
Part A or Part B. While an employer/union-sponsored PFFS plan must meet
access standards through signed contracts with providers, providers
that have not signed contracts can still be deemed to be contractors
under the deeming procedures in section 1852(j)(6) that currently
apply.
We are adding paragraph (a)(4) to Sec. 422.114 in order to reflect
this new statutory requirement for employer/union sponsored PFFS plans.
d. Variation in Payment Rates to Providers
Section 162(b) of MIPPA added a clarification to the definition of
an MA PFFS plan found at section 1859(b)(2) of the Act. Prior to MIPPA,
the statute defined an MA PFFS plan as an MA plan that pays providers
at a rate determined by the plan on a fee-for-service basis without
placing the provider at financial risk; does not vary the rates for a
provider based on the utilization of that provider's services; and does
not restrict enrollees' choice among providers who are lawfully
authorized to provide covered services and agree to accept the plan's
terms and conditions of payment. Section 162(b) of MIPPA added that
although payment rates cannot vary based solely on utilization of
services by a provider, an MA PFFS plan is permitted to vary the
payment rates for a provider based on the specialty of the provider,
the location of the provider, or other factors related to the provider
that are not related to utilization.
Furthermore, this section of MIPPA also allows MA PFFS plans to
increase payment rates for a provider based on increased utilization of
specified preventive or screening services. Section 162(b) of MIPPA is
effective at the time of publication of this rule.
We are revising paragraph (a)(3)(ii) of Sec. 422.4 and paragraph
(a) of Sec. 422.216 to add the clarifications in Section 162(b) of
MIPPA.
3. Revisions to Quality Improvement Programs Sec. 422.152
a. Requirement for MA PFFS and MSA Plans To Have a Quality Improvement
Program
Section 163(a) of MIPPA repeals, effective January 1, 2010, the
current statutory exemption found at section 1852(e)(1) of the Act for
MA PFFS plans and MSA plans from the requirement that MA plans have
quality improvement programs meeting specified statutory requirements.
Beginning plan year 2010, each MA PFFS and MSA plan must have an
ongoing quality improvement program that meets the requirements under
Sec. 422.152(a).
We are revising Sec. 422.152(a) to delete language exempting PFFS
and MSA plans from having quality improvement programs.
b. Data Collection Requirements for MA PFFS and MSA Plans
Section 1852(e)(3)(A)(i) of the Act amended by Section 163(b)(1) of
MIPPA by adding that MA PFFS and MSA plans must provide for the
collection, analysis, and reporting of data that permits the
measurement of health outcomes and other indices of quality, but these
requirements for PFFS and MSA plans can not exceed the requirements
established for MA local plans that are PPO plans beginning in plan
year 2011 and are subject to an exception for plan year 2010 (as
discussed below). We interpret this to mean that for plan year 2011 and
subsequent plan years, similar to MA local plans that are PPO plans,
PFFS, and MSA plans are required to collect, analyze, and report health
outcomes and quality data only to the extent that data are furnished by
providers who have a contract with the PFFS or MSA plan. For plan year
2011 and subsequent plan years, we are requiring that the data
collection requirements for MA PFFS and MSA plans are not subject to
requirements that exceed the requirements specified in Sec. 422.152(e)
for MA local plans that are PPO plans.
The statute provides for a special rule that applies for plan year
2010, when MA PFFS and MSA plan quality requirements are not restricted
to the data collection requirements established for MA local plans that
are PPO plans under Sec. 422.152(e). Instead, they must, for 2010
only, meet the data collection requirements with respect to
administrative claims data, as specified in CMS guidance. We interpret
this exception to mean that for plan year 2010, MA PFFS and MSA plans
are required to report quality data based on administrative claims data
from all providers that include contract, deemed (applicable to PFFS
plans only), and non-contract providers.
c. Data Collection Requirements for MA Regional Plans
Section 163(b)(2) deleted clause (ii) of Section 1852(e)(3)(A) of
the Act. Section 1852(e)(3)(A)(ii) had provided for CMS to establish
separate regulatory requirements for MA regional plans relating to the
collection, analysis, and reporting of data that permit the measurement
of health outcomes and other indices of quality and also provided that
these requirements for MA regional plans could not exceed the
requirements established for MA local plans that are PPO plans.
Furthermore, section 163(b)(3) amended Section 1852(e)(3)(iii) of the
Act by adding that MA regional plans are subject to the data collection
requirements under Section 1852(e)(3)(A)(i) of the Act only to the
extent that data are furnished by providers who have a contract with
the MA regional plan. This provision is effective for plan years
beginning on or after 2010 and allows for consistent data collection
requirements between MA local plans that are PPO plans and MA regional
plans.
No change to regulatory text is needed since existing language in
Sec. 422.152(e) describes the requirements for MA local plans that are
PPO plans as well as MA regional plans.
4. Phase-Out of Indirect Medical Education Component of MA Capitation
Rate (422.306)
Section 161 of MIPPA adds a new paragraph (4) to Sec. 1853(k) of
the Act. The new paragraph directs the Secretary to phase-out indirect
medical education (IME) amounts from MA capitation rates. The maximum
adjustment percentage per year is .60. Implementation of the IME
payment phase-out begins in plan year 2010. Each year after 2010 the
maximum adjustment percentage will increase up to an additional .60
percent until the entire IME portion of the MA capitation rate in an
area is reduced to zero. PACE programs are excluded from the IME
payment phase-out. Payment to teaching facilities for indirect medical
education expenses for MA plan enrollees will continue to be made under
Sec. 1886(d)(11) of the Act by original Medicare.
[[Page 54232]]
We are adding a new paragraph (c) to Sec. 422.306 to reflect this
statutory IME phase-out.
B. Changes to the Part D Prescription Drug Benefit Program
1. Use of Prescription Drug Event Data for Purposes of Section 1848(m)
(423.322(b))
Section 132 of MIPPA revises section 1848(m) of the Act, as added
and amended by section 131 of MIPPA, to provide incentive payments to
eligible professionals for successful electronic prescribing. A
successful electronic prescriber for a reporting period is one who
meets the requirements for submitting data on electronic prescribing
quality measures or, if the Secretary determines appropriate, submitted
a sufficient number (as determined by the Secretary) of prescriptions
under Part D during the reporting period. Congress added paragraph
(3)(iv) to section 1848(m) to permit the Secretary to use the data
regarding drug claims (prescription drug event data) submitted for
payment purposes under the authority of section 1860D-15 of the Act as
necessary for purposes of carrying out section 1848(m), notwithstanding
the limitations set forth under section 1860D-15(d)(2)(B) and (f)(2) of
the Act.
Consistent with the authority granted to the Secretary regarding
the use of the prescription drug event data for purposes of section
1848(m), we have revised Sec. 423.322(b) to remove the restriction
placed on officers, employees and contractors of the Department of
Health Human Services when using these data in accordance with section
1848(m).
2. Elimination of Medicare Part D Late Enrollment Penalties Paid by
Subsidy Eligible Individuals (Sec. Sec. 423.46 and 423.780)
Each year since the beginning of the Medicare prescription drug
program, CMS has conducted a Medicare payment demonstration entitled
``Elimination of the 2006 Late Enrollment Penalty,'' such that Medicare
beneficiaries who qualify for the low-income subsidy for Medicare
prescription drug coverage were able to enroll in a Medicare
prescription drug with no penalty. The demonstration has tested the
number and characteristics of the beneficiaries that benefited from the
waiver of the LEP, and the cost of the waiver to Medicare. Originally,
this payment demonstration, as announced on June 14, 2006, allowed
certain Medicare beneficiaries to enroll in a Medicare prescription
drug plan through December 31, 2006 with no late enrollment penalty.
Specifically, CMS did not collect the late enrollment penalty from
beneficiaries who enrolled in Medicare Part D in 2006 and were either
eligible for the low-income subsidy or lived in an area affected by
Hurricane Katrina. This payment demonstration was amended to include
beneficiaries who were eligible for the low-income subsidy and enrolled
in Medicare Part D in 2007 and 2008.
Section 114 of MIPPA revises the statute to incorporate the terms
of the demonstration into the Part D program. We accordingly are
revising section 423.780(e) in order to reflect this MIPPA change.
Under the revised regulation, CMS will not charge subsidy eligible
individuals (defined in 423.773) a late enrollment penalty. This
provision will become effective January 1, 2009 when the current
demonstration that is supplanted by section 114 of MIPPA ends. We also
are making a conforming change to Sec. 423.46(a) to reflect the fact
that subsidy eligible individuals may enroll in Medicare prescription
drug plan with no penalty.
3. Prompt Payment of Clean Claims (Sec. 423.505 and Sec. 423.520)
Section 171 of MIPPA amended sections 1860-12(b) and 1857(f) of the
Act by adding provisions with regard to prompt payment by prescription
drug plans (PDPs) and Medicare Advantage prescription drug (MA-PD)
plans, both of which are Part D sponsors as defined in Sec. 423.4. We
have codified these new requirements in Sec. 423.505 and Sec. 423.520
of this IFC.
In accordance with the new sections 1860D-12(b)(4) and
1857(f)(3)(A) of the Act, and as codified in Sec. 423.520 of this IFC,
effective January 1, 2010, CMS' contract with Part D sponsors must
include a provision requiring sponsors to issue, mail, or otherwise
transmit payment for all clean claims submitted by network pharmacies--
except for mail-order and long-term care pharmacies--within specified
timeframes for electronic and all other (non-electronically submitted)
claims.
Consistent with section 1860D-12(b)(4)(A)(ii) of the Act, a clean
claim is defined in Sec. 423.520(b) of this IFC as a claim that has no
defect or impropriety--including any lack of any required
substantiating documentation--or particular circumstance requiring
special treatment that prevents timely payment of the claim from being
made under the requirements of Sec. 423.520 of this IFC. We note that
this definition is consistent with the clean claim definitions under
Parts A, B, and C of Medicare, as required under sections
1816(c)(2)(B), 1842(c)(2)(B), and 1857(f)(1) of the Act, respectively.
As provided in section 1860D-12(b)(4)(B) of the Act and codified in
Sec. Sec. 423.520(a)(1)(i) and (ii) of this IFC, Part D sponsors must
make payment for clean claims within 14 days of the date on which an
electronic claim is received and within 30 days of the date on which
non-electronically submitted claims are received. Consistent with
MIPPA, sections 423.520(a)(2)(i) and (ii) of this IFC define receipt of
an electronic claim as the date on which the claim is transferred, and
receipt of a non-electronically submitted claim as the 5th day after
the postmark day of the claim or the date specified in the time stamp
of the transmission, whichever is sooner.
Additionally, as provided in section 1860D-12(b)(4)(D)(i) of the
Act and as codified in Sec. 423.520(c)(1) of this IFC, a claim will be
deemed to be a clean claim to the extent that the Part D sponsor that
receives the claim does not issue notice to the submitting network
pharmacy of any deficiency in the claim within 10 days after an
electronic claim is received and within 15 days after a non-
electronically submitted claim is received. A claim deemed to be a
clean claim must be paid by the sponsor within 14 days (for an
electronic claim) or 30 days (for a non-electronic claim) of the date
on which the claim is received, as provided in Sec. Sec.
423.520(a)(1)(i) and (ii) of this IFC.
Under section 1860D-12(b)(4)(D)(ii) of the Act and in Sec.
423.520(c)(2) of this IFC, if the Part D sponsor determines that a
submitted claim is not a clean claim, it is required to notify the
submitting pharmacy that the claim has been determined not to be clean,
specify all the defects or improprieties rendering the claim not a
clean claim, and list all additional information necessary for the
sponsor to properly process and pay the claim. This notification must
be provided within 10 days after an electronic claim is received for an
electronic claim, and within 15 days after a non-electronically
submitted claim is received.
Once the submitting pharmacy resubmits the original claim with the
additional information specified by the Part D sponsor as necessary for
properly processing and paying the claim, the sponsor has 10 days,
consistent with section 1860D-12(b)(4)(D)(iii) of the Act, and, as
specified in Sec. 423.520(c)(3) of this IFC to provide notice to the
submitting pharmacy of any defect or impropriety in the resubmitted
claim. If the sponsor does not provide notice to the submitting
pharmacy of any defect
[[Page 54233]]
or impropriety in the resubmitted claim within 10 days of the sponsor's
receipt of such claim, the resubmitted claim is deemed to be a clean
claim and must be paid consistent with the timeframes specified in
Sec. 423.520(a)(1) of this IFC (within 14 days of the date on which a
resubmitted electronic claim is received and within 30 days of the date
on which a non-electronically resubmitted claim is received).
To clarify these requirements, we provide the following example.
Assume a Part D sponsor receives an electronic claim on January 1,
2010. If the sponsor were to find a defect or impropriety in that
claim, it would be required to communicate that defect or impropriety
to the submitting pharmacy no later than January 11, 2010 (within the
10-day window established in Sec. 423.520(c)(1)(i) of this IFC). If
the sponsor received a resubmitted claim on January 12, 2010, it would
then be required to either deem the claim to be clean or else provide
notice to the submitting pharmacy of any defect or impropriety with the
resubmitted claim no later than January 22, 2010 (within the 10-day
window established in Sec. 423.520(c)(2)(ii) of this IFC). Assuming
the resubmitted claim contains all additional information necessary for
the sponsor to properly process and pay the claim, the sponsor would be
required to pay the resubmitted claim within 14 days of receiving it--
in this case, not later than February 5, 2010.
In accordance with section 1860D-12(b)(4)(D)(iv) of the Act, Sec.
423.520(d) this IFC specifies that payment for a clean claim is
considered to have been made on the date payment for an electronic
claim is transferred and on the date a non-electronic claim is
submitted to the United States Postal Service or common carrier,
respectively. To the extent that a Part D sponsor does not issue, mail,
or otherwise transmit payment for a clean claim within 14 days of the
date on which an electronic claim is received and within 30 days of the
date on which a non-electronically submitted claim is received, as
specified in Sec. 423.520(a)(1) of this IFC, section 1860D-12(b)(4)(C)
of the Act requires that the sponsor pay interest to the submitting
pharmacy. As required under section 1860D-12(b)(4)(C)(i) of the Act,
and as codified in Sec. 423.520(e)(1) of this IFC, the Part D sponsor
must pay such interest at a rate equal to the weighted average of
interest on 3-month marketable Treasury securities determined for such
period, increased by 0.1 percentage point for the period beginning on
the day after the required payment date and ending on the date on which
the payment is made under Sec. 423.520(d) of this IFC. For purposes of
CMS payments to Part D sponsors for qualified prescription drug
coverage, any interest amounts paid under Sec. 423.520(e)(1) of this
IFC do not count against the Part D sponsor's administrative costs, nor
are they treated as allowable risk corridor costs, under Sec. 423.308.
In other words, the Part D sponsor is fully liable for any interest
payments for claims not paid timely, consistent with Sec. 423.520(d)
of this IFC. In accordance with section 1860D-12(b)(4)(C)(ii) of the
Act and as codified in Sec. 423.520(e)(2) of this IFC, CMS may
determine that a Part D sponsor will not be charged interest under
Sec. 423.520(e)(1) as appropriate, including in exigent circumstances
such as natural disasters and other similar unique and unexpected
events that prevent timely claims processing. CMS will make such
determinations on a case-by-case basis at the sponsor's request.
Section 1860D-12(b)(4)(E) of the Act and Sec. 423.520(f) of this
IFC require that a Part D sponsor pay all electronically submitted
clean claims by electronic funds transfer (EFT) if the submitting
network pharmacy requests payment via EFT or has previously requested
payment via EFT. For ease of sponsor execution, the requirement that
payment be provided via EFT if a sponsor has previously requested EFT
payment means that any such previous request must have occurred during
the current contract year. This requirement also means that all Part D
sponsors must have the capacity to pay via EFT so that they may pay via
EFT any of their network pharmacies requesting payment for submitted
claims in this manner. In addition, under Sec. 423.520(f), for any
payment made via EFT, the Part D sponsor may also make remittance
electronically.
In accordance with section 1860D-12(b)(4)(F)(i) of the Act and as
codified in Sec. 423.520(g)(1) of this IFC, the requirements in Sec.
423.520 do not in any way prohibit or limit a claim or action that any
individual or organization may have against a pharmacy, provider, or
Part D sponsor that is unrelated to the new requirements in Sec.
423.520. Further, as provided under section 1860D-12(b)(4)(F)(ii) of
the Act and Sec. 423.520(g)(2) of this IFC, consistent with any
applicable Federal or State law, a Part D sponsor may not retaliate
against an individual, provider, or pharmacy for any such claim or
action. Finally, as provided under section 1860d-12(b)(4)(G) of the Act
and codified in Sec. 423.520(h), any determination that a claim
submitted by a network pharmacy is a clean claim as defined in Sec.
423.520(b) of this IFC shall not be construed as a positive
determination regarding the claim's eligibility for payment under Title
XVIII of the Act. In addition, any determination that a claim is a
clean claim as defined in Sec. 423.520(b) of the Act is not an
indication that the government approves, or acquiesces regarding the
submitted claim and does not relieve any party of civil or criminal
liability, nor offer defense to any administrative, civil, or criminal
action, with respect to the submitted claim.
In addition to adding a new Sec. 423.520 to reflect the prompt
payment requirements of section 1860D-12(b)(4) of the Act, we are
amending Sec. 423.505(b) to include the prompt payment provisions as
one of the required elements of the contract between CMS and the Part D
sponsor. Therefore, Sec. 423.505(b)(19) of this IFC requires that,
effective contract year 2010, the contract between CMS and the Part D
sponsor must include the prompt payment provisions at Sec. 423.520 of
this IFC.
We are also amending Sec. 423.505(i)(3) with respect to contracts
or written arrangements between Part D sponsors and pharmacies or other
providers, first tier, downstream and related entities to ensure that
Part D sponsors' contracts with these entities include prompt payment
provisions consistent with Sec. 423.520. Section 423.505(i)(3)(vi)
thus requires that sponsors' pharmacy contracts include the prompt
payment provisions of Sec. 423.520. We intend to review pharmacy
contract templates (except for mail-order and LTC pharmacy templates)
for new applicants to ensure the addition of these prompt payment
provisions.
We are aware that some pharmacies, particularly independent
pharmacies, work with agents for purposes of negotiating and/or signing
contracts with Part D sponsor, and that these agents may receive claim
payments from Part D sponsors on their participating pharmacies'
behalf. To the extent that such agents are authorized to receive
payment on behalf of a participating pharmacy for claims submitted to a
Part D sponsor, there is no distinction between a pharmacy and its
agent for purposes of the prompt payment provisions at Sec. 423.520.
Thus, the prompt payment provisions at Sec. 423.520 extend to an agent
authorized to receive payment for claims submitted to a Part D sponsor,
as long as it is in compliance with all Federal and State laws.
The revisions to the regulations reflecting the above-described
MIPPA prompt payment provisions are all effective on January 1, 2010.
[[Page 54234]]
4. Submission of Claims by LTC Pharmacies (Sec. 423.505)
Section 172 of MIPPA amended sections 1860D-12(b) and 1857(f)(3) of
the Act to add a provision on the submission of claims by pharmacies
located in or having a contract with a long-term care facility.
Effective January 1, 2010, new sections 1860D-12(b)(5) and
1867(f)(3)(B) of the Act direct us to incorporate into each contract
CMS enters into with a Part D sponsor a provision addressing the
submission of claims by long-term care pharmacies. Specifically, CMS
contracts with Part D sponsors must provide that long-term care
pharmacies must have not less than 30 days, nor more than 90 days, to
submit claims to the sponsor for reimbursement under the plan. We are
codifying this new statutory contract requirement at Sec.
423.505(b)(20). Effective January 1, 2010, this provision will apply to
any claim submitted by a long-term care pharmacy, as defined in Sec.
423.100.
It is important to note that this new requirement does not
eliminate the requirement, specified in a CMS policy memorandum dated
May 25, 2007 (available at insert URL) for Part D sponsors to provide a
new timely claims filing period for claims incurred by dual-eligible
beneficiaries during a period of retroactive Part D enrollment. The CMS
memorandum, entitled ``Special Transition Period for Retroactive
Enrollment,'' requires that in retroactive enrollment situations Part D
sponsors must use the date of Medicaid notification to establish a new
timely claims filing period to ensure that dual-eligible beneficiaries
and other parties, including pharmacies, have the opportunity to
request reimbursement for claims incurred during the retroactive
period. Therefore, consistent with this policy, sponsors must provide a
new period, as specified in Sec. 423.505(b)(20), for long-term care
pharmacies to submit claims for reimbursement.
Effective contract year 2010, new sections 1860D-12(b)(5) and
1867(f)(3)(B) of the Act require that CMS contracts with Part D
sponsors include a provision requiring sponsors to provide long-term
care pharmacies (as defined in Sec. 423.100) not less than 30 days,
nor more than 90 days, to submit claims for reimbursement under the
plan. In addition to adding this requirement to the contract provisions
specified in Sec. 423.505(b), we are amending Sec. 423.505(i) to
specify that timeframes for submission of claims by long-term care
pharmacies must be contained in Part D sponsor contracts with the long-
term care pharmacies. As provided in Sec. 423.505(i)(3)(vii), all
sponsor contracts with long-term care pharmacies must contain a
provision that establishes timeframes, consistent with Sec.
423.505(b)(20), for the submission to the sponsor of claims for
reimbursement.
5. Regular Update of Prescription Drug Pricing Standard (Sec. 423.505)
Section 173 of MIPPA amended sections 1860D-12(b) and 1857(f)(3) of
the Act, effective January 1, 2009, to add a provision on the regular
updating of prescription drug pricing standards. In accordance with new
sections 1860D-12(b)(6) and 1857(f)(3)(C) of the Act, which we are
codifying in Sec. 423.505(b)(21) of this IFC effective January 1,
2009, CMS' contracts with Part D sponsors must include a provision
requiring sponsors to regularly update any prescription drug pricing
standard they use to reimburse network pharmacies based on the cost of
the drug (for example, average wholesale price, wholesale average cost,
average manufacturer price, average sales price). As codified in
Sec. Sec. 423.505(b)(21)(i) and (ii), these updates, if applicable,
must occur on January 1 of each contract year and not less frequently
than every 7 days thereafter.
We are also amending Sec. 423.505(i)(3) with respect to contracts
or written arrangements between Part D sponsors and pharmacies or other
providers, first tier, downstream and related entities to ensure that
Part D sponsors' contracts with these entities include provisions for
regularly updating any prescription drug pricing standard used by
sponsors to reimburse their network pharmacies, as provided in Sec.
423.505(b)(21) of this IFC. Specifically, section 423.505(i)(3)(vi)(A)
of this IFC requires that sponsors' pharmacy contracts include the
pricing standard update requirements at Sec. 423.505(b)(21) of this
IFC, if applicable.
Implicit in the statutory requirement that pricing standards be
updated is the fact that such standards are being used. This
information is also necessary in order to monitor for compliance with
MIPPA updating requirement. Accordingly, Sec. 423.505(i)(3)(viii)(B)
of this IFC specifies that a Part D sponsor's pharmacy contract must
indicate the source used by the Part D sponsor for making such pricing
updates.
Given the applicability of the pricing standard update provisions
beginning in contract year 2009, Part D sponsors must ensure that they
amend their current pharmacy contracts consistent with Sec.
423.505(i)(3)(viii) of this IFC. CMS will review pharmacy contract
templates (except for mail-order and LTC pharmacy templates) for new
applicants beginning for contract year 2010 to ensure the addition of
this provision, if applicable.
We are aware that some pharmacies, particularly independent
pharmacies, work with agents for purposes of negotiating and/or signing
contracts with Part D sponsors, and that these agents may receive claim
payments from Part D sponsors on their participating pharmacies'
behalf. To the extent that such agents are authorized to receive
payment on behalf of a participating pharmacy for claims submitted to a
Part D sponsor, there is no distinction between a pharmacy and its
agent for purposes of the drug pricing standard update requirements at
Sec. 423.505(b)(21) of this IFC. Thus, the drug pricing standard
update requirements at Sec. 423.505(b)(21) of this IFC extend to an
agent authorized to receive payment for claims submitted to a Part D
sponsor, as long as it is in compliance with all Federal and State
laws.
6. Use of Part D Data (Sec. 423.505(m))
On May 28, 2008, prior to the passage of MIPPA, CMS published a
final regulation (73 FR 30664) regarding the collection and use of Part
D claims data. This regulation resolved the statutory ambiguity between
section 1860D-12(b)(3)(D) and section 1860D-15 of the Act. One of the
incorporated provisions at section 1860D-12(b)(3)(D) of the Act, is
section 1857(e)(1) of the Act, which provides broad authority for the
Secretary to add terms to the contracts with Part D sponsors, including
terms that require the sponsor to provide the Secretary, ``with such
information as the Secretary may find necessary and appropriate.'' As
we stated in our final rule on Part D claims data, we believe that the
broad authority of section 1860D-12(b)(3)(D) of the Act authorizes CMS
to collect the same prescription drug event data we currently collect
to properly pay sponsors under the statute for other purposes unrelated
to payment. However, we acknowledged that section 1860D-15 of the Act
contains provisions that might be viewed as limiting such collection,
thus compelling CMS to clarify the Secretary's broad authority under
section 1860D-12(b)(3)(D) in our final regulation. Accordingly, in the
final Part D data rule, we implemented the broad authority of section
1860D-12(b)(3)(D) of the Act to permit the Secretary to collect claims
data that are collected for Part D payment purposes for other research,
analysis, reporting, and public health functions. For a complete
[[Page 54235]]
discussion of this regulation, please see the final Part D data rule at
73 FR 30664.
Section 181 of MIPPA amends section 1860D-12(b)(3)(D) to make clear
that, notwithstanding any other provision of law, information provided
to the Secretary under the application of section 1857(e)(1) may be
used for purposes of carrying out Part D, and may be used to improve
public health through research on the utilization, safety,
effectiveness, quality, and efficiency of healthcare services. Thus,
MIPPA further strengthens CMS' final rule on Part D claims data and
confirms our authority to use claims data collected under 1860D-12 of
the Act for purposes of reporting to the Congress and the public,
conducting evaluations of the overall Medicare program, making
legislative proposals to Congress, and conducting demonstration
projects.
While MIPPA does not alter our ability to collect and use data for
purposes outlined in our final rule on Part D claims data, section 181
of MIPPA adds a provision with respect to the disclosure of claims data
to Congressional support agencies. Specifically, section 181 of MIPPA
adds clause (ii) to section 1860D-12(b)(3)(D), which requires the
Secretary to make data collected under section 1860D-12(b)(3)(D)
available to Congressional support agencies, in accordance with their
obligations to support Congress as set out in their authorizing
statutes, for the purposes of conducting Congressional oversight,
monitoring, making recommendations, and analysis of the Part D program.
In our previously issued final rule on Part D claims, we specified that
we would only release the minimum data necessary to Congressional
oversight agencies in accordance with our data sharing policies.
Section 1860D-12(b)(3)(D), as amended, removes the minimum necessary
data restriction when data are requested by a Congressional support
agency that is requesting the data in accordance with its obligation to
support Congress as set out in its authorizing statute.
Section 423.505(f)(3) of the regulation establishes that Part D
plan sponsors must submit the 37 original data elements included as
part of their drug claims ``for all purposes deemed necessary and
appropriate by the Secretary, including, but not limited to,''
reporting to Congress and the public on the operation of the Part D
program, conducting evaluations of the overall Medicare program, making
legislative proposals, conducting demonstrations and pilot projects,
supporting care coordination and disease management programs,
supporting quality improvement and performance measurement activities,
and populating personal health care records. Section 423.505(m)(1) of
the regulations currently provides that with respect to data collected
under section 423.505(f)(3), ``CMS may release the minimum data
necessary for a given purpose to Federal executive branch agencies,
congressional oversight agencies, States, and external entities in
accordance with the applicable Federal laws, CMS data sharing
procedures, and subject, in certain cases to encryption and or
aggregation of certain sensitive information. MIPPA revised 1860D-
12(b)(3)(D) of the Act to provide specifically that information
collected pursuant to this section be made available to Congressional
support agencies, in accordance with their obligations to support
Congress as set out in their authorizing statutes, for the purposes of
conducting Congressional oversight, monitoring, making recommendations,
and analysis of the Medicare Part D program. Consistent with this new
statutory provision, we have revised Sec. 423.505(m)(1) of our
regulations, to omit any reference to ``Congressional oversight
agencies.'' We are also adding a new paragraph Sec. 423.505(m)(3)
specifying that the Secretary will make the information collected under
Sec. 423.505(f)(3) available to Congressional support agencies in
accordance with their obligations to support Congress as set out in
their authorizing statutes.
We are using the same definition for Congressional support agencies
in Sec. 423.505(m)(3) that we previously used for Congressional
oversight agencies in the regulation at Sec. 423.505(m)(1)(iv). As
with the definition of Congressional oversight agencies at
423.505(m)(1)(iv), we are not including Congressional Research Service
(CRS) as a Congressional support agency unless it is requesting the
data on behalf of a Congressional committee consistent with 2 U.S.C.
166(d)(1). As previously explained in the preamble to CMS-4119-F, when
CRS is not acting as the agent of a Congressional committee, it does
not have the same authority to request data from departments or
agencies of the United States, and would be restricted in the same
manner as external entities when requesting prescription drug event
data.
7. Exemptions From Income and Resources for Determination of
Eligibility for Low-Income Subsidy (Sec. 423.772)
Section 1860 D-14 of the Social Security Act describes the rules
for determining financial eligibility for the Medicare Part D Low-
Income Subsidy (LIS). These rules closely conform to the Supplemental
Security Income (SSI) methodology for determining financial
eligibility. Section 116 of MIPPA amended the types of income and
resources to be taken into consideration for determining financial
eligibility for LIS to deviate from the SSI methodology in two areas.
Specifically, section 116 of MIPPA amended 1860D-14(a)(3) by exempting
from the determination of LIS the following:
Support and maintenance furnished in kind from income; and
Value of any life insurance policy from resources.
Support and maintenance furnished in kind is any food or shelter
that is given to the applicant/spouse or received because someone else
pays for it. This includes room, rent, mortgage payments, real property
taxes, heating fuel, gas, electricity, water, sewage, and garbage
collection services.
Life insurance policy includes whole life, term, and products that
combine features of whole life and term policies.
In general, it is the responsibility of the Social Security
Administration to determine eligibility for LIS. However, the Centers
for Medicare & Medicaid Services (CMS) maintain in regulation broad
parameters for income and resources for the Medicare Part D Low-Income
Subsidy. These regulations also govern how State Medicaid Agencies
process LIS applications when individuals apply there. In order for CMS
regulations to conform to the new law, CMS is updating its regulations
to reflect the new exclusions from income and resources.
In order to reflect these changes, we are revising the definitions
of ``income'' and ``resources'' in Sec. 423.772.
The amendments made by this provision are effective with respect to LIS
applications filed on or after January 1, 2010.
C. Changes to the MA and Prescription Drug Benefit Programs
In order to assist readers in understanding how the final
provisions we discuss in this section apply to both programs, we are
including Table 1, which highlights the provisions affecting both
programs and the pertinent Part 422 and Part 423 CFR sections.
[[Page 54236]]
Table 1--Provisions Affecting Both the Part C and Part D Programs
----------------------------------------------------------------------------------------------------------------
Part 422 CFR Part 423 CFR
Provision Part 422- subpart section Part 423-- subpart section
----------------------------------------------------------------------------------------------------------------
Disclosure of plan information.... Subpart C............ 422.111 Subpart C............ 423.128
Marketing: Standards for MA/Part D Subpart V............ 422.2268 ..................... 423.2268
marketing:
Nominal gifts
Scope of marketing
Co-branding
Including plan type
in plan name
Marketing: Reporting terminations. Subpart V............ 422.2272 ..................... 423.2272
Marketing: Subpart V............ 422.2274 ..................... 423.2274
Broker and agent
compensation
Training and testing
----------------------------------------------------------------------------------------------------------------
1. Disclosure of Plan Information (Sec. Sec. 422.111)
Section 164 of the Medicare Patients and Providers Improvement Act
revised section 1859(f) of the Act to require, effective January 1,
2010, disclosure of SNP plan information to beneficiaries. In order to
reflect the MIPPA changes, we are adding new paragraph (b)(iii) to
Sec. 422.111. The addition requires to require dual-eligible SNPs to
provide the information specified in Sec. Sec. 422.111(b) and
423.128(b) of the MA and Part D program regulations, both prior to
enrollment to each prospective enrollee and at least annually
thereafter, 15 days before the annual coordinated election period. CMS
plans to develop a model comprehensive statement for beneficiaries that
could be included with any description of benefits offered by the SNP
plan. Note that in a related final rule to be published on or about the
date of publication of this IFC, we will be finalizing provisions from
the May 16, 2008 proposed rule related to disclosure of plan
information for MA organizations.
2. Medicare Advantage and Prescription Drug Program Marketing
Requirements (New Subparts V)
a. General
In a separate final rule (that appears in this issue of the Federal
Register) finalizing several of the marketing provisions proposed in
our May 16, 2008 proposed rule we established a new marketing subpart V
for Parts 422 and 423. In this IFC, we refer to the codification of
marketing requirements that reflects those changes (revised Code of
Federal Regulations sections established in the final rule). With the
exception of the provisions relating to including plan type in the name
of the plan, and the reporting by plans of agent and broker
terminations to States, all of the Part C and Part D marketing
requirements discussed below are effective upon publication of this
interim final rule.
b. Standards for MA and PDP Marketing (Sec. Sec. 422.2268, 423.2268)
In the May 16, 2008 proposed rule, we proposed several regulatory
requirements in Sec. Sec. 422.2268 and 423.2268, providing additional
protections to ensure that beneficiaries are not the victims of
inappropriate marketing techniques. Several areas we addressed in these
proposed regulatory marketing requirements were addressed by Congress
in MIPPA, which required in section 103(b)(1)(B) that the Secretary
``establish limitations with respect to'' five areas specified in
statute. With the exceptions noted above, these MIPPA-mandated
marketing limitations are required to be in effect ``on a date
specified by the Secretary, but in no case later than November 15,
2008.'' Because this deadline is less than 150 days after the enactment
of MIPPA, under section 1871(b)(2)(B) of the Act, we may publish rules
implementing these MIPPA provisions without prior notice and comment.
Some provisions in the May 16, 2008 proposed rule were similar to those
in MIPPA. As a result, to the extent that our policies were informed by
comments we received on the proposed rule, we will discuss the public
comments in connection with the marketing provisions we have developed
in implementing the MIPPA provisions.
(i) Nominal Gifts
In our May 16, 2008 NPRM, we proposed a new regulatory requirement
in Sec. Sec. 422.2268(b) and 423.2268(b) under which organizations
would be required to limit the offering of gifts and other promotional
items offered to potential enrollees at promotional events to gifts of
``nominal value'' that are offered to all potential enrollees. This
proposed paragraph also contained a prohibition against offering meals
that we are addressing in a separate rule.
In section 103(b)(1)(B) of MIPPA, the Secretary was charged with
``establish[ing] limitations with respect to * * * the offering of
gifts and other promotional items other than those of nominal value (as
determined by the Secretary) to prospective enrollees at promotional
activities.'' Section 103(b)(2) of the MIPPA revises the Act to apply
these same guidelines to PDP sponsors.
We are implementing this MIPAA requirement in a revised version of
the nominal value gift portion of our proposed Sec. Sec. 422.2268(b)
and 423.2268(b). Commenters on our May 16, 2008 proposed version asked
if the requirement that promotional items be available to all eligible
individuals meant that the promotional items had to be offered to
current members. Other commenters recommended that a dollar limit
approach be adopted to ensure that the permitted promotional items were
truly of nominal value.
Our revised version of the nominal gift portion of our proposed
Sec. Sec. 422.2268(b) and 423.2268(b) clarifies that the promotional
items must be available to all potential enrollees at promotional
events without regard for whether or not the beneficiary enrolls. With
respect to the dollar amount issue, the Marketing Guidelines and
guidance currently specify a dollar limit of $15 to ensure that
promotional items are of nominal value. CMS will update this number as
necessary to account for inflation and other relevant factors. Examples
of nominal gifts include pens, pencils, and calendars.
(ii) Limiting the Scope of Health Care Products To Be Discussed
In Sec. Sec. 422.2268(g) and 423.2268(g) of the May 16, 2008,
rule, we proposed to limit any appointment with a beneficiary involving
marketing of health care related products (for example, whether
Medicare supplement, Medicare Advantage, stand-alone PDP will be
discussed) to the scope agreed upon by the beneficiary. We further
proposed to require, that, in advance of any marketing appointment, the
beneficiary
[[Page 54237]]
must have the opportunity to agree to the range of choices that will be
discussed, and that agreement would have to be documented by the plan.
Under proposed Sec. Sec. 422.2268(h) and 423.2268(h), additional lines
of plan business (for example, MA, MA-PD, PDP or Medigap) not
identified prior to the in-home appointment would require a separate
appointment that could not be re-scheduled until 48 hours after the
initial appointment.
In section 103(b)(1)(B) of MIPPA, the Secretary was charged with
``establish[ing] limitations with respect to * * * the scope of any
appointment with respect to the marketing of a Medicare Advantage
plan.'' Section 103(b)(2) of MIPPA revises the Act to apply these same
guidelines to PDP sponsors. The statute further provides that ``[s]uch
limitation shall require advance agreement with a prospective enrollee
on the scope of the marketing appointment and documentation of such
agreement by the Medicare Advantage organization. In the case where the
marketing appointment is in person, such documentation shall be in
writing.''
We are here adopting our proposed version of Sec. Sec. 422.2268(g)
and (h) and 423.2268(g) and (h) to implement these MIPPA provisions,
and in light of a comment on the proposed rule expressing confusion
about what a line of business is, we clarify here that ``lines of
business'' are considered Prescription Drug Plans, Medicare Advantage
Prescription Drugs Plans or Medicare Advantage only and Medigap.
(iii) Use of Names and Logos, Co-Branding
As an additional beneficiary protection, in Sec. Sec. 422.2268(n)
and 423.2268(n) of the May 16 proposed rule, we proposed to limit the
use of names and/or logos of co-branded network providers on member
information and marketing materials including plan membership
identification cards. We also proposed to codify existing policies that
MA organizations may include on plan membership cards, provider names/
logos that are specific to the members selection of providers or
provider organizations. In addition, all member information and
marketing materials except for plan identification cards should
indicate that other providers are available in the network. We believed
that this requirement would reduce the tendency of members to
mistakenly believe they must use the co-branded network provider in
order to obtain plan benefits.
In section 103(b)(1)(B) of MIPPA, the Secretary was charged with
``establish[ing] limitations with respect to * * * ``[t]he use of the
name or logo of a co-branded provider on Medicare Advantage plan
membership and marketing materials.'' Section 103(b)(2) of MIPPA
revises the Act to apply these same guidelines to PDP sponsors.
We are implementing this requirement through a modified version of
our proposed Sec. Sec. 422.2268(n) and 423.2268(n). Specifically, as a
result of comments on the May 16, 2008 proposed rule, we are revising
the proposed version of these rules to clarify that MA organizations
may include provider names/logos on the member identification card
related to the member selection of specific providers or provider
organizations. We further clarify here that ``other marketing
materials'' requiring the statement that other providers are available
in the network, are marketing materials as defined in Sec. Sec.
422.2260 and 423.2260.
(iv) Inclusion of Plan Type in Plan Name
Section 103(c)(1) of MIPPA requires that MA organizations and PDP
sponsors include the plan type within the name of each plan being
offered for plan years beginning on or after January 1, 2010. We are
adding new paragraph (q) in Sec. Sec. 422.2268 and 423.2268 to reflect
this requirement. For consistency across plans, it will be required
that the plan type is included at the end of the plan name. For
example, a plan previously submitted as ``Medicare ABCXYZ Gold'' could
be submitted as ``Medicare ABCXYZ Gold HMO'' or ``Medicare ABCWYZ Gold
HMO Plan.''
c. Reporting Agent and Broker Terminations (Sec. Sec. 422.2272 and
423.2272)
Section 103 of the Medicare Improvements for Patients and Providers
Act (MIPPA), requires us to expand our proposed requirements on plans
that use licensed agents and brokers. In accordance with MIPPA,
Sec. Sec. 422.2272(d) and 423.2272(d) implement the requirement,
effective January 1, 2009, that MA organizations and Part D sponsors
are required to report to the State in which the MAO or Part D sponsor
appoints an agent or broker, the termination of any such agent or
broker, including the reasons for the termination if State law requires
that the reasons for the termination be reported.
d. Broker and Agent Compensation (Sec. Sec. 422.2274, 423.2274)
Section 103(b)(1)(B) of MIPPA revises the Act to charge the
Secretary with establishing guidelines to ``ensure that the use of
compensation creates incentives for agents and brokers to enroll
individuals in the Medicare Advantage plan that is intended to best
meet their health care needs.'' Section 103(b)(2) of MIPPA revises the
Act to apply these same guidelines to PDP sponsors.
This is another area that we addressed in proposals set forth in
the May 16 proposed rule. Our proposed rules were based on our program
experience showing that the current compensation structure permitted
under the Marketing Guidelines had the potential to create a financial
incentive for agents to only market and enroll beneficiaries in some
plan products and not others. This compensation structure has led some
agents to encourage beneficiaries to enroll in products that may not
meet the beneficiaries' health needs but pays the agents the highest
commission. In addition, there is a potential financial incentive for
agents to encourage beneficiaries to change plans each year. Therefore,
in order to prevent agents from unnecessarily moving beneficiaries from
plan to plan and to ensure that beneficiaries are receiving the
information and counseling necessary to select the best plan based on
their health care needs, CMS proposed in the May 16 proposed rule to
add new rules regarding compensation at Sec. Sec. 422.2274(a)(1) and
(a)(2) and 423.2274(a)(1) and (a)(2).
In developing our policy for implementing the MIPPA changes to the
Act regarding agent and broker compensation, we benefited from public
comments we received on our proposal in our May 16 proposed rule.
For example, several commenters on that proposal wanted
clarification on the definition of ``independent broker or agent,'' and
whether the changes apply to both independent agents selling Medicare
products and plan employees or to the employer retiree group market.
There was a strong feeling among the commenters on the May 16 proposed
rule that the nature of compensation for employees was very different
than that of independent agents, and that it would be difficult to
develop a level compensation structure for both groups.
Several commenters wanted clarification on the distinction between
compensation and commission. Also, commenters had questions
specifically about bonuses. Some recommended that prizes, awards,
trips, and similar
[[Page 54238]]
bonuses and incentives be excluded from the proposed provisions. Some
commenters felt that these incentives should be prohibited. Others felt
there should be exceptions made for convention credits, exceptions for
incentives that reward high member retention, or one-time bonuses for
administrative efficiency (for example, encourage electronic submission
of applications).
Several commenters recommended a new provision that level
commissions be advanced to agents, but have to be earned at a level
rate (for example, one-twelfth of the annual amount per month as long
as the member is active with the plan sponsor). Along with the new
provision, the commenters requested that CMS continue to require plans
to charge back all commissions for applications that result in rapid
disenrollments within 60 days. One of the commenters asked that the
period for charge back be expanded to 6 months. There was one commenter
who wanted to know how the proposed structure would work with mid-year
plan changes or renewals (for example, with full duals).
The comments we received through the public notice and comment
process helped us implement the MIPPA changes to the Act regarding
agent and broker compensation. As a result, the structure we are
implementing in this IFC, while directed to Medicare Advantage
organizations and Part D sponsors that market ``through independent
brokers or agents,'' includes compensation paid to employees that is
based on volume of sales. By ``independent brokers or agents'' we mean
contracted brokers or agents, whether they sell for one plan, multiple
plans, or work through a Field Marketing Organization (FMO), general
agent (GA), or other similar subcontracted marketing organizations.
The proposal in the May 16 proposed rule defined commission to
include other compensation. Based on the comments received on that
proposed rule, our definition of compensation under our rule
implementing MIPPA includes pecuniary or non-pecuniary remuneration of
any kind relating to the sale or renewal of the policy (for example,
commissions, bonuses, gifts, prizes, awards, and finders' fees). Salary
or other benefits related to employment are excluded from this
definition (except if related to volume of sales). The payment of fees
to comply with State appointment laws, training, certification, and
testing costs; and reimbursement for mileage to and from appointments
with beneficiaries and reimbursement for actual costs associated with
beneficiary sales appointments such as venue rent, snacks, and
materials are also not considered compensation. We have clarified our
proposal by revising paragraph (a)(1) of Sec. Sec. 422.2274 and
423.2274 to clarify what is considered compensation.
We also include in this IFC a provision that compensation for a
sale is earned in months 4 through 12 of the enrollment year as long as
the member is active with the plan. If an enrollee leaves the plan
prior to month 4, no compensation is earned. If an enrollee leaves the
plan after month 3, compensation is paid on a prorated basis only for
the months in which the enrollee was actually a member of the plan.
We also received comments on our proposal in the proposed rule that
the commission an agent received in the first year after an enrollment
could not exceed the commission the agent receives in all subsequent
years. Many commenters recommended that CMS follow the industry
standard practice for Medicare supplements or modify the provision to
allow for a higher commission in the first year because there is a
significantly greater amount of work done in the initial year than in
subsequent ones. They requested that the subsequent years be limited to
five years. They also wanted clarification on what was meant by ``all
subsequent years.''
Based in part on these comments, in developing our policy
implementing MIPPA's changes to the Act regarding agent and broker
compensation, this IFC provides that an agent's aggregate first year
compensation can not exceed 200 percent of the aggregate compensation
in each individual subsequent renewal year, of which there must be a
total of 5 renewal years. This creates a 6-year compensation cycle.
This means that in the first year, the compensation paid can be no more
than 200 percent of the compensation paid in the second year or any
individual subsequent renewal year, up to a total of 5 renewal years
(6-year total compensation cycle). The agent will receive renewal
compensation for the 5-year renewal period (years 2 through 6) based on
this compensation structure as long as the member remains active in a
like-plan type (for example, PDP, MA plan, or cost plan). We believe
that this provision places limits on compensation paid to agents. It
also encourages agents to establish longer term relationships with
their clients, rather than short term relationships. This provision
eliminates the incentive for agents to move their clients from plan to
plan since the compensation that agents receive for a replacement plan
will be nearly the same as if the client had stayed in the original
plan. Additionally, since most plan changes occur in the first three
months of the plan year and agents typically are paid for the entire
year in the first three months, we are requiring that agents and
brokers earn compensation for months four through twelve and that they
be paid by a given plan only for months in which the beneficiary is
enrolled in that plan. This means that plans may pay agents and brokers
up-front or prorate compensation payments over 12 months or over months
4 through 12, but when a beneficiary disenrolls from the plan, the plan
must recover all compensation paid-for months in which the beneficiary
is not enrolled, and during months 1 through 3 if the beneficiary
disenrolls during the first 3 months and compensation was paid in
advance.
Several commenters on the proposal in the May 16 proposed rule
expressed concern about our proposal in 422.2274(a)(2) and
423.2274(a)(2) that commissions must be the same for all plan and plan
product types offered by plan's parent organization. These commenters
wanted ``parent organization'' defined. They were also concerned about
how this would apply to field marketing organizations (FMOs) and
general agents (GA), organizations composed of various levels of agents
and that provide additional services beyond selling insurance products
(for example, training, document management and storage, office space,
supplies, and equipment). The questions about FMOs centered around
whether the commission was paid at the ``street level'', meaning
directly to the agent, or at the FMO level, where the FMO would then be
responsible for paying the agent. One commenter suggested that plans
could include a term in their contracts with FMOs stating that the FMO
would receive a fee from the plan and out of that fee, the agent would
be paid the specified amount in accordance with CMS' rules. The
statement could be detailed enough to address the prohibition against
prizes, awards, trips and other types of incentives. One commenter
suggested that CMS should consider evaluating fees paid to FMOs for
future regulation.
There were many comments about variable commissions. Several
addressed the problems that a national plan would face in developing a
commission that would apply across the country because the average may
be too high for some areas and too low for others. They recommended
that commissions should be based on local
[[Page 54239]]
geographic areas. One commenter stated that basic drug plans should
have reduced commissions or not have commissions at all because
leveling them with commissions for enhanced plans would create
additional costs that would make it difficult for them to meet the
regional low-income benchmarks. Several commenters felt that there
should be a different commission for MA plans and PDPs. Some suggested
that there should be different commissions for all MA types. One
commenter asked whether the level commission applied to other products
(for example, Medicare supplements, dental, vision, auto, etc).
Several commenters suggested ways to design a variable commission
including--commissions based on percent of premium amount; tiered
commission structure based on volume of sales; commissions based on
amount of work required to sell product; commissions based on
education, experience, tenure, or services provided; commissions based
on performance; establishing a cap on commissions, separate commissions
for agents that only provide leads; or special commissions for SNPs.
Based in part on the issues raised by the above comments received
on the May 16 proposed rule, CMS is adopting a different approach to
compensation structure that focuses on creating incentives for agents
and brokers to enroll beneficiaries in MA and Part D plans that best
meet beneficiaries' health care needs. This shifts the focus from
specific dollar values, as proposed in the May 16 proposed rule, to
guidelines specifying how compensation is disbursed, whether an agent
receives a new or renewal compensation, and what qualifies as
compensation. However, CMS still expects that plans will set
compensation at levels that are reasonable and reflect fair market
value for the services. Accordingly, under this IFC, compensation can
vary (for example, by geographic area, plan type, agent experience),
but is subject to the requirements that renewal compensation be paid
for five renewal years (6-year total compensation cycle), that
compensation for a change in plans during that five-year period be the
same as the renewal compensation, and the initial compensation may not
exceed 200 percent of the renewal compensation. CMS encourages plans to
keep compensation as level as possible across plan types and among
agents providing similar services. As discussed above, we define
``compensation'' as including pecuniary or non-pecuniary remuneration
of any kind relating to the sale or renewal of the policy (for example,
commissions, bonuses, gifts, prizes, awards, and finders' fees). Salary
or other benefits related to employment are excluded from this
definition (except if related to volume of sales). The payment of fees
to comply with State appointment laws, training and testing,
certification, and reimbursement for mileage to and from appointments
with beneficiaries and reimbursement for actual costs associated with
beneficiary sales appointments such as venue rent, snacks, and
materials are also not considered compensation. Specifically, under the
rule set forth in this IFC implementing our charge under MIPPA, MA
organizations and PDP sponsors must adopt a compensation structure
according to the following:
The aggregate first year compensation is no more than 200
percent of the aggregate compensation paid for selling or servicing the
enrollee in each individual subsequent year, of which there must be
five total renewal years creating a 6-year compensation cycle.
If compensation is paid in the first year, renewal
compensation must be paid for no fewer than 5 renewal years (6-year
compensation cycle), provided that the enrollee remains enrolled in the
plan.
No entity may provide and no agent or broker may receive
aggregate compensation greater than the renewal compensation payable by
the replacing plan on renewal policies if an existing policy is
replaced with a like plan type during the first year and 5 renewal
years (6-year compensation cycle). ``Like plan type'' refers to PDP, MA
or MA-PD, or cost plan. Examples of replacements with like plan type
are--PDP replace with another PDP, MA or MA-PD replaced with another MA
or MA-PD, and cost plan replaced with another cost plan. If a PDP is
added to an MA-only plan, then a new compensation is paid for
enrollment in the PDP.
Compensation (for both first-year and renewals) is to be
earned for months 4 through 12 of the enrollment year. Plans may pay
agents and brokers up-front or prorate compensation payments over 12
months or over months 4 through 12, but when a beneficiary disenrolls
voluntarily or involuntarily from the plan, the plan must recover all
compensation paid-for months in which the beneficiary is not enrolled,
and for months 1 through 3 if the beneficiary disenrolls during the
first 3 months and compensation was paid in advance.
Organizations and sponsors must establish a compensation
structure for new and replacement enrollments and renewals effective in
a given plan year. Compensation structures must be in place by the
beginning of the plan marketing period, October 1.
Compensation structures must be available upon CMS request
including for audits, investigations, and to resolve complaints.
The compensation structure is designed to help prevent
inappropriate moves of beneficiaries from plan-to-plan. Parties remain
responsible, however, for compliance with fraud and abuse laws,
including the anti-kickback statute. Depending on the circumstances,
agent and broker relationships can be problematic under the anti-
kickback statute if they involve, by way of example only, compensation
in excess of fair market value, compensation structures tied to the
health status of the beneficiary (for example, cherry-picking), or
compensation that varies based on the attainment of certain enrollment
targets. We note that the Office of the Inspector General (OIG)
advisory opinion process is available to parties seeking OIG's opinion
as to the legality of a particular arrangement. Information about this
process is available on the OIG's Web site at http://oig.hhs.gov/fraud/advisoryopinions.html.
e. Agent and Broker Training (Sec. Sec. 422.2274 and 423.2274)
Section 103(b)(1)(B) of MIPPA revised the Act to charge the
Secretary with establishing ``limitations with respect to the use by a
Medicare Advantage organization of any individual as an agent, broker,
or other third party representing the organization that has not
completed an initial training and testing program and does not complete
an annual retraining and testing program.'' Section 103(b)(2) of MIPPA
revises the Act to apply these same limitations to PDP sponsors.
In our May 16 proposed rule, we proposed rules establishing a
requirement for training of agents that we hereby adopt under this IFC
to implement the above MIPPA language. These rules are set forth in
this IFC at Sec. Sec. 422.2274 and 423.2274.
In 422.2274(b) and 423.2274(b), MA organizations and PDP sponsors
are required to train all agents selling Medicare products on Medicare
rules, regulations and compliance-related information annually.
In 422.2274(c) and 423.2274(c), agents selling Medicare products
are required annually to pass written or electronic tests on Medicare
rules, regulations and information on the plan products they intend to
sell.
In 422.2274(d) and 423.2274(d), MA organizations and PDP sponsors
are
[[Page 54240]]
required to provide to CMS the information designated by CMS as
necessary to conduct oversight of marketing activities.
In 422.2274(e) and 423.2274(e), MA organizations and PDP sponsors
are required to comply with State requests for information about the
performance of licensed agents or brokers as part of a State
investigation into the individual's conduct. CMS will establish and
maintain a memorandum of understanding (MOU) to share compliance and
oversight information with States that agree to the MOU.
D. Changes to Section 1876 Cost Plans
Clarifying the Conditions Under Which 1876 Cost Plans or Portions of
Their Service Areas May Be Prohibited
Section 1876(h)(5)(C) of the Social Security Act (the Act)
prohibits the renewal of a cost plan, or a portion of a cost plan's
service area in an area where, during the previous year, two or more
organizations offering a local MA plan meet a minimum enrollment test,
or two or more organizations offering a regional MA plan meet the same
test. The test is that the local or regional plan must have at least
5000 enrollees in any portion of its service area that includes a
Metropolitan Statistical Area (MSA) with a population over 250,000
(enrollment in counties contiguous to the MSA count toward the 5000)
and enrollment of at least 1,500 in the other portion of its service
area. Section 167 of MIPPA clarified the application of minimum
enrollment requirements by revising paragraphs 1876(h)(5)(C) of the
Act.
The MIPPA-based revisions include clarifying in 1876(h)(5)(C)(iii)
that the two plans triggering the prohibition may not be offered by the
same MA organization.
In addition, by revising 1876(h)(5)(C)(iii)(I) of the Act, MIPPA
clarified that if a cost plan's service area falls within more than one
MSA with a population over 250,000 and the local or regional plans have
a minimum of 5000 enrollees, the determination to prohibit a plan will
be made with respect to each MSA and counties contiguous to each MSA.
If a cost plan's service area or portion of a service area falls in
one MSA only, the determination to prohibit a plan will be based on the
competing local or regional plans' enrollments in that MSA only.
In order to reflect these changes we are revising paragraphs
(c)(1)-(3) of Sec. 417.402 of Title 42 of the Code of Federal
Regulations.
III. 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.
IV. Waiver of Proposed Rulemaking
We ordinarily publish a notice of proposed rulemaking in the
Federal Register and invite public comment on the proposed rule. The
notice of proposed rulemaking includes a reference to the legal
authority under which the rule is proposed, and the terms and
substances of the proposed rule or a description of the subjects and
issues involved. This procedure can be waived, however, if an agency
finds good cause that a notice-and-comment procedure is impracticable,
unnecessary, or contrary to the public interest and incorporates a
statement of the finding and its reasons in the rule issued. Below, we
discuss the provisions of the rule and our reasons for the waiver of
notice-and-comment procedure and, as specified, waiver of effective
dates. If we do not specify that the effective date for a provision be
waived, the date noted in the section should be considered the
effective date.
A. Waiver of Notice-and-Comment Procedure
1. Marketing Provisions (Several Sections, Subpart V)
All of the marketing sections included in this regulation and
listed below with the exception of the requirement that plans must
include the plan type in the plan's name, and that plans report the
termination of agents or brokers to States, must be implemented,
according to MIPPA, by a date specified by the Secretary, but no later
than November 15, 2008. Under section 1871(b)(1)(B) of the Act, prior
notice and comment is not required when ``a statute establishes a
specific deadline for the implementation of a provision and the
deadline is less than 150 days after the date of the enactment of the
statute in which the deadline is contained. The deadline for the
marketing provisions that must be in effect by November 15th is less
than 150 days after enactment of HIPAA, and these provisions thus may
be published in final form without prior notice and comment.
2. Other Provisions
The remainder of the provisions in this IFC either update or revise
existing regulations or add new regulations to conform to the statutory
changes made by MIPAA. Since these provisions are set in law without
regard to what public commenters might say, seeking public comment is
unnecessary and contrary to the public interest.
B. Waiver of Delay of Effective Date
In addition, for those provisions discussed above which were
required by statute to be in effect by a date specified by the
Secretary, but in no case later than November 15, 2008, we find good
cause to waive the 30-day delay in effective date that would otherwise
apply under section 1871(e)(1)(B)(i) of the Act and section 553(d) of
the Administrative Procedure Act (APA).
Section 553(d) of the APA and section 1871(e)(1)(B)(i) of the Act
ordinarily require that a regulation be effective no earlier than 30
days after publication. Under section 553(d)(3) this requirement can be
waived for good cause, and under section 1871(e)(1)(B)(ii) this
requirement can be waived if necessary to comply with statutory
requirements, or if a delay is contrary to the public interest.
As noted above, Congress enacted MIPPA on July 15, 2008 and
directed that many of the marketing provisions in this rule be
effective on a date specified by the Secretary, but in no event later
than November 15, 2008, so that they could be implemented in time for
this fall's marketing for the 2009 plan year. As a result, we find good
cause to waive the APA delay of effective date, and find that a delay
under section 1871 is contrary to the public interest.
In addition, 5 U.S.C. section 801 generally requires that agencies
submit major rules to the Congress 60 days before the rules are
scheduled to become effective. This delay does not apply, however, when
there has been a finding of good cause for waiver of prior notice and
comment as set forth above.
V. Collection of Information Requirements
Under the Paperwork Reduction Act of 1995, we are required to
provide 30-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
[[Page 54241]]
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).
Section 422.101 Requirements Relating to Basic Benefits
Section 422.101(f)(1) states that MA organizations offering special
needs plans must implement a model of care with care management as a
centerpiece designed to meet the specialized needs of the plan's
targeted enrollees.
The burden associated with this requirement is the time and effort
put forth by the special needs plan to establish a model that meets the
requirements under Section 422.101(f). In the initial year of
development, we estimate it would take one special needs plan 80 hours
per year to meet this requirement. In subsequent years, we estimate
that it would take 10 hours per year to revise the model of care based
on performance data analysis through the plan's quality improvement
program. Existing SNPs already have models of care and will need to
revise, not develop, models of care. We estimate the 335 existing SNPs
would have a cumulative annual burden of 3,350 hours to revise their
model of care. In January 2010, we anticipate that CMS will approve 150
new SNPs. We estimate the 150 new SNPs would have a cumulative initial
year burden of 12,000 hours to develop their model of care, and a
cumulative annual burden of 1,500 hours to revise their model of care
in subsequent years. In summary, we project the total annual burden in
calendar year 2009 to be 3,350 hours. In calendar year 2010, we project
the total annual burden to be 13,500 hours (12,000 hours for SNPs
approved to begin operating January 1, 2010 and 1,500 hours for SNPs
approved prior to January 1, 2010).
Section 422.107 Special Needs Plans and Dual-Eligibles: Arrangements
With States
Section 422.107(a) requires that an MA organization seeking to
offer a special needs plan serving beneficiaries eligible for both
Medicare and Medicaid (dual-eligible SNPs) must have a contract with
the State Medicaid agency. The MA organization retains responsibility
under the contract for providing benefits, or arranging for benefits to
be provided, for individuals entitled to receive medical assistance
under Title XIX. Such benefits may include long-term care services
consistent with State policy.
Section 422.107 also allows MA organizations with an existing dual-
eligible SNP without a State Medicaid agency contract to continue to
operate through 2010 provided they meet all other statutory
requirements, that is, care management and quality improvement
requirements, and do not expand their service areas.
The burden associated with this requirement is the time and effort
put forth by each dual-eligible special needs plan to contract with the
State Medicaid agency. We estimate it would take one special needs plan
18 hours for 6 months to comply with this requirement. We estimate 460
special needs plans would be affected annually by this requirement;
therefore, the total annual burden associated with this requirement is
16,560 hours.
Section 422.111 Disclosure Requirements
Section 422.111(b)(2)(iii) states that each special needs plan must
provide for prospective dual-eligible individuals, prior to enrollment,
a comprehensive written statement describing cost-sharing protections
and benefits that the individual is entitled to under title XVIII and
the State Medicaid program under title XIX. This may be developed by
the special needs plans and distributed by the agents selling Medicare
products.
The burden associated with this requirement is the time and effort
put forth by each SNP to develop and provide such written statement. We
estimate that it would take one special needs plan 10 hours for 6
months to comply with this requirement. We estimate 460 special needs
plans would be affected annually by this requirement; therefore the
total annual burden associated with this requirement is 4,600 hours.
Section 422.114 Access to Services Under an MA Private Fee-for-Service
Plan
a. Clarification Regarding Utilization
The revised section 422.114(a)(2)(ii)(A) requires that for plan
year 2010 and subsequent plan years, a PFFS plan that meets access
requirements, with respect to a particular category of provider, by
establishing contracts or agreements with a sufficient number and range
of providers must meet the network accessibility and adequacy
requirements described in Section 1852(d)(1) of the Act. This section
of the statute describes the network adequacy requirements that
coordinated care plans currently must meet when contracting with
providers to furnish benefits covered under the plan.
CMS currently uses the network adequacy standards established for
coordinated care plans in order to determine whether PFFS plans who
want to meet access requirements under section 422.114(a)(2)(ii)
satisfactorily meet those requirements. Therefore, we believe that
there will be no additional burden on PFFS plans in order to comply
with section 422.114(a)(2)(ii)(A).
b. Requirement for Certain Non-Employer PFFS Plans To Use Contract
Providers
Section 422.114(a)(3) requires that for plan year 2011 and
subsequent plan years, an MA organization that offers a PFFS plan that
is operating in a network area as defined in section 422.114(a)(3)(i)
meets the access requirements in section 422.114(a)(1) only if the MA
organization has contracts or agreements with providers in accordance
with the network accessibility and availability requirements described
in Section 1852(d)(1) of the Act.
The burden associated with this requirement is that beginning in
plan year 2011, an MA organization offering a PFFS plan will be
required to create separate plans within its existing service area
based on whether the counties located in that service area are
considered network areas or not. We have 77 MA organizations currently
offering 838 non-employer MA PFFS plans. We estimate that an additional
300 plans will be created as a result of organizations creating
separate plan benefit packages for their network area and non-network
area plans. We estimate that it will take 2 hours to create a new plan
benefit package for a total of 600 hours to create 300 plan benefit
packages.
c. Requirement for all Employer/Union-Sponsored PFFS Plans To Use
Contracts With Providers
Section 422.114(a)(4) requires that an employer/union sponsored
PFFS plan operating on or after plan year 2011 must establish written
contracts or agreements with a sufficient number
[[Page 54242]]
and range of health care providers in its service area for all
categories of services in accordance with the network accessibility and
availability requirements described in Section 1852(d)(1) of the Act.
The burden associated with this requirement is the time and effort
necessary for an organization offering an employer/union sponsored PFFS
plan to submit the required application to CMS according to section
422.501. We estimate that approximately 100 hours would be required to
complete an application. We project approximately 5 organizations will
submit applications for a year, requiring 1000 hours of time by all
applicants on an annual basis. This burden associated with the
requirement under section 422.501 is captured in OMB 0938-
0935.
Section 422.152 Quality Improvement Program
Section 422.152(g) states that MA organizations offering special
needs plans must conduct a quality improvement program that (1)
provides for the collection, analysis, and reporting of data that
measures health outcomes and indices of quality at the plan level; (2)
measures the effectiveness of its model of care; and (3) makes
available to CMS information on quality and outcomes measures that will
enable (i) beneficiaries to compare health coverage options, and (ii)
CMS to monitor the plan's model of care performance.
The burden associated with this requirement is the time and effort
put forth by the special needs plan to develop, collect, and analyze
the quality and health outcomes measures that meet the requirements
under Section 422.152(g). In the initial year of development, we
estimate it would take one special needs plan 120 hours per year to
meet this requirement. In subsequent years, we estimate that it would
take 40 hours per year to revise the quality and health outcomes
measures based on performance data analysis through the plan's quality
improvement program.
The cumulative burden on SNPs is reflected in two parts: The burden
on existing plans; and the burden on new SNPs approved to operate
beginning on January 1, 2010. First, we estimate that, in calendar year
2009, the 335 existing SNPs would have a cumulative annual burden of
40,200 hours (120 hours x 335 plans) to develop the quality and health
outcomes measures needed to evaluate their model of care and overall
plan performance. In calendar year 2010 and subsequent years, the
existing SNPs would have a cumulative annual burden of 13,400 hours (40
hours x 335 plans) to revise the quality and health outcomes measures
based on performance data analysis through the plan's quality
improvement program. Second, by January 1, 2010, we anticipate that CMS
will approve 150 new SNPs. We estimate the 150 new SNPs would have a
cumulative initial year (calendar year 2010) burden of 18,000 hours
(120 hours x 150 plans) to develop their quality and health outcomes
measures needed to evaluate their model of care and overall plan
performance, and a cumulative annual burden of 6,000 hours (40 hours x
150 plans) to revise their model of care in subsequent years.
In summary, we project the cumulative annual burden in calendar
year 2009 to be 40,200 hours. In calendar year 2010, we project the
total annual burden to be 31,400 hours (13,400 hours for existing SNPs
revising their measures, and 18,000 hours for new SNPs developing their
measures).
Section 163 of MIPPA, as codified in new Sec. 422.152(h), newly
applies a general rule for quality improvement programs at Sec.
422.152(a) to PFFS and MSA plans in 2010. Each MA organization that
offers one or more MA plans must have, for each of those plans, an
ongoing quality improvement program that meets the applicable
requirements of this section for the services it furnishes to its MA
enrollees. As part of its ongoing quality improvement program, a plan
must--
(1) Have a chronic care improvement program that meets the
requirements of paragraph (c) of this section concerning elements of a
chronic care program;
(2) Conduct quality improvement projects that can be
expected to have a favorable effect on health outcomes and enrollee
satisfaction, and meet the requirements of paragraph (d) of this
section; and
(3) Encourage its providers to participate in CMS and HHS
quality improvement initiatives.
Section 163 of MIPPA, as codified in Sec. 422.152(h), also newly
applies Sec. 422.152(e)(2) to PFFS and MSA plans in 2011. Section
422.152(e)(2) are requirements that are currently applicable to local
PPO organizations with contracted networks: Sec. 422.152(e)(2)
requires that MA organizations offering an MA regional plan or local
PPO plan as defined in this section--
(i) Measure performance under the plan using standard
measures required by CMS and report its performance to CMS. The
standard measures may be specified in uniform data collection and
reporting instruments required by CMS.
(ii) Evaluate the continuity and coordination of care
furnished to enrollees.
(iii) If the organization uses written protocols for
utilization review, the organization must--
(A) Base those protocols on current standards of medical
practice; and
(B) Have mechanisms to evaluate utilization of services
and to inform enrollees and providers of services of the results of the
evaluation.
These requirements relate to measuring of performance under the
plans using standard measures required by CMS and to reporting this
performance to CMS. The standard measures may be specified in uniform
data collection and reporting instruments required by CMS and will
relate to clinical areas including effectiveness of care, enrollee
perception of care, and use of services and to non-clinical areas
including access to and availability of services, appeals and
grievances, and organizational characteristics.
The burden associated with this new reporting provision is the time
it takes affected MA organizations to gather and submit the
information. Reporting is usually required annually. Currently, the
standard measures that will be required will most likely be those
already captured in HEDIS and CAHPS, approved under OMB 0938-
0701. Note that CMS administers the CAHPS survey, and so the burden for
CAHPS is minimal on plans.
The currently approved annual burden, per plan, for Sec. 422.152
is estimated to be 400.53 hours.
Therefore, the total hours burden associated with this requirement,
as estimated based on current numbers for each plan type = 400 hours
for 1028 PFFS (employer and non-employer) plans and 400 hours for 10
MSA plans for 2010 and thereafter for a total of 415,200 hours.
Section 422.504 Contract Provisions
Section 422.504(g)(1) states that each MA organization must adopt
and maintain arrangements satisfactory to CMS to protect its enrollees
from incurring liability for payment of fees that are the legal
obligation of the MA organization. This may be done by the
establishment of identified liaison staff of the MA plan and the State
Medicaid agency, and by conducting regular meetings for the purpose of
enrollee review.
The burden associated with this requirement is the time and effort
put forth by the each MA plan to adopt and
[[Page 54243]]
maintain arrangements. We estimate it would take one MA plan 208 hours
to comply with this requirement. We estimate 3400 plans would be
affected annually by this requirement; therefore, the total annual
burden associated with this requirement is 707,200 hours.
Section 422.2268 Standards for MA Organization Marketing
Section 422.2268(g) states MA organizations cannot 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.
The burden associated with this requirement is the time and effort
put forth by the MA organization to document a beneficiary's signed
acknowledgement confirming the specific types of choices that the
marketing representative is authorized to discuss. While there is
burden associated with this requirement, we feel the burden associated
with these requirements is exempt from the requirements of the
Paperwork Reduction Act of 1995 (PRA) as defined in 5 CFR 1320.3(b)(2)
because the time, effort, and financial resources necessary to comply
with the requirement would be incurred by persons in the normal course
of their activities.
Section 422.2272 Licensing of Marketing Representatives and
Confirmation of Marketing Resources
Section 422.2272(d) states that MA organizations must report to the
State in which the MAO appoints an agent or broker, the termination of
any such agent or broker, including the reasons for such termination if
State law requires that the reasons for the termination be reported.
The burden associated with this requirement is the time and effort
put forth by the MA organization to comply with the State requests for
information. While there is burden associated with this requirement, we
feel the burden associated with these requirements is exempt from the
requirements of the Paperwork Reduction Act of 1995 (PRA) as defined in
5 CFR 1320.3(b)(2) because the time, effort, and financial resources
necessary to comply with the requirement would be incurred by persons
in the normal course of their activities.
Section 422.2274 Broker and Agent Compensation and Training of Sales
Agents
Section 422.2274(b) states that if a MA organization markets
through independent brokers or agents, they must train and test agents
selling Medicare products concerning Medicare rules and regulations
specific to the plan products they intend to sell.
The burden associated with this requirement is the time and effort
put forth by the MA organization to provide training and test agents.
While there is burden associated with this requirement, we feel the
burden associated with these requirements is exempt from the
requirements of the Paperwork Reduction Act of 1995 (PRA) as defined in
5 CFR 1320.3(b)(2) because the time, effort, and financial resources
necessary to comply with the requirement would be incurred by persons
in the normal course of their activities.
Section 422.2274(d) states that upon CMS' request, the organization
must provide to CMS the information necessary for it to conduct
oversight of marketing activities.
The burden associated with this requirement is the time and effort
put forth by the organization to provide the requested information to
CMS. We anticipate it would take 1 organization 480 minutes/8 hours to
fulfill this requirement. We estimate 670 MA organizations would be
affected annually by this requirement, therefore the total annual
burden associated with this requirement is 5360 hours.
Section 423.520 Prompt Payment for Part D Sponsors
Section 423.520(a)(ii)(2) requires the Part D sponsor to notify the
submitting network pharmacy that a submitted claim is not a clean
claim. Such notification must specify all defects or improprieties in
the claim and must list all additional information necessary for the
proper processing and payment of the claim.
The burden associated with this requirement is the time and effort
put forth by the Part D sponsor to provide proper notification to the
network pharmacy. While there is burden associated with this
requirement, we believe the burden associated with these requirements
is exempt from the requirements of the Paperwork Reduction Act (PRA) of
1995, as defined in 5 CFR 1320.3(b)(2), because the time, effort, and
financial resources necessary to comply with this requirement would be
incurred by persons in the normal course of their activities.
Section 423.2268 Standards for Part D Marketing
Section 423.2268(g) states Part D organizations cannot 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.
The burden associated with this requirement is the time and effort
put forth by the Part D organization to document a beneficiary's signed
acknowledgement confirming the specific types of choices that the
marketing representative is authorized to discuss. While there is
burden associated with this requirement, we feel the burden associated
with these requirements is exempt from the requirements of the
Paperwork Reduction Act of 1995 (PRA) as defined in 5 CFR 1320.3(b)(2)
because the time, effort, and financial resources necessary to comply
with the requirement would be incurred by persons in the normal course
of their activities.
Section 423.2272 Licensing of Marketing Representatives and
Confirmation of Marketing Resources
Section 423.2272(d) states that Part D sponsors must report to the
State in which the Part D sponsor appoints an agent or broker, the
termination of any such agent or broker, including the reasons for such
termination if State law requires that the reasons for the termination
be reported.
The burden associated with this requirement is the time and effort
put forth by the Part D sponsor to comply with the State requests for
information. While there is burden associated with this requirement, we
feel the burden associated with these requirements is exempt from the
requirements of the Paperwork Reduction Act of 1995 (PRA) as defined in
5 CFR 1320.3(b)(2) because the time, effort, and financial resources
necessary to comply with the requirement would be incurred by persons
in the normal course of their activities.
Section 423.2274 Broker and Agent Compensation and Training of Sales
Agents
Section 423.2274(b) requires the Part D sponsor to ensure agents
selling Medicare products are trained on Medicare rules and regulations
specific to the plan products they intend to sell.
The burden associated with this requirement is the time and effort
put forth by the Part D sponsor to provide training and test agents.
While there is burden associated with this requirement, we feel the
burden associated with these requirements is exempt from the
requirements of the Paperwork Reduction Act of 1995 (PRA) as defined in
5 CFR 1320.3(b)(2) because the time, effort, and financial resources
necessary to comply with the
[[Page 54244]]
requirement would be incurred by persons in the normal course of their
activities.
Section 423.2274(d) states that the Part D sponsor provide
information for it to conduct oversight of marketing activities upon
CMS' request.
The burden associated with this requirement is the time and effort
put forth the by the Part D sponsor to provide information to CMS. We
anticipate it would take 1 Part D sponsor 480 minutes/8 hours to
fulfill this requirement. We estimate 87 Part D sponsors would be
affected annually by this requirement; therefore the total annual
burden associated with this requirement is 696 hours.
Please note, CMS will revise the currently OMB approved PRA
packages that contain Part 422--Medicare Advantage Program and Part
423--Voluntary Medicare Prescription Drug Benefit to include any new
and/or revised burden requirements. The OMB approval numbers for those
PRA packages are 0938-0753 and 0938-0964.
As reflected in the table that follows, the aggregate annual burden
associated with the collection of information section for this rule
totals 1,194,766.
Table 2--Aggregate Annual Burden
----------------------------------------------------------------------------------------------------------------
Number of Total annual
OMB No. Requirements respondents Burden hours burden
----------------------------------------------------------------------------------------------------------------
0938-0753............................. 422.101(f)(1)........... 335 24 \1\ 3,350
0938-0753............................. 422.107(a).............. 460 20 16,560
0938-0753............................. 422.111(b)(2)........... 460 10 \1\ 4,600
0938-0753............................. 422.114(a)(3)........... 300 2 600
0938-0753............................. 422.114(a)(4)........... 10 100 1,000
0938-0753............................. 422.152(g).............. 335 120 \1\ 40,200
0938-0753............................. 422.152(h).............. 1,038 400 415,200
0938-0753............................. 422.504(g)(1)........... 3,400 208 \1\ 707,200
0938-0753............................. 422.2268(a)............. N/A N/A N/A
0938-0964............................. 422.2272(d)............. N/A N/A N/A
0938-0964............................. 422.2274(b)(d).......... 670 8 5,360
0938-0964............................. 423.520................. N/A N/A N/A
0938-0964............................. 423.2268(a)............. N/A N/A N/A
0938-0964............................. 423.2272(d)............. N/A N/A N/A
0938-0964............................. 423.2274(b)(d).......... 87 8 696
-----------------------------------------------
Total Aggregate Burden............ ........................ .............. .............. \1\ 1,194,766
----------------------------------------------------------------------------------------------------------------
\1\ = hours.
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 rule; or
2. Mail copies to the address specified in the ADDRESSES section of
this rule and to the Office of Information and Regulatory Affairs,
Office of Management and Budget, Room 10235, New Executive Office
Building, Washington, DC 20503, Attn: CMS Desk Officer, CMS-4138-IFC
[email protected]. Fax (202) 395-6974.
VI. Regulatory Impact Analysis
A. Overall Impact
Executive Order 12866 (as amended) 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).
We estimate the prompt payment provisions to have an impact to the
federal budget in an amount exceeding $100 million as specified in
Table 3 which indicates $670 million in costs to the Federal government
associated with these provisions from calendar year (CY) 2010 through
CY 2018. Costs for provisions not related to prompt payment, which are
indicated in Table 5, total $26.7 million, and will affect MA
organizations and prescription drug plan sponsors. In addition, we
project an incurred savings (before the Part B premium offset) ranging
from $780 million in CY 2011 to $1.59 billion in CY 2018, representing
savings to the Federal government of $8.1 billion over this period, as
the result of the requirement for certain non-employer and all employer
private-fee-for-service plans to establish contracts with providers
(see Table 4). Including both the costs and savings to the Federal
government as a result of the provisions in this IFC, we estimate a net
savings of $7.43 billion to the Federal government over the period
estimated. As a result, this interim final rule meets the threshold of
being economically significant and is consequently a major rule.
B. Regulatory Flexibility Analysis
1. General
The RFA requires agencies to analyze options for regulatory relief
of small businesses, if a rule has significant impact on a substantial
number of small entities. Under the RFA, we are not required to conduct
an initial regulatory flexibility analysis for interim final rules.
However, it is our longstanding policy to provide an analysis whenever
we believe it would aid understanding of the effects of the IFC. As a
result, we provide, in separate sections below, an analysis of the
prompt payment provisions and other provisions in the IFC that are not
associated with these. For purposes of RFA, a small business (as
determined by the Small Business Administration (SBA)), is a non-profit
entity of any size that is not dominant in its field, or a small
government jurisdiction. HHS uses an impact change of 3 to 5 percent on
revenues in its threshold measure of a significant economic impact on a
substantial number of small entities. Individuals and States are not
included in the definition of a small entity. Small entities affected
include small retail pharmacies, which we believe will have positive
cost impacts; pharmacy benefit managers, which we believe will have
[[Page 54245]]
some additional costs; and MA organizations and Part D sponsors, which
are not typically considered small entities. Cost impacts for these
entities are discussed in further detail below.
2. Prompt Payment Provisions
The Secretary has determined that this rule will have a significant
impact on a substantial number of small entities and that the prompt
payment revisions will positively impact retail pharmacies while adding
some additional cost impacts to Part D sponsors and pharmacy benefit
managers (PBMs).
With respect to the provisions contained in this interim final
rule, we discuss in further detail impacts to retail pharmacies, Part D
sponsors, and pharmacy benefit managers (PBMs). The Small Business
Administration (SBA) considers pharmacies with firm revenues less than
$6.5 million to be small businesses. The 2004 Business Census (the
latest available detailed data) indicated that there were approximately
19,443 firms operating about 40,115 retail pharmacies and drug store
establishments (NAICS code 44611). Of these firms, 17,835 had revenues
under $6.5 million and operated a total of 17,835 establishments. As a
result, we estimate that more than 90 percent of retail pharmacy firms
are small businesses (as defined by the SBA size standards).
Given this assumption, we estimate that the prompt payment
provisions will positively impact a substantial number of small retail
pharmacies. Our conversations with retail pharmacies indicate that
those pharmacies able to provide remittances to wholesalers for
invoices for drugs within a contractual 14 day period will receive a
rebate of 1-3% off the total invoice price. The new prompt payment
provisions requiring the payment by Part D plan sponsors of clean
claims from pharmacies within 14 days of electronic submission will
facilitate the payment of pharmacies' wholesalers for drugs within
their contractual window and receiving the related discount. We do not
anticipate that there will be any additional costs to pharmacies
related to this provision.
The other small businesses that may be impacted by the provisions
in this interim final rule are pharmacy benefit managers (PBMs). In our
2005 Part D final rule, we estimated approximately one hundred PBM
firms. Since that time we have seen continued consolidation in this
industry and believe there to be even a small number of PBMs, even
thought there have been a handful of new entrants in the industry. We
have no information on the size of the smaller firms in the industry,
but it is likely that none of them, or at most a very small number
would fall below the $6.5 million annual revenue threshold used by the
SBA for defining ``small entities'' in the insurance industry. We
address the impact of these provisions on health plans and PBMs with
revenues greater than the $6.5 million dollar threshold in section B.
However, we do believe that the prompt payment provisions may put small
PBMs at a disadvantage as more frequent payments may result in a
shorter float on cash and a loss of investment income.
Section 1102(b) of the Social Security Act requires us to prepare a
regulatory flexibility 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 604
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. This rule
will not affect small rural hospitals since the program will be
directed at outpatient prescription drugs, not drugs provided during a
hospital stay. As required by law, prescription drugs provided during
hospital stays are covered under a separate Medicare payment system.
Therefore, we are not providing an analysis in this rule.
Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA)
requires that agencies assess anticipated costs and benefits and take
certain other actions before issuing a final rule that includes any
Federal mandate that may result in expenditure in any one year by
State, local, or tribal governments, in the aggregate, or by the
private sector, of $110 million. That threshold level is currently
approximately $130 million. We anticipate that this interim final rule
would not impose costs above the $130 million UMRA threshold on State,
local, tribal governments, in the aggregate or by the private sector.
Executive Order 13132 establishes certain requirements that an
agency must meet when it issues a final rule that imposes substantial
direct requirement costs on State and local governments, preempts State
law, or otherwise has Federalism implications. The changes and
additions contained in this interim final rule do not impose new costs
on states or local governments. Thus, there are no anticipated
Federalism implications.
Anticipated Effects on Health Plans and Pharmacy Benefit Managers (PBM)
Part D sponsors and their PBM subcontractors will be significantly
impacted by a number of provisions contained in this interim final
rule. We estimate that the prompt payment provisions contained this
interim final rule will impose significant costs to PDPs, MA-PD plans,
and their subcontractors. The industry expects that the shortened
payment period will likely require sponsors to hold more cash reserves
and lose the opportunity for accumulating interest. We estimate the
loss of investment income resulting from the prompt payment provisions
to increase the costs of the Part D program by $670 million from CY
2010 through CY 2018.
CMS requests comments and information on the accuracy and
completeness of our estimates.
3. Other Provisions
Although other provisions of this rule do not exceed $100 million,
because there are costs to plans and sponsors associated with several
provisions of this rule, we indicate in Table 5 general areas affected
and specify the cost impacts associated with these other provisions of
the rule. For specific burden associated with the proposed requirements
and the bases for our estimates, see section IV, Collection of
Information Requirements, of this rule.
For the cost impact estimates for provisions other than the prompt
payment provisions, we use, as appropriate, the figures of $14.68
(based on the United States Department of Labor (DOL) statistics for
the hourly wages of word processors and typists) and $37.15 (based on
DOL statistics for a management analyst) \1\ plus the added OMB figures
of 12 percent for overhead and 36 percent for benefits, respectively,
to represent average costs to plans, sponsors and downstream entities
for the provisions discussed in this proposed rule with comment period
(note that the wages cited for the provisions below include the hourly
wage + an additional 48 percent to reflect overhead, benefit costs for
total wages of $21.73 and $54.98, respectively). Also, it should be
noted that while we believe there may be costs for special needs plans
to hire medical personnel or senior staff not captured above for the
state contracting and model of care provisions, we are unsure of the
costs for these and thus are
[[Page 54246]]
requesting comments on additional cost impacts for these provisions.
---------------------------------------------------------------------------
\1\ The hourly rates for the burden requirement were developed
using the Department of Labor, Bureau of Labor Statistics for May
2006 (National Occupational Employment and Wage Estimates).
---------------------------------------------------------------------------
In the Regulatory Impact Analysis of the January 28, 2005 final
rule (70 FR 4695) revising the Medicare Advantage program, we noted
that costs associated with the MA program would be approximately $18.3
billion from 2004 through 2009, 10 percent of which we estimated will
be administrative costs. The rule establishing the prescription drug
benefit program published on January 28, 2005 (70 FR 4194) made a
similar calculation in its Regulatory Impact Statement. Administrative
costs associated with the provisions of this final rule, then, add
negligibly to the total administrative costs of the MA or Part D
programs.
With respect to economic benefits, we have no reliable basis for
estimating the effects of these proposals. Many of the proposed changes
clarify or codify existing policies though such clarification could
contribute to greater plan efficiency and compliance with program
regulations. Accordingly, we estimate that while there could be
economic benefits associated with these proposals, they are difficult
to gauge at this time.
Special Needs Plans (Part C)
Several of our provisions concern special needs plans and
strengthening coordination between plans and States to better
coordinate care, developing models of care, and ensuring that enrollees
are not charged for costs that are the responsibility of the State. A
breakdown of costs for each provision are as follows:
Developing models of care ($54.98 x 3,350 hours =
$184,183).
Contracting with States ($54.98 x 16,560 hours =
$910,469).
Developing dual-eligible written information on both
Medicare and Medicaid cost-sharing and benefits ($21.73 x 4,600 hours =
$99,958).
Collecting, analyzing, and reporting data that measures
health outcomes and indices of quality on its model of care ($54.98 x
40,200 hours = $2,210,196).
Private Fee-for-Service Plans (Part C)
CMS estimates an incurred savings (before the Part B premium
offset) of $780 million for CY 2011 to $1.59 billion in CY 2018 as a
result of the requirement that certain non-employer and all employer
PFFS plans establish contracts with providers.
To do the estimates, we considered the number of counties that had
PFFS plans, and the number of members. We then saw how many coordinated
care plans were currently operating in each of these counties
(excluding regional PPOs). This gave us a basis to project how many
PFFS plans and members would be subject to the new requirement to set
up networks of providers by 2011.
Based on the information, as well as the level of payments that
these plans receive from CMS, we estimated how many members would end
up in PFFS plans that did not need to form networks; how many would be
in plans that converted to network PFFS plans, how many would end up in
a coordinated care plan; and how many would switch to original
Medicare. We used different assumptions for individual plans and for
group plans. However, for both group and individual plans, we assumed
that most members would remain in a PFFS plan (either network or non-
network).
For members who stayed in either a network or non-network PFFS
plan, we assumed a higher plan bid and, therefore, cost to Medicare. In
contrast, we assumed a savings for those that we estimate will go to a
coordinated care plan, and a larger savings for those who go to
original Medicare.
We indicate the estimated incurred savings over this period in
Table 4.
Costs for each provision, as shown in Table 5, affecting private
fee-for-service (PFFS) plans are as follows:
Certain non-employer PFFS plans establishing contracts
with providers ($54.98 x 600 hours = $32,988).
Employer/union sponsored PFFS plans establishing contracts
with providers ($54.98 x 1,000 hours = $54,980).
PFFS and MSA plans developing quality improvement programs
($54.98 x 415,200 hours) = $22,827,696.
Marketing (Parts C and D)
Costs for each marketing provision, in the context of each program,
are as follows:
Training and testing of agents selling Medicare products,
MA program ($54.98 x 5,360 hours = $294,692).
Training and testing of agents selling Medicare products,
Part D ($54.98 x 696 hours = $38,266)
CMS requests comments and information on the accuracy and
completeness of our estimates.
Table 3--Projected Part D (Non-Marketing) Costs for CY 2010-2018
[Millions of dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
CY 2010-
CY 2010 CY 2011 CY 2012 CY 2013 CY 2014 CY 2015 CY 2016 CY 2017 CY 2018 2018
--------------------------------------------------------------------------------------------------------------------------------------------------------
Prompt payment by prescription drug plans and MA-PD plans 50 50 60 60 70 80 90 100 110 670
under Part D...............................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
Table 4--Projected Incurred Savings for Non-Employer and Employer PFFS Network Provision
[Millions of dollars]
----------------------------------------------------------------------------------------------------------------
CY 2011-
CY 2011 CY 2012 CY 2013 CY 2014 CY 2015 CY 2016 CY 2017 CY 2018 2018
----------------------------------------------------------------------------------------------------------------
Total HI (MC and FFS)........ 420 470 520 580 640 690 760 830 4,910
Total SMI (MC and FFS)....... 360 400 460 490 540 600 670 760 4,280
Total Medicare (before Part B 780 870 980 1,070 1,180 1,290 1,430 1,590 9,190
premium offset).............
Total Medicare (after Part B 690 770 860 950 1,040 1,140 1,260 1,400 8,110
premium offset).............
----------------------------------------------------------------------------------------------------------------
[[Page 54247]]
Table 5--Projected Annual Costs to MAOs and PDP Sponsors: Other
Provisions
------------------------------------------------------------------------
Provision CY effective Projected costs
------------------------------------------------------------------------
Special needs plan: developing 2010............... $184,183
models of care.
Special needs plan: contracting 2010............... 910,469
with States.
Special needs plan: developing 2010............... 99,958
written information on both
Medicare and Medicaid cost-
sharing and benefits for dual-
eligible beneficiaries.
Special needs plan: collecting, 2010............... 2,210,196
analyzing, and reporting data
related to model of care
concerning health outcomes and
indices of quality.
Training and testing of agents October 2008....... 332,958
and brokers (Part C and Part D
programs).
Certain non-employer PFFS plans 2011............... 32,988
establishing contracts with
providers.
Employer/union sponsored PFFS 2011............... 54,980
plans establishing contracts
with providers.
PFFS and MSA plans developing 2010............... 22,827,696
quality improvement programs.
------------------
Total....................... ................... 26,653,428
------------------------------------------------------------------------
C. Alternatives Considered
All of the economically significant provisions in this interim
final rule are a result of the recent passage of MIPPA and are self-
implementing. While we had no discretion with these statutory
provisions, we desired to make our resulting regulations available to
industry and the public as soon as possible to facilitate continued,
efficient operation of the Part C and D programs. Regarding the other
provisions contained in this interim final rule, we considered not
issuing further guidance in these areas, but we believed that in order
to ensure public awareness of our policies, as well as to avoid
potential confusion regarding them, we should codify our policies in
this interim final rule.
D. Accounting Statement
As required by OMB Circular A-4 (available at http://www.whitehouse.gov/omb/circulars/index.html), in Table 6 below, we have
prepared an accounting statement showing the classification of the
expenditures associated with the prompt payment provisions of this
final rule and the benefits associated with the PFFS network
provisions. This table provides our best estimate of the costs and
savings as a result of the changes presented in this interim final
rule. All costs are classified as transfers by the Federal Government
to PDP sponsors or MAOs.
Table 6--Accounting Statement: Classification of Estimated Expenditures
----------------------------------------------------------------------------------------------------------------
Category Transfers ($ millions)
----------------------------------------------------------------------------------------------------------------
Incurred savings for the Non-Employer and Employer PFFS Network Provision, CYs 2011-2018
----------------------------------------------------------------------------------------------------------------
Undiscounted Annualized Monetized Transfers.............. $1,013.8.
Annualized Monetized Transfers Using 7% Discount Rate.... $838.4.
Annualized Monetized Transfers Using 3% Discount Rate.... $873.9.
From Whom to Whom? (Represents a reduction of transfers PFFS Plans to the Federal Government.
from the Federal Government to non-network/network PFFS
Plans.).
----------------------------------------------------------------------------------------------------------------
Prompt payment by prescription drug plans and MA-PD plans under Part D, CYs 2010-2018
----------------------------------------------------------------------------------------------------------------
Undiscounted Annualized Monetized Transfers.............. $74.4.
Annualized Monetized Transfers Using 7% Discount Rate.... $71.0.
Annualized Monetized Transfers Using 3% Discount Rate.... $72.9.
From Whom to Whom?....................................... Federal Government to Part D Sponsors.
----------------------------------------------------------------------------------------------------------------
Costs for all other (non-marketing) provisions not related to Part D
----------------------------------------------------------------------------------------------------------------
Undiscounted Annualized Monetized Costs.................. $26.7.
Who Is Affected?......................................... MAOs/PDP Sponsors.
----------------------------------------------------------------------------------------------------------------
E. Conclusion
Given that we expect the cost of implementing a number of the
provisions contained in this interim final rule, as specified in Table
3, will exceed the $100 million threshold within a single year between
CY 2010 and CY 2018, we conducted an economic impact analysis with
regard to those entities potentially impacted by these provisions. As
we stated previously, we expect that entities such as pharmacies will
benefit from these changes, whereas other entities, such as PBMs and
Part D sponsors, will experience additional costs which they will pass
on to CMS through direct subsidy payments and beneficiaries through
additional premiums as reflected in their bids. The prompt payment
provisions account for the primary cost impacts associated with this
IFC, ranging from $50 million in CY 2010 to $110 million in CY 2018.
Cost impacts for the other provisions of this IFC will total slightly
more than $26.7 million in the years indicated when the provisions
become effective. As discussed, we also estimate a savings ranging from
$780 million in CY 2011 to $1.59 billion in CY 2018 as a result of the
requirement that non-employer private-fee-for-service plans have
networks beginning in 2011.
In accordance with the provisions of Executive Order 12866, this
final rule was reviewed by the Office of Management and Budget.
[[Page 54248]]
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, Reporting and recordkeeping
requirements.
42 CFR Part 422
Administrative practice and procedure, Health facilities, Health
maintenance organizations (HMO), Medicare, Penalties, Privacy,
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.
0
For the reasons set forth in the preamble, the Centers for Medicare &
Medicaid Services amends 42 CFR chapter IV as set forth below:
PART 417--HEALTH MAINTENANCE ORGANIZATIONS, COMPETITIVE MEDICAL
PLANS, AND HEALTH CARE PREPAYMENT PLANS
0
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 J--Qualifying Conditions for Medicare Contracts
0
2. Amend Sec. 417.402 by--
0
A. Revising paragraph (c)(1).
0
B. Revising paragraph (c)(2).
0
C. Revising paragraph (c)(3).
The revisions read as follows:
Sec. 417.402 Effective date of initial regulations.
* * * * *
(c) * * *
(1) There were two or more coordinated care plan-model MA regional
plans not offered by the same MA organization in the same service area
or portion of a service area for the entire previous calendar year
meeting the conditions in paragraph(c)(3) of this section; or
(2) There were two or more coordinated care plan-model MA local
plans not offered by the same MA organization in the same service area
or portion of a service area for the entire previous calendar year
meeting the conditions in paragraph (c)(3) of this section.
(3) Minimum enrollment requirements. With respect to any service
area or portion of a service area that is within a Metropolitan
Statistical Area (MSA) with a population of more than 250,000 and
counties contiguous to the MSA that are not in another MSA with a
population of more than 250,000, 5000 enrolled individuals. If the
service area includes a portion in more than one MSA with a population
of more than 250,000, the minimum enrollment determination is made with
respect to each such MSA and counties contiguous to the MSA.
PART 422--MEDICARE ADVANTAGE PROGRAM
0
3. 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
0
4. Amend Sec. 422.4 by--
0
A. Republishing paragraph (a) introductory text.
0
B. Revising paragraph (a)(3)(ii).
The revision reads as follows:
Sec. 422.4 Types of MA plans.
(a) General rule. An MA plan may be a coordinated care plan, a
combination of an MA MSA plan and a contribution into an MA MSA
established in accordance with Sec. 422.262, or an MA private fee-for-
service plan.
(3) * * *
(ii) Subject to paragraphs (a)(3)(ii)(A) and (B) of this section,
does not vary the rates for a provider based on the utilization of that
provider's services; and
(A) May vary the rates for a provider based on the specialty of the
provider, the location of the provider, or other factors related to the
provider that are not related to utilization and do not violate Sec.
422.205 of this part.
(B) May increase the rates for a provider based on increased
utilization of specified preventive or screening services.
* * * * *
Subpart C--Benefits and Beneficiary Protections
0
5. Amend Sec. 422.101 by adding paragraph (f) to read as follows:
Sec. 422.101 Requirements relating to basic benefits.
* * * * *
(f) Special Needs Plan Model of Care. (1) MA organizations offering
special needs plans (SNP) must implement an evidence-based model of
care with appropriate networks of providers and specialists designed to
meet the specialized needs of the plan's targeted enrollees. The MA
organization must, with respect to each individual enrolled--
(i) Conduct a comprehensive initial health risk assessment of the
individual's physical, psychosocial, and functional needs as well as
annual health risk reassessment, using a comprehensive risk assessment
tool that CMS will review during oversight activities.
(ii) Develop and implement a comprehensive individualized plan of
care through an interdisciplinary care team in consultation with the
beneficiary, as feasible, indentifying goals and objectives including
measurable outcomes as well as specific services and benefits to be
provided.
(iii) Use an interdisciplinary team in the management of care.
(2) [Reserved]
0
6. Add new section Sec. 422.107 to read as follows:
Sec. 422.107 Special needs plans and dual-eligibles: Contract with
State Medicaid Agency.
(a) Definition. For the purpose of this section, a contract with a
State Medicaid agency means a formal written agreement between an MA
organization and the State Medicaid agency documenting each entity's
roles and responsibilities with regard to dual-eligible individuals.
(b) General rule. MA organizations seeking to offer a special needs
plan serving beneficiaries eligible for both Medicare and Medicaid
(dual-eligible) must have a contract with the State Medicaid agency.
The MA organization retains responsibility under the contract for
providing benefits, or arranging for benefits to be provided, for
individuals entitled to receive medical assistance under title XIX.
Such benefits may include long-term care services consistent with State
policy.
(c) Minimum contract requirements. At a minimum, the contract must
document--
(1) The MA organization's responsibility, including financial
obligations, to provide or arrange for Medicaid benefits.
(2) The category(ies) of eligibility for dual-eligible
beneficiaries to be enrolled under the SNP, as described under the
Statute at sections 1902(a), 1902(f), 1902(p), and 1905.
(3) The Medicaid benefits covered under the SNP.
(4) The cost-sharing protections covered under the SNP.
[[Page 54249]]
(5) The identification and sharing of information on Medicaid
provider participation.
(6) The verification of enrollee's eligibility for both Medicare
and Medicaid.
(7) The service area covered by the SNP.
(8) The contract period for the SNP.
(d) Date of Compliance. (1) Effective January 1, 2010--
(i) MA organizations offering a new dual-eligible SNP must have a
State Medicaid agency contract.
(ii) MA organizations with an existing dual-eligible SNP without a
State Medicaid agency contract may continue to operate through 2010
provided they meet all other statutory requirements, that is, care
management and quality improvement program requirements. However, they
cannot expand their service areas during 2010.
(2) [Reserved]
0
7.Amend Sec. 422.111 by--
0
A. Redesignating paragraph (b)(2)(iii) as (b)(2)(iv).
0
B. Adding new paragraph (b)(2)(iii) to read as follows:
Sec. 422.111 Disclosure requirements.
* * * * *
(b) * * *
(2) * * *
(iii) For a Special Needs Plan for dual-eligible individuals, prior
to enrollment, for each prospective enrollee, a comprehensive written
statement describing cost sharing protections and benefits that the
individual is entitled to under title XVIII and the State Medicaid
program under title XIX.
* * * * *
0
8. Amend Sec. 422.114 by--
0
A. Revising paragraph (a)(2) introductory text.
0
B. Revising paragraph (a)(2)(ii).
0
C. Adding paragraph (a)(3).
0
D. Adding paragraph (a)(4).
The revisions and additions read as follows:
Sec. 422.114 Access to services under an MA private fee-for-service
plan.
(a) * * *
(2) Subject to paragraphs (a)(3) and (a)(4) of this section, CMS
finds that an MA organization meets the requirement in paragraph (a)(1)
of this section if, with respect to a particular category of health
care providers, the MA organization has--
(i) * * *
(ii) Subject to paragraph (A) of section (a)(2)(ii), contracts or
agreements with a sufficient number and range of providers to furnish
the services covered under the MA private fee-for-service plan; or
(A) For plan year 2010 and subsequent plan years, contracts or
agreements with a sufficient number and range of providers to meet the
access standards described in section 1852(d)(1) of the Act.
(B) [Reserved]
* * * * *
(3) For plan year 2011 and subsequent plan years, an MA
organization that offers an MA private fee-for-service plan (other than
a plan described in section 1857(i)(1) or (2) of the Act) that is
operating in a network area (as defined in paragraph (a)(3)(i) of this
section) meets the requirement in paragraph (a)(1) of this section only
if the MA organization has contracts or agreements with providers in
accordance with paragraph (a)(2)(ii)(A) of this section.
(i) Network area is defined, for a given plan year, as the area
that the Secretary identifies in the announcement of the risk and other
factors to be used in adjusting MA capitation rates for each MA payment
area for the previous plan year as having at least 2 network-based
plans (as defined in paragraph (a)(3)(ii) of this section) with
enrollment as of the first day of the year in which the announcement is
made.
(ii) Network-based plan is defined as a coordinated care plan as
described in Sec. 422.4(a)(1)(ii), a network-based MSA plan, or a
section 1876 reasonable cost plan. A network-based plan excludes a MA
regional plan that meets access requirements substantially through the
authority of Sec. 422.112(a)(1)(ii) instead of written contracts.
(4) For plan year 2011 and subsequent plan years, an MA
organization that offers an MA private fee-for-service plan that is
described in section 1857(i)(1) or (2) of the Act meets the requirement
in paragraph (a)(1) of this section only if the MA organization has
contracts or agreements with providers in accordance with paragraph
(a)(2)(ii)(A) of this section.
* * * * *
Subpart D--Quality Improvement
0
9. Amend Sec. 422.152 by--
0
A. Revising paragraph (a) introductory text.
0
B. Adding paragraph (g).
0
C. Adding paragraph (h).
The revisions read as follows:
Sec. 422.152 Quality improvement program.
(a) General rule. Each MA organization that offers one or more MA
plans must have, for each of those plans, an ongoing quality
improvement program that meets applicable requirements of this section
for the service it furnishes to its MA enrollees. As part of its
ongoing quality improvement program, a plan must--
* * * * *
(g) Special requirements for specialized MA Plans for special needs
individuals. A SNP must conduct a quality improvement program that--
(1) Provides for the collection, analysis, and reporting of data
that measures health outcomes and indices of quality pertaining to its
targeted special needs population (that is, dual-eligible,
institutionalized, or chronic condition) at the plan level.
(2) Measures the effectiveness of its model of care through the
collection, aggregation, analysis, and reporting of data that
demonstrate the following:
(i) Access to care as evidenced by measures from the care
coordination domain (for example, service and benefit utilization
rates, or timeliness of referrals or treatment).
(ii) Improvement in beneficiary health status as evidenced by
measures from functional, psychosocial, or clinical domains (for
example, quality of life indicators, depression scales, or chronic
disease outcomes).
(iii) Staff implementation of the SNP model of care as evidenced by
measures of care structure and process from the continuity of care
domain (for example, National Committee for Quality Assurance
accreditation measures or medication reconciliation associated with
care setting transitions indicators).
(iv) Comprehensive health risk assessment as evidenced by measures
from the care coordination domain (for example, accuracy of acuity
stratification, safety indicators, or timeliness of initial assessments
or annual reassessments).
(v) Implementation of an individualized plan of care as evidenced
by measures from functional, psychosocial, or clinical domains (for
example, rate of participation by IDT members and beneficiaries in care
planning).
(vi) A provider network having targeted clinical expertise as
evidenced by measures from medication management, disease management,
or behavioral health domains.
(vii) Delivery of services across the continuum of care.
(viii) Delivery of extra services and benefits that meet the
specialized needs of the most vulnerable beneficiaries as evidenced by
measures from the psychosocial, functional, and end-of-life domains.
(ix) Use of evidence-based practices and nationally recognized
clinical protocols.
(x) Use of integrated systems of communication as evidenced by
[[Page 54250]]
measures from the care coordination domain (for example, call center
utilization rates, rates of beneficiary involvement in care plan
development, etc.).
(3) Makes available to CMS information on quality and outcomes
measures that will--
(i) Enable beneficiaries to compare health coverage options; and
(ii) Enable CMS to monitor the plan's model of care performance.
(h) Requirements for MA private-fee-for-service plans and Medicare
medical savings account plans. (1) Subject to paragraph (h)(2) of this
section, MA PFFS and MSA plans are subject to requirements that may not
exceed the requirements specified in Sec. 422.152(e).
(2) For plan year 2010, MA PFFS and MSA plans are not subject to
the limitations under Sec. 422.152(e)(1)(i) and must meet the
requirements using administrative claims data only.
Subpart E--Relationships With Providers
0
10. Revise paragraph (a) of Sec. 422.216 as follows:
Sec. 422.216 Special Rules for MA private-fee-for-service plans.
(a) Payment to Providers--(1) Payment Rate. (i) The MA organization
must establish payment rates for plan covered items and services that
apply to deemed providers. The MA organization may vary payment rates
for providers in accordance with Sec. 422.4(a)(3).
(ii) Providers must be reimbursed on a fee-for-service basis.
(iii) The MA organization must make information on its payment
rates available to providers that furnish services that may be covered
under the MA private fee-for-service plan.
(2) Noncontract providers. The organization pays for services of
noncontract providers in accordance with Sec. 422.100(b)(2).
(3) Services furnished by providers of service. Any provider of
services as defined in section 1861(u) of the Act that does not have in
effect a contract establishing payment amounts for services furnished
to a beneficiary enrolled in an MA private fee-for-service plan must
receive, and accept as payment in full, at least the amount (less any
payments under Sec. Sec. 412.105(g) and 413.76 of this chapter) that
it could collect if the beneficiary were enrolled in original Medicare.
* * * * *
Subpart G--Payments to Medicare Advantage Organizations
0
11. Amend Sec. 422.306 by--
0
A. Revising the introductory text.
0
B. Adding paragraph (c).
The revisions and additions read as follows:
Sec. 422.306 Annual MA capitation rates.
Subject to adjustments at Sec. 422.308(b) and Sec. 422.308(g),
the annual capitation rate for each MA local area is determined under
paragraph (a) of this section for 2005 and each succeeding year, except
for years when CMS announces under Sec. 422.312(b) that the annual
capitation rates will be determined under paragraph (b) of this
section, and is then adjusted to exclude the applicable phase-in
percentage of the standardized costs for payments under section
1886(d)(5)(B) of the Act in the area for the year under paragraph (c)
of this section.
* * * * *
(c) Phase-out of the indirect costs of medical education from MA
capitation rates. Beginning with 2010, after the annual capitation rate
for each MA local area is determined under paragraph (a) or (b), the
amount is adjusted in accordance with section 1853(k)(4) of the Act to
exclude from such amount the phase-in percentage for the year of the
estimated costs for payments under section 1886(d)(5)(B) of the Act in
the area for the year.
Subpart K--Contracts With Medicare Advantage Organizations
0
12. Amend Sec. 422.504 by adding paragraph (g)(1)(iii) to read as
follows:
Sec. 422.504 Contract provisions.
* * * * *
(g) * * *
(1) * * *
(iii) For full-benefit dual-eligible individuals or qualified
Medicare beneficiaries, plans may not impose cost sharing exceeding the
amount that would be permitted to the individual under title XIX if the
individual were not enrolled in the SNP.
* * * * *
Subpart V--Medicare Advantage Marketing Requirements
0
13. Amend Sec. 422.2268 by--
0
A. Adding paragraph (b)
0
B. Adding paragraph (g).
0
C. Adding paragraph (h).
0
D. Adding paragraph (n).
0
E. Adding paragraph (q).
The additions to read as follows:
Sec. 422.2268 Standards for MA organization marketing.
* * * * *
(b) Offer gifts to potential enrollees, unless the gifts are of
nominal (as defined in the CMS Marketing Guidelines) value, are offered
to all potential enrollees without regard to whether or not the
beneficiary enrolls, and are not in the form of cash or other monetary
rebates.
* * * * *
(g) 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.
(h) 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.
* * * * *
(n) Display the names and/or logos of co-branded network providers
on the organization's member identification card, unless the provider
names, and/or logos are related to the member selection of specific
provider organizations (for example, physicians, hospitals). Other
marketing materials (as defined in Sec. 422.2260) that include names
and/or logos of provider co-branding partners must clearly indicate
that other providers are available in the network.
* * * * *
(q) Use a plan name that does not include the plan type. The plan
type should be included at the end of the plan name.
0
14. Amend Sec. 422.2272 by adding paragraph (d) to read as follows:
Sec. 422.2272 Licensing of marketing representatives and
confirmation of marketing resources.
* * * * *
(d) Report to the State in which the MAO appoints an agent or
broker, the termination of any such agent or broker, including the
reasons for such termination if State law requires that the reasons for
the termination be reported.
0
15. Add Sec. 422.2274 to read as follows:
Sec. 422.2274 Broker and agent requirements.
If a Medicare Advantage organization markets through employed or
independent brokers or agents--
(a) Agents and brokers must be compensated as follows:
(1) An MA plan (or other entity on its behalf) may provide
compensation to a broker or agent for the sale of a MA product only if
the aggregate of the first year compensation is no more than 200
percent of the aggregate of the compensation paid for selling or
servicing the enrollee in each individual subsequent renewal year, of
which there
[[Page 54251]]
must be a total of five renewal years (creating a 6-year compensation
cycle). For purposes of this section, ``compensation''--
(i) Includes pecuniary or non-pecuniary remuneration of any kind
relating to the sale or renewal of the policy including but not limited
to commissions, bonuses, gifts, prizes, awards and finders fees.
(ii) Does not include salary or other benefits related to
employment, except to the extent that the salary or other benefits are
related to the volume of sales.
(iii) Does not include the payment of fees to comply with State
appointment laws, training, certification, and testing costs; and
reimbursement for mileage to and from appointments with beneficiaries
and reimbursement for actual costs associated with beneficiary sales
appointments such as venue rent, snacks, and materials.
(2) If compensation is paid in the first year, renewal compensation
must be paid for no fewer than 5 renewal years (6-year compensation
cycle), provided that the enrollee remains enrolled in the plan.
(3) No entity shall provide aggregate compensation to its agents or
brokers and no agent or broker shall receive aggregate compensation
greater than the renewal compensation payable by the replacing plan on
renewal policies if an existing policy is replaced with a like plan
type during the first year and 5 renewal years (6-year compensation
cycle).
(i) For purposes of this section, ``like plan type'' means PDP
replaced with another PDP, MA or MA-PD replaced with another MA or MA-
PD, or cost plan replaced with another cost plan.
(ii) Replacements between different plan types (for which a new
compensation is paid) include--PDP and MA-PD, PDP and cost plans, or
MA-PD and cost plans.
(4) Compensation shall be earned for months 4 through 12 of the
enrollment year.
(i) Plans may pay agents and brokers up-front or prorate
compensation payments over 12 months or over months 4 through 12, but
(ii) When a beneficiary disenrolls from the plan, the plan must
recover all compensation paid: for months in which the beneficiary is
not enrolled; and during months 1 through 3 if the beneficiary
disenrolls during the first three months.
(5) Organizations and sponsors must establish a compensation
structure for new and replacement enrollments and renewals effective in
a given plan year. Compensation structures must be in place by the
beginning of the plan marketing period, October 1.
(6) Compensation structures must be available upon CMS request
including for audits, investigations, and to resolve complaints.
(b) It must ensure agents selling Medicare products are trained
annually on Medicare rules and regulations specific to the plan
products they intend to sell.
(c) It must ensure agents selling Medicare products are tested
annually, as specified in CMS guidance.
(d) Upon CMS' request, the organization must provide to CMS, in a
form consistent with current CMS guidance, the information necessary
for it to conduct oversight of marketing activities.
(e) It must comply with State requests for information about the
performance of a licensed agent or broker as part of a state
investigation into the individual's conduct. CMS will establish and
maintain a memorandum of understanding (MOU) to share compliance and
oversight information with States that agree to the MOU.
PART 423--VOLUNTARY MEDICARE PRESCRIPTION DRUG BENEFIT
0
16. 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
0
17. Amend Sec. 423.46 by revising paragraph (a) introductory text to
read as follows:
Sec. 423.46 Late enrollment penalty.
(a) General. A Part D eligible individual must pay the late penalty
described under Sec. 423.286(d)(3), except as described at Sec.
423.780(e), if there is a continuous period of 63 days or longer at any
time after the end of the individual's initial enrollment period during
which the individual meets all of the following conditions:
* * * * *
Subpart G--Payments to Part D Plan Sponsors for Qualified
Prescription Drug Coverage
0
18. Amend Sec. 423.322 by revising paragraph (b) to read as follows:
Sec. 423.322 Requirement for disclosure of information.
* * * * *
(b) Restrictions on use of information. Officers, employees and
contractors of the Department of Health and Human Services may use the
information disclosed or obtained in accordance with the provisions of
this subpart only for the purposes of, and to the extent necessary in,
carrying out this subpart including, but not limited to, determination
of payments, and payment-related oversight, and program integrity
activities.
(1) This restriction does not limit OIG's authority to fulfill the
Inspector General's responsibilities in accordance with applicable
Federal law.
(2) This restriction does not limit CMS' ability to use data
regarding drug claims in accordance with section 1848(m) of the Act.
Subpart K--Application Procedures and Contracts with Part D Plan
Sponsors
0
19. Amend Sec. 423.505 by--
0
A. Adding paragraph (b)(19).
0
B. Adding paragraph (b)(20).
0
C. Adding paragraph (b) (21).
0
D. Adding paragraph (i)(3)(iv) through (vi).
0
E. Revising paragraph (m)(1) introductory text.
0
F. Revising (m)(1)(iii)(A).
0
G. Revising paragraph (m)(1)(iv).
0
H. Adding paragraph (m)(3).
The additions and revisions read as follows.
Sec. 423.505 Contract provisions.
* * * * *
(b) * * *
(19) Effective contract year 2010, include the prompt payment
provisions described in Sec. 423.520.
(20) Effective contract year 2010, provide that pharmacies located
in, or having a contract with, a long-term care facility (as defined in
Sec. 423.100) must have not less than 30 days, nor more than 90 days,
to submit to the Part D sponsor claims for reimbursement under the
plan.
(21) Effective contract year 2009, update any prescription drug
pricing standard for reimbursement of network pharmacies based on the
cost of a drug used by the Part D sponsor on--
(i) January 1 of each contract year; and
(ii) Not less frequently than once every 7 days after the date in
paragraph (b)(21)(i) of this section.
* * * * *
(i) * * *
(3) * * *
(iv) A provision requiring prompt payment of clean claims by the
Part D sponsor, consistent with Sec. 423.520.
(v) A provision that establishes timeframes, consistent with Sec.
423.505(b)(20), for long-term care
[[Page 54252]]
pharmacies to submit claims to the Part D sponsor for reimbursement
under the plan.
(vi) If applicable, a provision--
(A) Establishing regular updates of any prescription drug pricing
standard used by the Part D sponsor consistent with Sec.
423.505(b)(21); and
(B) Indicating the source used by the Part D sponsor for making any
such pricing updates.
* * * * *
(m)(1) CMS may release the minimum data necessary for a given
purpose from the data collected under paragraph (f)(3) of this section
to Federal executive branch agencies, States, and external entities in
accordance with the following:
* * * * *
(iii) * * *
(A) Subject to the restrictions in this paragraph, all elements on
the claim are available to HHS.
* * * * *
(iv) For purposes of paragraph (m)(1)(iii) of this section, States
and executive-branch Federal agencies are not considered to be external
entities.
* * * * *
(3) CMS shall make available to Congressional support agencies (the
Congressional Budget Office, the Government Accountability Office, the
Medicare Payment Advisory Commission, and the Congressional Research
Service when it is acting on behalf of a Congressional committee in
accordance with 2 U.S.C. 166(d)(1)) all information collected under
paragraph (f)(3) of this section for the purposes of conducting
congressional oversight, monitoring, making recommendations, and
analysis of the Medicare program.
0
20. Add 423.520 to read as follows:
Sec. 423.520 Prompt payment by Part D sponsors.
(a) Contract between CMS and the Part D sponsor. (1) Effective
contract year 2010, the contract between the Part D sponsor and CMS
must provide that the Part D sponsor will issue, mail, or otherwise
transmit payment with respect to all clean claims, as defined in
paragraph (b) of this section, submitted by network pharmacies (other
than mail-order and long-term care pharmacies) within--
(i) 14 days after the date on which the claim is received, as
defined in paragraph (a)(2)(i) of this section, for an electronic
claim; or
(ii) 30 days after the date on which the claim is received, as
defined in paragraph (a)(2)(ii) of this section, for any other claim.
(2) Date of receipt of claim. A claim is considered to have been
received--
(i) On the date on which the claim is transferred, for an
electronic claim; or
(ii) On the 5th day after the postmark day of the claim or the date
specified in the time stamp of the transmission, for any other claim,
whichever is sooner.
(b) Clean claim. A clean claim means a claim that has no defect or
impropriety (including any lack of any required substantiating
documentation) or particular circumstance requiring special treatment
that prevents timely payment of the claim from being made under this
section.
(c) Procedures involving claims--(1) Claims determined to be clean.
A claim is deemed to be a clean claim if the Part D sponsor receiving
the claim does not provide notice to the submitting network pharmacy of
any deficiency in the claim within--
(i) 10 days after the date on which the claim is received, as
defined in paragraph (a)(2)(i) of this section, for an electronic
claim; or
(ii) 15 days after the date on which the claim is received, as
defined in paragraph (a)(2)(ii) of this section, for any other claim.
(2) Claims determined not to be clean--(i) General. If a Part D
sponsor determines that a submitted claim is not a clean claim, as
defined in paragraph (b) of this section, the Part D sponsor must
notify the submitting network pharmacy of such determination within the
period described in paragraph (c)(1) of this section. Such notification
must specify all defects or improprieties in the claim and must list
all additional information necessary for the proper processing and
payment of the claim.
(ii) Determination after submission of additional information. A
claim is deemed to be a clean claim under paragraph (b) of this section
if the Part D sponsor that receives the claim does not provide notice
to the submitting network pharmacy of any defect or impropriety in the
claim within 10 days of the date on which additional information is
received under paragraph (c)(2)(i) of this section.
(3) Obligation to pay. A claim submitted to a Part D sponsor that
is not paid or contested by the Part D sponsor within the timeframes
specified in paragraphs (a)(1)(i) and (ii) of this section must be
deemed to be a clean claim and must be paid by the Part D sponsor in
accordance with paragraph (a) of this section.
(d) Date of payment of claim. Payment of a clean claim under
paragraph (c)(3) of this section is considered to have been made on the
date on which--
(1) The payment is transferred, for an electronic claim; or
(2) The payment is submitted to the United States Postal Service or
common carrier for delivery, for any other claim.
(e) Interest payment--(1) General. Subject to paragraph (e)(2) of
this section, if payment is not issued, mailed or otherwise transmitted
for a clean claim as required under paragraph (a) of this section, the
Part D sponsor must pay interest to the network pharmacy that submitted
the claim at a rate equal to the weighted average of interest on 3-
month marketable Treasury securities determined for such period,
increased by 0.1 percentage point for the period beginning on the day
after the required payment date and ending on the date on which the
payment is made, as determined under paragraph (d). Interest amounts
paid under this paragraph will not count against the Part D sponsor's
administrative costs, as defined in Sec. 423.308, and will not be
treated as allowable risk corridor costs, as defined in Sec. 423.308.
(2) Authority not to charge interest. As CMS determines
appropriate, including in exigent circumstances such as natural
disasters and other unique and unexpected events that prevent the
timely processing of claims, a Part D sponsor will not be charged
interest under paragraph (e)(1) of this section.
(f) Electronic transfer of funds. A Part D sponsor must pay all
clean claims submitted electronically by electronic transfer of funds
provided the submitting network pharmacy so requests or has so
requested previously that contract year. When such payment is made
electronically, remittance may also be made electronically by the Part
D sponsor.
(g) Protecting the rights of the claimants. (1) General. Nothing in
this section may be construed to prohibit or limit a claim or action
that any individual or organization has against a pharmacy, provider,
or Part D sponsor that is not covered by the subject matter of this
section.
(2) Anti-retaliation. Consistent with applicable Federal or State
law, a Part D sponsor may not retaliate against an individual,
pharmacy, or provider for exercising a right of action under paragraph
(g)(1) of this section.
(h) Construction. A determination under this section that a claim
submitted by a network pharmacy is a clean claim shall not be construed
as a positive determination regarding eligibility for payment under
title XVIII of the Act, nor is it an indication of government approval
of, or acquiescence regarding, the claim submitted. The determination
does not relieve any party of civil or criminal liability with respect
to the claim, nor
[[Page 54253]]
does it offer a defense to any administrative, civil, or criminal
action with respect to the claim.
Subpart P--Premiums and Cost-Sharing Subsidies for Low-Income
Individuals
0
21. Amend Sec. 423.772 by revising the definitions of ``income'' and
``resources'' to read as follows:
Sec. 423.772 Definitions.
* * * * *
Income means income as described under section 1905(p)(1) of the
Act without use of any more liberal disregards under section 1902(r)(2)
of the Act (that is defined by section 1612 of the Act) and exempts
support and maintenance furnished in kind. This definition includes the
income of the applicant and spouse who is living in the same household,
if any, regardless of whether the spouse is also an applicant.
* * * * *
Resources means liquid resources of the applicant (and, if married,
his or her spouse who is living in the same household), such as
checking and savings accounts, stocks, bonds, and other resources that
can be readily converted to cash within 20 days, that are not excluded
from resources in section 1613 of the Act, and real estate that is not
the applicant's primary residence or the land on which the primary
residence is located. It exempts the value of any life insurance
policy.
* * * * *
0
22. Amend Sec. 423.780 by revising paragraph (e) to read as follows:
Sec. 423.780 Premium subsidy.
* * * * *
(e) Waiver of Late Enrollment Penalty for Subsidy-Eligible
Individuals. Subsidy eligible individuals, as defined in Sec. 423.773,
are not subject to a late enrollment penalty, as defined in Sec.
423.46.
* * * * *
Subpart V--Part D Marketing Requirements
0
23. Amend Sec. 423.2268 by--
0
A. Adding paragraph (b)
0
B. Adding paragraph (g).
0
C. Adding paragraph (h).
0
D. Adding paragraph (n).
0
E. Adding paragraph (q).
The additions and revisions read as follows:
Sec. 423.2268 Standards for Part D marketing.
* * * * *
(b) Offer gifts to potential enrollees, unless the gifts are of
nominal (as defined in the CMS Marketing Guidelines) value, are offered
to all potential enrollees without regard to whether or not the
beneficiary enrolls, and are not in the form of cash or other monetary
rebates.
* * * * *
(g) 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.
(h) 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.
* * * * *
(n) Display the names and/or logos of co-branded network providers
on the organization's member identification card. Other marketing
materials (as defined in Sec. 423.2260) that include names and/or
logos of provider co-branding partners must clearly indicate that other
providers are available in the network.
* * * * *
(q) Use a plan name that does not include the plan type. The plan
type should be included at the end of the plan name.
0
24. Amend Sec. 423.2272 by adding new paragraph (d) to read as
follows:
Sec. 423.2272 Licensing of marketing representatives and confirmation
of marketing resources.
* * * * *
(d) Report to the State in which the MAO appoints an agent or
broker, the termination of any such agent or broker, including the
reasons for such termination if State law requires that the reasons for
the termination be reported.
0
25. Add new Sec. 423.2274 to read as follows:
Sec. 423.2274 Broker and agent requirements.
If a Part D sponsor markets through employed or independent brokers
or agents--
(a) Agents and brokers must be compensated as follows:
(1) A Part D sponsor (or other entity on its behalf) may provide
compensation to a broker or agent for the sale of a Part D plan only if
the aggregate of the first year compensation is no more than 200
percent of the aggregate of the compensation paid for selling or
servicing the enrollee in each individual subsequent renewal year, of
which there must be a total of five renewal years (creating a 6-year
compensation cycle). For purposes of this section ``compensation''--
(i) Includes pecuniary or non-pecuniary remuneration of any kind
relating to the sale or renewal of the policy including but not limited
to commissions, bonuses, gifts, prizes, awards and finders fees.
(ii) Does not include salary or other benefits related to
employment, except to the extent that the salary or other benefits are
related to the volume of sales.
(iii) Does not include the payment of fees to comply with State
appointment laws, training, certification, and testing costs; and
reimbursement for mileage to and from appointments with beneficiaries
and reimbursement for actual costs associated with beneficiary sales
appointments such as venue rent, snacks, and materials.
(2) If compensation is paid in the first year, compensation must be
paid for no fewer than 5 renewal years (6-year compensation cycle),
provided that the enrollee remains enrolled in the plan.
(3) No entity shall provide aggregate compensation to its agents or
brokers and no agent or broker shall receive aggregate compensation
greater than the renewal compensation payable by the replacing plan on
renewal policies if an existing policy is replaced with a like plan
type during the first year and 5 renewal years (6-year compensation
cycle).
(i) For purposes of this section, ``like plan type'' means PDP
replaced with another PDP, MA or MA-PD replaced with another MA or MA-
PD, or cost plan replaced with another cost plan.
(ii) Replacements between different plan types (for which a new
compensation is paid) include--PDP and MA-PD, PDP and cost plans, or
MA-PD and cost plans.
(iii) When a PDP is added to an MA-only plan, a new commission
would be paid for the enrollment in the PDP during the first year.
(4) Compensation shall be earned for months 4 through 12 of the
enrollment year.
(i) Plans may pay agents and brokers up-front or prorate
compensation payments over 12 months or over months 4 through 12, but
(ii) When a beneficiary disenrolls from the plan, the plan must
recover all compensation paid: for months in which the beneficiary is
not enrolled; and during months 1 through 3 if the beneficiary
disenrolls during the first three months.
(5) Organizations and sponsors must establish a compensation
structure for new and replacement enrollments and renewals effective in
a given plan year. Compensation structures must be in
[[Page 54254]]
place by the beginning of the marketing period, October 1.
(6) Compensation structures must be available upon CMS request
including for audits, investigations, and to resolve complaints.
(b) It must ensure agents selling Medicare products are trained
annually on Medicare rules and regulations specific to the plan
products they intend to sell.
(c) It must ensure agents selling Medicare products are tested
annually, as specified in CMS guidance.
(d) Upon CMS' request, the organization must provide to CMS, in a
form consistent with current CMS guidance, the information necessary
for it to conduct oversight of marketing activities.
(e) It must comply with State requests for information about the
performance of a licensed agent or broker as part of a state
investigation into the individual's conduct. CMS will establish and
maintain a memorandum of understanding (MOU) to share compliance and
oversight information with States that agree to the MOU.
Authority: (Catalog of Federal Domestic Assistance Program No.
93.778, Medical Assistance Program)
(Catalog of Federal Domestic Assistance Program No. 93.773,
Medicare--Hospital Insurance; and Program No. 93.774, Medicare--
Supplementary Medical Insurance Program)
Dated: August 19, 2008.
Kerry Weems,
Acting Administrator, Centers for Medicare & Medicaid Services.
Approved: September 2, 2008.
Michael O. Leavitt,
Secretary.
[FR Doc. E8-21686 Filed 9-15-08; 9:00 am]
BILLING CODE 4120-01-P